UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:
☒☐Preliminary Proxy Statement
☐Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
☐☒Definitive Proxy Statement
☐Definitive Additional Materials
☐Soliciting Material under §240.14a-12
CM LIFE SCIENCES, INC.SEMA4 HOLDINGS CORP.
(Name of Registrant as Specified Inin Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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☐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:
Not applicable
(2)Aggregate number of securities to which transaction applies:
Not applicable
(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):
Not applicable
(4)Proposed maximum aggregate value of transaction:
$2,837,595,123.44
(5)Total fee paid:
$309,582 1
☒Fee paid previously with preliminary materials.
☐Check box if any part of the fee is offset as providedFee computed on table in exhibit required by Item 25(b) per Exchange Act Rule 0-11(a)(2)Rules 14a6(i)(1) 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.
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_____________
1.Calculated pursuant to Section 6(b) of the Securities Act at a rate equal to $109.10 per $1,000,000 of the proposed maximum aggregate offering price.


PRELIMINARY PROXY STATEMENT - SUBJECT TO COMPLETION, DATED JUNE 10, 2021SEMA4 HOLDINGS CORP.
CM LIFE SCIENCES, INC.333 Ludlow Street
c/o Corvex ManagementNorth Tower, 8th Floor
667 Madison Avenue
New York, New YorkStamford, Connecticut
Dear Stockholder of CM Life Sciences, Inc.Sema4 Holdings Corp.:
You are cordially invited to attend the special meeting of stockholders (the “Special Meeting”) of CM Life Sciences, Inc.Sema4 Holdings Corp. (“we,” “us”, “our”, “CMLSSema4” or the “Company”) to be held on [    ], 2021April 27, 2022 at [      ]9:00 a.m. Eastern time. In light of ongoing developments related to the coronavirus (COVID-19),(“COVID-19”) pandemic, after careful consideration, the Company has determined that the Special Meeting will be a virtual meeting conducted exclusively via live webcast in order to facilitate stockholder attendance and participation while safeguarding the health and safety of our stockholders, directors and management team. You or your proxyholder will be able to attend and vote at the Special Meeting online by visiting https://www.cstproxy.com/CMLS/sm2021 and using a control number assigned by Continental Stock Transfer & Trust Company. To register and receive access to the virtual meeting, registered stockholders and beneficial stockholders (those holding shares through a stock brokerage account or by a bank or other holder of record) will need to follow the instructions applicable to them provided in the proxy statement.
On February 9, 2021, the Company and its wholly owned subsidiary, S-IV Sub, Inc. (“Merger Sub”), entered into an Agreement and Plan of Merger with Mount Sinai Genomics, Inc. d/b/a Sema4 (“Sema4”) (the “Merger Agreement”). If the Merger Agreement is approved by Company stockholders at the Special Meeting (and all other conditions pursuant to the Merger Agreement are either satisfied or waived) Merger Sub will merge with and into Sema4, with Sema4 surviving the merger as a wholly owned subsidiary of the Company. Upon the consummation of the transactions contemplated by the Merger Agreement (the “Business Combination”), the Company will change its name to Sema4 Holdings Corp. As described in this proxy statement, CMLS’s stockholders are being asked to consider and vote upon, among other things, the Business Combination and the other proposals set forth herein. For ease of reference, certain capitalized terms used in this proxy statement are defined below in “Frequently Used Terms”.
Subject to the terms and conditions of the Merger Agreement, each share of Sema4 Class B common stock issued and outstanding immediately prior to the effective time will be converted into 1/100th of a share of Sema4 Class A common stock as set forth in the Merger Agreement. Immediately thereafter, each share of Sema4 Common Stock and Sema4 Preferred Stock (other than Excluded Shares and Dissenting Shares (each as defined in the Merger Agreement)) 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 merger consideration, with each Sema4 Stockholder being entitled to receive (collectively, clauses (i) through (iii), the “merger consideration”) (i) its pro rata share of the Closing Available Cash (as defined in the Merger Agreement) if such Sema4 Stockholder has made an election to receive cash, and, if so elected, such Sema4 Stockholder’s pro rata share excess amount of any closing available excess cash, provided that in no event will a Sema4 Stockholder’s cash payment exceed an amount equal to the product of such Sema4 Stockholder’s total outstanding shares multiplied by the Per Share Amount; (ii) a number of shares of Company Class A common stock equal to the quotient of: (A)(1) the product of such Sema4 Stockholder’s total outstanding shares multiplied by the Per Share Amount minus (2) such Sema4 Stockholder’s stockholder cash payment amount divided by (B) $10.00; and (iii) its pro rata share of any earn out shares to which such Sema4 Stockholder is entitled pursuant to the terms of the Merger Agreement (the “Earnout”), including the Earnout RSUs, which Earnout RSUs are subject to vesting and will not be legally issued and outstanding shares of Company common stock at the closing of the Business Combination (the “Closing”), in each case of clauses (i), (ii) and (iii), without interest, upon surrender of stock certificates representing all of such Sema4 Stockholder’s Sema4 Common Stock and Sema4 Preferred Stock and delivery of the other documents required pursuant to the Merger Agreement. As of the effective time, each Sema4 Stockholder shall cease to have any other rights in and to Sema4 securities and each certificate relating to ownership of shares of Sema4 Common Stock and Sema4 Preferred Stock (other than Excluded Shares) will only represent the right to receive the applicable portion of the merger consideration.


Following the Closing, within five Business Days (as defined in the Merger Agreement) after the occurrence of a Triggering Event, the Company shall issue or cause to be issued to the Sema4 Stockholders (other than holders of Dissenting Shares and Excluded Shares) and the Earn-Out Service Providers, the following shares of Company Class A common stock (which shall be equitably adjusted for stock splits, reverse stock splits, stock dividends, reorganizations, recapitalizations, reclassifications, combination, exchange of shares or other like change or transaction with respect to Company Class A common stock occurring on or after the Closing, the “Earn-Out Shares”), upon the terms and subject to the conditions set forth in the Merger Agreement and other related agreements: (i) upon the occurrence of Triggering Event I, a one-time issuance of a number of Earn-Out Shares equal to 3.66% of the Earn-Out Total Outstanding Shares; (ii) upon the occurrence of Triggering Event II, a one-time issuance of a number of Earn-Out Shares equal to 3.67% of the Earn-Out Total Outstanding Shares; and (iii) upon the occurrence of Triggering Event III, a one-time issuance of a number of Earn-Out Shares equal to 3.67% of the Earn-Out Total Outstanding Shares. Upon the last day of any calendar year, the Company shall issue or cause to be issued to each Sema4 Stockholder (other than holders of Dissenting Shares) and Earn-Out Service Provider (in accordance with its respective Earn-Out Pro Rata Share and, in the case of the Earn-Out Service Providers, in accordance with the terms of the applicable Earn-Out Award Agreement) the Earn-Out Shares that (i) are in the Forfeiture Pool as in effect as of such date and (ii) would have been issuable to Sema4 Stockholders pursuant to the Merger Agreement as a result of the occurrence of a Triggering Event had they not been made subject to an award of Earnout RSUs.
Sema4 Stockholders and the Earn-Out Service Providers shall be entitled to receive Earn-Out Shares upon each Triggering Event, provided, however that each Triggering Event may only occur once, if at all, and in no event shall the Sema4 Stockholders and Earn-Out Service Providers, in the aggregate, be entitled to receive an aggregate number of Earn-Out Shares equal to more than 11% of the Earn-Out Total Outstanding Shares. Earn-Out Shares will be issued from the Forfeiture Pool only if the applicable Triggering event occurs.
Upon the Closing, the former Sema4 equity holders are expected to hold, in the aggregate, approximately 64.6% of the issued and outstanding shares of Company common stock. The foregoing percentage excludes 29,120,955 options for the purchase of 29,120,955 shares of Company common stock, which are authorized and subject to stock options but will not yet be issued at closing, as further described in the pro forma capitalization table in the section entitled “Unaudited Pro Forma Condensed Combined Financial Information — Description of the Transaction.” Any cash not paid to Sema4 Stockholders as merger consideration under the terms of the Merger Agreement will remain on the balance sheet of the combined company and be available for the payment of transaction expenses and other combined company uses.
In connection with the Business Combination, the Company entered into subscription agreements, each dated as of February 9, 2021 (the “Subscription Agreements”), with certain institutional investors, including affiliates of our Sponsor and existing investors in Sema4 (collectively, the “PIPE Investors”), pursuant to which, among other things, the Company agreed to issue and sell to the PIPE Investors, in private placements to close immediately prior to the Closing, an aggregate of 35,000,000 shares of common stock at $10.00 per share, for an aggregate purchase price of $350,000,000.
The Company and Sema4 cannot complete the Business Combination unless the Company’s stockholders approve the Business Combination, including the issuance of common stock to Sema4 equity holders as merger consideration, and certain of the other proposals contained herein. The Company is sending you this proxy statement to ask you to vote in favor of the Business Combination Proposal, as described below, and the other matters described in this proxy statement.
At the Special Meeting, Company stockholders will be asked to, consider and vote upon a proposalamong other things, approve the issuance of shares of the Company’s Class A common stock, par value $0.0001 per share (the “Business Combination Proposal” or “Proposal No. 1Class A common stock”) to adopt the Merger Agreement, a copy, in connection with our acquisition of which is attached to the accompanying proxy statement as Annex A, and approve the transactions contemplated thereby, including the Business Combination. In addition, you are being asked to consider and vote upon a proposal to approve, for purposes of complying with applicable Nasdaq Stock Market (the “GeneDx, Inc. (“NasdaqGeneDx”) listing rules,, approve the issuance of more than 20%shares of the Company’s outstandingClass A common stock in connection with the Business Combinationa related private placement financing and the Subscription Agreements, including upappoint two directors to 147,922,735 sharesour Board of common stockDirectors (the “Board”). We believe our acquisition of GeneDx will provide significant value to the Sema4 equity holdersCompany and our stockholders, as we expect the addition of GeneDx to provide the Company with additional revenue, synergistic product offerings that provide breadth to our overall product portfolio, and additional key personnel with expertise in the Business Combination and 35,000,000 shares of common stock to the PIPE Investors (the “our sector. Nasdaq Stock Issuance


Proposal” or “Proposal No. 2”); a proposal to adopt the Amended and Restated Certificate of Incorporation in the form attached hereto as Annex B (the “Charter Approval Proposal” or “Proposal No. 3”); a separate proposal with respect to certain governance provisions in the Amended and Restated Certificate of Incorporation, presented in accordance with SEC requirements and which will be voted upon on a non-binding advisory basis (the “Governance Proposal” or “Proposal No. 4”); a proposalPlease note, we are asking stockholders to approve the Sema4 Holdings Corp 2021 Equity Incentive Plan (the “Incentive Plan”) (the “Incentive PlanStock Consideration Issuance Proposal” or “ and the PIPE Investment Proposal No. 5”); a proposal(as defined and described in more detail in the accompanying proxy statement) in order to comply with listing rule 5635 of the Nasdaq Stock Market, and we are not asking our stockholders to approve the Sema4 Holdings Corp 2021 Employee Stock Purchase Plan (the “ESPP”) (the “ESPP Proposal”acquisition or “the private placement financing.Proposal No. 6”); a proposal to consider
In addition, we are holding the Special Meeting in lieu of our 2022 annual meeting of stockholders and, vote uponaccordingly, our stockholders will also be considering a proposal to elect ninethree Class I directors to serve on the post-combination company’s board of directors, each for a three-year term or until such director’s successor has been duly elected and qualified, or until such director’s earlier death, resignation, retirement or removal; alternatively, in the event the condition precedent proposals (as defined herein), including the Charter Approval Proposal, are not approved, to elect two directors as Class I directors on the Company’s board of directors, each to serve for a term of three years expiringexpire at theour 2025 annual meeting of stockholders to be held in 2024 or until such director’s successor has been duly elected and qualified, or until such director’s earlier death, resignation, retirement or removal (the “Director Election Proposal” or “Proposal No. 7”); a proposal to adjourn the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal, the Nasdaq Stock Issuance Proposal, the Charter Approval Proposal, the Incentive Plan Proposal or the ESPP Proposal (the “Adjournment Proposal” or “Proposal No. 8”); and the ratification of Withum as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020 (the “Auditor Ratification Proposal” or “Proposal No. 9”).stockholders.
Each of these proposals (and the other proposals) is more fully described in thisthe proxy statement, which each stockholder is encouraged to carefully read.
Pursuant to our current certificate of incorporation, we are providing our public stockholders with the opportunity to redeem, upon the Closing, shares of common stock for cash equal to the pro rata share of the aggregate amount on deposit (as of two business days prior to the Closing) in the trust account (the “Trust Account”) that holds the proceeds of our IPO (including interest not previously released to the Company to pay franchise and income taxes), subject to certain limitations. For illustrative purposes, based on the balance of the Trust Account of approximately $442 million as of January 29, 2021, the estimated per share redemption price would have been approximately $10.00. Public stockholders may elect to redeem their shares even if they vote for the Business Combination. Any request to redeem public shares, once made, may be withdrawn at any time until the deadline for exercising redemption requests and thereafter, with our consent, until the Closing. If we receive valid redemption requests from holders of public shares prior to the redemption deadline, we may, at our sole discretion, following the redemption deadline and until the date of Closing, seek and permit withdrawals by one or more of such holders of their redemption requests. We may select which holders to seek such withdrawals of redemption requests from based on any factors we may deem relevant, and the purpose of seeking such withdrawals may be to increase the funds held in the Trust Account, including where we otherwise would not satisfy the closing condition that the amount in the Trust Account and the proceeds from the PIPE Investment equal or exceed $300,000,000, following payment of the aggregate amount of cash proceeds that will be required to satisfy any redemptions and payment of all Company and Sema4 transaction expenses.
Each redemption of shares of common stock by our public stockholders will reduce the amount in the Trust Account. The Merger Agreement provides that Sema4’s obligation to consummate the Business Combination is subject to the condition that that the amount in the Trust Account and the proceeds from the PIPE Investment equal or exceed $300,000,000, following payment of the aggregate amount of cash proceeds that will be required to satisfy any redemptions and payment of all Company and Sema4 transaction expenses. This condition to closing in the Merger Agreement is for the sole benefit of, and may be waived by, Sema4. If, as a result of redemptions of common stock by our public stockholders, this condition is not met (or waived by Sema4), then Sema4 may elect not to consummate the Business Combination. In addition, in no event will we redeem shares of our common stock in an amount that would result in the Company’s failure to have net tangible assets equaling or exceeding $5,000,001 (so that we are not subject to the SEC’s “penny stock” rules). Holders of our outstanding public warrants do not have redemption rights in connection with the Business Combination. Unless otherwise specified, the


information in the accompanying proxy statement assumes that none of our public stockholders exercise their redemption rights with respect to their shares of common stock.
Our Sponsor and the Company’s officers and directors at the time of our IPO (together, our “Initial Stockholders”) have agreed to vote their shares of common stock in favor of the Business Combination. Currently, our Initial Stockholders own approximately 20% of our issued and outstanding shares of common stock. In addition, our Initial Stockholders have agreed to waive their redemption rights with respect to such shares.
We are providing the accompanying proxy statement and accompanying proxy card to our stockholders in connection with the solicitation of proxies to be voted at the Special Meeting (including following any adjournments or postponements of the Special Meeting). Information about the Special Meeting, the Business Combination and other related business to be considered by the Company’s stockholders at the Special Meeting is included in this proxy statement. Whether or not you plan to attend the Special Meeting, we urge all Company stockholders to read this proxy statement, including the Annexes and the accompanying financial statements of the Company and Sema4, carefully and in their entirety. In particular, we urge you to carefully read the section entitled “Risk Factors” of this proxy statement.
After careful consideration, our Board has approved the Merger Agreement and the transactions contemplated therein, and recommends that our stockholders vote “FOR” adoption of the Merger Agreement and approval of the transactions contemplated thereby, including the Business Combination, and “FOR” all other proposals presented to our stockholders in the accompanying proxy statement. When you consider the Board’s recommendation of these proposals, you should keep in mind that our directors and officers have interests in the Business Combination that may conflict with your interests as a stockholder. Please see the section entitled “Proposal No. 1 — Approval of the Business Combination — Interests of Certain Persons in the Business Combination” for additional information.
Approval of each of the Business Combination Proposal, the Nasdaq Stock Issuance Proposal, the Governance Proposal, the Incentive Plan Proposal, the ESPP Proposal and the Adjournment Proposal require the affirmative vote of a majority of the votes cast at the Special Meeting. Approval of the Charter Approval Proposal requires the affirmative vote of a majority of the outstanding shares of our common stock.
Your vote is very important. Whether or not you plan to attend the Special Meeting, please vote as soon as possible by following the instructions in thisthe proxy statement to make sure that your shares are represented at the Special Meeting. If you hold your shares in “street name” through a bank, broker or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee to ensure that your shares are represented and voted at the Special Meeting. Even if you have voted by proxy, you may still vote during the Special Meeting by visiting https://www.cstproxy.com/CMLS/sm2021www.virtualshareholdermeeting.com/SMFR2022SM with your 12-digit control number assigned by Continental Stock Transfer & Trust Company included on your proxy card or obtained from them via email. The transactions contemplated by the Merger Agreement will be consummated only if the Business Combination Proposal, the Nasdaq Stock Issuance Proposal, the Charter Approval Proposal and the Incentive Plan Proposal are approved at the Special Meeting. The proposals in this proxy statement (other than the Governance Proposal, the Auditor Ratification Proposal and the Adjournment Proposal) are conditioned on the approval of the Business Combination Proposal.
If you sign, date and return your proxy card without indicating how you wish to vote, your proxy will be voted “FOR” each of the proposals presented at the Special Meeting. If you fail to return your proxy card or fail to instruct your bank, broker or other nominee how to vote, and do not attend the Special Meeting, the effect will be that your shares will not be counted for purposes of determining whether a quorum is present at the Special Meeting. If you are a stockholder of record and you attend the Special Meeting and wish to vote at the Special Meeting, you may revoke your proxy and vote at the Special Meeting.
TO EXERCISE YOUR REDEMPTION RIGHTS, YOU MUST DEMAND THAT THE COMPANY REDEEM YOUR SHARES FOR A PRO RATA PORTION OF THE FUNDS HELD IN THE TRUST ACCOUNT AND TENDER YOUR SHARES TO THE COMPANY’S TRANSFER AGENT AT LEAST TWO BUSINESS DAYS PRIOR TO THE SPECIAL MEETING. YOU MAY TENDER YOUR SHARES BY EITHER DELIVERING YOUR SHARE CERTIFICATE TO THE TRANSFER AGENT OR BY DELIVERING YOUR


SHARES ELECTRONICALLY USING DEPOSITORY TRUST COMPANY’S DWAC (DEPOSIT WITHDRAWAL AT CUSTODIAN) SYSTEM. IF THE BUSINESS COMBINATION IS NOT COMPLETED, THEN THESE SHARES WILL NOT BE REDEEMED FOR CASH. IF YOU HOLD THE SHARES IN STREET NAME, YOU WILL NEED TO INSTRUCT THE ACCOUNT EXECUTIVE AT YOUR BANK OR BROKER TO WITHDRAW THE SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR REDEMPTION RIGHTS.
On behalf of our Board, I would like to thank you for your support of CM Life Sciences, Inc.Sema4 Holdings Corp. and look forward to a successful completion of the Business Combination.acquisition.
By Order of the Board of Directors,
                    [         ], 2021March 31, 2022
/s/ Eric Schadt
Eli Casdin
Eric Schadt
Chief Executive Officer
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THE TRANSACTIONS DESCRIBED IN THIS PROXY STATEMENT, PASSED UPON THE MERITS OR FAIRNESS OF THE BUSINESS COMBINATION OR RELATED TRANSACTIONS OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THIS PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY CONSTITUTES A CRIMINAL OFFENSE.
ThisThe accompanying proxy statement is dated [             ] , 2021March 31, 2022 and is expected to be first mailed to Company stockholders on or about [              ] , 2021.March 31, 2022.


NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS OF CM LIFE SCIENCES, INC.SEMA4 HOLDINGS CORP.
TO BE HELD , 2021ON APRIL 27, 2022
To the Stockholders of CM Life Sciences, Inc.Sema4 Holdings Corp.:
NOTICE IS HEREBY GIVEN that a special meeting of the stockholders (the “Special Meeting”) of CM Life Sciences, Inc.Sema4 Holdings Corp., a Delaware corporation (the “Company”), will be held on [            ] , 2021April 27, 2022 at [            ]9:00 a.m. Eastern time (the “SpecialMeeting”).time. In light of ongoing developments related to the coronavirus (COVID-19),(“COVID-19”) pandemic, after careful consideration, the Company has determined that the Special Meeting will be a virtual meeting conducted exclusively via live webcast in order to facilitate stockholder attendance and participation while safeguarding the health and safety of our stockholders, directors and management team. You or your proxyholder will be able to attend and vote at the Special Meeting online by visiting https://www.cstproxy.com/CMLS/sm2021www.virtualshareholdermeeting.com/SMFR2022SM and using a control number assigned by Continental Stock Transfer & Trust Company. To register and receive access to the virtual meeting, registered stockholders and beneficial stockholders (those holding shares through a stock brokerage account or by a bank or other holder of record)nominee) will need to follow the instructions applicable to them provided in the accompanying proxy statement.
At the Special Meeting (in lieu of the 2022 annual meeting of stockholders), you will be asked to consider and vote on proposals to:on:
1.Proposal No. 1 —- The Business CombinationStock Consideration Issuance Proposal — To- For purposes of complying with applicable Nasdaq Stock Market (the “Nasdaq”) listing rules (the “Nasdaq Listing Rules”), to approve the issuance of the Company’s Class A common stock, par value $0.0001 per share (the “Class A common stock”), in connection with the Acquisition (as defined in the accompanying proxy statement) and adoptas contemplated by the Agreement and Plan of Merger and Reorganization dated as of February 9, 2021 as amended by the Amendment to Agreement and Plan of Merger dated May 3, 2021 (as it may be further amended and/or restated from time to time, theJanuary 14, 2022 (the “MergerAgreement”), by and among the Company, its wholly ownedGeneDx, Inc. (“GeneDx”), a wholly-owned subsidiary S-IVof OPKO Health, Inc. (“OPKO”), OPKO, Orion Merger Sub I, Inc. (“Merger Sub”), and Mount Sinai Genomics, Inc. (“Sema4 I”), a copywholly-owned subsidiary of which is attached to this proxy statement as Annex A,the Company, Orion Merger Sub II, LLC (“Merger Sub II” and approve the transactions contemplated thereby (thetogether with Merger Sub I, “Business CombinationMerger Subs”), including the merger of Merger Sub with and into Sema4, with Sema4 surviving the merger as a wholly ownedwholly-owned subsidiary of the Company, and GeneDx Holding 2, Inc., which will own 100% of GeneDx at the issuance of common stock to Sema4 equity holders as merger consideration;Effective Time (as defined in the accompanying proxy statement) (“HoldCo”);
2.Proposal No. 2 —- The Nasdaq Stock IssuancePIPE Investment Proposal — To approve, for- For purposes of complying with applicable listing rules of the Nasdaq Stock Market (the “Nasdaq”),Listing Rules, to approve the issuance of more than 20% of the Company’s outstandingClass A common stock in connection with the Business CombinationPIPE Investment (as defined in the accompanying proxy statement) and as contemplated by the Subscription Agreements including up to 35,000,000 shares of our common stock to(as defined in the PIPE Investors, which includes affiliates of CMLS Holdings LLC (our “Sponsor”) that subscribed for 9,500,000 shares of common stock, and up to 147,922,735 shares of our common stock to Sema4 equity holders;accompanying proxy statement);
3.Proposal No. 3 —- The Special Designee Director Election Proposal - Assuming the Stock Consideration Issuance Proposal and the Charter Amendment Proposal are approved and adopted and the Acquisition is consummated, to appoint two directors who will become directors of the Company effective upon the consummation of the Acquisition;
4.Proposal No. 4 - The Charter ApprovalAmendment Proposal—- To adopt an Amendment (the “Amendment”) to the proposedThird Amended and Restated Certificate of Incorporation of the Company, (the “Amended and Restated Certificate of Incorporation”) in the form attached hereto as Annex B;
4.B (the “Proposal No. 4 — Governance ProposalCharter— To approve, on a non-binding advisory basis, a separate proposal with respect”), which increases the number of authorized shares of Class A common stock from 380,000,000 to certain governance provisions in the Amended and Restated Certificate of Incorporation in accordance with United States SEC requirements;1,000,000,000;
5.Proposal No. 5 — Incentive Plan- The Class I Director Election Proposal —- To approve the Sema4 Holdings Corp 2021 Equity Incentive Plan (the “Incentive Plan”), including the authorizationelect three Class I directors of the initial share reserve underCompany, each to serve a three-year term expiring at the Incentive Plan;Company’s 2025 annual meeting of stockholders and until such director’s successor is duly elected and qualified;
6.Proposal No. 6 — ESPP- The Auditor Ratification Proposal —- To approveratify the Sema4 Holdings Corp 2021 Employee Stock Purchase Plan (the “ESPP”), includingappointment of Ernst & Young LLP as the authorization ofCompany’s independent registered public accounting firm for the initial share reserve under the ESPP;
7.Proposal No. 7 — The Director Election Proposal — To considerfiscal year ending December 31, 2022; and vote upon a proposal to elect nine directors to serve on the post-combination company’s board of directors, each for a three-year term annual meeting of stockholders or until such director’s successor has been duly elected and qualified, or until such director’s earlier death, resignation, retirement or removal; alternatively, in the event the condition precedent proposals (as defined below), including the Charter Approval Proposal, are not approved, to elect


two directors as Class I directors on the Company’s board of directors, each to serve for a term of three years expiring at the annual meeting of stockholders to be held in 2024 or until such director’s successor has been duly elected and qualified, or until such director’s earlier death, resignation, retirement or removal (the “Director Election Proposal”); and
8.7.Proposal No. 8 —7 - Adjournment Proposal —- To approve, if necessary, the adjournment of the Special Meeting to a later date or dates to permit further solicitation and votes of proxies in the event that there are insufficient votes for, or otherwise in connection with the approvalany of the Business Combination Proposal, the Nasdaq Stock Issuance Proposal, the Charter Approval Proposal, the Incentive Plan Proposal or the ESPP Proposal. This proposal will only beproposals presented at the Special Meeting if there are not sufficient votes to approve the Business Combination Proposal, the Nasdaq Stock Issuance Proposal, the Charter Approval Proposal, the Incentive Plan Proposal or the ESPP Proposal.
9.Proposal No. 9 — Auditor Ratification Proposal --- The ratification of Withum as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020.Meeting.
The above mattersproposals are more fully described in thisthe accompanying proxy statement, which also includes, as Annex A, a copy of the Merger Agreement, and as Annex B, a copy of the Amended and Restated Certificate of Incorporation.proposed Amendment to the Charter. We urge you to carefully read thisthe proxy statement in its entirety, including the Annexes and accompanying financial statements of the Company and Sema4.GeneDx.
The record date for the Special Meeting is June 21, 2021.March 22, 2022. Only stockholders of record at the close of business on thatthe record date may vote at the Special Meeting or any adjournment thereof. A complete list of our stockholders of record entitled to vote at the Special Meeting will be available for ten days before the Special Meeting at our principal executive offices for inspection by stockholders during ordinary business hours for any purpose germane to the Special Meeting and electronically during the Special Meeting at https://www.cstproxy.com/CMLS/sm2021.
Pursuant to our current certificate of incorporation, we are providing our public stockholders with the opportunity to redeem, upon the Closing, shares of common stock for cash equal to the pro rata share of the aggregate amount on deposit (as of two business days prior to the Closing) in the Trust Account that holds the proceeds of our IPO (including interest not previously released to the Company to pay franchise and income taxes), subject to certain limitations. For illustrative purposes, based on the balance of the Trust Account of approximately $442 million as of January 29, 2021, the estimated per share redemption price would have been approximately $10.00. Public stockholders may elect to redeem their shares even if they vote for the Business Combination. Any request to redeem public shares, once made, may be withdrawn at any time until the deadline for exercising redemption requests and thereafter, with our consent, until the Closing. If we receive valid redemption requests from holders of public shares prior to the redemption deadline, we may, at our sole discretion, following the redemption deadline and until the date of Closing, seek and permit withdrawals by one or more of such holders of their redemption requests. We may select which holders to seek such withdrawals of redemption requests from based on any factors we may deem relevant, and the purpose of seeking such withdrawals may be to increase the funds held in the Trust Account, including where we otherwise would not satisfy the closing condition that the amount in the Trust Account and the proceeds from the PIPE Investment equal or exceed $300,000,000, following payment of the aggregate amount of cash proceeds that will be required to satisfy any redemptions and payment of all Company and Sema4 transaction expenses.
Our Initial Stockholders (as defined above), who own approximately 20% of our issued and outstanding shares of common stock, have agreed to vote their shares of common stock in favor of the Business Combination. In addition, our Initial Stockholders have agreed to waive their redemption rights with respect to such shares, which will be excluded from the pro rata calculation used to determine the per-share redemption price. Each redemption of shares of common stock by our public stockholders will reduce the amount in the Trust Account. The Merger Agreement provides that Sema4’s obligation to consummate the Business Combination is subject to the condition that the amount in the Trust Account and the proceeds from the PIPE Investment equal or exceed $300,000,000, following payment of the aggregate amount of cash proceeds that will be required to satisfy any redemptions and payment of all Company and Sema4 transaction expenses. This condition to closing in the Merger Agreement is for the sole benefit of, and may be waived only by, Sema4. If, as a result of redemptions of common stock by our public


stockholders, this condition is not met (or waived by Sema4), then Sema4 may elect not to consummate the Business Combination. In addition, in no event will we redeem shares of our common stock in an amount that would result in the Company’s failure to have net tangible assets equaling or exceeding $5,000,001 (such that we are not subject to the SEC’s “penny stock” rules). Holders of our outstanding public warrants do not have redemption rights in connection with the Business Combination. Unless otherwise specified, the information in the accompanying proxy statement assumes that none of our public stockholders exercise their redemption rights with respect to their shares of common stock.
In connection with the Business Combination, the Company entered into the Subscription Agreements (as defined above) with the PIPE Investors, pursuant to which, among other things, the Company agreed to issue and sell to the PIPE Investors, in private placements to close immediately prior to the Closing, an aggregate of 35,000,000 shares of common stock at $10.00 per share, for an aggregate purchase price of $350,000,000.www.virtualshareholdermeeting.com/SMFR2022SM.
A majority of the voting power of all outstanding shares of capital stock of the Company entitled to vote must be present in person or by proxy to constitute a quorum for the transaction of business at the Special Meeting. The Board recommends that you vote “FOR” each of these proposals.
By Order of the Board of Directors,
Eli Casdin/s/ Jason Ryan
Jason Ryan
Chief Executive OfficerChairman
New York, New YorkStamford, Connecticut
                                 [          ], 2021March 31, 2022


TABLE OF CONTENTS
Page
SUMMARY TERM SHEET
1
FREQUENTLY USED TERMS
74
QUESTIONS AND ANSWERS ABOUT THE PROPOSALS FOR STOCKHOLDERS
127
SUMMARY OF THE PROXY STATEMENT
29
44
47
4917
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
5126
RISK FACTORS
5227
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
11591
COMPARATIVE SHARE INFORMATION
12699
SPECIAL MEETING OF COMPANY STOCKHOLDERS
127100
THE ACQUISITION
105
PROPOSAL NO. 1 — APPROVAL OF- THE BUSINESS COMBINATIONSTOCK CONSIDERATION ISSUANCE PROPOSAL
135147
PROPOSAL NO. 2 —- THE NASDAQ STOCK ISSUANCEPIPE INVESTMENT PROPOSAL
176148
PROPOSAL NO. 3 —- THE CHARTER APPROVALSPECIAL DESIGNEE DIRECTOR ELECTION PROPOSAL
179149
PROPOSAL NO. 4 — APPROVAL OF CERTAIN GOVERNANCE PROVISIONS IN- THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATIONCHARTER AMENDMENT PROPOSAL
181150
PROPOSAL NO. 5 — APPROVAL OF- THE INCENTIVE PLANCLASS I DIRECTOR ELECTION PROPOSAL
183153
PROPOSAL NO. 6 — APPROVAL OF EMPLOYEE STOCK PURCHASE PLAN- THE AUDITOR RATIFICATION PROPOSAL
188156
PROPOSAL NO. 7 — THE DIRECTOR ELECTION PROPOSAL
191
193
194
195
THE COMPANY'S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
208158
SEMA4’S BUSINESS
217159
SEMA4’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
244185
GENEDX’S BUSINESS
209
GENEDX’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
213
EXECUTIVE COMPENSATION OF SEMA4
273217
228
234
236
MANAGEMENT AFTER THE BUSINESS COMBINATIONACQUISITION
279241
DESCRIPTIONCORPORATE GOVERNANCE OF SECURITIESSEMA4
286243
300247
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
304248
REPORT OF THE AUDIT COMMITTEE
255
BENEFICIAL OWNERSHIP OF SECURITIES
256
259
MARKET PRICE, TICKER SYMBOL AND DIVIDEND INFORMATION
311259
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
312260
APPRAISAL RIGHTS
312260
HOUSEHOLDING INFORMATION
312260
TRANSFER AGENT AND REGISTRAR
312260
SUBMISSION OF STOCKHOLDER PROPOSALS
312260
FUTURE STOCKHOLDER PROPOSALS
312260
WHERE YOU CAN FIND MORE INFORMATION
313261
SEMA4 HOLDING CORP. INDEX TO FINANCIAL STATEMENTS
F-1
i

1GENEDX. INC.AND SUBSIDIARY INDEX TOCOMBINED CARVE OUT FINANCIAL STATEMENTS
F-41
ANNEX A
A-1i
B-1
ANNEX C
C-1
ANNEX D
D-1
ANNEX EPROXY CARD
E-1
E-12
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PROXY STATEMENT FOR THE SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON
APRIL 27, 2022
The board of directors (the “Board”) of Sema4 Holdings Corp., a Delaware corporation (“we,” “us”, “our”, “Sema4” or the “Company”), is soliciting proxies for use at a special meeting of the stockholders to be held on April 27, 2022 at 9:00 a.m. Eastern time (the “SpecialMeeting”).
SUMMARY TERM SHEET
This summary term sheet, together with the sections entitled “Questions and Answers About the Proposals for Stockholders” and “Summary of the Proxy Statement,” summarizes certain information contained in this proxy statement, but does not contain all of the information that is important to you. You should carefully read this entire proxy statement, including the attached Annexes, for a more complete understanding of the matters to be considered at the Special Meeting. In addition, for definitions used commonly throughout this proxy statement, including this summary term sheet, please see the section entitled “Frequently Used Terms.”
•CM Life Sciences, Inc., a Delaware corporation, which we refer to as “we,” “us,” “our,” “CMLS” or the “Company,” is a special purpose acquisition company (“SPAC”) formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.
•There are currently 55,343,750 shares of Class A and Class B common stock, par value $0.0001 per share, of the Company, issued and outstanding, consisting of (i) 44,275,000 public shares, and (ii) 11,068,750 Founder Shares held by our Initial Stockholders (each share of Sema4 Class B common stock issued and outstanding immediately prior to the effective time will be converted into 1/100th of a share of Sema4 Class A common stock as set forth in the Merger Agreement). There are currently no shares of Company preferred stock issued and outstanding. In addition, we have 14,758,333 public warrants to purchase common stock (originally sold as part of the units issued in our IPO) outstanding along with 7,236,667 private placement warrants issued to our Sponsor in a private placement concurrently with our IPO (which up to a maximum of 33% of private placement warrants may be automatically cancelled immediately prior to Closing pursuant to the Forfeiture Agreement; for additional information on the potential forfeiture of private placement warrants by the Sponsor, see the section entitled “The Business Combination Proposal — Related Agreements — Forfeiture Agreement”.). Each warrant entitles its holder to purchase one share of our Class A common stock at an exercise price of $11.50 per whole share, to be exercised only for a whole number of shares of our Class A common stock. The warrants will become exercisable 30 days after the completion of the Business Combination, and they expire five years after the completion of the Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation. Once the warrants become exercisable, the Company may redeem the outstanding public warrants at a price of $0.01 per warrant, if the last reported sales price of the Company’s Class A common stock equals or exceeds $18.00 per share for any 20 trading days within a 30 trading day period ending on the third trading day prior to the date on which we give notice of such redemption and provided certain other conditions are met. For more information regarding the public warrants, please see the section entitled “Description of Securities.”
•Sema4 is a patient-centered, health intelligence company with a mission to use artificial intelligence, or AI, and machine learning to enable personalized medicine for all. By leveraging leading data scientists and technology, the company’sCompany’s platform powers remarkable and unique insights that transform the practice of medicine including how disease is diagnosed, treated, and prevented.
•Today, Sema4 has established one of the largest, most comprehensive, and fastest growing integrated health information platforms, collecting and leveraging genomic and clinical data in partnership with patients, healthcare providers and an extensive ecosystem of life science industry contributors. Sema4 is now generating and processing over 30 petabytes of data per month, growing by almost 1 petabyte per month, and maintains a database that includes more than 11.5 million de-identified clinical records, many with genomic profiles, integrated in a way that enables physicians to proactively diagnose and manage disease. This expanding database is a virtuous cycle of data: new data enables Sema4 to further develop, train, and refine predictive models and drive differentiated insights, which models and insights Sema4 deploys through its next generation diagnostic and research solutions and portals to support clinicians and researchers and engage patients, all of which interactions generate more data to continue the cycle. For more information about Sema4,the Company, please see the sections entitled “Sema4’s Business,”�� “Sema4’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Management after the Business CombinationAcquisition.”
•There were 244,727,239 shares of Class A common stock, par value $0.0001 per share (“Class A common stock”), of the Company, issued and outstanding as of February 22, 2022. There were no shares of Company preferred stock issued and outstanding as of February 22, 2022. In addition, the Company had 21,994,972 public and private warrants to purchase Class A common stock outstanding as of February 22, 2022.
•GeneDx, Inc. (“GeneDx”), a wholly-owned subsidiary of OPKO Health, Inc. (“OPKO”), is a patient-centric health information company and leader in delivering clinical genomic answers to an ever-increasing community of patients, families and healthcare providers. With more than 20 years of experience in diagnosing rare disorders and diseases, GeneDx has pioneered panels, exome and whole genome sequencing and has developed a proprietary genomic interpretation and information services platform in support of healthcare partners and patients globally. For more information about GeneDx, please see the sections entitled “GeneDx’s Business,” “GeneDx’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Management after the Acquisition”.
•On January 14, 2022, the Company, Orion Merger Sub I, Inc. (“Merger Sub I”), a wholly-owned subsidiary of the Company, and Orion Merger Sub II, LLC (“Merger Sub II” and together with Merger Sub I, “Merger Subs”), a wholly-owned subsidiary of the Company, entered into the Agreement and Plan of Merger and Reorganization dated January 14, 2022 (the “Merger Agreement”), by and among the Company, GeneDx, OPKO, Merger Subs, and GeneDx Holding 2, Inc., which will own 100% of GeneDx at the Effective Time (as defined herein) (“HoldCo”). The transactions contemplated by the Merger Agreement, including the Mergers (as defined below), are referred to herein as the “Acquisition”.
•Pursuant to the terms of the Merger Agreement, Merger Sub I will merge with and into HoldCo (the “First Merger”), with HoldCo being the surviving entity of the First Merger and immediately following the First Merger, HoldCo will merge with and into Merger Sub II, with Merger Sub II being the surviving entity of this second merger (the “Second Merger” and, together with the First Merger, the “Mergers”). After giving effect to the Acquisition and the other transactions contemplated by the Merger Agreement, GeneDx will have been converted into a Delaware limited liability company and be a wholly-owned indirect subsidiary of the Company. The Mergers are intended to qualify for federal income tax purposes as a tax-free reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended.
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•Subject to the terms and conditions of the Merger Agreement, each sharethe Company will pay consideration to OPKO for the Acquisition of Sema4 Class B common stock issued and outstanding immediately prior(i) $150 million in cash at the closing of the Acquisition (the “Closing”), subject to certain adjustments as provided in the effective time will be converted into 1/100thMerger Agreement (the “Cash Consideration”), (ii) 80 million shares of a share of Sema4 Class A common stock as set forth(the “Stock Consideration”), to be issued at the Closing and (iii) up to $150 million payable in cash and/or shares following the Merger Agreement. Immediately thereafter,Closing, if certain revenue-based milestones are achieved for each share of Sema4 Common Stockthe fiscal years ending December 31, 2022 and Sema4 Preferred Stock (other than Excluded SharesDecember 31, 2023 (the “Milestone Payments”).
•Each Milestone Payment, if and Dissenting Shares) 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 merger consideration, with each Sema4 Stockholder being entitled to receive (collectively, clauses (i) through (iii), the “merger consideration”) (i) its pro rata share of the Closing Available Cash if such Sema4 Stockholder has made an election to receive cash, and, if further elected, such Sema4 Stockholder’s pro rata share excess amount of any closing available excess cash, provided that in no event will a Sema4 Stockholder’s cash payment exceed an amount equal to the product of such Sema4 Stockholder’s total outstanding shares multiplied by the Per Share Amount; (ii) a number of shares of Company Class A common stock equal to the quotient of: (A)(1) the product of (x) such Sema4 Stockholder’s total outstanding shares multiplied by the Per Share Amount minus (2) such Sema4 Stockholder’s stockholder cash payment amount divided by (B) $10.00; and (iii) its earn out pro rata share of any earn out shares to which such Sema4 Stockholder is entitled pursuant toextent earned under the terms of the Merger Agreement, (the “Earnout”), includingwill be satisfied through the Earnout RSUs, which Earnout RSUs are subject to vesting and will not be legally issued and outstanding shares of Company common stock at the closing of the Business Combination (the “Closing”), in each case of clauses (i), (ii) and (iii), without interest, upon surrender of stock certificates representing all of such Sema4 Stockholder’s Sema4 Common Stock and Sema4 Preferred Stock and delivery of the other documents required pursuant to the Merger Agreement. As of the effective time, each Sema4 Stockholder shall cease to have any other rights in and to Sema4 and each certificate relating to ownership of shares of Sema4 Common Stock and Sema4 Preferred Stock (other than Excluded Shares) will only represent the right to receive the applicable portion of the merger consideration.
Following the Closing, within five Business Days after the occurrencepayment and/or issuance of a Triggering Event, the Company shall issue or cause to be issued to the Sema4 Stockholders (other than holderscombination of Dissenting Shares)cash and the Earn-Out Service Providers, the following shares of Company Class A common stock (which shall be equitably adjusted for stock splits, reverse stock splits, stock dividends, reorganizations, recapitalizations, reclassifications, combination, exchange(valued at $4.86 per share based on the average of shares or other like change or transaction with respect to Companythe daily volume average weighted price of the Company’s Class A common stock occurring on or afterover the Closing,period of 30 trading days ended January 12, 2022), with such mix to be determined in the Company’s sole discretion. If the Milestone Payment in respect of the fiscal year ending December 31, 2022 becomes payable in full, then the Milestone Payment in respect of the fiscal year ending December 31, 2023 is subject to acceleration upon the occurrence of an Acquirer Change in Control, as further described in the Merger Agreement.
•Concurrently with the execution of the Merger Agreement, the Company entered into subscription agreements (collectively, the “Earn-Out SharesSubscription Agreements”), upon with certain institutional investors (collectively, the “PIPE Investors”). The PIPE Investors include certain existing equity holders of the Company, some of whom own more than 5% of the outstanding shares of Class A common stock and some of whom are affiliated with certain directors of the Company. Pursuant to, and on the terms and subject to the conditions set forth in the Merger Agreement and other related agreements: (i) upon the occurrence of, Triggering Event I, a one-time issuance of a number of Earn-Out Shares equal to 3.66% of the Earn-Out Total Outstanding Shares; (ii) upon the occurrence of Triggering Event II, a one-time issuance of a number of Earn-Out Shares equal to 3.67% of the Earn-Out Total Outstanding Shares; and (iii) upon the occurrence of Triggering Event III, a one-time issuance of a number of Earn-Out Shares equal to 3.67% of the Earn-Out Total Outstanding Shares. Upon the last day of any calendar year, the Company shall issue or cause to be issued to the Sema4 Stockholders (other than holders of Dissenting Shares) and the Earn-Out Service Providers the Earn-Out Shares that are in the Forfeiture Pool as in effect as of such date and that would have been issuable to Sema4 Stockholders as a result of the occurrence of a Triggering Event had they not been made subject to an award of Earnout RSUs.
Sema4 Stockholders and the Earn-Out Service Providers shall be entitled to receive Earn-Out Shares upon each Triggering Event, provided, however that each Triggering Event may only occur once, if at all, and in no event shall the Sema4 Stockholders and Earn-Out Service Providers, in the aggregate, be entitled to receive more than an aggregate number of Earn-Out Shares equal to more than 11% of the Earn-Out Total Outstanding Shares. Earn-Out Shares will be issued from the Forfeiture Pool only if the applicable Triggering event occurs.
•The PIPE Investors, including certain stockholders of Sema4, have agreed to purchase 35,000,000 shares of common stock in the aggregate, for $350,000,000 of gross proceeds. In connection with the Business Combination, the Company entered into the Subscription Agreements, with the PIPE Investors, including certain stockholders of Sema4 and certain affiliates of our Sponsor, pursuant to which, among other things, the Company agreed to issue and sell to the PIPE Investors, in private placements to close immediately
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prior tosubstantially concurrently with the Closing, an aggregate of 35,000,00050 million shares of Class A common stock at $10.00$4.00 per share, for an aggregate gross purchase price of $350,000,000.$200 million (the “PIPE Investment,” and together with the Acquisition, the “Transactions”), before fees and expenses. The Company expects to fund the payment of the Cash Consideration in part with the net proceeds of the PIPE Investors may assign their commitments under the Subscription Agreements to purchaseInvestment.
Based on an aggregate of 242,647,604 shares of ourClass A common stock to one or moreoutstanding as of our affiliates.
It is anticipated that,December 31, 2021, upon completion of the Business Combination:Transactions, at the Closing, the Company expects that: (i) the Company’s public stockholders (other than(including any shares owned by PIPE Investors prior to the PIPE Investors)Transactions) will retain an ownership interestown approximately 65.1% of approximately 18.6% in the post-combination company;outstanding shares of Class A common stock; (ii) the PIPE Investors (excluding any shares owned by the PIPE Investors prior to the Transactions) will own approximately 12.2% (excluding certain PIPE Investors, who owned shares pre-transaction)13.4% of the post-combination company (such that public stockholders, including PIPE Investors,outstanding shares of Class A common stock; and (iii) OPKO will own approximately 30.8% (adding the foregoing 2 subsets)21.5% of the post-combination company); (iii) our Initial Stockholders (including our Sponsor) will own approximately 23.2% of the post-combination company; and (iv) the former Sema4 equity holders are expected to hold, in the aggregate, approximately 64.6% of the issued and outstanding shares of CompanyClass A common stock. The foregoing percentage excludes 29,120,955 options for the purchase of 29,120,955 shares of Company common stock, which are authorized and subject to stock options but will not yet be issued at closing, as further described in the pro forma capitalization table in the section entitled “Unaudited Pro Forma Condensed Combined Financial Information — Description of the Transaction.”
Upon the effective time, each outstanding and unsettled restricted stock unit in respect of shares of Sema4 Common Stock, option to purchase Sema4 Common Stock and unvested restricted share of Sema4 Common Stock will be rolled over into restricted stock units, options, or restricted shares, respectively, of common stock in accordance with the terms of the Merger Agreement.
•The ownership percentage with respect to the post-combination company following the Business Combination does not take into account (i) warrants to purchase common stock that will remain outstanding immediately following the Business Combination, (ii) the issuance of any shares upon completion of the Business Combination under the Incentive Plan or the ESPP, copies of which are attached to this proxy statement as Annex D and Annex E, respectively or (iii) the issuance of any Earn-Out Shares. If the actual facts are different than these assumptions, the percentage ownership retained by the Company’s existing stockholders in the post-combination company will be different. For more information, please see the sections entitled “Summary of the Proxy Statement — Impact of the Business Combination on the Company’s Public Float,” “Unaudited Pro Forma Condensed Combined Financial Information,” “Proposal No. 5 — Approval of the Incentive Plan” and “Proposal No. 6 — Approval of the ESPP.”
•The Sponsor Support Agreement provides that, our Sponsor will vote their shares of common stock in favor of the Business Combination, be bound by certain other covenants and agreements related to the Business Combination and be bound by certain transfer restrictions with respect to their shares of common stock prior to the closing of the Business Combination.
•The Forfeiture Agreement provides that, our Sponsor, subject to certain limitations and in accordance with the terms of the agreement, forfeit up to 33% of its warrants for Class A common stock and shares of its class B common our company subject to an amount tied to the actual exercise of redemption rights by stockholders of our company in connection with the Business Combination.
•Our management and Board considered various factors in determining whether to approve the PIPE Investment, Merger Agreement and the Business Combination.Acquisition. For more information about ourthe Company’s decision-making process, see the section entitled “Proposal No. 1 — Approval of the Business Combination — The Company’sAcquisition—Sema4 Board of Directors’ Reasons for the Approval of the Business CombinationAcquisition.”
•Pursuant to our current certificate of incorporation, in connection with the Business Combination, holders of our public shares may elect to have their public shares redeemed for cash at the applicable redemption price per share calculated in accordance with our current certificate of incorporation. As of December 31, 2020, the estimated per share redemption price would have been approximately $10.00. If a holder exercises its redemption rights, then such holder will be exchanging its shares of our common stock for cash and will no longer own shares of the post-combination company and will not participate in the future growth of the post-combination company, if any. Such a holder will be entitled to receive cash for its public
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shares only if it properly demands redemption and delivers its shares (either physically or electronically) to our Transfer Agent, Continental Stock Transfer & Trust Company, at least two business days prior to the Special Meeting. Please see the section entitled “Special Meeting of Company Stockholders — Redemption Rights.”
•In addition to voting on the proposal to adopt the Merger Agreement and approve the transactions contemplated thereunder, including the Business Combination, atAt the Special Meeting, the stockholders of the Company will be asked to vote on:
◦Proposal No. 2 —1 - The Nasdaq Stock Consideration Issuance Proposal —- To approve for purposes of complying with applicable listing rules of Nasdaq, the issuance of more than 20% of the Company’s outstandingClass A common stock in connection with the Business CombinationAcquisition and as contemplated by the Merger Agreement for purposes of complying with the Nasdaq listing rules (the “Nasdaq Listing Rules”);
◦Proposal No. 2 - The PIPE Investment Proposal - To approve the issuance of the Class A common stock in connection with the PIPE Investment and as contemplated by the Subscription Agreements including up to 35,000,000 sharesfor purposes of our common stock tocomplying with the PIPE Investors;Nasdaq Listing Rules;
◦Proposal No. 3 - The Special Designee Director Election Proposal  —- Assuming the Stock Consideration Issuance Proposal and the Charter Amendment Proposal are approved and adopted and the Acquisition is consummated, to appoint two directors who will become directors of the Company effective upon the consummation of the Acquisition;
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◦Proposal No. 4 - The Charter ApprovalAmendment Proposal —- To adopt an Amendment (the “Amendment”) to the proposedThird Amended and Restated Certificate of Incorporation of the Company, in the form attached hereto as Annex B;B (the “Charter”), which increases the number of authorized shares of Class A common stock from 380,000,000 to 1,000,000,000;
Proposal No. 4◦ — Governance Proposal — To approve, on a non-binding advisory basis, a separate proposal with respect to certain governance provisions in the Amended and Restated Certificate of Incorporation in accordance with SEC requirements;
Proposal No. 5 - The Class I Director Election Proposal— Incentive Plan Proposal — - To approve the Incentive Plan, including the authorizationelect three Class I directors of the initial share reserve under the Incentive Plan;
Proposal No. 6 — ESPP Proposal — To approve the ESPP, including the authorization of the initial share reserve under the ESPP;
Proposal No. 7 — The Director Election Proposal — To consider and vote upon a proposal to elect 9 directorsCompany, each to serve on the post-combination company’s board of directors, each for a three-year term expiring at the 2024Company’s 2025 annual meeting of stockholders orand until such director’s successor has beenis duly elected and qualified, or until such director’s earlier death, resignation, retirement or removal; alternatively, inqualified;
◦Proposal No. 6 - The Auditor Ratification Proposal - To ratify the event the condition precedent proposals, including the Charter Approval Proposal, are not approved, to elect two directorsappointment of Ernst & Young LLP as Class I directors on the Company’s board of directors, each to serveindependent registered public accounting firm for a term of three years expiring at the annual meeting of stockholders to be held in 2024 or until such director’s successor has been duly elected and qualified, or until such director’s earlier death, resignation, retirement or removal;fiscal year ending December 31, 2022; and
◦Proposal No. 8 —7 - Adjournment Proposal —- To approve, if necessary, the adjournment of the Special Meeting to a later date or dates to permit further solicitation and votes of proxies in the event that there are insufficient votes for, or otherwise in connection with the approvalany of the Business Combination Proposal, the Nasdaq Stock Issuance Proposal, the Charter Approval Proposal, the Incentive Plan Proposal or the ESPP Proposal. This proposal will only beproposals presented at the Special Meeting if there are not sufficient votes to approve the Business Combination Proposal, the Nasdaq Stock Issuance Proposal, the Charter Approval Proposal, the Incentive Plan Proposal or the ESPP Proposal.
Proposal No. 9 — Auditor Ratification Proposal --- The ratification of Withum as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020.Meeting.
•Please see the sections entitled “Proposal“Proposal No. 1 — Approval of the Business Combination,- The Stock Consideration Issuance Proposal,” “Proposal No. 2 —- The Nasdaq Stock IssuancePIPE Investment Proposal,” “Proposal No. 3 —- The Charter Approval Proposal,” “Proposal No. 4 — Approval of Certain Governance Provisions in the Amended and Restated Certificate of Incorporation,” “Proposal No. 5 — Approval of the Incentive Plan,” “Proposal No. 6 — Approval of the ESPP,” “Proposal No. 7 – TheSpecial Designee Director Election Proposal,” “Proposal No. 8 —4 - The AdjournmentCharter Amendment Proposal,” “Proposal No. 5 - The Class I Director Election Proposal,” “Proposal No. 6 - The Auditor Ratification Proposal,” and “Proposal No. 9 ---7 - The Auditor RatificationAdjournment Proposal.” ProposalsThe PIPE Investment Proposal and the Special Designee Director Election Proposal are conditioned upon stockholders’ approval of the Stock Consideration Issuance Proposal and the Charter Amendment Proposal.
•In connection with the Acquisition, OPKO and the Company have entered into support agreements (the “Support Agreements”) with certain stockholders of the Company (including certain stockholders that own more than 5% of the outstanding shares of Class A common stock and certain entities affiliated with the Company’s directors), whereby such stockholders have agreed to, among other things, vote at the Special Meeting all of their shares of Class A common stock held of record or beneficially (i) to approve the Stock Consideration Proposal, the PIPE Investment Proposal, the Special Designee Director Election Proposal, the Charter Amendment Proposal and the Adjournment Proposal; (ii) to approve any other proposal included in this proxy statement (other thanthat is recommended by the Governance Proposal,Board as necessary to consummate the Auditor Ratification ProposalTransactions; and (iii) against any and all other proposals that could reasonably be expected to delay or impair the Adjournment Proposal) are conditioned on the approvalability of the Business Combination Proposal.Company to consummate the Transactions.
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•The Merger Agreement may be terminated at any time prior to the consummation of the Business CombinationAcquisition upon agreement of the parties thereto, or by the Company or Sema4OPKO in specified circumstances. For more information about the termination rights under the Merger Agreement, please see the section entitled “Proposal No. 1 The Acquisition— Approval of the Business Combination — The Merger Agreement—Termination.”
•The proposed Business CombinationAcquisition involves numerous risks. For more information about these risks, please see the section entitled “Risk Factors.”
•In considering the recommendation of our Board to vote in favor of the Business Combination, stockholders should be aware that aside from their interests as stockholders, our Sponsor and its affiliates and certain members of our Board and officers have interests in the Business Combination that are different from, or in addition to, those of other stockholders generally. Our Board was aware of and considered these interests, among other matters, in evaluating and negotiating the Business Combination, and in recommending to stockholders that they approve the Business Combination. Stockholders should take these interests into account in deciding whether to approve the Business Combination. These interests include, among other things:
•the fact that our Initial Stockholders have agreed not to redeem any of the Founder Shares in connection with a stockholder vote to approve the Business Combination;
•the fact that our Initial Stockholders will retain 11,068,750 Founder Shares upon the Closing;
•the fact that our Initial Stockholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if we fail to complete an initial business combination by the applicable deadline;
•if the Trust Account is liquidated, including in the event we are unable to complete an initial business combination within the required time period, our Sponsor has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into an acquisition agreement or claims of any third party (other than our independent public accountants) for services rendered or products sold to us, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account;
•the continued indemnification of our existing directors and officers and the continuation of our directors’ and officers’ liability insurance after the Business Combination;
•the fact that Joshua Ruch, Michael Pellini and Rachel Sherman may join as board members of the post-combination company (dependent on the approval of the Director Election Proposal) and Nat Turner, Emily Leproust and Eli Casdin will continue as board members of the post-combination company, and each shall be entitled to receive compensation for serving on the board of directors of the post-combination company;
•the fact that our Sponsor, officers and directors will lose their entire investment in us and will not be reimbursed for any out-of-pocket expenses if an initial business combination is not consummated by the applicable deadline;
•that Corvex Master Fund LP, Corvex Select Equity Master Fund LP, Corvex Dynamic Equity Select Master Fund LP, and JS Capital LP, funds that are advised by an affiliate of the Sponsor, have entered into Subscription Agreements with the Company, pursuant to which such affiliates have committed to purchase 240,000; 3,696,000; 64,000; and 500,000 shares of common stock in the PIPE Investment, respectively, for an aggregate commitment of approximately $2,400,000; $36,960,000; $640,000; $5,000,000, respectively; and
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•that Casdin Partners Master Fund, L.P., a fund that is advised by an affiliate of the Sponsor, has entered into a Subscription Agreement with the Company, pursuant to which the affiliate has committed to purchase 5,000,000 shares of common stock in the PIPE Investment for an aggregate commitment of approximately $50,000,000.
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FREQUENTLY USED TERMS
Unless otherwise stated or unless the context otherwise requires, the terms “we,“we,” “us,“us,” “our,“our,” the “Company”“Company” and “CMLS”“Sema4” refer to CM Life Sciences, Inc.Sema4 Holdings Corp., a Delaware corporation, and the term “post-combination company” refers to the company following the consummation of the Business Combination.corporation. In this proxy statement:
“Aggregate Sema4 Share Amount” shall mean the sum, without duplication, of (a) the aggregate number of shares of Sema4 Common Stock that are issued and outstanding immediately prior to the effective time, (b) the aggregate number of shares of Sema4 Common Stock that are issuable upon the exercise of Sema4 Options or vesting of Sema4 RSUs or other direct or indirect rights to acquire shares of Sema4 Common Stock that are issued and outstanding immediately prior to the effective time (and in the case of Sema4 SARs, the aggregate number of shares of Sema4 Common Stock on which the value of such Sema4 SARs is based), in each case calculated on a treasury stock basis and after giving effect to the conversion of the Class B common stock pursuant to the mandatory conversion notice under the organizational documents of Sema4, and (c) the aggregate number of shares of Sema4 Common Stock that would be issuable upon the conversion all shares of Sema4 Preferred Stock into shares of Sema4 Common Stock pursuant to the organizational documents of Sema4; provided that, for the avoidance of doubt, the Earnout RSUs shall be disregarded for the purpose of the Aggregate Sema4 Share Amount.
“Amended and Restated Certificate of IncorporationAcquisition” means the transactions contemplated by the Merger Agreement, including the Mergers.
“Amendment” means the proposed Amended and Restated Certificate of Incorporation ofAmendment to the Company,Charter, a form of which, as amended in accordance with the proposal contained in this proxy statement is attached hereto as Annex B, which will become the post-combination company’s certificate of incorporation upon the approval of the Charter Approval Proposal, assuming the consummation of the Business Combination.
“applicable deadline” means November 9, 2021.B.
“Board” or “Board of Directors” means the board of directors of the Company.
“Business CombinationCash Consideration” means the transactions contemplated$150 million in cash to be paid by the Company to OPKO at the Closing pursuant to the Merger Agreement, includingsubject to certain adjustments as provided in the Merger.Merger Agreement.
“Class A common stock” means the shares of Class A common stock, par value $0.0001 per share, of the Company.
“Class B common stock” means the shares of Class B common stock, par value $0.0001 per share, of the Company.
“Closing” means the closing of the Business Combination.Acquisition.
“Code” means the Internal Revenue Code of 1986, as amended.
“Common Share Price” shall mean the share price equal to the VWAP of one share of Company common stock as reported on Nasdaq (or the exchange on which the shares of Company common stock are then listed) 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 (as adjusted as appropriate to reflect any stock splits, reverse stock splits, stock dividends (including any dividend or distribution of securities convertible into Company common stock), extraordinary cash dividend (which adjustment shall be subject to the reasonable mutual agreement of Company and Sema4), reorganization, recapitalization, reclassification, combination, exchange of shares or other like change or transaction with respect to Company common stock).
“common stock” or “Company common stock” means (i) prior to the consummation of the Business Combination, the shares of Class A common stock and Class B common stock of the Company and (ii) upon the consummation of the Business Combination and the automatic conversion of the shares of Class B common stock into shares of Class A common stock, the shares of Class A common stock of the Company.
“Company” means CM Life Sciences, Inc., a Delaware corporation.
“current certificate of incorporationCharter” means our sixth amendedThird Amended and restated certificateRestated Certificate of incorporation,Incorporation, dated as of July 27, 2020.22, 2021.
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“D.F. King” means D.F. King & Co., Inc., proxy solicitor to the Company.
“DGCL” means the General Corporation Law of the State of Delaware.
“Earnout Condition” means the condition in the Merger Agreement specifying that the Sema4 Stockholders (other than holders of Dissenting Shares) and Earn-Out Service Providers will receive the following Earn-Out shares (i) upon the occurrence of Triggering Event I, a one-time issuance of a number of Earn-Out Shares equal to 3.66% of the Earn-Out Total Outstanding Shares; (ii) upon the occurrence of Triggering Event II, a one-time issuance of a number of Earn-Out Shares equal to 3.67% of the Earn-Out Total Outstanding Shares; (iii) upon the occurrence of Triggering Event III, a one-time issuance of a number of Earn-Out Shares equal to 3.67% of the Earn-Out Total Outstanding Shares; and (iv) upon the last day of any calendar year, a one-time issuance of the Earn-Out Shares in the Forfeiture Pool as in effect as of such date that would have been issuable to Sema4 Stockholders as a result of the occurrence of a Triggering Event had they not been subject to an award of Earnout RSUs.
“Earn-Out Total Outstanding Shares” means the aggregate number of shares of Company common stock to which holders of Sema4 Common Stock and Sema4 Preferred Stock would be entitled under Section 2.7(a)(ii) of the Merger Agreement if none made a Cash Election and the Closing Cash Payment was $0 (as each such term is defined in the Merger Agreement.
“Earn-Out Period” shall mean the time period beginning upon the expiration of the Founder Shares Lock-Up Period (as such term is defined in and pursuant to the terms of that certain Letter Agreement, dated September 1, 2020, entered into by and among the Company, Sponsor and certain of the Company’s current and former officers and directors) and ending on the 2-year anniversary of the Closing Date (as defined herein).
“Earn-Out Service Provider” shall mean each (a) holder of a Company Option, Company RSU, Company SAR, other than any holder of a Company Option, Company RSU or Company SAR who is not employed by or providing services to the Company as of the Effective Time (as defined herein), and (b) each other employee or individual service provider of the Company, in each case whom the board of directors of the Company designates as an Earn-Out Service Provider prior to the Closing and who enters into an Earn-Out Award Agreement.
“Earn-Out Shares” means the shares of Company Class A common stock that the Company shall issue or cause to be issuedissuable pursuant to the Sema4 Stockholders (other than holdersPrior Merger Agreement upon the achievement of Dissenting Shares) andcertain vesting conditions.
“Effective Time” means the Earn-Out Service Providers, which shall be equitably adjusted for stock splits, reverse stock splits, stock dividends, reorganizations, recapitalizations, reclassifications, combination, exchange of shares or other like change or transaction with respect to Company Class A common stock occurring on or aftertime the Closing.First Merger becomes effective.
“ESPP” means the Sema4 Holdings CorpCorp. 2021 Employee Stock Purchase Plan.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Forfeiture Agreement” means that certain Sponsor Forfeiture Agreement entered into on February 9, 2021, between the Company and Sponsor, pursuant to which the Sponsor has agreed to forfeit certain shares of private placement warrants and Founder Shares, as applicable.
“Founder SharesFirst Merger” means the 11,068,750 sharesmerger of Class B common stock that are currently owned by our Initial Stockholders, of which 10,993,750 shares are held by our Sponsor, 25,000 shares are held by Mr. Islam, 25,000 shares are held by Dr. LeproustMerger Sub I with and 25,000 shares are held by Mr. Turner, which shares of Class B common stock will automatically convert into Class A common stockHoldCo, with HoldCo as the surviving corporation in connection with the consummation of the Business Combination.First Merger.
“GAAP” means United States generally accepted accounting principles.
“GeneDx” means GeneDx, Inc., a New Jersey corporation.
“GeneDx Group” means (x) GeneDx and its subsidiaries as of the date of the Merger Agreement and (y) immediately following consummation of the Pre-Closing Restructuring, HoldCo and its direct subsidiary, GeneDx Delaware LLC, together with the subsidiaries of GeneDx Delaware LLC immediately following the Pre-Closing Restructuring.
“GeneDx Parties” means (x) GeneDx and HoldCo as of the date of the Merger Agreement until immediately prior to consummation of the Pre-Closing Restructuring and (y) HoldCo and GeneDx Delaware LLC following consummation of the Pre-Closing Restructuring.
“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
“Incentive PlanHoldCo” means GeneDx Holding 2, Inc., which will own 100% of GeneDx immediately following the Sema4 Holdings Corp 2021 Equity Incentive Plan.Effective Time.
“Initial Stockholders” means our Sponsor together with Mr. Islam, Dr. Leproust and Mr. Turner.
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“Investment Company Act” means the Investment Company Act of 1940, as amended.
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“IPO2021 EIP”” means the Company’s initial public offering, consummated on September 4, 2020, of 44,275,000 units (including 5,775,000 units that were subsequently issued to the underwriters in connection with the partial exercise of their over-allotment option) at $10.00 per unit.Sema4 Holdings Corp. 2021 Equity Incentive Plan.
“JOBS Act” means the Jumpstart Our Business Startups Act of 2012.
“leader,,” “leading,“leading,” “industry-leading,“industry-leading,” and other similar statements included in this proxy statement and, in particular, in the sections entitled “Summary“Summary Term Sheet,,” “Summary“Summary of the Proxy Statement,,” “Proposal No. 1 — Approval of the“The Acquisition,” “Sema4’s Business, Combination,” “Sema4’s Business” and “Sema4’s“Sema4’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “GeneDx’s Business” and “GeneDx’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding (i) Sema4 and its products and services are based on Sema4’s belief in its competitive advantages in data, analytics and patient and provider engagement, in particular with respect to Sema4’s diagnostic solutions and genomic platform.platform and (ii) GeneDx and its products and services are based on Sema4’s belief in GeneDx’s competitive advantages in the rare disease diagnostics market. Sema4 bases its beliefs regarding these matters, including its estimates of its and GeneDx’s respective market share in its sector, on itsSema4’s collective institutional knowledge and expertise regarding its and GeneDx’s industries, markets and technology, which are based on, among other things, publicly available information, reports of government agencies, RFPs and the results of contract bids and awards, and industry research firms, and information supplied to Sema4 by GeneDx, as well as Sema4’s internal research, calculations and assumptions based on its analysis of such information and data. Sema4 believes these assertions to be reasonable and accurate as of the date of this proxy statement.
“Lock-Up Holder” means certain stockholders of OPKO who entered into the Shareholder Agreements with Sema4.
“Merger Agreement” means that certain Agreement and Plan of Merger and Reorganization, dated as of February 9, 2021,January 14, 2022, by and among the Company, Merger Sub I, Merger Sub II, GeneDx, OPKO, and Sema4 as amended by the Amendment to Agreement and Plan of Merger dated May 3, 2021.Holdco.
“Merger Consideration” means the merger of Merger Sub withCash Consideration and into Sema4, with Sema4 continuing as the surviving company.Stock Consideration.
“Merger Sub I” means S-IVOrion Merger Sub I, Inc.
“Merger Sub II” means Orion Merger Sub II, LLC.
“Merger Subs” means Merger Sub I and Merger Sub II.
“Mergers” means the First Merger and the Second Merger.
“Milestone Payments” means the up to $150 million payable by the Company to OPKO pursuant to the Merger Agreement following the Closing, if certain revenue-based milestones are achieved for each of the fiscal years ending December 31, 2022 and December 31, 2023. Each Milestone Payment, if and to the extent earned under the terms of the Merger Agreement, will be satisfied through the payment and/or issuance of a combination of cash and shares of Class A common stock (valued at $4.86 per share based on the average of the daily volume average weighted price of the Company’s Class A common stock over the period of 30 trading days ended January 12, 2022), with such mix to be determined in the Company’s sole discretion.
“Nasdaq” means the Nasdaq Stock Market.
“NYSEOPKO” means the New York Stock Exchange LLC.
“Per Share Amount” shall mean the quotient, rounded to the nearest one-tenth of a cent, obtained by dividing (a) the $2,000,000,000.00 by (b) the Aggregate Sema4 Share Amount.OPKO Health, Inc.
“PIPE Investment” means the private placement pursuant to which the PIPE Investors have collectively subscribed for 35,000,000 shares of common stockthe PIPE Shares at $10.00$4.00 per share, for an aggregate purchase price of $350,000,000.$200 million.
“PIPE Investors” means certain institutional investors that willhave committed to invest in the PIPE Investment.Investment pursuant to, and on the terms and subject to the conditions of, the Subscription Agreements.
“PIPE Shares” means the 35,000,00050 million shares of Class A common stock to be issued in the PIPE Investment.
“private placement warrantsPre-Closing Restructuring” meanshas the warrants held by our Sponsor that were issuedmeaning ascribed to our Sponsor in connection with our IPO, each of which is exercisable for three-quarters of one share of common stock, in accordance with its terms.
“public shares” means shares of common stock includedit in the units issued in our IPO.
“public stockholders” means holders of public shares, including our Initial Stockholders to the extent our Initial Stockholders hold public shares; provided, that our Initial Stockholders are considered a “public stockholder” only with respect to any public shares held by them.
“public units” means the units sold in our IPO, consisting of one share of common stock and one public warrant of the Company.Merger Agreement.
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“public warrantsPrior Merger Agreement” means the warrants included in the public units issued in our IPO, eachthat certain Agreement and Plan of which is exercisable for three-quartersMerger, dated as of one share of common stock, in accordance with its terms.February 9, 2021, as amended, by and among CM Life Sciences, Inc., S-IV Sub, Inc. and Mount Sinai Genomics, Inc. d/b/a Sema4.
“Related Agreements” means, collectively, the Amended and Restated Registration Rights Agreement,Shareholder Agreements, the Sponsor Support Agreement, the Forfeiture Agreement, the Stockholder Lock-up Letter, the ISMMS Lock-Up Agreement, the Inside Letter,Subscription Agreements and the SubscriptionSupport Agreements.
“RSUs” means restricted stock units granted under the Incentive Plan in accordance with the terms of the Merger Agreement.
“SAR Exchange Ratio” shall mean the quotient, rounded2017 EIP, 2021 EIP or pursuant to the nearest one ten-thousandth, of (i) the Per Share Amount divided by (ii) $10.00.Prior Merger Agreement.
“SEC” means the United States Securities and Exchange Commission.
“Second Merger” means the merger of HoldCo, as the surviving corporation in the First Merger, with and into Merger Sub II, with Merger Sub II as the surviving company.
“Securities Act” means the Securities Act of 1933, as amended.
“Sema4Shareholder Agreements” means, Mount Sinai Genomics, Inc. d/b/a Sema4, a Delaware corporation.
“Sema4 capital stock” means Sema4 Class A common stock, par value $0.00001 per share, Class B common stock, par value $0.00001 per share, Series A-1 preferred stock, par value $0.00001 per share, series A-2 preferred stock, $0.00001 per share, series B preferred stock, $0.00001 per share,collectively, those certain shareholder agreements entered into on January 14, 2022, between the Company and series C preferred stock, $0.00001 per share in each case, that is issuedOPKO and outstanding immediately prior to the Closing.
“Sema4 Common Stock” shall mean the Class A common stock (after giving effect to the conversion of the Class B common stockLock-Up Holders, pursuant to a mandatory conversion notice underwhich OPKO and the organizational documentsLock-Up Holders have agreed, among other things, to certain transfer restrictions in respect of Sema4).
“Sema4 equity holder” means each holder of Sema4 capital stock or a vested equity award.
“Sema4 Incentive Plan” means the Sema4 2017 Stock Incentive Plan, as amended from time to time.
“Sema4 Option” shall mean an option to purchase shares of Class A common stock or Class B common stock granted underto be issued pursuant to the Sema4 Incentive Plan.
“Sema4 Preferred Stock” means Sema4’s Series A-1 Preferred Stock, par value $0.00001; Series A-2 Preferred Stock, par value $0.00001; Series B Preferred Stock, par value $0.00001; and Series C Preferred Stock, par value $0.00001.
“Sema4 RSU” shall mean a restricted stock unit representingMerger Agreement, which agreement is substantially in the opportunityform attached as Exhibit A to acquire shares of Class B common stock granted under the Sema4 Incentive Plan.
“Sema4 SAR” shall mean a stock appreciation right with respect to shares of Sema4 Common Stock granted under the Sema4 Incentive Plan.Merger Agreement in Annex A hereto.
“SOX” means the Sarbanes-Oxley Act of 2002.
“Special Meeting” means the special meeting of the stockholders of the Company (in lieu of the 2022 annual meeting of stockholders) that is the subject of this proxy statement.
“Sponsor” means CMLS Holdings LLC, a Delaware limited liability company.
“Stock Consideration” means the 80 million shares of Class A common stock to be issued by the Company to OPKO at the Sema4 equity holdersClosing pursuant to the transactions contemplated byMerger Agreement.
“stockholders” means holders of shares of the Merger Agreement, including any Earn-Out Shares issuable pursuant to Article III thereof.Company’s Class A common stock.
“Subscription Agreements” means, collectively, those certain subscription agreements entered into on February 9, 2021,January 14, 2022, between the Company and certain investors, including our Sponsor,the PIPE Investors, pursuant to which such investors have
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agreed to purchase an aggregate of 35,000,000 shares of common stockthe PIPE Shares in the PIPE Investment on the terms and subject to the conditions of the Subscription Agreements, and substantially in the form attached hereto as Annex C.D.
“Support Agreements” means, collectively, those certain support agreements entered into on January 14, 2022, between OPKO, the Company and certain stockholders of the Company, pursuant to which stockholders have agreed to, among other things, vote all of their shares of Class A common stock held of record or beneficially at the Special Meeting (i) to approve the Stock Consideration Proposal, the PIPE Investment Proposal, the Special Designee Director Election Proposal, the Charter Amendment Proposal and the Adjournment Proposal, and substantially in the form attached hereto as Exhibit B to the Merger Agreement in Annex A.
“Transfer Agent” means Continental Stock Transfer & Trust Company.
“Triggering Event I” shall occur if, within the Earn-Out Period, the Common Share Price is greater than or equal to $13.00 per share.
“Triggering Event II” shall occur if, within the Earn-Out Period, the Common Share Price is greater than or equal to $15.00 per share.
“Triggering Event III” shall occur if, within the Earn-Out Period, the Common Share Price is greater than or equal to $18.00 per share.
“Triggering Events” shall mean Triggering Event I, Triggering Event II and Triggering Event III, collectively.
“Trust Account” means the trust account of the Company that holds the proceeds from the Company’s IPO and a portion of the proceeds from the sale of the private placement warrants.
“VWAP” means, for any security as of any date(s), the dollar volume-weighted average price for such security on the principal securities exchange or securities market on which such security is then traded during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg through its “HP” function (set to weighted average) or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported by OTC Markets Group Inc. If the VWAP cannot be calculated for such security on such date(s) on any of the foregoing bases, the VWAP of such security on such date(s) shall be the fair market value per share on such date(s) as reasonably determined by the Company.
“Withum” means WithumSmith+Brown, PC, the Company’s independent registered public accounting firm.
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QUESTIONS AND ANSWERS ABOUT THE PROPOSALS FOR STOCKHOLDERS
The questions and answers below highlight only selected information from this documentproxy statement and only briefly address some commonly asked questions about the proposals to be presented at the Special Meeting, including with respect to the proposed Business Combination.Stock Consideration Issuance Proposal. The following questions and answers do not include all the information that is important to our stockholders. We urge stockholders to carefully read this entire proxy statement, including the Annexes and the other documents referred to herein, to fully understand the proposed Business Combinationproposals and the voting procedures for the Special Meeting, which will be held on [                    ] , 2021April 27, 2022 at [           ]9:00 a.m. Eastern time.
Q: Why am I receiving this proxy statement?
A: Our stockholders are being asked to consider and vote upon a proposal to adopt the Merger Agreement and approve the transactions contemplated thereby, including the Business Combination, among other proposals. We have entered into the Merger Agreement, pursuant to which the Company’s wholly owned subsidiary will merge with and into Sema4, with Sema4 surviving the merger as a wholly owned subsidiary of the Company. Subject to the terms of the Merger Agreement, at the effective time of the Business Combination, each share of Sema4 capital stock issued and outstanding immediately prior to the effective time of the Business Combination (other than shares owned by Sema4 as treasury stock or dissenting shares) will be cancelled and automatically deemed for all purposes to represent the right to receive a portion of the merger consideration set forthproposals described in the Merger Agreement. A copy of the Merger Agreement is attached to this proxy statement as Annex A.statement.
This proxy statement and its Annexes contain important information about the proposed Business Combinationproposals and the other matters to be acted upon at the Special Meeting. You should read this proxy statement and its Annexes carefully and in their entirety.
Your vote is important. You are encouraged to submit your proxy as soon as possible after carefully reviewing this proxy statement and its Annexes.
Q: When is the Special Meeting?
A: The Special Meeting will be held on [                ] , 2021April 27, 2022 at [            ]9:00 a.m. Eastern time. In light of ongoing developments related to the coronavirus (COVID-19),(“COVID-19”) pandemic, after careful consideration, the Company has determined that the Special Meeting will be a virtual meeting conducted exclusively via live webcast in order to facilitate stockholder attendance and participation while safeguarding the health and safety of our stockholders, directors and management team. You or your proxyholder will be able to attend the virtual Special Meeting online, vote, view the list of stockholders entitled to vote at the special meetingSpecial Meeting and submit questions during the Special Meeting by visiting https://www.cstproxy.com/CMLS/sm2021www.virtualshareholdermeeting.com/SMFR2022SM and using a control number assigned by Continental Stock Transfer & Trust Company. To register and receive access to the virtual meeting, registered stockholders and beneficial stockholders (those holding shares through a stock brokerage account or by a bank or other holder of record)nominee) will need to follow the instructions applicable to them provided in thethis proxy statement. Because the special meetingSpecial Meeting is completely virtual and being conducted via live webcast, stockholders will not be able to attend the meeting in person.
Q: How can I attend and vote at the Special Meeting?
Any stockholder wishing to attend the virtual meeting should register for the meeting by [            ], 2021. To register for the Special Meeting, please follow these instructions as applicable to the nature of your ownership of our common stock:A:
•If your shares are registered in your name with Continental Stock Transfer & Trust Company and you wish to attend the Special Meeting, go to https://www.cstproxy.com/CMLS/sm2021,www.virtualshareholdermeeting.com/SMFR2022SM, and enter the 12-digit control number included on your proxy card or notice of the meeting and click on the “Click here to preregister for the online meeting” link at the top of the page. Just prior to the start of the meeting you will need to log back into the meeting site using your control number. Pre-registration is recommended but is not required in order to attend.meeting.
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•Beneficial stockholders (those holding shares through a stock brokerage account or by a bank or other holder of record)nominee) who wish to attend the Special Meeting must obtain a legal proxy by contacting their account representative at the bank, broker, or other nominee that holds their shares and e-mail a copy (a legible photograph is sufficient) of their legal proxy to proxy@continentalstock.com. Beneficial stockholders who e-mail a valid legal proxy will be issued a 12-digit meeting control number that will allow them to register to attend and participate in the Special Meeting. After contacting Continental Stock Transfer & Trust Company, a beneficial holder will receive an e-mail prior to the meeting with a link and instructions for entering the virtual meeting. Beneficial stockholders should contact Continental Stock Transfer & Trust Company at least five (5) business days prior to the meeting date in order to ensure access.
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Q: What are the specific proposals on which I am being asked to vote on at the Special Meeting?
A: You are being asked to consider and vote on proposals to:
1.Proposal No. 1 —- The Business CombinationStock Consideration Issuance Proposal —- To approve the issuance of the Company’s Class A common stock in connection with the Acquisition and adoptas contemplated by the Merger Agreement a copyfor purposes of which is attached to this proxy statement as Annex A, and approve the transactions contemplated thereby, including the merger of Merger Subcomplying with and into Sema4, with Sema4 surviving the merger as a wholly owned subsidiary of the Company, and the issuance of common stock to Sema4 equity holders as merger consideration;applicable Nasdaq Listing Rules;
2.Proposal No. 2 —- The Nasdaq Stock IssuancePIPE Investment Proposal— - To approve for purposes of complying with applicable listing rules of Nasdaq, the issuance of more than 20% of the Company’s outstandingClass A common stock in connection with the Business CombinationPIPE Investment and as contemplated by the Subscription Agreements including up to 35,000,000 sharesfor purposes of our common stock tocomplying with the PIPE;Nasdaq Listing Rules;
3.Proposal No. 3 —- The Special Designee Director Election Proposal - Assuming the Stock Consideration Issuance Proposal and the Charter Amendment Proposal are approved and adopted and the Acquisition is consummated, to appoint two directors who will become directors of the Company effective upon the consummation of the Acquisition;
4.Proposal No. 4 - The Charter ApprovalAmendment Proposal— - To adopt the proposed Amended and Restated Certificate of IncorporationAmendment to the Charter, in the form attached hereto as Annex B;
4.Proposal No. 4 — Governance Proposal— To approve, on a non-binding advisory basis, a separate proposal with respectB, which increases the number of authorized shares of Class A common stock from 380,000,000 to certain governance provisions in the Amended and Restated Certificate of Incorporation in accordance with SEC requirements;1,000,000,000;
5.Proposal No. 5 — Incentive Plan- The Class I Director Election Proposal —- To approve the Incentive Plan, including the authorizationelect three Class I directors of the initial share reserve underCompany, each to serve a three-year term expiring at the Incentive Plan;Company’s 2025 annual meeting of stockholders and until such director’s successor is duly elected and qualified;
6.Proposal No. 6 — ESPP- The Auditor Ratification Proposal —- To approveratify the ESPP, includingappointment of Ernst & Young LLP as the authorization ofCompany’s independent registered public accounting firm for the initial share reserve under the ESPP;fiscal year ending December 31, 2022; and
7.Proposal No. 7 — The Director Election- Adjournment Proposal — To consider and vote upon the Director Election Proposal; and
8.Proposal No. 8 — Adjournment Proposal —- To approve, if necessary, the adjournment of the Special Meeting to a later date or dates to permit further solicitation and votes of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approvalany of the Business Combination Proposal, the Nasdaq Stock Issuance Proposal, the Charter Approval Proposal, the Incentive Plan Proposal or the ESPP Proposal. This proposal will only beproposals presented at the Special Meeting if there are not sufficient votes to approveMeeting.
Q: How does the Business Combination Proposal,Board recommend that I vote?
A: The Board recommends that the Nasdaqstockholders of the Company vote:
•“FOR” the Stock Consideration Issuance Proposal,Proposal;
•“FOR” the PIPE Investment Proposal;
•“FOR” each of the Special Designee Directors;
•“FOR” the Charter Approval Proposal, the Incentive Plan Proposal or the ESPP Proposal.Amendment Proposal;
9.•Proposal No. 9 -—“FOR” each of the Class I director nominees;
•“FOR” the Auditor Ratification ProposalProposal; and
—• The ratification of Withum as“FOR” the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020.Adjournment Proposal
Q: Are certain of the proposals conditioned on one another?
A: Yes. Under the Business CombinationMerger Agreement, the approval of the condition precedent proposalsStock Consideration Issuance Proposal and the Charter Amendment Proposal presented at the Special Meeting is a condition to the consummation of the Business Combination. The adoption
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of each condition precedent proposal in this proxy statement (other thanAcquisition, and the Governance Proposal, the Auditor RatificationPIPE Investment Proposal and the Adjournment Proposal) is conditioned on the approval of all of the condition precedent proposals. The election of the directors to a one-year term in theSpecial Designee Director Election Proposal is conditioned on the approval of the condition precedent proposals, including the Charter Approval Proposal. If our stockholders do not approve of each of the condition precedent proposals, the Business Combination may not be consummated. Therefore, approval of the Nasdaq Stock Issuance Proposal, the Charter Approval Proposal, the Incentive Plan Proposal and the ESPP Proposal are conditioned upon stockholders’ approval of the Business Combination Proposal. Moreover, the transactions contemplated by the Merger Agreement will be consummated only if the Business Combination Proposal, the Nasdaq Stock Consideration Issuance Proposal and the Charter Approval Proposal, the Incentive Plan Proposal and ESPP Proposal are approved at the Special Meeting.Amendment Proposal.
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It is important for you to note that in the event that the Business Combination Proposal, the Nasdaq Stock Consideration Issuance Proposal, the Charter Approval Proposal or the Incentive PlanCharter Amendment Proposal do not receive the requisite vote for approval (including following any adjournments), we will not consummate the Business Combination. If we do not consummate the Business Combination and fail to complete an initial business combination by the applicable deadline, we will be required to dissolve and liquidate our Trust Account by returning the then remaining funds in such account to the public stockholders.
Q: Why is the Company providing stockholders with the opportunity to vote on the Business Combination?
A: Under our current certificate of incorporation, we must provide all holders of public shares with the opportunity to have their public shares redeemed upon the consummation of our initial business combination either in conjunction with a tender offer or in conjunction with a stockholder vote. For business and other reasons, we have elected to provide our stockholders with the opportunity to have their public shares redeemed in connection with a stockholder vote, rather than a tender offer. Therefore, we are seeking to obtain the approval of our stockholders of the Business Combination Proposal in order to allow our public stockholders to effectuate redemptions of their public shares in connection with the Closing. The adoption of the Merger Agreement is required under Delaware law and the approval of the Business Combination is required under our current certificate of incorporation. In addition, such approval is also a condition to the Closing under the Merger Agreement.Acquisition.
Q: What will happen in the Business Combination?Acquisition?
A: Pursuant to the Merger Agreement, Sema4 will become a wholly-owned subsidiary of the Company as a result of the Company’s wholly owned subsidiary, Merger Sub mergerI, will merge with and into Sema4,HoldCo, with Sema4Holdco as the surviving entity. HoldCo will then immediately merge into the Company’s wholly owned subsidiary, Merger Sub II, with Merger Sub II surviving the merger as a wholly owned subsidiary of the Company.
Q: Following The Company will pay consideration to OPKO for the Business Combination, willAcquisition of (i) $150 million in cash at the Company’s securities continueClosing, subject to trade on a stock exchange?
A: Yes. We intend to apply to listcertain adjustments as provided in the post-combination company’sMerger Agreement, (ii) 80 million shares of Class A common stock, to be issued at the Closing and warrants on Nasdaq under(iii) up to $150 million payable in cash and/or shares following the symbol “SMFR” and “SMFRW,” respectively, upon the Closing. Our units will automatically separate into the component securities upon consummationClosing, if certain revenue-based milestones are achieved for each of the Business Combinationfiscal years ending December 31, 2022 and as a result, will no longer trade as a separate security.December 31, 2023.
Q: How has the announcement of the Business CombinationAcquisition affected the trading price of the Company’s Class A common stock?stock and warrants?
A: On February 9, 2021,January 14, 2022, the trading date before the public announcement of the Business Combination,Acquisition, the Company’s units,Class A common stock and public warrants closed at $16.96, $15.52$4.04 and $4.70,$0.75, respectively. On June 25, 2021,March 30, 2022 the trading date immediately prior to the date of this proxy statement, the Company’s units,Class A common stock and public warrants closed at $14.25, $12.66$3.12 and $4.48,$0.69, respectively.
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Q: How will the Business CombinationAcquisition and the PIPE Investment impact the shares of the CompanyCompany’s Class A common stock outstanding after the Business Combination?Transactions?
A: AfterAt the Business CombinationClosing, the issuance of the Stock Consideration and the consummation of the transactions contemplated thereby, including the PIPE Investment,Shares will increase the amount of Class A common stock issued and outstanding will increase to approximately 238,266,485by 130,000,000 shares of Class A common stock (excluding warrants and assuming that no shares of common stock are redeemed).stock. Additional shares of Class A common stock may also be issuableissued in the future as a result ofpursuant to the issuance of additional shares that are not currently outstanding, including the issuance of shares of common stock upon exercise or settlement of the public warrants, private placement warrants, options and RSUs issuedMerger Agreement in connection with the Business Combination after the Business Combination.Milestone Payments. The issuance and sale of such shares in the public market could adversely impact the market price of our Class A common stock, even if our business is doing well.
Q: Is the Business Combination the first step in a “going private” transaction?
A: No. The Company does not intend for the Business Combination to be the first step in a “going private” transaction. One of the primary purposes of the Business Combination is to provide a platform for Sema4 to access the U.S. public markets.
Q: Will the management of Sema4the Company change in the Business Combination?Acquisition?
A: We anticipate that all of the executive officers of Sema4GeneDx will remain with the post-combination company. The current directorsbecome employees of the Company following the Acquisition. In addition, pursuant to the Merger Agreement, Katherine Stueland, the current Chief Executive Officer of GeneDx, will resign at the timebecome co-Chief Executive Officer of the Business Combination, other than Nat Turner, Emily Leproust and Eli Casdin, who have been nominated by the CMLS to serve as directors of the post-combination company upon completion of the Business Combination. The remaining director nominees will be designated by the Company inCompany. In accordance with the terms of the Merger Agreement.Agreement and following the Closing, the Specified Designees (as defined in the Merger Agreement) will join our Board. Please see the sections entitled “Management After the Business CombinationAcquisition” and “Proposal No. 7 — The Director Election ProposalAcquisition” for additional information.
Q: What equity stake will current stockholders of the Company, the PIPE Investors and the Sema4 equity holdersOPKO hold in the post-combination company after the Closing?
A: It is anticipated that,Based on an aggregate of 242,647,604 shares of Class A common stock outstanding as of December 31, 2021, upon completion of the Business Combination, assuming no redemptions:Transactions, at the Closing, the Company expects that: (i) the Company’s public stockholders (other than(including any shares owned by PIPE Investors prior to the PIPE Investors)Transactions) will retain an ownership interestown approximately 65.1% of approximately 18.6% in the post-combination company;outstanding shares of Class A common stock; (ii) the PIPE Investors (excluding any shares owned by the PIPE Investors prior to the Transactions) will own approximately 12.2% (excluding certain PIPE Investors, who owned shares pre-transaction)13.4% of the post-combination company (such that public stockholders, including PIPE Investors,outstanding shares of Class A common stock; and (iii) OPKO will own approximately 30.8% (adding the foregoing 2 subsets)21.5% of the post-combination company); (iii) our Initial Stockholders (including our Sponsor) will own approximately 23.2% of the post-combination company; and (iv) the former Sema4 equity holders are expected to hold, in the aggregate, approximately 64.6% of the issued and outstanding shares of CompanyClass A common stock. The foregoing percentage excludes 29,120,955 options for the purchase of 29,120,955 shares of Company common stock, which are authorized and subject to stock options but will not yet be issued at closing, as further described in the pro forma capitalization table in the section entitled “Unaudited Pro Forma Condensed Combined Financial Information — Description of the Transaction.”
The ownership percentage with respect to the post-combination company following the Business Combination does not take into account (i) warrants to purchase common stock that will remain outstanding immediately following the Business Combination, (ii) the issuance of any shares upon completion of the Business Combination under the Incentive Plan or the ESPP, copies of which are attached to this proxy statement as Annex D and Annex E, respectively and (iii) the issuance of Earn-Out Shares. If the actual facts are different than these assumptions, the percentage ownership retained by the Company’s existing stockholders in the post-combination company will be different. For more information, please see the sections entitled “Summary of the Proxy Statement — Impact of the Business Combination on the Company’s Public Float,” “Unaudited Pro Forma Condensed Combined Financial Information,” “Proposal No. 5 — Approval of the Incentive Plan” and “Proposal No. 6 — Approval of the ESPP.”
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Q: Will the Company obtain new financing in connection with the Business Combination?Acquisition?
A: Yes. The PIPE Investors have agreed to purchase 35,000,00050 million shares of Class A common stock in the aggregate, for $350,000,000$200 million of gross proceeds, pursuant to the Subscription Agreements. TheConsummation of the PIPE Investment pursuant to the Subscription Agreements areis contingent upon, among other things, stockholder approval
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of the Business CombinationPIPE Investment Proposal and the Closing.Closing of the Acquisition being scheduled to occur substantially concurrently with or immediately following the closing of the PIPE Investment. However, consummation of the PIPE Investment is not a condition to the Closing of the Acquisition. See “Proposal No. 1 The Acquisition— Approval of the Business Combination — Related Agreements—Subscription Agreements.” The Company does not currently anticipate obtaining any new debt financing to fund the Business Combination.Acquisition.
Q: What conditions must be satisfied to complete the Business Combination?Acquisition?
A: There are a number of closing conditions in the Merger Agreement, including the approval by the stockholders of the Company of the Business Combination Proposal, the Nasdaq Stock Consideration Issuance Proposal, the Charter Approval Proposal, the Incentive Plan Proposal and the ESPPCharter Amendment Proposal. For a summary of the conditions that must be satisfied or waived prior to completion of the Business Combination,Acquisition, please see the section entitled “Proposal No. 1 The Acquisition— Approval of the Business Combination — The Merger Agreement.”
Q: Are there any arrangements to help ensure that the Company will have sufficient funds together withto pay the proceeds in its Trust Account and from the PIPE Investment,Cash Consideration?
A: The Company expects to fund the aggregate purchase price?
A: Unless waived by Sema4,payment of the Merger Agreement provides that Sema4’s obligation to consummate the Business Combination is conditioned on the funds in the Trust Account, togetherCash Consideration with the funding of any amounts payable under the Subscription Agreements, being equal to no less than an aggregate amount of $300,000,000 after payment of redemptions and Company and Sema4 transaction expenses. The PIPE Investors have agreed to purchase approximately 35,000,000 shares of common stock at $10.00 per share for gross proceeds to the Company of approximately $350,000,000 pursuant to Subscription Agreements entered into at the signing of the Merger Agreement. The PIPE Investment is contingent upon, among other things, stockholder approval of the Business Combination Proposal and the Closing.
The Company will use thenet proceeds of the PIPE Investment together withand cash on hand.
In addition, the funds inCompany will use the Trust Account,net proceeds of the PIPE Investment and cash on hand to pay the Cash Consideration and certain fees, costs and expenses (including regulatory fees, legal fees, accounting fees, printer fees and other professional fees) that were incurred by the Company and other parties to the Merger Agreement in connection with the transactions contemplated by the Merger Agreement, including the Business Combination,Acquisition, and pursuant to the terms of the Merger Agreement. The Company additionally has cash and cash equivalents of $400.6 million as of December 31, 2021 and $125.0 million of available credit under its existing senior secured credit facility.
Q: Why is the Company proposing the Nasdaq Stock Consideration Issuance Proposal?
A: We are proposingThe approval of the Nasdaq Stock Consideration Issuance Proposal in orderis required under Nasdaq Listing Rules. In addition, the approval of the Stock Consideration Issuance Proposal is a condition to comply withthe Closing under the Merger Agreement.
Pursuant to Nasdaq Listing Rule s 5635(a) and (d), which require stockholder approval is required prior to the Company’s issuance of certain transactions that resultClass A common stock or other securities convertible into or exercisable for Class A common stock, in connection with the acquisition of the stock or assets of another company and (i) the Class A common stock has, or will have upon issuance, voting power equal to or in excess of 20% of the voting power outstanding before the issuance of 20%such securities, or more(ii) the number of shares of Class A common stock to be issued is or will be equal to or in excess of 20% of the outstanding voting power ornumber of shares of Class A common stock outstanding before the issuance of stock orsuch securities.
In connection with the Business Combination,Acquisition, we have agreed to issue 80 million shares of Class A common stock in respect of with the payment of the Stock Consideration. We may also issue, in our sole discretion, a maximum of up to approximately 30.9 million shares of Class A common stock in connection with the potential Milestone Payments. We also expect to issue (i) up to 147,922,735an aggregate of 50 million shares of Class A common stock at the Closing in the Business Combination, and (ii) approximately 35,000,000 shares of common stock inconnection with the PIPE Investment.Investment, which is related to the Acquisition. Because we may issue 20% or more of our outstanding Class A common stock when considering together the Stock Consideration, and the PIPE Investment and the potential Milestone Payments, we are required to obtain stockholder approval of such issuanceissuances pursuant to Nasdaq Listing Rule s 5635(a). For more information, please see the section entitled “Proposal No. 1 - The Stock Consideration Issuance Proposal.”
Q: Why is the Company proposing the PIPE Investment Proposal?
A: We are also proposing the PIPE Investment Proposal in order to comply with Nasdaq Listing Rule 5635(a), as the issuance of the PIPE Shares is occurring in connection with the Acquisition.
As described above, because we may issue 20% or more of our outstanding Class A common stock when considering together the Stock Consideration, the PIPE Investment and (d)the potential Milestone Payments, we are
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required to obtain stockholder approval of such issuances pursuant to Nasdaq Listing Rule 5635(a). For more information, please see the section entitled “Proposal No. 2 —- The Nasdaq Stock IssuancePIPE Investment Proposal.”
Q: Why is the Company proposing the Charter ApprovalSpecial Designee Director Election Proposal?
A: The AmendedAssuming the Stock Consideration Issuance Proposal and Restated Certificate of Incorporation that wethe Charter Amendment Proposal are askingapproved and adopted and the Acquisition is consummated, our stockholders are being asked to adoptappoint two directors, Katherine Stueland and Richard C. Pfenniger, Jr., who will become directors of the Company effective upon consummation of the Acquisition. The Company believes it is in connection with the Business Combination (the “Charter Approval Proposal” or “Proposal No. 3”) provides for certain amendmentsbest interests of stockholders to our existing certificateallow stockholders to vote upon the election of incorporation. Pursuant to Delaware law andnewly appointed directors. In addition, the inclusion of this proposal is a requirement under the Merger Agreement, we are required to submit the Charter Approval Proposal to the Company’s stockholders for
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adoption. For additional information pleaseAgreement. Please see the section entitled “Proposal No. 3 —- The Charter ApprovalSpecial Designee Director Election Proposal.”
Q: Why is the Company proposing the Governance Proposal?
A: As required by applicable SEC guidance, the Company is requesting that its stockholders vote upon, on a non-binding advisory basis, a proposal to approve certain governance provisions contained in the Amended and Restated Certificate of Incorporation that materially affect stockholder rights. This separate vote is not otherwise required by Delaware law separate and apart from the Charter Approval Proposal (Proposal No. 3), but pursuant to SEC guidance, the Company is required to submit these provisions to its stockholders separately for approval. However, the stockholder vote regarding this proposal is an advisory vote, and is not binding on the Company or its board of directors. Furthermore, the Business Combination is not conditioned on the separate approval of the Governance Proposal. For additional information, please see the section entitled “Proposal No. 4 — Approval of Certain Governance Provisions in the Amended and Restated Certificate of Incorporation.”
Q: Why is the Company proposing the Incentive Plan Proposal?
A: The purpose of the Incentive Plan Proposal is to further align the interests of the eligible participants with those of stockholders by providing long- term incentive compensation opportunities tied to the performance of the Company. Please see the section entitled “Proposal No. 5 — Approval of the Incentive Plan” for additional information.
Q: Why is the Company proposing the ESPPCharter Amendment Proposal?
A: The purpose ofAmendment that we are asking our stockholders to adopt in connection with the ESPP Proposal isother proposals provides for an amendment to provide eligible employees with an opportunityour Charter to increase their proprietary interest in the successnumber of the Company by purchasingauthorized shares of our Class A common stock on favorable terms andfrom 380,000,000 to pay for such purchases through payroll deductions. The Company believes by providing eligible employees with an opportunity1,000,000,000. Pursuant to increase their proprietary interest inDelaware law, we are required to submit the success of the Company, the ESPP will motivate participants to offer their maximum effortCharter Amendment Proposal to the Company and help focus them onCompany’s stockholders for adoption. In addition, such approval is also a condition to the creation of long-term value consistent withClosing under the interests of the Company’s stockholders.Merger Agreement. For moreadditional information about the ESPP, please see the section entitled “Proposal No. 6 — Approval of the ESPP4 - The Charter Amendment Proposal.”.
Q: Why is the Company proposing the Class I Director Election Proposal?
A: AssumingWe are holding the condition precedent proposals, includingSpecial Meeting in lieu of our 2022 annual meeting of stockholders. Pursuant to our Charter, the Charter Approval Proposal, are approved, uponinitial term of office of the Closing,Company’s Class I directors would otherwise expire at our 2022 annual meeting of stockholders. Accordingly, our stockholders are also being asked to elect ninethree Class I directors to serve on the post-combination company’s board of directorsBoard each for a three-year term or until such director’s successor has been duly elected and qualified, or until such director’s earlier death, resignation, retirement or removal; alternatively, in the event the condition precedent proposals, including the Charter Approval Proposal, are not approved, to elect two directors to serve as Class I directors on the Company’s Board, each for a term of three years expiring at the annual meeting of stockholders to be held in 2024 or until such director’s successor has been duly elected and qualified, or until such director’s earlier death, resignation, retirement or removal. The Company believes it is in the best interests of stockholders to allow stockholders to vote upon the election of newly appointed directors. For additional information, please see the section entitled “Proposal No. 7 — The Director Election Proposal.”
Q: Why is the Company proposing the Adjournment Proposal?
A: We are proposing the Adjournment Proposal to allow our Board to adjourn the Special Meeting to a later date or dates to permit further solicitation of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal, the Nasdaq Stock Issuance Proposal, the Charter Approval Proposal, the Incentive Plan Proposal or the ESPP Proposal, but no other proposal if the Business Combination Proposal, the Nasdaq Stock Issuance Proposal, the Charter Approval Proposal, the Incentive Plan Proposal and the ESPP Proposal are approved. Please see the section entitled “Proposal No. 8 —5 - The AdjournmentClass I Director Election Proposal” for additional information.
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Q: Why is the Company proposing the Auditor Ratification Proposal?
A: Neither our bylaws or other governing documents or law require stockholder ratification of the appointment of Withum,Ernst & Young LLP, as ourthe Company’s independent registered public accounting firm. However, the Board is submitting the appointment of WithumErnst & Young LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the Company’s audit committee will reconsider whether or not to continue to retain that firm. Even if the selection is ratified, the audit committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders. For additional information, pleasePlease see the section entitled “Proposal No. 9 —6 - The Auditor Ratification Proposal.” for additional information.
Q: Why is the Company proposing the Adjournment Proposal?
A: We are proposing the Adjournment Proposal to allow our Board to adjourn the Special Meeting to a later date or dates to permit further solicitation of proxies in the event that there are insufficient votes for, or otherwise in connection with the approval of any of the proposals presented at the Special Meeting. Please see the section entitled “Proposal No. 7 - The Adjournment Proposal” for additional information.
Q: What happens if I sell my shares of Class A common stock before the Special Meeting?
A: The record date for the Special Meeting is earlier than the date that the Business CombinationAcquisition is expected to be completed. If you transfer your shares of Class A common stock after the record date, but before the Special Meeting, unless the transferee obtains from you a proxy to vote those shares, you will retain your right to vote at the Special Meeting. However, you will not be able to seek redemption of your shares of common stock because you will no longer be able to deliver them for cancellation upon consummation of the Business Combination. If you transfer your shares of Class A common stock prior to the record date, you will have no right to vote those shares at the Special Meeting or redeem those shares for a pro rata portion of the proceeds held in our Trust Account.Meeting.
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Q: What constitutes a quorum at the Special Meeting?
A: A majority of the voting power of all outstanding shares of the capital stock of the Company entitled to vote must be present in person or by proxy (which would include presence at the virtual Special Meeting) to constitute a quorum for the transaction of business at the Special Meeting. Abstentions and broker non-votes will be counted as present for the purpose of determining a quorum. Our Initial Stockholders, who currently own approximately 20% of our issued and outstanding shares of common stock, will count towards this quorum. In the absence of a quorum, the chairman of the Special Meeting has power to adjourn the Special Meeting. As of the record date for the Special Meeting, a majority of the outstanding shares of the Company representing a majority of voting power would be required to achieve a quorum.
Q: What vote is required to approve the proposals presented at the Special Meeting?
A: Proposal No. 1 —- The Business CombinationStock Consideration Issuance Proposal: The approval of the Business CombinationStock Consideration Issuance Proposal requires the affirmative vote of a majority of the votes cast by the stockholders present in person or represented by proxy and entitled to vote at the Special Meeting. Accordingly, under Delaware law, a Company stockholder’s failure to vote, as well as an abstention from voting and a broker non-vote, will have no effect on the Business CombinationStock Consideration Issuance Proposal. Abstentions and broker non-votes will be counted in connection with the determination of whether a valid quorum is established but will have no effect on the Business Combination Proposal. Our Initial Stockholders have agreed to vote their shares of common stock “FOR” the Business Combination Proposal.established.
Proposal No. 2 —- The Nasdaq Stock IssuancePIPE Investment Proposal: The approval of the Nasdaq Stock IssuancePIPE Investment Proposal requires the affirmative vote of a majority of the votes cast by the stockholders present in person or represented by proxy and entitled to vote at the Special Meeting. Accordingly, under Delaware law, a Company stockholder’s failure to vote, as well as an abstention and broker non-vote, will have no effect on the Nasdaq Stock IssuancePIPE Investment Proposal. Abstentions and broker non-votes will be counted in connection with the determination of whether a valid quorum is established.
Proposal No. 3 —- The Charter Approval Proposal:Special Designee Director Election Proposal - The approval of the Charter Approval Proposal requires the affirmative vote of holders of a majority of our outstanding shares of common stock entitled to vote at the Special Meeting. Accordingly, a Company stockholder’s failure to vote, as well as an abstention from voting and a broker non-vote, will have the same effect as a vote “AGAINST” such Charter Approval Proposal.
Proposal 4 — The Governance Proposal: The approval of the Governance Proposal, which is a non-binding advisory vote, requires the affirmative vote of a majority of the votes cast by the stockholders present in person
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or represented by proxy and entitled to vote at the Special Meeting. Accordingly, a Company stockholder’s failure to vote, as well as an abstention from voting and a broker non-vote, will have no effect on the Governance Proposal. Abstentions will be counted in connection with the determination of whether a valid quorum is established but will have no effect on the Governance Proposal.
Proposal 5 — The Incentive Plan Proposal: The approval of the Incentive Plan Proposal requires the affirmative vote of a majority of the votes cast by the stockholders present in person or represented by proxy and entitled to vote at the Special Meeting. Accordingly, under Delaware law, a Company stockholder’s failure to vote by proxy, as well as an abstention and broker non-vote, will have no effect on the Incentive Plan Proposal. Abstentions will be counted in connection with the determination of whether a valid quorum is established.
Proposal 6 — The ESPP Proposal: The approval of the ESPP Proposal requires the affirmative vote of a majority of the votes cast by the stockholders present in person or represented by proxy and entitled to vote at the Special Meeting. Accordingly, under Delaware law, a Company stockholder’s failure to vote by proxy, as well as an abstention and broker non-vote, will have no effect on the ESPP Proposal. Abstentions will be counted in connection with the determination of whether a valid quorum is established.
Proposal 7 — The Director Election Proposal: The approval of theDesignee Director Election Proposal requires the affirmative vote of a majority of the votes cast by the stockholders present in person or represented by proxy and entitled to vote at the Special Meeting. Accordingly, under Delaware law, a Company stockholder’s failure to vote, by proxy, as well as an abstention and broker non-vote, will have no effect on the Special Designee Director Election Proposal. Abstentions and broker non-votes will be counted in connection with the determination of whether a valid quorum is establishedestablished.
Proposal 8 —No. 4 - The Charter Amendment Proposal: The approval of the Charter Amendment Proposal requires the affirmative vote of holders of a majority of our outstanding shares of Class A common stock entitled to vote at the Special Meeting. Accordingly, a Company stockholder’s failure to vote, as well as an abstention from voting and a broker non-vote, will have the same effect as a vote “AGAINST” such Charter Amendment Proposal.
Proposal No. 5 - The Class I Director Election Proposal - The approval of the Class I Director Election Proposal requires the affirmative vote of a majority of the votes cast by the stockholders present in person or represented by proxy and entitled to vote at the Special Meeting. Accordingly, under Delaware law, a Company stockholder’s failure to vote, as well as an abstention and broker non-vote, will have no effect on the Class I Director Election Proposal. Abstentions and broker non-votes will be counted in connection with the determination of whether a valid quorum is established.
Proposal No. 6 - The Auditor Ratification Proposal -  The approval of the Auditor Ratification Proposal requires the affirmative vote of a majority of the votes cast by the stockholders present in person or represented by proxy and entitled to vote at the Special Meeting. Accordingly, under Delaware law, a Company stockholder’s failure to vote, as well as an abstention and broker non-vote, will have no effect on the Auditor Ratification Proposal. Abstentions and broker non-votes will be counted in connection with the determination of whether a valid quorum is established.
Proposal No. 7 - The Adjournment Proposal: The approval of the Adjournment Proposal requires the affirmative vote of a majority of the votes cast by the stockholders present in person or represented by proxy and entitled to vote at the Special Meeting. Accordingly, a Company stockholder’s failure to vote, as well as an abstention from voting and a broker non-vote, will have no effect on the Adjournment Proposal. Abstentions and broker non-votes will be counted in connection with the determination of whether a valid quorum is established but will have no effect on the Adjournment Proposal.established.
Proposal 9 — The Auditor Ratification Proposal: The approval of the Auditor Ratification Proposal requires the affirmative vote of a majority of the votes cast by the stockholders present in person or represented by proxy and entitled to vote at the Special Meeting. Accordingly, a Company stockholder’s failure to vote by proxy, as well as an abstention and broker non-vote, will have no effect on the Auditor Ratification Proposal. Abstentions will be counted in connection with the determination of whether a valid quorum is established
Q: What happens if the Business Combination Proposal is not approved?
A: If the Business Combination Proposal is not approved and we do not consummate a business combination by the applicable deadline, we will be required to dissolve and liquidate our Trust Account.
Q: May the Company, its Sponsor or the Company’s directors or officers or their affiliates purchase shares in connection with the Business Combination?
A: In connection with the stockholder vote to approve the proposed Business Combination, our Sponsor, directors or officers or their respective affiliates may privately negotiate transactions to purchase shares from stockholders who would have otherwise elected to have their shares redeemed in conjunction with a proxy solicitation pursuant to the proxy rules for a per-share pro rata portion of the Trust Account. None of our directors or officers or their respective affiliates will make any such purchases when they are in possession of any material non-public information not disclosed to the seller or during a restricted period under Regulation M under the Exchange Act. Such a purchase may include a contractual acknowledgement that such selling stockholder, although still the record holder of our shares, is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights, and could include a contractual provision that directs such selling stockholder to vote such shares in a manner directed by the purchaser. In the event that our Sponsor,
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directors or officers or their affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. Any such privately negotiated purchases may be effected at purchase prices that are below or in excess of the per-share pro rata portion of the Trust Account.
Q: How many votes do I have at the Special Meeting?
A: Our stockholders are entitled to one vote on each proposal presented at the Special Meeting for each share of Class A common stock held of record as of June 21, 2021,March 22, 2022 , the record date for the Special Meeting. As of the close of business on the record date, there were [            ]245,016,425 outstanding shares of our Class A common stock.
Q: How do I vote?
A: If you were a stockholder of record on June 21, 2021,March 22, 2022, you may vote by granting a proxy. Specifically, you may vote:
•By Mail —- You may vote by mail by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided. Votes submitted by mail must be received by 11:59 pm Eastern time on [                       ], 2021.April 25, 2022.
•By Internet - You may vote through the Internet using the procedures and instructions described on the proxy card.
•You should sign your name exactly as it appears on the proxy card. If you are signing in a representative capacity (for example, as guardian, executor, trustee, custodian, attorney or officer of a corporation), indicate your name and title or capacity.
•We encourage you to sign and return the proxy card even if you plan to attend the Special Meeting virtually so that your shares will be voted if you are unable to attend the Special Meeting.
•If you receive more than one proxy card, it is an indication that your shares are held in multiple accounts. Please sign and return all proxy cards to ensure that all of your shares are voted.
•Voting at the Special Meeting —- We will be hosting the Special Meeting via live webcast. If you attend the Special Meeting, you may submit your vote at the Special Meeting online at https://www.cstproxy.com/CMLS/sm2021,www.virtualshareholdermeeting.com/SMFR2022SM, in which case any votes that you previously submitted will be superseded by the vote that you cast at the Special Meeting.
If you hold your shares in street name, you must submit voting instructions to your broker, bank or other nominee. In most instances, you will be able to do this over the Internet, by telephone or by mail. Please refer to information from your bank, broker, or other nominee on how to submit voting instructions.
Q: What will happen if I abstain from voting or fail to vote at the Special Meeting?
A: At the Special Meeting, we will count a properly executed proxy marked “ABSTAIN” with respect to a particular proposal as present for purposes of determining whether a quorum is present. For purposes of approval, a failure to vote or an abstention will have no effect on the Business CombinationStock Consideration Issuance Proposal, the GovernancePIPE Investment Proposal, the Incentive Plan Proposal, the ESPP Proposal, theSpecial Designee Director Election Proposal, the AdjournmentClass I Director Election Proposal, the Auditor Ratification Proposal and the Auditor RatificationAdjournment Proposal. However, an abstention or failure to vote will have the same effect as a vote “AGAINST” the Charter ApprovalAmendment Proposal.
Q: What will happen if I sign and return my proxy card without indicating how I wish to vote?
A: Signed and dated proxies received by us without an indication of how the stockholder intends to vote on a proposal will be voted “FOR” each proposal presented to the stockholders. The proxyholders may use their discretion to vote on any other matters which properly come before the Special Meeting.
Q: If I am not going to attend the Special Meeting, should I return my proxy card instead?
A: Yes. Whether you plan to attend the Special Meeting or not, please read the enclosed proxy statement carefully. If you are a stockholder of record of our Class A common stock as of the close of business on the record date,
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you can vote by proxy by mail or through the Internet by following the instructions provided in the enclosed proxy card. Please note that if you are a beneficial owner of our Class A common stock, you may vote by submitting
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voting instructions to your broker, bank or nominee, or otherwise by following instructions provided by your broker, bank or nominee. Telephone and internet voting may be available to beneficial owners. Please refer to the vote instruction form provided by your broker, bank or nominee.
Q: What is the difference between a stockholder of record and a “street name” holder?
A: If your shares are registered directly in your name with the Company’s transfer agent, Continental Stock Transfer & Trust Company, you are considered the stockholder of record with respect to those shares, and access to proxy materials is being provided directly to you. If your shares are held in a stock brokerage account or by a bank or other nominee, then you are considered the beneficial owner of those shares, which are considered to be held in “street name.” Access to proxy materials is being provided to you by your broker, bank or other nominee who is considered the stockholder of record with respect to those shares.
Q: If my shares are held in “street name,” will my broker, bank or nominee automatically vote my shares for me?
A: No. Under the rules of various national and regional securities exchanges, your broker, bank, or nominee cannot vote your shares with respect to non-routine matters unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank, or nominee.
We believe that all of the proposals presented to the stockholders at this Special Meeting will be considered non-routine, other than the Auditor Ratification Proposal, will be considered non-routine and, therefore, your broker, bank, or nominee cannot vote your shares without your instruction on any of the proposals presented at the Special Meeting other than the Auditor Ratification Proposal. Accordingly, if your broker submits a proxy for your shares with respect to the Auditor Ratification Proposal, but you do not submit voting instructions on the other proposals, your broker, bank, or other nominee may deliver a proxy card expressly indicating that it is NOT voting your shares; this indication that a broker, bank, or nominee is not voting your shares is referred to as a “broker non-vote.” Broker non-votes will not be counted for the purposes of determining the existence of a quorum orbut they will not be counted for purposes of determining the number of votes cast at the Special Meeting. YourExcept with respect to the Auditor Ratification Proposal, your bank, broker, or other nominee can vote your shares only if you provide instructions on how to vote. You should instruct your broker to vote your shares in accordance with directions you provide.
Q: How will a broker non-vote impact the results of each proposal?
A: Broker non-votes will count as a vote “AGAINST” the Charter ApprovalAmendment Proposal but will not have any effect on the outcome of any other proposals.
Q: May I change my vote after I have returned my signed proxy card or voting instruction form?
A: Yes. If you are a holder of record of our Class A common stock as of the close of business on the record date,Record Date, whether you vote by mail, through the Internet or by telephone you can change or revoke your proxy before it is voted at the Special Meeting by:
•delivering a signed written notice of revocation to our Secretary at CM Life Sciences, Inc.Sema4 Holdings Corp., 667 Madison Ave, New York, NY 10065,333 Ludlow Street, North Tower, 8th Floor, Stamford, Connecticut 06902, bearing a date later than the date of the proxy, stating that the proxy is revoked;
•signing and delivering a new proxy, relating to the same shares and bearing a later date;
•submitting another proxy over the Internet prior to 11:59 p.m., Eastern Time on April 26, 2022; or
•attending and voting at the Special Meeting and voting, although attendance at the special meetingSpecial Meeting will not, by itself, revoke a proxy.
If you are a beneficial owner of our Class A common stock as of the close of business on the record date, you must follow the instructions of your broker, bank or other nominee to revoke or change your voting instructions.
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Q: What should I do if I receive more than one set of voting materials?
A: You may receive more than one set of voting materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage
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account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive in order to cast your vote with respect to all of your shares.
Q: How will the Company’s Sponsor, directors and officers vote?
A: Prior to our IPO, we entered into agreements with our Sponsor and each of ourThe Company’s directors and officers pursuant to which each agreed towill vote any shares of common stock owned by themaffirmatively in favor of the Business Combination Proposal. None of our Sponsor, directors or officers has purchased any shares of our common stock during or after our IPO and, aseach of the date of this proxy statement, neither we nor our Sponsor, directors or officers have entered into agreements, and are not currently in negotiations, to purchase shares prior to the consummation of the Business Combination. Currently, our Initial Stockholders own approximately 20% of our issued and outstanding shares of common stock, including all of the Founder Shares, and will be able to vote all such shares at the Special Meeting.
Q: What interests do the Sponsor and the Company’s current officers and directors have in the Business Combination?
A: Our Sponsor and certain members of our Board and officers have interests in the Business Combination that are different from or in addition to (and which may conflict with) your interests. You should take these interests into account in deciding whether to approve the Business Combination. These interests include:
•the fact that our Initial Stockholders have agreed not to redeem any of the Founder Shares in connection with a stockholder vote to approve the Business Combination;
•the fact that our Initial Stockholders will retain 11,068,750 Founder Shares upon the Closing;
•the fact that our Initial Stockholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if we fail to complete an initial business combination by the applicable deadline;
•if the Trust Account is liquidated, including in the event we are unable to complete an initial business combination within the required time period, our Sponsor has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into an acquisition agreement or claims of any third party (other than our independent public accountants) for services rendered or products sold to us, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account;
•the continued indemnification of our existing directors and officers and the continuation of our directors’ and officers’ liability insurance after the Business Combination;
•the fact that Nat Turner, Emily Leproust and Eli Casdin will remain as board members of the post-combination company, and each may be entitled to receive compensation for serving on the board of directors of the post-combination company;
•the fact that our Sponsor, officers and directors will lose their entire investment in us and will not be reimbursed for any out-of-pocket expenses if an initial business combination is not consummated by the applicable deadline;
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•that Corvex Master Fund LP, Corvex Select Equity Master Fund LP, Corvex Dynamic Equity Select Master Fund LP, and JS Capital LP, funds that are advised by an affiliate of the Sponsor, have entered into Subscription Agreements with the Company, pursuant to which such affiliates have committed to purchase 240,000; 3,696,000; 64,000; and 500,000 shares of common stock in the PIPE Investment, respectively, for an aggregate commitment of approximately $2,400,000; $36,960,000; $640,000; $5,000,000, respectively; and
•that Casdin Partners Master Fund, L.P., a fund that is advised by an affiliate of the Sponsor, has entered into a Subscription Agreement with the Company, pursuant to which the affiliate has committed to purchase 5,000,000 shares of common stock in the PIPE Investment for an aggregate commitment of approximately $50,000,000.
These interests may influence our directors in making their recommendation that you vote in favor of the approval of the Business Combination.
Q: What happens if I vote against the Business Combination Proposal?
A: If you vote against the Business Combination Proposal but the Business Combination Proposal still obtains the affirmative vote of a majority of the votes cast by holders of our common stock represented in person or by proxy and entitled to vote at the Special Meeting, then the Business Combination Proposal will be approved and, assuming the approval of the Nasdaq Stock Issuance Proposal, the Incentive Plan Approval, the ESPP Approval and the Charter Approval Proposal and the satisfaction or waiver of the other conditions to closing, the Business Combination will be consummated in accordance with the terms of the Merger Agreement.
If you vote against the Business Combination Proposal and the Business Combination Proposal does not obtain the affirmative vote of a majority of the votes cast by holders of our of common stock represented in person or by proxy and entitled to vote at the Special Meeting, then the Business Combination Proposal will fail and we will not consummate the Business Combination. If we do not consummate the Business Combination, we may continue to try to complete a business combination with a different target business until the applicable deadline. If we fail to complete an initial business combination by the applicable deadline, then we will be required to dissolve and liquidate the Trust Account by returning the then-remaining funds in such account to our public stockholders.
Q: Do I have redemption rights?
A: Pursuant to our current certificate of incorporation, we are providing our public stockholders with the opportunity to redeem, upon the Closing, shares of common stock for cash equal to the pro rata share of the aggregate amount on deposit (as of two business days prior to the Closing) in the Trust Account that holds the proceeds of our IPO (including interest not previously released to the Company to pay franchise and income taxes), subject to certain limitations. For illustrative purposes, based on the balance of the Trust Account of approximately $442 million as of January 29    , 2021, the estimated per share redemption price would have been approximately $10.00. Public stockholders may elect to redeem their shares even if they vote for the Business Combination. Any request to redeem public shares, once made, may be withdrawn at any time until the deadline for exercising redemption requests and thereafter, with our consent, until the Closing. If we receive valid redemption requests from holders of public shares prior to the redemption deadline, we may, at our sole discretion, following the redemption deadline and until the date of Closing, seek and permit withdrawals by one or more of such holders of their redemption requests. We may select which holders to seek such withdrawals of redemption requests from based on any factors we may deem relevant, and the purpose of seeking such withdrawals may be to increase the funds held in the Trust Account, including where we otherwise would not satisfy the closing condition that the amount in the Trust Account and the proceeds from the PIPE Investment equal or exceed $300,000,000, after the payment of redemptions and satisfaction of Company and Sema4 transaction expenses.
Our Initial Stockholders have agreed to waive their redemption rights with respect to such shares, which will be excluded from the pro rata calculation used to determine the per-share redemption price. Each redemption of shares of common stock by our public stockholders will reduce the amount in the Trust Account. The Merger
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Agreement provides that Sema4’s obligation to consummate the Business Combination is conditioned on the funds in the Trust Account, together with the funding of any amounts payable under the Subscription Agreements, will be no less than an aggregate amount of $300,000,000. This condition to closing in the Merger Agreement is for the sole benefit of, and may be waived only by, Sema4. If, as a result of redemptions of common stock by our public stockholders, this condition is not met (or waived by Sema4), then Sema4 may elect not to consummate the Business Combination. In addition, in no event will we redeem shares of our common stock in an amount that would result in the Company’s failure to have net tangible assets equaling or exceeding $5,000,001 (such that we are not subject to the SEC’s “penny stock” rules). Holders of our outstanding public warrants do not have redemption rights in connection with the Business Combination. Unless otherwise specified, the information in the accompanying proxy statement assumes that none of our public stockholders exercise their redemption rights with respect to their shares of common stock by the applicable deadline.
Q: Can the Initial Stockholders redeem their Founder Shares in connection with consummation of the Business Combination?
A: No. Our Initial Stockholders, officers and directors have agreed to waive their redemption rights with respect to their shares of common stock in connection with the consummation of our Business Combination. Our Initial Stockholders have also agreed to waive their right to a conversion price adjustment with respect to any shares of our common stock they may hold in connection with the consummation of the Business Combination.
Q: Is there a limit on the number of shares I may redeem?
A: We have no specified maximum redemption threshold under our current certificate of incorporation. Each redemption of shares of common stock by our public stockholders will reduce the amount in the Trust Account. The Merger Agreement provides that Sema4’s obligation to consummate the Business Combination is conditioned on the funds in the Trust Account, together with the funding of any amounts payable under the Subscription Agreements, being no less than an aggregate amount of $300,000,000. This condition to closing in the Merger Agreement is for the sole benefit of, and may be waived only by, Sema4. If, as a result of redemptions of common stock by our public stockholders, this condition is not met (or waived by Sema4), then Sema4 may elect not to consummate the Business Combination. In addition, in no event will we redeem shares of our common stock in an amount that would result in the Company’s failure to have net tangible assets equaling or exceeding $5,000,001 (so that we are not subject to the SEC’s “penny stock” rules).
Q: Is there a limit on the total number of shares that may be redeemed?
A: Yes. Our current certificate of incorporation provides that we may not redeem our public shares in an amount that would result in the Company’s failure to have net tangible assets in excess of $5,000,000 (such that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the Merger Agreement. Other than this limitation, our current certificate of incorporation does not provide a specified maximum redemption threshold. In addition, the Merger Agreement provides that the obligation of Sema4 to consummate the Business Combination is conditioned on the amount in the Trust Account and the proceeds from the PIPE Investment equaling or exceeding $300,000,000, after the payment of redemptions and satisfaction of Company and Sema4 transaction expenses. In the event the aggregate cash consideration we would be required to pay for all shares of common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the Merger Agreement exceeds the aggregate amount of cash available to us, we may not complete the Business Combination or redeem any shares, all shares of common stock submitted for redemption will be returned to the holders thereof, and we instead may search for an alternate business combination.
Based on the amount of approximately $442,763,951 million in our Trust Account as of December 31, 2020, and taking into account the anticipated gross proceeds of approximately $350,000,000 from the PIPE Investment, all of our shares of common stock may be redeemed and still enable us to have sufficient cash to satisfy the cash closing conditions in the Merger Agreement. We refer to this as the maximum redemption scenario.
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Q: Will how I vote affect my ability to exercise redemption rights?
A: No. You may exercise your redemption rights whether you vote your shares of common stock for or against, or whether you abstain from voting on the Business Combination Proposal or any other proposal described by this proxy statement. As a result, the Merger Agreement can be approved by stockholders who will redeem their shares and no longer remain stockholders, leaving stockholders who choose not to redeem their shares holding shares in a company with a potentially less-liquid trading market, fewer stockholders, potentially less cash and the potential inability to meet the listing standards of Nasdaq.
Q: How do I exercise my redemption rights?
A: In order to exercise your redemption rights, you must (i)(a) hold public shares or (b) hold public shares through units and elect to separate your units into the underlying public shares and public warrants prior to exercising your redemption rights with respect to the public shares; and (ii) prior to 5:00 p.m. Eastern time on [                    ] (two business days before the Special Meeting) (a) submit a written request to the Transfer Agent that the Company redeem your public shares for cash and (b) deliver your public shares to the Transfer Agent, physically or electronically through DTC (as defined herein). Any demand for redemption, once made, may be withdrawn at any time until the deadline for exercising redemption requests and thereafter, with our consent, until the Closing.
The Transfer Agent’s address is as follows:
Continental Stock Transfer & Trust Company
1 State Street, 30th Floor
New York, New York 10004
Attention: Mark Zimkind
Email: mzimkind@continentalstock.com
Stockholders seeking to exercise their redemption rights and opting to deliver physical certificates should allot sufficient time to obtain physical certificates from the Transfer Agent and time to effect delivery. It is our understanding that stockholders should generally allot at least two weeks to obtain physical certificates from the Transfer Agent. However, we do not have any control over this process and it may take longer than two weeks. Stockholders who hold their shares in street name will have to coordinate with their bank, broker or other nominee to have the shares certificated or delivered electronically.
Stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name” are required to either tender their certificates to our Transfer Agent prior to the date set forth in these proxy materials, or up to two business days prior to the vote on the proposal to approve the Business Combination at the Special Meeting, or to deliver their shares to the Transfer Agent electronically using Depository Trust Company’s (“DTC”) Deposit/Withdrawal At Custodian (“DWAC”) system, at such stockholder’s option. The requirement for physical or electronic delivery prior to the Special Meeting ensures that a redeeming stockholder’s election to redeem is irrevocable once the Business Combination is approved.
There is a nominal cost associated with the above-referenced tendering process and the act of certificating the shares or delivering them through the DWAC system. The Transfer Agent will typically charge a tendering broker a fee and it is in the broker’s discretion whether or not to pass this cost on to the redeeming stockholder. However, this fee would be incurred regardless of whether or not we require stockholders seeking to exercise redemption rights to tender their shares, as the need to deliver shares is a requirement to exercising redemption rights, regardless of the timing of when such delivery must be effectuated.
Q: What are the U.S. federal income tax consequences of exercising my redemption rights?
A: The U.S. federal income tax consequences of exercising your redemption rights depends on your particular facts and circumstances. It is possible that you may be treated as selling your public shares for cash and, as a result, recognize capital gain or capital loss. It is also possible that the redemption may be treated as a
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distribution for U.S. federal income tax purposes depending on the amount of public shares that you own or are deemed to own (including through the ownership of the warrants). Please see the section entitled “Proposal No. 1 — Approval of the Business Combination — Material United States Federal Income Tax Considerations for Public Stockholders Exercising Redemption Rights” for a more detailed discussion of the U.S. federal income tax considerations of an exercise of redemption rights. We urge you to consult your tax advisors regarding the tax consequences of exercising your redemption rights in your particular facts and circumstances.
Q: If I am a Company warrant holder, can I exercise redemption rights with respect to my public warrants?
A: No. The holders of our public warrants have no redemption rights with respect to our public warrants.proposals.
Q: Do I have appraisal rights if I object to the proposed Business Combination?Acquisition?
A: No. Appraisal rights are not available to holders of our Class A common stock in connection with the Business Combination.
Q: What happens to the funds held in the Trust Account upon consummation of the Business Combination?
A: The funds held in the Trust Account (together with the proceeds from the PIPE Investment) will be used to pay certain fees, costs and expenses (including regulatory fees, legal fees, accounting fees, printer fees and other professional fees) that were incurred by the Company and other parties to the Merger Agreement in connection with the transactions contemplated by the Merger Agreement, including the Business Combination, and pursuant to the terms of the Merger Agreement.Acquisition.
Q: What happens if the Business CombinationStock Consideration Issuance Proposal or the Charter Amendment Proposal is not approved?
A: If the Stock Consideration Issuance Proposal and the Charter Amendment Proposal are not approved (including following any adjournments) and we do not consummate the Acquisition by August 14, 2022 (which date may be extended, by either our or OPKO’s written notice, to October 14, 2022 if, as of the August 14, 2022, any one of certain conditions have not been met) (the “termination date”), then we will be unable to complete the Acquisition.
Q: Can the Acquisition be terminated or otherwise not be consummated?
A: There are certain circumstances under which the Merger Agreement may be terminated. Please see the section entitled “Proposal No. 1 The Acquisition— Approval of the Business Combination — The Merger AgreementAgreement”” for information regarding the parties’ specific termination rights.
If we do not consummate the Business Combination, we may continue to try to complete a business combination with a different target business until the applicable deadline. If we fail to complete an initial business combination by the applicable deadline, then we will: (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem our public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest not previously released to the Company to pay its franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish our public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law; and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our Board, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the initial public offering price per unit in the IPO. Please see the section entitled “Risk Factors — Risks Related to the Company and the Business Combination.”
Holders of our Founder Shares have waived any right to any liquidation distribution with respect to such shares and the underwriters of our IPO agreed to waive their rights to the business combination marketing fee held in the Trust Account in the event we do not complete our initial business combination within the required period. In addition, if we fail to complete a business combination by the applicable deadline, there will be no redemption rights or liquidating distributions with respect to our outstanding warrants, which will expire worthless.
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Q: When is the Business CombinationAcquisition expected to be completed?
A: The closing of the Business CombinationAcquisition is expected to take place on or prior to the third business day following the satisfaction or waiver of the conditions described below in the subsection entitled “Proposal No. 1 The Acquisition— Approval of the Business Combination — The Merger Agreement—Conditions to Closing of the Business Combinationhe Acquisition.” The closing is expected to occur in the thirdsecond quarter of 2021. The Merger Agreement may be terminated by the Company or Sema4 if the Closing has not occurred by November 9, 2021.2022.
For a description of the conditions to the completion of the Business Combination,Acquisition, see the section entitled “Proposal No. 1 The Acquisition— Approval of the Business Combination — The Merger Agreement— Agreement—Conditions to Closing of the Business CombinationAcquisition.”
Q: What do I need to do now?
A: You are urged to carefully read and consider the information contained in this proxy statement, including the Annexes, and to consider how the Business CombinationTransactions will affect you as a stockholder. You should then vote as soon as possible in accordance with the instructions provided in this proxy statement and on the enclosed proxy card or, if you hold your shares through a brokerage firm, bank or other nominee, on the voting instruction form provided by the broker, bank or nominee.
Q: Who will solicit and pay the cost of soliciting proxies for the Special Meeting?
A: The Company is soliciting proxies on behalf of its Board. The Company will pay the cost of soliciting proxies for the Special Meeting. The Company has engaged D.F. King to assist in the solicitation of proxies for the Special Meeting. The Company has agreed to pay D.F. King a fee of $25,000,$7,500, plus disbursements, and will reimburse D.F. King for its reasonable out-of-pocket expenses and indemnify D.F. King and its affiliates against certain claims, liabilities, losses, damages and expenses. The Company will also reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of shares of the Company’s Class A common stock for their expenses in forwarding soliciting materials to beneficial owners of the Company’s Class A common stock and in obtaining voting instructions from those owners. Our directors, officers and employees may also solicit
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proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.
Q: Who can help answer my questions?
A: If you have questions about the proposals or if you need additional copies of this proxy statement or the enclosed proxy card you should contact:
c/o Corvex Management LP333 Ludlow Street
667 Madison AvenueNorth Tower, 8th Floor
New York 10065Stamford, Connecticut 06902
Attn: Eli CasdinInvestor Relations
Email: Eli@casdincapital.comInvestors@Sema4.com
You may also contact our proxy solicitor at:
D.F. King & Co., Inc.
48 Wall Street, 22nd Floor
New York, NY 10005
Stockholders Call (toll-free): (800) 967-5074735-3591
Banks and Brokers Call: (212) 269-5550
Email: CMLF@dfking.comSema4@dfking.com
To obtain timely delivery, our stockholders must request the materials no later than five business days prior to the Special Meeting.
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You may also obtain additional information about us from documents filed with the SEC by following the instructions in the section entitled “Where You Can Find More Information.”
If you intend to seek redemption of your public shares, you will need to send a letter demanding redemption and deliver your stock (either physically or electronically) to our Transfer Agent prior to the Special Meeting in accordance with the procedures detailed under the question “How do I exercise my redemption rights?” If you have questions regarding the certification of your position or delivery of your stock, please contact our Transfer Agent:
Continental Stock Transfer & Trust Company
1 State Street, 30th Floor
New York, New York 10004
Attention: Mark ZimkindHenry Farrell & Margaret Lloyd
Email: mzimkind@continentalstock.comhfarrell@continentalstock.com & mlloyd@continentalstock.com
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SUMMARY OF THE PROXY STATEMENT
This summary, highlights selectedtogether with the sections entitled “Questions and Answers About the Proposals for Stockholders” and “Summary Term Sheet,” summarizes certain information contained in this proxy statement, andbut does not contain all of the information that may beis important to you. You should carefully read this entire proxy statement, including the attached Annexes, and accompanying financial statementsfor a more complete understanding of the Company and Sema4, to fully understand the proposed Business Combination (as described below) before voting on the proposalsmatters to be considered at the Special Meeting (as described below).Meeting. Please see the section entitled “Where You Can Find More Information” of this proxy statement. In addition, for definitions used commonly throughout this proxy statement, please see the section entitled “Frequently Used Terms.”
Unless otherwise specified, all share calculations assume:in this proxy statement are based upon 242,647,604 shares of Class A common stock outstanding as of December 31, 2021 and exclude (i) no exercise of redemption rights by the Company’s public stockholders; (ii) no inclusion of any shares of Class A common stock issuable upon the exercise or vesting of the Company’s outstanding warrants, options or any shares to be issuedrestricted stock units (“RSUs”), (ii) Earn-Out Shares issuable pursuant to the Incentive PlanPrior Merger Agreement, and (iii) shares of Class A common stock issuable for future grant or issuance pursuant to the 2021 EIP or the ESPP. In addition, these share calculations assume (i) no outstanding warrants, options or RSUs were exercised or vested after December 31, 2021, (ii) no equity awards of shares of Class A common stock were granted or issued under the Prior Merger Agreement, the 2021 EIP or the ESPP at or following the Closing;after December 31, 2021, (iii) an equity raise of approximately $350,000,000$200 million of gross proceeds from the PIPE Investment of 35,000,00050 million shares of Class A common stock at $10.00$4.00 per share;share, and (iv) no issuance of shares of Class A common stock in connection with the Earn-Out SharesMilestone Payments.
The Special Meeting
At the Special Meeting, stockholders will be asked to, Sema4 equity holders upon satisfactionamong other things, approve the issuance of shares of Class A common stock in connection with the Acquisition, approve the issuance of shares of Class A common stock in connection with the PIPE Investment and appoint two directors to the Board, Katherine Stueland and Richard C. Pfenniger, Jr., in connection with the consummation of the earn-out conditions.Acquisition. The Company believes the Acquisition will provide significant value to the Company and its stockholders, as the Company expects the addition of GeneDx to provide the Company with additional revenue, synergistic product offerings that provide breadth to the Company’s overall product portfolio, and additional key personnel with expertise in the Company’s sector.
The Company is asking stockholders to approve the Stock Consideration Issuance Proposal and the PIPE Investment Proposal in order to comply with Listing Rule 5635 of the Nasdaq Stock Market. The Company is not asking stockholders to approve the Acquisition or the PIPE Investment.
In addition, the Company is holding the Special Meeting in lieu of its 2022 annual meeting of stockholders and, accordingly, stockholders will also be considering a proposal to elect three Class I directors, Eli D. Casdin, Joshua Ruch and Michael Pellini, for a three-year term to expire at the Company’s 2025 annual meeting of stockholders.
Special Meeting Proposals
Specifically, at the Special Meeting, the stockholders of the Company will be asked to vote on:
•a proposal to approve the issuance of the Company’s Class A common stock in connection with the Acquisition and as contemplated by the Merger Agreement for purposes of complying with applicable Nasdaq Listing Rules (Proposal No. 1 – The Stock Consideration Issuance Proposal)
•a proposal to approve the issuance of the Company’s Class A common stock in connection with the PIPE Investment and as contemplated by the Subscription Agreements for purposes of complying with the Nasdaq Listing Rules (Proposal No. 2 – The PIPE Investment Proposal);
•a proposal to, Assuming the Stock Consideration Issuance Proposal and the Charter Amendment Proposal are approved and adopted and the Acquisition is consummated, to appoint two directors who will become directors of the Company effective upon the consummation of the Acquisition (Proposal No. 3 – The Special Designee Director Election Proposal);
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•a proposal to adopt the Amendment to the Charter, which increases the number of authorized shares of Class A common stock from 380,000,000 to 1,000,000,000 (Proposal No. 4 – The Charter Amendment Proposal);
•a proposal to elect three Class I directors of the Company, each to serve a three-year term expiring at the Company’s 2025 annual meeting of stockholders and until such director’s successor is duly elected and qualified (Proposal No. 5 – The Class I Director Election Proposal );
•a proposal to ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2022 (Proposal No. 6 – The Auditor Ratification Proposal);
•a proposal to adjourn the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if there are insufficient votes for, or otherwise in connection with, any of the proposals presented at the Special Meeting (Proposal No. 7 – The Adjournment Proposal).
Please see the sections entitled “Proposal No. 1 – The Stock Consideration Issuance Proposal.” “Proposal No. 2 - The PIPE Investment Proposal,” “Proposal No. 3 -  The Special Designee Director Election Proposal,” “Proposal No. 4 - The Charter Amendment Proposal,” “Proposal No. 5 - The Class I Director Election Proposal,” “Proposal No. 6 - The Auditor Ratification Proposal,” and “Proposal No. 7 - The Adjournment Proposal” for more information.
Parties to the Business CombinationAcquisition
The Company
The Company is a blank check company incorporated as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.
The mailing address of the Company’s principal executive office is 667 Madison Avenue, New York, New York 10065.
Merger Sub
Merger Sub, a Delaware corporation, is a wholly-owned subsidiary of the Company, formed by the Company in February 1, 2021, to consummate the Business Combination. In the Business Combination, Merger Sub will merge with and into Sema4, with Sema4 continuing as the surviving corporation.
The mailing address of Merger Sub’s principal executive office is 667 Madison Avenue, New York, New York 10065.
Sema4
Sema4 was formed in October 2015 as Mount Sinai Genomics, Inc. (“Legacy Sema4”), a Delaware corporation, doing business as Sema4, and commenced operations in 2017. On July 22, 2021, Legacy Sema4 completed its business combination with CM Life Sciences, Inc. (“CMLS”), a publicly held company, pursuant to which, CMLS acquired Legacy Sema4, with Legacy Sema4 surviving as a wholly-owned subsidiary of CMLS. In connection with the merger, CMLS changed its name to Sema4 Holdings Corp.
Sema4 is a patient-centered, health intelligence company with a mission to use artificial intelligence, or AI, and machine learning, or ML, to enable personalized medicine for all. By leveraging leading data scientists and technology, the company’sCompany’s platform powers remarkable and unique insights that transform the practice of medicine including how disease is diagnosed, treated, and prevented.
Today, Sema4 has established one of the largest, most comprehensive, and fastest growing integrated health information platforms, collecting and leveraging genomic and clinical data in partnership with patients, healthcare providers and an extensive ecosystem of life science industry contributors. Sema4 is now generating and processing over 3047 petabytes of data per month, growing by almostmore than 1 petabyte per month, and maintainsmaintaining a database that includes more than 11.512 million de-identified clinical records, many with genomic profiles, integrated in a way that enables physicians to proactively diagnose and manage disease. This expanding database is a virtuous cycle of data: new data enables Sema4 to further develop, train, and refine predictive models and drive differentiated insights, which models and insights Sema4 deploys through its next generation diagnostic and research solutions and portals to support clinicians and researchers and engage patients, all of which interactions generate more data to continue the cycle. Sema4 is able to provide differentiated insights through diagnostic testing solutions to physicians and patients across the United States in areas such as reproductive health, or Women’s Health, population health, and oncology, or Oncology, Sema4 is reimbursed by payors, providers, and patients for providing these services.
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While there are many companies seeking to harness the potential of big data to address the challenges within the healthcare ecosystem, Sema4 believes that few have the scale of Sema4 and its origins as a company conceived and nurtured within a world-class health system. We believe Sema4’s scale and health system origin have enabled it to build a significant and highly differentiated technological and informational asset positioned to drive precision medicine solutions into the standard of care in an unparalleled way.
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Sema4’s principal executive office is located at 333 Ludlow Street, North Tower, 8th floor, Stamford, CT 06902, and its telephone number is (800) 298-6470. Sema4’s corporate website address is https://www.sema4.com/. Sema4’s website and the information contained on, or that can be accessed through, the website is not deemed to be incorporated by reference in, and is not considered part of, this proxy statement.
Merger Subs
Merger Sub I, a Delaware corporation, is a wholly-owned subsidiary of the Company, formed by the Company in January 2022, to consummate the Acquisition. In the Acquisition, Merger Sub I will merge with and into HoldCo, with HoldCo as the surviving corporation in the First Merger.
The Business Combination Proposalmailing address of Merger Sub I’s principal executive office is 333 Ludlow Street, North Tower, 8th Floor, Stamford, Connecticut 06902.
Merger Sub II, a Delaware corporation, is a wholly-owned subsidiary of the Company, formed by the Company in January 2022, to consummate the Acquisition. In the Acquisition, HoldCo, as the surviving corporation in the First Merger, will merge with and into Merger Sub II, with Merger Sub II as the surviving company.
The mailing address of Merger Sub II’s principal executive office is 333 Ludlow Street, North Tower, 8th Floor, Stamford, Connecticut 06902.
HoldCo
GeneDx Holding 2, Inc., a Delaware corporation, is a wholly owned subsidiary of OPKO, formed by OPKO, to consummate the Mergers. The mailing address of HoldCo’s principal executive offices is c/o OPKO Health, Inc., 4400 Biscayne Blvd, Miami, FL 33137.
GeneDx
GeneDx, a New Jersey corporation and wholly-owned subsidiary of OPKO, is a patient-centric health information company and leader in delivering clinical genomic answers to an ever-increasing community of patients, families and healthcare providers. With more than 20 years of experience in diagnosing rare disorders and diseases, GeneDx has pioneered panels, exome and whole genome sequencing and has developed a proprietary genomic interpretation and information services platform in support of healthcare partners and patients globally.
The mailing address of GeneDx’s principal executive office is 207 Perry Parkway, Gaithersburg, MD 20877.
OPKO
OPKO, a Delaware corporation, is a multinational biopharmaceutical and diagnostics company that seeks to establish industry-leading positions in large, rapidly growing markets by leveraging its discovery, development, and commercialization expertise and novel and proprietary technologies. GeneDx is currently an indirect wholly owned subsidiary of OPKO. The mailing address of OPKO’s principal executive offices is 4400 Biscayne Blvd, Miami, FL 33137.
The Acquisition
On February 9, 2021,January 14, 2022, the Company and Merger SubSubs entered into the Merger Agreement with Sema4. The Sema4 stockholders have unanimously adoptedGeneDx, OPKO and approvedHoldCo. Pursuant to the Merger Agreement. CMLS shares are currently listed on Nasdaq. Ifterms of the Merger Agreement, is approved by Company stockholders at the Special Meeting, Merger Sub I will merge with and into Sema4,HoldCo (the “First Merger”), with Sema4HoldCo being the surviving the merger as a wholly owned subsidiaryentity of the Company.First Merger and following the First Merger, HoldCo will merge with and into Merger Sub II, with Merger Sub II being the surviving entity of this second merger (the “Second Merger” and, together with the First Merger, the “Mergers”). For more information about the transactions contemplated by the Merger Agreement, please see the section entitled “P“roposal No. 1 — Approval of the Business CombinationThe Acquisition.” Copy of the Merger Agreement is attached to this proxy statement as Annex A.
Merger
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Consideration to the Sema4 shareholdersOPKO
Subject to the terms and conditions of the Merger Agreement, each share of Sema4 Class BHoldCo common stock issued and outstanding immediately prior to the effective time will be converted into 1/100th of a share of Sema4 Class A common stock as set forth in the Merger Agreement. Immediately thereafter, each share of Sema4 Common Stock and Sema4 Preferred Stock (other than Excluded Shares and Dissenting Shares) issued and outstanding immediately prior to the effective timeEffective Time will be cancelled and automatically deemed for all purposes to represent the right to receive a portion of the merger consideration, with each Sema4 StockholderOPKO being entitled to receive (collectively, clauses (i) through (iii)(ii), the “merger considerationMerger Consideration”) (i) its pro rata share$150 million in cash at the closing of the Acquisition (the “Closing Available Cash if such Sema4 Stockholder has made an election”), subject to receive cash, and, if further elected, such Sema4 Stockholder’s pro rata share excess amount of any closing available excess cash,certain adjustments as provided that in no event will a Sema4 Stockholder’s cash payment exceed an amount equal to the product of such Sema4 Stockholder’s total outstanding shares multiplied by the Per Share Amount; (ii) a number of shares of Company Class A common stock equal to the quotient of: (A)(1) the product of (x) such Sema4 Stockholder’s total outstanding shares multiplied by the Per Share Amount minus (2) such Sema4 Stockholder’s stockholder cash payment amount divided by (B) $10.00; and (iii) its earn out pro rata share of any earn out shares to which such Sema4 Stockholder is entitled pursuant to the terms of the Merger Agreement (the “EarnoutCash Consideration”), including the Earnout RSUs, which Earnout RSUs are subject to vesting and will not be legally issued and outstanding(ii) 80,000,000 shares of CompanyClass A common stock at the closing of the Business Combination (the “ClosingStock Consideration”), in each case of clauses (i), (ii) and (iii), without interest, upon surrender of stock certificates representing all of such Sema4 Stockholder’s Sema4 Common Stock and Sema4 Preferred Stock and delivery of the other documents required pursuant to the Merger Agreement.. As of the effective time, each Sema4 StockholderEffective Time, OPKO shall cease to have any other rights in and to Sema4HoldCo and each certificate relating to ownership of shares of Sema4 Common Stock and Sema4 Preferred Stock (other than Excluded Shares)HoldCo common stock will only represent the right to receive the applicable portion of the merger consideration.Merger Consideration.
Each issued and outstanding share of common stock of Merger Sub shall be converted into and become one validly issued, fully paid and nonassessable share of common stock, par value $0.01 per share,In addition, the Company will pay up to $150 million payable following the Closing, if certain revenue-based milestones are achieved for each of the entity surviving the mergerfiscal years ending December 31, 2022 and December 31, 2023 (the “Surviving CorporationMilestone Payments”), which shall constitute. Each Milestone Payment, if and to the only outstanding shares of capital stockextent earned under the terms of the Surviving Corporation. FromMerger Agreement, will be satisfied through the payment and/or issuance of a combination of cash and after the effective time, all certificates representing the common stock of Merger Sub shall be deemed for all purposes to represent the number of shares of common stock of the Surviving Corporation into which they were converted.
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Each share of Sema4 Common Stock and Sema4 Preferred Stock held in the Sema4’s treasury or owned by the Company, Merger Sub or Sema4 immediately prior to the effective time (each an “Excluded Share”), shall be cancelled and no consideration shall be paid or payable with respect thereto.
The numbers of shares of Company Class A common stock that Sema4 Stockholders are entitled(valued at $4.86 per share based on the average of the daily volume average weighted price of the Company’s Class A common stock over the period of 30 trading days ended January 12, 2022), with such mix to receive as a resultbe determined in the Company’s sole discretion.
PIPE Investment
Concurrently with the execution of the Merger is based uponAgreement, the numberCompany entered into the Subscription Agreements with the PIPE Investors. The PIPE Investors include certain existing equity holders of the Company, some of whom own more than 5% of the outstanding shares of Company Class A common stock and as otherwise contemplated bysome of whom are affiliated with certain directors of the Merger Agreement shall be adjustedCompany. Pursuant to, appropriately reflect the effect of any stock split, split-up, reverse stock split, stock dividend or distribution (including any dividend or distribution of securities convertible into Company Class A common stock), extraordinary cash dividend, reorganization, recapitalization, reclassification, combination, exchange of shares or other like change with respect to Company Class A common stock occurringand on or after the date hereof and prior to the Closing.
Following the Closing, within five Business Days after the occurrence of a Triggering Event, the Company shall issue or cause to be issued to the Sema4 Stockholders (other than holders of Dissenting Shares) and the Earn-Out Service Providers, the following shares of Company Class A common stock (which shall be equitably adjusted for stock splits, reverse stock splits, stock dividends, reorganizations, recapitalizations, reclassifications, combination, exchange of shares or other like change or transaction with respect to Company Class A common stock occurring on or after the Closing, the “Earn-Out Shares”), upon the terms and subject to the conditions set forth in the Merger Agreement and other related agreements: (i) upon the occurrence of Triggering Event I, a one-time issuance of a number of Earn-Out Shares equal to 3.66% of, the Earn-Out Total Outstanding Shares; (ii) uponSubscription Agreements, the occurrenceCompany agreed to issue and sell to the PIPE Investors, in private placements to close substantially concurrently with the Closing, an aggregate of Triggering Event II, a one-time issuance50 million shares of a numberClass A common stock at $4.00 per share, for an aggregate gross purchase price of Earn-Out Shares equal$200 million, before fees and expenses. The Company expects to 3.67%fund the payment of the Earn-Out Total Outstanding Shares; and (iii) uponCash Consideration in part with the occurrence of Triggering Event III, a one-time issuance of a number of Earn-Out Shares equal to 3.67%net proceeds of the Earn-Out Total Outstanding Shares. Upon the last day of any calendar year, the Company shall issue or cause to be issued to the Sema4 Stockholders (other than holders of Dissenting Shares) and the Earn-Out Service Providers the Earn-Out Shares that are in the Forfeiture Pool as in effect as of such date and that would have been issuable to Sema4 Stockholders as a result of the occurrence of a Triggering Event had they not been made subject to an award of Earnout RSUs.PIPE Investment.
Sema4 Stockholders and the Earn-Out Service Providers shall be entitled to receive Earn-Out Shares upon each Triggering Event, provided, however that each Triggering Event may only occur once, if at all, and in no event shall the Sema4 Stockholders and Earn-Out Service Providers, in the aggregate, be entitled to receive more than an aggregate number of Earn-Out Shares equal to more than 11% of the Earn-Out Total Outstanding Shares. Earn-Out Shares will be issued from the Forfeiture Pool only if the applicable Triggering event occurs.
Related Agreements
This section describes the material provisions of the RelatedShareholder Agreements but does not purport to describe all of the terms thereof. The following summary is qualified in its entirety by reference to the complete text of each of the Related Agreements. Forms of the Forfeiture Agreement, Shareholder Lock-up Letter, Sponsor Support Agreement and Subscription Agreement are attached hereto as Annexes C, D, and E, respectively. Stockholders and other interested parties are urged to read such Related Agreements in their entirety prior to voting on the proposals presented at the Special Meeting.
Amended and Restated Registration Rights Agreement
In connection with the execution ofentry into the Business CombinationMerger Agreement, the Company, the Sponsorwe entered into Shareholder Agreements with OPKO and certain other parties thereto (collectively, the “rights holders”) enter into the Amended and Restated Registration Rights Agreement, a formstockholders of OPKO (the “Lock-Up Holders”), pursuant to which was agreed to on February 9, 2021, which will amend and restate in its entirety the existing registration rights agreement, dated September 1, 2020, by and between CMLSOPKO and the parties thereto. PursuantLock-Up Holders have agreed, respectively, to, the terms of the Amended and Restated Registration Rights Agreement, CMLS isamong other things, be subject to prepare and file with the SEC, no later than 30 days after the Closing Date, a shelf registration statement for an offering to be made on a continuous basis from time to timelock-up period with respect to the resaleLock-Up Shares (as defined therein), which will last from the Closing until (a) in the case of the registrableStock Consideration issued at the Closing, the date that is one (1) year from the Closing Date, (b) if and to the extent earned, in the case of the stock portion of the first Milestone Payment, the date that is one (1) year from the date of issuance for such stock and (c) if and to the extent earned, in the case of the second Milestone Payment, the date that is six (6) months from the date of issuance for such stock (as applicable, the “Lock-Up Period”). During this Lock-Up Period, the holders of Lock-Up Shares may not transfer any Lock-Up Shares or engage in any short sales or other hedging or derivative transactions, subject to certain limited exceptions. Following such Lock-Up Period, OPKO and the Lock-Up Holders have agreed to dispose of their Lock-Up Shares in a marketed sale process under certain circumstances for so long as they continue to hold at least 5% of the outstanding Class A common stock.
In addition, OPKO and the Lock-Up Holders have further agreed to certain standstill provisions whereby, subject to certain exceptions, they are obligated to refrain from taking certain actions with respect to the Company’s Class A common stock. OPKO and the Lock-Up Holders have also agreed to vote their shares in accordance with the recommendations of the Board for so long as they continue to hold at least 5% of the outstanding Class A common stock. Further, Sema4 has also granted OPKO and the Lock-Up Holders certain customary shelf, piggyback and demand registration rights that require Sema4 to register their Lock-Up Shares for resale under the Amended and Restated Registration Rights Agreement. CMLS is further required to use commercially reasonable efforts to cause such shelf registration statement to be declared effective as soon as possible after filing, but in no event later than the earlier of 60 days following the filing date thereof and five business days after the SEC notifies CMLS that it willSecurities Act.
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not review such registration statement, subject to extension in the event that the registration is subject comments from the SEC.
In addition, pursuant to the terms of the Amended and Restated Registration Rights Agreement and subject to certain requirements and customary conditions, including with regard to the number of demand rights that may be exercised, the rights holders may demand at any time or from time to time, that CMLS file a registration statement on Form S-1 or Form S-3 to register certain shares of CMLS Class A common stock held by such rights holders. The Amended and Restated Registration Rights Agreement will also provide the rights holders with “piggy-back” registration rights, subject to certain requirements and customary conditions. The Company will bear the expenses incurred in connection with the filing of any such registration statement.
Forfeiture Agreement
In connection with the execution of the Merger Agreement, the Company and the Sponsor entered into the Forfeiture Agreement whereby the Sponsor agreed to forfeit certain of its Private Placement Warrants and Class B common stock. Under the Forfeiture Agreement, up to 33% of Sponsor’s warrants and shares are subject to forfeiture based on the extent of redemptions from the Trust Account, such that Sponsor shall forfeit the full 33% of such warrants and shares if there are redemptions for 100% of the Trust Account and no warrants or shares if there are less than 3% redemptions (with the portion of such 33% of Sponsor’s warrants and shares that are forfeited adjusting on a linear basis in between 100% and 3% redemptions from the Trust Account).
ISMMS Lock-Up Agreement
In connection with the execution of the Merger Agreement, the Company and Icahn School of Medicine at Mount Sinai (“ISMMS”), a shareholder of Sema4, entered into the ISMMS Lock-Up Agreement whereby ISMMS agreed not to (i) sell, offer to sell, contract or agree to sell, hypothecate pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act, with respect to shares of Company Class A common stock issued to ISMMS pursuant to the Merger Agreement (such shares of Company Class A common stock, the “Lock-up Shares”), (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any of the Lock-up Shares, in cash or otherwise, or (iii) publicly announce any intention to effect any transaction specified in clause (i) or (ii); the ISMMS will take none of the foregoing actions until the earliest of (a) the date that is 180 calendar days from the Closing Date, and (b) the date following the Closing Date on which the Company completes a liquidation, merger, stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of Company capital stock for cash, securities or other property. Notwithstanding the foregoing, the ISMMS may take any of the actions specified in clauses (i), (ii) and (iii) above at any time after the first date on which the closing price of Company Class A common stock has equaled or exceeded $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Closing Date.
Shareholder Lock-up Agreement
In connection with the execution of the Merger Agreement, each Sema4 Stockholder holding more than 1% of the outstanding common stock of Sema4 prior to the into a Stockholder Lock-up Agreement whereby such shareholder agreed not to (i) sell, offer to sell, contract or agree to sell, hypothecate pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act, with respect to shares of Company Class A common stock issued to such shareholder pursuant to the Merger Agreement (such shares of Company Class A common stock, the “Lock-up Shares”), (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any of the Lock-up Shares, in cash or otherwise, or (iii) publicly announce any intention to effect any transaction specified in clause (i) or (ii); the PIPE Investor will take none of the foregoing actions until the earliest of (a) the date that is 180 calendar days from the Closing Date, and (b) the date following the Closing Date on which the Company completes a liquidation, merger, stock exchange or other similar transaction that results in all of the
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Company’s stockholders having the right to exchange their shares of Company capital stock for cash, securities or other property. Notwithstanding the foregoing, the shareholder may take any of the actions specified in clauses (i), (ii) and (iii) above at any time after the first date on which the closing price of Company Class A common stock has equaled or exceeded $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Closing Date.
Sponsor Support Agreement
In connection with the execution of the Merger Agreement, the Sponsor entered into the Sponsor Support Agreement with the Company and Sema4, pursuant to which, among other things, the Sponsor agreed to vote all shares of Company Class B Stock and Private Placement Warrants beneficially owned by the Sponsor in favor of each of the proposals and any other matters necessary or reasonably requested by Sema4 for consummation of the merger and the other transactions contemplated by the Merger Agreement, and against any other competing business combination proposal.
The Sponsor Support Agreement provides that the Sponsor will not redeem any shares of common stock in connection with the merger.
The Sponsor also agreed, subject to certain exceptions, not to (a) transfer any of its Company Class B Stock (which, immediately prior to the effective time, will be converted into 1/100th of a share of Class A common stock in accordance with organizational documents of Sema4) or Private Placement Warrants, (b) enter into any swap or other arrangement that transfers to another the Sponsor’s Company Class B Stock or Private Placement Warrants, (c) publicly announce any intention to effect any transaction specified by the foregoing until the earlier of (i) the effective time, (ii) such date and time as the Merger Agreement is terminated in accordance with its terms (the earlier of (i) and (ii), the “expiration time”), (iii) liquidation of the Company subsequent to the Closing.
The Sponsor Support Agreement provides for the terms of the Sponsor’s lock-up period with respect to its capital stock and warrants, the agreement also provides that no amendment may be made to the Inside Letter.
The Sponsor Support Agreement shall terminate and be of no further force or effect upon the earliest of: (i) the expiration time, (b) the liquidation of the Company, (iii) the written agreement of the Company, Sponsor and Sema4. Upon such termination of the Sponsor Support Agreement, all obligations of the parties under such agreement will terminate, without any liability or other obligation on the part of any party to any person in respect thereof or the transactions contemplated thereby, and no party shall have any claim against another (and no person shall have any rights against such party), whether under contract, tort or otherwise, with respect to the subject matter thereof; provided, however, that the termination of the Sponsor Support Agreement shall not relieve any party thereto from liability arising in respect of any breach of the Sponsor Support Agreement prior to such termination.
Inside Letter
In connection with the underwriting agreement and the IPO of the Company, the Company, the Sponsor and each insider and the Sponsor entered into the Insider Letter providing for a lock-up in relation to the Sponsor’s Class B common stock of the Company or any shares of Class A common stock of the Company until the earlier of (a) one year after the completion of the Company’s initial business combination and (b) subsequent to the business combination, (x) if the closing price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations, and the like) for any 20 trading days within any 30-day trading day period commencing at least 150 days after the Company’s initial business combination or (y) the date following the completion of the Company’s initial business combination on which the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of Class A common stock for cash securities or other property. The Sponsor and each insider also agreed not to transfer any Private Placement Warrants (or any share of Class A common stock issued or issuable upon the exercise of the Private Placement Warrants), until 30 days after the completion of a business combination.
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Subscription Agreements
In connection with the Business Combination,Acquisition, the Company entered into the Subscription Agreements with the PIPE Investors, pursuant to which, among other things, the Company agreed to issue and sell to the PIPE Investors, in private placements to close immediately prior to the Closing, an aggregate of 35,000,00050 million shares of Class A common stock at $10.00$4.00 per share, for an aggregate purchase price of $350,000,000.$200 million. The obligations to consummate the subscriptions are conditioned upon, among other things, customary closing conditions and the consummation of the transactions contemplated by the Merger Agreement. The PIPE Investment will be consummated substantially concurrently with the Closing. All
Support Agreements
In connection with the execution of the PIPE investors have affirmedMerger Agreement, the Company entered into support agreements with certain of its stockholders, a copy of which is attached as Exhibit B to usthe Merger Agreement (the “Support Agreements”). These stockholders include stockholders that the Restatement (as defined below) would not affect the closingown more than 5% of the Transaction. For more information aboutoutstanding shares of Class A common stock and certain entities affiliated with the Restatement please see the section entitled “Risk Factors — Risks RelatedCompany’s directors. Pursuant to the CompanySupport Agreements, such signatory stockholders have agreed to, among other things, vote to adopt and approve Proposals 1 through 4 and Proposal 7, subject to the Business Combination”.
Incentive Plan
Our Board approved the formterms and conditions of the Incentive Plan on February 9, 2021, subject to stockholder approval of the Incentive Plan at the Special Meeting. The purpose of the Incentive Plan is to promote our long-term success of the Company and the creation of stockholder value by encouraging service providers to focus on critical long-range corporate objectives, encouraging the attraction and retention of service providers with exceptional qualifications and linking service providers directly to stockholder interests through increased stock ownership. These incentives are provided through the grant of stock options, including incentive stock options, and nonqualified stock options, stock appreciation rights, restricted stock, and restricted stock units. For more information about the Incentive Plan, please see the section entitled “Support Agreement.Proposal No. 5 — Approval of the Incentive Plan — Summary of the Incentive Plan.”
Employee Stock Purchase Plan
Our Board approved the form of the ESPP on February 9, 2021 subject to stockholder approval of the ESPP at the Special Meeting. The purpose of the ESPP Proposal is to provide eligible employees with an opportunity to increase their proprietary interest in the success of the Company by purchasing common stock on favorable terms and to pay for such purchases through payroll deductions. The Company believes by providing eligible employees with an opportunity to increase their proprietary interest in the success of the Company, the ESPP will motivate participants to offer their maximum effort to the Company and help focus them on the creation of long-term value consistent with the interests of the Company’s stockholders. For more information about the Incentive Plan, please see the section entitled “Proposal No. 6 — Approval of the ESPP.”
Redemption Rights
Pursuant to our current certificate of incorporation, holders of public shares may elect to have their shares redeemed for cash at the applicable redemption price per share equal to the quotient obtained by dividing (i) the aggregate amount on deposit in the Trust Account as of two business days prior to the consummation of the Business Combination, including interest not previously released to the Company to pay its franchise and income taxes, by (ii) the total number of then-outstanding public shares; provided that the Company will not redeem any shares of common stock issued in the IPO to the extent that such redemption would result in the Company’s failure to have net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) in excess of $5,000,001. As of December 31, 2020, the estimated per share redemption price would have been approximately $10.00.
If a holder exercises its redemption rights, then such holder will be exchanging its shares of our common stock for cash and will no longer own shares of the post-combination company. Such a holder will be entitled to receive cash for its public shares only if it properly demands redemption and delivers its shares (either physically or electronically) to our Transfer Agent in accordance with the procedures described herein. Please see the section entitled “Special Meeting of Company Stockholders — Redemption Rights” for the procedures to be followed if you wish to redeem your shares for cash. Any request for redemption may be withdrawn until the deadline for submitting redemption requests and thereafter, with our consent, until the Closing.
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Impact of the Business CombinationTransactions on the Company’s Public FloatClass A common stock
It is anticipated that, uponUpon completion of the Business Combination, assuming no redemptions:Transactions, at the Closing, the Company expects that: (i) the Company’s public stockholders (other than(including any shares owned by PIPE Investors prior to the PIPE Investors)Transactions) will retain an ownership interestown approximately 65.1% of approximately 18.6% in the post-combination company;outstanding shares of Class A common stock; (ii) the PIPE Investors (excluding any shares owned by the PIPE Investors prior to the Transactions) will own approximately 12.2% (excluding certain PIPE Investors, who owned shares pre-transaction)13.4% of the post-combination company (such that public stockholders, including PIPE Investors,outstanding shares of Class A common stock; and (iii) OPKO will own approximately 30.8% (adding the foregoing 2 subsets)21.5% of the post-combination company); (iii) our Initial Stockholders (including our Sponsor) will own approximately 23.2% of the post-combination company; and (iv) the former Sema4 equity holders are expected to hold, in the aggregate, approximately 64.6% of the issued and outstanding shares of CompanyClass A common stock. The foregoing percentage excludes 29,120,955 options for the purchase of 29,120,955 shares of Company common stock, which are authorized and subject to stock options but will not yet be issued at closing, as further described in the pro forma capitalization table inFor more information, please see the section entitled “Unaudited Pro Forma Condensed Combined Financial Information — Description of the Transaction.” The PIPE Investors have agreed to purchase 35,000,000 shares of common stock in the aggregate, for $350,000,000 of gross proceeds. The ownership percentage with respect to the post-combination company following the Business Combination does not take into account (i) warrants to purchase common stock that will remain outstanding immediately following the Business Combination, (ii) the issuance of the Earn-Out Shares to the Sema4 equity holders should the earn-out conditions in the Merger Agreement be satisfied or (iii) the issuance of any shares upon completion of the Business Combination under the Incentive Plan and the ESPP, copies of which are attached to this proxy statement as Annex D and Annex E, respectively. If the actual facts are different than these assumptions, the percentage ownership retained by the Company’s existing stockholders in the post-combination company will be different. For more information, please see the sections entitled “Summary of the Proxy Statement — Impact of the Business Combination on the Company’s Public Float,” “Unaudited Pro Forma Condensed Combined Financial Information,” “Proposal No. 5 — Approval of the Incentive Plan” and “Proposal No. 6 — Approval of the ESPP.”
The following table illustrates varying ownership levels in the Company, assuming no redemptionsCompany:
Ownership (%)
The Company’s stockholders(1)
65.1 %
PIPE Investors(2)
13.4 %
OPKO21.5 %
100.0 %
__________________
(1)Includes shares of Class A common stock owned by PIPE Investors prior to the Company’s public stockholders andTransactions.
(2)Excludes shares of Class A common stock owned by PIPE Investors prior to the maximum redemptions by the Company’s stockholders:
No RedemptionsMaximum Redemptions
The Company’s public stockholders18.6 %6.4 %
PIPE Investors12.2 %12.6 %
Initial Stockholders (excluding certain PIPE Investors)4.6 %3.7 %
The former Sema4 equity holders64.6 %77.3 %
100 %100 %
Transactions.
Please see ‘‘Unaudited Pro Forma Condensed Combined Financial Information—Description of the TransactionAcquisition’’.
The Charter Approval ProposalReasons for the Acquisition
UponIn evaluating the Closing, our current certificateAcquisition, the Board consulted with the Company’s management and legal counsel as well as financial and other advisors, and the Board considered and evaluated several factors. In particular, the Board considered, among other things, the following positive factors, although not weighted or in any order of incorporation will be amended promptly to reflect the Charter Approval Proposal to:significance:
•changeLeading Industry Position in Rare Diseases and Competitive Advantage of Data Asset. The Board considered that GeneDx has an industry leading rare disorder franchise, based on strong customer relationships with major hospitals and health systems around the post-combinationworld, calling on medical geneticists and selling into the pediatric and rare disease channels. Further, the Board considered GeneDx’s approximately 300,000 clinical exomes and 2.1 million annotated phenotypes collected over the company’s name to Sema4 Holdings Corp;
•delete provisions relating to our status as a blank check company;
•the charter provides for 380,000,000 class A common stock authorized and 1,000,000 of preferred stock authorized. We would not expect this needsnine year history. The Board estimated GeneDx’s clinical exome data asset to be increased based on the pro forma cap tables; and
•changemost extensive by any U.S. diagnostics company. Furthermore, the stockholder vote required to 66 2/3%Board considered GeneDx’s estimated 70% market share among clinicians ordering exomes as evidence of superior positioning in voting power of the stock of the post-combination company in order for stockholders to amend certain provisions of our Amended and Restated Certificate of Incorporation unless 2/3rds of the whole board of directors of the post-combination company approves suchmarket.
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•Strong Revenue Growth Profile. The Board considered that GeneDx had estimated 2021 revenue of $116 million, representing 22% growth over the prior year, and estimated 2021 test volume of 145,000, representing 29% over the prior year, as well as the anticipated growth reflected in the projections prepared by GeneDx management.
•Experienced Management, Commercial and Laboratory Operations Team With Deep Genetics Expertise. The Board considered that GeneDx has an amendmentexperienced management and engineering team, comprising over 100 MDs and PhDs, and approximately 70 professionals in which case such stockholder vote will require only a majoritysales, marketing, product and business development. Katherine Stueland, Chief Executive Officer, has more than two decades of experience in voting powerthe healthcare sector where she has overseen commercial organizations and corporate brand transformations, and helped bring the first cancer immunotherapy to market.
•Relationships with Health Systems. The Board considered that GeneDx has entrenched relationships with leading hospitals, based on its over 100 contracts with children’s hospitals in the United States.
•Growth and Business Opportunities of the then outstanding stockAcquisition. The Board believed the Acquisition would create a market-leading, AI-driven genomic and clinical data platform with differentiated products across all phases of life, allowing Sema4 to generate increased data from increased testing, grow its patient base, increase its scale, and deliver more clinically actionable insights. Additionally, the Board believed that GeneDx would enable Sema4 to enhance its reach into health systems and biopharma companies. In particular, the Board considered the following opportunities presented by the Acquisition:
◦Health Systems. Opportunities for Sema4 to accelerate the uptake of GeneDx’s clinical exome sequencing into Sema4’s core channels, and for Sema4 to accelerate the adoption of its Oncology solutions through GeneDx’s relationships.
◦Data. An opportunity for Sema4 to leverage GeneDx’s exome database with Sema4’s Centrellis platform to drive increased biopharma partnership opportunities.
◦Scale. An opportunity Sema4 to be the market leader in both Women’s Health and rare disease diagnostics.
◦Growth and Synergy. An opportunity for Sema4 to increase its revenues and accelerate its path to profitability.
•Benefit of Combining Management and Board Members of both the Company and GeneDx. The Board considered that GeneDx’s management and key employees becoming management and key employees of the post-combination company.
PleaseCompany as part of the Acquisition would provide the necessary experience and knowledge of GeneDx’s business and operations, and facilitate the post-Acquisition transition and integration. The Board also considered that the addition of a member of GeneDx’s management and board of directors, and an affiliate of OPKO, to the Board as part of the Acquisition would provide Sema4 with additional board members experienced in the life sciences industry generally and with GeneDx’s business in particular. For more information about our decision-making process, please see the section entitled “Proposal No. 3 — The Charter Approval ProposalAcquisition”—Sema4’s Board of Directors’ Reasons for more information.
Other Proposals
In addition, the stockholders of the Company will be asked to vote on:
•Acquisitiona proposal to approve, for purposes of complying with applicable Nasdaq Listing Rules, the issuance of more than 20% of the Company’s issued and outstanding common stock pursuant to the Business Combination and the PIPE Investment (Proposal No. 2);.”
•a separate proposal to approve, on a non-binding advisory basis, certain governance provisions inDue Diligence. The Board considered the Amendedthoroughness of Sema4’s due diligence examinations of GeneDx and Restated Certificate of Incorporation in accordancediscussions with SEC requirements (Proposal No. 4);GeneDx’s management and financial and legal advisors.
•a proposal to approve and adopt the Incentive Plan, a copyReceipt of which is attached to this proxy statement as Annex D, including the authorization of the initial share reserve under the Incentive Plan (Proposal No. 5);
•a proposal to approve and adopt the ESPP, a copy of which is attached to this proxy as Annex E, including the authorization of the initial share reserve under the ESPP (Proposal No. 6); and
•a proposal to adjourn the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if there are insufficient votes for, or otherwiseFairness Opinion from its Financial Advisor in connection with the approvalAcquisition. The Board considered that on January 14, 2022, at a meeting of the Business CombinationBoard, Goldman Sachs & Co. LLC (“Goldman Sachs”) rendered its oral opinion, subsequently confirmed in writing, that, as of January 14, 2022, and based upon and subject to the factors and assumptions set forth therein, the $150 million in cash, the 80 million shares of the Company’s Class A common stock, and up to $150 million of contingent payments payable in cash and/or shares of Company’s Class A common Stock, based upon achievement of 2022 and 2023 revenue milestones, to be paid to acquire all of the issued and outstanding shares of capital stock of GeneDx pursuant to the Merger Agreement, was fair from a financial point of view to the Company. The
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full text of the written opinion of Goldman Sachs, dated January 14, 2022, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex C to this proxy statement. The opinion of Goldman Sachs is more fully described in the section of this proxy statement entitled “The Acquisition—Opinion of Sema4’s Financial Advisor.”
•Other Alternatives. The Board believed that the proposed Acquisition represents an excellent opportunity for Sema4 and its stockholders based upon its view of the growth prospects and risks associated with GeneDx and its business, and at the time it approved the transaction had not identified another target that it determined would represent a preferred transaction opportunity.
•Terms of the Merger Agreement. The Board believed that the financial and other terms and conditions of the Merger Agreement, including the parties’ representations, warranties and covenants, and the conditions to their respective obligations to consummate the Acquisition, are reasonable and were the product of arms’ length negotiations between the Company and its advisors and OPKO and its advisors and compare favorably with those in similar acquisition transactions considering GeneDx’s business, results of operations, financial condition and prospects.
•PIPE Equity Commitment. A group of growth and life sciences investors, including Pfizer, have committed approximately $200 million in PIPE subscriptions. This was viewed as support from growth and life sciences investors for the opportunities represented by the Transactions, and provides committed capital to fund the Cash Consideration and transaction costs and to fuel the Company’s growth.
•Stockholder Support. The Board also considered that the holders of approximately 61% of the outstanding Class A common stock were willing to enter into the Support Agreements originally proposed by OPKO, committing such holders to vote to approve the Stock Consideration Proposal, the Nasdaq Stock IssuancePIPE Investment Proposal, the Special Designee Director Election Proposal, the Charter ApprovalAmendment Proposal the Incentive Plan Proposal or the ESPP Proposal (Proposal No.7).
Please see the section entitled “Proposal No. 2 — The Nasdaq Stock Issuance Proposal,” “Proposal No. 4 — Approval of Certain Governance Provisions in the Amended and Restated Certificate of Incorporation,” “Proposal No. 5 — Approval of the Incentive Plan,” “Proposal No. 6 — Approval of the ESPP,” “Proposal No. 7 – The Director Election Proposal,” “Proposal No. 8 — The Adjournment Proposal,” and “Proposal No. 9 --- The Auditor Ratification” for more information. which significantly reduces deal uncertainty.
Date and Time of Special Meeting
The Special Meeting will be held on [          ], [          ]April 27, 2022 at [          ]9:00 a.m. Eastern time at https://www.cstproxy.com/CMLS/sm2021,www.virtualshareholdermeeting.com/SMFR2022SM, or at such other date, time and place to which such meeting may be adjourned or postponed, to consider and vote upon the proposals. The Special Meeting will be conducted exclusively via live webcast and so stockholders will not be able to attend the meeting in person. Stockholders may attend the special meetingSpecial Meeting online and vote at the Special Meeting by visiting https://www.cstproxy.com/CMLS/sm2021www.virtualshareholdermeeting.com/SMFR2022SM and entering your 12-digit control number, which is either included on the proxy card you received or obtained through Continental Stock Transfer & Trust Company.
Registering forAttending the Special Meeting
Any stockholder wishing to attend the virtual meeting should register for the meeting by [            ], Eastern time, on [            ], 2021, at https://www.cstproxy.com/CMLS/sm2021. To register for the Special Meeting, please follow these instructions as applicable to the nature of your ownership of our common stock:
•If your shares are registered in your name with Continental Stock Transfer & Trust Company and you wish to attend the online-only Special Meeting, go to https://www.cstproxy.com/CMLS/sm2021,www.virtualshareholdermeeting.com/SMFR2022SM, and enter the 12-digit control number included on your proxy card or notice of the meeting and click on the “Click here to preregister for the online meeting” link at the top of the page. Just prior to the start of the meeting you will need to log back into the meeting site using your control number. Pre-registration is recommended but is not required in order to attend.meeting.
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•Beneficial stockholders (those holding shares through a stock brokerage account or by a bank or other holder of record)nominee) who wish to attend the virtual meeting must obtain a legal proxy by contacting their account representative at the bank, broker, or other nominee that holds their shares and e-mail a copy (a legible photograph is sufficient) of their legal proxy to proxy@continentalstock.com. Beneficial stockholders who e-mail a valid legal proxy will be issued a 12-digit meeting control number that will allow them to register to attend and participate in the Special Meeting. After contacting Continental Stock Transfer & Trust Company, a beneficial holder will receive an e-mail prior to the meeting with a link and instructions for entering the virtual meeting. Beneficial stockholders should contact Continental Stock Transfer & Trust Company at least five (5) business days prior to the meeting date in order to ensure access.
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Voting Power; Record Date
Only Company stockholders of record at the close of business on June 21, 2021,March 22, 2022, the record date for the Special Meeting, will be entitled to vote at the Special Meeting. You are entitled to one vote for each share of CompanyClass A common stock that you owned as of the close of business on the record date. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker, bank or other nominee to ensure that votes related to the shares you beneficially own are properly counted. On the record date, there were 55,343,750245,016,425 shares of CompanyClass A common stock outstanding and entitled to vote, of which 44,275,000 are public shares and 11,068,750 are Founder Shares held by our Initial Stockholders.vote.
Accounting Treatment
The Business CombinationAcquisition will be accounted for as a reverse recapitalization,using the acquisition method of accounting in accordance with GAAP.Accounting Standards Codification (“ASC”) 805 - Business Combinations. Under thisthe acquisition method of accounting, although CMLS will issue shares for outstanding equity interests of Sema4 in the Business Combination, CMLS will be treated astotal purchase price is allocated to the “acquired” company for financial reporting purposes. Accordingly, the Business Combination will be treated as the equivalent of Sema4 issuing stock for the net assets of CMLS, accompanied by a recapitalization. The net assets of CMLS will be stated at historical cost, with no goodwill or othertangible and identifiable intangible assets recorded. Operations prior to the Business Combination will be those of Sema4.and liabilities assumed based on their relative fair values.
Appraisal Rights
Appraisal rights are not available to our stockholders in connection with the Business Combination.Acquisition.
Proxy Solicitation
The Company is soliciting proxies on behalf of its Board. Proxies may be solicited by mail. The Company has engaged D.F. King to assist in the solicitation of proxies.
If a stockholder grants a proxy, it may still vote its shares at the Special Meeting if it revokes its proxy before the Special Meeting. A stockholder may also change its vote by submitting a later-dated proxy, as described in the section entitled “Special Meeting of Company Stockholders—Revoking Your Proxy.”
Interests of Certain Persons in the Business Combination
In considering the recommendation of our Board to vote in favor of the Business Combination, stockholders should be aware that aside from their interests as stockholders, our Sponsor and certain members of our Board and officers have interests in the Business Combination that are different from, or in addition to, those of other stockholders generally. Our Board was aware of and considered these interests, among other matters, in evaluating and negotiating the Business Combination, and in recommending to stockholders that they approve the Business Combination. Stockholders should take these interests into account in deciding whether to approve the Business Combination.
These interests include, among other things:
•the fact that our Initial Stockholders have agreed not to redeem any of the Founder Shares in connection with a stockholder vote to approve the Business Combination;
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•the fact that our Initial Stockholders will retain 11,068,750 Founder Shares upon the Closing;
•the fact that our Initial Stockholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if we fail to complete an initial business combination by the applicable deadline;
•if the Trust Account is liquidated, including in the event we are unable to complete an initial business combination within the required time period, our Sponsor has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into an acquisition agreement or claims of any third party (other than our independent public accountants) for services rendered or products sold to us, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account;
•the continued indemnification of our existing directors and officers and the continuation of our directors’ and officers’ liability insurance after the Business Combination; the fact that Joshua Ruch, Michael Pellini and Rachel Sherman may join as board members of the post-combination company (dependent on the approval of the Director Election Proposal), and Nat Turner, Emily Leproust and Eli Casdin will continue as a board member of the post-combination company, and each shall be entitled to receive compensation for serving on the board of directors of the post-combination company;

•the fact that our Sponsor, officers and directors will lose their entire investment in us and will not be reimbursed for any out-of-pocket expenses if an initial business combination is not consummated by the applicable deadline;
•that Corvex Master Fund LP, Corvex Select Equity Master Fund LP, Corvex Dynamic Equity Select Master Fund LP, and JS Capital LP, funds that are advised by an affiliate of the Sponsor, have entered into Subscription Agreements with the Company, pursuant to which such affiliates have committed to purchase 240,000; 3,696,000; 64,000; and 500,000 shares of common stock in the PIPE Investment, respectively, for an aggregate commitment of approximately $2,400,000; $36,960,000; $640,000; $5,000,000, respectively; and
•that Casdin Partners Master Fund, L.P., a fund that is advised by an affiliate of the Sponsor, has entered into a Subscription Agreement with the Company, pursuant to which the affiliate has committed to purchase 5,000,000 shares of common stock in the PIPE Investment for an aggregate commitment of approximately $50,000,000.
Reasons for the Approval of the Business Combination
We were formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. We sought to do this by utilizing the networks and industry experience of both our Sponsor and our Board to identify, acquire and operate one or more businesses within or outside of the United States, although we were not limited to a particular industry or sector, we focused on the life sciences sector.
In particular, our Board considered, among other things, the following positive factors, although not weighted or in any order of significance:
•Leading Industry Position with Supportive Long-Term Dynamics and Competitive Market Advantage. The Board considered the fact that Sema4, with its next generation information and genomic platform that promises to yield insights to improve standards of care and drug discovery, satisfies all of the factors contributing to sustainable competitive advantages that the Board sought in a target.
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•Stable Free Cash Flow, Prudent Debt and Financial Visibility. The Board considered that Sema4 has no debt other than long-term debt, net of current portion, in the amount of $18.5 million as of March 31, 2021, limited capital expenditures, and therefore satisfies the Board’s criteria of acquiring a business that has historically generated, or has the near-term potential to generate, strong and sustainable free cash flow. The Board also took into account that Sema4 had negative cash flow from operating activities in the amounts of $93.1 million, $18.7 million, and $24.7 million for the years ended December 31, 2020, 2019 and 2018, respectively.
•Clear Use of Proceeds and SPAC as Preferred Course of Action. The Board considered that a SPAC transaction is Sema4’s preferred course of action, as opposed to a traditional initial public offering, because Sema4 can provide forward-looking guidance and talk more directly about projections for future years that are backed by existing customer contracts. As a result, Sema4’s ability to become a publicly-traded company is accelerated through a SPAC, and the proceeds raised in the Business Combination will fund Sema4 to positive cash flow and enable selective acquisitions.
•Committed and Capable Management Team. The Board considered that Sema4 has a professional management team whose interests are aligned with those of our stockholders and can clearly and confidently articulate the business plan and market opportunities to public market investors. Founder and Chief Executive Officer Eric Schadt has built groups and companies throughout the industry to elucidate the complexity of human diseases, and he has published more than 450 peer-reviewed papers in leading scientific journals and contributed to discoveries relating to the genetic basis of common human diseases such as diabetes, obesity, and Alzheimer’s disease. Sema4 CFO Isaac Ro is an industry icon having over 20 years of financial leadership and experience, with a strong focus on the medical technology and life sciences space.
•Potential to Engage Key Industry Partners. The Board and management team includes individuals with relationships across the industry which will allow Sema4 to strategically align itself for synergistic collaborations and engagement with other industry leading companies.
•Potential to Grow, including Through Further Consolidation Opportunities. The Board considered that Sema4 has the potential to grow organically with its team of world class data scientists and engineers focused on category-defining healthcare intelligence. In particular, Sema4 is in an industry with significant opportunities and rationale for industry consolidation across multiple segments.
•Opportunities Arising from Sema4’s Business and Growth Model. The Board considered Sema4's focus on the opportunities arising from its patient-centric model, open architecture for partnerships, and a collaborative focus on key industry partners, including health systems and pharmaceutical companies that should drive growth, and that the additional cash available to Sema4 from the transaction should permit Sema4 to accelerate its business plan beyond the stand alone plan provided by Sema4.
•Committed and Capable Management Team. The Board considered that Sema4 has an experienced and professional management team. Founder and Chief Executive Officer Eric Schadt has built groups and companies throughout the industry to elucidate the complexity of human diseases, and he has published more than 450 peer-reviewed papers in leading scientific journals and contributed to discoveries relating to the genetic basis of common human diseases such as diabetes, obesity, and Alzheimer’s disease. Sema4 CFO Isaac Ro has over 20 years of financial leadership and experience, with a strong focus on the medical technology and life sciences space.
•Potential for Key Industry Partnerships. The Sema4 board and management team includes individuals with relationships across the industry that should allow Sema4 to strategically align itself for synergistic partnerships with other companies in the industry.
•Potential to Grow Through Both Organic and Inorganic Opportunities. The Board considered that Sema4 has the potential to grow organically with its team of data scientists and engineers focused on category-defining healthcare intelligence. In addition, Sema4 is in an industry with opportunities and rationale for inorganic growth through acquisitions of complementary businesses in addition to organic
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growth. The ability to take advantage of these opportunities is expected to be facilitated by the additional cash being made available to Sema4 as a result of the business combination.
•Benefit of Combining Board Members of both the Company and Sema4. The Board considered that the addition of members of the CM Life Board to the Sema4 board of directors as part of the business combination will provide Sema4 with additional board members experienced in the life sciences industry and with experience as members of the board of a public company. For more information about our decision-making process, please see the section entitled “Proposal No. 1 — Approval of the Business Combination — The Company’s Board of Directors’ Reasons for the Approval of the Business Combination.”
Conditions to Closing of the Business Combination
Conditions to Each Party’s Obligations
The respective obligations of the Company and Sema4 to complete the Business Combination are subject to the satisfaction of the following conditions:
•the approval of the Merger Agreement and the transactions contemplated by the Merger Agreement by the requisite vote of the Sema4 stockholders;
•the Company must have $5,000,001 of net tangible assets, as more fully described in “Proposal No. 1 — Approval of the Business Combination — The Merger Agreement — Conditions to the Merger”;
•the applicable waiting period(s) under the HSR Act and, if required, any other applicable antitrust law in respect of the transactions contemplated by the Merger Agreement must have expired or been terminated; and
•there must be no legal requirement prohibiting, enjoining or making illegal the consummation of the transactions contemplated by the Merger Agreement and no restraining order prohibiting, enjoining or making illegal the consummation of such transactions may be in effect, as more fully described in “Proposal No. 1 — Approval of the Business Combination — The Merger Agreement — Conditions to the Merger”;
Conditions to the Company’s Obligations
The obligation of the Company to complete the Business Combination is also subject to the satisfaction, or waiver by the Company, of the following conditions:
•the accuracy of the representations and warranties of Sema4 as of the date of the Merger Agreement and as of the Closing, subject to certain materiality and material adverse effect thresholds, as more fully described in “Proposal No. 1 — Approval of the Business Combination — The Merger Agreement — Conditions to the Merger” ;
•Sema4 must have performed or complied with all agreements and covenants required by the Merger Agreement to be performed or complied with by it at or prior to the Closing Date, in each case in all material respects;
•Sema4 must have delivered to the Company a certificate signed by an officer of Sema4 certifying that the two preceding conditions have been satisfied;
•approval of the transactions contemplated by the Merger Agreement must have been received from the Sema4 stockholders;
•no material adverse effect may have occurred since the date of the Merger Agreement that is continuing; and
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•Sema4 must have delivered, or caused to have been delivered, or must stand ready to deliver all of the certificates, instruments, contracts and other documents specified to be delivered by it hereunder, including copies of the documents to be delivered by the company pursuant to the Merger Agreement, duly executed by the applicable signatory or signatories specified therein, if any.
Conditions to Sema4’s Obligations
The obligation of Sema4 to complete the merger is also subject to the satisfaction, or waiver by Sema4, of the following conditions:
•the accuracy of the representations and warranties of the Company as of the date of the Merger Agreement and as of the Closing, subject to certain materiality and material adverse effect thresholds, as more fully described in “Proposal No. 1 — Approval of the Business Combination — The Merger Agreement — Conditions to the Merger”;
•the Company and Merger Sub must have performed or complied with all agreements and covenants required by the Merger Agreement to be performed or complied with by them on or prior to the Closing Date, in each case in all material respects;
•the Company must have delivered to Sema4 a certificate, signed by an executive officer of the Company and dated as of the Closing Date, certifying that the two preceding conditions have been satisfied;
•the Company must have delivered or must stand ready to deliver all of the certificates, instruments, contracts and other documents specified to be delivered by it hereunder, including copies of the documents to be delivered by the Company pursuant to the Merger Agreement, duly executed by the Company and Merger Sub, as applicable;
•the Company certificate of incorporation must be amended and restated in the form attached to the Merger Agreement and the Company Bylaws must be amended and restated in the form attached to the Merger Agreement;
•the Company must have made appropriate arrangements to have the Trust Account, less amounts paid and to be paid pursuant the Merger Agreement, available to the Company for payment of the cash payment amount to be paid at Closing, and the Company and Sema4 transaction costs at the Closing;
•the funds contained in the Trust Account, together with the Subscription Agreements to be received substantially concurrently with the Closing, must equal or exceed $300,000,000, following (i) payment of the aggregate amount of cash proceeds that will be required to satisfy any exercise of the redemptions by the Company stockholders, and (ii) payment of all Company and Sema4 transaction costs;
•the shares of Company common stock to be issued in connection with the Merger must have been approved for listing on the Nasdaq; and
•no material adverse effect must have occurred since the date of the Merger Agreement and be continuing.
Regulatory Matters
Under the HSR Act and the rules that have been promulgated thereunder by the U.S. Federal Trade Commission (“FTC”), certain transactions may not be consummated unless information has been furnished to the Antitrust Division of the Department of Justice (“Antitrust Division”) and the FTC and certain waiting period requirements have been satisfied. The Business Combination is subject to these requirements and may not be completed until the expiration of a 30-day waiting period following the filing of the required Notification and Report Forms with the Antitrust Division and the FTC or until early termination is granted. If the FTC or the Antitrust Division makes a request for additional information or documentary material related to the Business Combination (a “Second Request”), the waiting period with respect to the Business Combination will be extended for an additional period of 30 calendar days, which will begin on the date on which the Company and Sema4 each certify compliance with the Second Request. Complying with a Second Request can take a significant period of time. On February 24, 2021, the
41

Company and Sema4 filed the required forms under the HSR Act with the Antitrust Division and the FTC. The waiting period under the HSR Act with respect to the Business Combination expired on March 26, 2021.
At any time before or after consummation of the Business Combination, notwithstanding any termination of the waiting period under the HSR Act, the applicable competition authorities could take such action under applicable antitrust laws as each deems necessary or desirable in the public interest, including seeking to enjoin the consummation of the Business Combination. Private parties may also seek to take legal action under the antitrust laws under certain circumstances. We cannot assure you that the Antitrust Division, the FTC, any state attorney general, or any other government authority will not attempt to challenge the Business Combination on antitrust grounds, and, if such a challenge is made, we cannot assure you as to its result. Neither the Company nor Sema4 is aware of any material regulatory approvals or actions that are required for completion of the Business Combination other than the expiration or early termination of the waiting period under the HSR Act. It is presently contemplated that if any such additional regulatory approvals or actions are required, those approvals or actions will be sought. There can be no assurance, however, that any additional approvals or actions will be obtained.
Quorum and Required Vote for Proposals for the Special Meeting
A quorum of Company stockholders is necessary to hold a valid meeting. A quorum will be present at the Special Meeting if a majority of the Class A common stock outstanding on the record date and entitled to vote at the Special Meeting is represented in person or by proxy. Abstentions and broker non-votes will count as present for the purposes of establishing a quorum.
The approval of the Business Combination Proposal, the Nasdaq Stock Consideration Issuance Proposal, the Governance Proposal, which is a non-binding advisory vote, the Incentive PlanPIPE Investment Proposal, the ESPPClass I Director Election Proposal, the Special Designee Director Election Proposal, the Adjournment ProposalAuditor Ratification and the Auditor RatificationAdjournment Proposal requires the affirmative vote of a majority of the votes cast by holders of our Class A common stock represented in person or by proxy and entitled to vote at the Special Meeting. The approval of the Charter ApprovalAmendment Proposal requires the affirmative vote of holders of a majority of our outstanding shares of Class A common stock entitled to vote thereon at the Special Meeting.
A failure to vote, a broker non-vote or an abstention will have no effect on the Business Combination Proposal, the Nasdaq Stock Consideration Issuance Proposal, the GovernancePIPE Investment Proposal, the Incentive PlanClass I Director Election Proposal, the ESPPSpecial Designee Director Election Proposal, the Auditor Ratification and the Adjournment Proposal. However, an abstention, a broker non-vote or failure to vote will have the same effect as a vote “AGAINST” the Charter ApprovalAmendment Proposal.
The proposals in this proxy statement (other than the Governance Proposal, the Auditor RatificationPIPE Investment Proposal and the Adjournment Proposal)Special Designee Director Election Proposal are conditioned on theupon stockholders’ approval of the Business Combination Proposal, the Nasdaq Stock Consideration Issuance Proposal, the Incentive Plan Proposal and the ESPPCharter Amendment Proposal.
It is important for you to note that in the event that the Business Combination Proposal, the Nasdaq Stock Consideration Issuance Proposal, the Incentive Plan Proposal, the ESPP Proposal or the Charter ApprovalAmendment Proposal do not receive the requisite vote for approval and we do not consummate the Acquisition by August 14, 2022 (which date may be extended, by either party’s written notice, to October 14, 2022 if, as of the August 14, 2022, any one of certain conditions have not been met), we will be unable to complete, we will not consummate the Business Combination. If we do not consummate the Business Combination and fail to complete an initial business combination by the applicable deadline, we will be required to dissolve and liquidate our Trust Account by returning the then remaining funds in such account to our public stockholders.Acquisition.
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Recommendation to Company Stockholders
Our Board believes that each of the Business Combination Proposal, the Nasdaq Stock Consideration Issuance Proposal, the Charter ApprovalPIPE Investment Proposal, the Governance Proposal, the Incentive Plan Proposal, the ESPP Proposal, theSpecial Designee Director Election Proposal, the AdjournmentCharter Amendment Proposal, the Class I Director Election Proposal, the Auditor Ratification Proposal and the Auditor RatificationAdjournment Proposal to be presented at the Special Meeting is in the best interests of the Company and our stockholders and recommends that its stockholders vote “FOR” each of the proposals.
When you considerThe Company’s directors and executive officers have no substantial interests, directly or indirectly, in the recommendationAcquisition except (A) to the extent of: (i) their ownership of shares of our Class A common stock (or rights to acquire shares), and (ii) that each officer and director are expected to be employed by and will continue to serve on Sema4’s Board following the Acquisition (assuming, in favorthe case of approvalMr. Casdin, Mr. Ruch and Mr. Pellini, that each are re-elected pursuant to Proposal No. 5), for which they each receive cash and equity compensation, and (B) in connection with the PIPE Investment.
In connection with the Acquisition, the Company has entered into the Subscription Agreements with the PIPE Investors. The PIPE Investors include certain existing equity holders of the Business Combination Proposal, you should keep in mind that our Sponsor andCompany, some of whom are affiliated with certain membersdirectors of our Board and officers have interests in the Business Combination that are different from or in addition to (or which may conflict with) your interests as a
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stockholder. Stockholders should take these interests into account in deciding whether to approve the proposals presented at the Special Meeting, including the Business Combination Proposal. PleaseCompany. For more information, see “Special Meeting of Company Stockholders — Recommendation to Company StockholdersCertain Relationships and Related Party Transactions”.”
Risk Factors
In evaluating the Business CombinationAcquisition and the proposals to be considered and voted on at the Special Meeting, you should carefully review and consider the risk factors set forth under the section entitled “Risk Factors” of this proxy statement. The occurrence of one or more of the events or circumstances described in that section, alone or in combination with other events or circumstances, may have a material adverse effect on (i) the ability of the Company and Sema4GeneDx to complete the Business Combination,Acquisition, and (ii) the business, cash flows, financial condition and results of operations of Sema4GeneDx prior to the consummation of the Business CombinationAcquisition and the post-combination companyCompany following the consummation of the Business Combination.Acquisition.
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SELECTED HISTORICAL FINANCIAL INFORMATION OF THE COMPANY
The following table contains summary historical financial data for the Company as of and for the year ended December 31, 2020 and through March 31, 2021. Such data for the year ended and as of December 31, 2020 have been derived from the audited financial statements of the Company, which are included elsewhere in this proxy statement. The information below is only a summary and should be read in conjunction with the sections entitled “The Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Information About the Company” and our financial statements, and the notes and schedules related thereto, which are included elsewhere in this proxy statement.
Statement of Operations DataFor the three months ended March 31, 2021For the Period from July 10, 2020 (Inception) Through December 31, 2020
General and administrative expenses$1,845,158 $206,195 
Loss from operations
(1,845,158)(206,195)
Other income:
Interest earned on investments held in Trust Account10,919 13,951 
Change in fair value of warrant liability(56,637,684)(38,510,584)
Transaction Costs(1,204,771)
Loss before provision for income taxes(58,471,923)(39,907,559)
Provision for income taxes— — 
Net loss$(58,471,923)$(39,907,559)
Weighted average shares outstanding of Class A redeemable common stock44,275,000 44,275,000 
Basic and diluted income per share, Class A redeemable common stock
$— $— 
Weighted average shares outstanding of Class B non-redeemable common stock11,068,750 10,633,062 
Basic and diluted net loss per share, Class B non-redeemable common stock
(5.28)(3.75)
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Balance Sheet DataMarch 31,
2021 (Unaudited)		For the Period from July 10, 2020 (Inception) Through December 31,
2020
ASSETS
Current Assets
Cash$627,415 $1,094,681 
Prepaid expenses293,754 277,031 
Total Current Assets921,169 1,371,712 
Cash and marketable securities held in trust account442,774,870 442,763,951 
Total Assets
$443,696,039 $444,135,663 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued expenses$1,491,735 $97,120 
Total Current Liabilities1,491,735 97,120 
Warrant liability126,960,100 70,322,418 
Deferred underwriting fee payable15,496,250 15,496,250 
Total Liabilities
$143,948,085 85,915,788 
Commitments and Contingencies
Class A common stock subject to possible redemption, 29,474,795 and 35,321,987 shares at $10.00 per share as of March 31, 2021 and December 31, 2020, respectively294,747,950 353,219,870 
Stockholders’ Equity
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding— — 
Class A common stock, $0.0001 par value; 380,000,000 shares authorized; 14,800,205 and 8,953,013 shares issued and outstanding (excluding 29,474,795 and 35,321,987 shares subject to possible redemption) as of March 31, 2021 and December 31, 2020, respectively1,480 895 
Class B common stock, $0.00001 par value; 20,000,000 shares authorized; 11,068,750 shares issued and outstanding as of March 31, 2021 and December 31, 20201,107 1,107 
Additional paid-in capital103,376,938 44,905,602 
Accumulated deficit(98,379,521)(39,907,599)
Total Stockholders’ Equity
5,000,004 5,000,005 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$443,696,039 $444,135,663 
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Cash Flow DataFor the three months ended March 31, 2021For the Period from July 10, 2020 (Inception) Through December 31, 2020
Cash Flows from Operating Activities:
Net Loss$(58,471,923)$(39,907,599)
Adjustments to reconcile net loss to net cash used in operating activities:
Interest earned on investments held in Trust Account(10,919)(13,951)
Change in fair value of warrant liability56,637,684 38,510,584 
Transaction costs1,204,771 
Changes in operating assets and liabilities:
Prepaid expenses(16,723)(277,031)
Accrued expenses1,394,615 97,120 
Net cash used in operating activities
(467,266)(386,106)
Cash Flows from Investing Activities:
Investment of cash into Trust Account(442,750,000)
Net cash used in investing activities
(442,750,000)
Cash Flows from Financing Activities:
Proceeds from sale of Units, net of underwriting discounts paid433,895,000 
Proceeds from sale of Private Placement Warrants10,855,000 
Proceeds from promissory note – related party112,837 
Repayment of promissory note – related party(165,081)
Payment of offering costs(466,969)
Net cash provided by financing activities
444,230,787 
Net Change in Cash(467,266)1,094,681 
Cash – Beginning of period1,094,681 — 
Cash – End of period
$627,415 $1,094,681 
Non-Cash financing activities:
Initial classification of common stock subject to possible redemption$380,268,982 
Change in value of common stock subject to possible redemption$ (58,471,923)$(27,049,112)
Initial classification of warrant liabilities$31,811,834 
Deferred underwriting fee payable$15,496,250 
Offering costs paid directly by Sponsor in consideration for the issuance of Class B common stock$25,000 
Payment of offering costs through promissory note — related party$52,244 
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SELECTED HISTORICAL FINANCIAL DATA OF SEMA4
The selected historical consolidated statements of operations data of Sema4 for the years ended December 31, 2020, 2019 and 2018 and the historical consolidated balance sheet data as of December 31, 2020 and 2019 are derived from Sema4’s audited consolidated financial statements included elsewhere in this proxy statement. The selected consolidated statements of operations data for the three months ended March 31, 2021 and 2020 and the selected consolidated balance sheet data as of March 31, 2021 are derived from Sema4’s unaudited interim condensed consolidated financial statements included elsewhere in this proxy statement. Sema4’s historical results are not necessarily indicative of the results that may be expected in the future. You should read the following selected historical consolidated financial data together with “Sema4’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Sema4 consolidated financial statements and related notes included elsewhere in this proxy statement.
Three months ended March 31,Year Ended December 31,

20212020202020192018

(in thousands, except per share amounts)
Revenue

Diagnostic test revenue (including related party revenue of $33 and $61 for the three months ended March 31, 2021 and 2020, respectively; and of $285, $0 and $0 for the years ended December 31, 2020, 2019, and 2018, respectively)(1)
$62,760 $46,070 $175,351 $191,667 $132,970 
Other revenue (including related party revenue of $27 and $0 for the three months ended March 31, 2021 and 2020, respectively; and of $3, $1,180 and $254 for the years ended December 31, 2020, 2019 and 2018, respectively)1,591 585 3,971 4,507  371
Total revenue64,351 46,655 179,322 196,174 133,341 
Cost of services (including related party expenses of $278 and $574 for the three months ended March 31, 2021 and 2020, respectively; and of $2,189, $1,859 and $4,122 for the years ended December 31, 2020, 2019 and 2018, respectively)(1)
71,812 39,239 184,648 119,623 92,093 
Gross (loss) profit(7,461)7,416 (5,326)76,551 41,248 
Research and development53,131 13,096 72,700 34,910 21,383 
Selling and marketing31,569 11,733 53,831 33,118 19,947 
General and administrative101,917 7,164 100,742 29,484 19,449 
Related party expenses1,797 2,195 9,395 9,452 9,132 
Loss from operations(195,875)(26,772)(241,994)(30,413)(28,663)



Other income (expense):


Interest income21 334 506988— 
Interest expense(723)(574)(2,474)(783)(248)
Gain on extinguishment of debt— — — — 4,500 
Other income, net5,584 22 2,622 504539
Total other income, net4,882 (218)654 7094,791 
Loss before income taxes(190,993)(26,990)(241,340)(29,704)(23,872)
Income tax provision— — — — — 
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Net loss and comprehensive loss(190,993)(26,990)$(241,340)$(29,704)$(23,872)



Redeemable convertible preferred stock dividends— — — 3,039 2,951 
Net loss attributable to common stockholders(190,993)(26,990)$(241,340)$(32,743)$(26,823)


Weighted average shares outstanding of Class A common stock1 1 11 1 
Basic and diluted net loss per share, Class A common stock$(43)$(26,990)$(5,824)$(32,743)$(26,823)
Weighted average shares outstanding of Class B common stock443,864 — 4,044 — — 
Basic and diluted net loss per share, Class B common stock$— $— $(58)$— $— 
_________________
(1)Includes stock-based compensation expense as follows:
 Three months ended March 31,Year Ended December 31,
 20212020202020192018
 
(in thousands)
Cost of services$19,782 $120 $13,947 $710 $748 
Research and development38,187 234 26,650 1,281 1,135 
Selling and marketing17,381 126 10,750 650 416 
General and administrative89,612 335 68,884 2,841 3,306 
Total stock-based compensation expense$164,962 $815 $120,231 $5,482 $5,605 

 As of March 31,As of December 31,
 202120202019
 (in thousands)
Consolidated Balance Sheet Data:  
Cash and cash equivalents$58,652 $108,132 $115,006 
Total assets219,586 251,642 203,839 
Total liabilities406,191 247,254 75,435 
Redeemable convertible preferred stock334,439 334,439 217,115 
Total stockholders’ (deficit) equity(521,044)(330,051)(88,711)

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SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following selected unaudited pro forma condensed combined financial data is derived from the unaudited pro forma condensed combined balance sheet and unaudited pro forma condensed combined statements of operations included elsewhere in this proxy statement/prospectus.
The unaudited pro forma condensed combined financial statements are based on CMLS’s and Sema4’s historical financial statements as adjusted to give effect to the Business Combination and the PIPE Investment. The unaudited pro forma condensed combined balance sheet gives pro forma effect to the Business Combination, treated as a reverse recapitalization for accounting purposes, and the PIPE Investment as if they had been consummated on March 31, 2021. The unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2021 and for the year ended December 31, 2020, give effect to the Business Combination and the PIPE Investment as if they had occurred on January 1, 2020, the beginning of the earliest period presented.
The unaudited pro forma condensed combined financial statements were prepared in accordance with Article 11 of SEC Regulation S-X, as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” Release No. 33-10786 replaces the existing pro forma adjustment criteria with simplified requirements to depict the accounting for the transaction (“Transaction Accounting Adjustments”) and present the reasonably estimable synergies and other transaction effects that have occurred or reasonably expected to occur (“Management’s Adjustments”). CMLS has elected not to present Management’s Adjustments and will only be presenting Transaction Accounting Adjustments in the unaudited pro forma condensed combined financial statements. The adjustments presented in the unaudited pro forma condensed combined financial statements have been identified and presented to provide relevant information necessary for an understanding of the combined company upon consummation of the Business Combination and the PIPE Investment.
The unaudited pro forma condensed combined financial statements are for illustrative purposes only. The financial results may have been different had the companies always been combined. You should not rely on the unaudited pro forma condensed combined financial information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the combined company will experience. CMLS and Sema4 have not had any historical relationship prior to the Business Combination. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.
This information should be read together with CMLS’s and Sema4’s historical financial statements and related notes, “Unaudited Pro Forma Condensed Combined Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of CMLS,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Sema4,” and other financial information relating to CMLS and Sema4 included elsewhere in this proxy statement/prospectus.
The selected unaudited pro forma condensed combined financial data below presents two redemption scenarios as follows:
•Assuming no Redemptions: This presentation assumes that no CMLS public stockholders exercise their rights to redeem any of their Public Shares for a pro rata portion of the funds in the Trust Account. Thus, the full amount held in the Trust Account as of Closing is available for the Business Combination, and Sema4 equity holders receive $243.8 million of Merger Consideration in cash at Closing.
•Assuming maximum Redemptions: This presentation assumes that CMLS public stockholders holding 29,474,795 shares of Class A common stock exercise their rights to redeem their Public Shares (as defined herein) or a pro rata portion of the funds in the Trust Account. This scenario gives effect to redemptions of 29,474,795 shares of Class A common stock of CMLS for aggregate redemption payments of $294.7 million, using a per-share redemption price of $10.00, which is the maximum redemption amount after which the closing conditions of the Merger Agreement are still achieved. Under this maximum redemption scenario, Sema4 equity holders would not be entitled to receive any of their Merger Consideration in cash, and the closing cash payment amount under the Merger Agreement is $0.
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Additionally, 2,439,452 shares of Class B common stock would be forfeited by the Sponsor as a result of the maximum redemptions in accordance with the Forfeiture Agreement.
Pro Forma
Three Months Ended March 31, 2021Year Ended December 31, 2020
Scenario 1 Assuming No RedemptionsScenario 2 Assuming Maximum RedemptionsScenario 1 Assuming No RedemptionsScenario 2 Assuming Maximum Redemptions
(in thousands)(in thousands)
Combined Statement of Operations data:
Total revenue$64,351 $64,351 $179,322 $179,322 
Loss from operations(197,720)(197,720)(250,375)(250,375)
Net loss(249,476)(249,476)(289,759)(289,759)
Net loss attributable to common stockholders(249,476)(249,476)(289,759)(289,759)
Pro Forma
As of March 31, 2021
Scenario 1 Assuming No RedemptionsScenario 2 Assuming Maximum Redemptions
(in thousands)
Combined Balance Sheet data:
Total assets$695,135 $644,202 
Long-term debt7,750 7,750 
Total liabilities722,007 722,007 
Total stockholders’ equity (deficit)(26,872)(77,805)
5025

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement contains certain forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, includingfederal securities laws with respect to the proposed Transactions, including statements regarding the anticipated benefits of the Transaction, the anticipated timing completion and effects of the Business Combination.Transactions, expansion plans, projected future results and market opportunities of Sema4. These statements are based on the current expectations and beliefs of management of the Company and Sema4,GeneDx, and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These forward-looking statements include statements about future financial and operating results of Sema4; benefits ofgenerally are identified by the Business Combination; statements of the plans, strategies and objectives of management for future operations of Sema4; statements regarding future economic conditions or performance; and other statements regarding the Business Combination. Forward-looking statements may contain words such as “will be,“believe,” “will,“project,” “expect,” “anticipate,” “continue,“estimate,” “project,“intend,” “believe,“strategy,” “future,” “opportunity,” “plan,” “could,” “estimate,” “forecast,” “guidance,” “intend,” “may,” “plan,” “possible,” “potential,” “predict,” “pursue,” “should,” “target” or“will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions,expressions. Forward-looking statements are predictions, projections and include theother statements about future events that are based on current expectations and assumptions that underlie such statements.and, as a result, are subject to risks and uncertainties. These statements include, but are not limited to statements about the ability of CMLSSema4 and Sema4GeneDx prior to the Business Combination,Acquisition, and the post-combination companyCompany following the Business Combination,Acquisition, to:
•meet the Closingclosing conditions to and complete the Business Combination;Acquisition;
•realize the benefits expected from the Business Combination;Acquisition;
•the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement;
•the post-combination company’sCompany’s ability to raise financing in the future and to comply with restrictive covenants related to its long-term indebtedness;
•the post-combination company’sCompany’s success in retaining or recruiting, or changes required in, its officers, key employees or directors following the Business Combination;Acquisition;
•factors relating to the business, operations and financial performance of Sema4,GeneDx as a subsidiary of the Company, including:
◦the post-combination company’sCompany’s ability to comply with laws and regulations applicable to its business; and
◦market conditions and global and economic factors beyond the post-combination company’sCompany’s control;
•intense competition and competitive pressures from other companies worldwide in the industries in which the combined company will operate;Company operates;
•litigation and the ability to adequately protect the post-combination company’sCompany’s intellectual property rights; and
•other factors detailed under the section entitled “Risk Factors.”
Factors that could cause the actual results to differ materially from those described in the forward-looking statements include those set forth in the risk factors included in this proxy statement. Any forward-looking statements made in this proxy statement are qualified in their entirety by the forward-looking statements contained or referred to in this section, and there is no assurance that the actual results or developments anticipated by either the Company or Sema4GeneDx will be realized. All subsequent written and oral forward-looking statements concerning the Company, Sema4, the post-combination company,GeneDx, the transactions contemplated by the Merger Agreement or other matters attributable to the Company or Sema4GeneDx or any person acting on their behalf are expressly qualified in their entirety by the forward-looking statements above. Except to the extent required by applicable law, the Company and Sema4GeneDx are under no obligation (and expressly disclaim any such obligation) to update or revise their forward-looking statements whether as a result of new information, future events, or otherwise.
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RISK FACTORS
You should carefully review and consider the following risk factors and the other information contained in this proxy statement, including the financial statements and notes to the financial statements included herein, in evaluating the Business CombinationAcquisition and the proposals to be voted on at the Special Meeting. The following risk factors related to Sema4GeneDx apply to the business and operations of Sema4GeneDx and will also apply to the business and operations of the post-combination companyCompany following the completion of the Business Combination.Acquisition. The occurrence of one or more of the events or circumstances described in these risk factors, alone or in combination with other events or circumstances, may adversely affect the ability to complete or realize the anticipated benefits of the Business Combination,Acquisition, and may have an adverse effect on the business, cash flows, financial condition and results of operations of the post-combination company.Company following the completion of the Acquisition. You should also carefully consider the following risk factors in addition to the other information included in this proxy statement, including matters addressed in the sectionsections entitled “Cautionary Note Regarding Forward-Looking Statements.Statements,” “Sema4’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “GeneDx’s Management’s Discussion and Analysis of Financial Condition and Results Of Operations.” We or Sema4GeneDx may face additional risks and uncertainties that are not presently known to us or Sema4,GeneDx, or that we or Sema4GeneDx currently deem immaterial, which may also impair our or Sema4’sGeneDx’s business or financial condition. The following discussion should be read in conjunction with the financial statements and notes to the financial statements included herein.
Risk Factors Summary
Risks RelatedThe Company and GeneDx’s business are subject to Sema4’s Business, Industrya number of risks and Operationsuncertainties, including those risks discussed at length below. These risks include, among others, the following:
Certain•GeneDx faces risks mayrelated to health epidemics, including the current COVID-19 pandemic, which could have a material adverse effect on Sema4’sits business financial condition and results of operations. These risks include those described below
•GeneDx expects to continue incurring significant losses, and it may include additional risks and uncertainties not presently knownsuccessfully execute its plan to Sema4achieve or that Sema4 currently deems immaterial. These risks should be readsustain profitability.
•The issuance of shares of Class A common stock to OPKO in conjunctionconnection with the other informationAcquisition and to the PIPE Investors in this proxy statement, includingthe PIPE Investment will dilute the voting power of Sema4’s financial statementscurrent stockholders.
•Because the lack of a public market for GeneDx’s outstanding shares makes it more difficult to evaluate the value of such shares, OPKO may receive consideration in the Acquisition that is greater than the fair market value of the GeneDx shares.
•Following the Acquisition, OPKO will be a substantial holder of shares of our Class A common stock and related notes thereto and “Sema4’s Management’s Discussion and Analysissales by OPKO into the market in the future could cause the market price of Financial Condition and Results of Operations” in this proxy statement.our Class A common stock to drop significantly, even if our business is doing well.
•The ongoing COVID-19 pandemic has affected and may further materially and adversely affect Sema4’sour business and financial results.
•We face intense competition. If we do not continue to innovate and provide products and services that are useful to users, we may not remain competitive, which could harm our business and operating results.
•If third-party payors, including managed care organizations, private health insurers and government health plans, do not provide adequate reimbursement for our tests, or seek to amend or renegotiate their fee reimbursement schedules, or if we are unable to comply with their requirements for reimbursement, our commercial success could be negatively affected.
•We have limited experience with the development and commercialization of our databases and our health information and genomic platforms.
•If we fail to comply with federal and state laboratory licensing requirements or standards, we could lose the ability to perform our tests or experience disruptions to our business.
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•We rely on highly skilled personnel in a broad array of disciplines and, if we are unable to hire, retain or motivate these individuals, or maintain our corporate culture, we may not be able to maintain the quality of our services or grow effectively.
•We need to scale our infrastructure in advance of demand for our products and services, and our failure to generate sufficient demand for our products and services would have a negative impact on our business and our ability to attain profitability.
•We rely on a limited number of suppliers or, in some cases, single suppliers, for some of our laboratory instruments and materials and may not be able to find replacements or immediately transition to alternative suppliers or service providers.
•We rely on a limited number of product and service providers for data infrastructure and analytics capabilities, and any disruption of, or interference with, our use of data and workflow services could adversely affect our business, financial condition, and results of operations, and we may not be able to find replacements or immediately transition to alternative products or service providers.
•Our projections are subject to significant risks, assumptions, estimates and uncertainties, including assumptions regarding adoption of our products and services. As a result, our projected revenues, market share, expenses and profitability may differ materially from our expectations in any given quarter or fiscal year.
•Uncertainty in the development and commercialization of our enhanced or new tests or services could materially adversely affect our business, financial condition and results of operations.
•We currently use, and in the future expect to increase our use of, information and rights from customers, strategic partners, and collaborators for several aspects of our operations, and if we cannot maintain current and enter new relationships with these parties with adequate access and authorization to such information, our business will suffer.
•Our operating results could be subject to significant fluctuation, which could increase the volatility of our stock and warrant prices and cause losses to our stockholders.
•We may need to raise additional capital to fund our existing operations, develop additional products and services, commercialize new products and services or expand our operations and may have difficulties raising capital depending on financial market conditions.
•We expect to make significant investments in our continued research and development of new products and services, which may not be successful.
•We have identified material weaknesses, some of which have a pervasive effect across the organization, and may identify additional material weaknesses or significant deficiencies, in our internal controls over financial reporting. Our failure to remedy these matters could result in a material misstatement of our financial statements and we will incur increased costs and demands on management as a result of compliance with internal control requirements, which could harm our operating results.
•We rely on third-party laboratories to perform certain elements of our service offerings.
•Future changes in FDA enforcement discretion for LDTs could subject our operations to much more significant regulatory requirements.
•For each product and service we are developing that may require FDA premarket review prior to marketing, the FDA may not grant clearance, authorization or premarket approval and failure to obtain necessary approvals for our future products and services would adversely affect our ability to grow our business.
•Compliance with the HIPAA security, privacy and breach notification regulations may increase our costs.
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•We face uncertainty related to healthcare reform, pricing, coverage and reimbursement, which could reduce our revenue.
•Our inability to effectively protect our proprietary products, processes, and technologies, including the confidentiality of our trade secrets, could harm our competitive position.
•Security breaches, privacy issues, loss of data and other incidents could compromise sensitive, protected, or personal information related to our business, could prevent it from accessing critical information, and could expose it to regulatory liability, which could adversely affect our business.
•We will incur increased costs and demands on management as a result of compliance with laws and regulations applicable to public companies, which could harm our operating results.
Risks Related to GeneDx’s Business
GeneDx faces risks related to health epidemics, including the current COVID-19 pandemic, which could have a material adverse effect on its business and results of operations.
GeneDx’s business has been and could continue to be adversely affected by a widespread outbreak of contagious disease, including the COVID-19 pandemic. Global health concerns relating to COVID-19 have negatively affected the macroeconomic environment, and the pandemic has significantly increased economic volatility and uncertainty.
The pandemic has resulted in government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place or stay-at-home orders, and business shutdowns. For example, some of GeneDx’s personnel located at its headquarters and other offices in Maryland and elsewhere in the United States, were subject to shelter-in-place or stay-at-home orders from state and local governments. These measures have in the past adversely impacted, and may impact in the future, GeneDx’s employees and operations and the operations of its customers, suppliers and business partners, and may continue to negatively impact spending patterns, payment cycles and insurance coverage levels. For example, these measures adversely affected demand for certain of GeneDx’s tests, and, while demand for such tests has returned to pre-COVID-19 levels, COVID-19 or variants of the virus may in the future adversely affect demand for such tests. In early 2020, many of GeneDx’s customers, including hospitals and clinics, suspended non-emergency appointments and services, which resulted in a significant decrease in its test volume. Travel bans, restrictions and shipment delays also impacted GeneDx’s ability to ship tests to and receive samples from its customers. In addition, because GeneDx relies heavily on its direct sales force to sell its tests, its sales cycle, particularly for new customers, has in the past been significantly impacted by shelter-in-place or stay-at-home orders. Some of these measures by government authorities may continue to remain in place for a significant period of time. Even if these measures are lifted, they may be implemented again if COVID-19 is not contained or returns, as has been the case recently. These measures have adversely affected and may continue to adversely affect GeneDx’s test volume, sales activities and results of operations.
The spread of COVID-19 caused GeneDx to modify its business practices (including employee travel, mandating that all non-essential personnel work from home, temporary closures of its offices, cancellation of physical participation in sales activities, meetings, events and conferences and increasing inventories of certain supplies because, although GeneDx has not experienced significant disruption in its supply chain, since March 2020, it has experienced supply delays as a result of the COVID-19 pandemic, and GeneDx may take further actions as may be required by government authorities or that it determines are in the best interests of its employees, customers and business partners. There is no certainty that such actions will be sufficient to mitigate the risks posed by the virus or otherwise be satisfactory to government authorities. If significant portions of GeneDx’s workforce, particularly its laboratory staff, are unable to work effectively, including due to illness, quarantines, social distancing, government actions or other restrictions in connection with COVID-19 or its variants, GeneDx’s operations will be impacted.
The extent to which COVID-19 may in the future impact GeneDx’s business, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but
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not limited to, the duration and spread of the pandemic and variants of the virus, the actions to contain the virus and treat its impact, and how quickly and to what extent normal economic and operating activities can resume. COVID-19 or variants of the virus could limit the ability of GeneDx’s customers, suppliers and business partners to perform, including third-party payers’ ability to make timely payments to GeneDx during and following the pandemic. Even after COVID-19 and variants of the virus have subsided, GeneDx may continue to experience an adverse impact to its business as a result of its global economic impact, including labor shortages and any recession that has occurred or may occur in the future, and loss of health insurance coverage resulting from pandemic-related job losses.
Specifically, difficult macroeconomic conditions, such as decreases in per capita income and level of disposable income and related health insurance coverage, increased and prolonged unemployment or a decline in consumer confidence as a result of COVID-19, as well as limited or significantly reduced points of access of its tests, could have a material adverse effect on the demand for GeneDx’s tests. Under difficult economic conditions, consumers may seek to reduce discretionary spending by forgoing GeneDx’s tests. Decreased demand for GeneDx’s tests, particularly in the United States, has negatively affected and could continue to negatively affect its overall financial performance. Because GeneDx’s revenue is concentrated in the United States, where the impact of COVID-19 continues to be significant, COVID-19 has had, and could continue to have, a disproportionately negative impact on its business and financial results.
To the extent the COVID-19 pandemic continues to adversely affect GeneDx’s business and financial results, it may also have the effect of heightening many of the other risks described in this section.
GeneDx expects to continue incurring significant losses, and it may not successfully execute its plan to achieve or sustain profitability.
GeneDx has incurred substantial losses since its inception. For the years ended December 31, 2021 and 2020, GeneDx’s net losses were $36.9 million and $34.9 million, respectively. At December 31, 2021, GeneDx’s accumulated deficit was $199.4. While its revenue has increased over time, GeneDx expects to continue to incur significant losses as GeneDx invests in its business. GeneDx expects these losses may increase as it focuses on scaling its business and operations and expanding its testing, sequencing and analytical capabilities, which may also increase GeneDx’s operating expenses, and GeneDx has experienced and may continue to experience decreases in test volume due to the impact of COVID-19. GeneDx’s failure to achieve and sustain profitability in the future would negatively affect its business, financial condition, results of operations and cash flows.
GeneDx launched the first commercially available NGS panels in 2008, diagnostic exome sequencing in 2012, the first rapid exome products in 2015 and a rapid whole genome product in 2020; accordingly, GeneDx has a relatively limited operating history with respect to certain of its testing products and services. GeneDx’s limited commercial history makes it difficult to evaluate its current business and makes predictions about its future results, prospects or viability subject to significant uncertainty. GeneDx’s prospects must be considered in light of the risks and difficulties frequently encountered by companies in their early stage of development, particularly companies in new and rapidly evolving markets such as genome testing. These risks include an evolving and unpredictable business model and the management of growth. To address these risks, GeneDx must, among other things, increase its customer base; continue to implement and successfully execute its business and marketing strategy; successfully enter into other strategic collaborations or relationships; obtain access to capital on acceptable terms and effectively utilize that capital; identify, attract, hire, retain, motivate and successfully integrate additional employees; continue to expand, automate and upgrade its laboratory, technology and data systems; obtain, maintain and expand coverage and reimbursement by healthcare payers; provide rapid test turnaround times with accurate results at low prices; provide superior customer service; and respond to competitive developments. There can be no assurance GeneDx will be successful in addressing these risks, and the failure to do so could have a material adverse effect on its business, prospects, financial condition and results of operations.
If third-party payers, including managed care organizations, private health insurers and government health plans, do not provide adequate reimbursement for GeneDx’s tests or GeneDx is unable to comply with their requirements for reimbursement, its commercial success could be negatively affected.
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GeneDx’s ability to increase the number of billable tests and its revenue will depend on its success achieving reimbursement for its tests from third-party payers. Reimbursement by a payer may depend on a number of factors, including a payer’s determination that a test is appropriate, medically necessary, cost-effective and has received prior authorization. The commercial success of GeneDx’s distributed products, including its exome sequencing and whole genome sequencing, will depend in part on the extent to which its customers receive coverage and adequate reimbursement from third-party payers, including as managed care organizations and government payers (e.g., Medicare and Medicaid).
Because each payer makes its own decision as to whether to establish a policy or enter into a contract to cover GeneDx’s tests, as well as the amount it will reimburse for a test, seeking these approvals is a time-consuming and costly process. To date, GeneDx has obtained policy-level reimbursement approval or contractual reimbursement for some of its tests from most of the large commercial third-party payers in the United States, certain hospital systems, and the Centers for Medicare & Medicaid Services, or CMS. GeneDx believes that establishing adequate reimbursement from Medicaid is an important factor in gaining adoption from healthcare providers. GeneDx claims for reimbursement from third-party payers may be denied upon submission, and it must appeal the claims. The appeals process is time consuming and expensive and may not result in payment. In cases where there is not a contracted rate for reimbursement, there is typically a greater coinsurance or copayment requirement from the patient, which may result in further delay or decreased likelihood of collection.
In cases where GeneDx has established reimbursement rates with third-party payers, GeneDx faces additional challenges in complying with their procedural requirements for reimbursement. These requirements often vary from payer to payer, and GeneDx has needed additional time and resources to comply with them. GeneDx has also experienced, and may continue to experience, delays in or denials of coverage if it does not adequately comply with these requirements. GeneDx’s third-party payers have also requested, and in the future may request, audits of the amounts paid to it. GeneDx has been required to repay certain amounts to payers as a result of such audits, and it could be adversely affected if it is required to repay other payers for alleged overpayments due to lack of compliance with their reimbursement policies. In addition, GeneDx has experienced, and may continue to experience, delays in reimbursement when it transitions to being an in-network provider with a payer.
GeneDx expects to continue to focus its resources on increasing adoption of, and expanding coverage and reimbursement for, its current tests and any future tests it may develop or acquire. If GeneDx fails to expand and maintain broad adoption of, and coverage and reimbursement for, its tests, GeneDx’s ability to generate revenue could be harmed and its future prospects and its business could suffer.
GeneDx faces intense competition, which is likely to intensify further as existing competitors devote additional resources to, and new participants enter, the market. If GeneDx cannot compete successfully, it may be unable to increase its revenue or achieve and sustain profitability.
GeneDx’s business environment is rapidly evolving and intensely competitive. GeneDx’s business faces changing technologies, shifting provider and patient needs, and frequent introductions of rival products and services. To compete successfully, including as one of Sema4’s subsidiaries following the completion of the Acquisition, GeneDx must accurately anticipate technology developments and deliver innovative, relevant and useful genetic testing services in a timely manner. As GeneDx’s business evolves, the competitive pressure to innovate will encompass a wider range of testing and interpretation and information services. GeneDx must continue to invest significant resources in research and development, including potentially through acquisitions and collaborations, joint ventures and partnerships, in order to enhance its service offerings.
With the development of next generation sequencing, the clinical genetics market is becoming increasingly competitive, and GeneDx expects this competition to intensify in the future. GeneDx faces competition from a variety of sources, including:
•dozens of relatively specialized competitors focused on genetics applied to healthcare, such as Ambry Genetics, a subsidiary of Konica Minolta Inc.; Invitae Corporation, Athena Diagnostics and Blueprint Genetics, subsidiaries of Quest Diagnostics Incorporated; Baylor-Miraca Genetics Laboratories; Centogene AG; Connective Tissue Gene Test LLC, a subsidiary of Health Network Laboratories, L.P.; Emory
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Genetics Laboratory, a subsidiary of Eurofins Scientific; Fulgent Genetics, Inc.; Integrated Genetics, Sequenom Inc., Correlagen Diagnostics, Inc., and MNG Laboratories, subsidiaries of Laboratory Corporation of America Holdings; Myriad Genetics, Inc.; Natera, Inc.; Perkin Elmer, Inc.; Exact Sciences and Prevention Genetics, LLC, a subsidiary of Exact Sciences; and Progenity, Inc;
•a few large, established general testing companies with large market share and significant channel power, such as Laboratory Corporation of America Holdings and Quest Diagnostics Incorporated;
•a large number of clinical laboratories in an academic or healthcare provider setting that perform clinical genetic testing on behalf of their affiliated institutions and often sell and market more broadly; and
•a large number of new entrants into the market for genetic information ranging from informatics and analysis pipeline developers to focused, integrated providers of genetic tools and services for health and wellness including Illumina, Inc., which is also one of its suppliers.
Hospitals, academic medical centers and eventually physician practice groups and individual clinicians may also seek to perform at their own facilities the type of genetic testing GeneDx would otherwise perform for them. In this regard, continued development of equipment, reagents, and other materials as well as databases and interpretation services may enable broader direct participation in genetic testing and analysis.
Participants in closely related markets such as clinical trial or companion diagnostic testing could converge on offerings that are competitive with the type of tests GeneDx performs. Instances where potential competitors are aligned with key suppliers or are themselves suppliers could provide such potential competitors with significant advantages.
In addition, the biotechnology and genetic testing fields are intensely competitive both in terms of service and price, and continue to undergo significant consolidation, permitting larger clinical laboratory service providers to increase cost efficiencies and service levels, resulting in more intense competition.
Many of GeneDx’s competitors and potential competitors have larger customer bases, greater brand recognition and market penetration, higher margins on their tests, substantially greater financial, technological and research and development resources, selling and marketing capabilities, lobbying efforts, and more experience dealing with third-party payers. As a result, they may be able to respond more quickly to changes in customer requirements, devote greater resources to the development, promotion and sale of their tests than GeneDx does, sell their tests at prices designed to win significant levels of market share, or obtain reimbursement from more third-party payers and at higher prices than GeneDx does. As technologies continue to develop, GeneDx’s competitors may be able to offer services that are, or that are seen to be, substantially similar to or better than GeneDx’s current services. GeneDx may not be able to compete effectively against these organizations. Increased competition and cost-saving initiatives on the part of governmental entities and other third-party payers are likely to result in pricing pressures, which could harm GeneDx’s sales, profitability or ability to gain market share. In addition, competitors may be acquired by, receive investments from or enter into other commercial relationships with larger, well-established and well-financed companies as use of next generation sequencing, including whole genome sequencing, for prenatal, pediatric, congenital disease and rare disorder diagnosis, Neonatal Intensive Care Units (“NICU”) testing and preventative care increases. Certain of GeneDx’s competitors may be able to secure key inputs from vendors on more favorable terms, devote greater resources to marketing and promotional campaigns, adopt more aggressive pricing policies and devote substantially more resources to website and systems development than GeneDx can. In addition, companies or governments that control access to genetic testing through umbrella contracts or regional preferences could promote GeneDx’s competitors or prevent GeneDx from performing certain services. In addition, some of GeneDx’s competitors have obtained approval or clearance for certain of their tests from the U.S. Food and Drug Administration (the “FDA”). If payers decide to reimburse only for tests that are FDA-approved or FDA-cleared, or if they are more likely to reimburse for such tests, GeneDx may not be able to compete effectively unless it obtains similar approval or clearance for its tests. If GeneDx is unable to compete successfully against current and future competitors, it may be unable to increase market acceptance and sales of its tests, which could prevent it from increasing its revenue or achieving profitability.
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GeneDx may not be able to manage its future growth effectively, which could make it difficult to execute its business strategy.
GeneDx’s expected future growth could create a strain on its and, following completion of the Acquisition, Sema4’s organizational, administrative and operational infrastructure, including laboratory operations, quality control, customer service, marketing and sales, and management. GeneDx may not be able to maintain the quality of or expected turnaround times for its tests, or satisfy customer demand as it grows. GeneDx may need to continue expanding its sales force to facilitate growth, and GeneDx may have difficulties locating, recruiting, training and retaining sales personnel. Following the completion of the Acquisition, Sema4’s ability to manage GeneDx’s growth effectively will require Sema4 to continue to improve GeneDx’s operational, financial and management controls, as well as its reporting systems and procedures. As GeneDx grows, any failure of its controls or interruption of its production facilities or systems could have a negative impact on its and Sema4’s business and financial operations. If either GeneDx or Sema4 is unable to manage GeneDx’s growth effectively, it may be difficult for GeneDx to execute its business strategy and its and Sema4’s business could be harmed.
GeneDx relies on highly skilled personnel in a broad array of disciplines and, if it is unable to hire, retain or motivate these individuals it may not be able to maintain the quality of its services or grow effectively.
GeneDx’s performance, including its research and development programs and laboratory operations, largely depend on its continuing ability to identify, hire, develop, motivate and retain highly skilled personnel for all areas of its organization, including software developers, geneticists, biostatisticians, certified laboratory scientists and other scientific and technical personnel to process and interpret genetic tests. In addition, GeneDx may need to continue to expand its sales force with qualified and experienced personnel. Competition in GeneDx’s industry for qualified employees is intense, and GeneDx may not be able to attract or retain qualified personnel in the future due to the competition for qualified personnel among life science and technology businesses as well as universities and public and private research institutions, particularly in the Washington, D.C. and Baltimore, Maryland areas. If GeneDx is not able to attract and retain the necessary personnel to accomplish its business objectives, it may experience constraints that could adversely affect its ability to scale its business, support its research and development efforts and its clinical laboratory.
GeneDx needs to scale its infrastructure in advance of demand for its tests, and its failure to generate sufficient demand for its tests would have a negative impact on its business and its ability to attain profitability.
GeneDx’s success depends in large part on its ability to extend its market position, to provide customers with high-quality test reports quickly and at a lower price than its competitors, and to achieve sufficient test volume to realize economies of scale. GeneDx’s overall test volumes grew from approximately 134 thousand to 169 thousand tests processed during the years ended December 31, 2020 and 2021. In addition, GeneDx regularly evaluates and refines its testing process, often significantly updating its workflows, including with respect to exome sequencing and whole genome sequencing. In order to execute GeneDx’s business model, it intends to continue to invest heavily in order to significantly scale its infrastructure, including GeneDx’s testing capacity, particularly, with respect to exome sequencing and whole genome sequencing to supplement its panel testing capabilities, and information systems, expand its commercial operations, customer service, billing and systems processes and enhance its internal quality assurance program. GeneDx expects that much of this growth will be in advance of demand for its tests. GeneDx’s and Sema4’s current and future expense levels are to a large extent fixed and are largely based on investment plans and estimates of future revenue. Because the timing and amount of revenue from GeneDx’s tests is difficult to forecast, when revenue does not meet expectations, GeneDx may not be able to adjust its spending promptly or reduce spending to levels commensurate with its revenue. Even if GeneDx successfully scales its infrastructure and operations, there can be no assurance that tests will increase at levels consistent with the growth of GeneDx’s infrastructure. If GeneDx fails to generate demand commensurate with this growth or if it fails to scale its infrastructure sufficiently in advance of demand to successfully meet such demand, its business, prospects, financial condition and results of operations could be adversely affected.
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If GeneDx is not able to continue to generate substantial demand of its tests, its commercial success will be negatively affected.
GeneDx’s business model assumes that it will be able to generate significant test volume, particularly with respect to exome sequencing and whole genome sequencing in addition to its panel testing offerings, and it may not succeed in continuing to drive adoption of its tests to achieve sufficient volumes. Inasmuch as detailed genetic data from exome and whole genome sequencing has only recently become available at relatively affordable prices, the continued pace and degree of clinical acceptance of the utility of such testing is uncertain. Specifically, it is uncertain how much genetic data will be accepted as necessary or useful, as well as how detailed that data should be, particularly since medical practitioners may have become accustomed to genetic testing that is specific to one or a few genes and may not embrace the utility of exome sequencing and whole genome sequencing. Given the substantial amount of additional information available from a broad-based testing panel such as GeneDx’s, there may be distrust as to the reliability of such information when compared with more limited and focused genetic tests. To generate further demand for GeneDx’s tests, GeneDx will need to continue to make clinicians aware of the benefits of its tests, including the price, the breadth of its testing options, and the benefits of having additional genetic data available from which to make treatment decisions. A lack of or delay in clinical acceptance of GeneDx’s exome sequencing and whole genome sequencing testing, or its legacy broad-based panels testing, would negatively impact sales and market acceptance of GeneDx’s tests and limit its revenue growth and potential profitability. Genetic testing is expensive and many potential customers may be sensitive to pricing. In addition, potential customers may not adopt GeneDx’s tests if adequate reimbursement is not available, or if GeneDx is not able to maintain low prices relative to its competitors.
If GeneDx is not able to generate demand for its tests at sufficient volume, or if it takes significantly more time to generate this demand than GeneDx anticipates, GeneDx’s business, prospects, financial condition and results of operations could be materially harmed.
GeneDx has devoted a portion of its resources to the development and commercialization of exome sequencing and whole genome sequencing, and to research and development activities related to such sequencing and the analysis thereof, including clinical and regulatory initiatives to obtain diagnostic clearance and marketing approval. The demand for these regulated products is relatively unproven, and GeneDx may not be successful in achieving market awareness and demand for these products through its and, following completion of the Acquisition, Sema4’s sales and marketing operations.
GeneDx’s success will depend on its ability to use rapidly changing genetic data to interpret test results accurately and consistently, and its failure to do so would have an adverse effect on its operating results and business and harm its reputation.
GeneDx’s success depends on its ability to provide reliable, high-quality tests that incorporate rapidly evolving information about the role of genes and gene variants in disease and clinically relevant outcomes associated with those variants. Errors, such as failure to detect genomic variants with high accuracy, or mistakes, such as failure to identify, or incompletely or incorrectly identifying, gene variants or their significance, could have a significant adverse impact on GeneDx’s business.
GeneDx classifies variants in accordance with published guidelines as benign, likely benign, variants of uncertain significance, likely pathogenic or pathogenic, and these guidelines are subject to change. Interpretation of some guidelines is open to clinical or scientific judgment and thus may vary between experts. In addition, it is GeneDx’s practice to offer support to clinicians and geneticists ordering its tests regarding which genes or panels to order as well as interpretation of genetic variants. GeneDx also relies on clinicians to interpret what it reports and to incorporate specific information about an individual patient into the physician’s treatment decision.
The marketing, sale and use of GeneDx’s genetic tests could subject it to liability for errors in, misunderstandings of, or inappropriate reliance on, information it provides to clinicians, geneticists or customers, and lead to claims against GeneDx if someone were to allege that a test failed to perform as it was designed, if GeneDx failed to correctly interpret the test results, if GeneDx failed to update the test results due to a reclassification of the variants according to new published guidelines, or if the ordering physician were to
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misinterpret test results or improperly rely on them when making a clinical decision. A professional liability claim could result in substantial damages and be costly and time-consuming for GeneDx or, following completion of the Acquisition, Sema4 to defend. Although GeneDx maintains liability insurance, including for errors and omissions, there can be no assurance that such insurance would fully protect GeneDx or, following completion of the Acquisition, Sema4 from the financial impact of defending against these types of claims or any judgments, fines or settlement costs arising out of any such claims. Any liability claim, including an errors and omissions liability claim, brought against GeneDx or, following completion of the Acquisition, Sema4, with or without merit, could increase GeneDx’s or Sema4’s insurance rates or prevent GeneDx or Sema4 from securing insurance coverage in the future. Additionally, any liability lawsuit could cause injury to GeneDx’s reputation or cause it to suspend sales of its tests. The occurrence of any of these events could have an adverse effect on GeneDx’s, and, following completion of the Acquisition, Sema4’s reputation and results of operations.
GeneDx’s industry is subject to rapidly changing technology and new and increasing amounts of scientific data related to genes and genetic variants and their role in disease. GeneDx’s failure to develop tests to keep pace with these changes could make it obsolete.
In recent years, there have been numerous advances in methods used to analyze very large amounts of genomic information and the role of genetics and gene variants in disease and treatment therapies. GeneDx’s industry has and will continue to be characterized by rapid technological change, increasingly larger amounts of data, frequent new testing service introductions and evolving industry standards, all of which could make GeneDx’s tests obsolete. As the fields of genomic analysis and health information become more widely known to the public, GeneDx anticipates that competition will further increase. GeneDx’s future success will also depend on its ability to keep pace with the evolving needs of its customers on a timely and cost-effective basis and to pursue new market opportunities that develop as a result of technological and scientific advances. GeneDx’s tests could become obsolete and its business adversely affected unless it continually update its offerings to reflect new scientific knowledge about genes and genetic variations and their role in diseases and treatment therapies.
GeneDx relies on a limited number of suppliers or, in some cases, sole suppliers, for some of its laboratory instruments, materials and services, and it may not be able to immediately transition to alternative suppliers.
GeneDx relies on a limited number of suppliers for certain laboratory substances used in the chemical reactions incorporated into its processes, (which are referred to herein as “reagents”), as well as sequencers and other equipment and materials which GeneDx uses in its laboratory operations. GeneDx does not have short- or long-term agreements with all of its suppliers, and its suppliers could cease supplying these materials and equipment at any time, or fail to provide GeneDx with sufficient quantities of materials or materials that meet its specifications. GeneDx’s laboratory operations could be interrupted if it encounters delays or difficulties in securing these reagents, sequencers or other equipment or materials, and if it cannot obtain an acceptable substitute. If the supply of reagents, sequencers or other equipment or materials GeneDx receives does not meet its quality control or performance standards, GeneDx may not be able to use such items, or if it uses them not knowing that they are of inadequate quality (which occasionally occurs with respect to certain reagents), GeneDx’s tests may not work properly or at all, or may provide erroneous results, and GeneDx may be subject to significant delays caused by interruption in production or manufacturing or to lost revenue from such interruption or from spoiled tests. In addition, any natural or other disaster, acts of war or terrorism, shipping embargoes, labor unrest, political instability, outbreak of disease or similar events at the facilities of GeneDx’s third-party suppliers’ that cause a loss of manufacturing capacity would heighten the risks that GeneDx faces. Any such interruption could significantly affect GeneDx’s business, financial condition, results of operations and reputation. GeneDx relies on Illumina as a predominate supplier of next generation sequencers and associated reagents, maintenance and repair services. Any disruption in Illumina’s operations could impact GeneDx’s supply chain and laboratory operations as well as GeneDx’s ability to conduct its tests, and it could take a substantial amount of time to integrate replacement equipment into GeneDx’s laboratory operations.
GeneDx believes that there are only a few other manufacturers that are currently capable of supplying and servicing the equipment necessary for its laboratory operations, including sequencers and various associated reagents. The use of equipment or materials provided by these replacement suppliers would require GeneDx to alter its laboratory operations. Transitioning to a new supplier would be time consuming and expensive, may result in
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interruptions in laboratory operations, could affect the performance specifications of laboratory operations or could require that GeneDx revalidate its tests. There can be no assurance that GeneDx will be able to secure alternative equipment, reagents and other materials, and bring such equipment, reagents and materials on line and revalidate them without experiencing interruptions in its workflow. In the case of an alternative supplier for Illumina, GeneDx cannot make any assurance that replacement sequencers and associated reagents will be available or will meet its quality control and performance requirements for its laboratory operations. If GeneDx encounters delays or difficulties in securing, reconfiguring or revalidating the equipment and reagents it requires for its tests, GeneDx’s business, financial condition, results of operations and reputation could be adversely affected.
If GeneDx’s laboratories become inoperable due to disasters, health epidemics or for any other reasons, it will be unable to perform tests and its business will be harmed.
GeneDx performs all of its tests at its production facilities in Gaithersburg, Maryland. GeneDx’s laboratories and the equipment it uses to perform its tests would be costly to replace and could require substantial lead time to replace and qualify for use. GeneDx’s laboratories may be harmed or rendered inoperable by natural or man-made disasters, including flooding, fire and power outages, or by health epidemics, which may render it difficult or impossible for GeneDx to perform its tests for some period of time. The inability to perform GeneDx’s tests or the backlog that could develop if its laboratories are inoperable for even a short period of time may result in the loss of customers or harm its reputation. Although GeneDx maintains insurance for damage to its property and the disruption of its business, this insurance may not be sufficient to cover all potential losses and may not continue to be available to GeneDx on acceptable terms, if at all.
Ethical, legal and social concerns related to the use of genetic information could reduce demand for GeneDx’s tests.
Genetic testing has raised ethical, legal and social issues regarding privacy rights and the appropriate uses of the resulting information. Governmental authorities could, for social or other purposes, limit or regulate the use of genetic information or genetic testing or prohibit testing for genetic predisposition to certain conditions, particularly for those that have no known cure. Similarly, these concerns may lead customers to refuse to use, or clinicians to be reluctant to order, genomic tests even if permissible, or withhold or withdraw consent for GeneDx’s use of their data. These and other ethical, legal and social concerns may limit market acceptance of GeneDx’s tests or reduce the potential markets for its tests, either of which could have an adverse effect on GeneDx’s business, financial condition or results of operations.
GeneDx currently uses, and in the future expects to increase its use of, information and rights from customers, strategic partners, and collaborators for several aspects of its operations, and if GeneDx cannot maintain current and enter new relationships with these parties with adequate access and authorization to such information, its business will suffer.
Accessing, combining, curating, and analyzing health information, including longitudinal patient medical history data and genetic data, are core features of GeneDx’s exome and genome sequencing solutions and key elements of its long term business model. The regulatory landscape around the storage, processing and deidentification of genetic data is evolving globally and greatly impacts the ability of GeneDx, its strategic partners and its collaborators to process and use the data in connection with its products and services.
GeneDx’s future success depends in part on its ability to maintain and grow its existing relationships and to establish new relationships. Many factors may impact the success of such collaborations, including GeneDx’s ability to perform its obligations, its collaborators’ satisfaction with GeneDx’s services, its collaborators’ performance of their obligations to GeneDx, its collaborators’ internal priorities, resource allocation decisions and competitive opportunities, the ability to obtain regulatory approvals, disagreements with collaborators, the costs required of either party to the collaboration and related financing needs, and operating, legal and other risks in any relevant jurisdiction. GeneDx’s ability to support such collaborations may also depend on factors outside of its control including the willingness of customers to engage with it and share their data, societal perspectives on privacy, and the willingness of health systems to establish collaborations, relationships and programs utilizing their data, all of which may impact the utility of these databases and the insights GeneDx will be able to generate from expanding
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datasets. In addition to reducing GeneDx’s revenue or delaying the development of future services and revenue streams, the loss of one or more of these relationships may reduce GeneDx’s access to research, longitudinal patient health data, clinical trials or computing technologies that facilitate the collection and incorporation of new information into the databases GeneDx manages and to which it has access. All of the risks relating to testing service development, regulatory clearance, authorization or approval and commercialization described herein apply to GeneDx derivatively through the activities of its collaborators. GeneDx engages in conversations with companies regarding potential collaborations on an ongoing basis. These conversations may not result in a commercial agreement. Even if an agreement is reached, the resulting relationship may not be successful, and any products and services developed as part of the collaboration may not produce successful outcomes. Speculation in the industry about GeneDx’s existing or potential collaborations can be a catalyst for adverse speculation about GeneDx, or its products or services, which can adversely affect GeneDx’s reputation and its business.
GeneDx’s business may suffer if it does not retain its senior management.
GeneDx depends on its senior management. The loss of services of members of GeneDx’s senior management team, including Katherine Stueland, the Chief Executive Office of GeneDx, could adversely affect its business until suitable replacements can be found. There may be a limited number of persons with the requisite skills to serve in these positions and GeneDx may be unable to locate or employ qualified personnel on acceptable terms.
Professional liability suits against GeneDx could result in expensive and time-consuming litigation, payment of substantial damages and increases in its insurance rates.
The sale and use of GeneDx’s exome and genome sequencing solutions could lead to professional liability claims, including class action lawsuits. GeneDx may also be subject to liability for errors in the test results it provides to healthcare providers or customers or for a misunderstanding of, or inappropriate reliance upon, the information such tests provides. Claims could also arise out of planned interpretation and information services or any of GeneDx’s other activities. A professional liability claim could result in substantial damages, be costly and time consuming to defend, and cause material harm to GeneDx’s business, reputation or financial condition. There can be no assurance that GeneDx’s liability insurance would protect GeneDx’s or, following the completion of the Acquisition, Sema4’s assets from the financial impact of defending a professional liability claim. Any claim brought against GeneDx with or without merit, could increase its or, following completion of the Acquisition, Sema4’s liability insurance rates or prevent GeneDx or Sema4 from securing insurance coverage in the future.
GeneDx’s inability to effectively protect its proprietary technologies, including the confidentiality of its trade secrets, could harm its competitive position.
GeneDx’s success and ability to compete depends to a large extent on its ability to develop proprietary technologies and to maintain adequate protection of its intellectual property in the United States and other countries. The laws of some foreign countries do not protect proprietary rights to the same extent as the laws of the United States, and GeneDx may encounter difficulties in establishing and enforcing its proprietary rights outside of the United States. In addition, the proprietary positions of companies developing and commercializing tools for molecular diagnostics, including GeneDx’s, generally are uncertain and involve complex legal and factual questions.
GeneDx currently relies upon trade secret protection and copyright, as well as non-disclosure agreements and invention assignment agreements with its employees, consultants and third parties to protect its confidential and proprietary information. Although GeneDx’s competitors have utilized and are expected to continue utilizing similar methods and have aggregated and are expected to continue to aggregate similar databases of genetic testing information, GeneDx’s success will depend upon its ability to develop proprietary methods and databases and to defend any advantages afforded to it by such methods and databases relative to its competitors. If GeneDx does not protect its intellectual property adequately, competitors may be able to use its methods and databases and thereby erode any competitive advantages it may have.
GeneDx will be able to protect its proprietary rights from unauthorized use by third parties only to the extent that its proprietary technologies are effectively maintained as trade secrets. GeneDx expects to rely primarily upon trade secrets and proprietary know-how protection for its confidential and proprietary information, and it has taken security measures to protect this information. These measures, however, may not provide adequate protection for
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GeneDx’s trade secrets, know-how or other confidential information. Among other things, GeneDx seeks to protect its trade secrets and confidential information by entering into confidentiality agreements with employees and consultants. There can be no assurance that any confidentiality agreements that GeneDx has with employees and consultants will provide meaningful protection for its trade secrets and confidential information or will provide adequate remedies in the event of unauthorized use or disclosure of such information. Accordingly, there also can be no assurance that GeneDx’s trade secrets will not otherwise become known or be independently developed by competitors. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret can be difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, trade secrets may be independently developed by others in a manner that could prevent legal recourse by GeneDx. If any of GeneDx’s confidential or proprietary information, such as its trade secrets, were to be disclosed or misappropriated, or if any such information was independently developed by a competitor, GeneDx’s competitive position could be harmed.
Third parties may assert that GeneDx’s employees or consultants have wrongfully used or disclosed confidential information or misappropriated trade secrets.
GeneDx employs individuals who were previously employed at universities or genetic testing, diagnostic or other healthcare companies, including its competitors or potential competitors. Although GeneDx tries to ensure that its employees and consultants do not use the proprietary information or know-how of others in their work for it, GeneDx may be subject to claims that it or its employees or consultants have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of a former employer or other third parties. Further, GeneDx may be subject to ownership disputes in the future arising, for example, from conflicting obligations of consultants or others who are involved in developing its intellectual property. Litigation may be necessary to defend against these claims. If GeneDx fails in defending against any such claims, in addition to paying monetary damages, GeneDx may lose valuable intellectual property rights or personnel. Even if GeneDx is successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.
Risks Related to Sema4’s Business, Industry and Operations
The ongoing COVID-19 pandemic has affected and may further materially and adversely affect our business and financial results.
The ongoing COVID-19 pandemic, together with related precautionary measures beganin response to the initial outbreak and resurgences, materially disrupt Sema4’sdisrupted our business during certain periods in April 2020 and 2021 and may continue to disrupt itsour business for an unknown period of time. TheSince the initial outbreak, the territories in which Sema4 markets, sells, distributeswe market, sell, distribute and performs itsperform our tests and performs itsour health information and data science services are attemptingcontinue to address the COVID-19 pandemic in varying ways, including stay-at-home orders, temporarily closing businesses, restricting gatherings, restricting travel, and mandating social distancing, face coverings and face coverings. Certain jurisdictions have begun re-opening only to return to restrictions due to increasesproof of vaccination. Despite recent progress in new COVID-19 cases. Even in areas where “stay-at-home” restrictions have been liftedthe administration of vaccines, the future impact and the number of cases of COVID-19 has declined, many individuals remain cautious about resuming activities such as preventive-care medical visits. Medical practices continue to be cautious about allowing individuals, such as sales representatives, into their offices. Many individuals continue to work from home rather than from an office setting. The level and nature of the disruption caused by the COVID-19 ispandemic continues to be unpredictable, may be cyclical and long-lasting and may vary from location to location.location, and the emergence of new variant strains of COVID-19, including Delta and Omicron, in regions that have reopened have necessitated, and may in the future necessitate, renewed government restrictions. As a result, Sema4we experienced a significant impact to itsour 2020 and 2021 operating results, including itsour order volumes, revenues, margins, and cash utilization, among other measures.measures and may experience further impacts in future periods depending on the evolution of the COVID-19 pandemic.
Beginning in MarchThroughout 2020 Sema4and 2021, both we and our partners undertook temporarya number of precautionary measures intendedin response to help minimize the risk of the virus, to its employees, including requiring most employees to work remotely; suspending field-based, face-to-face interactions by its sales force; requiring on-site employees to undergo COVID-19 testing, wear personal protective equipment (including face masks or shields) and maintain social distancing; pausing all non-essentialremotely, restricting travel for its employees; and limiting employee attendance at industry eventsinteractions in person, and in-person work-related meetings, to the extent those events and meetings are continuing. Sema4’s current partners also took similar precautions, including suspending face-to-face interactions between sales representatives and healthcare providers.
Sema4 expectswe expect to adjust itsour precautionary measures at itsour various locations based on local recovery levels, vaccination rates and applicable governmental regulations. For example, a portion of Sema4’sour sales force has recommenced field-based interactions, although access to healthcare providers remains limitedimpaired and the resumption ofindustry continues to resume normal activities is
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expected to be gradual. Sema4’sactivities. Our business could be negatively affected in the future if it takes excessive, ineffective or inadequate precautions.precautions
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The ongoing COVID-19 pandemic has materially impacted Sema4’sour business in 2020 and 2021 and may continue to impact itsour business for an unknown period of time. Such impacts have included and may include the following:
•Healthcare providers or patients have canceled or delayed scheduling, and for an extended period of time may continue to cancel or delay scheduling, standard wellness visits and other non-emergency appointments and procedures (including oncology and pregnancy-related screenings), contributing to a decline in orders for Sema4’sour products or services;
•Restrictions on travel, commerce and shipping may prevent patients and pathologists from shipping samples to Sema4’sour clinical laboratories;
•Illnesses, quarantines, financial hardships, restrictions on travel, commerce and shipping, or other consequences of the pandemic, may disrupt Sema4’sour supply chain or other business relationships, and itwe or other parties may assert rights under force majeure clauses to excuse performance;
•Sema4 hasWe have experienced, and for an extended period of time may continue to experience, reduced volumes at itsour clinical laboratories and itwe may need to suspend operations at some or all of itsour clinical laboratories;
•Sema4 hasWe have taken, and may take additional, cost cutting measures, which may hinder itsour efforts to commercialize itsour products or delay the development of future products and services. Further, Sema4we might not realize all of the cost savings it expectswe expect to achieve as a result of those efforts;
•Sema4We and itsour partners have postponed or cancelled clinical studies, which may delay or prevent itsour launch of future products and services;
•Sema4’sSome or all of our workforce, much of which has been askedcontinues to work remotely in an effort to reduce the spread of COVID-19, may be infected by the virus or otherwise distracted;
•A combination of factors, including infection from the virus, supply shortfalls, and inability to obtain or maintain equipment, could adversely affect Sema4’sour lab capacity and itsour ability to meet the demand for itsour testing services. In addition, in April of 2020 Sema4 began offering a COVID-19 test and by devoting lab capacity and supplies to that test, it may experience capacity limitations and supply shortfalls that adversely affect its ability to provide women’s health and oncology testing, and other tests that may generate more revenue and higher profits;services; and
•Sema4We may inaccurately estimate the duration or severity of the COVID-19 pandemic, which could cause itus to misalign itsour staffing, spending, activities and precautionary measures with current or future market conditions.
Despite Sema4’sour efforts, the ultimate impact of the COVID-19 pandemic, or the impact of the emergence of new strains of the virus and any future resurgences of COVID-19 or variant strains, depends on factors beyond itsour knowledge or control, including availability and distribution of effective medical treatments and vaccines, the duration and severity of the pandemic, third-party actions taken to contain its spread and mitigate its public health effects and short- and long-term changes in the behaviors of medical professionals and patients resulting from the pandemic.
Additionally, the anticipated economic consequences of the COVID-19 pandemic have, and may continue to, adversely impacted financial markets, resulting in high share price volatility, reduced market liquidity, and substantial declines in the market prices of the securities of many publicly traded companies. Following the Business Combination volatileVolatile or declining markets for equities could adversely affect the post-combination company’sour ability to raise capital in the future when needed through the sale of shares of common stock or other equity or equity-linked securities. If these market conditions persist when and if the post-combination company needswe need to raise capital, and if it iswe are able to sell shares of itsour common stock following the Business Combination under then prevailing market conditions, the post-combination companywe might have to accept lower prices for itsour shares and issue a larger number of shares than might have been the case under better market conditions, resulting in significant dilution of the interests of itsour stockholders.
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Due to the high degree of uncertainty regarding the implementation and impact of the CARES Act and other legislation related to COVID-19, there can be no assurance that Sema4we will be able to comply with the applicable terms and conditions of the CARES Act and retain such assistance.
On March 27, 2020, the CARES Act was signed into law, aimed at providing emergency assistance and health care for individuals, families, and businesses affected by the COVID-19 pandemic and generally supporting the U.S. economy. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, and modifications to the net interest deduction limitations. The CARES Act and similar legislation intended to provide assistance related to the COVID-19 pandemic also authorized $175.0 billion in funding to be distributed by the U.S. Department of Health and Human Services, or the HHS, to eligible health care providers. This funding, known as the Provider Relief Fund, is designated to fund eligible healthcare providers’ healthcare-related expenses or lost revenues attributable to COVID-19. On December 27, 2020, the Consolidated Appropriations Act, 2021 was signed into law, which adds $3.0 billion to the Provider Relief Fund. Payments from the Provider Relief Fund are subject to certain eligibility criteria, as well as reporting and auditing requirements, but do not need to be repaid to the U.S. government if recipients comply with the applicable terms and conditions.
In 2020, Sema4we received $5.4 million as part of the stimulus, comprised of $2.6 million received under the Provider Relief Fund, or PRF, distribution and $2.8 million received under the Employee Retention Credit, or ERC, distribution. During the three months ended March 31,In 2021, Sema4we received an additional $5.6 million under the PRF distribution. PRF distributions to healthcare providers are not loans and will not be required to be repaid; however, as a condition to receiving these payments, providers must agree to certain terms and conditions and submit sufficient documentation demonstrating that the funds are being used for healthcare-related expenses or lost revenue attributable to the COVID-19 pandemic. ERC distributions are refundable tax credits for 50% of qualified wages paid to employees during the pandemic. A company is eligible for the ERC if it has not received a Paycheck Protection Program loan under the Cares Act and (1) its operations have been fully or partially suspended because of COVID-19 or (2) its gross receipts in a calendar quarter in 2020 declined by more than 50% from the same period in 2019. At the time of applying for the ERC, Sema4we concluded that the eligibility requirements were met. However, subsequent to the filing of the application, Sema4’sour revenue was revised due to a change in estimate as a result of finalizing itsour accounting records, which impacted the applicable periods and calculations for determining eligibility, and may no longer meet the eligibility requirements. As such, Sema4 haswe have deferred the recognition of the ERC distribution and recorded the proceeds in other liabilities on the balance sheets as of December 31, 20202021 and MarchDecember 31, 2021. See Note 2 to Sema4’s audited financial statements and Note 2 to Sema4’s unaudited condensed financial statements contained elsewhere in this proxy statement.2020.
Due to the high degree of uncertainty regarding the implementation of the CARES Act, the Consolidated Appropriations Act, 2021 and other stimulus legislation, and due to Sema4’sour revenue revisions, there can be no assurance that the terms and conditions of the PRF, ERC or other relief programs will not change or be interpreted in ways that affect Sema4’sour ability to comply with such terms and conditions in the future, which could affect itsour ability to retain such assistance. Sema4We will continue to monitor itsour compliance with the terms and conditions of the PRF, including demonstrating that the distributions received have been used for healthcare-related expenses or lost revenue attributable to COVID-19, and the ERC. If Sema4 iswe are unable to comply with current or future terms and conditions, itsour ability to retain some or all of the distributions received may be impacted, and itwe may be subject to actions including payment recoupment, audits and inquiries by governmental authorities, and criminal, civil or administrative penalties.
Other companies or institutions may develop and market novel or improved technologies, which may make Sema4’sour technologies less competitive or obsolete.
Sema4 operatesWe operate in a rapidly evolving and highly competitive industry. There are a number of private and public companies that offer products or services or have announced that they are developing products or services that compete, or may one day compete, with itsour products or services. Some of Sema4’sour current and potential competitors possess greater brand recognition, financial and other resources and development capabilities than it does.we do. As the fields of genomic analysis and health information become more widely known to the public, Sema4 anticipateswe anticipate that competition will further increase. Sema4 expectsWe expect to compete with a broad range of organizations in the U.S. and
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other countries that are engaged in the development, production and commercialization of genetic screening products,
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including women’s health and oncology screening products, health information services, and analytics, and data science services, and other diagnostic products. These competitors include:
•companies that offer clinical, research and data clinical services, molecular genetic testing and other clinical diagnostics, life science research and drug discovery services, data services and healthcare analytics, and consumer genetics products;
•academic and scientific institutions;
•governmental agencies; and
•public and private research organizations.
Sema4We may be unable to compete effectively against itsour competitors either because their products and services are superior or because they may have more expertise, experience, financial resources, or stronger business relationships. These competitors may have broader product lines and greater name recognition than Sema4 does.we do. Furthermore, Sema4we must compete successfully in itsour existing markets, including women’s health and oncology, but also in any new markets it expandswe expand into. Even if Sema4 doeswe successfully develop new marketable products or services, itsour current and future competitors may develop products and services that are more commercially attractive than Sema4’s,ours, and they may bring those products and services to market earlier or more effectively than it.we are able to. If Sema4 iswe are unable to compete successfully against current or future competitors, itwe may be unable to increase market acceptance for and sales of itsour tests and services, which could prevent itus from increasing or sustaining itsour revenues or achieving sustained profitability.
Sema4 facesWe face intense competition. If Sema4 doeswe do not continue to innovate and provide products and services that are useful to users, itwe may not remain competitive, which could harm itsour business and operating results.
Sema4’sOur business environment is rapidly evolving and intensely competitive. Sema4’sOur businesses face changing technologies, shifting provider and patient needs, and frequent introductions of rival products and services. To compete successfully, Sema4we must accurately anticipate technology developments and deliver innovative, relevant and useful products, services, and technologies in a timely manner. As Sema4’sour businesses evolve, the competitive pressure to innovate will encompass a wider range of products and services. Sema4We must continue to invest significant resources in research and development, including through acquisitions and collaborations (such as the pending Acquisition on GeneDx discussed herein), joint ventures and partnerships, in order to enhance itsour current diagnostics and health information and data science technologies, and existing and new products and services based off these technologies.
Sema4 hasWe have many competitors in different industries. Sema4’sOur current and potential domestic and international competitors range from large and established companies to emerging start-ups in addition to academic and scientific institutions, and public and private research organizations. Some competitors have longer operating histories in various sectors. They can use their experience and resources in ways that could affect Sema4’sour competitive position, including by making acquisitions, continuing to invest heavily in research and development and in talent, aggressively initiating intellectual property claims (whether or not meritorious), and continuing to compete aggressively for itsour customers and partners in the market for health information and data science products and services. Sema4’sOur competitors may be able to innovate and provide products and services faster than Sema4we can or may foresee the need for products and services before it does.we do.
Sema4’sOur operating results may also suffer if itsour products and services are not responsive to the needs of itsour customers and partners. As technologies continue to develop, Sema4’sour competitors may be able to offer products and services that are, or that are seen to be, substantially similar to or better than itsour current products and services. This may force Sema4us to compete in different ways and expend significant resources in order to remain competitive. If Sema4’sour competitors are more successful than itus in developing compelling products and services for or in attracting and retaining customers or partners in the market for health information and data science products and services, Sema4’sour operating results could be harmed.
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If third-party payors, including managed care organizations, private health insurers and government health plans, do not provide adequate reimbursement for Sema4’sour tests, or seek to amend or renegotiate their fee reimbursement schedules, or if Sema4 iswe are unable to comply with their requirements for reimbursement, itsour commercial success could be negatively affected.
Sema4’sOur ability to increase the number of billable tests and itsour revenue therefrom will depend on itsour success in achieving reimbursement for itsour tests from third-party payors. Reimbursement by a payor may depend on a number of factors, including a payer’s determination that a test is appropriate, medically necessary, cost-effective and has received prior authorization. The commercial success of Sema4’sour current and future products, if approved, will depend on the extent to which itsour customers receive coverage and adequate reimbursement from third-party payors, including as managed care organizations and government payers (e.g.(e.g., Medicare and Medicaid).
Since each payer makes its own decision as to whether to establish a policy or enter into a contract to cover Sema4’sour tests, as well as the amount it will reimburse for a test, seeking these approvals is a time-consuming and costly process. In addition, the determination by a payer to cover and the amount it will reimburse for Sema4’sour tests will likely be made on an indication-by-indication basis and may consider Sema4’sour billing practices and reimbursements from other payors and from Sema4’sour patient billing programs. To date, Sema4 haswe have obtained policy-level reimbursement approval or contractual reimbursement for some indications for itsour tests from most of the large commercial third-party payors in the United States, and the Centers for Medicare & Medicaid Services, or CMS, provides reimbursement for itsour multi-gene tests for hereditary breast and ovarian cancer-related disorders as well as other tests. Sema4 believesWe believe that establishing adequate reimbursement from Medicare is an important factor in gaining adoption from healthcare providers. Sema4’sOur claims for reimbursement from third-party payors may be denied upon submission, and Sema4we must appeal the claims. The appeals process is time consuming and expensive and may not result in payment. In cases where there is not a contracted rate for reimbursement, there is typically a greater coinsurance or copayment requirement from the patient, which may result in further delay or decreased likelihood of collection.
A significant portion of the payments for Sema4’sour tests are paid or reimbursed under insurance programs with third-party payors. To contain reimbursement and utilization rates, third-party payors often attempt to, or do in fact, amend or renegotiate their fee reimbursement schedules. Loss of revenue by Sema4 caused by third-party payor cost containment efforts or an inability to negotiate satisfactory reimbursement rates could have a material adverse effect on Sema4’sour revenue and results of operations.
Furthermore, in cases where Sema4we or itsour partners have established reimbursement rates with third-party payors, Sema4 faceswe face additional challenges in complying with their procedural requirements for reimbursement. These requirements often vary from payer to payer and are reassessed by third party payors on a regular basis, and Sema4 haswe have needed additional time and resources to comply with them. Sema4 hasWe have also experienced, and may continue to experience, delays in or denials of coverage if it doeswe do not adequately comply with these requirements. Sema4’sOur third-party payors have also requested, and in the future may request, audits of the amounts paid to it. Sema4 hasus. We have been required to repay certain amounts to payers as a result of such audits, and Sema4we could be adversely affected if it iswe are required to repay other payers for alleged overpayments due to lack of compliance with their reimbursement policies. In addition, Sema4 haswe have experienced, and may continue to experience, delays in reimbursement when Sema4 transitionswe transition to being an in-network provider with a payer.
Sema4 expectsWe expect to continue to focus itsour resources on increasing adoption of, and expanding coverage and reimbursement for, itsour current tests and any future tests itwe may develop or acquire. If Sema4 failswe fail to expand and maintain broad adoption of, and coverage and reimbursement for, itsour tests, itsour ability to generate revenue could be harmed and itsour future prospects and itsour business could suffer.
Sema4 hasWe have limited experience with the development and commercialization of itsour databases and itsour health information and genomic platforms.
Sema4 hasWe have limited experience with the development or commercialization of clinical or research products in connection with the databases it manageswe manage and to which it haswe have access, and itsincluding our Centrellis and Traversa platforms. Sema4’sOur partners’ usage of an advanced machine learning engine for therapeutic decision-making are at an early
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stage of development and usage under current and proposed collaborations, and Sema4 iswe are continuing to develop
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new processes that may support the development of new therapeutics applications such as the delivery of personalized clinically actionalactionable insights into clinical reports, clinical trial matching, real-world evidence trials, and clinical decision support, via an advanced programmable interface layer. Although Sema4’sour partners have invested significant financial resources to develop and utilize new technologies to support preclinical studies and other early research and development activities, and provide general and administrative support for these operations, Sema4’sour future success is dependent on itsour current and future partners’ ability to successfully derive actionable insights from the database and itsour platform, and itsour partners’ ability, where applicable, to obtain regulatory approval for new therapeutic solutions based off existing models or to obtain regulatory approval and marketing for, and to successfully commercialize, new therapeutics. The use of Sema4’sour platform and the databases it manages and to which it has access for these purposes will require additional regulatory investments for Centrellis, such as “good practice” quality guidelines and regulations, or GxP, and data quality and integrity controls.
Ethical, legal and social concerns related to the use of genomic medicine and health information analysis could reduce demand for itsour tests.
Genomic medicine and health information analysis has raised ethical, legal and social issues regarding privacy rights and the appropriate uses of the resulting information. Domestic and international governmental and regulatory authorities could, for social or other purposes, such as data privacy, limit or regulate the use of health information or health information testing or prohibit testing for specific information derived from health information testing, including, for example, data on genetic predisposition to certain conditions, particularly for those that have no known cure. Similarly, these concerns may lead patients to refuse to use, or clinicians to be reluctant to order, genomic tests as part of health information assessment even if permissible, or lead patients to withhold or withdraw consent for Sema4’sour use of their data. These and other ethical, legal and social concerns may limit market acceptance of itsour tests or services or reduce the potential markets for itsour tests, or services either of which could have an adverse effect on Sema4’sour business, research, financial condition or results of operations.
If Sema4 failswe fail to comply with federal and state laboratory licensing requirements or standards, Sema4we could lose the ability to perform itsour tests or experience disruptions to itsour business.
Sema4 isWe are subject to Clinical Laboratory Improvement Amendments of 1988, or CLIA, a federal law that regulates clinical laboratories that perform testing on specimens derived from humans for the purpose of providing information for the diagnosis, prevention or treatment of disease. CLIA regulations establish specific standards with respect to personnel qualifications, facility administration, proficiency testing, quality control, quality assurance and inspections. CLIA certification is also required in order for Sema4us to be eligible to bill state and federal healthcare programs, as well as many private third-party payors, for itsour tests. Sema4 hasWe have current CLIA, CAP, and other certifications to conduct itsour tests at itsour laboratories in Connecticut. To renew these certifications, Sema4 iswe are subject to survey and inspection on a regular basis and at the request of the certifying bodies. Moreover, CLIA inspectors may make random inspections of itsour clinical reference laboratories.
Sema4We would also be required to maintain in-state licenses if itwe were to conduct testing in other states. Several states require the licensure of out-of-state laboratories that accept specimens from certain states.
In addition to having laboratory licenses in New York, Sema4’sour clinical reference laboratories are approved on test-specific bases for the tests they run as laboratory-developed tests, or LDTs, by the New York State Department of Health, or NYDOH. Other states may adopt similar licensure requirements in the future, which may require Sema4us to modify, delay or stop itsour operations in such jurisdictions. Sema4We may also be subject to regulation in foreign jurisdictions as it seekswe seek to expand international utilization of itsour tests or such jurisdictions adopt new licensure requirements, which may require review of itsour tests in order to offer them or may have other limitations such as restrictions on the transport of samples necessary for itus to perform itsour tests that may limit itsour ability to make itsour tests available outside of the United States. Complying with licensure requirements in new jurisdictions may be expensive, time-consuming, and subject Sema4us to significant and unanticipated delays.
Failure to comply with applicable clinical laboratory licensure requirements or standards may result in a range of enforcement actions, including license suspension, limitation, or revocation, directed plan of action, onsite
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monitoring, civil monetary penalties, criminal sanctions, and cancellation of the laboratory’s approval to receive
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Medicare and Medicaid payment for itsour services, as well as significant adverse publicity. Any sanction imposed under CLIA, its implementing regulations, or state or foreign laws or regulations governing clinical laboratory licensure, or Sema4’sour failure to renew itsour CLIA certifications, a state or foreign license, or accreditation, could have a material adverse effect on itsour business, financial condition and results of operations. Even if Sema4we were able to bring itsour laboratory back into compliance, itwe could incur significant expenses and potentially lose revenue in doing so.
The College of American Pathologists, or CAP, maintains a clinical laboratory accreditation program. CAP asserts that its program is “designed to go well beyond regulatory compliance” and helps laboratories achieve the highest standards of excellence to positively impact patient care. While not required to operate a CLIA-certified laboratory, many private insurers require CAP accreditation as a condition to contracting with clinical laboratories to cover their tests. In addition, some countries outside the United States require CAP accreditation as a condition to permitting clinical laboratories to test samples taken from their citizens. Sema4 hasWe have CAP accreditations for itsour laboratories. Failure to maintain CAP accreditation could have a material adverse effect on the sales of itsour tests and the results of Sema4’sour operations.
Risks Related to Sema4’sOur Business Model
Sema4 reliesWe rely on highly skilled personnel in a broad array of disciplines and, if it iswe are unable to hire, retain or motivate these individuals, or maintain itsour corporate culture, itwe may not be able to maintain the quality of itsour services or grow effectively.
Sema4’sOur performance, including itsour research and development programs and laboratory operations, largely depends on itsour continuing ability to identify, hire, develop, motivate and retain highly skilled personnel for all areas of itsour organization, including software developers, geneticists, biostatisticians, bioinformaticians, data scientists, certified laboratory directors and technicians and other scientific and technical personnel to process and interpret Sema4’sour tests and related data. In addition, Sema4we may need to continue to expand itsour sales force with qualified and experienced personnel. Competition in Sema4’sour industry for qualified employees is intense, and itwe may not be able to attract or retain qualified personnel in the future due to the competition for qualified personnel among life science and technology businesses as well as universities and public and private research institutions, particularly in the New York City and the tri-state area. Further, Sema4we may be unable to obtain the necessary visas for foreign personnel to work in the United States. In addition, Sema4’sour compensation arrangements, such as itsour equity award programs, may not always be successful in attracting new employees and retaining and motivating itsour existing employees. If Sema4 iswe are not able to attract and retain the necessary personnel to accomplish itsour business objectives, itwe may experience constraints that could adversely affect itsour ability to scale itsour business, support itsour research and development efforts and itsour clinical laboratories. Sema4 believesWe believe that itsour corporate culture fosters innovation, creativity and teamwork. However, as Sema4’sour organization grows, itwe may find it increasingly difficult to maintain the beneficial aspects of itsour corporate culture. This could negatively impact Sema4’sour ability to retain and attract employees and itsour future success.
The loss of any member or change in structure of Sema4’sour senior management team could adversely affect itsour business.
Sema4’sOur success depends in large part upon the skills, experience and performance of members of itsour executive management team and others in key leadership positions. The efforts of these persons will be critical to Sema4us as it continueswe continue to develop itsour technologies and test processes and focus on scaling itsour business. If Sema4we were to lose one or more key executives, including itsour founder and CEO, Dr. Eric Schadt, itwe may experience difficulties in competing effectively, developing itsour tests and technologies and implementing itsour business strategy. Only certain Sema4’sof our executives have employment contracts, and the majority of Sema4’sour employees are at-will, which means that either Sema4we or any employee may terminate their employment at any time or in the notice period set forth in an executive’s contract. Sema4 doesWe do not carry key person insurance for any of itsour executives or employees. In addition, Sema4 doeswe do not have a long-term retention agreement in place with itsour CEO. Furthermore, Sema4 competeswe compete against other leading companies in the diagnostics, health information, and data sciences markets for top talent. If such
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competitors offer better compensation or opportunities, there is no guarantee that Sema4we would be able to retain itsour key executives.
Sema4’s
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Our founder and CEO, Eric Schadt, and certain other Sema4of our employees have performed, and will continue to perform, duties for or on behalf of Mount Sinai following the Business Combination.Sinai.
Sema4’sOur founder CEO, Eric Schadt, and certain of our other employees of Sema4 will continue to perform duties for or on behalf of the Mount Sinai Health System, which refer to together with its related entities as Mount Sinai following the Business Combination.Sinai. In the case of Dr. Schadt, in addition to serving as theour CEO for and as a director, of Sema4, Dr. Schadt also serves as the Dean for Precision Medicine and a professor at Icahn School of Medicine at Mount Sinai, or ISMMS. Following the Business Combination, Sema4 expectsWe expect Dr. Schadt to continue to devote a substantial amount of time to the obligations of managing a public company while maintaining certain duties for Mount Sinai. Though Sema4 doeswe do not expect Dr. Schadt’s role as a CEO and a director of the post-combination company to conflict with his roles at Mount Sinai, there can be no guarantee that such conflicts will not occur in the future.
Sema4We may not be able to manage itsour future growth effectively, which could make it difficult to execute itsour business strategy.
Sema4’sOur expected future growth could create a strain on itsour organizational, administrative and operational infrastructure, including data and laboratory operations, quality control, customer service, marketing and sales, and management. Sema4We may not be able to maintain the quality of or expected turnaround times for itsour products or services, or satisfy customer demand as it grows. Sema4We may need to continue expanding itsour sales force to facilitate itsour growth, and itwe may have difficulties locating, recruiting, training and retaining sales personnel. Sema4’sOur ability to manage itsour growth effectively will require itus to continue to improve itsour operational, financial and management controls, as well as itsour reporting systems and procedures. As Sema4 grows,we grow, any failure of itsour controls or interruption of itsour facilities or systems could have a negative impact on itsour business and financial operations. Sema4 plansWe plan to develop and launch new versions of itsour Centrellis and Traversa platforms and itsour core diagnostic products, which will affect a broad range of business processes and functional areas. The time and resources required to implement these new systems is uncertain, and failure to complete these activities in a timely and efficient manner could adversely affect Sema4’sour operations. Future growth in Sema4’sour business could also make it difficult for it to maintain itsour corporate culture. If Sema4 iswe are unable to manage itsour growth effectively, it may be difficult for itus to execute itsour business strategy and itsour business could be harmed.
Sema4 needsWe need to scale itsour infrastructure in advance of demand for itsour products and services, and itsour failure to generate sufficient demand for itsour products and services would have a negative impact on itsour business and itsour ability to attain profitability.
Sema4’sOur success depends in large part on itsour ability to extend itsour market position, to provide customers with high-quality health reports and health information and data science services in a manner that differentiates itus from itsour competitors, and to deploy technologies and achieve sufficient volumes to realize economies of scale. In order to execute itsour business model, Sema4 intendswe intend to continue to invest heavily in order to significantly scale itsour infrastructure, including itsour lab infrastructure and testing capacity and itsour information and computing systems, expand itsour commercial operations, customer service, billing and systems processes and enhance itsour internal quality assurance program. Sema4We will also need to enhance itsour capacity for data privacy management as it scales itswe scale our infrastructure. Sema4 expectsWe expect that much of this growth will be in advance of both demand for itsour products and services as well as itsour ability to diversify itsour offerings, including services related to Centrellis and Traversa and the databases it manageswe manage and to which it haswe have access, and itsour ability to find appropriate partners through collaborations and acquisitions. Sema4’sOur current and future expense levels are to a large extent fixed and are largely based on itsour investment plans and itsour estimates of future revenue. Because the timing and amount of revenue from Sema4’sour products and services are difficult to forecast, when revenue does not meet itsour expectations, Sema4we may not be able to adjust itsour spending promptly or reduce itsour spending to levels commensurate with itsour revenue. Even if Sema4 iswe are able to successfully scale itsour infrastructure and operations while successfully diversifying itsour offering, itwe cannot assure you that demand for itsour products and services, including itsour Centrellis platform, will increase at levels consistent with the growth of itsour infrastructure. If Sema4 failswe fail to generate demand commensurate with this growth or
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if Sema4 failswe fail to scale itsour infrastructure sufficiently in advance of demand to successfully meet such demand, itsour business, prospects, financial condition and results of operations could be adversely affected.
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International expansion of Sema4’sour business could expose itus to business, regulatory, political, operational, financial and economic risks associated with doing business outside of the United States.
When cleared, authorized or approved, Sema4we and itsour collaborators may market, sell, and distribute itsour products and services outside of the United States, and itsour business would be subject to risks associated with doing business outside of the United States, including an increase in itsour expenses and diversion of itsour management’s attention from the development of future products and services. Accordingly, Sema4’sour business and financial results in the future could be adversely affected due to a variety of factors, including:
•multiple, conflicting and changing laws and regulations such as privacy, security and data use regulations, tax laws, export and import restrictions, economic sanctions and embargoes, employment laws, anticorruption laws, regulatory requirements, reimbursement or payer regimes and other governmental;
•approvals, permits and licenses;
•failure by Sema4, itsus, our collaborators or Sema4our distributors to obtain regulatory clearance, authorization or approval for the use of itsour products and services in various countries;
•additional potentially relevant third-party patent rights;
•complexities and difficulties in obtaining intellectual property protection and enforcing Sema4’sour intellectual property;
•difficulties in staffing and managing foreign operations;operations, including repatriating foreign earned profits;
•complexities associated with managing multiple payer reimbursement regimes, government payers or patient self-pay systems;
•difficulties in negotiating favorable reimbursement negotiations with governmental authorities;
•logistics and regulations associated with shipping samples, including infrastructure conditions and transportation delays;
•limits in Sema4’sour ability to penetrate international markets if it iswe are not able to conduct itsour clinical diagnostic services locally;
•financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for Sema4’sour products and services and exposure to foreign currency exchange rate fluctuations;
•international regulations and license requirements that may restrict foreign investment in and operation of the internet, IT infrastructure, data centers and other sectors, and international transfers of data;
•natural disasters, political and economic instability, including wars, terrorism and political unrest, and outbreak of disease;
•boycotts, curtailment of trade and other business restrictions; and
•regulatory and compliance risks that relate to maintaining accurate information and control over sales and distributors’ activities that may fall within the purview of the Foreign Corrupt Practices Act of 1977, or FCPA, its books and records provisions, or its anti-bribery provisions or laws similar to the FCPA in other jurisdictions in which Sema4we may in the future operate, such as the United Kingdom’s Bribery Act of 2010 and anti-bribery requirements of member states in the European Union, or EU.
Any of these factors could significantly harm Sema4’sour future international expansion and operations and, consequently, itsour revenue and results of operations.
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Unfavorable U.S. or global economic conditions could adversely affect Sema4’sour business, financial condition or results of operations.
Sema4’sOur results of operations could be adversely affected by general conditions in the global economy and financial markets. A severe or prolonged economic downturn or increase in inflation rates could result in a variety of risks to Sema4’sour business, including weakened demand for itsour products and services and itsour ability to raise additional capital when needed on favorable terms, if at all. A weak declining or declininginflationary economy could strain Sema4’sour collaborators and suppliers, possibly resulting in supply disruption, or cause delays in their payments to Sema4.us. Any of the foregoing could harm itsour business and Sema4we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact itsour business.
Sema4 reliesWe rely on a limited number of suppliers or, in some cases, single suppliers, for some of itsour laboratory instruments and materials and may not be able to find replacements or immediately transition to alternative suppliers or service providers.
Sema4 hasWe have sourced and will continue to source components of itsour diagnostic testing workflow, including sequencers and other laboratory equipment, reagents, lab supplies and other laboratory services and materials and related services, from third parties.
Sema4’sOur failure to maintain a continued supply of itsour sequencers and other laboratory equipment, reagents, lab supplies and other laboratory services and materials, along with the right to use certain hardware and software and related services, would adversely impact itsour business, financial condition, and results of operations. In particular, while Sema4 iswe are seeking to validate itsour tests on additional sequencing platforms Sema4 haswe have not, to date, validated a viable alternative sequencing platform on which itsour testing could be run in a commercially viable manner. These efforts will require significant resources, expenditures and time and attention of management, and there is no guarantee that Sema4we will be successful in implementing any such sequencing platforms in a commercially sustainable way. Sema4We also cannot guarantee that itwe will appropriately prioritize or select alternative sequencing platforms on which to focus itsour efforts, in particular given itsour limited product and research and development resources and various business initiatives, which could result in increased costs and delayed timelines or otherwise adversely impact itsour business and results of operations.
Because Sema4 relieswe rely on third-party manufacturers, Sema4 doeswe do not control the manufacture of these components, including whether such components will meet itsour quality control requirements, nor the ability of itsour suppliers to comply with applicable legal and regulatory requirements. In many cases, Sema4our suppliers are not contractually required to supply these components to the quality or performance standards that it requires.we require. If the supply of components Sema4 receiveswe receive does not meet itsour quality control or performance standards, itwe may not be able to use the components, or if it useswe use them not knowing that they are of inadequate quality, which occasionally occurs with respect to certain reagents, itsour tests may not work properly or at all, or may provide erroneous results, and Sema4we may be subject to significant delays caused by interruption in production or manufacturing or to lost revenue from such interruption or from spoiled tests. In addition, any natural or other disaster, acts of war or terrorism, shipping embargoes, labor unrest, political instability, outbreak of disease or similar events at Sema4’sour third-party manufacturers' facilities that cause a loss of manufacturing capacity would heighten the risks that it faces.
In the event of any adverse developments with Sema4’sour sole suppliers, or if any of itsour sole suppliers modifies any of the components they supply to it, itsus, our ability to supply itsour products may be interrupted, and obtaining substitute components could be difficult or require itus to re-design or re-validate itsour products. Sema4’sOur failure to maintain a continued supply of components, or a supply that meets itsour quality control requirements, or changes to or termination of itsour agreements or inability to renew itsour agreements with these parties or enter into new agreements with other suppliers could result in the loss of access to important components of itsour tests and impact itsour test performance or affect itsour ability to perform itsour tests in a timely manner or at all, which could impair, delay or suspend itsour commercialization activities. In the event that Sema4 transitionswe transition to a new supplier from any of itsour sole suppliers, doing so could be time-consuming and expensive, may result in interruptions in itsour ability to supply itsour products to the market, could affect the performance of itsour tests or could require that Sema4we re-validate itsour affected tests using replacement equipment and supplies, which could delay the performance of itsour tests, impact diagnostic
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solutions and heath information derived from such tests, and result in increased costs. Any of these occurrences could have a material adverse effect on Sema4’sour business, financial condition and results of operations.
Sema4 reliesWe rely on a limited number of product and service providers for data infrastructure and analytics capabilities, and any disruption of, or interference with, itsour use of data and workflow services could adversely affect itsour business, financial condition, and results of operations, and Sema4we may not be able to find replacements or immediately transition to alternative products or service providers.
Sema4We currently reliesrely upon third-party services for data storage and workflow management, including cloud storage solution providers, such as Amazon Web Services, or AWS, and Google Cloud Platform, or GCP. Sema4 reliesWe rely on each of AWS and GCP features to complete several vital workflows in itsour health information and data science service delivery. To varying degrees some of those services are proprietary to how each platform performs in connection with Sema4’sour current usage of the services. Further, Sema4 haswe have also built several proprietary workflows with itsour vendor and partner Command Health where it maintainswe maintain versions of developed software on such platforms.
Nearly all of Sema4’sour data storage and analytics are conducted on, and the data and content it generateswe generate on itsour platforms are processed through, servers hosted by these providers, particularly AWS and GCP. Sema4We also reliesrely on email service providers, bandwidth providers, internet service providers and mobile networks to deliver communications to patients, physicians and partners and to allow patients, physicians and itsour partners to access various offerings from itsour platforms. If Sema4’sour third-party vendors are unable or unwilling to provide the services necessary to support itsour business, or if itsour agreements with such vendors are terminated, Sema4our operations could be significantly disrupted. Some of Sema4’sour vendor agreements may be unilaterally terminated by the licensor for convenience, including with respect to AWS or GCP, and if such agreements are terminated, Sema4we may not be able to enter into similar relationships in the future on reasonable terms or at all.
Any damage to, or failure of, Sema4’sour systems or the systems of itsour third-party data centers or itsour other third-party providers could result in interruptions to the availability or functionality of database and platforms. As a result, Sema4we could lose health information data and miss opportunities to acquire and retain patients, physicians and partners including health systems and pharmaceutical and biotech companies, which could result in decreased revenue. If for any reason Sema4’sour arrangements with itsour data centers or third-party providers are terminated or interrupted, such termination or interruption could adversely affect itsour business, financial condition and results of operations. Sema4 exercisesWe exercise little control over these providers, which increases itsour vulnerability to problems with the services they provide. Sema4We could incur additional expense in arranging for new or redesigned facilities, technology, services and support. In addition, the failure of Sema4’sour third-party data centers or any other third-party providers to meet Sema4’sour capacity needs or any system failure as a result of reliance on third parties, including network, software or hardware failure, which causes a delay or interruption in the Sema4’sour services and products, including itsour ability to handle existing or increased processing of data on itsour platforms, could have a material adverse effect on the Sema4’sour business, revenues, operating results and financial condition.
Sema4’sOur current and future products and services may never achieve significant commercial market acceptance.
Sema4’sOur success depends on the market’s confidence that Sema4we can provide data-driven research and diagnostic products and services that improve clinical outcomes, lower healthcare costs and enable better product development by pharmaceutical and biotech, or Biopharma, companies. Failure of Sema4’sour products and services, or those jointly developed with itsour collaborators, to perform as expected or to be updated to meet market demands could significantly impair itsour operating results and itsour reputation. Sema4 believesWe believe patients, health systems, clinicians, academic institutions and Biopharma companies are likely to be particularly sensitive to defects, errors, inaccuracies and delays with Sema4’sour products and services. Furthermore, inadequate performance of these products or services may result in lower confidence in Sema4’sour Centrellis platform in general.
Sema4We and itsour collaborators may not succeed in achieving significant commercial market acceptance for itsour current or future products and services due to a number of factors, including:
•Sema4’sOur ability to demonstrate the utility of itsour platforms including Centrellis and Traversa, and related products and services and their potential advantages over existing clinical AIartificial intelligence technology, life sciences
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life sciences research, clinical diagnostic and drug discovery technologies to academic institutions, Biopharma companies and the medical community;
•Sema4’sOur ability, and that of itsour collaborators, to perform clinical trials or other research to gather adequate evidence and/or to secure and maintain FDA and other regulatory clearance authorization or approval for Sema4’sour products or products developed based off Sema4’sour platform;
•the agreement by third-party payors to reimburse Sema4’sour products or services, the scope and extent of which will affect patients’ willingness or ability to pay for Sema4’sour products or services and will likely heavily influence physicians’ decisions to recommend Sema4’sour products or services;
•the rate of adoption of itsour platforms and related products and services by academic institutions, clinicians, patients, key opinion leaders, advocacy groups and Biopharma companies; and
•the impact of Sema4’sour investments in product and services, and technological innovation and commercial growth.
Additionally, Sema4’sour customers and collaborators, including Mount Sinai, may decide to decrease or discontinue their use of Sema4’sour products and services due to changes in their research and development plans, failures in their clinical trials, financial constraints, the regulatory environment, negative publicity about itsour products and services, competing products or the reimbursement landscape, all of which are circumstances outside of itsour control. Sema4We may not be successful in addressing these or other factors that might affect the market acceptance of itsour products, services and technologies. Failure to achieve widespread market acceptance of Sema4’sour platform and related products and services would materially harm Sema4’sour business, financial condition and results of operations.
Sema4’sOur projections are subject to significant risks, assumptions, estimates and uncertainties, including assumptions regarding adoption of itsour products and services. As a result, Sema4’sour projected revenues, market share, expenses and profitability may differ materially from itsour expectations in any given quarter or fiscal year.
Sema4 operatesWe operate in rapidly changing and competitive industries and itsour projections are subject to the risks and assumptions made by Sema4’sour management with respect to these industries. Operating results are difficult to forecast as they generally depend on Sema4’sour assessment of the timing of adoption of itsour current and future products and services, which is uncertain. Furthermore, as Sema4 investswe invest in the continued development of new businesses that have yet to achieve significant commercial success, whether because of competition or otherwise, Sema4we may not recover the often substantial up-front costs of developing and marketing those products and services or recover the opportunity cost of diverting management and financial resources away from other products or services. Additionally, Sema4’sour business may be affected by reductions in customer or partner demand as a result of a number of factors which may be difficult to predict. Similarly, Sema4’sour assumptions and expectations with respect to margins and the pricing of itsour products and services may not prove to be accurate as a result of competitive pressures or customer or partner demands. This may result in decreased revenue, and Sema4we may be unable to adopt measures in a timely manner to compensate for any unexpected shortfall in revenue. This inability could cause Sema4’sour operating results in a given quarter or year to be higher or lower than expected. Any failure to achieve Sema4’sour projected operating results could harm the trading price of the post-combination company’sour securities and itsour financial position following the completion of the Business Combination.position.
Sema4 hasWe have estimated the sizes of the markets for itsour current and future products and services, and these markets may be smaller than it estimates.we estimate.
Sema4’sOur estimates of the annual addressable markets for itsour current products and services and those under development are based on a number of internal and third-party estimates, including, without limitation, the number of patients who have developed one or more of a broad range of cancers, the number of individuals who are at a higher risk for developing one or more of a broad range of cancers, the number of individuals who have developed or are at a higher risk of developing certain disorders, the number of individuals with certain infectious diseases. The estimates also depend on whether Sema4we or itsour collaborators are able to engage, diagnose or treat patients through or using Sema4’sour products and services, the number of potential clinical tests utilized per treatment course per patient, the ongoing engagement by patients, physicians and health systems on itsour platforms, and the assumed prices at
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which Sema4we can sell itsour current and future products and services for markets that have not been established. While Sema4 believes itswe
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believe our assumptions and the data underlying itsour estimates are reasonable, these assumptions and estimates may not be correct and the conditions supporting itsour assumptions or estimates may change at any time, thereby reducing the predictive accuracy of these underlying factors. As a result, Sema4’sour estimates of the annual addressable market for itsour current or future products and services may prove to be incorrect. If the actual number of patients who would benefit from Sema4’sour products or services, the price at which itwe can sell future products and services or the annual addressable market for itsour products or services is smaller than Sema4 haswe have estimated, it may impair itsour sales growth and have an adverse impact on itsour business.
Uncertainty in the development and commercialization of Sema4’sour enhanced or new tests or services could materially adversely affect itsour business, financial condition and results of operations.
Sema4’sOur success will depend in part on itsour ability to effectively introduce enhanced or new offerings. The focus of itsour research and development efforts has expanded beyond itsour current products and services, focused substantially on women’s health and oncology, as Sema4 iswe are now also applying itsour expertise in processing and analyzing new areas, such as rare diseases. In recent years Sema4 haswe have developed and/or launched several new products or enhanced versions of existing products, including products leveraging alternative sequencing technologies, and Sema4 expectswe expect to continue itsour efforts in all of these areas and more. The development and launch of enhanced or new tests requires the completion of certain clinical development and commercialization activities that are complex, costly, time-intensive and uncertain, and requires Sema4us to accurately anticipate patients', clinicians', payors' and other counterparties' attitudes and needs as well as emerging technology and industry trends. This process is conducted in various stages, and each stage presents the risk that Sema4we will not achieve itsour goals.
Sema4 hasWe have relatively limited experience developing and commercializing products and services outside of the fields of women’s health and oncology diagnostics, and itwe may not be successful in itsour current or future efforts to do so. Sema4We also hashave limited experience forecasting itsour future financial performance from itsour new products and services, and itsour actual results may fall below itsour financial guidance or other projections, or the expectations of analysts or investors, which following the Business Combination, could cause the price of the post-combination company’sour common stock and warrants to decline. Sema4We may experience research and development, regulatory, marketing and other difficulties that could delay or prevent itsour introduction of enhanced or new tests and result in increased costs and the diversion of management's attention and resources from other business matters, such as from itsour current product and service offerings, which currently represent the significant majority of itsour current revenues. For example, any tests that Sema4we may enhance or develop may not prove to be clinically effective in clinical trials or commercially, or may not meet itsour desired target product profile, be offered at acceptable cost and with the sensitivity, specificity and other test performance metrics necessary to address the relevant clinical need or commercial opportunity; Sema4’sour test performance in commercial experience may be inconsistent with itsour validation or other clinical data; Sema4we may not be successful in achieving market awareness and demand, whether through itsour own sales and marketing operations or through collaborative arrangements; healthcare providers may not order or use, or third-party payors may not reimburse for, any tests that Sema4we may enhance or develop; or Sema4we may otherwise have to abandon a test or service in which Sema4 haswe have invested substantial resources. For example, Sema4 iswe are subject to the risk that the biological characteristics of the genetic mutations Sema4 seekswe seek to target, and upon which itsour technologies rely, are uncertain and difficult to predict. Sema4We may also experience unforeseen difficulties when implementing updates to itsour processes.
Sema4We cannot assure you that itwe can successfully complete the development of any new or enhanced product, or that Sema4we can establish or maintain the collaborative relationships that may be essential to itsour collaborators’ goals, including clinical development or commercialization efforts. For example, clinical development requires large numbers of patient specimens and, for certain products, may require large, prospective, and controlled clinical trials. Sema4We may not be able to identify and help enroll patients or collect a sufficient amount of appropriate health data in a timely manner; or itwe may experience delays during data analysis process due to slower than anticipated supplies of patient data, or due to changes in study design or inputs, or other unforeseen circumstances; or Sema4we or itsour collaborators may be unable to afford or manage the large-sized clinical trials that some of itsour planned future products may require. Further, the publication of clinical data in peer-reviewed journals is a crucial step in commercializing and obtaining reimbursement for certain diagnostic solutions such as the ones offered by Sema4,us, and itsour inability to control when, if ever, results are published may delay or limit Sema4’sour ability to derive sufficient
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revenues from any diagnostic solution that is the subject of or component in a study. Peer-reviewed publications regarding Sema4’sour products may be limited by many factors, including delays in the completion of, poor design of, or
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lack of compelling data from, clinical studies, as well as delays in the review, acceptance and publication process. If Sema4’sour diagnostic solutions or the technology underlying itsour current and future diagnostic solutions do not receive sufficient favorable exposure in peer-reviewed publications, the rate of clinician adoption of Sema4’sour diagnostic solutions and positive reimbursement coverage determinations for itsour diagnostic solutions could be negatively affected.
In addition, development of the data necessary to obtain regulatory clearance and approval of tests is time-consuming and carries with it the risk of not yielding the desired results. The performance achieved in published studies may not be repeated in later studies that may be required to obtain premarket clearance or approval from the U.S. Food and Drug Administration, or the FDA. Limited results from earlier-stage verification studies may not predict results from studies in larger numbers of subjects drawn from more diverse populations over longer periods of time. Unfavorable results from ongoing preclinical and clinical studies may delay, limit or prevent regulatory approvals or clearances or commercialization of Sema4’sour product candidates, or could result in delays, modifications or abandonment of ongoing analytical or future clinical studies, or abandonment of a product development program, any of which could have a material adverse effect on itsour business, operating results or financial condition.
These and other factors beyond Sema4’sour control could result in delays or other difficulties in the research and development, approval, production, launch, marketing or distribution of enhanced or new tests and could adversely affect Sema4’sour competitive position and results of operations.
Sema4We currently uses,use, and in the future expectsexpect to increase itsour use of, information and rights from customers, strategic partners, and collaborators for several aspects of itsour operations, and if Sema4we cannot maintain current and enter new relationships with these parties with adequate access and authorization to such information, itsour business will suffer.
Accessing, combining, curating, and analyzing health information, including longitudinal patient medical history data and genetic data, are core features of the Centrellis platform and key elements of Sema4’sour long term business model. The regulatory landscape around the storage, processing and deidentification of genetic data is evolving globally and greatly impacts the ability of Sema4, itsus, our strategic partners and collaborators to process and use the data in connection with itsour products and services.
Sema4 hasWe have limited resources to conduct itsour health information services, data analysis, life sciences research, clinical diagnostics and drug discovery operations and hashave not yet fully established infrastructure for sales, marketing or distribution in connection with itsour products and services. Accordingly, Sema4 haswe have entered into service and collaboration agreements under which itsour partners, including health systems, have provided, and may in the future provide, funding, data access, and other resources for developing and potentially commercializing Sema4’sour products and services. These collaborations may result in Sema4us incurring significant expenses in pursuit of potential products and services, and Sema4we may not be successful in identifying, developing or commercializing any potential products or services.
Sema4’sOur future success depends in part on itsour ability to maintain and grow itsour existing relationships, including with Mount Sinai, and to establish new relationships. Many factors may impact the success of such collaborations, including Sema4’sour ability to perform itsour obligations, itsour collaborators’ satisfaction with itsour products and services, itsour collaborators’ performance of their obligations to Sema4, itsus, our collaborators’ internal priorities, resource allocation decisions and competitive opportunities, the ability to obtain regulatory approvals, disagreements with collaborators, the costs required of either party to the collaboration and related financing needs, and operating, legal and other risks in any relevant jurisdiction. Sema4’sOur ability to support such collaborations may also depend on factors outside of itsour control including the willingness of patients to engage with Sema4us and share their data, societal perspectives on privacy, and the willingness of health systems to establish collaborations, relationships and programs utilizing their data, all of which may impact the utility of these databases and the insights Sema4we will be able to generate from expanding datasets. In addition to reducing Sema4’sour revenue or delaying the development of itsour future products and services, the loss of one or more of these relationships may reduce Sema4’sour access to research, longitudinal patient health data, clinical trials or computing technologies that facilitate the collection and incorporation of new
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information into the databases it manageswe manage and to which it haswe have access. All of the risks relating to product and service development, regulatory clearance, authorization or approval and commercialization described herein apply to Sema4us derivatively through the activities of itsour collaborators. Sema4 engagesWe engage in conversations with companies regarding potential collaborations on an
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ongoing basis. These conversations may not result in a commercial agreement. Even if an agreement is reached, the resulting relationship may not be successful, and any products and services developed as part of the collaboration may not produce successful outcomes. Speculation in the industry about Sema4’sour existing or potential collaborations can be a catalyst for adverse speculation about it,us, or itsour products or services, which can adversely affect itsour reputation and itsour business.
If Sema4’sour products and services do not perform as expected, itwe may not realize the expected benefits of such products and services.
The success of Sema4’sour products depends on the market’s confidence that itwe can provide reliable products and services that enable high quality diagnostic testing and health information services with high sensitivity and specificity and short turnaround times. There is no guarantee that the accuracy and reproducibility Sema4 haswe have demonstrated to date will continue as itsour product deliveries increase and itsour product and service portfolio expands.
Sema4’sOur products and services use a number of complex and sophisticated biochemical and bioinformatics processes, many of which are highly sensitive to external factors. An operational, technological or other failure in one of these complex processes or fluctuations in external variables may result in sensitivity or specificity rates that are lower than Sema4 anticipateswe anticipate or result in longer than expected turnaround times. In addition, labs are required to validate their processes before using Sema4our products for clinical purposes. These validations are outside of Sema4’sour control. If Sema4’sour products do not perform, or are perceived to not have performed, as expected or favorably in it to competitive products, its consolidatedour operating results, reputation, and business will suffer, and Sema4we may also be subject to legal claims arising from product limitations, errors, or inaccuracies.
If Sema4’sour sales and development or other collaborations and commercial relationships are not successful and it iswe are not able to offset the resulting impact through itsour own efforts or through agreements with new partners, itsour commercialization activities may be impaired and itsour financial results could be adversely affected.
Part of Sema4’sour business strategy is to develop relationships with health systems, biopharma companies, and other partners to utilize itsour products and to provide access to data. Developing and commercializing products with third parties reduces Sema4’sour control over such development and commercialization efforts and subjects itus to the various risks inherent in a joint effort with a third party, such as delays, operational issues, technical difficulties and other contingencies outside of itsour influence or control. The financial condition of these third parties could weaken, or they could terminate their relationship with Sema4us and/or stop sharing data or other information; reduce their marketing efforts relating to Sema4’sour products; develop and commercialize, or otherwise utilize competing products in addition to or in lieu of Sema4’sour tests; merge with or be acquired by a competitor of Sema4us or a company that chooses to de-prioritize the efforts to utilize Sema4’sour products or provide Sema4us with adequate data; or otherwise breach their agreements with Sema4.us. Further, Sema4we must expend resources to operationalize itsour existing collaborations with itsour health system partners, which requires substantial effort in areas such as integrations for testing workflow, EMR, consents, marketing, and billing. To the extent, Sema4 iswe are not successful at operationalizing existing collaborations with health partners, itwe may not be able to further improve or pursue new agreements with additional partners. Furthermore, Sema4’sour partners may misappropriate Sema4’sour trade secrets or use Sema4’sour proprietary information in such a way as to expose Sema4us to litigation and potential liability; and Sema4’sour compliance risk may increase to the extent that Sema4 iswe are responsible for itsour partners' activities. Disagreements or disputes with Sema4’sour health systems and other partners, including disagreements over customers, proprietary or other rights or itsour or their compliance with financial or other contractual obligations, might cause delays or impair the development or commercialization of Sema4’sour products, services, and technologies, lead to additional responsibilities for Sema4us with respect to new products, services and technologies, or result in litigation or arbitration, any of which would divert management attention and resources and be time-consuming and expensive. As is typical for companies in Sema4’sour industry, it is continually evaluating and pursuing various strategic or commercial relationships, some of which may following the Business Combination, involve the sale and issuance of the post-combination company’sour common stock, which could result in additional dilution of the percentage ownership of itsour stockholders and could cause the price of itsour common stock and warrants to decline.
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If Sema4’sour relationships are not successful, itsour ability to develop and improve of products, services and technologies, and to successfully execute itsour commercial strategy regarding such products, services and technologies, could be compromised.
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We may seek to grow our business through acquisitions of complementary products or technologies, and the failure to manage acquisitions, or the failure to integrate them with our existing business, could have a material adverse effect on our business, financial condition and operating results.
From time to time, we may consider opportunities to acquire other products or technologies that may enhance our product platform or technology, expand the breadth of our markets or customer base, or advance our business strategies. Potential acquisitions involve numerous risks, including:
•problems assimilating the acquired products or technologies;
•issues maintaining uniform standards, procedures, controls and policies;
•unanticipated costs associated with acquisitions;
•diversion of management’s attention from our existing business;
•risks associated with entering new markets in which we have limited or no experience; and
•increased legal and accounting costs relating to the acquisitions or compliance with regulatory matters.
For example, we are exposed to these and other risks in connection with the pending Acquisition of GeneDx. See “—Risks Related to the Acquisition”. We do not know if we will be able to identify any other acquisitions we deem suitable, whether we will be able to successfully complete any acquisitions on favorable terms or at all, or whether we will be able to successfully integrate any acquired products or technologies. Our potential inability to integrate any acquired products or technologies effectively may adversely affect our business, operating results and financial condition.
If Sema4 iswe are unable to deploy and maintain effective sales, marketing and medical affairs capabilities, itwe will have difficulty achieving market awareness and selling itsour products and services.
To achieve commercial success for itsour tests and itsour future products and services, Sema4we must continue to develop and grow itsour sales, marketing and medical affairs organizations to effectively explain to healthcare providers the reliability, effectiveness and benefits of itsour current and future products and services as compared to alternatives. Sema4We may not be able to successfully manage itsour dispersed or inside sales forces or itsour sales force may not be effective. Because of the competition for their services, Sema4we may be unable to hire, partner with or retain additional qualified sales representatives or marketing or medical affairs personnel, either as itsour employees or independent contractors or through independent sales or other third-party organizations. Market competition for commercial, marketing and medical affairs talent is significant, and Sema4we may not be able to hire or retain such talent on commercially reasonable terms, if at all.
Establishing and maintaining sales, marketing and medical affairs capabilities will be expensive and time-consuming. Sema4’sOur expenses associated with maintaining itsour sales force may be disproportionate to the revenues itwe may be able to generate on sales of the certain tests or any future products or services.
Sema4We may never become profitable.
Sema4 has incurred losses since itSema4 was formed and expectswe expect to continue to generate significant operating losses for the foreseeable future. As of December 31, 2021 and December 31, 2020, and March 31, 2021, Sema4 haswe have an accumulated deficit of approximately $575.4 million and $330.1 million, and $521.0, respectively. Sema4 expectsWe expect to continue investing significantly toward development and commercialization of itsour health information technology and other products and services. If Sema4’sour revenue does not grow significantly, itwe will not be profitable. Sema4We cannot be certain that the revenue from the sale of any products or services based on itsour technologies will be sufficient to make itus profitable.
Sema4’s
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Our operating results could be subject to significant fluctuation, which following the Business Combination, could increase the volatility of the post-combination company’sour stock and warrant priceprices and cause losses to itsour stockholders.
Sema4’sOur revenues and results of operations may fluctuate significantly, depending on a variety of factors, including the following:
•Sema4’sour success in marketing and selling, and changes in demand for, itsour tests, and the level of reimbursement and collection obtained for such tests;
•seasonal and environmental variations affecting healthcare provider recommendations for Sema4’sour tests and patient compliance with healthcare provider recommendations, including without limitation holidays, weather events, and circumstances such as the outbreak of coronavirus or influenza that may limit patient access to medical practices for diagnostic tests and preventive services;
•Sema4’sour success in collecting payments from third-party payors, patients and collaborative partners, variation in the timing of these payments and recognition of these payments as revenues;
•the pricing of itsour tests, including potential changes in CMS or other reimbursement rates;
•circumstances affecting Sema4’sour ability to provide itsour tests, including weather events, supply shortages, or regulatory or other circumstances that adversely affect itsour ability to manufacture itsour tests or process tests in itsour clinical laboratories;
•circumstances affecting Sema4’sour ability to provide health information and data science services to biopharma partners, including software or hardware failures, insufficient capacity, regulatory changes or other circumstances that adversely affect the ability of Sema4us to deliver these services;
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•fluctuations in the amount and timing of Sema4’sour selling and marketing costs and itsour ability to manage costs and expenses and effectively implement itsour business;
•Sema4’sour research and development activities, including the timing of clinical trials; and
•Sema4'sour ability to collect, use, and commercialize data in a changing regulatory environment at a time when the public is growing increasingly concerned about privacy.
Sema4’sOur revenue growth rate could decline over time, and it may experience downward pressure on itsour operating margins in the future.
Sema4’sOur revenue growth rate could decline over time as a result of a number of factors, including increasing competition and the continued expansion of itsour business into a variety of new fields. Changes in geographic mix and product and service mix and an increasing competition for tests may also affect itsour revenue growth rate. Sema4We may also experience a decline in itsour revenue growth rate as itsour revenues increase to higher levels, if there is a decrease in the rate of adoption of itsour products, services, and technologies, among other factors.
In addition to a decline in itsour revenue growth rate, Sema4we may also experience downward pressure on itsour gross operating margins resulting from a variety of factors, such as the continued expansion of itsour business into new fields, including new products and services, as well as significant investments in new areas, all of which may have margins lower than those that Sema4 generateswe generate from testing. Sema4We may also experience downward pressure on itsour gross operating margins from increasing competition and increased costs for many aspects of itsour business. Sema4We may also pay increased fees to itsour partners as well as increased acquisition costs. Sema4We may also face an increase in infrastructure costs, supporting other businesses. Additionally, Sema4’sour expenditures to promote new products and services or to distribute certain products and services or increased investment in itsour innovation efforts across itsour Centrellis platform may affect itsour operating margins.
Due to these factors and the evolving nature of itsour business, Sema4’sour historical projected revenue growth rate and historical gross operating margins may not be indicative of itsour future performance.
Sema4
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We may need to raise additional capital to fund itsour existing operations, develop additional products and services, commercialize new products and services or expand itsour operations.
Sema4 has incurred net losses and negative cash flows from operations since its inception, including net losses of $245.4 million, $241.3 million and expects$29.7 million for the years ended December 31, 2021, 2020 and 2019, respectively. As of December 31, 2021, we had an accumulated deficit of $575.4 million. We expect to continue to generate significant operating losses for the foreseeable future. As of May 6, 2021, the issuance date of Sema4’s audited financial statements included elsewhere in this proxy statement, Sema4’s operating expensesfuture, and capital expenditure requirements over the next 12 months were in excess of Sema4’s existing cash and cash equivalents, and, as a result, the audit report and opinion of Sema4’s independent registered public accounting firm contained in Sema4’s audited financial statements includes an explanatory paragraph that describes conditions that raise substantial doubt about Sema4’s ability to continue as a going concern. Further, as of June 10, 2021, the issuance date of Sema4’s unaudited condensed financial statements included elsewhere in this proxy statement, Sema4 also concluded there is substantial doubt about Sema4’s ability to continue as a going concern. See “Sema4’s Management’s Discussion and Analysis of Financial Condition and Results of Operation - Going Concern, Liquidity and Capital Resources” for more information. Although Sema4 expects the funding to be received upon the completion of the Business Combination and the PIPE Investment to address the substantial doubt about Sema4’s ability to continue as a going concern, following the Business Combination, the post-combination companywe may therefore also seek to sell common or preferred equity or convertible debt securities, enter into a credit facility or another form of third-party funding or seek other debt financing. Sema4 may also seek additional capital prior to the consummation of the Business Combination, subject to Sema4’s covenants in the Merger Agreement.
Following the Business Combination, the post-combination companyWe may also consider raising additional capital in the future to expand Sema4’sour business, to pursue strategic investments, to take advantage of financing opportunities or for other reasons, including to:
•increase Sema4’sour sales and marketing efforts to drive market adoption of itsour current and future products and services;
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•fund development efforts for Sema4’sour current and future products and services;
•expand Sema4’sour products and services into other disease indications and clinical applications;
•acquire, license or invest in technologies;
•acquire or invest in complementary businesses or assets; and
•finance capital expenditures and general and administrative expenses.
Sema4’sIn particular, in connection with the pending Acquisition of GeneDx, we have entered into subscription agreements with certain institutional investors pursuant to which we have agreed to issue and sell to the investors, in private placements to close substantially concurrently with the closing of the Acquisition, an aggregate of 50 million shares of our common stock at $4.00 per share, for an aggregate gross purchase price of $200 million, before fees and expenses.
Our present and future funding requirements will depend on many factors, including:
•Sema4’sour ability to achieve revenue growth;
•Sema4’sour rate of progress in establishing payer coverage and reimbursement arrangements with commercial third-party payors and government payers;
•the cost of expanding Sema4’sour laboratory operations and offerings, including itsour sales and marketing efforts;
•Sema4’sour rate of progress in, and cost of the sales and marketing activities associated with, establishing adoption of itsour Centrellis solution;
•Sema4’sour rate of progress in, and cost of research and development activities associated with, products and services in research and early development;
•the effect of competing technological, product and market developments;
•costs related to international expansion; and
•the potential cost of and delays in product development as a result of any regulatory oversight applicable to Sema4’sour products and services.
The various ways the post-combination companywe could raise additional capital following the Business Combination carry potential risks. If the post-combination company raiseswe raise funds by issuing equity securities, like in the PIPE Investment, dilution to itsour stockholders could result. Any preferred equity securities issued also could provide for rights, preferences or privileges senior to those of holders of itsour common stock. If the post-combination company raiseswe raise funds by issuing debt securities, those debt securities would have rights, preferences and privileges senior to
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those of holders of itsour common stock. The terms of debt securities issued or borrowings pursuant to a credit agreement could impose significant restrictions on Sema4’sour operations. If Sema4 raiseswe raise funds through collaborations and licensing arrangements, Sema4we might be required to relinquish significant rights to itsour technologies or products and services or grant licenses on terms that are not favorable to it.us.
Sema4 expectsWe expect to make significant investments in itsour continued research and development of new products and services, which may not be successful.
Sema4 isWe are seeking to leverage and deploy itsour Centrellis and Traversa platforms to develop a pipeline of future disease-specific research, diagnostic and therapeutic products and services. For example, Sema4 iswe are attempting to extend current products into additional indications and sample types, and it iswe are developing itsour population health program, and itsour pharmacogenomics solutions with a view toward advancing the development of tests designed to identify genetic variants for drug response that are associated with medically actionable and clinically relevant data to make more informed treatment decisions. Sema4 expectsWe expect to incur significant expenses to advance these development efforts, but they may not be successful.
Developing new products and services is a speculative and risky endeavor. Products or services that initially show promise may fail to achieve the desired results or may not achieve acceptable levels of analytical accuracy or clinical utility. Sema4We may need to alter itsour products in development and repeat analysis or clinical studies before it identifieswe identify a potentially successful product or service. Product development is expensive, may take years to complete
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and can have uncertain outcomes. Failure can occur at any stage of the development. If, after development, a product or service appears successful, Sema4we or itsour collaborators may, depending on the nature of the product or service, still need to obtain FDA and other regulatory clearances, authorizations or approvals before Sema4we can market it. In the case of clinical products, the FDA’s clearance, authorization or approval pathways are likely to involve significant time, as well as additional research, development and clinical study expenditures. The FDA may not clear, authorize or approve any future product or service Sema4 develops.we develop. Even if Sema4 developswe develop a product or service that receives regulatory clearance, authorization or approval, or succeeds in initial product testing, itwe or itsour collaborators would need to commit substantial resources to commercialize, sell and market it before it could be profitable, and the product or service may never be commercially successful. Additionally, development of any product or service may be disrupted or made less viable by the development of competing products or services.
New potential products and services may fail at any stage of development or recalled after commercialization and if Sema4 determineswe determine that any of itsour current or future products or services are unlikely to succeed, itwe may abandon them without any return on itsour investment. If Sema4 iswe are unsuccessful in developing additional products or services, itsour potential for growth may be impaired.
Sema4 hasWe have identified material weaknesses, some of which have a pervasive effect across the organization, and may identify additional material weaknesses or significant deficiencies, in itsour internal controls over financial reporting. Sema4’sOur failure to remedy these matters could result in a material misstatement of itsour financial statements.
In the course of preparing itsLegacy Sema4’s financial statements for 2020, 2019 and 2018, Sema4we identified material weaknesses in itsour internal control over financial reporting as of December 31, 2020, which could, if not remediated, result in material misstatements in our financial statementsstatements. These material weaknesses had not been fully remediated as of December 31, 2020.2021. In addition, during 2021, management identified a misclassification related to certain costs included within cost of services for the years ended December 31, 2021, 2020 and 2019. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses identified related to the fact that Sema4we did not design and maintain accounting policies, procedures and controls to ensure complete, accurate and timely financial reporting in accordance with U.S. GAAP. Specifically, the material weaknesses identified included the following:
•Sema4We did not design and maintain accounting policies, processes and controls to analyze, account for and report itsour revenue arrangements in accordance with ASC 606, Revenue from Contracts with Customers, and ASC 605, Revenue Recognition.
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•Sema4We did not design and maintain formal accounting policies, procedures and controls to achieve complete, accurate and timely financial accounting, reporting and disclosures, including controls over the preparation and review of account reconciliations and journal entries; the accounting for cost capitalization policies in accordance with ASC 330, Inventory, and ASC 350-40, Intangibles – Goodwill and Other – Internal-Use Software; and the application of ASC 840, Leases.
•Sema4We had not developed and effectively communicated to itsour employees itsour accounting policies and procedures, which resulted in inconsistent practices. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.
•Sema4’sOur accounting and operating systems lacked controls over access, and program change management that are needed to ensure access to financial data is adequately restricted to appropriate personnel.
•Sema4 doesWe do not have sufficient, qualified finance and accounting staff with the appropriate U.S. GAAP technical accounting expertise to identify, evaluate and account for accounting and financial reporting, and effectively design and implement systems and processes that allow for the timely production of accurate financial information in accordance with internal financial reporting timelines, commensurate with Sema4’sour size and the nature and complexity of itsour operations. As a result, Sema4we did not design and maintain formal accounting policies, processes and controls related to complex transactions necessary for an effective financial reporting process.
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Sema4’sOur management is preparingin the process of implementing a remediation plan that is expected to include policies and procedures to support internal control over financial reporting for a public company as well as supplementing the accounting and finance function with robust technical accounting and financial reporting experience and training. However, Sema4we cannot guarantee that the steps it haswe have taken or may subsequently take have been or will be sufficient to remediate the material weaknesses or ensure that Sema4’sour internal controls are effective. For a discussion of our remediation plan and actions, see the section entitled “Sema4’s Management’s Discussion and Analysis of Financial Condition and Results of Operations.” However, as noted above, as of December 31, 2021, the material weaknesses have not yet been fully remediated.
Furthermore, as a public company, the Company iswe are required to comply with certain rules and requirements related to itsour disclosure controls and procedures and itsour internal control over financial reporting. Following the completion of the Business Combination, anyAny failure to develop or maintain effective controls as a public company, any deficiencies found in the technology system we use to support our controls, or any difficulties encountered in their implementation or improvement, could harm the post-combination company’sour operating results or cause the post-combination companyus to fail to meet itsour reporting obligations and may result in a restatement of the post-combination company’sour financial statements for prior periods. For more information, see “Risk Factors—“Risks Related to the Company and the Business Combination—Being a Public Company—Our internal controls over financial reporting may not be effective and our independent registered public accounting firm may not be able to certify as to their effectiveness, which could have a significant and adverse effect on our business and reputation.”
Sema4’sOur ability to use itsour net operating loss carry forwards and certain other tax attributes may be limited.
At December 31, 2020, Sema4’s2021, our total gross deferred tax assets were $60.6$160.5 million. Due to Sema4’sour lack of earnings history, future deductible temporary differences related to compensation and uncertainties surrounding itsour ability to generate future taxable income, itsour net deferred tax assets have been fully offset by a valuation allowance. The deferred tax assets are primarily comprised of federal and state tax net operating losses and tax credit carryforwards, stock-based compensation and other tax deductible temporary differences.
Furthermore, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards, or NOLs, and other pre-change tax attributes (such as research tax credits) to offset its future taxable income may be limited. In general, an “ownership change” occurs if there is a cumulative change in its ownership by “5% shareholders” that exceeds 50 percentage points over a rolling three-year period. Sema4’sOur existing NOLs and tax credit carryovers may be subject to limitations arising from previous ownership changes, and if it undergoeswe undergo one or more ownership changes in connection with completed acquisitions, including the Business Combination,business
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combination or otherthe pending Acquisition, or future transactions in Sema4’sour stock, itsour ability to utilize NOLs and tax credit carryovers could be further limited by Section 382 of the Internal Revenue Code. As a result, if Sema4 earnswe earn future taxable income, itsour ability to use itsour pre-change net operating loss and tax credit carryforwards to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to it.us. In addition, the Tax Cuts and Jobs Act limits the deduction for NOLs to 80% of current year taxable income and eliminates NOL carrybacks. Further, there may also be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state liability.
Risks Related to Sema4’sOur Key Relationships
Sema4 reliesWe rely on third-party laboratories to perform certain elements of itsour service offerings.
A limited but meaningful portion of Sema4’sour genomic analysis services is performed by third-party laboratories and service providers, while the remaining portion is performed in Sema4’sour laboratories. The third-party laboratories are subject to contractual obligations to perform these services for Sema4,us, but are not otherwise under itsour control. Sema4We therefore doesdo not control the capacity and quality control efforts of these third-party laboratories other than through itsour ability to enforce contractual obligations on volume and quality systems, and it haswe have no control over such laboratories’ compliance with applicable legal and regulatory requirements. Sema4We also hashave no control over the timeliness of such laboratories’ performance of their obligations to it,us, and the third-party laboratories that Sema4 haswe have contracted with have in the past had, and occasionally continue to have, issues with delivering results to itus or resolving issues with Sema4us within the time frames itwe expected or established in itsour contracts with them, which sometimes results in longer than expected turnaround times for, or negatively impacts the performance of, these tests and services. In the event of any adverse developments with these third-party laboratories or their ability to perform their obligations in a timely manner and in accordance with the standards that Sema4we and itsour customers expect, its
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our ability to service customers may be delayed, interrupted or otherwise adversely affected, which could result in a loss of customers and harm to itsour reputation. Furthermore, when these issues arise, Sema4 haswe have had to expend time, management’s attention and other resources to address and remedy such issues.
Sema4We may not have sufficient alternative backup if one or more of the third-party laboratories that it contractswe contract with are unable to satisfy their obligations to itus with sufficient performance, quality and timeliness, including as a result of the ongoing COVID-19 pandemic. Any natural or other disaster, acts of war or terrorism, shipping embargoes, labor unrest, political instability, outbreaks of disease or similar events at one or more of these third-party laboratories’ facilities that causes a loss of capacity would heighten the risks that Sema4 faces.we face. Changes to or termination of agreements or inability to renew agreements with these third-party laboratories or enter into new agreements with other laboratories that are able to perform such portions of Sema4’sour service offerings could impair, delay or suspend itsour efforts to market and sell these services. In addition, certain third-party payors, including some state Medicaid payers, that Sema4 iswe are under contract with may take the position that sending out testing to third-party laboratories and billing for such tests is contrary to the terms of its provider agreement and may refuse to pay Sema4us for the testing. If any of these events occur, Sema4’sour business, financial condition and results of operations could suffer. Further, some state laws impose anti-markup restrictions that prevent an entity from realizing a profit margin on outsourced testing. If Sema4 or its subsidiarieswe are unable to markup outsourced testing, itsour revenues and operating margins may suffer.
Sema4 reliesWe rely on Mount Sinai, a related party, and its clinicians for a portion of itsour test volume in connection with itsour diagnostic solutions and for data programs, and Sema4 haswe have entered into certain other arrangements with Mount Sinai.
Sema4 reliesWe rely on Mount Sinai, which is a related party, and its clinicians for a portion of itsour test volumes in connection with itsour diagnostic solutions and for a significant portion of the de-identified clinical records in Sema4’sour databases. In 2020, orders from Mount Sinai clinicians accounted for 5.5% of Sema4’s total test volume, down from 12.8% in 2019. In addition, Sema4 subleaseswe sublease certain facilities from Mount Sinai, Sema4 provideswe provide certain research and data services to Mount Sinai, and Sema4we and Mount Sinai have entered into certain collaborative and commercial arrangements. Furthermore, Sema4we may in the future enter into other contracts for services or other engagements with Mount Sinai. See “Certain Relationships and Related Party Transactions — Sema4’s Related Party Transactions”
Mount Sinai is primarily made up of not-for-profit hospitals, a medical and graduate school and employed clinicians. The charitable missions of the Mount Sinai entities include patient care, teaching and research. As such,
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the Mount Sinai entities are required to deal with Sema4us strictly on an arms-length, fair market value basis, and the interests of Mount Sinai may not necessarily be aligned with theour interests or those of Sema4 or itsour other stockholders.
Sema4 isWe are subject to risks as a result of itsour reliance on Mount Sinai, and if Sema4’sour transactions and relationship with Mount Sinai were to cease, Sema4’sour business could be disrupted and it could have a material adverse effect on Sema4’sour business, research, financial condition and results of operations.
In addition, following the completion of the Business Combination, ISMMS is expectedone of our significant stockholders. ISMMS has entered into a support agreement in connection with the Acquisition, whereby ISMMS has agreed to, among other things, be significant stockholder in the post-combination company.bound by certain transfer restrictions. Following the expiration of the lock-up period under the ISMMS Lock-Up Agreement,these transfer restrictions, ISMMS may choose to dispose of some or all of the shares of our common stock held by it. Any disposal of shares of common stock by ISMMS, or the perception that these sales could occur, could cause the market price of the post-combination company’sour stock or warrants to decline.
Sema4 reliesWe rely on commercial courier delivery services to transport samples to itsour facilities in a timely and cost-efficient manner and if these delivery services are disrupted, itsour business could be harmed.
Sema4’sOur core business depends on itsour ability to quickly and reliably deliver test results to itsour customers. Sema4We typically receivesreceive blood, saliva, or tissue samples for analysis at itsour laboratory facilities within days of collection from the patient. Disruptions and errors in these delivery service and accessioning errors and breaches, whether due to error by the courier service, labor disruptions, bad weather, natural disaster, terrorist acts or threats, outbreaks of disease or for other reasons, could adversely affect specimen integrity, Sema4’sour ability to process or store samples in a timely manner and to service itsour customers, and ultimately itsour reputation and itsour business. In addition, if Sema4 is
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we are unable to continue to obtain expedited delivery services on commercially reasonable terms, itsour operating results may be adversely affected.
Sema4’s Risks Related to Legal, Regulatory and Compliance
Sema4We may be subject to increased compliance risks as a result of itsour rapid growth, including itsour dependence on itsour sales, marketing and billing efforts.
Sema4 hasWe have had to expand itsour training and compliance efforts in line with itsour increasing reliance on personnel in itsour sales, marketing and billing functions, and itsour expansion of these functions in line with the overall growth in itsour business. Sema4 continuesWe continue to monitor itsour personnel, but Sema4 haswe have in the past experienced, and may in the future experience, situations in which employees fail to strictly adhere to itsour policies. In addition, sales and marketing activities in the healthcare space are subject to various rules and regulations. Moreover, Sema4’sour billing and marketing messaging can be complex and nuanced, and there may be errors or misunderstandings in itsour employees' communication of such messaging. Furthermore, Sema4 utilizeswe utilize text messaging, email, phone calls and other similar methods to communicate with patients who are existing or potential users of itsour products for various business purposes. These activities subject itus to laws and regulations relating to communications with consumers, such as the CAN-SPAM Act and the Telephone Consumer Protection Act, violations of which could subject Sema4us to claims by consumers, who may seek actual or statutory damages, which could be material in the aggregate. As Sema4 continueswe continue to scale up itsour sales and marketing efforts in line with the growth in itsour business, in particular itsour increased pace of product launches as well as further geographical expansion, Sema4we face an increased need to continuously monitor and improve itsour policies, processes and procedures to maintain compliance with a growing number and variety of laws and regulations, including with respect to consumer marketing. To the extent that there is any violation, whether actual, perceived or alleged, of itsour policies or applicable laws and regulations, Sema4we may incur additional training and compliance costs, may receive inquiries from third-party payors or other third parties, or be held liable or otherwise responsible for such acts of non-compliance. Any of the foregoing could adversely affect Sema4’sour cash flow and financial condition.
If Sema4 useswe use hazardous materials in a manner that causes injury, itwe could be liable for resulting damages.
Sema4’sOur activities currently require the use of hazardous chemicals and biological material. Sema4We cannot eliminate the risk of accidental contamination or injury to employees or third parties from the use, storage, handling or disposal of these materials. In the event of contamination or injury, Sema4we could be held liable for any resulting damages, and any liability could exceed itsour resources or any applicable insurance coverage itwe may have. Additionally, Sema4 iswe are subject
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on an ongoing basis to federal, state and local laws and regulations governing the use, storage, handling and disposal of these materials and specified waste products. The cost of compliance with these laws and regulations may become significant, and Sema4’sour failure to comply may result in substantial fines or other consequences, and either could negatively affect itsour operating results.
Sema4We and itsour partners will have to maintain compliance with FDA requirements for research, products and services and failure to maintain compliance with FDA requirements may prevent or delay the marketing of itsour products and services.
Even if Sema4 haswe have obtained marketing authorization, itwe will have to comply with the scope of that clearance, authorization or approval. Failure to secure and to comply with clearance, authorization or approval or the additional, extensive and ongoing post-marketing obligations imposed by the FDA or other regulatory requirements of other regulatory agencies could result in unanticipated compliance expenditures, a range of administrative enforcement actions, injunctions and criminal prosecution. FDA post-market obligations include, among other things, compliance with the FDA QSR, establishing registration and device listings, labeling requirements, reporting of certain adverse events and malfunctions, and reporting of certain recalls. In addition, circumstances may arise that cause Sema4us to recall equipment used in connection with itsour research, products and services. Such recalls could have an adverse effect on Sema4’sour ability to provide those products and services, which in turn would adversely affect itsour financial condition. Sema4’sour collaborators will also be required to maintain FDA clearance, authorization or approval for the products and services that Sema4we jointly develops.develop. Any failure by Sema4us or itsour collaborators to
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maintain such clearance, authorization or approval could impair or cause a delay in itsour ability to profit from these collaborations.
Future changes in FDA enforcement discretion for LDTs could subject Sema4’sour operations to much more significant regulatory requirements.
Sema4We currently offersoffer a laboratory-develop test, or LDT, version of certain tests. The FDA has a policy of enforcement discretion with respect to, or LDTs, whereby the FDA does not actively enforce its medical device regulatory requirements for such tests. However, in October 2014, the FDA issued two draft guidance documents stating that the FDA intended to modify its policy of enforcement discretion with respect to LDTs in a risk-based manner consistent with the existing classification of medical devices. Although the FDA halted finalization of the guidance in November 2016 to allow for further public discussion on an appropriate oversight approach to LDTs and to give Congressional authorizing committees the opportunity to develop a legislative solution, it is unclear if Congress or the FDA will modify the current approach to the regulation of LDTs in a way that would subject Sema4’sour current or future services marketed as LDTs to the enforcement of FDA regulatory requirements. The FDA Commissioner and the Director of the Center for Devices and Radiological Health, or CDRH, have expressed significant concerns regarding disparities between some LDTs and in vitro diagnostics that have been reviewed, cleared, authorized or approved by the FDA. If the FDA were to determine that certain tests offered by Sema4us as LDTs are not within the policy for LDTs for any reason, including new rules, policies or guidance, or due to changes in statute, itsour tests may become subject to extensive FDA requirements or Sema4’sour business may otherwise be adversely affected. If the FDA were to disagree with Sema4’sour LDT status or modify itsour approach to regulating LDTs, Sema4we could experience reduced revenue or increased costs, which could adversely affect Sema4’sour business, prospects, results of operations and financial condition. If required, the regulatory marketing authorization process required to bring Sema4’sour current or future LDTs into compliance may involve, among other things, successfully completing additional clinical validations and submitting to and obtaining clearance from the FDA for a premarket clearance (510(k)) submission or authorization for a de novo or approval of a PMA. Furthermore, pending legislative proposals, if passed, such as the VALID Act, could create new or different regulatory and compliance burdens on Sema4us and could have a negative effect on itsour ability to keep products on the market or develop new products, which could have a material effect on itsour business. In the event that the FDA requires marketing authorization of Sema4’sour LDTs in the future, the FDA may not ultimately grant any clearance, authorization or approval requested by Sema4us in a timely manner, or at all. In addition, if the FDA inspects Sema4’sour laboratory in relation to the marketing of any FDA-authorized test, any enforcement action the FDA takes might not be limited to the FDA-authorized test carried by Sema4us and could encompass itsour other testing services.
Recently, the FDA has also taken a more active role in certain diagnostic areas, including the oversight of pharmacogenetic, or PGx, and COVID-19 tests. In 2019, the FDA contacted several laboratories to demand changes
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to PGx test reports and marketing materials. In February 2020, the FDA issued a statement indicating that it continues to have concerns about the claims that certain clinical laboratories make with respect to their PGx tests, and published tables that list PGx associations for which the FDA has determined that the data support therapeutic management recommendations, a potential impact on safety or response, or a potential impact on pharmacokinetic properties only, respectively. To date, however, the FDA has not provided any general guidance on the types of claims or other characteristics that will cause a PGx test to fall outside FDA’s enforcement discretion. As such, the extent to which the FDA will allow any laboratory to offer PGx tests in their current form without meeting FDA regulatory requirements for medical devices is unclear at this time.
For each product and service Sema4 iswe are developing that may require FDA premarket review prior to marketing, the FDA may not grant clearance, authorization or premarket approval and failure to obtain necessary approvals for itsour future products and services would adversely affect itsour ability to grow itsour business.
Before Sema4 beginswe begin to manufacture, label and market additional clinical diagnostic products for commercial diagnostic use in the United States, Sema4we may be required to obtain either clearance, marketing authorization or approval from the FDA, unless an exemption applies or the FDA exercises its enforcement discretion and refrains from enforcing its requirements. For example, the FDA currently has a policy of refraining from enforcing its medical device requirements with respect to LDTs, which the FDA considers to be a type ofin vitro diagnostic test that is designed, manufactured and used within a single properly licensed laboratory.
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The process of obtaining PMA is much more rigorous, costly, lengthy and uncertain than the 510(k) clearance process. In the PMA approval process, the FDA must determine that a proposed device is safe and effective for its intended use based, in part, on extensive data, including, but not limited to, technical, preclinical, clinical trial, manufacturing and labeling data. Conversely, in the 510(k) clearance process, the FDA must determine that a proposed device is “substantially equivalent” to a legally marketed “predicate” device in order for the product to be cleared for marketing. To be “substantially equivalent,” the proposed device must have the same intended use as the predicate device, and either have the same technological characteristics or if it has different technological characteristics as the predicate device, the proposed device must be as safe and effective as, and not raise different questions of safety or effectiveness than, the predicate device. Clinical data is sometimes required to support substantial equivalence. For lower-risk devices that would otherwise automatically be placed into Class III, which require a PMA because no predicate device is available and the devices do not fall within an existing 510(k)-exempt classification, an applicant may submit a de novo request to down classify the device into Class II or Class I, which would not require a PMA. In the de novo process, the FDA must determine that general and special controls are sufficient to provide reasonable assurance of the safety and effectiveness of a device, which is low to moderate risk and has no predicate. In other words, the applicant must justify the “down-classification” to Class I or II for a new product type that would otherwise automatically be placed into Class III, but is lower risk. Clinical data may be required. For laboratory tests for which FDA clearance, authorization or approval is required, the FDA may also require data to support analytical and clinical validity.
The 510(k), de novo and PMA processes can be expensive and lengthy and require the payment of significant fees, unless an exemption applies. The FDA’s 510(k) clearance pathway usually takes from three to nine months from submission, but it can take longer for a novel type of product. The FDA’s de novo classification pathway usually takes from six to 12 months, but for many applicants can take up to 18 months or more.
The process of obtaining a PMA generally takes from one to three years, or even longer, from the time the PMA is submitted to the FDA until an approval is obtained. Any delay or failure to obtain necessary regulatory clearances, authorizations or approvals would have a material adverse effect on Sema4’sour business, financial condition and prospects.
The FDA can delay, limit or deny clearance, authorization or approval of a device for many reasons, including:
•the inability to demonstrate to the satisfaction of the FDA that the products are safe or effective for their intended uses;
•the disagreement of the FDA with the design, conduct or implementation of the clinical trials or the analysis or interpretation of data from preclinical studies, analytical studies or clinical trials;
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•serious and unexpected adverse device effects experienced by participants in clinical trials;
•the data from preclinical studies, analytical studies and clinical trials may be insufficient to support clearance, authorization or approval, where required;
•the inability to demonstrate that the clinical and other benefits of the device outweigh the risks;
•an advisory committee, if convened by the FDA, may recommend against approval of a PMA or other application or may recommend that the FDA require, as a condition of approval, additional preclinical studies or clinical trials, limitations on approved labeling or distribution and use restrictions, or even if an advisory committee makes a favorable recommendation, the FDA may still not approve the product;
•the FDA may identify deficiencies in Sema4’sour marketing application;
•the FDA may identify deficiencies in Sema4our or itsour collaborators’ manufacturing processes, facilities or analytical methods;
•the potential for policies or regulations of the FDA or applicable foreign regulatory bodies to change significantly in a manner rendering clinical data or regulatory filings insufficient for clearance, authorization or approval; and
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•the FDA or foreign regulatory authorities may audit clinical trial data and conclude that the data is not sufficiently reliable to support a PMA.
There are numerous FDA personnel assigned to review different aspects of marketing submissions, which can present uncertainties based on their ability to exercise judgment and discretion during the review process. During the course of review, the FDA may request or require additional data and information, and the development and provision of these data and information may be time-consuming and expensive. The process of obtaining regulatory clearances, authorizations or approvals to market a medical device can be costly and time-consuming, and Sema4we may not be able to obtain these clearances, authorizations or approvals on a timely basis, or at all for itsour products in development. If Sema4 iswe are unable to obtain clearance, authorization or approval for any products for which it plans to seek clearance, authorization or approval, itsour business may be harmed.
Modifications to Sema4’sour products with FDA marketing authorization may require new FDA clearances, authorizations or approvals, or may require it to cease marketing or recall the modified clinical diagnostic products or future clinical products until clearances are obtained.
Any modification to a 510(k)-cleared device that significantly affects its safety or effectiveness, or that constitutes a major change in its intended use, could require a new 510(k) clearance, a new de novo authorization or approval of a PMA. The FDA requires every manufacturer to make this determination in the first instance, but the FDA may review any manufacturer’s decision. The FDA may not agree with Sema4’sour decisions regarding whether new clearances, authorizations or approvals are necessary.
For any product approved pursuant to a PMA, Sema4we would be required to seek supplemental approval for many types of modifications to the approved product. The FDA requires manufacturers in the first instance to determine whether a PMA supplement or other regulatory filing is needed or whether the change may be reported via the PMA Annual Report, but may disagree with a company’s assessment.
If the FDA disagrees with Sema4’sour determination, which it may not review until Sema4 submitswe submit an annual report or the FDA conducts an inspection or other inquiry, and requires Sema4us to seek new clearances, authorizations or approvals for modifications to itsour previously cleared, authorized or approved clinical diagnostic products for which Sema4 haswe have concluded new clearances, authorizations or approvals are unnecessary, Sema4we may be required to cease marketing or distribution of these clinical diagnostic products or to recall the modified products until Sema4 obtainswe obtain clearance, authorization or approval. Sema4We may also be subject to enforcement action, including, among other things, significant regulatory fines or penalties.
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In addition, for example, Sema4 planswe plan to match itsour test reports for certain indications to identified mutations with FDA-approved targeted therapies or relevant clinical trials of targeted therapies. If a patient or physician who orders a test using one of Sema4’sour products is unable to obtain, or be reimbursed for the use of, targeted therapies because they are not indicated in the FDA-approved label for treatment, the patient is unable to enroll in an identified clinical trial due to the enrollment criteria of the trial, or some other reason, the ordering physician may conclude the test report does not contain actionable information. If physicians do not believe Sema4’sour products consistently generate actionable information about their patients’ disease or condition, they may be less likely to use Sema4’sour products.
Furthermore, Sema4we cannot provide assurance that customers will always use these products in the manner in which they are intended. Any intentional or unintentional misuse of these products by customers could lead to substantial civil and criminal monetary and non-monetary penalties, and could result in significant legal and investigatory fees.
Sema4’sOur business is subject to various complex laws and regulations applicable to clinical diagnostics. Sema4We could be subject to significant fines and penalties if itwe or itsour partners fail to comply with these laws and regulations.
As a provider of clinical diagnostic products and services, Sema4we and itsour partners are subject to extensive and frequently changing federal, state, local and foreign laws and regulations governing various aspects of itsour business.
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In particular, the clinical laboratory and healthcare industry is subject to significant governmental certification and licensing regulations, as well as federal, state and foreign laws regarding:
•test ordering and billing practices;
•marketing, sales and pricing practices;
•health information privacy and security, including HIPAA and comparable state laws;
•insurance;
•anti-markup legislation;
•fraud and abuse; and
•consumer protection.
Sema4 isWe are also required to comply with FDA regulations, including with respect to itsour labeling and promotion activities. In addition, advertising and marketing of itsour clinical products are subject to regulation by the Federal Trade Commission, or FTC, and advertising of laboratory services is regulated by certain state laws. Violation of any FDA requirement could result in enforcement actions, such as seizures, injunctions, civil penalties and criminal prosecutions, and violation of any FTC or state law requirement could result in injunctions and other remedies, all of which could have a material adverse effect on Sema4’sour business. Most states also have similar regulatory and enforcement authority for devices. Additionally, most foreign countries have authorities comparable to the FDA and processes for obtaining marketing approvals. Obtaining and maintaining these approvals, and complying with all laws and regulations, may subject Sema4us to similar risks and delays as those itwe could experience under FDA, FTC and state regulation. Sema4 incursWe incur various costs in complying and overseeing compliance with these laws and regulations. The growth of Sema4’sour business and sales organization, the acquisition of additional businesses, such as the pending Acquisition of GeneDx, or products and services and itsour expansion outside of the U.S. may increase the potential of violating these laws, regulations or itsour internal policies and procedures.
Healthcare policy has been a subject of extensive discussion in the executive and legislative branches of the federal and many state governments and healthcare laws and regulations are subject to change. Development of the existing commercialization strategy for itsour tests and planned development of products in Sema4’sour pipeline has been based on existing healthcare policies. Sema4We cannot predict what additional changes, if any, will be proposed or adopted or the effect that such proposals or adoption may have on itsour business, financial condition and results of operations.
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If Sema4we or itsour partners, fail to comply with these laws and regulations, it could incur significant fines and penalties and itsour reputation and prospects could suffer. Additionally, any such partners could be forced to cease offering Sema4’sour products and services in certain jurisdictions, which could materially disrupt itsour business. An adverse outcome could include Sema4us being required to pay treble damages, incur civil and criminal penalties, paying attorneys’ fees, entering into a corporate integrity agreement, being excluded from participation in government healthcare programs, including Medicare and Medicaid, and other adverse actions that could materially and adversely affect itsour business, financial condition and results of operations.
Compliance with the HIPAA security, privacy and breach notification regulations may increase Sema4’sour costs.
The HIPAA privacy, security and breach notification regulations, including the expanded requirements under HITECH, establish comprehensive federal standards with respect to the uses and disclosures of protected health information, or PHI, by health plans, healthcare providers and healthcare clearinghouses, in addition to setting standards to protect the confidentiality, integrity and security of PHI. The regulations establish a complex regulatory framework on a variety of subjects, including:
•the circumstances under which uses and disclosures of PHI are permitted or required without a specific authorization by the patient, including but not limited to treatment purposes, activities to obtain payments for Sema4’sour services, and itsour healthcare operations activities;
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•a patient’s rights to access, amend and receive an accounting of certain disclosures of PHI;
•requirements to notify individuals if there is a breach of their PHI;
•the contents of notices of privacy practices for PHI;
•administrative, technical and physical safeguards required of entities that use or receive PHI;
•deidentification of PHI; and
•the protection of computing systems maintaining electronic PHI.
Sema4 hasWe have implemented practices intended to meet the requirements of the HIPAA privacy, security and breach notification regulations, as required by law. Sema4 isWe are required to comply with federal privacy, security and breach notification regulations as well as varying state privacy, security and breach notification laws and regulations, which may be more stringent than federal HIPAA requirements. In addition, for healthcare data transfers from other countries relating to citizens and/or residents of those countries, Sema4we must comply with the laws of those countries. The federal privacy regulations under HIPAA restrict Sema4’sour ability to use or disclose patient identifiable data, without patient authorization, for purposes other than payment, treatment, healthcare operations and certain other specified disclosures such as public health and governmental oversight of the healthcare industry.
HIPAA provides for significant fines and other penalties for wrongful use or disclosure of PHI, including potential civil and criminal fines and penalties. Computer networks are always vulnerable to breach and unauthorized persons may in the future be able to exploit weaknesses in the security systems of Sema4’sour computer networks and gain access to PHI. Additionally, Sema4 shareswe share PHI with third-parties who are legally obligated to safeguard and maintain the confidentiality of PHI. Unauthorized persons may be able to gain access to PHI stored in such third-parties computer networks. Any wrongful use or disclosure of PHI by Sema4us or such third-parties, including disclosure due to data theft or unauthorized access to Sema4us or itsour third-parties computer networks, could subject it to fines or penalties that could adversely affect itsour business and results of operations. Although the HIPAA statute and regulations do not expressly provide for a private right of damages, Sema4we could also be liable for damages under state laws to private parties for the wrongful use or disclosure of confidential health information or other private personal information.
Some of Sema4’sour activities may subject it to risks under federal and state laws prohibiting ‘kickbacks’ and false or fraudulent claims.
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In addition to FDA marketing and promotion restrictions, several other types of state and federal healthcare fraud and abuse laws have been applied in recent years to restrict certain marketing practices in the healthcare product and service industry and to regulate billing practices and financial relationships with healthcare providers, hospitals and other healthcare providers. These laws include a federal law commonly known as the Medicare/Medicaid anti-kickback law, and several similar state laws, which prohibit payments intended to induce healthcare providers or others either to refer patients or to acquire or arrange for or recommend the acquisition of healthcare products or services. While the federal law applies only to referrals, products or services for which payment may be made by a federal healthcare program, state laws often apply regardless of whether federal funds may be involved. These laws constrain the sales, marketing and other promotional activities of manufacturers of medical devices and providers of laboratory services by limiting the kinds of financial arrangements, including sales programs, that may be used with hospitals, healthcare providers, laboratories and other potential purchasers or prescribers of medical devices and laboratory services. Other federal and state laws generally prohibit individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payors that are false or fraudulent, or are for items or services that were not provided as claimed.
In 2018, Congress passed the Eliminating Kickbacks in Recovery Act, or EKRA, as part of the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act. Similar to the Medicare/Medicaid anti-kickback law, EKRA imposes criminal penalties for knowing or willful payment or offer, or solicitation or receipt, of any remuneration, whether directly or indirectly, overtly or covertly, in cash or in kind, in exchange for the referral or inducement of laboratory testing (among other healthcare services) unless a specific exception applies. However,
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unlike the Medicare/Medicaid anti-kickback law, EKRA is not limited to services covered by federal or state healthcare programs but applies more broadly to services covered by “healthcare benefit programs,” including commercial insurers. As currently drafted, EKRA potentially expands the universe of arrangements that could be subject to government enforcement under federal fraud and abuse laws. In addition, while the Medicare/Medicaid anti-kickback law includes certain exceptions that are widely relied upon in the healthcare industry, including compensating employees on a percentage basis, not all of those same exceptions apply under EKRA. EKRA expressly does not protect employee compensation that varies by the number of individuals referred to a laboratory, the number of tests performed by a laboratory, or the amount billed to or received from a health benefit program from individuals referred to a laboratory. Because EKRA is a relatively new law, there is no agency guidance and only one court has addressed the application of EKRA. That case was decided by the United States District Court of Hawaii and involved a lawsuit between a laboratory and an employee. The Court ruled that the commission-based compensation provisions of the laboratory employee’s contract did not violate EKRA. Although this may be a favorable interpretation of EKRA for laboratory compensation structures, we cannot be assured that courts in our jurisdiction will reach the same conclusion or that the decision will not be overturned if there is an appeal. Because EKRA is a relatively new law, there is no agency guidance or court precedent to indicate how and to what extent it will be applied and enforced. Sema4We cannot assure you that itsour relationships with healthcare providers, hospitals, customers, itsour own sales representatives, or any other party will not be subject to scrutiny or will survive regulatory challenge under EKRA.
Additionally, to avoid liability under federal false claims laws, Sema4we or itsour partners must carefully and accurately code claims for reimbursement, proactively monitor the accuracy and appropriateness of claims and payments received, diligently investigate any credible information indicating that itwe or our partners may have received an overpayment, and promptly return any overpayments. Medicare payments are subject to audit, including through the Comprehensive Error Rate Testing, or CERT, program, and payments may be recouped by CMS if it is determined that they were improperly made. Currently, a small percentage of Sema4’sour revenues are generated by payments from Medicare. The federal anti-kickback statute and certain state-level false claims laws prescribe civil and criminal penalties (including fines) for noncompliance that can be substantial. In addition, various states have enacted false claim laws analogous to the federal laws that apply where a claim is submitted to any third-party payor and not only a governmental payer program. While Sema4we continually strivesstrive to comply with these complex requirements, interpretations of the applicability of these laws to marketing and billing practices are constantly evolving and even an unsuccessful challenge could cause adverse publicity and be costly to respond to, and thus could harm itsour business and prospects. Sema4’sOur failure to comply with applicable laws could result in various adverse consequences that could have a material adverse effect upon itsour business, including the exclusion of itsour products and services from government programs and the imposition of civil or criminal sanctions.
Sema4’s
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Our business could be harmed by the loss, suspension or other restriction on a license, certification or accreditation, or by the imposition of a fine or penalties, under CLIA, itsour implementing regulations or other state, federal and foreign laws and regulations affecting licensure or certification, or by future changes in these laws or regulations.
Federal law requires virtually all clinical laboratories to comply with CLIA, which generally involves becoming certified by the federal and state government for the testing that will be performed and complying with various operational, personnel, facilities administration, quality and proficiency testing requirements intended to ensure that testing services are accurate and reliable. CLIA certification is also a prerequisite to be eligible to bill state and federal healthcare programs, as well as many private third-party payors, for laboratory research and clinical diagnostic testing services. For example, as a condition of Sema4’sour CLIA certification, a laboratory may be subject to survey and inspection every other year, additional random inspections and surprise inspections based on complaints received by state or federal regulators. The biennial survey and inspection is conducted by CMS, a CMS agent or, if the laboratory holds a CLIA certificate of accreditation, a CMS-approved accreditation organization, such as CAP. Sanctions for failure to comply with CLIA requirements, including proficiency testing violations, may include suspension, revocation or limitation of a laboratory’s CLIA certificate, which is necessary to conduct business, as well as the imposition of significant civil, administrative or criminal sanctions against the lab, its owners and other individuals. In addition, Sema4 iswe are subject to regulation under certain state laws and regulations governing laboratory licensure. Some states have enacted laboratory licensure and compliance laws that are more stringent than CLIA. Changes in state licensure laws that affect Sema4’sour ability to offer and provide research and diagnostic products and services across state or foreign country lines could materially and adversely affect itsour business. In addition, state and foreign requirements for laboratory certification may be costly or difficult to meet and could affect itsour ability to receive specimens from certain states or foreign countries.
Any sanction imposed under CLIA, its implementing regulations or state or foreign laws or regulations governing licensure, or Sema4’sour failure to renew a CLIA certificate, a state or foreign license or accreditation, could have a material adverse effect on itsour business.
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Sema4We may never obtain approval in the EU or in any other foreign country for any of itsour products or services and, even if Sema4 does, itwe do, we or itsour partners and collaborators may never be able to commercialize them in another jurisdiction, which would limit Sema4’sour ability to realize their full market potential.
In order to eventually market any of itsour current or future products and services in any particular foreign jurisdiction, Sema4we must establish compliance with numerous and varying regulatory requirements on a jurisdiction-by-jurisdiction basis regarding quality, safety, performance, privacy and efficacy. In addition, clinical trials or clinical investigations conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory clearance, authorization or approval in one country does not guarantee regulatory clearance, authorization or approval in any other country. Approval processes vary among countries and can involve additional product testing and validation and additional administrative review periods.
Seeking foreign regulatory clearance, authorization or approval could result in difficulties and costs for Sema4us and itsour collaborators and require additional preclinical studies, clinical trials or clinical investigations which could be costly and time-consuming. Regulatory requirements and ethical approval obligations can vary widely from country to country and could delay or prevent the introduction of Sema4’sour products and services in those countries. The foreign regulatory clearance, authorization or approval process involves all of the risks and uncertainties associated with FDA clearance, authorization or approval. Sema4We currently hashave limited experience in obtaining regulatory clearance, authorization or approval in international markets. If Sema4we or itsour collaborators fail to comply with regulatory requirements in international markets or to obtain and maintain required regulatory clearances, authorizations or approvals in international markets, or if those approvals are delayed, itsour target market will be reduced and itsour ability to realize the full market potential of Sema4’sour products and services will be unrealized.
Complying with numerous statutes and regulations pertaining to Sema4’sour business is an expensive and time-consuming process, and any failure to comply could result in substantial penalties.
Sema4’s
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Our operations are subject to other extensive federal, state, local and foreign laws and regulations, all of which are subject to change. These laws and regulations currently include, among others:
•HIPAA, which establishes comprehensive federal standards with respect to the privacy and security of protected health information and requirements for the use of certain standardized electronic transactions;
•amendments to HIPAA under HITECH, which strengthen and expand HIPAA privacy and security compliance requirements, increase penalties for violators and expand vicarious liability, extend enforcement authority to state attorneys general, and impose requirements for breach notification;
•the General Data Protection Regulation, or GDPR, which imposes strict privacy and security requirements on controllers and processors of European personal data, including enhanced protections for “special categories” of personal data, including sensitive information such as health and genetic information of data subjects;
•the CCPA, which, among other things, regulates how subject businesses may collect, use, disclose and/or sell the personal information of consumers who reside in California, affords rights to consumers that they may exercise against businesses that collect their information, and requires implementation of reasonable security measures to safeguard personal information of California consumers;
•the federal Anti-Kickback Statute, which prohibits knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for the referral of an individual, for the furnishing of or arrangement for the furnishing of any item or service for which payment may be made in whole or in part by a federal healthcare program, or the purchasing, leasing, ordering, arranging for, or recommend purchasing, leasing or ordering, any good, facility, item or service for which payment may be made, in whole or in part, under a federal healthcare program;
•EKRA, which prohibits payments for referrals to recovery homes, clinical treatment facilities, and laboratories and reaches beyond federal health care programs, to include private insurance;
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•the federal physician self-referral law, known as the Stark Law, which prohibits a physician from making a referral to an entity for certain designated health services covered by the Medicare program, including laboratory and pathology services, if the physician or an immediate family member has a financial relationship with the entity unless an exception applies, and prohibits an entity from billing for designated health services furnished pursuant to a prohibited referral;
•the federal false claims law, which imposes liability on any person or entity that, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment to the federal government;
•the federal Civil Monetary Penalties Law, which prohibits, among other things, the offering or transfer of remuneration to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner or supplier of services reimbursable by Medicare or a state healthcare program, unless an exception applies;
•the HIPAA fraud and abuse provisions, which create new federal criminal statutes that prohibit, among other things, defrauding health care benefit programs, willfully obstructing a criminal investigation of a healthcare offense and falsifying or concealing a material fact or making any materially false statements in connection with the payment for healthcare benefits, items or services;
•other federal and state fraud and abuse laws, such as anti-kickback laws, prohibitions on self-referral, fee-splitting restrictions, insurance fraud laws, anti-markup laws, prohibitions on the provision of tests at no or discounted cost to induce physician or patient adoption, and false claims acts, which may extend to services reimbursable by any third-party payer, including private insurers;
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•the 21st Century Cures Act information blocking prohibition, which prohibits covered actors from engaging in certain practices that are likely to interfere with the access, exchange, or use of electronic health information;
•the Physician Payments Sunshine Act and similar state laws that require reporting of certain payments and other transfers of value made by applicable manufacturers, directly or indirectly, to or on behalf of covered recipients including physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals as well as ownership and investment interests held by physicians and their immediate family members.
•Beginning in 2022, applicable manufacturers also will be required to report such information regarding its relationships with physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists and certified nurse midwives during the previous year;
•state laws that limit or prohibit the provision of certain payments and other transfers of value to certain covered healthcare providers;
•the prohibition on reassignment of Medicare claims, which, subject to certain exceptions, precludes the reassignment of Medicare claims to any other party;
•state laws that prohibit other specified practices, such as billing clinicians for testing that they order; waiving coinsurance, copayments, deductibles and other amounts owed by patients; billing a state Medicaid program at a price that is higher than what is charged to one or more other payers;
•similar foreign laws and regulations that may apply to itus in the countries in which Sema4 operateswe operate or may operate in the future; and
•laws that relate to maintaining accurate information and control over activities that may fall within the purview of the U.S. Foreign Corrupt Practices Act, its books and records provisions, or anti-bribery provisions.
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Sema4 hasWe have adopted policies and procedures designed to comply with these laws and regulations. In the ordinary course of itsour business, Sema4 conductswe conduct internal reviews of itsour compliance with these laws. Sema4’sOur compliance may also be subject to governmental review. The growth of Sema4’sour business and itsour expansion outside of the United States may increase the potential of violating these laws or itsour internal policies and procedures. The risk of Sema4us being found in violation of these or other laws and regulations is further increased by the fact that many have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations. Any action brought against Sema4us for violation of these or other laws or regulations, even if itwe successfully defendsdefend against it, could cause itus to incur significant legal expenses and divert Sema4’sour management’s attention from the operation of itsour business. If Sema4’sour operations are found to be in violation of any of these laws and regulations, itwe may be subject to any applicable penalty associated with the violation, including significant administrative, civil and criminal penalties, damages, fines, imprisonment, exclusion from participation in Federal healthcare programs, refunding of payments received by itus and curtailment or cessation of Sema4’sour operations, which may impact existing contracts with key payors, collaborators, health systems, and commercial partners. Any of the foregoing consequences could seriously harm Sema4’sour business and itsour financial results.
Sema4 facesWe face uncertainty related to healthcare reform, pricing, coverage and reimbursement, which could reduce itsour revenue.
Healthcare reform laws, including the Patient Protection and Affordable Care Act or ACA, and the Protecting Access to Medicare Act of 2014, or PAMA, are significantly affecting the U.S. healthcare and medical services industry. Existing legislation, and possible future legal and regulatory changes, including potential repeal or modification of the ACA, elimination of penalties regarding the individual mandate for coverage, or approval of health plans that allow lower levels of coverage for preventive services, could materially change the structure and finances of the health insurance system and the methodology for reimbursing medical services, drugs and devices, including Sema4’sour current and future products and services. The ACA has also been the subject of various legal
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challenges and in December 2018, a federal district court in Texas found that the ACA’s “individual mandate” was unconstitutional such that the whole of the ACA is invalid. The decision was appealed, and in December 2019, the Fifth Circuit Court of Appeals affirmed certain portions of the district court’s decision but remanded to the district court to determine if any portions of the ACA may still be valid. If the plaintiffs in this case, or in any other case challenging the ACA, are ultimately successful, insurance coverage for Sema4’sour tests could be materially and adversely affected. Any change in reimbursement policy could result in a change in patient cost-sharing, which could adversely affect a provider’s willingness to prescribe and patient’s willingness and ability to use Sema4’sour tests and any other product or service Sema4we may develop. Healthcare reforms, which may intend to reduce healthcare costs, may have the effect of discouraging third-party payors from covering certain kinds of medical products and services, particularly newly developed technologies, or other products or tests Sema4we may develop in the future. Sema4We cannot predict whether future healthcare reform initiatives will be implemented at the federal or state level or the effect any such future legislation or regulation will have on it. The taxes imposed by new legislation, cost reduction measures and the expansion in the government’s role in the U.S. healthcare industry may result in decreased profits to Sema4,us, which may adversely affect itsour business, financial condition and results of operations.
PAMA presents significant uncertainty for future CMS reimbursement rates for Sema4’sour tests. Because Medicare currently covers a significant number of patients, any reduction in the CMS reimbursement rate for Sema4’sour tests would negatively affect itsour revenues and itsour business prospects. Under PAMA, CMS reimbursement rates for clinical diagnostic laboratory tests are updated every three years, or annually for clinical laboratory tests that are considered "advanced diagnostic laboratory tests". The CMS reimbursement rates for clinical diagnostic laboratory tests are updated based on the volume-weighted median of private payer rates for each clinical diagnostic laboratory test based on data submitted by certain applicable laboratories. Further, laboratories that fail to report or erroneously report required payment information may be subject to substantial civil money penalties. There can be no assurance under PAMA that adequate CMS reimbursement rates will continue to be assigned to Sema4’sour tests. Congress could modify or repeal PAMA in the future or CMS could modify regulations under PAMA, and any such action could have the effect of reducing the CMS reimbursement rate for Sema4’sour tests. Further, it is possible that Medicare or other federal payers that provide reimbursement for Sema4’sour tests may suspend, revoke or discontinue coverage at any time, may require co-payments from patients, or may reduce the reimbursement rates payable to it.us. Any such action could have a negative impact on Sema4’sour revenues.
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Coverage of Sema4’sour screening products that itwe may develop may also depend, in whole or in part, on whether payers determine, or courts and/or regulatory authorities determine, coverage is required under applicable federal or state laws mandating coverage of certain cancer screening services.
Several states have laws mandating coverage for preventive services, such as certain cancer screening services, applicable to certain health insurers. However, not all of these laws apply to Sema4’sour current tests and not all of these laws presently mandate coverage for patients within the certain age ranges. Sema4We and payers may disagree about how these mandates apply to itsour tests and Sema4we may find the mandates difficult to enforce. Further, if the ACA is repealed, replaced or overturned, or even if it is not, states may decide to modify their laws, which may include repeal of those coverage mandates that Sema4 believeswe believe currently apply to itsour oncology tests.
Outside of the U.S., Sema4we would largely depend on public or government-controlled payers for coverage of itsour oncology tests. As compared to many more routine diagnostic tests, Sema4’sour oncology tests are more complicated, expensive and are performed in a central, specialized lab. In order to accommodate the unique characteristics of Sema4’sour diagnostic products, public payers in certain non-U.S. markets have designed reimbursement frameworks specifically for each test type. These payers could decide to modify or discontinue these special frameworks, potentially leading to lower reimbursement prices or the impossibility of providing the test in the market. These changes could also impose additional administrative burdens on Sema4,us, if it were to ever sell itsour tests in foreign jurisdictions, including complex public tendering procedures, or on ordering physicians, which could adversely affect the number of payers covering the test or the number of orders placed. Public payers could condition reimbursement of Sema4’sour tests upon performance of itsour tests locally or, even in laboratories owned or operated by the payers. Any such change would adversely affect Sema4’sour ability to continue to serve those patients through itsour labs. Sema4We may develop future oncologic tests that could be performed locally by laboratory partners and in hospitals around the world, however those developments efforts may be unsuccessful and any such tests that Sema4we may develop may not be approved by regulators or accepted by payers or patients.
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Product and professional liability suits against Sema4us could result in expensive and time-consuming litigation, payment of substantial damages and increases in itsour insurance rates.
The sale and use of Sema4’sour solutions, products and services could lead to product or professional liability claims, including class action lawsuits. Sema4We may also be subject to liability for errors in the test results including health information it provides to healthcare providers or patients or for a misunderstanding of, or inappropriate reliance upon, the information it provides. Claims could also arise out of clinical studies Sema4we may conduct or any of itsour other activities. A product or professional liability claim could result in substantial damages, be costly and time consuming to defend, and cause material harm to itsour business, reputation or financial condition. Sema4We cannot assure you that itsour liability insurance would protect itsour assets from the financial impact of defending a product or professional liability claim. Any claim brought against Sema4,us, with or without merit, could increase itsour liability insurance rates or prevent it from securing insurance coverage in the future.
Errors, defects, or mistakes in Sema4’sour products or services, and operations could harm itsour reputation, decrease market acceptance of itsour products or services.
Sema4 isWe are creating new products and services, many of which are initially based on largely untested technologies. As all of Sema4’sour products and services progress, Sema4we or others may determine that it made product or service-level scientific or technological mistakes. The diagnostic and testing processes utilize a number of complex and sophisticated molecular, biochemical, informatics, and mechanical processes, many of which are highly sensitive to external factors. An operational or technological failure in one of these complex processes or fluctuations in external factors may result in less efficient processing or variation between testing runs. Refinements to Sema4’sour processes may initially result in unanticipated issues that reduce the efficiency or increase variability. In particular, sequencing, which is a key component of these processes, could be inefficient with higher than expected variability thereby increasing total sequencing costs and reducing the number of samples Sema4we can process in a given time period. Therefore, inefficient or variable processes can cause variability in Sema4’sour operating results and damage itsour reputation.
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In addition, Sema4’sour laboratory operations could result in any number of errors or defects. Sema4’sOur quality assurance system may fail to prevent it from inadvertent problems with samples, sample quality, lab processes including sequencing, software, data upload or analysis, raw materials, reagent manufacturing, assay quality or design, or other components or processes. In addition, Sema4’sour assays may have quality or design errors, and itwe may have inadequate procedures or instrumentation to process samples, assemble itsour proprietary primer mixes and commercial materials, upload and analyze data, or otherwise conduct itsour laboratory operations. If Sema4 provideswe provide products or services with undiscovered errors to itsour customers, itsour clinical diagnostics may falsely indicate a patient has a disease or genetic variant, fail to assess a patient’s risk of getting a disease or having a child with a disease, or fail to detect disease or variant in a patient who requires or could benefit from treatment or intervention. Sema4 believes itsWe believe our customers are likely to be particularly sensitive to product and service defects, errors and delays, including if Sema4’sour products and services fail to indicate the presence of residual disease with high accuracy from clinical specimens or if Sema4 failswe fail to list or inaccurately indicate the presence or absence of disease in itsour test report or analysis. In drug discovery, such errors may interfere with Sema4’sour collaborators’ clinical studies or result in adverse safety or efficacy profiles for their products in development. This may harm Sema4’sour customers’ businesses and may cause it to incur significant costs, divert the attention of key personnel, encourage regulatory enforcement action against it, create a significant customer relations problem for Sema4us and cause itsour reputation to suffer. Sema4We may also be subject to warranty and liability claims for damages related to errors or defects in itsour products or services. Any of these developments could harm Sema4’sour business and operating results.
Sema4 isWe are subject to increasingly complex taxation rules and practices, which may affect how it conducts itswe conduct our business and itsour results of operationsoperations.
As itsour business grows, Sema4 iswe are required to comply with increasingly complex taxation rules and practices. Sema4 isWe are subject to tax in multiple U.S. tax jurisdictions and may be subject to foreign tax jurisdictions in the future. The development of Sema4’sour tax strategies requires additional expertise and may impact how it conducts itswe conduct our business. Sema4’sOur future effective tax rates could be unfavorably affected by changes in, or interpretations of, tax rules and regulations in the jurisdictions in which it doeswe do business or by changes in the valuation of itsour deferred tax assets and liabilities. Furthermore, Sema4 provideswe provide for certain tax liabilities that involve significant judgment. Sema4 isWe are and may be subject to
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the examination of itsour tax returns by federal, state and foreign tax authorities. If Sema4’sour tax strategies are ineffective or it is not in compliance with domestic and international tax laws, as applicable, itsour financial position, operating results and cash flows could be adversely affected.
Risks Related to Sema4’sOur Intellectual Property and Trade Secrets
Sema4’sOur inability to effectively protect itsour proprietary products, processes, and technologies, including the confidentiality of itsour trade secrets, could harm itsour competitive position.
Sema4We currently reliesrely upon trade secret protection and copyright, as well as non-disclosure agreements and invention assignment agreements with itsour employees, consultants and third parties, and to a limited extent patent protection, to protect itsour confidential and proprietary information. Although Sema4’sour competitors have utilized and are expected to continue utilizing similar methods and have aggregated and are expected to continue to aggregate similar databases of genetic testing information, itsour success will depend upon itsour ability to develop proprietary methods and databases and to defend any advantages afforded to it by itsour methods and databases relative to itsour competitors. If Sema4 doeswe do not protect itsour intellectual property adequately, competitors may be able to use itsour methods and databases and thereby erode any competitive advantages Sema4we may have.
Sema4We will be able to protect itsour proprietary rights from unauthorized use by third parties only to the extent that itsour proprietary technologies are covered by valid and enforceable patents or are effectively maintained as trade secrets. In this regard, Sema4 haswe have applied, and it intendswe intend to continue applying, for patents covering such aspects of itsour technologies as it deems appropriate. However, Sema4 expectswe expect that potential patent coverage itwe may obtain will not be sufficient to prevent substantial competition. In this regard, Sema4 believeswe believe it is probable that others will independently develop similar or alternative technologies or design around those technologies for which Sema4we may obtain patent protection. In addition, any patent applications Sema4 fileswe file may be challenged and may not result in issued patents or may be invalidated or narrowed in scope after they are issued. Questions as to inventorship or ownership may also arise. Any finding that Sema4’sour patents or applications are unenforceable could harm itsour ability
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to prevent others from practicing the related technology, and a finding that others have inventorship or ownership rights to itsour patents and applications could require itus to obtain certain rights to practice related technologies, which may not be available on favorable terms, if at all. If Sema4 initiateswe initiate lawsuits to protect or enforce itsour patents, or litigate against third-party claims, which would be expensive, and Sema4 loses, itwe lose, we may lose some of itsour intellectual property rights. Furthermore, these lawsuits may divert the attention of itsour management and technical personnel.
Sema4 expectsWe expect to rely substantially upon trade secrets and proprietary know-how protection for itsour confidential and proprietary information, and Sema4 haswe have taken security measures to protect this information. These measures, however, may not provide adequate protection for itsour trade secrets, know-how or other confidential information. Among other things, Sema4 seekswe seek to protect itsour trade secrets and confidential information by entering into confidentiality agreements with employees and consultants. There can be no assurance that any confidentiality agreements that Sema4 haswe have with itsour employees and consultants will provide meaningful protection for itsour trade secrets and confidential information or will provide adequate remedies in the event of unauthorized use or disclosure of such information. Accordingly, there also can be no assurance that Sema4’sour trade secrets will not otherwise become known or be independently developed by competitors. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret can be difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, trade secrets may be independently developed by others in a manner that could prevent legal recourse by Sema4.us. If any of Sema4’sour confidential or proprietary information, such as itsour trade secrets, were to be disclosed or misappropriated, or if any such information was independently developed by a competitor, Sema4’sour competitive position could be harmed.
Any inability to effectively protect Sema4’sour proprietary technologies under certain jurisdictions and legal regimes could harm itsour competitive position.
Sema4’sOur success and ability to compete in certain jurisdictions and under certain legal regimes depend to a large extent on itsour ability to develop proprietary products and technologies and to maintain adequate protection of itsour intellectual property in the United States and other countries; this becomes increasingly important as Sema4 expands itswe expand our operations and entersenter into strategic collaborations with partners to develop and commercialize products. The laws of some foreign countries do not protect proprietary rights to the same extent as the laws of the United States, and Sema4 we
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may encounter difficulties in establishing and enforcing its proprietary rights outside of the United States. In addition, the proprietary positions of companies developing and commercializing tools for molecular diagnostics, including Sema4’s,our own, generally are uncertain and involve complex legal and factual questions. This uncertainty may materially affect Sema4’sour ability to defend or obtain patents or to address the patents and patent applications owned or controlled by itsour collaborators and licensors.
Any of these factors could adversely affect Sema4’sour ability to obtain commercially relevant or competitively advantageous patent protection for itsour products.
If patent regulations or standards are modified, such changes could have a negative impact on Sema4’sour business.
From time to time, the U.S. Supreme Court, other federal courts, the U.S. Congress or the USPTO may change the standards of patentability and validity of patents within the cancer screening and diagnostics space, and any such changes could have a negative impact on itsour business.
There have been several cases involving “gene patents” and diagnostic claims that have been considered by the U.S. Supreme Court. In March 2012, the Supreme Court in Mayo Collaborative Services v. Prometheus Laboratories, Inc, found a patented diagnostic method claim unpatentable because the relationship between a metabolite concentration and optimized dosage was a patent-ineligible “law of nature.” In June 2013, the Supreme Court ruled in ACLU v. Myriad Genetics, Inc, that an isolated genomic DNA sequence is not patent eligible while cDNA is eligible. The Prometheus and Myriad decisions, as well as subsequent case law, affect the legal concept of subject matter eligibility by seemingly narrowing the scope of the statute defining patentable inventions.
In December 2014 and again in 2019, the USPTO published revised guidelines for patent examiners to apply when examining process claims for patent eligibility in view of several recent Supreme Court decisions, including Mayo, Association for Molecular Pathology v. Myriad Genetics, IncInc.., and Alice Corporation Pty. Ltd. v. CLS Bank International, and others. The guidance indicates that claims directed to a law of nature, a natural phenomenon, or
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an abstract idea that do not meet the eligibility requirements should be rejected as non-statutory, patent ineligible subject matter. While these guidelines may be subject to review and modification by the USPTO over time, Sema4we cannot assure you that itsour intellectual property strategy or patent portfolio will not be negatively impacted by the decisions described above, rulings in other cases or changes in guidance or procedures issued by the USPTO.
Additional substantive changes to patent law, whether new or associated with the America Invents Act — which substantially revised the U.S. patent system — may affect Sema4’sour ability to obtain, enforce or defend itsour patents. Accordingly, it is not clear what, if any, impact these substantive changes will ultimately have on the cost of prosecuting Sema4’sour patent applications, itsour ability to obtain patents based on itsour discoveries and itsour ability to enforce or defend itsour issued patents, all of which could have a material adverse effect on itsour business.
If Sema4 iswe are not able to adequately protect itsour trade secrets and other proprietary information, including the databases it manageswe manage and to which it haswe have access, the value of itsour technology and products could be significantly diminished.
Sema4 reliesWe rely on trade secret and proprietary know-how protection for itsour confidential and proprietary information and have taken security measures to protect this information. These measures, however, may not provide adequate protection. For example, Sema4 haswe have a policy of requiring itsour consultants, advisors and collaborators, including, for example, itsour strategic collaborators with whom Sema4we seek to develop and commercialize products, to enter into confidentiality agreements and itsour employees to enter into invention, non-disclosure and in certain cases non-compete agreements. However, breaches of Sema4’sour physical or electronic security systems, or breaches caused by itsour employees who failing to abide by their confidentiality obligations during or upon termination of their employment with it,us, could compromise these protection efforts. Any action Sema4we take to enforce itsour rights may be time-consuming, expensive, and possibly unsuccessful. Even if successful, the resulting remedy may not adequately compensate Sema4us for the harm caused by the breach. These risks are heightened in countries where laws or law enforcement practices may not protect proprietary rights as fully as in the United States or Europe. Any unauthorized use or disclosure of, or access to, Sema4’sour trade secrets, know-how or other proprietary information, whether accidentally or through willful misconduct, could have a material adverse effect on itsour programs and itsour strategy, and on itsour ability to compete effectively.
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If Sema4’sour trademarks and trade names are not adequately protected, itwe may not be able to build name recognition in itsour markets of interest, and itsour business may be adversely affected.
Failure to maintain Sema4’sour trademark registrations, or to obtain new trademark registrations in the future, could limit itsour ability to protect itsour trademarks and impede itsour marketing efforts in the countries in which Sema4 operates. Sema4we operate. We may not be able to protect itsour rights to trademarks and trade names which Sema4we may need to build name recognition with potential partners or customers in itsour markets of interest. As a means to enforce Sema4’sour trademark rights and prevent infringement, Sema4we may be required to file trademark claims against third parties or initiate trademark opposition proceedings. This can be expensive and time-consuming, and possibly unsuccessful. Sema4’sour registered or unregistered trademarks or trade names may be challenged, infringed, circumvented, declared generic or determined to infringe on other marks.
Sema4’sOur pending trademark applications in the United States and in other foreign jurisdictions where Sema4we may file may not be successful. Even if these applications result in registered trademarks, third parties may challenge these trademarks in the future. Over the long term, if Sema4 iswe are unable to establish name recognition based on itsour trademarks and trade names, then itwe may not be able to compete effectively, and itsour business may be adversely affected.
Litigation or other proceedings resulting from either third-party claims of patent infringement, or asserting infringement by third parties of Sema4’sour technology, could be costly, time-consuming, and could limit itsour ability to commercialize itsour products or services.
Sema4’sOur success depends in part on itsour non-infringement of the patents or intellectual property rights of third parties, and itsour ability to successfully prevent third parties from infringing itsour intellectual property. Sema4 operatesWe operate in a crowded technology area in which there has been substantial litigation and other proceedings regarding patent and other intellectual property rights in the genetic diagnostics industry. Third parties, including Sema4’s
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our competitors, have asserted and may in the future assert that Sema4 iswe are infringing their intellectual property rights. Sema4We may also become subject to and/or initiate future intellectual property litigation as itsour product portfolio and the level of competition in itsour industry grow.
Because the U.S. Patent & Trademark Office, or USPTO, maintains patent applications in secrecy until a patent application publishes or the patent is issued, Sema4 haswe have no way of knowing if others may have filed patent applications covering technologies used by it or itsour partners. Additionally, there may be third-party patents, patent applications and other intellectual property relevant to Sema4’sour technologies that may block or compete with itsour technologies. From time-to-time Sema4 haswe have received correspondence from third parties alleging to hold intellectual property rights that could block itsour development or commercialization of products. While none of these inquiries to date have had any material effect on it, Sema4we may receive inquiries in the future that could have a material effect on itsour business. Even if third-party claims are without merit, defending a lawsuit may result in substantial expense to Sema4us and may divert the attention of management and key personnel. In addition, Sema4we cannot provide assurance that it would prevail in any such suits to the extent necessary to conduct itsour business according to itsour strategic plan or that the damages or other remedies, if any, awarded against it would not be substantial. Claims of intellectual property infringement may require that Sema4,we, or itsour strategic partners, enter into unsustainably high royalty or license agreements with third parties that may only be available on unacceptable terms, if at all. In addition, Sema4we could experience delays in product introductions or sales growth while Sema4 attemptswe attempt to develop non-infringing alternatives. These claims could also result in injunctions against the further development and commercial sale of services or products containing Sema4’sour technologies, which would have a material adverse effect on itsour business, financial condition and results of operations.
Further, patents and patent applications owned by Sema4us may become the subject of interference proceedings in the USPTO to determine priority of invention, which could result in substantial cost to Sema4us as well as a possible adverse decision as to the priority of invention of the patent or patent application involved. An adverse decision in an interference proceeding may result in the loss of rights under a patent or patent application subject to such a proceeding. Sema4We cannot predict whether, or offer any assurance that, the patent infringement claims may initiate in the future will be successful. Sema4 isWe are and may become subject to counterclaims by patent infringement defendants. Sema4’sOur patents may be declared invalid or unenforceable, or narrowed in scope. Even if Sema4 prevailswe prevail in an infringement action, Sema4we cannot assure you that it would be adequately compensated for the harm to itsour business. If Sema4 iswe are unable
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to enjoin third-party infringement, itsour revenues may be adversely impacted and itwe may lose market share; and such third-party product may continue to exist in the market, but fail to meet itsour regulatory or safety standards, thereby causing irreparable harm to Sema4’sour reputation as a provider of quality products, which in turn could result in loss of market share and have a material adverse effect on itsour business, financial condition and itsour results of operations.
In addition, Sema4’sour agreements with some of itsour customers, suppliers, and other entities with whom Sema4 doeswe do business require itus to defend or indemnify these parties to the extent they become involved in patent infringement claims, including the types of claims described in this risk factor. Sema4 hasWe have agreed, and may in the future agree, to defend or indemnify third parties if Sema4 determineswe determine it to be in the best interests of itsour business relationships. If Sema4 iswe are required or agree to defend or indemnify third parties in connection with any infringement claims, Sema4we could incur significant costs and expenses that could adversely affect itsour business, financial condition and results of operations.
Sema4’sOur use of open-source software could subject itour business to possible litigation or cause Sema4us to subject itsour platform to unwanted open-source license conditions that could negatively impact itsour sales.
A limited but meaningful portion of Sema4’sour platforms and products incorporate open-source software, and itwe will incorporate open-source software into other offerings or products in the future. Such open-source software is generally licensed by its authors or other third parties under open-source licenses. There is little legal precedent governing the interpretation of certain terms of these licenses, and therefore the potential impact of these terms on Sema4’sour business is unknown and may result in unanticipated obligations regarding itsour products and technologies. If an author or other third party that distributes such open-source software were to allege that Sema4we had not complied with the conditions of one or more of these licenses, Sema4we could be required to incur significant legal expenses defending against such allegations. In addition, if Sema4 combines itswe combine our proprietary software with open-source
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software in a certain manner, under some open-source licenses, Sema4we could be required to release the source code of itsour proprietary software, which could substantially help itsour competitors develop products that are similar to or better than Sema4’sour products.
Sema4 reliesWe rely on strategic collaborative and licensing arrangements with third parties to develop critical intellectual property. Sema4We may not be able to successfully establish and maintain such intellectual property.
The development and commercialization of Sema4’sour products and services rely, directly or indirectly, upon strategic collaborations and licensing agreements with third parties. Such arrangements provide Sema4us with intellectual property and other business rights crucial to itsour product development and commercialization. Sema4 hasWe have incorporated licensed technology into itsour tests. Sema4’sOur dependence on licensing, collaboration and other similar agreements with third parties may subject it to a number of risks. There can be no assurance that any current contractual arrangements between Sema4us and third parties or between itsour strategic partners and other third parties will be continued on materially similar terms and will not be breached or terminated early. Any failure to obtain or retain the rights to necessary technologies on acceptable commercial terms could require Sema4us to re-configure itsour products and services, which could negatively impact their commercial sale or increase the associated costs, either of which could materially harm itsour business and adversely affect itsour future revenues and ability to achieve sustained profitability.
Sema4 expectsWe expect to continue and expand itsour reliance on collaborative and licensing arrangements. Establishing new strategic collaborations and licensing arrangements is difficult and time-consuming. Discussions with potential collaborators or licensors may not lead to the establishment of collaborations on favorable terms, if at all. To the extent Sema4 agreeswe agree to work exclusively with one collaborator in a given area, itsour opportunities to collaborate with other entities could be limited. Potential collaborators or licensors may reject collaborations with it based upon their assessment of Sema4’sour financial, regulatory or intellectual property position or other factors. Even if Sema4we successfully establishesestablish new collaborations, these relationships may never result in the successful commercialization of any product or service. In addition, the success of the projects that require collaboration with third parties will be dependent on the continued success of such collaborators. There is no guarantee that Sema4’sour collaborators will continue to be successful and, as a result, Sema4we may expend considerable time and resources developing products or services that will not ultimately be commercialized.
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Sema4’s Risks Related to Cybersecurity, Privacy and Information Technology
Interruption, interference with, or failure of Sema4’sour information technology and communications systems could hurt itsour ability to effectively provide itsour products and services, which could harm itsour reputation, financial condition, and operating results.
The availability of Sema4’sour products and services and fulfillment of itsour customer contracts depend on the continuing operation of Sema4’sour information technology and communications systems. Sema4’sOur systems are vulnerable to damage, interference, or interruption from terrorist attacks, natural disasters, the effects of climate change (such as sea level rise, drought, flooding, wildfires, and increased storm severity), power loss, telecommunications failures, computer viruses, ransomware attacks, computer denial of service attacks, phishing schemes, or other attempts to harm or access Sema4’sour systems. Some of Sema4’sour data centers are located in areas with a high risk of major earthquakes or other natural disasters. Sema4’sOur data centers are also subject to break-ins, sabotage, and intentional acts of vandalism, and, in some cases, to potential disruptions resulting from problems experienced by facility operators. Some of Sema4’sour systems are not fully redundant, and disaster recovery planning cannot account for all eventualities.
The occurrence of a natural disaster, closure of a facility, or other unanticipated problems at Sema4’sour data centers could result in lengthy interruptions in itsour service. In addition, Sema4’sour products and services are highly technical and complex and may contain errors or vulnerabilities, which could result in interruptions in or failure of itsour services or systems.
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Security breaches, privacy issues, loss of data and other incidents could compromise sensitive, protected, or personal information related to Sema4’sour business, could prevent it from accessing critical information, and could expose it to regulatory liability, which could adversely affect itsour business.
In the ordinary course of itsour business, Sema4 collectswe collect and storesstore sensitive data, including protected health information, or PHI, personally identifiable information, genetic information, credit card information, intellectual property and proprietary business information owned or controlled by Sema4us or itsour customers, payers and other parties. Sema4 managesWe manage and maintains itsmaintain our applications and data utilizing a combination of on-site systems, managed data center systems and cloud-based systems. Sema4We also communicatescommunicate PHI and other sensitive patient data through itsour various customer tools and platforms. In addition to storing and transmitting sensitive data that is subject to multiple legal protections, these applications and data encompass a wide variety of business-critical information including research and development information, commercial information, and business and financial information. Sema4 facesWe face a number of risks relative to protecting this critical information, including loss of access risk, inappropriate disclosure, inappropriate modification, and the risk of itsour being unable to adequately monitor and modify itsour controls over itsour critical information. Any technical problems that may arise in connection with the data that Sema4 accesseswe access and Sema4’sour systems, including those that are hosted by third-party providers, could result in interruptions to itsour business and operations or exposure to security vulnerabilities. These types of problems may be caused by a variety of factors, including infrastructure changes, intentional or accidental human actions or omissions, software errors, malware, viruses, security attacks, fraud, spikes in customer usage and denial of service issues. From time to time, large third-party web hosting providers have experienced outages or other problems that have resulted in their systems being offline and inaccessible. Such outages could materially impact Sema4’sour business and operations.
The secure processing, storage, maintenance and transmission of this critical information are vital to Sema4’sour operations and business strategy, and it devoteswe devote significant resources to protecting such information. Although Sema4 takeswe take what it believeswe believe to be reasonable and appropriate measures, including a formal, dedicated enterprise security program, to protect sensitive information from various compromises (including unauthorized access, disclosure, or modification or lack of availability), Sema4’sour information technology and infrastructure may be vulnerable to attacks by hackers or viruses or breached due to employee error, malfeasance or other disruptions. Any such breach or interruption could compromise Sema4’sour networks and the information stored therein could be accessed by unauthorized parties, altered, publicly disclosed, lost or stolen.
Further, Sema4’s some of our customer tools and platforms are currently accessible through a portal and there is no guarantee that Sema4we can protect itsour portal them from a security breach. Unauthorized access, loss or dissemination could also disrupt Sema4’sour operations (including itsour ability to conduct itsour analyses, provide test results, bill payers or patients,
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process claims and appeals, provide customer assistance, conduct research and development activities, collect, process and prepare company financial information, provide information about itsour tests and other patient and physician education and outreach efforts through itsour website, and manage the administrative aspects of itsour business) and damage itsour reputation, any of which could adversely affect Sema4’sour business. In addition to data security risks, Sema4we also face privacy risks. Should Sema4we actually violate, or be perceived to have violated, any privacy promises itour business makes to patients or consumers, it could be subject to a complaint from an affected individual or interested privacy regulator, such as the FTC, a state Attorney General, an EU Member State Data Protection Authority, or a data protection authority in another international jurisdiction. This risk is heightened given the sensitivity of the data Sema4 collects.we collect.
Any security compromise that causes an apparent privacy violation could also result in legal claims or proceedings; liability under federal, state, foreign, or multinational laws that regulate the privacy, security, or breach of personal information, such as but not limited to the HIPAA, HITECH, state data security and data breach notification laws, the EU’s GDPR, the UK Data Protection Act of 2018; and related regulatory penalties. Penalties for failure to comply with a requirement of HIPAA or HITECH vary significantly, and, depending on the knowledge and culpability of the HIPAA-regulated entity, may include civil monetary penalties of up to $1.5 million per calendar year for each provision of HIPAA that is violated. A person who knowingly obtains or discloses individually identifiable health information in violation of HIPAA may face a criminal penalty of up to $50,000 and up to one-year imprisonment. The criminal penalties increase if the wrongful conduct involves false pretenses or the intent to sell, transfer or use identifiable health information for commercial advantage, personal gain or malicious
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harm. Penalties for unfair or deceptive acts or practices under the FTC Act or state Unfair and Deceptive Acts and Practices, or UDAP, statutes may also vary significantly.
There has been unprecedented activity in the development of data protection regulation around the world. As a result, the interpretation and application of consumer, health-related and data protection laws in the United States, Europe and elsewhere are often uncertain, contradictory and in flux. The GDPR took effect on May 25, 2018. The GDPR took effect on May 25, 2018. The GDPR applies to any entity established in the EU as well as extraterritorially to any entity outside the EU that offers goods or services to, or monitors the behavior of, individuals who are located in the EU. The GDPR imposes strict requirements on controllers and processors of personal data, including enhanced protections for “special categories” of personal data, which includes sensitive information such as health and genetic information of data subjects. The GDPR also grants individuals various rights in relation to their personal data, including the rights of access, rectification, objection to certain processing and deletion. The GDPR provides an individual with an express right to seek legal remedies if the individual believes his or her rights have been violated. Failure to comply with the requirements of the GDPR or the related national data protection laws of the member states of the EU, which may deviate from or be more restrictive than the GDPR, may result in significant administrative fines issued by EU regulators. Maximum penalties for violations of the GDPR are capped at 20M20 million euros or 4% of an organization’s annual global revenue, whichever is greater.
Further, the United Kingdom’s decision to leave the EU, often referred to as Brexit, has created uncertainty with regard to data protection regulation in the United Kingdom. In particular, it is still unclear whether the transfer of personal information from the EU to the United Kingdom will in the future remain lawful under the GDPR. The United Kingdom-EU post-Brexit trade deal provides that transfers of personal information to the United Kingdom will not be treated as restricted transfers to a non-EU country for a period of up to six months from January 1, 2021. However, unless the EU Commission makes an “adequacy finding” with respect to the United Kingdom before the end of that transition period, from that date the United Kingdom will be a “third country” under the GDPR and transfers of personal information from the EU to the United Kingdom will require an “adequacy mechanism,” such as the SCCs.
Additionally, the implementation of GDPR has led other jurisdictions to either amend or propose legislation to amend their existing data privacy and cybersecurity laws to resemble the requirements of GDPR. For example, on June 28, 2018, California adopted the CCPA. The CCPA regulates how certain for-profit businesses that meet one or more CCPA applicability thresholds collect, use, and disclose the personal information of consumers who reside in California. Among other things, the CCPA confers to California consumers the right to receive notice of the categories of personal information that will be collected by a business, how the business will use and share the personal information, and the third parties who will receive the personal information; the CCPA also confers rights
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to access, delete, or transfer personal information; and the right to receive equal service and pricing from a business after exercising a consumer right granted by the CCPA. In addition, the CCPA allows California consumers the right to opt out of the “sale” of their personal information, which the CCPA defines broadly as any disclosure of personal information to a third party in exchange for monetary or other valuable consideration. The CCPA also requires a business to implement reasonable security procedures to safeguard personal information against unauthorized access, use, or disclosure. California amended the law in September 2018 to exempt all PHI collected by certain parties subject to HIPAA, and further amended the law in September 2020 to clarify that de-identified data as defined under HIPAA will also be exempt from the CCPA. The California Attorney General’s final regulations implementing the CCPA took effect on August 14, 2020. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches resulting from a business’s failure to implement and maintain reasonable data security procedures that is expected to increase data breach litigation. In addition, California voters recently approved the California Privacy Rights Act of 2020, or CPRA, that is scheduled to go into effect on January 1, 2023. The CPRA would, among other things, amend the CCPA to give California residents the ability to limit the use of their sensitive information, provide for penalties for CPRA violations concerning California residents under the age of 16, and establish a new California Privacy Protection Agency to implement and enforce the law. Other jurisdictions in the United States are beginning to propose laws similar to CCPA. Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent privacy legislation, which could increase Sema4’sour potential liability and adversely affect itsour business, results of operations, and financial condition.
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It is possible the GDPR, CCPA and other emerging United States and international data protection laws may be interpreted and applied in manner that is inconsistent with Sema4’sour practices. If so, this could result in government-imposed fines or orders requiring that Sema4we change itsour practices, which could adversely affect itsour business. In addition, these privacy laws and regulations may differ from country to country and state to state, and Sema4’sour obligations under these laws and regulations vary based on the nature of itsour activities in the particular jurisdiction, such as whether Sema4 collectswe collect samples from individuals in the local jurisdiction, performsperform testing in the local jurisdiction, or processesprocess personal information regarding employees or other individuals in the local jurisdiction. Complying with these various laws and regulations could cause Sema4us to incur substantial costs or require it to change itsour business practices and compliance procedures in a manner adverse to itsour business. Sema4We can provide no assurance that it is or will remain in compliance with diverse privacy and data security requirements in all of the jurisdictions in which it doeswe do business. Failure to comply with privacy and data security requirements could result in a variety of consequences, or damage to Sema4’sour reputation, any of which could have a material adverse effect on itsour business.
Data privacy and security concerns relating to Sema4’sour technology and itsour practices could damage itsour reputation, subject it to significant legal and financial exposure, and deter current and potential users or customers from using itsour products and services. Software bugs or defects, security breaches, and attacks on Sema4’sour systems could result in the improper disclosure and use of user data and interference with itsour users and customers’ ability to use itsour products and services, harming itsour business operations and reputation.
Concerns about Sema4’sour practices with regard to the collection, use, disclosure, or security of personal information or other data-privacy-related matters, even if unfounded, could harm itsour reputation, financial condition, and operating results. Sema4’sOur policies and practices may change over time as expectations regarding privacy and data change.
Sema4’sOur products and services involve the storage and transmission of protected health information and other personal information, proprietary information, and bugs, theft, misuse, defects, vulnerabilities in itsour products and services, and security breaches expose it to a risk of loss of this information, improper use and disclosure of such information, litigation, and other potential liability. Systems and control failures, security breaches, failure to comply with Sema4’sour privacy policies, and/or inadvertent disclosure of user data could result in government and legal exposure, seriously harm itsour reputation and brand and, therefore, itsour business, and impair itsour ability to attract and retain users or customers. Sema4 expectsWe expect to continue to expend significant resources to maintain security protections that shield against bugs, theft, misuse, or security vulnerabilities or breaches.
Sema4 experiencesWe experience cyber-attacks and other attempts to gain unauthorized access to itsour systems on a regular basis. Sema4We may experience future security issues, whether due to employee error or malfeasance or system errors or vulnerabilities in itsour or other parties’ systems, which could result in significant legal and financial exposure.
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Government inquiries and enforcement actions, litigation, and adverse press coverage could harm itsour business. Sema4We may be unable to anticipate or detect attacks or vulnerabilities or implement adequate preventative measures. Attacks and security issues could also compromise trade secrets and other sensitive information, harming itsour business.
While Sema4 haswe have dedicated significant resources to privacy and security incident response capabilities, including dedicated worldwide incident response teams, itsour response process may not be adequate, may fail to accurately assess the severity of an incident, may not respond quickly enough, or may fail to sufficiently remediate an incident. As a result, Sema4we may suffer significant legal, reputational, or financial exposure, which could harm itsour business, financial condition, and operating results.
Sema4 dependsWe depend on itsour scientific computing and information technology and management systems and any failure of these systems could harm itsour business.
Sema4 dependsWe depend on scientific computing and information technology and management systems, including third-party cloud computing infrastructure, operating systems and artificial intelligence platforms, for significant elements of itsour operations, including itsour laboratory information management system, clinical database, analytical platform,
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laboratory workflow tools, customer and collaborator reporting and related functions. Sema4We also dependsdepend on itsour proprietary workflow software to support new product and service launches and regulatory compliance.
Sema4 usesWe use complex software processes and bioinformatic pipelines to manage samples and evaluate sequencing result data. These are subject to initial design or ongoing modifications which may result in unanticipated issues that could cause variability in patient results, leading to service disruptions or errors, resulting in liability.
Sema4 hasWe have installed, and expects to expand, a number of enterprise software systems that affect a broad range of business processes and functional areas, including systems laboratory operations, handling human resources, financial controls and reporting, contract management, regulatory compliance and other infrastructure operations, and patient consent and information management. In addition to these business systems, Sema4 haswe have installed, and intends to extend, the capabilities of both itsour preventative and detective security controls by augmenting the monitoring and alerting functions, the network design and the automatic countermeasure operations of itsour technical systems. These information technology and telecommunications systems support a variety of functions, including laboratory operations, test validation, sample tracking, quality control, customer service support, billing and reimbursement, research and development activities, scientific and medical curation and general administrative activities. In addition, Sema4’sour third-party billing and collections provider depends upon technology and telecommunications systems provided by outside vendors.
Information technology and telecommunications systems are vulnerable to damage from a variety of sources, including telecommunications or network failures, malicious internal or external human acts and natural disasters. Moreover, despite network security and back-up measures, some of itsour servers are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptive problems. Despite the precautionary measures Sema4 haswe have taken to prevent unanticipated problems that could affect itsour information technology and telecommunications systems, failures or significant downtime of these systems or those used by itsour collaborators or subcontractors could prevent it from conducting itsour comprehensive screening analysis, clinical diagnostics and drug discovery, preparing and providing reports to researchers, clinicians and itsour collaborators, billing payers, handling physician inquiries, conducting research and development activities and managing the administrative aspects of itsour business. Any disruption or loss of information technology or telecommunications systems on which critical aspects of Sema4’sour operations depend could have an adverse effect on itsour business and itsour reputation, and Sema4we may be unable to regain or repair itsour reputation in the future.
Our ability to transfer data stored outside of the United States could be limited by international regulations or other action by foreign governments, which could adversely affect our business.
Some of the data we process in the ordinary course of our business may be stored outside of the United States. In order to process such data, we may need to transfer them to countries other than those where they are stored. Should a foreign government adopt a regulation restricting the international transfer of such data, we may not be able to process them, which could adversely impact our business.
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Risks Related to Sema4 Being a Public Company
Sema4We will incur increased costs and demands on management as a result of compliance with laws and regulations applicable to public companies, which could harm itsour operating results.
Sema4 has never beenAs a public company. Following the Business Combination, the post-combination company, couldwe incur significant legal, accounting and other expenses, including costs associated with public company reporting requirements. In addition, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, as well as rules implemented by the SEC and Nasdaq, impose a number of requirements on public companies, including with respect to corporate governance practices. The SEC and other regulators have continued to adopt new rules and regulations and make additional changes to existing regulations that require the post-combination company’s compliance. In addition, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, enacted in 2010, includes significant corporate governance and executive-compensation-related provisions. The post-combination company’sOur management and other personnel will need to devote a substantial amount of time to these compliance and disclosure obligations. If these requirements divert the attention of the post-combination company’sour management and personnel from other aspects of itsour business concerns, they could have a material adverse effect on itsour business, financial condition and results of operations. Moreover, these rules and regulations applicable to public companies substantially could increase the post-combination company’sour legal, accounting and financial compliance costs, require that the post-combination companywe hire additional personnel and make some activities more time consuming and costly. It may also be more expensive for the post-combination company to obtain director and officer liability insurance as a public company.
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Risks Related to the Company and the Business Combination
Our Initial Stockholders have agreed to vote in favor of the Business Combination and the other proposals described in this proxy statement, regardless of how our public stockholders vote.
Unlike many other blank check companies in which the founders agree to vote their Founder Shares in accordance with the majority of the votes cast by the holders of public stock in connection with an initial business combination, our Initial Stockholders have agreed to vote any shares of common stock owned by them in favor of the Business Combination Proposal and the other proposals described in this proxy statement. As of the date hereof, our Initial Stockholders own shares equal to 20% of our issued and outstanding shares of common stock. Accordingly, it is more likely that the necessary stockholder approval will be received for the Business Combination than would be the case if our Initial Stockholders agreed to vote any shares of common stock owned by them in accordance with the majority of the votes cast by our public stockholders.
Our Sponsor, certain members of our Board and our officers have interests in the Business Combination that are different from or are in addition to other stockholders in recommending that stockholders vote in favor of approval of the Business Combination Proposal and approval of the other proposals described in this proxy statement.
When considering our Board’s recommendation that our stockholders vote in favor of the approval of the Business Combination Proposal, our stockholders should be aware that the directors and officers of the Company have interests in the Business Combination that may be different from, or in addition to, the interests of our stockholders. These interests include:
•the fact that our Initial Stockholders have agreed not to redeem any of the Founder Shares in connection with a stockholder vote to approve the Business Combination;
•the fact that our Initial Stockholders will retain 11,068,750 Founder Shares upon the Closing;
•the fact that the Sponsor paid an aggregate of $25,000 for the Founder Shares and now holds 10,993,750 Founder Shares, which will convert into 10,993,750 shares of Class A common stock in accordance with the terms of the Merger Agreement; such shares will have a significantly higher value at the time of the Business Combination, which if unrestricted and freely tradable would have an aggregate market value of approximately $130,605,750 based upon the closing price of $11.88 per public share on Nasdaq on June 7, 2021, but, given the restrictions on such shares, we believe such shares have less value;
•the fact that (i) Munib Islam, one of our directors, owns 25,000 Founder Shares, (ii) Emily Leproust, one of our directors, owns 25,000 Founder Shares, and (iii) Nat Turner, one of our directors, owns 25,000 Founder Shares, which will convert into 25,000, 25,000 and 25,000 shares of Class A common stock, respectively, in accordance with the terms of the Merger Agreement, such shares if unrestricted and freely tradable would have a value at the time of the Business Combination of $297,000 to each of the aforementioned directors, based upon the closing price of $11.88 per public share on Nasdaq on June 7, 2021, but, given the restrictions on the shares, we believe such shares have less value;
•the fact that our Initial Stockholders own 7,236,667 private placement warrants, which were purchased at a purchase price of $1.50 per private placement warrant; 6,736,669 of which are held by our Sponsor and 499,998 of which are held in the aggregate by Mr. Islam, Dr. Leproust and Mr. Turner;
•that the Initial Stockholders could make a substantial profit after the consummation of the Business Combination even if public investors experience substantial losses;
•the fact that our Initial Stockholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if we fail to complete an initial business combination by the applicable deadline;
•if the Trust Account is liquidated, including in the event we are unable to complete an initial business combination within the required time period, our Sponsor has agreed to indemnify us to ensure that the
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proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into an acquisition agreement or claims of any third party (other than our independent public accountants) for services rendered or products sold to us, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account;
•the continued indemnification of our existing directors and officers and the continuation of our directors’ and officers’ liability insurance after the Business Combination;
•the fact that the fact that Joshua Ruch, Michael Pellini and Rachel Sherman may join as board members of the post-combination company (dependent on the approval of the Director Election Proposal), and Nat Turner, Emily Leproust and Eli Casdin will continue as board members of the post-combination company, and each shall be entitled to receive compensation for serving on the board of directors of the post-combination company;
•the fact that our Sponsor, officers and directors will lose their entire investment in us and will not be reimbursed for any out-of-pocket expenses if an initial business combination is not consummated by the applicable deadline;
•that Corvex Master Fund LP, Corvex Select Equity Master Fund LP, Corvex Dynamic Equity Select Master Fund LP, and JS Capital LP, funds that are advised by an affiliate of the Sponsor, have entered into Subscription Agreements with the Company, pursuant to which such affiliates have committed to purchase 240,000; 3,696,000; 64,000; and 500,000 shares of common stock in the PIPE Investment, respectively, for an aggregate commitment of approximately $2,400,000; $36,960,000; $640,000; $5,000,000, respectively; and
•that Casdin Partners Master Fund, L.P., a fund that is advised by an affiliate of the Sponsor, has entered into a Subscription Agreement with the Company, pursuant to which the affiliate has committed to purchase 5,000,000 shares of common stock in the PIPE Investment for an aggregate commitment of approximately $50,000,000.
Our Initial Stockholders, including our Sponsor and our independent directors, hold a significant number of shares of our common stock. The aggregate average investment made by our Initial Stockholders for their investments in the Founder Shares was approximately $0.002 per share, or approximately $24,850 for our Sponsor and approximately $50 for each of Mr. Munib Islam, Dr. Emily Leproust and Mr. Nat Turner. The aggregate average investment made by our Initial Stockholders for their investments in the private placement warrants was $1.50 per private placement warrant, or approximately $10.1 million for our Sponsor and approximately $250,000 for each of Mr. Islam, Dr. Leproust and Mr. Turner. They will lose their entire investment in us if a business combination is not completed. There are no outstanding loans, fees due, or out-of-pocket expenses for which the Sponsor or its affiliates or our directors are awaiting reimbursement.
Our Initial Stockholders hold in the aggregate 11,068,750 Founder Shares, representing 20% of the total shares outstanding as of the date of this proxy. The Founder Shares will be worthless if we do not complete a business combination by the applicable deadline.
The Founder’s Shares are identical to the shares of common stock included in the public units, except that: (i) the Founder Shares are subject to certain transfer restrictions; (ii) our Initial Stockholders, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed: (a) to waive their redemption rights with respect to their shares of common stock in connection with the completion of our Business Combination; (b) waive their redemption rights with respect to their shares of common stock in connection with a stockholder vote to approve an amendment to our current certificate of incorporation to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination within 18 months from the closing of the IPO or to provide for redemption in connection with a business combination; and (c) to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if we fail to complete our initial business combination by the applicable deadline (although they will be entitled to
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liquidating distributions from the Trust Account with respect to any public shares they hold if we fail to complete our initial business combination by the applicable deadline.
The personal and financial interests of our officers and directors may have influenced their motivation in identifying and selecting Sema4, completing a business combination with Sema4 and may influence their operation of the post-combination company following the Business Combination. This risk may become more acute as the deadline for completing an initial business combination nears.
Our Sponsor, directors or officers or their affiliates may elect to purchase shares or warrants from public stockholders, which may influence a vote on a proposed Business Combination and the other proposals described in this proxy statement and reduce the public “float” of our common stock.
Our Sponsor, directors or officers or their affiliates may purchase shares in privately negotiated transactions or in the open market either prior to or following the completion of our Business Combination, although they are under no obligation to do so. Such a purchase may include a contractual acknowledgement that such stockholder, although still the record holder of our shares is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. In the event that our Sponsor, directors, officers or their affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. The purpose of such purchases could be to vote such shares in favor of the Business Combination and thereby increase the likelihood of obtaining stockholder approval of the Business Combination or to satisfy closing conditions in the Merger Agreement regarding required amounts in the Trust Account and the proceeds from the PIPE Investment equaling or exceeding certain thresholds where it appears that such requirements would otherwise not be met. The purpose of any such purchases of public warrants could be to reduce the number of public warrants outstanding or to vote such warrants on any matters submitted to the warrant holders for approval in connection with our initial business combination. This may result in the completion of our Business Combination that may not otherwise have been possible. Any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements.
In addition, if such purchases are made, the public “float” of our common stock and the number of beneficial holders of our securities may be reduced, possibly making it difficult to obtain or maintain the quotation, listing or trading of our securities on the NYSE or another national securities exchange or reducing the liquidity of the trading market for our common stock.
Our public stockholders will experience dilution as a consequence of, among other transactions, the issuance of common stock as consideration in the Business Combination and the PIPE Investment. Having a minority share position may reduce the influence that our current stockholders have on the management of the post-combination company.
The issuance of the common stock in the Business Combination and in the PIPE Investment will dilute the equity interest of our existing stockholders and may adversely affect prevailing market prices for our public shares and/or public warrants.
It is anticipated that, upon completion of the Business Combination, assuming no redemptions: (i) the Company’s public stockholders (other than the PIPE Investors) will retain an ownership interest of approximately 18.6% in the post-combination company; (ii) the PIPE Investors will own approximately 12.2% (excluding certain PIPE Investors, who owned shares pre-transaction) of the post-combination company (such that public stockholders, including PIPE Investors, will own approximately 30.8% (adding the foregoing 2 subsets) of the post-combination company); (iii) our Initial Stockholders (including our Sponsor) will own approximately 23.2% of the post-combination company; and (iv) the former Sema4 equity holders are expected to hold, in the aggregate, approximately 64.6% of the issued and outstanding shares of Company common stock. The foregoing percentage excludes 29,120,955 options for the purchase of 29,120,955 shares of Company common stock, which are authorized and subject to stock options but will not yet be issued at closing, as further described in the pro forma capitalization table in the section entitled “Unaudited Pro Forma Condensed Combined Financial Information — Description of the Transaction.” The PIPE Investors have agreed to purchase in the aggregate 35,000,000 shares of
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common stock, for approximately $350,000,000 of gross proceeds, in the PIPE Investment. The ownership percentage with respect to the post-combination company following the Business Combination does not take into account (i) warrants to purchase common stock that will remain outstanding immediately following the Business Combination, (ii) the issuance of Earn-Out Shares to the Sema4 equity holders should the earn-out conditions in the Merger Agreement be satisfied or (iii) the issuance of any shares upon completion of the Business Combination under the Incentive Plan or the ESPP, copies of which are attached to this proxy statement as Annex D and Annex E, respectively Depending on the number of public shares redeemed, our current stockholders could own a majority of the voting rights in the post-combination company, but would not have effective control over the post-combination company. For more information, please see the sections entitled “Summary of the Proxy Statement — Impact of the Business Combination on the Company’s Public Float,” “Unaudited Pro Forma Condensed Combined Financial Information”, “Proposal No. 5 — Approval of the Incentive Plan” and “Proposal No. 6 — ESPP Proposal.”
Nasdaq may not list the post-combination company’s securities on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.
In connection with the Business Combination, in order to obtain the listing of the post-combination company’s securities on Nasdaq, we will be required to demonstrate compliance with Nasdaq’s initial listing requirements, which are more rigorous than the NYSE’s continued listing requirements. We will seek to have the post-combination company’s securities listed on Nasdaq upon consummation of the Business Combination. We cannot assure you that we will be able to meet all initial listing requirements. Even if the post-combination company’s securities are listed on Nasdaq, we may be unable to maintain the listing of its securities in the future.
If we fail to meet the initial listing requirements and Nasdaq does not list the post-combination company’s securities on its exchange, Sema4 would not be required to consummate the Business Combination. In the event that Sema4 elected to waive this condition, and the Business Combination was consummated without the post-combination company’s securities being listed on Nasdaq or on another national securities exchange, we could face significant material adverse consequences, including:
•a limited availability of market quotations for our securities;
•reduced liquidity for our securities;
•a determination that our common stock is a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;
•a limited amount of news and analyst coverage; and
•a decreased ability to issue additional securities or obtain additional financing in the future.
The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” If the post-combination company’s securities were not listed on Nasdaq, such securities would not qualify as covered securities and we would be subject to regulation in each state in which we offer our securities because states are not preempted from regulating the sale of securities that are not covered securities. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. While we are not aware of a state, other than the State of Idaho, having used these powers to prohibit or restrict the sale of securities issued by blank check companies, certain state securities regulators view blank check companies unfavorably and might use these powers, or threaten to use these powers, to hinder the sale of securities of blank check companies in their states. Resales of the shares of common stock included in the stock consideration could depress the market price of our common stock.
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Resales of the shares of common stock included in the stock consideration could depress the market price of our common stock
We will have approximately 238,266,485 million shares of common stock outstanding immediately following the Business Combination, and there may be a large number of shares of common stock sold in the market following the completion of the Business Combination or shortly thereafter. The shares held by the Company’s public stockholders are freely tradable, and the shares of common stock held by the PIPE Investors will be freely tradable following effectiveness of the registration statement that we have agreed to file in connection with the Business Combination covering the resales of such shares. In addition, the Company will be obligated to register the resale of shares of common stock issued as merger consideration, which shares will become available for resale following the expiration of any applicable lockup period. We also expect that Rule 144 will become available for the resale of shares of our common stock that are not registered for resale once one year has elapsed from the date that we file the Current Report on Form 8-K following the Closing that includes the required Form 10 information that reflects we are no longer a shell company. Such sales of shares of common stock or the perception of such sales may depress the market price of our common stock.
The process of taking a company public by means of a business combination with a special purpose acquisition company is different from taking a company public through an IPO and may create risks for our unaffiliated investors.
An IPO involves a company engaging underwriters to purchase its shares and resell them to the public. An underwritten offering imposes statutory liability on the underwriters for material misstatements or omissions contained in the registration statement unless they are able to sustain the burden of providing that they did not know and could not reasonably have discovered such material misstatements or omissions. This is referred to as a “due diligence” defense and results in the underwriters undertaking a detailed review of IPO company’s business, financial condition and results of operations. Going public via a business combination with a SPAC does not involve any underwriters and may therefore result in less careful review of information that is presented to the public.
In addition, going public via a business combination with a SPAC does not involve a book-building process as is the case in an IPO. In any IPO, the initial value of a company is set by investors who indicate the price at which they are prepare to purchase shares from the underwriters. In the case of a SPAC transaction, the value of the company is established by means of negotiations between the target company, the SPAC and, in some cases, “PIPE” investors who agree to purchase shares at the time of the business combination. The process of establishing the value of a company in a SPAC business combination may be less effective than an IPO bookbuilding process and also does not reflect events that may have occurred between the date of the business combination agreement and the closing of the transaction. In addition, IPOs are frequently oversubscribed resulting in additional potential demand for shares in the aftermarket following the IPO. There is no such book of demand built up in connection with SPAC transaction which may result in the share price being harder to sustain after the transaction.
We have no operating history and are subject to a mandatory liquidation and subsequent dissolution requirement. As such, there is a risk that we will be unable to continue as a going concern if we do not consummate an initial business combination by the applicable deadline. If we are unable to effect an initial business combination by the applicable deadline, we will be forced to liquidate and our warrants will expire worthless.
We are a blank check company, and as we have no operating history and are subject to a mandatory liquidation and subsequent dissolution requirement, there is a risk that we will be unable to continue as a going concern if we do not consummate an initial business combination by the applicable deadline. Unless we amend our current certificate of incorporation to extend the life of the Company and certain other agreements into which we have entered, if we do not complete an initial business combination by the applicable deadline, we will: (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to us to pay our franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses) divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights
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as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law; and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our Board, dissolve and liquidate, subject in each case to our obligations under the DGCL to provide for claims of creditors and the requirements of other applicable law. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the initial public offering price per public unit in the IPO. In addition, if we fail to complete an initial business combination by the applicable deadline, there will be no redemption rights or liquidating distributions with respect to our public warrants or the private placement warrants, which will expire worthless. We expect to consummate the Business Combination and do not intend to take any action to extend the life of the Company beyond the applicable deadline if we are unable to effect an initial business combination by that date.
Even if we consummate the Business Combination, there is no guarantee that the public warrants will ever be in the money, and they may expire worthless and the terms of our public warrants may be amended.
The exercise price for the public warrants is $11.50 per share of common stock. There is no guarantee that the public warrants will ever be in the money prior to their expiration, and as such, the public warrants may expire worthless.
Our ability to successfully effect the Business Combination and to be successful thereafter will be dependent upon the efforts of our key personnel, including the key personnel of Sema4. The loss of key personnel could negatively impact the operations and profitability of our post-combination business and its financial condition could suffer as a result.
Our ability to successfully effect our Business Combination is dependent upon the efforts of our key personnel, including the key personnel of Sema4. Although some of our key personnel are expected to remain with the post-combination company as members of the board of directors or in advisory positions following our Business Combination, it is possible that we will lose some key personnel, the loss of which could negatively impact the operations and profitability of our post-combination business. We anticipate that the executive officers of Sema4 will serve the post-combination company in their respective roles immediately following the Closing.
Sema4’s success depends to a significant degree upon the continued contributions of senior management, certain of whom would be difficult to replace. Departure by certain of Sema4’s officers could have a material adverse effect on Sema4’s business, financial condition, or operating results. The services of such personnel may not continue to be available to the post-combination company following the Closing. See “Risk Factors—Risks Related to Sema4’s Business Model—The loss of any member or change in structure of Sema4’s senior management team could adversely affect its business.”
The Company and Sema4 will be subject to business uncertainties and contractual restrictions while the Business Combination is pending.
Uncertainty about the effect of the Business Combination on employees and third parties may have an adverse effect on the Company and Sema4. These uncertainties may impair our or Sema4’s ability to retain and motivate key personnel and could cause third parties that deal with any of us or them to defer entering into contracts or making other decisions or seek to change existing business relationships. If key employees depart because of uncertainty about their future roles and the potential complexities of the Business Combination, our or Sema4’s business could be harmed.
We may waive one or more of the conditions to the Business Combination.
We may agree to waive, in whole or in part, one or more of the conditions to our obligations to complete the Business Combination, to the extent permitted by our current certificate of incorporation and bylaws and applicable laws. We may not waive the condition that our stockholders approve the Business Combination. Please see the section entitled “Proposal No. 1 — Approval of the Business Combination — The Merger Agreement — Conditions to Closing of the Business Combination” for additional information.
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The exercise of discretion by our directors and officers in agreeing to changes to the terms of or waivers of closing conditions in the Merger Agreement may result in a conflict of interest when determining whether such changes to the terms of the Merger Agreement or waivers of conditions are appropriate and in the best interests of our stockholders.
In the period leading up to the Closing, other events may occur that, pursuant to the Merger Agreement, would require the Company to agree to amend the Merger Agreement, to consent to certain actions or to waive rights that we are entitled to under those agreements. Such events could arise because of changes in the course of Sema4’s business, a request by Sema4 to undertake actions that would otherwise be prohibited by the terms of the Merger Agreement or the occurrence of other events that would have a material adverse effect on Sema4’s business and would entitle the Company to terminate the Merger Agreement. In any of such circumstances, it would be in the discretion of the Company, acting through the Board, to grant its consent or waive its rights. The existence of the financial and personal interests of the directors described elsewhere in this proxy statement may result in a conflict of interest on the part of one or more of the directors between what he or she may believe is best for the Company and our stockholders and what he or she may believe is best for himself or herself or his or her affiliates in determining whether or not to take the requested action. As of the date of this proxy statement, we do not believe there will be any changes or waivers that our directors and officers would be likely to make after stockholder approval of the Business Combination has been obtained at the Special Meeting. While certain changes could be made without further stockholder approval, if there is a change to the terms of the Business Combination that would have a material impact on the stockholders, we will be required to circulate a new or amended proxy statement relating to the Business Combination or supplement thereto and resolicit the vote of our stockholders with respect to the Business Combination Proposal thereto.
Shareholders may not know immediately after the special meeting whether we have satisfied the closing condition that the Trust Account and the proceeds from the PIPE Investment equal or exceed $300,000,000.
If we receive valid redemption requests from holders of public shares prior to the redemption deadline, we may, at our sole discretion, following the redemption deadline and until the date of Closing, seek and permit withdrawals by one or more of such holders of their redemption requests. We may select which holders to seek such withdrawals of redemption requests from based on any factors we may deem relevant, and the purpose of seeking such withdrawals may be to increase the funds held in the trust account, including where we otherwise would not satisfy the closing condition that the amount in the Trust Account and the proceeds from the PIPE Investment equal or exceed $300,000,000, after the payment of redemptions and satisfaction of Company and Sema4 transaction expenses. This process could take a number of days, and there may be a period of time after the special meeting and before the Closing when stockholders do not know whether we have satisfied this closing condition. Furthermore, the Subscription Agreements for the PIPE Investment are subject to certain conditions and there can be no guarantee that all the PIPE Investors will purchase their shares of common stock pursuant to the PIPE Investment.
We and Sema4 will incur significant transaction and transition costs in connection with the Business Combination.
We and Sema4 have both incurred and expect to incur significant, non-recurring costs in connection with consummating the Business Combination and operating as a public company following the consummation of the Business Combination. We and Sema4 may also incur additional costs to retain key employees. All expenses incurred in connection with the Merger Agreement and the transactions contemplated thereby (including the Business Combination), including all legal, accounting, consulting, investment banking and other fees, expenses and costs, will be for the account of the party incurring such fees, expenses and costs or paid by the Company following the Closing.
The aggregate transaction expenses as a result of the Business Combination are expected to be approximately $35 million. The per-share amount we will distribute to stockholders who properly exercise their redemption rights will not be reduced by the transaction expenses and after such redemptions, the per-share value of shares held by non-redeeming stockholders will reflect our obligation to pay the transaction expenses.
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If we are unable to complete an initial business combination, our public stockholders may receive only approximately $10.00 per share on the liquidation of the Trust Account (or less than $10.00 per share in certain circumstances where a third party brings a claim against us that our Sponsor is unable to indemnify), and our warrants will expire worthless.
If we are unable to complete an initial business combination by the applicable deadline, our public stockholders may receive only approximately $10.00 per share on the liquidation of the Trust Account (or less than $10.00 per share in certain circumstances where a third-party brings a claim against us that our Sponsor is unable to indemnify (as described herein)) and our warrants will expire worthless.
If third parties bring claims against us, the proceeds held in the Trust Account could be reduced and the per-share redemption amount received by stockholders may be less than $10.00 per share.
Our placing of funds in the Trust Account may not protect those funds from third-party claims against us. Although we will seek to have all vendors, service providers, prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any funds held in the Trust Account for the benefit of our public stockholders, such parties may not execute such agreements, or even if they execute such agreements they may not be prevented from bringing claims against the Trust Account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against our assets, including the funds held in the Trust Account. If any third party refuses to execute an agreement waiving such claims to the funds held in the Trust Account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third-party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative.
Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the Trust Account for any reason.
Upon redemption of our public shares, if we are unable to complete our initial business combination within the prescribed timeframe, or upon the exercise of a redemption right in connection with our initial business combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the ten years following redemption. Accordingly, the per-share redemption amount received by public stockholders could be less than the $10.00 per share initially held in the Trust Account, due to claims of such creditors.
Our Sponsor has agreed that it will be liable to us if and to the extent any claims by a third party for services rendered or products sold to us, or a prospective target business with which we have entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under our indemnity of the underwriter of our IPO against certain liabilities, including liabilities under the Securities Act. However, we have not asked our Sponsor to reserve for such indemnification obligations, nor have we independently verified whether our Sponsor has sufficient funds to satisfy its indemnity obligations and believe that our Sponsor’s only assets are securities of our Company. Therefore, we cannot assure you that our Sponsor would be able to satisfy those obligations. As a result, if any such claims were successfully made against the Trust Account, the funds available for our business combination and redemptions could be reduced to less than $10.00 per public share. In such event, we may not be able to complete our business combination, and you would receive such lesser amount per share in
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connection with any redemption of your public shares. None of our officers or directors will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
Our directors may decide not to enforce the indemnification obligations of our Sponsor, resulting in a reduction in the amount of funds in the Trust Account available for distribution to our public stockholders.
In the event that the proceeds in the Trust Account are reduced below the lesser of (i) $10.00 per public share and (ii) the actual amount per share held in the Trust Account as of the date of the liquidation of the Trust Account if less than $10.00 per share due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, and our Sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our Sponsor to enforce its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against our Sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment and subject to their fiduciary duties may choose not to do so in any particular instance if, for example, the cost of such legal action is deemed by the independent directors to be too high relative to the amount recoverable or if the independent directors determine that a favorable outcome is not likely. If our independent directors choose not to enforce these indemnification obligations, the amount of funds in the Trust Account available for distribution to our public stockholders may be reduced below $10.00 per share.
If, before distributing the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our stockholders and the per-share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.
If, before distributing the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the Trust Account, the per-share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.
Following the consummation of the Business Combination, our only significant asset will be our ownership interest in Sema4 and such ownership may not be sufficient to pay dividends or make distributions or loans to enable us to pay any dividends on our common stock or satisfy our other financial obligations.
Following the consummation of the Business Combination, we will have no direct operations and no significant assets other than our ownership of Sema4. The Sema4 equity holders, and directors and officers of Sema4 will become stockholders of the post-combination company at that time. We will depend on Sema4 for distributions, loans and other payments to generate the funds necessary to meet our financial obligations, including our expenses as a publicly traded company and to pay any dividends with respect to our common stock. The financial condition and operating requirements of Sema4 may limit our ability to obtain cash from Sema4. The earnings from, or other available assets of, Sema4 may not be sufficient to pay dividends or make distributions or loans to enable us to pay any dividends on our common stock or satisfy our other financial obligations.
The ability of Sema4 to make distributions, loans and other payments to us for the purposes described above and for any other purpose may be limited by credit agreements to which Sema4 is party from time to time, and will be subject to any negative covenants set forth therein. Any loans or other extensions of credit to us from Sema4 will be permitted only to the extent there is an applicable exception to the investment covenants under these credit agreements. Similarly, any dividends, distributions or similar payments to us from Sema4 will be permitted only to the extent there is an applicable exception to the dividends and distributions covenants under these credit agreements.
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Subsequent to our completion of our Business Combination, we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and our stock price, which could cause you to lose some or all of your investment.
Although we have conducted due diligence on Sema4, we cannot assure you that this diligence will surface all material issues that may be present in Sema4’s business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of Sema4’s business and outside of our and Sema4’s control will not later arise. As a result of these factors, we may be forced to later write down or write off assets, restructure operations, or incur impairment or other charges that could result in losses. Even if our due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Even though these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about the post-combination company or its securities. Accordingly, any of our stockholders who choose to remain stockholders following our Business Combination could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction in value.
We have no operating or financial history and our results of operations and those of the post-combination company may differ significantly from the unaudited pro forma financial data included in this proxy statement.
We are a blank check company and we have no operating history and no revenues. This proxy statement includes unaudited pro forma condensed combined financial statements for the post-combination company. The unaudited pro forma condensed combined statement of operations of the post-combination company combines the historical audited results of operations of the Company for the year ended December 31, 2020, with the historical audited results of operations of Sema4 for the year ended December 31, 2020, and gives pro forma effect to the Business Combination as if it had been consummated on January 1, 2021. The unaudited pro forma condensed combined balance sheet of the post-combination company combines the historical balance sheets of the Company as of December 31, 2020 and of Sema4 as of December 31, 2020 and gives pro forma effect to the Business Combination as if it had been consummated on January 1, 2021.
The unaudited pro forma condensed combined financial statements are presented for illustrative purposes only, are based on certain assumptions, address a hypothetical situation and reflect limited historical financial data. Therefore, the unaudited pro forma condensed combined financial statements are not necessarily indicative of the results of operations and financial position that would have been achieved had the Business Combination and the acquisitions by Sema4 been consummated on the dates indicated above, or the future consolidated results of operations or financial position of the post-combination company. Accordingly, the post-combination company’s business, assets, cash flows, results of operations and financial condition may differ significantly from those indicated by the unaudited pro forma condensed combined financial statements included in this document. For more information, please see the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.”
Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our financial condition and results of operations.
We will be subject to income taxes in the United States and other jurisdictions, and our tax liabilities will be subject to the allocation of expenses in differing jurisdictions. Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:
•changes in the valuation of our deferred tax assets and liabilities;
•expected timing and amount of the release of any tax valuation allowances;
•tax effects of stock-based compensation;
•costs related to intercompany restructurings;
•changes in tax laws, regulations or interpretations thereof; or
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•lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher than anticipated future earnings in jurisdictions where we have higher statutory tax rates.
In addition, we may be subject to audits of our income, sales and other transaction taxes by taxing authorities. Outcomes from these audits could have an adverse effect on our financial condition and results of operations.
A market for our securities may not continue, which would adversely affect the liquidity and price of our securities.
Following the Business Combination, theThe price of our securities may fluctuate significantly due to the market’s reaction to the Business Combination and general market and economic conditions. An active trading market for our securities following the Business Combination may never develop or, if developed, it may not be sustained. In addition, the price of our securities after the Business Combination can vary due to general economic conditions and forecasts, our general business condition and the release of our financial reports. You may be unable to sell your securities when desired or at an acceptable price unless an active trading market can be sustained.
If the Business Combination’s benefitswe do not meet the expectations of investors, stockholders or financial analysts, the market price of our securities may decline.
If the benefits of the Business Combinationwe do not meet the expectations of investors or securities analysts, the market price of the Company’sour securities prior to the Closing may decline. The market values of our securities at the time of the Business Combination may vary significantly from their prices on the date the Merger Agreement was executed, the date of this proxy statement, or the date on which our stockholders vote on the Business Combination.
In addition, following the Business Combination, fluctuations in the price of our securities could contribute to the loss of all or part of your investment. Immediately prior to the Business Combination, there has not been a public market for Sema4’s stock and trading in the shares of our common stock has not been active. Accordingly, the valuation ascribed to Sema4 and our common stock in the Business Combination may not be indicative of the price of the post-combination company that will prevail in the trading market following the Business Combination. If an active market for our securities develops and continues,does not continue, the trading price of our securities following the Business Combination could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control. Any of the factors listed below could have a material adverse effect on your investment in our securities and our securities may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of our securities may not recover and may experience a further decline.
Factors affecting the trading price of the post-combination company’sour securities following the Business Combination may include:
•actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us;
•changes in the market’s expectations about our operating results;
•the public’s reaction to our press releases, our other public announcements and our filings with the SEC;
•speculation in the press or investment community;
•announcements of technological innovation, new products, acquisitions, strategic alliances, significant agreements by us or competitors;
•success of competitors;
•our operating results falling below our financial guidance or other projections or failing to meet the expectation of securities analysts or investors in a particular period;
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•changes in financial estimates and recommendations by securities analysts concerning the post-combination companyus or the market in general;
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•operating and stock price performance of other companies that investors deem comparable to the post-combination company;us;
•our ability to market new and enhanced products on a timely basis;
•changes in laws and regulations affecting our business;
•commencement of, or involvement in, litigation involving the post-combination company;us;
•changes in the post-combination company’sour capital structure, such as future issuances of securities or the incurrence of additional debt;debt (including the potential issuance of shares of common stock in connection with the pending Acquisition of GeneDx and the PIPE Investment);
•the inability to complete the Acquisition due to the failure to satisfy the conditions to the consummation of the Acquisition, including receipt of the required stockholder approval or the required regulatory approvals;
•risks that the proposed Acquisition disrupts our current plans and operations or affects our ability to retain or recruit key employees;
•risks related to the Acquisition diverting management’s or employees’ attention from ongoing business operations;
•the effect of the pending Acquisition on our business relationships (including, without limitation customers, strategic partners, collaborators and suppliers), operating results and business generally;
•the amount of the costs, fees, expenses and charges related to the Acquisition;
•the volume of shares of our common stock available for public sale;
•any major change in our Board or management;
•sales of substantial amounts of common stock by our directors, officers or significant stockholders or the perception that such sales could occur;
•the expiration of the market stand-off or contractual lock-up agreements;
•the realization of any of the risk factors presented in this proxy statement;described herein;
•additions or departures of key personnel;
•failure to comply with the requirements of Nasdaq;
•failure to comply with SOXthe Sarbanes-Oxley Act or other laws or regulations;
•actual, potential or perceived control, accounting or reporting problems;
•changes in accounting principles, policies and guidelines; and
•general economic and political conditions such as recessions, inflation and interest rates, fuel prices, international currency fluctuations and acts of war or terrorism.
Broad market and industry factors may materially harm the market price of our securities irrespective of our operating performance. The stock market in general and Nasdaq have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of our securities, may not be predictable. A loss of investor confidence in the market for the stocks of other companies which investors perceive to be similar to the post-combination companyus could depress our stock price regardless of our business, prospects, financial conditions or results of operations. A decline in the
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market price of our securities also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future.
In the past, securities class action litigation has often been initiated against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management’s attention and resources, and could also require us to make substantial payments to satisfy judgments or to settle litigation.
If following the Business Combination, securities or industry analysts do not publish or cease publishing research or reports about the post-combination company, itsus, our business, or itsour market, or if they change their recommendations regarding our common stock adversely, then the price and trading volume of our common could decline.
The trading market for our common stock will beis influenced by the research and reports that industry or securities analysts may publish about us, our business, our market, or our competitors. Securities and industry analysts do not currently, and may never, publish research on the Company or the post-combination company. If no
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securities or industry analysts commence coverage of the post-combination company, our stock price and trading volume would likely be negatively impacted. If any of the analysts who may cover the post-combination companyus change their recommendation regarding our stock adversely, or provide more favorable relative recommendations about our competitors, the price of our common stock would likely decline. If any analyst who may cover the Companycovers us were to cease coverage of the post-combination companyus or fail to regularly publish reports on it,us, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.
Changes in laws, regulations or rules, or a failure to comply with any laws, regulations or rules, may adversely affect our business, investments and results of operations.
We are subject to laws, regulations and rules enacted by national, regional and local governments and Nasdaq. In particular, we are required to comply with certain SEC, Nasdaq and other legal or regulatory requirements. Compliance with, and monitoring of, applicable laws, regulations and rules may be difficult, time consuming and costly. Those laws, regulations or rules and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws, regulations or rules, as interpreted and applied, could have a material adverse effect on our business and results of operations.
Anti-takeover provisions contained in our Amended and Restated Certificate of Incorporation and Restated Bylaws, as well as provisions of Delaware law, could impair a takeover attempt.
Our Amended and Restated Certificate of Incorporation (which we refer to as our “Charter”) contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. We have not registeredare also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together, these provisions may make more difficult the sharesremoval of common stock issuable upon exercisemanagement and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities. These provisions will include:
•no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;
•a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of the public warrants under Board;
•the Securities Actrequirement that directors may only be removed from the Board for cause;
•the right of our Board to elect a director to fill a vacancy created by the expansion of our Board or any state securities laws at this time, and such registration may not bethe resignation, death or removal of a director in place when an investor desires to exercise public warrants, thus precluding such investorcertain circumstances, which prevents stockholders from being able to exercise its public warrants exceptfill vacancies on our Board;
•a cashless basisprohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;
•a prohibition on stockholders calling a special meeting and potentially causing such public warrants to expire worthless.
We have not registered the sharesrequirement that a meeting of common stock issuable upon exercisestockholders may only be called by a majority of the public warrants under the Securities Act or any state securities laws at this time. However, under the termsboard, our chairman of the warrant agreement, we have agreed that as soon as practicable, but in no event later than 15 business days after the closing ofboard or our initial business combination, we will use our best efforts to file with the SEC a registration statement for the registration under the Securities Act of the shares of common stock issuable upon exercise of the warrantschief executive officer and thereafter will use our best efforts to cause the same to become effective within 60 business days following our initial business combination and to maintain a current prospectus relating to the common stock issuable upon exercise of the public warrants, until the expiration of the public warrants in accordance with the provisions of the warrant agreement. We cannot assure you that we will be able to do so if, for example, any facts or events arise which represent a fundamental change in the information set forth in the registration statement or prospectus, the financial statements contained or incorporated by reference therein are not current or correct or the SEC issues a stop order. If the shares issuable upon exercise of the public warrants are not registered under the Securities Act, we will be required to permit holders to exercise their public warrants on a cashless basis. However, no public warrant will be exercisable for cash or on a cashless basis, and we will not be obligated to issue any shares to holders seeking to exercise their public warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder or an exemption from registration is available. Notwithstanding the above, if our common stock is at the time of any exercise of a public warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of public warrants who exercise their public warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, and in the event we do not so elect, we will use our best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. In no event will we be required to net cash settle any public warrant, or issue securities or other compensation in exchange for the public warrants in the event that we are unable to register or qualify the shares underlying the public warrants under applicable state securities laws and there is no exemption available. If the issuance of the shares upon exercise of the public warrants is not so registered or qualified or exempt from registration or qualification, the holder of such public warrant shall not be entitled to exercise such public warrant and such public warrant may have no value and expire worthless. In such event, holders who acquired their public warrants as part of a purchase of public units will have paid the full unit purchase price solely for the shares of common stock included in the public units. If and when the public warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. We will use our best efforts to register or qualify such shares of common stock under the blue sky laws of the state of residence in those states in
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may not be called by any other person, which may delay the warrants were offeredability of our stockholders to force consideration of a proposal or to take action, including the removal of directors;
•the requirement that changes or amendments to certain provisions of our Charter must be approved by holders of at least two-thirds of our common stock; and
•advance notice procedures that stockholders must comply with in order to nominate candidates to our Board or to propose matters to be acted upon at a meeting of stockholders, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
The JOBS Act permits “emerging growth companies” like us to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies.
We currently qualify as an “emerging growth company” as defined in Section 2(a)(19) of the IPO. However,Securities Act, as modified by the JOBS Act. As such, we take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as we continue to be an emerging growth company, including: (i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act; (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements; and (iii) reduced disclosure obligations regarding executive compensation in our periodic reports. As a result, our stockholders may not have access to certain information they deem important. We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year: (a) following September 1, 2025, the fifth anniversary of the initial public offering of CMLS; (b) in which we have total annual gross revenue of at least $1.07 billion; or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th, and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as we are an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable. We have elected to avail ourselves of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited consolidated financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of our common stock held by non-affiliates exceeds $250 million as of the prior June 30, or (ii) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our common stock held by non-affiliates exceeds $700 million as of the prior June 30.
We cannot predict if investors will find our common stock less attractive because we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be instances in which holders ofa less active trading market for our public warrantscommon stock and our stock price may be unable to exercise suchmore volatile.
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Our internal controls over financial reporting may not be effective and our independent registered public warrants but holders of our private warrantsaccounting firm may not be able to exercisecertify as to their effectiveness, which could have a significant and adverse effect on our business and reputation.
As a public company, we are required to comply with the SEC’s rules implementing Sections 302 and 404 of Sarbanes-Oxley Act, which require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of internal control over financial reporting. To comply with the requirements of being a public company, we are required to provide management’s assessment on internal controls, and we may need to undertake various actions, such private warrants.
The exercise price foras implementing additional internal controls and procedures and hiring additional accounting or internal audit staff. Further, as an emerging growth company, our independent registered public warrantsaccounting firm is higher than in many similar blank check company offeringsnot required to formally attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404 until the date we are no longer an emerging growth company. At such time, our independent registered public accounting firm may issue a report that is adverse in the past,event that it is not satisfied with the level at which the controls of the company are documented, designed or operating.
Testing and accordingly,maintaining these controls can divert our management’s attention from other matters that are important to the operation of our business. If we identify material weaknesses in the internal control over financial reporting of the company or are unable to comply with the requirements of Section 404 or assert that our internal control over financial reporting is effective, or if our independent registered public warrants are more likelyaccounting firm is unable to expire worthless.
The exerciseexpress an opinion as to the effectiveness of our internal controls over financial reporting when we no longer qualify as an emerging growth company, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our public warrants is higher than is typicalcommon stock could be negatively affected, and we could become subject to investigations by the SEC or other regulatory authorities, which could require additional financial and management resources.
Our Amended and Restated Certificate of Incorporation designates the Court of Chancery of the State of Delaware and federal court within the State of Delaware as the exclusive forum for certain types of actions and proceedings that our stockholders may initiate, which could limit a stockholder’s ability to obtain a favorable judicial forum for disputes with many similar blank check companies inus or our directors, officers or employees.
Our Charter designates the past. Historically,Court of Chancery of the State of Delaware and federal court within the State of Delaware as the exclusive forum for certain types of actions and proceedings that our stockholders may initiate, which could limit a stockholder’s ability to obtain a favorable judicial forum for disputes with regardus or our directors, officers or employees.
Our Charter provides that, subject to units offered by blank check companies,limited exceptions, the exercise priceCourt of Chancery of the State of Delaware and federal court within the State of Delaware will be exclusive forums for any:
•derivative action or proceeding brought on our behalf;
•action asserting a claim of breach of a public warrant was generallyfiduciary duty owed by, or other wrongdoing by, any of our directors, officers, stockholders, employees or agents to us or our stockholders;
•action asserting a fractionclaim against the us or any of our directors, officers, stockholders, employees or agents arising pursuant to any provision of the purchase priceGeneral Corporation Law, our Charter or our Restated Bylaws (which we refer to as our “Bylaws”) or as to which the General Corporation Law confers jurisdiction on the Court of Chancery of the unitsState of Delaware:
•action to interpret, apply, enforce or determine the validity of our Charter or our Bylaws; or
•other action asserting a claim against us or any of our directors, officers, stockholders, employees or agents that is governed by the internal affairs doctrine.
This choice of forum provision does not apply to actions brought to enforce a duty or liability created under the Exchange Act or any other claim for which federal courts have jurisdiction. Furthermore, in accordance with our
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Bylaws, unless we consent in writing to the initial public offering. selection of an alternative forum, the federal district courts of the United States will be, to the fullest extent permitted by law, the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Any person or entity purchasing or otherwise acquiring or holding any interest in any of our securities shall be deemed to have notice of and consented to our exclusive forum provision in our Bylaws and the choice of forum provision in our Charter.
These provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, or other employees, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provisions contained in our Charter to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations and financial condition.
The exercise pricestockholders will not be deemed to have waived our compliance with the federal securities laws and the regulations promulgated thereunder.
Any person or entity purchasing or otherwise acquiring or holding any interest in any of our securities shall be deemed to have notice of and consented to our exclusive forum provisions, including the choice of forum provision. These provisions may limit a stockholders’ ability to bring a claim, and may result in increased costs for a stockholder to bring a claim in a judicial forum of their choosing for disputes with us or our public warrants is $11.50 per share, subjectdirectors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees.
Risks Related to adjustment as provided herein. As a result, the public warrants are less likely to ever be in the moneyOur Common Stock and more likely to expire worthless.Warrants
We may amend the terms of the public warrants in a manner that may be adverse to holders with the approval by the holders of at least 50% of the then-outstanding public warrants. As a result, the exercise price of a holder’s public warrants could be increased, the exercise period could be shortened and the number of shares of our common stock purchasable upon exercise of a public warrant could be decreased, all without the approval of that warrant holder.
Our public warrants were issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The warrant agreement provides that the terms of the public warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 50% of the then-outstanding public warrants to make any change that adversely affects the interests of the registered holders. Accordingly, we may amend the terms of the public warrants in a manner adverse to a holder if holders of at least 50% of the then-outstanding public warrants approve of such amendment. Although our ability to amend the terms of the public warrants with the consent of at least 50% of the then-outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the public warrants, convert the warrants into cash or stock, shorten the exercise period or decrease the number of shares of common stock purchasable upon exercise of a public warrant.
We may redeem unexpired public warrants prior to their exercise at a time that is disadvantageous to warrant holders, thereby making their public warrants worthless.
We have the ability to redeem outstanding public warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per public warrant; provided that the last reported sales price of our Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date on which we give notice of such redemption to the warrant holders. If and when the public warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. We will use our best efforts to register or qualify such shares of common stock under the blue sky laws of the state of residence in those states in which the warrants were offered by us. Redemption of the outstanding public warrants could force the warrant holders: (i) to exercise their public warrants and pay the exercise price therefor at a time when it may be disadvantageous for them to do so; (ii) to sell their public warrants at the then-current market price when they might otherwise wish to hold their public warrants; or (iii) to accept the nominal redemption price which, at the time the outstanding public
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warrants are called for redemption, is likely to be substantially less than the market value of their public warrants. None of the private placement warrants will be redeemable by us so long as they are held by ourCMLS Holdings LLC, or the Former Sponsor, or its permitted transferees. The Forfeiture Agreement provides that, immediately prior to the Closing, and conditioned and effective upon the Closing, up to a maximum of 33% of private placement
Our warrants held by the Sponsor immediately prior to the Closing, may be automatically cancelled, for no consideration, and shall no longer be outstanding. For additional information on the potential forfeiture of private placement warrants by the Sponsor, see the section entitled “The Business Combination Proposal — Related Agreements — Forfeiture Agreement”.
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Warrants will becomeare exercisable for our common stock, which wouldwill increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.
OurAs of December 31, 2021, our public warrants are exercisable for 14,758,33314,758,305 shares of common stock as part of our IPO at $11.50 per share. Our private warrants are exercisable for 7,236,667 shares of common stock as part of our IPO at $11.50 per share. We expect to issue 35,000,000 shares of our common stock to the PIPE Investors in the PIPE Investment upon consummation of the Business Combination. The shares of common stock issued in the PIPE Investment and additional shares of our common stock issuedissuable upon exercise of our warrants will result in dilution to the then existing holders of our common stock of the Company and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of our common stock.
Our stockholders may be held liable for claims by third parties against us toIn addition, the extent of distributions received by them upon redemption of their shares.
Under the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by themassumptions used in a dissolution. The pro rata portion of the Trust Account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete an initial business combination by the applicable deadline may be considered a liquidating distribution under Delaware law. If a corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, including a 60- day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution. However, it is our intention to redeem our public shares as soon as reasonably possible following the applicable deadline in the event we do not complete an initial business combination and, therefore, we do not intend to comply with the foregoing procedures.
Because we will not be complying with Section 280 of the DGCL, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the ten years following our dissolution. However, because we are a blank check company, rather than an operating company, and our operations are limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses. If our plan of distribution complies with Section 281(b) of the DGCL, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would likely be barred after the third anniversary of the dissolution. We cannot assure you that we will properly assess all claims that may be potentially brought against us. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of our stockholders may extend beyond the third anniversary of such date. Furthermore, ifpreparing the pro rata portion of our Trust Account distributed to our public stockholders upon the redemption of our public shares in the event we doforma financial information may not complete an initial business combination by the applicable deadline is not considered a liquidating distribution under Delaware law and such redemption distribution is deemedprove to be unlawful, then pursuant to Section 174accurate and other factors may affect our financial condition or results of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution.
If, after we distribute the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, a bankruptcy court may seek to recover such proceeds, and we and our Board may be exposed to claims of punitive damages.
If, after we distribute the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by
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our stockholders. In addition, our Board may be viewed as having breached its fiduciary duty to our creditors and/or having acted in bad faith, thereby exposing itself and us to claims of punitive damages, by paying public stockholders from the Trust Account prior to addressing the claims of creditors.
Anti-takeover provisions containedoperations. Any potential decline in our Amended and Restated Certificatefinancial condition or results of Incorporation and bylaws, as well as provisions of Delaware law, could impair a takeover attempt.
Assuming the post-combination company’s Amended and Restated Certificate of Incorporation is approved at the Special Meeting, it will contain provisions thatoperations may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together, these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities. These provisions will include:
•no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;
•a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of the Board;
•the requirement that directors may only be removed from the Board for cause;
•the right of our Board to elect a director to fill a vacancy created by the expansion of our Board or the resignation, death or removal of a director in certain circumstances, which prevents stockholders from being able to fill vacancies on our Board;
•a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;
•a prohibition on stockholders calling a special meeting and the requirement that a meeting of stockholders may only be called by a majority of the board, the chairman of the board or the chief executive officer of the post-combination company and may not be called by any other person, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors;
•the requirement that changes or amendments to certain provisions of our Amended and Restated Certificate of Incorporation must be approved by holders of at least two-thirds of the common stock of the post-combination company; and
•advance notice procedures that stockholders must comply with in order to nominate candidates to our Board or to propose matters to be acted upon at a meeting of stockholders, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Company.
The JOBS Act permits “emerging growth companies” like us to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies.
We currently qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act. As such, we take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as we continue to be an emerging growth company, including: (i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of SOX; (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements; and (iii) reduced disclosure obligations regarding executive compensationcause significant variations in our periodic reports and proxy statements. As a result, our stockholders may not have access to certain information they deem important. We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year: (a) following September 1, 2025, the fifth anniversary of our IPO; (b) in which we have total annual gross revenue of at least $1.07 billion; or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of
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the prior June 30th, and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as we are an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable. We have elected to avail ourselves of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
We cannot predict if investors will find our common stock less attractive because we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
Our internal controls over financial reporting may not be effective and our independent registered public accounting firm may not be able to certify as to their effectiveness, which could have a significant and adverse effect on our business and reputation.
As a public company, we are required to comply with the SEC’s rules implementing Sections 302 and 404 of SOX, which require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of internal control over financial reporting. To comply with the requirements of being a public company, the post-combination company will be required to provide management’s assessment on internal controls commencing with the annual report for fiscal year ended December 31, 2020, and we may need to undertake various actions, such as implementing additional internal controls and procedures and hiring additional accounting or internal audit staff. The standards required for a public company under Section 404 of SOX are significantly more stringent than those required of Sema4 as a privately-held company. Further, as an emerging growth company, our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404 until the date we are no longer an emerging growth company. At such time, our independent registered public accounting firm may issue a report that is adverse in the event that it is not satisfied with the level at which the controls of the post-combination company are documented, designed or operating.
Testing and maintaining these controls can divert our management’s attention from other matters that are important to the operation of our business. If we identify material weaknesses in the internal control over financial reporting of the post-combination company or are unable to comply with the requirements of Section 404 or assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls over financial reporting when we no longer qualify as an emerging growth company, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by the SEC or other regulatory authorities, which could require additional financial and management resources.price.
Our warrants are accounted for as liabilities and the changes in value of our warrants could have a material effect on our financial results.
On April 12, 2021, the Acting Director of the Division of Corporation Finance and Acting Chief Accountant of the SEC together issued a statement regarding the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Statement”). Specifically, the
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SEC Statement focused on certain settlement terms and provisions related to certain tender offers following a business combination, which terms are similar to those contained in the warrant agreement governing our warrants. As a result of the SEC Statement, we reevaluated the accounting treatment of our 14,758,333 public warrants and 7,236,667 private placement warrants, and determined to classify the warrants as derivative liabilities measured at fair value, with changes in fair value each period reported in earnings.
As a result, includedIncluded on our balance sheet as of December 31, 2020 contained elsewhere in this Annual Report2021 are derivative liabilities related to our warrants. Accounting Standards Codification 815, Derivatives and Hedging, (“or ASC 815”),815, provides for the remeasurement of the fair value of such derivatives at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the statement of operations. As a result of the recurring fair value measurement, our financial statements and results of operations may fluctuate quarterly, based on factors, which are outside of our control. Due to the recurring fair value measurement, we expect that we will recognize non-cash gains or losses on our warrants each reporting period and that the amount of such gains or losses could be material.
We have identified a material weakness inFuture resales of our internal control over financial reporting ascommon stock could cause the market price of December 31, 2020. If we are unableour common stock to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affectdrop significantly, even if our business is doing well.
Sales of a significant number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock.
Immediately after the closing of our July 2021 business combination: (i) former holders of Legacy Sema4 common stock owned approximately 64.89% of our total outstanding common stock, (ii) holders of public shares owned 18.43% of our total outstanding common stock, (iii) the Former Sponsor and operating results.certain of CMLS’s other initial stockholders owned 4.61% of our total outstanding common stock and (iv) the Merger PIPE Investors owned approximately 12.07% of our total outstanding shares of common stock.
Following this issuanceAlthough the Former Sponsor and certain of our stockholders were subject to certain lock-up restrictions regarding the transfer of our common stock following the consummation of the SEC Statement,business combination, these lock-up restrictions expired on April 12, 2021, after consultationJanuary 18, 2022. However, certain of our existing stockholders have also entered into support agreements in connection with our independent registered public accounting firm, our managementthe Acquisition, whereby these stockholders have agreed to, among other things, be bound by certain transfer restrictions. Furthermore, we have filed a registration statement on Form S-1 related to the offer and our audit committee concludedsale from time to time by the selling securityholders named in the prospectus that in lightforms a part of that registration statement of up to 236,223,401 shares of common stock and 7,236,667 warrants, which registration statement has been declared effective by the SEC Statement, it was appropriate to restate our previously issued audited financial statements as of and forSEC. Because the period ended December 31, 2020 (the “Restatement”). See “—Our warrants are accounted for as liabilitiesbusiness combination lock-up restrictions have expired and the changes in valueregistration statement is available for use, and as the transfer restrictions under the support agreement end, the market price of our warrantscommon stock could have a material effect on our financial results.” As part of such process, we identified a material weakness in our internal controls over financial reporting.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatementdecline if the holders of our annualcommon stock sell them or interim financial statements will not be prevented, or detected and corrected on a timely basis.
Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. We continue to evaluate steps to remediate the material weakness. These remediation measures may be time consuming and costly and there is no assurance that these initiatives will ultimately have the intended effects.
If we identify any new material weaknesses in the future, any such newly identified material weakness could limit our ability to prevent or detect a misstatement of our accounts or disclosures that could result in a material misstatement of our annual or interim financial statements. In such case, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting and our stock price may decline as a result. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to avoid potential future material weaknesses.
We, and following the Business Combination, the post-business combination company, may face litigation and other risks as a result of the material weakness in our internal control over financial reporting.
Following the issuance of the SEC Statement, after consultation with our independent registered public accounting firm, our management and our audit committee concluded that it was appropriate to restate our previously issued audited financial statements as of December 31, 2020 and for the period from July 10, 2020 (inception) through December 31, 2020. See section entitled “—Our warrants are accounted for as liabilities and the changes in value of our warrants could have a material effect on our financial results.” As part of the Restatement, we identified a material weakness in our internal controls over financial reporting.
As a result of such material weakness, the Restatement, the change in accounting for the warrants, and other matters raised or that may in the future be raisedperceived by the SEC, we face potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claimsmarket as intending to sell them.
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arising fromThere is no guarantee that the Restatementpublic warrants will ever be in the money, and material weaknesses in our internal control over financial reportingthey may expire worthless and the preparationterms of our financial statements. Aspublic warrants may be amended.
The exercise price for the public warrants is $11.50 per share of common stock. There is no guarantee that the public warrants will ever be in the money prior to their expiration, and as such, the public warrants may expire worthless.
Risks Related to the Acquisition
The issuance of shares of Class A common stock to OPKO in connection with the Acquisition and to the PIPE Investors in the PIPE Investment will dilute the voting power of Sema4’s current stockholders.
Pursuant to the Merger Agreement, at the Effective Time, Sema4 will issue shares of Class A common stock to OPKO which, together with our Class A common stock to be issued in the PIPE Investment, will represent approximately 34.9% of the dateCompany on a fully diluted basis after the Acquisition. In addition, pursuant to the Subscription Agreements, Sema4 will issue shares of this Annual Report, weClass A common stock to the PIPE Investors which, together with our Class A common stock to be issued to OPKO at the Effective Time, will represent approximately 34.9% of the Company on a fully diluted basis after the Closing. Accordingly, the issuance of shares of Class A common stock to OPKO in connection with the Acquisition and the PIPE Investors in connection with the PIPE Investment will reduce the relative voting power of each share of Class A common stock held by our current stockholders. Consequently, our stockholders as a group will have no knowledgeless influence over the management and policies of anythe Company after the Transactions than prior to the Transactions.
Because the lack of a public market for GeneDx’s outstanding shares makes it more difficult to evaluate the value of such litigation or dispute. However, we can provide no assurance that such litigation or dispute will not ariseshares, OPKO may receive consideration in the future. Any such litigationAcquisition that is greater than the fair market value of the GeneDx shares.
GeneDx is a wholly owned subsidiary of OPKO and its outstanding capital stock is not traded in any public market. The lack of a public market makes it difficult to determine the fair market value of GeneDx or dispute, whetherits shares of capital stock. Since the number of shares of Class A common stock to be issued to OPKO in the Acquisition was determined based on negotiations between the parties, it is possible that the value of our Class A common stock to be issued to OPKO in connection with the Acquisition will be greater than the fair market value of GeneDx.
Following the Acquisition, OPKO will be a substantial holder of shares of our Class A common stock and sales by OPKO into the market in the future could cause the market price of our Class A common stock to drop significantly, even if our business is doing well.
As a result of the Acquisition, OPKO will become the owner of at least 80 million shares of Class A common stock. OPKO is subject to transfer restrictions and requirements to dispose of its shares in marketed sales processes under the Shareholder Agreements, but those restrictions and requirements are finite and subject to exceptions.
If the shares held by OPKO or the other Lock-Up Holders are sold, or if it is perceived that they will be sold in the public market, the trading price of our Class A common stock could decline. For more information on the Lock-Up Shares and the applicable Lock-Up Periods see “The Acquisition—Shareholder Agreements”.
Our ability to successfully effect the Acquisition and to be successful or not,thereafter will be dependent upon the efforts of our key personnel, including the key personnel of GeneDx. The loss of key personnel could negatively impact the operations and profitability of our Company following the Acquisition and its financial condition could suffer as a result.
Our ability to successfully effect our Acquisition is dependent upon the efforts of our key personnel, including the key personnel of GeneDx (who are expected to become our employees as of the Closing). Although our key personnel are expected to remain with the Company in their current roles following the Acquisition, it is possible that we will lose some key personnel, the loss of which could negatively impact the operations and profitability of our Company’s business following the Acquisition.
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GeneDx’s success depends to a significant degree upon the continued contributions of senior management, certain of whom would be difficult to replace. Departure by certain of GeneDx���s officers could have a material adverse effect on ourGeneDx’s business, results of operations and financial condition, or our abilityoperating results. The services of such personnel may not continue to complete a Business Combination.
The proposed Amended and Restated Certificate of Incorporation designates the Court of Chancery of the State of Delaware and federal court within the State of Delaware as the exclusive forum for certain types of actions and proceedings that the post-combination company’s stockholders may initiate, which could limit a stockholder’s ability to obtain a favorable judicial forum for disputes with the post-combination company or its directors, officers or employees.
The proposed Amended and Restated Certificate of Incorporation designates the Court of Chancery of the State of Delaware and federal court within the State of Delaware as the exclusive forum for certain types of actions and proceedings that the post-combination company’s stockholders may initiate, which could limit a stockholder’s ability to bring an action or proceeding in an alternative judicial forum that a stockholder may prefer for disputes with the post-combination company or its directors, officers or employees.
The proposed Amended and Restated Certificate of Incorporation provides that, subject to limited exceptions, the Court of Chancery of the State of Delaware and federal court within the State of Delaware will be exclusive forums for any:
•derivative action or proceeding brought on the Company’s behalf;
•action asserting a claim of breach of a fiduciary duty owed by, or other wrongdoing by, any director, officer, stockholder, employee or agent of the Companyavailable to the Company orfollowing the Company’s stockholders;
•Closing. See “action asserting a claim against the Company or any director, officer, stockholder, employee or agent of the Company arising pursuant to any provision of the General Corporation Law, the Company’s Amended and Restated Certificate of Incorporation or Bylaws or as to which the General Corporation Law confers jurisdiction on the Court of Chancery of the State of Delaware:
•—action to interpret, apply, enforce or determine the validity of the Amended and Restated Certificate of Incorporation or the Bylaws; or
•other action asserting a claim against the Company or any director, officer, stockholder, employee or agent of the Company that is governed by the internal affairs doctrine.
This choice of forum provision does not apply to actions brought to enforce a duty or liability created under the Exchange Act or any other claim for which federal courts have jurisdiction. Furthermore, in accordance with the post-combination’s company restated bylaws, unless the Company consents in writing to the selection of an alternative forum, the federal district courts of the United States will be, to the fullest extent permitted by law, the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Any person or entity purchasing or otherwise acquiring or holding any interest in any of our securities shall be deemed to have notice of and consented to the Company’s exclusive forum provision in the restated bylaws and the choice of forum provision in the proposed Amended and Restated Certificate of Incorporation.
These provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the post-combination company or any of its directors, officers, or other employees, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provisions contained in the post-combination company’s restated certificate of incorporation to be inapplicable or unenforceable in an action, it may incur additional costs associated with resolving such action in other jurisdictions, which could harm its business, results of operations and financial condition.
The stockholders will not be deemed to have waived the post-combination company’s compliance with the federal securities laws and the regulations promulgated thereunder.
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Any person or entity purchasing or otherwise acquiring or holding any interest in any of the post-combination company’s securities shall be deemed to have notice of and consented to its exclusive forum provisions, including the choice of forum provision. These provisions may limit a stockholders’ ability to bring a claim, and may result in increased costs for a stockholder to bring a claim in a judicial forum of their choosing for disputes with the post-combination company or its directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees.
Risks Related to the Redemption
We do not have a specified maximum redemption threshold. The absence of such a redemption thresholdGeneDx’s Business—GeneDx’s business may makesuffer if it possible for us to complete a Business Combination with which a substantial majority of our stockholders do not agree.
Our current certificate of incorporation does not provideretain its senior management.”
The Company and GeneDx will be subject to business uncertainties and contractual restrictions while the Acquisition is pending.
Uncertainty about the effect of the Acquisition on employees and third parties may have an adverse effect on the Company and GeneDx. These uncertainties may impair our or GeneDx’s ability to retain and motivate key personnel and could cause third parties that deal with any of us or them to defer entering into contracts or making other decisions or seek to change existing business relationships. If key employees depart because of uncertainty about their future roles and the potential complexities of the Acquisition, our or GeneDx’s business could be harmed. In addition, GeneDx’s ability to make changes to its business may be restricted by covenants in the Merger Agreement, which restrictions generally require GeneDx to conduct its business in the ordinary course and subject it to a variety of specified maximum redemption threshold, except that we will not redeem our public shares in an amount that would causelimitations absent the Company’s net tangible assetsprior written consent. GeneDx may find that these and other contractual restrictions in the Merger Agreement may delay or prevent it from responding, or limit its ability to be less than $5,000,001 uponrespond, effectively to competitive pressures.
The completion of the PIPE Investment is not a condition to the consummation of our initial business combination (such thatthe Merger Agreement.
Pursuant to the terms of the Merger Agreement, we are not subjectrequired to complete any private placement financing including the SEC’s “penny stock” rules). However,PIPE Investment in order to consummate the Merger Agreement. The Company will be required to close the Acquisition even if the PIPE Investment is not consummated. If we consummate the Merger Agreement provides that our obligation to consummate the Business Combination is conditioned on the amount in the Trust Account and the proceeds fromwithout completing the PIPE Investment, equaling or exceeding $300,000,000, and the obligation of Sema4 to consummate the Business Combination is conditioned on the amountwe may need additional financing in the Trust Accountfuture to support our business, pursue strategic investments, or and pursue our growth strategy. Please see the proceeds fromsection entitled “The Acquisition—The Merger Agreement—Conditions to the PIPE Investment equalingAcquisition” for additional information.
The exercise of discretion by our directors and officers in agreeing to changes to the terms of or exceeding $300,000,000, in each case after the paymentwaivers of redemptions and satisfaction of Company and Sema4 transaction expenses. As a result, we may be able to complete our Business Combination even though a substantial portion of our public stockholders do not agree with the transaction and have redeemed their shares or have entered into privately negotiated agreements to sell their shares to our Sponsor, directors or officers or their affiliates. Based on the amount of approximately $442,763,951 million in our Trust Account as of December 31, 2021, and taking into account the anticipated gross proceeds of approximately $350,000,000 from the PIPE Investment, all of our shares of common stock may be redeemed and still enable us to have sufficient cash to satisfy the cash closing conditions in the Merger Agreement may result in a conflict of interest when determining whether such changes to the terms of the Merger Agreement or waivers of conditions are appropriate and in the best interests of our stockholders.
In the period leading up to the Closing, other events may occur that, pursuant to the Merger Agreement, would cause the Company to agree to amend the Merger Agreement, to consent to certain actions, to waive in whole or in part one or more of the conditions to our obligations to complete the Acquisition (with the exception of the condition that our stockholders approve the Acquisition) or to waive rights that we are entitled to under the Merger Agreement. Such events could arise because of changes in the course of GeneDx’s business, a request by GeneDx to undertake actions that would otherwise be prohibited by the terms of the Merger Agreement or the occurrence of other events that would have a material adverse effect on GeneDx’s business and would entitle the Company to terminate the Merger Agreement. In any of such circumstances, it would be in the discretion of the Company, acting through the Board, to grant its consent or waive its rights. The existence of the financial and personal interests of the directors (including the members of the transaction committee that supervised the Company’s consideration of the Acquisition) described elsewhere in this proxy statement may result in a conflict of interest on the part of one or more of the directors between what he or she may believe is best for the Company and our stockholders and what he or she may believe is best for himself or herself or his or her affiliates in determining whether or not to take the requested action. As of the date of this proxy statement, no agreements with respectwe do not believe there will be any changes or waivers that our directors and officers would be likely to make after the proposed stockholder approvals have been obtained at the Special Meeting. Please see the section entitled “The Acquisition—The Merger Agreement—Conditions to the private purchaseAcquisition” for additional information.
We and GeneDx will incur significant transaction and transition costs in connection with the Acquisition.
We have incurred and expect to incur significant, non-recurring costs in connection with consummating the Acquisition. We may also incur additional costs to retain key employees. All expenses incurred in connection with
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the Merger Agreement and the Acquisition, including all legal, accounting, consulting, investment banking and other fees, expenses and costs, will be for the account of public sharesthe party incurring such fees, expenses and costs or paid by the Company orfollowing the persons described above have been entered into with any such investor or holder. We will file a Current Report on Form 8-K with the SEC to disclose private arrangements entered into or significant private purchases made by anyClosing.
The anticipated benefits of the aforementioned personsAcquisition may not be realized fully or at all or may take longer to realize than expected.
The Acquisition involves the integration of two companies that wouldhave previously operated independently. Prior to the announcement, Sema4 and GeneDx did not conduct any integration planning for the two companies, and their ability to do so prior to consummation of the Acquisition may be substantially limited by applicable law. After the Acquisition, the two companies will devote significant management attention and resources to integrating the two businesses. Delays in this process could adversely affect the vote on the Business Combination Proposal or other proposals (as described in this proxy statement) at the Special Meeting.
In the event the aggregate cash consideration we would be required to pay for all shares of commoncombined company’s business, financial results, financial condition and stock thatprice. Even if Sema4 and GeneDx are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the Merger Agreement exceeds the aggregate amount of cash available to us, we may not complete the Business Combination or redeem any shares, all shares of common stock submitted for redemption will be returned to the holders thereof, and we instead may search for an alternate business combination.
There is no guarantee that a stockholder’s decision whether to redeem its shares for a pro rata portion of the Trust Account will put the stockholder in a better future economic position.
We can give no assurance as to the price at which a stockholder may be able to sell its public shares in the future following the completion of the Business Combination or any alternativeintegrate their business combination. Certain events following the consummation of any initial business combination, including the Business Combination, may cause an increase in our share price, and may result in a lower value realized now than a stockholder of the Company might realize in the future had the stockholder not redeemed its shares. Similarly, if a stockholder does not redeem its shares, the stockholder will bear the risk of ownership of the public shares after the consummation of any initial business combination, andoperations successfully, there can be no assurance that this integration will result in the realization of the full benefits of synergies, cost savings, innovation and operational efficiencies that they currently expect from this integration or that these benefits will be achieved within the anticipated time frame.
If the Acquisition’s benefits do not meet the expectations of investors, stockholders or financial analysts, the market price of our securities may decline.
If the benefits of the Acquisition do not meet the expectations of investors or securities analysts, the market price of the Company’s securities may decline. The market values of our securities at the time of the Acquisition may vary significantly from their prices on the date the Merger Agreement was executed, the date of this proxy statement, or the date on which our stockholders vote at the Special Meeting.
For additional factors that may affect the trading price of the Company’s securities see “—Risks Related to Being a stockholder can sellPublic Company—If we do not meet the expectations of investors, stockholders or financial analysts, the market price of our securities may decline.”
The Stock Consideration is not adjustable based on the market price of our Class A common stock so the Stock Consideration at the Closing may have a greater or lesser value than at the time the Merger Agreement was signed.
The Merger Agreement provides that a fixed number of shares of our Class A common stock will be issued as the Stock Consideration at the Closing. Any changes in the market price of our Class A common stock before the completion of the Acquisition will not affect the number of shares OPKO will be entitled to receive pursuant to the Merger Agreement. Therefore, if before the completion of the Acquisition, the market price of our Class A common stock increases from the market price on January 14, 2022, then OPKO could receive Stock Consideration with substantially greater value for its shares in the future for a greater amountof GeneDx’s capital stock than the redemption price set forth in this proxy statement.value of our Class A stockholder should consultcommon stock when Sema4 entered into the stockholder’s own tax and/orMerger Agreement.
Prospective financial information regarding GeneDx and Sema4 may not prove accurate.
In performing its financial analysis and rendering its opinion, Goldman Sachs & Co. LLC, the financial advisor to Sema4, reviewed and relied on, among other things, forecasts for assistance on how this may affect his, her or its individual situation.
StockholdersGeneDx, which were prepared by GeneDx management and adjusted by management of Sema4, financial forecasts for Sema4, and pro forma financial forecasts for the Company who wish to redeem their shares for a pro rata portion of the Trust Account must comply with specific requirements for redemption that may make it more difficult for them to exercise their redemption rights priorcombined company after giving effect to the deadline. If stockholders failAcquisition. This prospective financial information reflects numerous assumption and estimate, including, without limitation, as to complyindustry performance, general business, economic, regulatory, market and financial conditions and other future events. This prospective financial information was not prepared with a view to public disclosure, is subject to significant economic, competitive, industry, and other uncertainties and may not be achieved in full, at all, or within projected timeframes. The failure of GeneDx’s or Sema4’s business to achieve projected results could have a material adverse effect on the redemption requirements specifiedprice of Sema4’s securities and financial condition following the Acquisition.
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The unaudited pro forma combined financial information in this proxy statement theyis presented for illustrative purposes only and may not be reflective of the operating results and financial condition of Sema4 following completion of the Acquisition.
The unaudited pro forma combined financial information in this proxy statement is presented for illustrative purposes only and is not necessarily indicative of what Sema4’s actual financial condition or results of operations would have been had the Acquisition been completed on the dates indicated. The unaudited pro forma combined financial information is subject to a number of assumptions, and does not take into account any synergies related to the proposed transaction. Further, Sema4’s actual results and financial condition after the Acquisition may differ materially and adversely from the unaudited pro forma combined financial data that is included in this proxy statement. The unaudited pro forma combined financial information reflects adjustments based upon preliminary estimates of the fair value of assets to be acquired and liabilities to be assumed. The final acquisition accounting will be based upon the actual purchase price and the fair value of the assets and liabilities of GeneDx as of the date of the completion of the Acquisition. In addition, subsequent to the Closing Date, there will be further refinements of the acquisition accounting as additional information becomes available. Accordingly, the final acquisition accounting may differ materially from the unaudited pro forma combined financial information reflected in this proxy statement. For further discussion, see “Unaudited Pro Forma Combined Financial Information”.
Sema4 has not obtained, and does not expect to obtain, an updated opinion from Goldman Sachs & Co. LLC, reflecting changes in circumstances that may have occurred since the signing of the Merger Agreement.
The opinion rendered to the Board by Goldman Sachs & Co. LLC was provided in connection with, and at the time of, the Board’s evaluation of the Acquisition on January 14, 2022. The opinion was based on financial forecasts and other information made available to Goldman Sachs & Co. LLC as of the date of its opinion, which may have changed, or may change, after the date of such opinion. Sema4 has not obtained an updated opinion from Goldman Sachs & Co. LLC as of the date of this proxy statement. Sema4 does not expect to obtain an updated opinion prior to completion of the Acquisition. Changes in the operations and prospects of Sema4 or GeneDx, general market and economic conditions and other factors which may be beyond the control of Sema4 or GeneDx, and on which the opinion was based, may have altered the prices or values of shares of our Class A common stock or shares of GeneDx common stock since the date of such opinion, or may alter such values and prices by the time the Acquisition is completed. The opinion does not speak as of any date other than the date of such opinion. For a description of Goldman Sachs & Co. LLC’s opinion, see “The Acquisition—Opinion of Sema4’s Financial Advisor”.
Sema4 may be the target of transaction related lawsuits which could result in substantial costs and may delay or prevent the Acquisition from being completed. If the Acquisition is completed, Sema4 will also assume GeneDx’s risks arising from various legal proceedings.
Securities class action lawsuits and derivative lawsuits are often brought against companies that have entered into merger agreements. Even if the lawsuits are without merit, defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on Sema4’s and GeneDx’s respective liquidity and financial condition. Additionally, if a plaintiff is successful in obtaining an injunction prohibiting completion of the Acquisition, then that injunction may delay or prevent the Acquisition from being completed, which may adversely affect Sema4’s and GeneDx’s respective business, financial condition and results of operation. There can be no assurance that complaints will not be entitledfiled with respect to redeem their shares of our common stock for a pro rata portionthe Acquisition.
One of the funds held in our Trust Account.
Public stockholders who wishconditions to redeem their shares for a pro rata portioncompletion of the Trust Account must, among other things (i) submitAcquisition is the absence of any injunction or order being in effect that prohibits completion of the Acquisition. Accordingly, if a requestplaintiff is successful in writingobtaining any injunction or order prohibiting the completion of the Acquisition, then such injunction or order may prevent the Acquisition from being completed, or from being completed within the expected timeframe.
In addition, if Sema4 completes the Acquisition, it will assume GeneDx’s risks arising from legal proceedings. In addition, following the Closing of the Acquisition, the strategies or motivations of a party or parties with respect to actual or potential litigation against Sema4 may change. Sema4 cannot predict with certainty the eventual
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outcome of GeneDx’s pending or future legal proceedings and (ii) tender their certificates to our Transfer Agent or deliver their sharesthe ultimate outcome of such matters could be material to the Transfer Agent electronically throughCompany’s results of operations, cash flows and financial condition following the DWAC system at least two business days priorAcquisition.
Finally, the Acquisition may result in post-transaction disputes with OPKO or the other counterparties to the Special Meeting. In order to obtainMerger Agreement and the Related Agreements regarding a physical stock certificate, a stockholder’s broker and/or clearing broker, DTC and our Transfer Agent will need to act to facilitate this request. It is our understanding that stockholders should generally allot at least two weeks to obtain physical certificates from the Transfer Agent. However, because we do not havenumber of matters, including any control over this process or over the brokers, which we refer to as “DTC,” it may take significantly longer than two weeks to obtain a physical stock certificate. If it takes longer than anticipated to obtain a physical certificate, stockholders who wish to redeem their shares may be unable to obtain physical certificates by the deadline for exercising their redemption rights and thus will be unable to redeem their shares.
Stockholders electing to redeem their shares will receive their pro rata portion of the Trust Account less franchise and income taxes payable, calculated as of two business days priorpost-closing adjustments to the anticipated consummationCash Consideration, the occurrence or non-occurrence of the Business Combination. Please see the section entitled “Special Meetingany Milestone Event or payment of Company Stockholders — Redemption Rights” for additional information on how to exercise your redemption rights.
If a stockholder fails to receive notice of our offer to redeem our public shares in connection with our Business Combination, or fails to comply with the procedures for tendering its shares, such shares may not be redeemed.
If, despite our compliance with the proxy rules, a stockholder fails to receive our proxy materials, such stockholder may not become aware of the opportunity to redeem its shares. In addition, the proxy materials that we are furnishing to holders of our public shares in connection with our Business Combination describes the various procedures that must be complied with in order to validly redeem public shares.
If the Adjournment Proposal is not approved, the Business Combination would not be completed.
The Adjournment Proposal, if adopted, will allow our Board to adjourn the Special Meeting to a later date or dates to permit further solicitation of proxies. The Adjournment Proposal will only be presented to our stockholders in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal, the Nasdaq Stock Issuance Proposal, the Charter Approval Proposal, the Incentive Plan Proposal or the ESPP Proposal, but no other proposal if the Business Combination Proposal, the Nasdaq Stock Issuance Proposal, the Charter Approval Proposal, the Incentive Plan Proposal and the ESPP Proposal are approved.
If the Adjournment Proposal is not approved by our stockholders, our Board may not be able to adjourn the Special Meeting to a later date in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal, the Nasdaq Stock Issuance Proposal, the Charter Approval Proposal, the Incentive Plan Proposal, the ESPP Proposalany Milestone Payment or any other proposal.liabilities for which Sema4 or OPKO believes it was indemnified under the Merger Agreement.
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UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION ABOUT THE PARTIES TO THE BUSINESS COMBINATION
CMLSIntroduction
CMLSThe following unaudited pro forma combined financial statements are based on the historical consolidated financial statements of Sema4 and historical combined financial statements of GeneDx and are adjusted to give effect to the pending Acquisition. In order to finance the Acquisition, Sema4 entered into Subscription Agreements with the PIPE Investors. The PIPE Investment is a blank check company whose business purpose isexpected to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combinationclose substantially concurrently with one or more businesses. For more information regarding Fusion, see the section entitled “Information About the Company”.
Merger Sub
Merger Sub is a wholly-owned subsidiaryclosing of the Company formed solely for the purpose of effecting the Business Combination. Merger Sub was incorporated under the DGCL on February 9, 2021. Merger Sub owns no material assets and does not operate any business
Sema4Acquisition.
Sema4 is a patient-centered, health intelligence company with a mission to use artificial intelligence, or AI, and machine learning to enable personalized medicine for all. Sema4’s integrated information platform leverages longitudinal patient data, AI-driven predictive modeling, and genomics in combination with other molecular and high-dimensional data in itsour efforts both to deliver better outcomes for patients and to transform the practice of medicine, including how diseases aredisease is diagnosed, treated, and prevented. Sema4 is headquartered in Stamford, Connecticut.
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Defined terms included belowGeneDx, is a patient-centric health information company and leader in delivering clinical genomic answers to an ever-increasing community of patients, families and healthcare providers. With more than 20 years of experience in diagnosing rare disorders and diseases, GeneDx have the same meaning as terms definedpioneered panels, exome and included elsewherewhole genome sequencing and have developed a proprietary genomic interpretation and information services platform in this proxy statement/prospectus.support of healthcare partners and patients globally. GeneDx is headquartered in Elmwood Park in New Jersey.
The following unaudited pro forma condensed combined financial information is provided to aid you in your analysis of the financial aspects of the Business Combination and the PIPE Investment.
The following unaudited pro forma condensed combined balance sheet as of MarchDecember 31, 2021, combines the audited historical balance sheet of CMLS as of March 31, 2021 with the historicalconsolidated balance sheet of Sema4 as of MarchDecember 31, 2021, with the audited historical combined carve out balance sheets of GeneDx as of December 31, 2021, giving effect to the Business Combination andAcquisition, the PIPE Investment and all factually supportable adjustments that are directly attributable to the Transactions, as if they had been consummated as of that date.
The following unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2021 and the year ended December 31, 20202021, combine the historical consolidated statements of operationscomprehensive loss of CMLSSema4 and Sema4the historical combined carve out statements of comprehensive loss of GeneDx for such periods, giving effect to the Business Combination andAcquisition, the PIPE Investment and all factually supportable adjustments that are directly attributable to the Transactions, as if they had been consummated on January 1, 2020,2021, the beginning of the earliest period presented.
The unaudited pro forma condensedcombined financial information presented is based on the assumptions and adjustments described in the accompanying notes. The unaudited pro forma combined financial information is derived from the respective historical consolidated financial statements of Sema4 and combined carve out financial statements of GeneDx as described further in Note 2 — Basis of Presentation. The unaudited pro forma combined financial information includes adjustments which are preliminary and may be revised upon closing. There can be no assurance that such revisions will not result in material changes. The unaudited pro forma combined financial information is presented for illustrative purposes only and is not necessarily indicative of the results or financial position that would have occurred or that may occur in the future had the Acquisition and PIPE been completed on the dates indicated, nor is it necessarily indicative of the future operating results or financial position of Sema4 after the Acquisition. Future results may vary significantly from the results reflected because of various factors.
The unaudited pro forma combined financial information has been compiled in a manner consistent with the accounting policies adopted by Sema4. Upon completion of the Acquisition, Sema4 will perform a more detailed review of the GeneDx accounting policies. As a result of that review, differences could be identified between the accounting policies of the two companies that, when conformed, have a material impact on the combined financial statements.
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UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF DECEMBER 31, 2021
(in thousands)
HistoricalPro Forma
Sema4GeneDxPro forma Adjustment
(Note 4)		Pro Forma Balance Sheet
ASSETS
Current assets:
Cash and cash equivalents$400,569 $144 $49,201 a1$449,914 
Accounts receivable26,509 20,341 — 46,850 
Due from related parties54 — — 54 
Inventory33,456 7,828 — 41,284 
Prepaid expenses19,154 3,422 (594)b521,982 
Other current assets3,802 1,804 — 5,606 
Total current assets483,544 33,539 48,607 565,690 
Property and equipment, net62,719 28,277 — 90,996 
Restricted cash900 — — 900 
Other assets6,930 53 — 6,983 
Intangible assets— 166,888 50,112 e1217,000 
Goodwill— 282,024 6,936 f288,960 
Due from Parent and its subsidiaries— 5 (5)b2— 
Operating lease right of use assets— 5,789 (5,789)c— 
Investment in related companies— 205 (205)b1— 
Total assets$554,093 $516,780 $99,656 $1,170,529 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$44,693 $5,397 $— $50,090 
Accrued expenses20,108 15,565 — 35,673 
Due to related parties2,623 — — 2,623 
Current portion of capital lease obligations3,419 — — 3,419 
Current contract liabilities473 — — 473 
Other current liabilities29,968 571 — 30,539 
Income tax payable— 180 (180)b3— 
Total current liabilities101,284 21,713 (180)122,817 
Long-term debt, net of current portion11,000 — — 11,000 
Capital lease obligation, net of current portion18,427 — — 18,427 
Other liabilities3,480 — 15,800 a319,280 
Earn-out liabilities10,244 — — 10,244 
Warrant liability21,555 — — 21,555 
Operating lease liabilities— 9,936 (9,936)c— 
Deferred tax liabilities, net— 24,063 (24,063)b4— 
Total liabilities165,990 55,712 (18,379)203,323 
STOCKHOLDERS' EQUITY
Sema4 Class A common stock, $0.0001 par value24 — 13 a1,a237 
Additional paid-in capital963,520 660,506 (148,292)g1,475,734 
Accumulated deficit(575,441)(199,438)266,314 b4(508,565)
Total stockholders' equity388,103 461,068 118,035 967,206 
Total liabilities and stockholders' equity$554,093 $516,780 $99,656 $1,170,529 
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UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2021
(in thousands, except share and per share amounts)
HistoricalPro forma
Sema4GeneDxPro Forma Adjustments (Note 4)Pro Forma Statement of Operations
Revenue:
Diagnostic test revenue$205,100 $116,595 $— $321,695 
Other revenue7,095 — — 7,095 
Total revenue212,195 116,595 — 328,790 
Cost of services228,797 84,361 — 313,158 
Total gross profit (loss)(16,602)32,234 — 15,632 
Operating expenses:
Research and development105,162 12,377 — 117,539 
Selling and marketing112,738 12,145 7,219 d1,d3132,102 
General and administrative205,988 40,294 11,113 d2,d3257,395 
Related party expenses5,659 — — 5,659 
Amortization of intangible assets— 16,813 (16,813)e3— 
Loss from operations(446,149)(49,395)(1,519)(497,063)
Other income (expense):
Change in fair value of warrant and earn-out contingent liabilities198,401 — — 198,401 
Interest income79 — — 79 
Interest expense(2,835)— — (2,835)
Other income (expense), net5,114 (44)40 b15,110 
Total other income (expense), net200,759 (44)40 200,755 
Net loss before income taxes(245,390)(49,439)(1,479)(296,308)
Provision or benefit for income taxes— 12,547 54,329 d466,876 
Net loss$(245,390)$(36,892)$52,850 $(229,432)
Weighted average shares outstanding, basic and diluted108,077,439 — 130,000,000 238,077,439 
Basic and diluted net loss per share$(2.27)$— $— $(0.96)
93

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
1. Description of Acquisition
On January 14, 2022, Sema4, Merger Sub I and Merger Sub II entered into the Merger Agreement with GeneDx, a wholly-owned subsidiary of OPKO, Holdco and OPKO.
After giving effect to the Acquisition and the other transactions contemplated by the Merger Agreement, GeneDx will have converted into a Delaware limited liability company and be a wholly-owned indirect subsidiary of Sema4. Subject to the terms and conditions of the Merger Agreement, Sema4 will pay consideration to OPKO, for the Acquisition of (i) $150 million in cash at the closing of the Acquisition, subject to certain adjustments as provided in the Merger Agreement, (ii) 80 million shares of Sema4’s Class A common stock to be issued at the Closing and (iii) up to $150 million payable following the Closing, if certain revenue-based milestones are achieved for each of the fiscal years ending December 31, 2022 and December 31, 2023. Each Milestone Payment, if and to the extent earned under the terms of the Merger Agreement, will be satisfied through the payment and/or issuance of a combination of cash and shares of Class A common stock (valued at $4.86 per share based on the average of the daily volume average weighted price of Class A common stock over the period of 30 trading days ended January 12, 2022), with such mix to be determined in Sema4’s sole discretion.
Additionally, in connection with entering into the Merger Agreement and as a condition under the Merger Agreement, Sema4 entered into Subscription Agreements for the PIPE Investment to sell $200 million in Class A common stock at a price of $4.00 per share to the PIPE Investors.
2. Basis of Presentation
The unaudited pro forma financial information set out below has been prepared in accordance with Article 11 of Regulation S-X, as amended by the SEC Final Rule Release No. 33 10786, Amendments to Financial Disclosures About Acquired and Disposed Businesses (“Regulation S-X”), using accounting policies in accordance with GAAP.
The unaudited pro forma combined financial statements have been derived from and should be read in conjunction with:
•the accompanying notes to the unaudited pro forma condensed combined financial statements;
•the (i) audited historical consolidated financial statements of CMLSSema4 as of December 31, 2020 and for the period from July 10, 2020 (inception) through December 31, 2020 and (ii) unaudited historical condensed financial statements of CMLS as of and for the three months ended March 31, 2021, and the related notes, in each case, included elsewhere in this proxy statement/prospectus;statement;
•the (i) audited historical combined carve out financial statements of Sema4GeneDx as of and for the year ended December 31, 2020 and (ii) unaudited historical condensed financial statements of Sema4 as of and for the three months ended March 31, 2021, and the related notes, in each case, included elsewhere in this proxy statement/prospectus;statement; and
•the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of CMLS,” “Management’s Discussion and Analysis of Financial Condition and Results of Operation of Sema4,” and other financial information relating to CMLS and Sema4 included elsewhere in this proxy statement/prospectus.
The unaudited pro forma condensed combined financial statements are for illustrative purposes only and are not necessarily indicative of what the actual results of operations and financial position would have been had the Business Combination and the PIPE Investment taken place on the dates indicated, nor are they indicative of the future consolidated results of operations or financial position of the combined company.
115
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 2021
(in thousands, except share and per share amounts)

HistoricalScenario 1 Assuming No RedemptionsScenario 2 Assuming Maximum Redemptions
5(A)
CMLS		5(B)
Sema4		Transaction Accounting AdjustmentsPro Forma Balance SheetTransaction Accounting AdjustmentsPro Forma Balance Sheet
ASSETS
Current assets:
Cash and cash equivalents$627 $58,652 474,628 5(a)$533,907 $(50,933)5(i)$482,974 
Accounts receivable— 33,490 — 33,490 — 33,490 
Due from related parties— 349 — 349 — 349 
Inventory— 32,969 — 32,969 — 32,969 
Prepaid expenses and other current assets294 15,070 — 15,364 — 15,364 
Total current assets921 140,530 474,628 616,079 (50,933)565,146 
Property and equipment, net— 64,632 — 64,632 — 64,632 
Restricted cash— 10,828 — 10,828 — 10,828 
Other assets— 3,596 — 3,596 — 3,596 
Cash and marketable securities held in trust account442,775 — (442,775)5(b)— — — 
Total assets$443,696 $219,586 $31,853 $695,135 $(50,933)$644,202 
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses$1,492 $41,609 $— $43,101 $— $43,101 
Due to related parties— 797 — 797 — 797 
Current contract liabilities— 2,810 — 2,810 — 2,810 
Other current liabilities— 22,991 (1,846)5(c)21,145 — 21,145 
Total current liabilities1,492 68,207 (1,846)67,853 — 67,853 
Long-term debt, net of current portion— 18,502 (10,752)5(c)7,750 — 7,750 
Stock-based compensation liabilities— 296,952 — 296,952 — 296,952 
Other liabilities— 22,530 — 22,530 — 22,530 
Contingent consideration— — 199,962 5(d)199,962 — 199,962 
Warrant liability126,960 — — 126,960 — 126,960 
Deferred underwriting fee payable15,496 — (15,496)5(e)— — — 
Total liabilities143,948 406,191 171,868 722,007 — 722,007 
116
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 2021
(in thousands, except share and per share amounts)

COMMITMENTS AND CONTINGENCIES
Redeemable convertible preferred stock:
Sema4 Series A-1 redeemable convertible preferred stock, $0.00001 par value— 51,811 (51,811)5(f)— — — 
Sema4 Series A-2 redeemable convertible preferred stock, $0.00001 par value— 46,480 (46,480)5(f)— — — 
Sema4 Series B redeemable convertible preferred stock, $0.00001 par value— 118,824 (118,824)5(f)— — — 
Sema4 Series C redeemable convertible preferred stock, $0.00001 par value— 117,324 (117,324)5(f)— — — 
Redeemable convertible preferred stock— 334,439 (334,439)5(f)— — — 
CMLS Class A Common stock subject to possible redemption294,748 — (294,748)5(g)— — — 
STOCKHOLDERS' EQUITY (DEFICIT)
Sema4 Class A common stock, $0.00001 par value— — — — — — 
Sema4 Class B convertible common stock, $0.00001 par value— — — — — — 
CMLS Preferred stock, $0.0001 par value— — — — — — 
CMLS Class A common stock, $0.0001 par value1 — 23 5(h)24 (1)5(i)23 
CMLS Class B common stock, $0.0001 par value1 — (1)5(h)— — — 
Additional paid-in capital103,378 — 399,267 5(h)502,645 (50,932)5(i)451,713 
Accumulated deficit(98,380)(521,044)89,883 5(h)(529,541)— (529,541)
Total stockholders' equity (deficit)5,000 (521,044)489,172 5(h)(26,872)(50,933)5(i)(77,805)
Total liabilities, redeemable convertible preferred stock and stockholders' deficit$443,696 $219,586 $31,853 $695,135 $(50,933)$644,202 
See accompanying notes to the unaudited pro forma condensed combined financial information.
117
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(Dollars in thousands, except share and per share amounts)
HistoricalScenario 1
Assuming No
Redemptions		Scenario 2
Assuming Maximum
Redemptions
6(A)6(B)Transaction
Accounting
Adjustments		Pro Forma
Statement of
Operations		Transaction
Accounting
Adjustments		Pro Forma
Statement of
Operations
CMLSSema4
Revenue:
Diagnostic test revenue$— $62,760 $— $62,760 $— $62,760 
Other revenue— 1,591 — 1,591 — 1,591 
Total revenue— 64,351 — 64,351 — 64,351 
Cost of services— 71,812 — 71,812 — 71,812 
Total gross profit— (7,461)— (7,461)— (7,461)
Operating expenses:
Research and development— 53,131 — 53,131 — 53,131 
Selling and marketing— 31,569 — 31,569 — 31,569 
General and administrative1,845 101,917 — 103,762 — 103,762 
Related party expenses— 1,797 — 1,797 — 1,797 
Total operating expenses1,845 181,414 — 190,259 — 190,259 
Loss from operations(1,845)(195,875)— 197,720 — 197,720 
Other income (expense):
Interest income— 21 — 21 — 21 
Interest expense— (723)— (723)— (723)
Other income, net— 5,584 — 5,584 — 5,584 
Interest earned on marketable securities held in Trust Account11 — (11)6(c)— — 
Change in fair value of warrant liability(56,638)— — (56,638)— (56,638)
Total other income, net(56,627)4,882 (11)(51,756)— (51,756)
Net loss before income taxes(58,472)(190,993)(11)(249,476)— (249,476)
Provision for income taxes— — — — — — 
Net loss$(58,472)$(190,993)$(11)$(249,476)$— $(249,476)
Weighted average shares outstanding, basic and diluted11,068,750 1 238,266,485 6(c)— 230,733,726 6(c)
Basic and diluted net loss per share$(5.28)$(43,000.00)$(1.05)6(c)— $(1.08)6(c)
118
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2020
(in thousands, except share and per share amounts)

HistoricalScenario 1 Assuming No RedemptionsScenario 2 Assuming Maximum Redemptions
6(A)
CMLS		6(B)
Sema4		Transaction Accounting AdjustmentsPro Forma Statement of OperationsTransaction Accounting AdjustmentsPro Forma Statement of Operations
Revenue:
Diagnostic test revenue$— $175,351 $— $175,351 $— $175,351 
Other revenue— 3,971 — 3,971 — 3,971 
Total revenue— 179,322 — 179,322 — 179,322 
Cost of services— 184,648 — 184,648 — 184,648 
Total gross profit— (5,326)— (5,326)— (5,326)
Operating expenses:
Research and development— 72,700 — 72,700 — 72,700 
Selling and marketing— 53,831 — 53,831 — 53,831 
General and administrative206 100,742 8,175 6(a)109,123 — 109,123 
Related party expenses— 9,395 — 9,395 — 9,395 
Total operating expenses206 236,668 8,175 245,049 — 245,049 
Loss from operations(206)(241,994)(8,175)(250,375)— (250,375)
Other income (expense):
Interest income— 506 — 506 — 506 
Interest expense— (2,474)(322)6(b)(2,796)— (2,796)
Other income, net— 2,622 — 2,622 — 2,622 
Interest earned on marketable securities held in Trust Account14 — (14)6(c)— — — 
Change in fair value of warrant liability(38,511)— — (38,511)— (38,511)
Transaction costs(1,205)— — (1,205)— (1,205)
Total other income, net(39,702)654 (336)(39,384)— (39,384)
Net loss before income taxes(39,908)(241,340)(8,511)(289,759)— (289,759)
Provision for income taxes— — — — — — 
Net loss$(39,908)$(241,340)$(8,511)$(289,759)$— $(289,759)
Weighted average shares outstanding, basic and diluted10,633,062 1 238,266,485 6(d)230,733,726 6(d)
Basic and diluted net loss per share$(3.75)$(5,824,000)$(1.22)6(d)$(1.26)6(d)
See accompanying notes to the unaudited pro forma condensed combined financial information.
119
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
1.Description of the Transactions
The Business Combination
On February 9, 2021, the Company and its wholly owned subsidiary, S-IV Sub, Inc. (“Merger Sub”), entered into an Agreement and Plan of Merger with Mount Sinai Genomics, Inc. d/b/a Sema4 (“Sema4”) (theproxy statement entitled “Merger Agreement”). If the Merger Agreement is approved by Company stockholders at the Special Meeting (and all other conditions pursuant to the Merger Agreement are either satisfied or waived) Merger Sub will merge with and into Sema4, with Sema4 surviving the merger as a wholly owned subsidiary of the Company. Upon the consummation of the transactions contemplated by the Merger Agreement (the “Business Combination”), the Company will change its name to Sema4 Holdings Corp.
Subject to the terms and conditions of the Merger Agreement, each share of Sema4 Class B common stock issued and outstanding immediately prior to the effective time will be converted into 1/100th of a share of Sema4 Class A common stock as set forth in the Merger Agreement. Immediately thereafter, each share of Sema4 Common Stock and Sema4 Preferred Stock (other than Excluded Shares and Dissenting Shares (each as defined in the Merger Agreement)) 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 merger consideration, with each Sema4 Stockholder being entitled to receive (collectively, clauses (i) through (iii), the “merger consideration”) (i) its pro rata share of the Closing Available Cash (as defined in the Merger Agreement) if such Sema4 Stockholder has made an election to receive cash, and, if so elected, such Sema4 Stockholder’s pro rata share excess amount of any closing available excess cash, provided that in no event will a Sema4 Stockholder’s cash payment exceed an amount equal to the product of such Sema4 Stockholder’s total outstanding shares multiplied by the Per Share Amount; (ii) a number of shares of Company Class A common stock equal to the quotient of: (A)(1) the product of such Sema4 Stockholder’s total outstanding shares multiplied by the Per Share Amount minus (2) such Sema4 Stockholder’s stockholder cash payment amount divided by (B) $10.00; and (iii) its pro rata share of any earn out shares to which such Sema4 Stockholder is entitled pursuant to the terms of the Merger Agreement (the “Earnout”), including the Earnout RSUs, which Earnout RSUs are subject to vesting and will not be legally issued and outstanding shares of Company common stock at the closing of the Business Combination (the “Closing”), in each case of clauses (i), (ii) and (iii), without interest, upon surrender of stock certificates representing all of such Sema4 Stockholder’s Sema4 Common Stock and Sema4 Preferred Stock and delivery of the other documents required pursuant to the Merger Agreement. As of the effective time, each Sema4 Stockholder shall cease to have any other rights in and to Sema4 securities and each certificate relating to ownership of shares of Sema4 Common Stock and Sema4 Preferred Stock (other than Excluded Shares) will only represent the right to receive the applicable portion of the merger consideration.
Following the Closing, within five Business Days (as defined in the Merger Agreement) after the occurrence of a Triggering Event, the Company shall issue or cause to be issued to the Sema4 Stockholders (other than holders of Dissenting Shares and Excluded Shares) and the Earn-Out Service Providers, the following shares of Company Class A common stock (which shall be equitably adjusted for stock splits, reverse stock splits, stock dividends, reorganizations, recapitalizations, reclassifications, combination, exchange of shares or other like change or transaction with respect to Company Class A common stock occurring on or after the Closing, the “Earn-Out Shares”), upon the terms and subject to the conditions set forth in the Merger Agreement and other related agreements: (i) upon the occurrence of Triggering Event I, a one-time issuance of a number of Earn-Out Shares equal to 3.66% of the Earn-Out Total Outstanding Shares; (ii) upon the occurrence of Triggering Event II, a one-time issuance of a number of Earn-Out Shares equal to 3.67% of the Earn-Out Total Outstanding Shares; and (iii) upon the occurrence of Triggering Event III, a one-time issuance of a number of Earn-Out Shares equal to 3.67% of the Earn-Out Total Outstanding Shares. Upon the last day of any calendar year, the Company shall issue or cause to be issued to each Sema4 Stockholder (other than holders of Dissenting Shares) and Earn-Out Service Provider (in accordance with its respective Earn-Out Pro Rata Share and, in the case of the Earn-Out Service Providers, in accordance with the terms of the applicable Earn-Out Award Agreement) the Earn-Out Shares that (i) are in the Forfeiture Pool as in effect as of such date and (ii) would have been issuable to Sema4 Stockholders pursuant to the Merger Agreement as a result of the occurrence of a Triggering Event had they not been made subject to an award of Earnout RSUs.
120
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Sema4 Stockholders and the Earn-Out Service Providers shall be entitled to receive Earn-Out Shares upon each Triggering Event, provided, however that each Triggering Event may only occur once, if at all, and in no event shall the Sema4 Stockholders and Earn-Out Service Providers, in the aggregate, be entitled to receive an aggregate number of Earn-Out Shares equal to more than 11% of the Earn-Out Total Outstanding Shares. Earn-Out Shares will be issued from the Forfeiture Pool only if the applicable Triggering event occurs.
The Earn-Out Shares issuable to Sema4 Stockholders are accounted for as contingent consideration in accordance with ASC 805, Business Combinations. The contingent consideration is not considered indexed to the Company’s own stock and is therefore classified as a liability in the unaudited pro forma condensed combined balance sheet and will be remeasured to fair value at each reporting date (see Note 5(c)). The Earn-Out Shares issuable to Earn-Out Service Providers are accounted for as equity-classified, share-based compensation in accordance with ASC 718, Compensation–Stock Compensation, as the shares are subject to additional vesting conditions and continued employment.
The PIPE Investment
On February 9, 2021, concurrently with the execution of the Merger Agreement, CMLS entered into subscription agreements (collectively, the “Subscription Agreements”) with certain investors (collectively, the “PIPE Investors” which include certain existing Sema4 equity holders), pursuant to which the PIPE Investors have collectively subscribed for 35,000,000 shares of Common Stock for an aggregate purchase price equal to $350,000,000 (the “PIPE Investment”). The PIPE Investment will be consummated immediately prior to the closing of the Business Combination.
2.Basis of Presentation
The unaudited pro forma condensed combined financial statements were prepared in accordance with Article 11 of SEC Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” Release No. 33-10786 replaces the existing pro forma adjustment criteria with simplified requirements to depict the accounting for the transaction (“Transaction Accounting Adjustments”) and present the reasonably estimable synergies and other transaction effects that have occurred or reasonably expected to occur (“Management’s Adjustments”). CMLS has elected not to present Management’s Adjustments and will only be presenting Transaction Accounting Adjustments in the unaudited pro forma condensed combined financial statements. The adjustments presented in the unaudited pro forma condensed combined financial statements have been identified and presented to provide relevant information necessary for an understanding of the combined company upon consummation of the Business Combination and the PIPE Investment.
The unaudited pro forma condensed combined balance sheet as of March 31, 2021 gives effect to the Business Combination and the PIPE Investment as if they occurred on March 31, 2021. The unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2021 and the year ended December 31, 2020 give effect to the Business Combination and the PIPE Investment as if they occurred on January 1, 2020, the beginning of the earliest period presented.
The pro forma adjustments reflecting the consummation of the Business Combination and the PIPE Investment are based on certain currently available information and certain assumptions and methodologies that CMLS believes are reasonable under the circumstances. The pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments, and it is possible that the difference may be material. CMLS believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Business Combination and the PIPE Investment based on information available to management at this time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.
The unaudited pro forma condensed combined financial statements do not give effect to any anticipated synergies, operating efficiencies, tax savings, or cost savings that may be associated with the Business Combination. CMLS and Sema4 have not had any historical relationship prior to the Business Combination. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.
121
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The unaudited pro forma condensed combined financial information presents two redemption scenarios as follows:
•Assuming no Redemptions: This presentation assumes that no CMLS public stockholders exercise their rights to redeem any of their Public Shares for a pro rata portion of the funds in the Trust Account. Thus, the full amount held in the Trust Account as of Closing is available for the Business Combination, and Sema4 equity holders receive $243.8 million of Merger Consideration in cash at Closing.
•Assuming maximum Redemptions: This presentation assumes that CMLS public stockholders holding 29,474,795 shares of Class A common stock exercise their rights to redeem their Public Shares for a pro rata portion of the funds in the Trust Account. This scenario gives effect to redemptions of 29,474,795 shares of Class A common stock of CMLS for aggregate redemption payments of $294.7 million, using a per-share redemption price of $10.00, which is the maximum redemption amount after which the closing conditions of the Merger Agreement are still achieved. Under this maximum redemption scenario, Sema4 equity holders would not be entitled to receive any of their Merger Consideration in cash, and the closing cash payment amount under the Merger Agreement is $0. Additionally, 2,439,452 shares of Class B common stock would be forfeited by the Sponsor as a result of the maximum redemptions in accordance with the Forfeiture Agreement.
These unaudited pro forma condensed combined financial statements and related notes have been derived from and should be read in conjunction with:
•the (i) audited historical financial statements of CMLS as of December 31, 2020 and for the period from July 10, 2020 (inception) through December 31, 2020 and (ii) unaudited historical condensed financial statements of CMLS as of and for the three months ended March 31, 2021, and the related notes in each case, included elsewhere in this proxy statement/prospectus;
•the (i) audited historical financial statements of Sema4 as of and for the year ended December 31, 2020 and (ii) unaudited historical condensed financial statements of Sema4 as of and for the three months ended March 31, 2021, and the related notes in each case, included elsewhere in this proxy statement/prospectus; and
•the sections entitled “Sema4’s Management’s Discussion and Analysis of Financial Condition and Results of Operations of CMLS,” “Management’sand “GeneDx’s Management’s Discussion and Analysis of Financial Condition and Results of Operation of Sema4,”Operations” and the other financial information relating to CMLS and Sema4 included elsewhere in this proxy statement/prospectus.statement.
The completion of the Acquisition is subject to various closing conditions, including, among others, (i) approval by Sema4’s stockholders of the issuance of the Stock Consideration under the Merger Agreement, (ii) delivery of closing certificates, including the Closing Certificate, Allocation Schedule Certificate, and Good Standing Certificates, each as defined in the Merger Agreement, (iii) the accuracy of the representations of GeneDx and Sema4, (iv) the performance by GeneDx and Sema4 in all material respects of their respective obligations under the Merger Agreement, and (v) no material adverse effect, litigation, injunctions or restraints
The unaudited pro forma condensed combined financial statements assume that (i) the all proposals required to be approved under the Merger Agreement are approved by Sema4’s stockholders and (ii) all other Acquisition-related transactions are consummated. Management elected not to present any adjustments related to synergies or dis-synergies that may exist.
94

The unaudited pro forma combined financial statements have been prepared for illustrative purposes only and are not necessarilyintended to represent or be indicative of what the consolidated financial results of operations in future periods or the results that actually would have been achieved if Sema4 and GeneDx had been a combined company during the periods presented. The actual results of operations and financial position would have been hadmay differ significantly from the Business Combination and the PIPE Investment taken place on the dates indicated, nor are they indicativepro forma amounts reflected herein due to a variety of the future consolidated resultsfactors. The unaudited pro forma combined statement of operations does not reflect any operating efficiencies and/or financial position ofcost savings that Sema4 may achieve with respect to the combined company.
3.Accounting for the Business Combination
The Business CombinationAcquisition will be accounted for as a reverse recapitalization,using the acquisition method of accounting in accordance with GAAP.Accounting Standards Codification (“ASC”) 805 - Business Combinations. Under thisthe acquisition method of accounting, although CMLS will issue shares for outstanding equity intereststhe total purchase price is allocated to the tangible and identifiable intangible assets and liabilities assumed based on their relative fair values. The excess of Sema4 in the Business Combination, CMLS will be treated as the “acquired” company for financial reporting purposes. Accordingly, the Business Combination will be treated as the equivalent of Sema4 issuing stock forpurchase price over the net assets is recorded as goodwill. The purchase price allocations is preliminary because valuation of CMLS, accompanied by a recapitalization. Thethe net assets of CMLS will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prioris still being finalized. Accordingly, the pro forma adjustments related to the Business Combinationpurchase price allocations and certain other estimates, assumptions, and adjustments are preliminary and subject to change, which changes could be significant.
3. GeneDx Accounting Policies Historical Financial Statement Reclassification
GeneDx’s historical combined carve out financial statements were prepared in accordance with U.S. GAAP. Sema4 performed certain procedures for the purposes of identifying material differences in significant accounting policies between Sema4 and GeneDx, and any accounting adjustments that would be required in connection with adopting uniform policies. These procedures included a review of GeneDx’s standalone combined carve out financial statements and preliminary discussion with GeneDx management. Sema4 does not believe there are any differences in the accounting policies that will result in material adjustments to Sema4’s consolidated financial statements. Upon completion of the Acquisition, or as more information becomes available, Sema4 will perform a more detailed review of the GeneDx accounting policies. As a result of that review, differences could be thoseidentified between the accounting policies of the two companies that, when conformed, could have a material impact on the combined financial statements.
Additionally, $12.1 million included as selling, general and administrative in GeneDx’s historical financial information included within the unaudited pro forma combined financial information has been reclassified to selling and marketing to conform the presentation to that of Sema4.
Sema4 has been determined4. Adjustments to unaudited pro forma combined financial information
The adjustments included in the unaudited preliminary pro forma combined financial statements are as follows:
a)Estimated aggregate purchase price consideration and allocation:
The aggregate purchase price consideration is estimated to be the accounting acquirerapproximately $478.8 million as follows (in millions):
Cash Consideration$150.0
Less: Closing Net Working Capital Adjustment(10.2)
Cash Consideration (a1)
139.8
Add: Stock Consideration (a2)
323.2
Add: Fair value of Contingent Consideration (a3)
15.8
Aggregate Purchase Price Consideration$478.8
a1)This represents cash consideration estimated net of net working capital adjustment ($10.2 million) based on the evaluationclosing net working capital target of the following facts and circumstances under both the no and maximum Redemption scenarios:
•The former owners of Sema4 hold the largest portion of voting rights$22 million, as stated in the combined company;
•Sema4 has the right to appoint a majorityMerger Agreement. This cash consideration is offset by gross proceeds of the directors in the combined company;
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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
•Sema4’s existing senior management team will comprise senior management of the combined company;
•The operations of the combined company will represent the operations of Sema4;
•The combined company will assume Sema4’s name and headquarters.
4.Capitalization
The following summarizes the pro forma ownership of Class A common stock of CMLS following the Business Combination and PIPE Investment under both the no redemption and maximum redemption scenarios:
Scenario 1
Assuming No Redemptions		Scenario 2
Assuming Maximum Redemptions
Equity Capitalization SummaryShares%Shares%
Sema4 Equity Holders(1)
153,922,735 64.6 %178,304,22377.3 %
CMLS Public Stockholders(2)
44,275,000 18.6 %14,800,2056.4 %
CMLS Sponsor(3)
11,068,750 4.6 %8,629,2983.7 %
New PIPE Investors(4)
29,000,000 12.2 %29,000,00012.6 %
Total Class A common stock238,266,485 100.0 %230,733,726100.0 %
__________________
(1)Under Scenario 1, assumes Stock Consideration of 147,922,735$200 million which is based on 50 million shares of Class A common stock at a price of $4.00 per share in accordance with the Subscription Agreements that have been entered into with PIPE investors. The $200 million gross proceeds are offset by the estimated incremental transaction costs to be paid by Sema4 for $11 million, resulting in an approximately $49 million adjustment to cash and cash considerationequivalents.
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a2)80 million shares of $243.8 million, as well as 6,000,000 shares ofSema4 Class A common stock purchasedwill be issued to the seller upon closing of the Acquisition. We estimated the Stock Consideration based on a per share price of $4.04, which was the closing price of the Class A common stock on January 14, 2022, the date the Merger Agreement was signed.
a3)The fair value of the $15.8 million Milestone Payment is estimated using a Monte Carlo simulation valuation model. Pay-out of this consideration is dependent upon GeneDx achieving 2022 and 2023 revenue target of $163 million and $219 million, respectively.
The purchase price allocations for the assets acquired and liabilities assumed are based on preliminary valuations and are subject to change as we obtain additional information (in thousands).
Cash and cash equivalents$144 
Accounts receivables, net20,341 
Inventory7,828 
Other current assetsd24,632 
Non-current assetsb1,b2,c28,330 
Current liabilitiesb3(21,533)
Deferred tax liabilitiesb4,c(66,876)
Fair value of net assets acquired(27,134)
Goodwillf288,960 
Identifiable Intangiblee217,000 
Aggregate purchase pricea$478,826 
Pro Forma-10% change+10% change
Price per share$4.04$3.64$4.44
Purchase price (in thousands)$478,826$446,506$511,146
$ change vs pro forma (in thousands)n/a$(32,320)$32,320
The estimated value of the purchase price consideration does not purport to represent the actual value of the total Merger Consideration that will be paid when the Acquisition is completed. The Stock Consideration will be remeasured at the closing date at the then-current market price. The value we use then will result in a per share value difference from the $4.04 per share assumed in the calculation, and that difference may be material. For example, an increase or decrease of 10% in the closing price of shares of Sema4’s Class A common stock from the closing price assumed in these unaudited pro forma combined financial statements would change the value of the purchase price by existingapproximately $32.3 million.
b)Elimination of GeneDx’s historical balance sheet accounts that are not acquired or assumed by Sema4:
b1)As part of the pre-closing condition, GeneDx will exit the joint venture investment that had a carrying value of $0.2 million. Therefore, the related investment balance and impairment loss of $0.04 million is eliminated.
b2)Represents adjustment to eliminate the carrying value of intercompany receivables.
b3)Represents adjustment to eliminate the income tax payable.
b4)Deferred tax liabilities of $24.1 million were adjusted due to certain deferred tax assets being absorbed by OPKO and the write off of historical intangible assets. Therefore, they do not carry over. Additionally, there are deferred tax liabilities recorded for $66.9 million related to intangible assets that will result in the release of Sema4’s valuation allowance in a corresponding amount. The impact of the valuation allowance release is reflected in the unaudited pro forma combined statement of operations as well as the accumulated deficit.
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b5)Represents adjustment to eliminate the prepaid bonus of GeneDx executives.
c)This adjustment relates to eliminating the affect of the ASC 842, Leases (“ASC 842”) which was adopted by GeneDx because Sema4 equity holdersdid not adopt the ASC 842 as of December 31, 2021. Therefore, the adjustment removed the carrying value of the right of use assets ($5.8 million) and lease liabilities ($9.9 million). As an emerging growth company, the Company elected to adopt the ASC 842 under the extended transition period available, which will be effective for the annual period beginning on January 1, 2022 and all interim periods within the year ended December 31, 2023. Early adoption is permitted.
d)Adjustment of GeneDx’s historical income statement accounts relates to the following (in millions):
d1)Adjustment of $7.2 million of selling and marketing expense is primarily related to the amortization expense of identifiable intangible assets (e2) and stock-based compensation adjustment (d3).
d2)Adjustment of $11.1 million of general and administrative expense is primarily related to the amortization expense of identifiable intangible assets (e2) and stock-based compensation adjustment (d3).
d3)Stock-based compensation adjustment represents estimated $6.2 million of Sema4 stock awards that are agreed to be granted to certain executives once the transaction closes. We only considered the contingent grants made to certain GeneDx executives who are continuing their employment with Sema4. The grant date fair value for options were calculated using a Black-Scholes option-pricing model, using the closing share price as of January 14, 2022 of $4.04, risk free rate of 1.64%, expected life of 5.5 years, volatility 65.2% and dividend yield of zero. The fair value of the restricted stock units are calculated using Sema4’s closing share price as of January 14, 2022, $4.04. The expense is reduced by $1.2 million of stock-based compensation recorded for the executives and reflected in GeneDx financial information under their current employment agreement with GeneDx.
d4)Income tax benefit of $12.5 million is eliminated as we expect GeneDx’s parent company to absorb this benefit. In addition, we adjust for $66.9 million of income tax benefit related to the deferred tax liabilities of identifiable intangible assets created in connection with the PIPE Investment. Under Scenario 2, assumes Stock ConsiderationAcquisition.
e)Reflects the adjustment to record the fair values of 172,304,223 shares of Class A common stock and no cash consideration, as well as 6,000,000 shares of Class A common stock purchased by existing Sema4 equity holdersthe identifiable intangible assets created in connection with the PIPE Investment.Acquisition.
(2)Under Scenario 2, assumes redemptionsThe fair value of 29,474,795 sharesGeneDx’s trade name and trademarks and developed technology intangible assets were determined using the relief from royalty method under the income approach, which estimates the cost savings generated by a company related to the ownership of Class A common stockan asset for which it would otherwise have had to pay royalties or license fees on revenues earned through the use of CMLS for aggregate Redemption paymentsthe asset. The discount rate used is determined at the time of $294.7 millionmeasurement based on an analysis of the implied internal rate of return of the transaction, weighted average cost of capital, and weighted average return on assets.
The fair value of the customer relationships was calculated using a per-share redemption price of $10.00.
(3)Under Scenario 2, assumes 2,439,452 Sponsor Class B Shares are forfeited pursuant to the Sponsor Forfeiture Agreement asmulti-period excess earnings method, a result of redemptions by CMLS public stockholders and, thus, are not converted into Class A common stock at Closing.
(4)Under Scenario 1 and Scenario 2, assumes the PIPE Investment is consummated in accordance with its terms for aggregate proceeds of $350.0 million in connection with the issuance of 35,000,000 shares of Class A common stock, with 29,000,000 shares purchased by new PIPE Investors and 6,000,000 shares purchased by existing Sema4 equity holders as noted in (1) above. The shares purchased by new PIPE Investors includes 9,500,000 shares purchased by funds that are advised by affiliatesform of the Sponsor.
1.
5.Adjustmentsincome approach, which incorporates the estimated future cash flows to Unaudited Pro Forma Condensed Combined Balance Sheet asbe generated from GeneDx’s existing customer base. Excess earnings are the earnings remaining after deducting the market rates of March 31, 2021
return on the estimated values of contributory assets, including debt-free net working capital, tangible assets, and other identifiable intangible assets. The pro forma notesexcess earnings are thereby calculated for each year of a multi-year projection period and adjustments, based on preliminary estimates that could change materially as additional information is obtained, are as follows:
Pro forma notes
(A)Derived fromdiscounted to present value. The primary components of this method consist of the unaudited condensed balance sheetcustomer attrition rate, determination of CMLS asexcess earnings, and an appropriate rate of March 31, 2021.
(B)Derived from the unaudited condensed balance sheet of Sema4 as of March 31, 2021.return.
12397
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Pro forma adjustmentsThe following table summarizes the estimated fair values of GeneDx’s identifiable intangible assets and their estimated useful lives determined (in million):
Useful Life (in years)Estimated Fair ValueAnnual Amortization
Trade Names and Trademarks (General and administrative)17 $32.0 $1.9 
Developed Technology (General and administrative)9 50.0 5.6 
Customer Relationships (Selling and marketing)20 135.0 6.8 
Total217.0 $14.3 e2)
Less: Historic GeneDx Intangible Assets(166.9)(16.8)e3)
Pro forma adjustment$50.1 e1
(a)e3)To reflectRepresents adjustment to eliminate the net cash proceedsamortization of historic GeneDx intangible assets of $16.8 million.
f)Based on the preliminary purchase price allocations performed, the estimated goodwill of $289.0 million is recognized from the Business CombinationAcquisition resulting the adjustment of $7.0 million. The historic GeneDx goodwill of $282.0 million is eliminated.
g)Represents elimination of GeneDx’s historical additional paid-in capital and adjustment to Sema4’s common stock and additional paid capital for the stock considerations and PIPE Investment as followsfinancing (in thousands):millions).
Additional paid-in capitalAmount
Elimination of GeneDx historical additional paid-in capital$(660.5)
Release of Trust AccountStock consideration a2)323.2 
PIPE financing a1)199.9 
PIPE financing cost a1)(10.9)
Total$442,775 5(b)
Proceeds from PIPE Investment350,000 5(h)
Payment of cash consideration(243,815)5(h)
Payment of transaction expenses(42,116)5(h)
Payment of CMLS deferred underwriting fee payable(15,496)5(e)
Settlement of Sema4 stock appreciation rights(3,800)5(h)
Repayment of Sema4 long-term debt(12,598)5(c)
Payment of early-payment penalties on Sema4 long-term debt(322)5(h)
Cash and cash equivalents$474,628 (148.3)
(b)To reflect the release of $442.8 million from the Trust Account (see Note 5(a)).
(c)To reflect the repayment of $12.6 million of Sema4’s long-term debt, including $1.8 million classified as current and $10.8 million classified as non-current (see Note 5(a)).
(d)To record contingent consideration for the estimated fair value of the Earn-Out Shares to be issued to Sema4 equity holders upon the achievement of the Triggering Events, assuming no Earn-Out Forfeitures by Earn-Out Service Providers (see Note 5(h)).
(e)To reflect the settlement of $15.5 million of deferred underwriting fees incurred during CMLS’s IPO that are contractually due upon completion of the Business Combination (see Note 5(a)).
(f)To reflect the exchange of $334.4 million of Sema4’s redeemable convertible preferred stock as a result of the Business Combination (see Note 5(h)).
(g)In Scenario 1, which assumes no CMLS Public Shares are redeemed, the CMLS ordinary shares subject to possible redemption of $294.7 million would be reclassified to permanent equity immediately prior to the consummation of the Business Combination (see Note 5(h)).
(h)To reflect the recapitalization of the combined company through the exchange of all of the outstanding share capital of Sema4 for Class A common stock of CMLS and the following equity transactions (in thousands):
Exchange of Sema4 redeemable convertible preferred stock$334,439 5(f)
Reclassification of CMLS common stock subject to possible redemption294,748 5(g)
Proceeds from PIPE Investment350,000 5(a)
Payment of cash consideration(243,815)5(a)
Payment of transaction expenses(42,116)5(a)
Contingent consideration(199,962)5(d)
Settlement of Sema4 stock appreciation rights(3,800)5(a)
Payment of early-payment penalties on Sema4 long-term debt(322)5(a)
Total stockholders' equity$489,172 
(i)In Scenario 2, which assumes the maximum number of shares are redeemed for cash by the CMLS Public Shareholders, $294.7 million would be paid out in cash. The $294.7 million or 29,474,795 shares of CMLS Class A common stock represents the maximum redemption amount after which the closing conditions of the Merger Agreement are still achieved. Additionally, no cash consideration would be paid to Sema4 equity holders, resulting in an offsetting adjustment of $243.8 million.
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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
6.Adjustments to Unaudited Pro Forma Condensed Combined Statements of Operations for the Three Months Ended March 31, 2021 and the Year Ended December 31, 2020
The pro forma notes and adjustments, based on preliminary estimates that could change materially as additional information is obtained, are as follows:
Pro forma notes
(A)Derived from the unaudited condensed statement of operations of CMLS for the three months ended March 31, 2021.
(B)Derived from the unaudited condensed statement of operations of Sema4 for the three months ended March 31, 2021.
(C)Derived from the audited statement of operations of CMLS for the period from July 10, 2020 (inception) through December 31, 2020.
(D)Derived from the audited statement of operations of Sema4 for the year ended December 31, 2020.
Pro forma adjustments
(a)To reflect an accrual of $4.4 million for additional transaction costs which do not qualify for capitalization and the recognition of $3.8 million of unrecognized compensation expense related to the settlement of Sema4 stock appreciation rights.
(b)To recognize the payment of early-payment penalties on Sema4’s long-term debt to be repaid upon closing of the Business Combination.
(c)To eliminate interest income earned on the Trust Account which will be released upon closing of the Business Combination.
(d)The pro forma basic and diluted earnings per share amounts presented in the unaudited pro forma condensed combined statements of operations are based upon the number of CMLS shares outstanding at the closing of the Business Combination and PIPE Investment, assuming the Business Combination and PIPE Investment occurred on January 1, 2020. As the unaudited pro forma condensed combined statements of operations are in a loss position, anti-dilutive instruments were not included in the calculation of diluted weighted average number of common shares outstanding.
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COMPARATIVE SHARE INFORMATION
The following table sets forth historical comparative per share information of CMLSSema4 and Sema4,GeneDx, each on a stand-alone basis, and the unaudited pro forma condensed combined per share information after giving effect to the Business CombinationAcquisition and the PIPE Investment, assuming no redemptions and maximum redemptions, respectively.Investment.
The historical information should be read in conjunction with the information in the sections entitled “Selected Historical Financial Information of the Company” and “Selected Historical Financial Information of Sema4” and the historical financial statements of CMLSSema4 and Sema4GeneDx included elsewhere in this proxy statement. The unaudited pro forma condensed combined per share information is derived from, and should be read in conjunction with, the information contained in the section of this proxy statement entitled “Unaudited Pro Forma Condensed Combined Financial Information.”
The unaudited pro forma combined per share information does not purport to represent what the actual results of operations of the Company would have been had the Business CombinationAcquisition been completed or project CMLS’sSema4’s and Sema4’sGeneDx’s results of operations that may be achieved after the Business Combination.Acquisition.
For the year ended December 31, 2021For the year ended December 31, 2021HistoricalPro Forma
(in thousands, except share and per share amounts)(in thousands, except share and per share amounts)HistoricalPro Forma(in thousands, except share and per share amounts)Sema4GeneDxSema4
For the three months ended March 31, 2021CMLSSema4Scenario 1 Assuming No RedemptionsScenario 2 Assuming Maximum Redemptions
Net lossNet loss$(58,472)$(190,993)$(249,476)$(249,476)Net loss$(245,390)$(36,892)$(229,432)
Net loss available to common stockholdersNet loss available to common stockholders$(58,472)$(43)$(249,476)$(249,476)Net loss available to common stockholders$(245,390)$(36,892)$(229,432)
Weighted average common shares outstanding, basic and dilutedWeighted average common shares outstanding, basic and diluted11,068,750 1 238,266,485 230,733,726 Weighted average common shares outstanding, basic and diluted108,077,439 — 238,077,439 
Net loss per share attributable to common stockholders, basic and dilutedNet loss per share attributable to common stockholders, basic and diluted$(5.28)$(43,000.00)$(1.05)$(1.08)Net loss per share attributable to common stockholders, basic and diluted$(2.27)$— $(0.96)
For the year ended December 31, 2020
Net loss$(39,908)$(241,340)$(289,759)$(289,759)
Net loss available to common stockholders$(39,908)$(5,824)$(289,759)$(289,759)
Weighted average common shares outstanding, basic and diluted10,633,062 1 238,266,485 230,733,726 
Net loss per share attributable to common stockholders, basic and diluted$(3.75)$(5,824,000.00)$(1.22)$(1.26)
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SPECIAL MEETING OF COMPANY STOCKHOLDERS
This proxy statement is being provided to Company stockholders as part of a solicitation of proxies by the Board for use at the Special Meeting of Stockholders to be held on [            ], 2021,April 27, 2022, and at any adjournment or postponement thereof. This proxy statement contains important information regarding the Special Meeting, the proposals on which you are being asked to vote and information you may find useful in determining how to vote and voting procedures.
This proxy statement is being first mailed on or about [            ], 2021March 31, 2022 to all stockholders of record of the Company as of June 21, 2021,March 22, 2022, the record date for the Special Meeting. Stockholders of record who owned CompanyClass A common stock at the close of business on the record date are entitled to receive notice of, attend and vote at the Special Meeting. On the record date, there were 55,343,750245,016,425 shares of CompanyClass A common stock outstanding.
Date and Time of Special Meeting
The Special Meeting will be held on [            ], 2021April 27, 2022 at [            ]9:00 a.m. Eastern time at [            ],www.virtualshareholdermeeting.com/SMFR2022SM, or at such other date, time and place to which such meeting may be adjourned or postponed, to consider and vote upon the proposals. The Special Meeting will be conducted exclusively via live webcast and so stockholders will not be able to attend the meeting in person. Stockholders may attend the special meetingSpecial Meeting online and vote at the Special Meeting by visiting https://www.cstproxy.com/CMLS/sm2021www.virtualshareholdermeeting.com/SMFR2022SM and entering your 12-digit control number, which is either included on the proxy card you received or obtained through Continental Stock Transfer & Trust Company.
Registering forAttending the Special Meeting
Any stockholder wishing to attend the virtual meeting should register for the meeting by [            ], 2021. To register for the Special Meeting, please follow these instructions as applicable to the nature of your ownership of our common stock:
•If your shares are registered in your name with Continental Stock Transfer & Trust Company and you wish to attend the online-only Special Meeting, go to https://www.cstproxy.com/CMLS/sm2021,www.virtualshareholdermeeting.com/SMFR2022SM, and enter the 12-digit control number included on your proxy card or notice of the meeting and click on the “Click here to preregister for the online meeting” link at the top of the page. Just prior to the start of the meeting you will need to log back into the meeting site using your control number. Pre-registration is recommended but is not required in order to attend.meeting.
•Beneficial stockholders (those holding shares through a stock brokerage account or by a bank or other holder of record)nominee) who wish to attend the virtual meeting must obtain a legal proxy by contacting their account representative at the bank, broker, or other nominee that holds their shares and e-mail a copy (a legible photograph is sufficient) of their legal proxy to proxy@continentalstock.com. Beneficial stockholders who e-mail a valid legal proxy will be issued a 12-digit meeting control number that will allow them to register to attend and participate in the Special Meeting. After contacting Continental Stock Transfer & Trust Company, a beneficial holder will receive an e-mail prior to the meeting with a link and instructions for entering the virtual meeting. Beneficial stockholders should contact Continental Stock Transfer & Trust Company at least five (5) business days prior to the meeting date in order to ensure access.
Voting Power; Record Date
As a stockholder of the Company, you have a right to vote on certain matters affecting the Company. The proposals that will be presented at the Special Meeting and upon which you are being asked to vote are summarized below and fully set forth in this proxy statement. You will be entitled to vote or direct votes to be cast at the Special Meeting if you owned shares of our Class A common stock at the close of business on June 21, 2021,March 22, 2022, which is the record date for the Special Meeting. You are entitled to one vote for each share of our Class A common stock that you owned as of the close of business on the record date. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker, bank or other nominee to ensure that votes related to the shares you beneficially own are properly counted. On the record date, there were 55,343,750245,016,425 shares of Class A common stock outstanding.
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outstanding, of which 44,275,000 are public shares and 11,068,750 are Founder Shares held by our Initial Stockholders.
Proposals at the Special Meeting
At the Special Meeting, Company stockholders will vote on the following proposals:
•Proposal No. 1 —- The Business CombinationStock Consideration Issuance Proposal —- To approve the issuance of the Company’s Class A common stock in connection with the Acquisition and adoptas contemplated by the Merger Agreement a copyfor purposes of which is attached to this proxy statement as Annex A, and approve the transactions contemplated thereby, including the merger of Merger Subcomplying with and into Sema4, with Sema4 surviving the merger as a wholly owned subsidiary of the Company, and the issuance of common stock to holders of Sema4 capital stock as merger consideration;applicable Nasdaq Listing Rules;
•Proposal No. 2 —- The Nasdaq Stock IssuancePIPE Investment Proposal —- To approve for purposes of complying with applicable listing rules of Nasdaq, the issuance of more than 20% of the Company’s outstandingClass A common stock in connection with the Business CombinationPIPE Investment and as contemplated by the Subscription Agreements including up to 35,000,000 sharesfor purposes of our common stock tocomplying with the PIPE Investors, which includes affiliates of our Sponsor that subscribed for 9,500,000 shares of common stock, and up to 6,000,000 shares of our common stock to holders of Sema4 capital stock;Nasdaq Listing Rules;
•Proposal No. 3 —- The Special Designee Director Election Proposal - Assuming the Stock Consideration Issuance Proposal and the Charter Amendment Proposal are approved and adopted and the Acquisition is consummated, to appoint two directors who will become directors of the Company effective upon the consummation of the Acquisition;
•Proposal No. 4 - The Charter ApprovalAmendment Proposal - — To adopt the proposed Amended and Restated Certificate of IncorporationAmendment to the Charter, in the form attached hereto as Annex B;
•Proposal No. 4 — Governance Proposal — To approve, on a non-binding advisory basis, a separate proposal with respectB, which increases the number of authorized shares of Class A common stock from 380,000,000 to certain governance provisions in the Amended and Restated Certificate of Incorporation in accordance with SEC requirements;1,000,000,000;
•Proposal No. 5 — Incentive Plan- The Class I Director Election Proposal —- To approve the Incentive Plan, including the authorizationelect three Class I directors of the initial share reserve underCompany, each to serve a three-year term expiring at the Incentive Plan;Company’s 2025 annual meeting of stockholders and until such director’s successor is duly elected and qualified;
•Proposal No. 6 — ESPP- The Auditor Ratification Proposal —- To approveratify the ESPP, includingappointment of Ernst & Young LLP as the authorization ofCompany’s independent registered public accounting firm for the initial share reserve under the ESPP;fiscal year ending December 31, 2022;
•Proposal No. 7 — The Director Election Proposal — To consider and vote upon Director Election Proposal; and
•Proposal No. 8 —- Adjournment Proposal —- To approve, if necessary, the adjournment of the Special Meeting to a later date or dates to permit further solicitation and votes of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approvalany of the Business Combination Proposal, the Nasdaq Stock Issuance Proposal, the Charter Approval Proposal, the Incentive Plan Proposal or the ESPP Proposal. This proposal will only beproposals presented at the Special Meeting if there are not sufficient votes to approve the Business Combination Proposal, the Nasdaq Stock Issuance Proposal, the Charter Approval Proposal, the Incentive Plan Proposal or the ESPP Proposal.
•Proposal No. 9 — Adjournment Proposal --- The ratification of Withum as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020.Meeting.
THE BOARD RECOMMENDS THAT YOU VOTE “FOR” EACH OF THESE PROPOSALS.
Vote of the Company’s Sponsor, Directors and Officers
Prior to our IPO, we entered into agreements with our Initial Stockholders, other current directors and officers, pursuant to which each agreed to vote any shares of common stock owned by them in favor of an initial business combination. These agreements apply to our Initial Stockholders, including our Sponsor, as it relates to the Founder Shares and the requirement to vote all of the Founder Shares in favor of the Business Combination Proposal and for all other proposals to be presented to our stockholders at the Special Meeting and described in this proxy statement.
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Our Initial Stockholders, other current directors and officers have waived any redemption rights, including with respect to shares of common stock purchased in our IPO or in the aftermarket, in connection with Business Combination. The Founder Shares held by our Initial Stockholders have no redemption rights upon our liquidation and will be worthless if no business combination is effected by us by the applicable deadline. However, our Initial Stockholders are entitled to redemption rights upon our liquidation with respect to any public shares they may own.
Quorum and Required Vote for Proposals for the Special Meeting
A quorum of Company stockholders is necessary to hold a valid meeting. A quorum will be present at the Special Meeting if a majority of the Company’s Class A common stock outstanding on the record date and entitled to vote at the Special Meeting is represented in person or by proxy. Abstentions and broker non-votes will count as present for the purposes of establishing a quorum.
The approval of the Business Combination Proposal, the Nasdaq Stock Consideration Issuance Proposal, the Governance Proposal, which is a non-binding advisory vote, the Incentive PlanPIPE Investment Proposal, the ESPPSpecial Designee Director Election Proposal, the Class I Director Election Proposal, the Auditor Ratification Proposal and the Adjournment Proposal requires the affirmative vote of a majority of the votes cast by holders of our Class A common stock represented in person or by proxy and entitled to vote at the Special Meeting. The approval of the Charter ApprovalAmendment Proposal requires the affirmative vote of holders of a majority of our outstanding shares of Class A common stock entitled to vote thereon at the Special Meeting.
Under these voting standards, a failure to vote, a broker non-vote or an abstention will have no effect on the Business Combination Proposal, the GovernanceStock Consideration Issuance Proposal and the Adjournment Proposal. However, an abstention, a broker non-vote or failure to vote will have the same effect as a vote “AGAINST” the Charter ApprovalAmendment Proposal.
The transactions contemplated by the Merger Agreement will be consummated only if the Business Combination Proposal, the Nasdaq Stock Consideration Issuance Proposal, the Charter Approval Proposal and the Incentive Plan ProposalCharter Amendment proposal are approved at the Special Meeting. The proposals in this proxy statement (other than the Governance Proposal, the Auditor Ratification PIPE Investment
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Proposal and the Adjournment Proposal)Special Designee Director Election Proposal are conditioned on theupon stockholders’ approval of the Business CombinationStock Consideration Issuance Proposal and the other condition precedent proposals.Charter Amendment Proposal.
It is important for you to note that in the event that the Business Combination Proposal, the Nasdaq Stock Consideration Issuance Proposal and the Charter Approval Proposal, the ESPP Proposal or the Incentive PlanAmendment Proposal do not receive the requisite vote for approval, we will not consummate the Business Combination. If we do not consummate the Business Combination and fail to complete an initial business combination by the applicable deadline, we will be required to dissolve and liquidate our Trust Account by returning the then remaining funds in such account to our public stockholders.Acquisition.
Recommendation to Company Stockholders
Our Board believes that each of the Business Combination Proposal, the Nasdaq Stock Consideration Issuance Proposal, the Charter ApprovalPIPE Investment Proposal, the GovernanceSpecial Designee Director Election Proposal, the Incentive PlanCharter Amendment Proposal, the ESPP Proposal, theClass I Director Election Proposal, the Auditor Ratification Proposal and the Adjournment Proposal to be presented at the Special Meeting is in the best interests of the Company and our stockholders and recommends that its stockholders vote “FOR” each of the proposals.
When you considerOur directors and executive officers have no substantial interests, directly or indirectly, in the recommendationmatters set forth in the Acquisition (A) except to the extent of: (i) their ownership of shares of our Class A common stock (or rights to acquire shares), and (ii) that each officer and director are expected to be employed by and will continue to serve on Sema4’s Board in favor of approval offollowing the Business Combination Proposal, you should keep in mind that our Sponsor and certain members of our Board and officers have interestsAcquisition (assuming, in the Business Combinationcase of Mr. Casdin, Mr. Ruch and Mr. Pellini, that each are different from or in additionre-elected pursuant to (orProposal No. 5), for which may conflict with) your interests as a stockholder. Stockholders should take these interests into account in deciding whether to approve the proposals presented at the Special Meeting, including the Business Combination Proposal. These interests include, among other things:
•the fact that our Initial Stockholders have agreed not to redeem any of the Founder Sharesthey each receive cash and equity compensation, and (B) in connection with a stockholder vote to approve the Business Combination;PIPE Investment.
•In connection with the fact that our Initial Stockholders will retain 11,068,750 Founder Shares uponAcquisition, the Closing;
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•the fact that our Initial Stockholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if we fail to complete an initial business combination by the applicable deadline;
•if the Trust Account is liquidated, including in the event we are unable to complete an initial business combination within the required time period, our SponsorCompany has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into an acquisition agreement or claims of any third party (other than our independent public accountants) for services rendered or products sold to us, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account;
•the continued indemnification of our existing directors and officers and the continuation of our directors’ and officers’ liability insurance after the Business Combination;
•the fact that the fact that Joshua Ruch, Michael Pellini and Rachel Sherman may join as board members of the post-combination company (dependent on the approval of the Director Election Proposal), and Nat Turner, Emily Leproust and Eli Casdin will continue as board members of the post-combination company, and each shall be entitled to receive compensation for serving on the board of directors of the post-combination company;
•the fact that our Sponsor, officers and directors will lose their entire investment in us and will not be reimbursed for any out-of-pocket expenses if an initial business combination is not consummated by the applicable deadline;
•that Corvex Master Fund LP, Corvex Select Equity Master Fund LP, Corvex Dynamic Equity Select Master Fund LP, and JS Capital LP, funds that are advised by an affiliate of the Sponsor, have entered into Subscription Agreements with the Company, pursuant to which such affiliates have committed to purchase 240,000; 3,696,000; 64,000; and 500,000 shares of common stock in the PIPE Investment, respectively, for an aggregate commitment of approximately $2,400,000; $36,960,000; $640,000; $5,000,000, respectively; and
•that Casdin Partners Master Fund, L.P., a fund that is advised by an affiliateInvestors. The PIPE Investors include certain existing equity holders of the Sponsor, has entered into a Subscription AgreementCompany, some of whom are affiliated with certain directors of the Company, pursuant to which the affiliate has committed to purchase 5,000,000 shares of common stock in the PIPE Investment for an aggregate commitment of approximately $50,000,000.Company. For more information, see “Certain Relationships and Related Party Transactions”.
Abstentions and Broker Non-Votes
Abstentions are considered present for the purposes of establishing a quorum. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” the Charter ApprovalAmendment Proposal, but will have no effect on the Business Combination Proposal, the Nasdaq Stock Consideration Issuance Proposal, the GovernancePIPE Investment Proposal, the Incentive PlanSpecial Designee Director Election Proposal, the ESPP Proposal, theClass I Director Election Proposal, the Auditor Ratification Proposal and the Adjournment Proposal.
In general, if your shares are held in “street” name and you do not instruct your broker, bank or other nominee on a timely basis on how to vote your shares, your broker, bank or other nominee, in its sole discretion, may either leave your shares unvoted or vote your shares on routine matters, but not on any non-routine matters. None of the proposals at the Special Meeting are routine matters.matters, other than the Auditor Ratification Proposal As such, without your voting instructions, your brokerage firm cannot vote your shares on any proposal to be voted on at the Special Meeting.Meeting other than the Auditor Ratification Proposal.
Voting Your Shares —- Stockholders of Record
If you are a Company stockholder of record, you may vote by mail, through the Internet or at the Special Meeting. Each share of our Class A common stock that you own in your name entitles you to one vote on each of the proposals for the Special Meeting. Your one or more proxy cards show the number of shares of our Class A common stock that you own.
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Voting by Mail— - You can vote your shares by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided. By signing the proxy card and returning it in the enclosed prepaid and addressed envelope, you are authorizing the individuals named on the proxy card to vote your shares at the Special Meeting in the manner you indicate. We encourage you to sign and return the proxy card even if you plan to attend the Special Meeting so that your shares will be voted if you are unable to attend the Special Meeting. If you receive more than one proxy card, it is an indication that your shares are held in multiple accounts. Please sign and return all proxy cards to ensure that all of your shares are voted. If you sign and return the proxy card but do not give instructions on how to vote your shares, your shares of our Class A common stock will be voted as recommended by our Board. Our Board recommends
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Voting by Internet - All stockholders of record can vote through the Internet using the procedures and instructions described on the proxy card. Street name holders may vote by Internet if their bank or broker makes those methods available, in which case the bank or broker will enclose the instructions with the proxy materials. The Internet voting “FOR” the Business Combination Proposal, “FOR” the Nasdaq Stock Issuance Proposal, “FOR” the Charter Approval Proposal, “FOR” the Governance Proposal, “FOR” the Incentive Plan Proposal, “FOR” the ESPP Proposal, “FOR” the Director Election Proposal, “FOR” the Adjournment Proposalprocedures are designed to authenticate stockholders’ identities, allow stockholders to vote their shares and “FOR” the Auditor Ratification Proposal. Votes submitted by mail must be received by 11:59 pm Eastern time on [            ], 2021.to confirm that their instructions have been properly recorded.
Voting at the Meeting —- We will be hosting the Special Meeting via live webcast. If you attend the Special Meeting, you may submit your vote at the Special Meeting online at https://www.cstproxy.com/cmls/sm2021,www.virtualshareholdermeeting.com/SMFR2022SM, in which case any votes that you previously submitted will be superseded by the vote that you cast at the Special Meeting. See “— Registering for“—Attending the Special Meeting”Meeting” above for further details on how to attend the Special Meeting.
Our Board recommends voting “FOR” the Stock Consideration Issuance Proposal, “FOR” the PIPE Investment Proposal, “FOR” the Special Designee Director Election Proposal, “FOR” the Charter Amendment Proposal, “FOR” the Class I Director Election Proposal, “FOR” the Auditor Ratification Proposal and “FOR” the Adjournment Proposal. Votes submitted by mail must be received by 11:59 pm Eastern time on April 25, 2022.
Voting Your Shares —- Beneficial Owners
If your shares are held in an account at a brokerage firm, bank or other nominee, then you are the beneficial owner of shares held in “street name” and this proxy statement is being sent to you by that broker, bank or other nominee. The broker, bank or other nominee holding your account is considered to be the stockholder of record for purposes of voting at the Special Meeting. As a beneficial owner, you have the right to direct your broker, bank or other nominee regarding how to vote the shares in your account by following the instructions that the broker, bank or other nominee provides you along with this proxy statement. As a beneficial owner, if you wish to vote at the Special Meeting, you will need to obtain a legal proxy from your bank, broker, or other nominee and e-mail a copy (a legible photograph is sufficient) of such legal proxy to proxy@continentalstock.com. You will then be issued a 12-digit meeting control number that will allow you to register to attend and participate in the Special Meeting. Please see “— Registering forAttending the Special Meeting”Meeting” above for further details on how to attend the special meeting.Special Meeting.
Revoking Your Proxy
If you give a proxy, you may revoke it at any time before the Special Meeting or at the Special Meeting by doing any one of the following:
•delivering a signed written notice of revocation to our Secretary at CM Life Sciences, Inc.Sema4 Holdings Corp., 667 Madison Ave, New York, NY 10065,333 Ludlow Street, North Tower, 8th Floor, Stamford, Connecticut 06902, bearing a date later than the date of the proxy, stating that the proxy is revoked;
•signing and delivering a new proxy, relating to the same shares and bearing a later date;
•submitting another proxy over the Internet prior to 11:59 p.m., Eastern Time on April 26, 2022; or
•attending and voting at the Special Meeting and voting, although attendance at the special meetingSpecial Meeting will not, by itself, revoke a proxy.
If you are a beneficial owner of our Class A common stock as of the close of business on the record date, you must follow the instructions of your broker, bank or other nominee to revoke or change your voting instructions.
No Additional Matters
The Special Meeting has been called only to consider the approval of the Business Combination Proposal, the Nasdaq Stock Consideration Issuance Proposal, the Charter ApprovalPIPE Investment Proposal, the GovernanceSpecial Designee Director Election Proposal, the Incentive PlanCharter Amendment Proposal, the ESPP Proposal, theClass I Director Election Proposal, the Auditor Ratification Proposal and the Adjournment Proposal. Under our bylaws, other than procedural matters incident to the conduct of the Special Meeting, no other
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matters may be considered at the Special Meeting if they are not included in this proxy statement, which serves as the notice of the Special Meeting.
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Who Can Answer Your Questions About Voting
If you have any questions about how to vote or direct a vote in respect of your shares of our Class A common stock, you may contact D.F. King, our proxy solicitor, at:
D.F. King & Co., Inc.
48 Wall Street, 22nd Floor
New York, NY 10005
Stockholders Call (toll-free): (800) 967-5074735-3591
Banks and Brokers Call: (212) 269-5550
Email: CMLF@dfking.com
Redemption Rights
Pursuant to our current certificate of incorporation, we are providing our public stockholders with the opportunity to redeem, upon the Closing, shares of common stock for cash equal to the pro rata share of the aggregate amount on deposit (as of two business days prior to the Closing) in the Trust Account that holds the proceeds of our IPO (including interest not previously released to the Company to pay franchise and income taxes), subject to certain limitations. For illustrative purposes, based on the balance of the Trust Account of approximately $442 million as of January 29, 2021, the estimated per share redemption price would have been approximately $10.00. Public stockholders may elect to redeem their shares even if they vote for the Business Combination. Any request to redeem public shares, once made, may be withdrawn at any time until the deadline for exercising redemption requests and thereafter, with our consent, until the Closing. If we receive valid redemption requests from holders of public shares prior to the redemption deadline, we may, at our sole discretion, following the redemption deadline and until the date of Closing, seek and permit withdrawals by one or more of such holders of their redemption requests. We may select which holders to seek such withdrawals of redemption requests from based on any factors we may deem relevant, and the purpose of seeking such withdrawals may be to increase the funds held in the Trust Account, including where we otherwise would not satisfy the closing condition that the amount in the Trust Account and the proceeds from the PIPE Investment equal or exceed $300,000,000.
In order to exercise your redemption rights, you must: (i)(a) hold public shares or (b) hold public shares through units and elect to separate your unites into the underlying public shares and public warrants prior to exercising your redemption rights with respect to the public shares; and (ii) prior to 5:00 p.m. Eastern time on [           ], 2021 (two business days before the Special Meeting) (a) submit a written request to the Transfer Agent that the Company redeem your public shares for cash and (b) deliver your public shares to the Transfer Agent, physically or electronically through DTC. Any demand for redemption, once made, may be withdrawn at any time until the deadline for exercising redemption requests and thereafter, with our consent, until the Closing.
The Transfer Agent’s address is as follows:
Continental Stock Transfer & Trust Company
1 State Street, 30th Floor
New York, New York 10004
Attention: Mark Zimkind
Email: mzimkind@continentalstock.com
Stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name” are required to either tender their certificates to our Transfer Agent prior to the date set forth in these proxy materials, or up to two business days prior to the vote on the proposal to approve the Business Combination at the Special Meeting, or to deliver their shares to the Transfer Agent electronically using DTC’s DWAC system, at such stockholder’s option. The requirement for physical or electronic delivery prior to the Special Meeting ensures that a redeeming stockholder’s election to redeem is irrevocable once the Business Combination is approved.
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Holders of outstanding units must separate the underlying public shares and public warrants prior to exercising redemption rights with respect to the public shares. Any demand for redemption, once made, may be withdrawn at any time until the deadline for exercising redemption requests and thereafter, with our consent, until the Closing.
If you hold units registered in your own name, you must deliver the certificate for such units to Continental Stock Transfer & Trust Company, our Transfer Agent, with written instructions to separate such units into public shares and public warrants. This must be completed far enough in advance to permit the mailing of the public share certificates back to you so that you may then exercise your redemption rights upon the separation of the public shares from the units.
If a broker, dealer, commercial bank, trust company or other nominee holds your units, you must instruct such nominee to separate your units. Your nominee must send written instructions by facsimile to Continental Stock Transfer & Trust Company, our Transfer Agent. Such written instructions must include the number of units to be split and the nominee holding such units. Your nominee must also initiate electronically, using DTC’s DWAC system, a withdrawal of the relevant units and a deposit of an equal number of public shares and public warrants. This must be completed far enough in advance to permit your nominee to exercise your redemption rights upon the separation of the public shares from the units. While this is typically done electronically on the same business day, you should allow at least one full business day to accomplish the separation. If you fail to cause your public shares to be separated in a timely manner, you will likely not be able to exercise your redemption rights. Any demand for redemption, once made, may be withdrawn at any time until the deadline for exercising redemption requests and thereafter, with our consent, until the Closing.
Each redemption of shares of common stock by our public stockholders will reduce the amount in the Trust Account. The Merger Agreement provides that our obligation to consummate the Business Combination is conditioned on the funds in the Trust Account, together with the funding of any amounts payable under the Subscription Agreements, being no less than an aggregate amount of $300,000,000, after the payment of redemptions and satisfaction of Company and Sema4 transaction expenses. This condition to closing in the Merger Agreement is for the sole benefit of the parties thereto and may be waived by Sema4. If, as a result of redemptions of common stock by our public stockholders, this condition is not met (or waived), then we or Sema4 (as applicable) may elect not to consummate the Business Combination. In addition, in no event will we redeem shares of our common stock in an amount that would result in the Company’s failure to have net tangible assets equaling or exceeding $5,000,001 (so that we are not subject to the SEC’s “penny stock” rules). Holders of our outstanding public warrants do not have redemption rights in connection with the Business Combination.
Prior to exercising redemption rights, stockholders should verify the market price of our common stock as they may receive higher proceeds from the sale of their common stock in the public market than from exercising their redemption rights if the market price per share is higher than the redemption price. We cannot assure you that you will be able to sell your shares of our common stock in the open market, even if the market price per share is higher than the redemption price stated above, as there may not be sufficient liquidity in our common stock when you wish to sell your shares.
If you exercise your redemption rights, your shares of our common stock will cease to be outstanding immediately prior to the Business Combination and will only represent the right to receive a pro rata share of the aggregate amount on deposit in the Trust Account. You will no longer own those shares and will have no right to participate in, or have any interest in, the future growth of the post-combination company, if any. You will be entitled to receive cash for these shares only if you properly and timely demand redemption.
If the Business Combination is not approved and we do not consummate an initial business combination by the applicable deadline, we will be required to dissolve and liquidate our Trust Account by returning the then remaining funds in such account to the public stockholders and our warrants will expire worthless.Sema4@dfking.com
Appraisal Rights
Appraisal rights are not available to holders of shares of our Class A common stock in connection with the Business Combination.Acquisition.
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Proxy Solicitation Costs
The Company is soliciting proxies on behalf of its Board. This proxy solicitation is being made by mail and over the Internet, but also may be made by telephone or in person. The Company has engaged D.F. King to assist in the solicitation of proxies for the Special Meeting. The Company and its directors, officers and employees may also solicit proxies in person. The Company will ask banks, brokers and other institutions, nominees and fiduciaries to forward the proxy materials to their principals and to obtain their authority to execute proxies and voting instructions.
The Company will bear the entire cost of the proxy solicitation, including the preparation, assembly, printing, mailing and distribution of the proxy materials. The Company will pay D.F. King a fee of $25,000,$ 7,500, plus disbursements, reimburse D.F. King for its reasonable out-of-pocket expenses and indemnify D.F. King and its affiliates against certain claims, liabilities, losses, damages and expenses for their services as our proxy solicitor. We will reimburse brokerage firms and other custodians for their reasonable out-of-pocket expenses for forwarding the proxy materials to our stockholders. Directors, officers and employees of the Company who solicit proxies will not be paid any additional compensation for soliciting proxies.
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PROPOSAL NO. 1 — APPROVAL OF THE BUSINESS COMBINATIONACQUISITION
We are asking our stockholders to adopt the Merger Agreement and approve the transactions contemplated thereby, including the Business Combination. Our stockholders should carefully read this proxy statement in its entirety for more detailed information concerning the Merger Agreement, which is attached as Annex A to this proxy statement. Please see the subsection entitled ““—The Merger Agreement” below, for additional information and a summary of certain terms of the Merger Agreement. You are urged to carefully read the Merger Agreement in its entirety before voting on this proposal.entirety.
We may consummate the Business CombinationAcquisition only if itthe Stock Consideration Issuance Approval and the Charter Amendment Proposal is approved by the affirmative vote of the holders of a majority of the votes cast by holders of our Class A common stock represented in person or by proxy and entitled to vote at the Special Meeting.
The Merger Agreement
This section describes the material terms of the Merger Agreement. The description in this section and elsewhere in this proxy statement is qualified in its entirety by reference to the complete text of the Merger Agreement, a copy of which is attached as Annex A to this proxy statement. This summary does not purport to be complete and may not contain all of the information about the Merger Agreement that is important to you. You are encouraged to read the Merger Agreement carefully and in its entirety. This section is not intended to provide you with any factual information about the Company, GeneDx or Sema4.any other party to the Merger Agreement. Such information with respect to the Company and GeneDx can be found elsewhere in this proxy statement.
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 allocating risk in the contract among the respective parties and are subject to important qualifications and limitations agreed to by the parties in connection with negotiating the Merger Agreement. The representations, warranties and covenants in the Merger Agreement are also modified in important part by the underlying confidential disclosure schedules, which we refer to as the “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. We do not believe that the Schedules contain information that is material to an investment or voting decision. Capitalized terms used but not defined in this section shall have the respective meanings ascribed to such terms in the Merger Agreement.
Effects of the MergerAcquisition
As a result of the merger,Acquisition, Merger Sub I will merge with and into Sema4HoldCo (the “First Merger”), with Sema4HoldCo being the surviving the merger as a direct, wholly owned subsidiaryentity of the Company.First Merger and following the First Merger, HoldCo will merge with and into Merger Sub II, with Merger Sub II being the surviving entity of this second merger (the “Second Merger” and, together with the First Merger, the “Mergers”). The certificate of incorporationformation and bylawsoperating agreement of the surviving companyMerger Sub II will be amendedcontinue to read the same asbe the certificate of incorporationformation and bylawsoperating agreement of Merger Sub II as in effect immediately prior to the Business Combination will be the certificate of incorporation and bylaws (respectively) of the surviving company.
In addition, the Merger Agreement provides that prior to the Closing, subject to obtaining the stockholder approval of the Company stockholders contemplated by the Business Combination Proposal, the Company will adopt the Amended and Restated Certificate of Incorporation in the form attached to this proxy as Annex A. See “Proposal No. 3 — The Charter Approval Proposal” for description of the Amended and Restated Certificate of Incorporation of the Company.Acquisition.
Merger Consideration
Subject to the terms and conditions of the Merger Agreement, each share of Sema4 Class BHoldCo common stock issued and outstanding immediately prior to the effective time will be converted into 1/100th of a share of Sema4 Class A common stock as set forth in the Merger Agreement. Immediately thereafter, each share of Sema4 Common Stock and Sema4 Preferred Stock (other than Excluded Shares and Dissenting Shares) 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 merger consideration, with each Sema4 StockholderOPKO being entitled to receive
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(collectively, clauses (i) throughthe Cash Consideration, (ii) the Stock Consideration and (iii), if and only to the “merger consideration”) (i) its pro rata shareextent payable pursuant to the Merger Agreement, the Milestone Payments (which may be paid in cash, shares of Class A common stock or a combination of the Closing Available Cash if such Sema4 Stockholder has made an election to receive cash, and, if further elected, such Sema4 Stockholder’s pro rata share excess amount of any closing available excess cash, provided that in no event will a Sema4 Stockholder’s cash payment exceed an amount equal to the product of such Sema4 Stockholder’s total outstanding shares multiplied by the Per Share Amount; (ii) atwo). The number of shares of Company Class A common stock equal to the quotient of: (A)(1) the product of (x) such Sema4 Stockholder’s total outstanding shares multiplied by the Per Share Amount minus (2) such Sema4 Stockholder’s stockholder cash payment amount divided by (B) $10.00; and (iii) its earn out pro rata share of any earn out shares to which such Sema4 Stockholderthat OPKO is entitled pursuant to the terms of the Merger Agreement (the “Earnout”), including the Earnout RSUs, which Earnout RSUs are subject to vesting and will not be legally issued and outstanding shares of Company common stock at the closing of the Business Combination (the “Closing”), in each case of clauses (i), (ii) and (iii), without interest, upon surrender of stock certificates representing all of such Sema4 Stockholder’s Sema4 Common Stock and Sema4 Preferred Stock and delivery of the other documents required pursuant to the Merger Agreement. As of the effective time, each Sema4 Stockholder shall cease to have any other rights in and to Sema4 and each certificate relating to ownership of shares of Sema4 Common Stock and Sema4 Preferred Stock (other than Excluded Shares) will only represent the right to receive the applicable portion of the merger consideration.
Each issued and outstanding share of common stock of Merger Sub shall be converted into and become one validly issued, fully paid and nonassessable share of common stock, par value $0.01 per share, of the entity surviving the merger (the “Surviving Corporation”), which shall constitute the only outstanding shares of capital stock of the Surviving Corporation. From and after the effective time, all certificates representing the common stock of Merger Sub shall be deemed for all purposes to represent the number of shares of common stock of the Surviving Corporation into which they were converted.
Each share of Sema4 Common Stock and Sema4 Preferred Stock held in the Sema4’s treasury or owned by the Company, Merger Sub or Sema4 immediately prior to the effective time (each an “Excluded Share”), shall be cancelled and no consideration shall be paid or payable with respect thereto.
The numbers of shares of Company common stock that Sema4 Stockholders are entitled to receive as a result of the Merger is based upon the number of shares of Company common stock, andAcquisition, as otherwise contemplated by the Merger Agreement, shall be adjusted to appropriately reflect the effect of any stock split, split-up, reverse stock split, stock dividend or distribution (including any dividend or distribution of securities convertible into CompanyClass A common stock), extraordinary cash dividend, reorganization, recapitalization, reclassification, combination, exchange of shares or other like change with respect to CompanyClass A common stock occurring on or after the date hereof and prior to the Closing.
Followingclosing of the Closing, within five Business Days after the occurrence of a Triggering Event, the Company shall issue or cause to be issued to the Sema4 Stockholders (other than holders of Dissenting Shares) and the Earn-Out Service Providers, the following shares of Company Class A common stock (which shall be equitably adjusted for stock splits, reverse stock splits, stock dividends, reorganizations, recapitalizations, reclassifications, combination, exchange of shares or other like change or transaction with respect to Company Class A common stock occurring on or after the Closing, theAcquisition (the “Earn-Out SharesClosing”), upon the terms and subject to the conditions set forth in the Merger Agreement and other related agreements: (i) upon the occurrence of Triggering Event I, a one-time issuance of a number of Earn-Out Shares equal to 3.66% of the Earn-Out Total Outstanding Shares; (ii) upon the occurrence of Triggering Event II, a one-time issuance of a number of Earn-Out Shares equal to 3.67% of the Earn-Out Total Outstanding Shares; and (iii) upon the occurrence of Triggering Event III, a one-time issuance of a number of Earn-Out Shares equal to 3.67% of the Earn-Out Total Outstanding Shares. Upon the last day of any calendar year, the Company shall issue or cause to be issued to the Sema4 Stockholders (other than holders of Dissenting Shares) and the Earn-Out Service Providers the Earn-Out Shares that are in the Forfeiture Pool as in effect as of such date and that would have been issuable to Sema4 Stockholders as a result of the occurrence of a Triggering Event had they not been made subject to an award of Earnout RSUs..
Sema4 Stockholders and the Earn-Out Service Providers shall be entitled to receive Earn-Out Shares upon each Triggering Event, provided, however that each Triggering Event may only occur once, if at all, and in no event shall the Sema4 Stockholders and Earn-Out Service Providers, in the aggregate, be entitled to receive more than an
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aggregate numberFollowing the Closing, upon the occurrence of Earn-Out Shares equala Milestone Event, the Company will be obligated to more than 11%pay milestone payments (each, a “Milestone Payment”) to OPKO on the terms described in the Merger Agreement. Each Milestone Payment shall be satisfied through the payment and issuance of a combination of cash and shares of Class A common stock (valued at $4.86 (the “Share Value”)), with such mix to be determined in Company’s sole discretion. If the Milestone Payment in respect of the Earn-Out Total Outstanding Shares. Earn-Out Sharesfirst Milestone Event becomes payable in full, then the Milestone Payment owing in respect of the second Milestone Event is subject to acceleration upon the occurrence of an Acquirer Change in Control, as further described in the Merger Agreement. The Cash Consideration is subject to closing-related adjustments, based on the GeneDx Group’s debt, net working capital and transaction expenses at the closing of the Acquisition, which are subject to a customary true-up process. The Company has agreed to bear a portion of the GeneDx Group’s operating expenses during the pre-closing period, which will be issued fromfunded by OPKO through an intercompany note, up to $15 million through the Forfeiture Pool only iffirst 6 months following the applicable Triggering event occurs.
No fractional sharessigning of common stock will be issued. In lieu of the issuance of any such fractional shares and pursuant to the Merger Agreement, fractional sharesand 50% of such cost during the seventh month and thereafter. Accordingly, the GeneDx Group’s debt at closing will include only a portion of the GeneDx Group’s obligation in respect of financing provided by OPKO during the pre-closing period in order to fund the GeneDx Group’s operations in accordance with the agreed pre-closing budget and evidenced by an inter-company note mid-term rate.
Subject to the terms and conditions of the Merger Agreement, (a) the first Milestone Payment of $112.5 million will become due and payable if the revenue of the GeneDx Group for the fiscal year 2022 equals or exceeds $163 million and (b) the second Milestone Payment of $37.5 million will become due and payable if the revenue of the GeneDx Group for the fiscal year 2023 equals or exceeds $219 million (each of clauses (a) and (b), a “Milestone Event”); provided that would otherwise be issued80% of the Milestone Payment for the First Milestone Period or the Second Milestone Period, as applicable, shall become payable in respect of such period if the GeneDx Group achieves 90% of the applicable Milestone Event revenue target for such period set forth in the table above, which amount will scale on a linear basis up to 100% of the applicable Milestone Payment at 100% of the applicable revenue target. The second Milestone Payment is subject to acceleration and will become automatically due and payable in full if (i) a Company change in control occurs prior to the end of the Second Milestone Period and (ii) the full amount of the fist Milestone Payment was earned. Each Milestone Payment will be rounded downsatisfied through the payment and issuance of a combination of cash and shares of our Class A common stock (based on the Share Value), with such mix to be determined in the nearest whole share of Company common stock.Company’s sole discretion.
Closing and Effective Time of the MergerAcquisition
Unless the parties otherwise mutually agree, the Closing will take place on the date which is three (3)no more later than the third (3rd) business daysday after the date on which all of the closing conditions have been satisfied or waived (other than those conditions that by their terms are to be satisfied at the Closing) (such date, the “closing dateClosing Date”). See ““—The Merger Agreement—Conditions to the MergerAcquisition” for a more complete description of the conditions that must be satisfied prior to closing.
On the closing date,Closing Date, the Company and Sema4HoldCo will effect the mergerFirst Merger by filing a certificate of merger with the Secretary of State of the State of Delaware, and the mergerFirst Merger will become effective at the time the first certificate of merger has been duly filed. The time at which the mergerFirst Merger becomes effective is referred to in this proxy statement as the “effective time”. Immediately following the First Merger, HoldCo and Merger Sub II will effect the Second Merger by filing a certificate of merger with the Secretary of State of the State of Delaware, and the Second Merger will become effective at the time the second certificate of merger has been duly filed. The time at which the Second Merger becomes effective is referred to in this proxy statement as the “second merger effective time”.
As of the date of this proxy statement, the parties expect that the mergerAcquisition will be effective during the thirdsecond quarter of 2021.2022. However, there can be no assurance as to when or if the mergerAcquisition will occur.
If the mergerAcquisition is not completed by November 9, 2021August 14, 2022, which date may be extended, by either our or OPKO’s written notice, to October 14, 2022 if, as of August 14, 2022, any one of certain conditions have not been met (the “termination date”), then the Merger Agreement may be terminated by either the Company or Sema4.OPKO. A party may not terminate the Merger Agreement pursuant to the provision described in this paragraph if the failure of the Closing to occur by the termination date is due primarily to the failure of the party seeking to terminate the Merger
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Agreement to fulfill any obligations of such party set forth in the Merger Agreement. See ““—The Merger Agreement—Termination”.
Treatment of Equity Awards
(a)Each Sema4 Option that is outstanding as of immediately prior to the Effective Time shall be assumed by the Company and converted into an option to purchase shares of Company Class A common stock upon substantially the same terms and conditions as are in effect with respect to such Sema4 Option immediately prior to the Effective Time, including with respect to vesting, exercisability and termination-related provisions (each, a “Company Option”) except that (a) such Company Option shall provide the right to purchase that whole number of shares of Company Class A common stock (rounded down to the nearest whole share) equal to the number of shares of Sema4 Common Stock subject to such Sema4 Option as of immediately prior to the Effective Time, multiplied by the Option Exchange Ratio applicable to such Sema4 Option, and (b) the exercise price per share for each such Company Option shall be equal to the exercise price per share of such Sema4 Option in effect immediately prior to the Effective Time, divided by the Option Exchange Ratio applicable to such Sema4 Option (the exercise price per share, as so determined, being rounded up to the nearest full cent); provided, however, that the conversion of the Sema4 Options will be made in a manner consistent with Treasury Regulation Section 1.424-1, such that such conversion will not constitute a “modification” of such Sema4 Options for purposes of Section 409A or Section 424 of the Code.
(b)Each Sema4 RSU that is outstanding as of immediately prior to the Effective Time shall be assumed by Company and converted into a restricted stock unit representing the opportunity to be issued shares of Company Class A common stock upon substantially the same terms and conditions as are in effect with respect to such Sema4 RSU immediately prior to the Effective Time, including with respect to vesting and termination-related provisions (each, a “Company RSU”) except that such Company RSU shall provide opportunity to be issued that whole number of shares of Company Class A common stock (rounded to the nearest whole share) equal to the number of Shares of Sema4 Common Stock subject to such Sema4 RSU as of immediately prior to the Effective Time, multiplied by the RSU Exchange Ratio; provided, however, that the conversion of the Sema4 RSUs will be made in a manner consistent with the requirements of Section 409A of the Code and the applicable regulations promulgated thereunder.
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(c)Except as otherwise set forth in the Merger Agreement, each Sema4 SAR that is outstanding as of immediately prior to the Effective Time shall be assumed by the Company and converted into a stock appreciation right with respect to shares of Company Class A common stock upon substantially the same terms and conditions as are in effect with respect to such Sema4 SAR immediately prior to the Effective Time, including with respect to vesting, exercisability, payment terms and termination-related provisions (each, a “Company SAR”) except that (i) such Company SAR shall be based on that whole number of shares of Company Class A common stock (rounded down to the nearest whole share) equal to the number of shares of Sema4 Common Stock subject to such Sema4 SAR as of immediately prior to the Effective Time, multiplied by the SAR Exchange Ratio, and (ii) the base amount per share for each such Company SAR shall be equal to the base amount per share of such Sema4 SAR in effect immediately prior to the Effective Time, divided by the SAR Exchange Ratio (the base amount per share, as so determined, being rounded up to the nearest full cent); provided, however, that the conversion of the Sema4 SARs will be made in a manner consistent with Treasury Regulation Section 1.424-1, such that such conversion will not constitute a “modification” of such Sema4 SARs for purposes of Section 409A or Section 424 of the Code. For the avoidance of doubt, the foregoing shall not apply to any Sema4 SAR that is deemed by Sema4 to be exercised in connection with the Closing.
(d)Sema4 shall take all necessary actions to effect the treatment of Sema4 Options, Sema4 RSUs and Sema4 SARs pursuant to the Merger Agreement in accordance with the Sema4 Incentive Plan and the applicable award agreements and to ensure that no Company Option may be exercised prior to the effective date of an applicable Form S-8 (or other applicable form, including Form S-1 or Form S-3) of the Company. The board of directors of Sema4 shall amend the Sema4 Incentive Plan and take all other necessary actions, effective as of immediately prior to the Closing, in order to (i) provide that the unallocated share reserve remaining under the Sema4 Incentive Plan as of the Closing Date (including any shares subsequently returned to such share reserve as a result of the termination of awards issued under the Company Stock Plan) shall be included in the share reserve under the long term incentive plan, in accordance with the terms thereof, and (ii) provide that no new Sema4 Options, Sema4 RSUs or Sema4 SARs will be granted under the Sema4 Incentive Plan following the Closing. Prior to the Effective Time, Sema4 shall deliver to each holder of a Sema4 Option, Sema4 RSU or Sema4 SAR a notice, in a form reasonably acceptable to the Company, setting forth the effect of the Merger on such holder’s Sema4 Options, Sema4 RSUs and Sema4 SARs and describing the treatment of such Sema4 Options, Sema4 RSUs and Sema4 RSUs in accordance with the Merger Agreement.
(e)The Company shall take all actions that are necessary for the assumption and conversion of Sema4 Options, Sema4 RSUs and Sema4 SARs pursuant to the Merger Agreement. If registration of the Company Options, Company RSUs or Company SARs is required under the Securities Act, the Company shall file, as promptly as practicable after the date that is sixty (60) days after the Form 8-K announcing the Closing is filed (or any such earlier date permitted by applicable law), a registration statement on Form S-8 with respect to such Company Options, Company RSUs and Company SARs, and shall use its commercially reasonable efforts to maintain the effectiveness of such registration statement for so long as the applicable Company Options, Company RSUs and Company SARs remain outstanding and such registration of the shares of Company Class A common stock issuable thereunder continues to be required.
Covenants and Agreements
Conduct of Businesses Prior to the Completion of the MergerAcquisition
Subject to certain exceptions set forth inEach of OPKO and the Schedules, Sema4 hasGeneDx Parties have agreed that, prior to the Closing or earlier valid termination of the Merger Agreement, except (i) as set forth in the Schedules or an agreed pre-closing budget, (ii) to the extent necessary to comply with the GeneDx Parties’ obligations under this Agreement, including completion of the Pre-Closing Restructuring, (iii) as required by applicable law (“Applicable Legal Requirements”) or (iv) with the written consent of the Company (such consent not to be unreasonably withheld, conditioned or delayed) (collectively, the exceptions set forth in clauses (i) through (iv), the “Specified Exceptions”), it will, and cause its subsidiarieseach member of the GeneDx Group to use commercially reasonable efforts to conduct and operate their respective businesses in the ordinary course except (i) to the extent that the Company otherwise consentsand in writing and such consent will not be unreasonably withheld, conditioned or delayed; (ii) as expressly contemplated by the Merger Agreement or Sema4 disclosure letter; or (iii) as may be required by any federal, state, local, municipal, foreign or other law, statute, constitution, treaty, principle of common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling, injunction, judgment, order, assessment, writ or other legal requirement, administrative policy or guidance, or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any governmental entity (“compliance in all material respects with Applicable Legal Requirements”) (including measures required by and an agreed pre-closing budget, pay its debts and Taxes when due (subject to good faith disputes regarding such debts and Taxes), pay or perform other material obligations when due and use its commercially reasonable efforts to preserve intact its present business organizations, keep available the COVID-19 pandemic).
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services of its present officers and key employees and preserve its present relationships with customers, suppliers, distributors, licensors and licensees. In addition to the general covenants above, Sema4 haseach of OPKO and the GeneDx Parties have agreed that prior to the Closing, subject to specified exceptions,the Specified Exceptions, it will not, and will cause its subsidiarieseach member of the GeneDx Group not to:
•except as otherwise required in relation to Sema4 benefit plans,amend the Merger Agreementgoverning documents of any member of the GeneDx Group;
•acquire (by merger, consolidation or Applicable Legal Requirements: (i) increasecombination, or grantacquisition of stock or assets) any increase in the compensation, bonus, fringeperson or other benefits of,division or pay, grant or promise any bonus to, any current or former employee, director or independent contractor except for any such person with an annual base salary or wage rate of lessassets (other than $350,000 in the ordinary course of business; (ii) grant or pay any severance or change in control pay or benefits to,business) thereof, or otherwise increase the severanceeffect any merger, consolidation or change in control pay or benefitsreorganization of any currentmember of the GeneDx Group, or former employee, directoreffect any conversion or independent contractor; (iii) enter into, amend (other than immaterial amendments)restructuring of any equity or terminateequity-linked interest, purchase any Sema4 benefit plansecurities of, voting interests in or any employee benefit plan, policy, program, agreement, trustassets of any Person, other than acquiring or arrangement that would have constituted an Sema4 benefit plan if it had been in effect on the date of the Merger Agreement (other than annual renewal of welfare planspurchasing equipment or supplies in the ordinary course of business that does not result in a material increase in cost to Sema4 or its subsidiaries (the “Sema4 Companies”)); (iv) take any action to accelerate the vesting or payment of, or otherwise fund or secure the payment of, any compensation or benefits under any Sema4 benefit plan; (v) grant any equity or equity-based compensation awards; or (vi) terminate any employee or independent contractor (other than for cause), if such terminated employee or consultant receives, annual base compensation (or annual base wages or fees) in excess of $350,000; or (vii) enter into, amend or terminate any collective bargaining agreement or other agreement with a labor union, works council or similar organization respecting employees of Sema4 Companies;business;
•(i) transfer, sell, assign, license, sublicense, encumber, impair, abandon, fail to diligently maintain, transfer or otherwise dispose of any right, title or interest of Sema4 in any owned Intellectual Property or licensed Intellectual Property, in each case, that is material to any of the businesses of Sema4 Companies; (ii) extend, amend, waive, cancel or modify any material rights in or to any owned Intellectual Property or licensed Intellectual Property, in each case, that is material to any business of Sema4 Companies; (iii) fail to diligently prosecute the patent applications owned by the Sema4 other than applications the Sema4, in the exercise of its good faith business judgment, has determined to abandon; or (iv) divulge, furnish to or make accessible any trade secrets constituting material owned Intellectual Property or any trade secrets of any person to whom any of the Sema4 Companies has a confidentiality obligation to any third party who is not subject to an enforceable written agreement to maintain the confidentiality of such trade secrets, other than, in each of (i) through (iv), in the ordinary course of business; provided, that in no event shall Sema4 license on an exclusive basis or sell any material owned Intellectual Property;
•except for transactions solely among Sema4 and its subsidiaries: (i) declare, set aside or pay any dividends on or make any other distributions (whether in cash, stock, equity securities or property) in respect of any capital stock or split, combine or reclassify the outstanding shares of HoldCo Common Stock (as defined in the Merger Agreement) nor enter into any capital stock or issue or authorize the issuanceagreement with respect to voting of any other securities in respect of in lieu of or in substitution for any capital stock; (ii) repurchase, redeem or otherwise acquire, or offer to repurchase, redeem or otherwise acquire, any membership interests, capital stock or any other equity interests, as applicable, in any of the Sema4 Companies, other than pursuant to the terms of a Sema4 option; (iii) grant, issue, sell or otherwise dispose, or authorize to issue, sell, or otherwise dispose any membership interests, capital stock or any other equity interests (such as stock options, stock units, restricted stock or other contracts for the purchase or acquisition of such capital stock), as applicable, in any of the Sema4 Companies, other than the award of restricted stock units in respect of the Earn-Out Shares granted to the Earn-Out Service Providers pursuant to the Earn-Out award agreement (the “HoldCo Common Stock;
•Earn-Out RSUs”) issued in accordance with the Merger Agreement; (iv) declare, set aside or pay any dividend or makeother distribution, payable in cash, stock, property or otherwise, in respect of any HoldCo Common Stock;
•purchase, redeem or otherwise acquire any shares of HoldCo Common Stock or any securities convertible or exchangeable or exercisable for any shares of HoldCo Common Stock;
•transfer, lease, license, guarantee, sell, mortgage, pledge, dispose of or encumber any material asset, except for (i) the incurrence of certain permitted encumbrances, (ii) non-exclusive licenses of GeneDx’s intellectual property in the ordinary course of business, (iii) sales or other dispositions of inventory and other assets in the ordinary course of business, (iv) sales of obsolete or written off assets and (v) sales or dispositions for an amount less than $500,000 in the aggregate;
•incur any indebtedness or issue any debt securities or warrants or other rights to acquire debt securities of any member of the GeneDx Group or assume, guarantee or endorse, as an accommodation or otherwise, the obligations of any other distribution;person for indebtedness or (v) issue, deliver, sell, authorize, pledge or otherwise encumber, or agree tocapital obligations, in the case of any of the foregoing, with respect to,other than (i) incurrences of Indebtedness (as defined in the Merger Agreement) under the agreed pre-closing budget and (ii) the incurrence of debt by OPKO;
•issue, sell, pledge, dispose of or encumber any shares of, capital stock or other equity securities or ownership interests or any securities convertible into or exchangeable for shares of capital stock or other equity securities or ownership interests, or subscriptions, rights, warrantsexercisable for, or options, warrants, calls, commitments or rights of any kind to acquire, any shares of capital stock or other equity securities or ownership interests or any securities convertible into or exchangeable for shares of capital stock or other equity securities or other ownership interests, or enter into other agreements or commitments of any character obligating it to issue any such shares, equity securities or other ownership interests or convertible or exchangeable securities;HoldCo Common Stock;
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•amend its certificate of incorporation, bylawsmake any change in accounting methods, principles or other comparable governing instruments with different names of any of the Sema4 Companies;practices (including for Tax purposes), except as required by accounting standards or by applicable law or a governmental authority;
•(i) merge, consolidate or combine withrevalue any entity; or (ii) acquire or agree to acquireof its material assets except as required by merging or consolidating with, purchasing any equity interest in or a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof;GAAP;
•sell, lease, license, sublicense, abandon, divest, transfer, cancel, abandon or permit to lapse or expire, dedicate to the public, or otherwise dispose of, any material assets (other than Intellectual Property) or material properties, other than any sale, lease or disposition in the ordinary course of business, enter into certain contracts, or as set forth onamend, modify or consent to the Sema4 disclosure letter;termination of any such contract or the applicable member of the GeneDx Group’s rights thereunder, or waive, release or assign any rights or claims thereunder;
•(i) issueenter into, modify, amend or sellterminate any debt securitiescontract, or waive, release, assign or fail to exercise or pursue any material rights to acquire any debt securities of any of the Sema4 Companies or guarantee any debt securities of another person; (ii) make, incur, create or assume any loans, advances or capital contributions to, or investments in, or guarantee any indebtedness of, any personclaims thereunder, other than any of the Sema4 Companies except for (A) loans, advances or capital contributions pursuant to and in accordance with the terms of agreements or legal obligations existing as of February 9, 2021, in each case set forth on the Sema4 disclosure letter; provided, that any such amounts do not exceed $250,000 in the aggregate and remain with Sema4 for general working capital expenditures in the ordinary course of business, and (B) equipment financing arrangementswhich if so entered into, modified, amended, terminated, waived, released, assigned, or not exercised or pursued would reasonably be expected to (i) adversely affect in any material respect any member of the GeneDx Group; (ii) impair in any material respect the ability of any of the GeneDx Parties or OPKO to perform its obligations under the Merger Agreement; or (iii) prevent or materially delay the consummation of the Mergers;
•make any loan, advance, capital contribution to, or investment in, any person other than business expense advances to employees of any member of the GeneDx Group in the ordinary course of business; (iii) except
•enter into any contract to the extent consummation of the Acquisition or compliance with the provisions of the Merger Agreement would reasonably be expected to conflict with, or result in a violation or breach of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of, or result in, termination, cancellation or acceleration of any obligation or to the loss of a benefit under, or result in the ordinary coursecreation of business, create any material liens on any material propertyencumbrance (other than permitted encumbrances) in or assets ofupon any of the Sema4 Companies in connection withproperties or other assets (including intellectual property) of the any indebtedness thereofmember of the GeneDx Group under, or require the Company to license or transfer any GeneDx intellectual property or other material assets (other than permitted liens as definedencumbrances) under such contract;
•effect certain transactions with respect to intellectual property;
•enter into any agreement with any related parties;
•grant any severance or termination pay (cash, equity or otherwise) to any GeneDx employee or contractor or adopt any new severance plan, or amend or modify or alter in any material respect any severance plan, agreement or arrangement existing on the date of the Merger Agreement;
•(i) make or change any material tax election, except to the extent required by applicable law or in furtherance of the Pre-Closing Restructuring, (ii) adopt or change any tax accounting method, (iii) agree or settle any material claim or assessment in respect of taxes, (iv) file any material amendment to any material tax return, (v) enter into any tax allocation agreement, tax sharing agreement, tax indemnity agreement or closing agreement relating to any tax, (vi) surrender any right to claim a material tax refund or extend or waive the limitation period applicable to any claim or assessment in respect of taxes, or (vii) take any other similar action relating to the filing of any tax return or the payment of any tax; in the Merger Agreement); (iv) cancel or forgive any indebtedness owed to anycase of each of the Sema4 Companies;immediately preceding clauses (i) through (vii), if such action would have the effect of increasing the tax liability of acquirer or (v) make, incurits affiliates for any period ending after the Closing Date or commitdecreasing any tax attribute of HoldCo or GeneDx existing on the Closing Date;
•commence any material proceeding;
•except for proceedings with respect to makewhich an insurer has the right to control the decision to settle, waive, release, assign, or incurcompromise any capital expenditures,claim, litigation, complaint, investigation or proceeding, waive, release, assign, settle, pay, discharge or satisfy any proceeding other than in the ordinary course of business;
•release, assign, compromise, settle or agree to settle any legal proceeding material to the Sema4 Companies, taken as a whole;
•except in the ordinary course of business: (i) enter into any material or governmental contract that would have been a (other than pursuant to offers, bids or proposals made by any Sema4 Companies on or prior to the date hereof that, if accepted, would result in a government contract) had it been entered into prior to February 9, 2021 or (ii) waive, delay the exercise of, release or assign any material rights or claims under any material or governmental contract;
•modify, amend or terminate in a manner that is materially adverse to the applicable Sema4 Companies, taken as a whole, any material contract (other than pursuant to (i) offers, bids or proposals made by any Sema4 Companies on or prior to the date hereof that, if accepted, would result in a government contract or (ii) requirements from any governmental entity to modify the scope of work under any government contract);
•incur or enter into a contract requiring the Sema4 to make any capital expenditures or commitments, capital additions or capital improvements in excess of $250,000 in any 12-month period;
•except as required by U.S. GAAP (or any interpretation thereof) or Applicable Legal Requirements, make any change in accounting methods, principles or practices;
•(i) make or rescind any material tax election; (ii) settle or compromise any material tax claim; (iii) change (or request to change) any method of accounting for tax purposes; (iv) file any amendment to an material tax return; (v) waive or extend any statute of limitations in respect of a period within which an assessment or reassessment of material taxes may be issued (other than any extension pursuant to an extension to file any tax return); (vi) knowingly surrender any claim for a refund of taxes; or (vii) enter into any “closing agreement” as described in Section 7121 of the Code (or any similar legal requirement) with any governmental entity; (viii) incur any liability for taxes other thansuch amounts specified in the ordinary course of business; (ix) prepare any tax return in a manner inconsistent with past practice;(x) take any action or fail to take anyagreed pre-closing budget;
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action that would reasonably•fail to keep or cause to be expected to prevent, impair or impedekept the intended tax treatment; or (xi) authorize, recommend, propose or announce an intention to adopt a planmaterial existing insurance policies (or substantial equivalents) of complete or partial liquidation, restructuring, recapitalization, dissolution or winding-upany member of the Sema4 or any subsidiary of Sema4;
•except for solely among the Sema4 Companies, enter into or amend any agreement with, or pay, distribute or advance any assets or property to, any of its officers, directors, employees, partners, stockholders or other affiliates, other than payments or distributions relating to obligationsGeneDx Group as in respect of arms-length commercial transactions pursuant to the agreements set forthforce on the Sema4 disclosure letter as existing on February 9, 2021;date of the Merger Agreement;
•engageemploy or use any contractor or consultant that, to GeneDx’s knowledge, employs any person that is: (A) debarred by the FDA, or excluded from participation in government programs (or subject to any material new linesimilar sanction of business;any other applicable governmental authority); or (B) who is the subject of an FDA debarment investigation or proceeding (or similar proceeding of any other applicable governmental authority); or
•authorize, agree or enter into anyan agreement or otherwise agree, commit or resolve to do any action prohibited byof the foregoing.
Notwithstanding anything to the contrary in the Merger Agreement, Sema4 may, in connection with COVID-19, take such actions in good faith as are reasonably necessarythe Company, OPKO and the GeneDx Parties acknowledge and agree that (x) to protect the health and safety of its employees and other individuals having business dealings with Sema4 or (y) to respond to third-party supply or service disruptions caused by COVID-19, including, but not limited to Pandemic Measures, and any such actions taken (or not taken) as a result of, in response to, or otherwise related to COVID-19 shall be deemed to be taken in the “ordinary course of business” and not be considered a breach of the covenants of the Merger Agreement; provided that, to the extent that Sema4 took any actions pursuant to the immediately preceding clause that caused deviations from its business being conducted in the ordinary course of business, Sema4 is to resume conducting its business in the ordinary course of business in all material respects as soon as reasonably practicable.
Nothing containednothing in the Merger Agreement shall give the Company, directly or indirectly, anythe right to control or direct theGeneDx’s operations for purposes of the Sema4 CompaniesHSR Act prior to the Closing. Priorexpiration or termination of any applicable waiting period pursuant to the Closing, eachHSR Act, (y) no consent of Sema4 and the Company shall exercise, consistent with the other terms and conditions of the Merger Agreement, complete control and supervision over their respective businesses.
The Company has agreed to certain restrictions on the business of CM Life and its subsidiaries prior to the Closing. Specifically, the Company has agreed that prior to the effective time, except as expressly contemplated or permitted by the Merger Agreement, asbe required to comply with Applicable Legal Requirements (including measures required by the COVID-19 pandemic) or subject to certain specified exceptions, it will not, and it will not permit its subsidiaries, without the written consent of Sema4 (which may not be unreasonably withheld, conditioned or delayed):
•declare, set aside or pay dividends on or make any other distributions (whether in cash, stock, equity securities or property) in respect of any capital stock (or warrant) or split, combine or reclassify any capital stock (or warrant), effect a recapitalization or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for any capital stock or warrant, or effect any like change in capitalization;
•purchase, redeem or otherwise acquire, directly or indirectly, any equity securities of the Company or any of its subsidiaries;
•other than in connection with the Subscription Agreements, grant, issue, deliver, sell, authorize, pledge or otherwise encumber, or agree to any of the foregoing with respect to any shares of capital stock or other equity securities or any securities convertible into or exchangeable for shares of capital stock or other equity securities, or subscriptions, rights, warrants or options to acquire any shares of capital stock or other equity securities or any securities convertible into or exchangeable for shares of capital stock or other equity securities, or enter into other agreements or commitments of any character obligating it to issue any such shares of capital stock or equity securities or convertible or exchangeable securities;
•amend its certificate of incorporation, bylaws or other comparable governing instruments with different names of the Company or its subsidiaries;
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•(i) merge, consolidate or combine with any person; or (ii) acquire or agree to acquire by merging or consolidating with, or by purchasing any equity interest in or a portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, or otherwise acquire or agree to acquire any assets, or enter into any joint ventures, strategic partnerships or alliances;
•incur any indebtedness or guarantee any such indebtedness of another person or persons, issue or sell any debt securities or options, warrants, calls or other rights to acquire any debt securities of the Company, as applicable, enter into any “keep well” or other agreement to maintain any financial statement condition or enter into any arrangement having the economic effect of any of the foregoing, in each case, except in the ordinary course of business;
•except as required by GAAP (or any interpretation thereof) or Applicable Legal Requirements, make any change in accounting methods, principles or practices;
•(i) make or rescind any material tax election (ii) settle or compromise any material tax claim; (iii) change (or request to change) any method of accounting for tax purposes; (iv) file any amendment to any material tax return; (v) waive or extend any statute of limitations in respect of a period within which an assessment or reassessment of material taxes may be issued (other than any extension pursuant to an extension to file any tax return); (vi) knowingly surrender any claim for a refund of taxes; or (vii) enter into any “closing agreement” as described in Section 7121 of the Code (or any similar legal requirement) with any governmental entity; (viii) create any material liens on any material property or assets of the Company or Merger Sub; (ix) incur any liability for taxes other than in the ordinary course of business; or (x) take any action or fail to take any action that would reasonably be expected to prevent, impair or impede the intended tax treatment;
•liquidate, dissolve, reorganize or otherwise wind up the business or operations of the Company or Merger Sub;
•commence, settle or compromise any legal proceeding;
•engage in any material new line of business;
•amend the Trust Agreement or any other agreement related to the Trust Account;
•(i) adopt or amend any employee benefit plan, or enter into any employment contract or collective bargaining agreement other than a long term incentive plan or an employee stock purchase plan, or (ii) hire any employee or any other individual to provide services to the Company or its subsidiaries;
•(i) enter into any material or other contract that will not be terminable for convenience on or before Closing without requiring the payment of any amount or any post-Closing liability or obligation, (ii) modify, amend or terminate any material contract or (iii) waive, delay the exercise of, release or assign any material rights or claims under any material contract;
•make any expenditures utilizing funds in the Trust Account; or
•enter into any agreement or otherwise agree, commit or resolve to do any action prohibited by the foregoing.
Trust Account
The Company has agreed to make appropriate arrangements to cause the funds in the Trust Account to be disbursed in accordance with the Trust Agreement (as defined in the Merger Agreement) for the following: (a) the redemption of any shares of common stock in connection with the redemption offer in relation to the public shares; (b) the payment obligations of the Company with respect to certain expenses, asmatter set forth in the Merger Agreement to the extent the requirement of such consent would violate any antitrust law, and (c) the balance of the assets(z) nothing in the Trust Account, if any, after payment ofMerger Agreement shall prevent or limit the foregoing to be disbursed toPre-Closing Restructuring or the Company.transactions contemplated thereby.
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HSR Act and Regulatory Approvals
Sema4On January 28, 2022, GeneDx and the Company have agreed to comply promptly butfiled the notifications required by the HSR Act in no event later than ten business days after the daterespect of the Merger Agreement with the notification and reporting requirementsAcquisition. The 30-day HSR Act waiting period expired at 11:59 p.m. on February 28, 2022.
At any time before or after consummation of the Acquisition, notwithstanding expiration of the waiting period under the HSR Act. Sema4Act, the applicable competition authorities could take such action under applicable antitrust laws as each deems necessary or desirable in the public interest, including seeking to enjoin the consummation of the Acquisition. Private parties may also seek to take legal action under the antitrust laws under certain circumstances. GeneDx and the Company have agreed to furnish to each other as promptly as reasonably practicable all information required for any application or other filing to be made by the other pursuant to any applicable law relating to antitrust.antitrust, and the Company has agreed to use reasonable best efforts to promptly take any and all steps necessary to avoid or eliminate impediments under any applicable antitrust law that may be asserted by any governmental authority or other person so as to enable the parties to close the Acquisition. However, the Company shall not be required to take any remedial action under any applicable antitrust laws which would otherwise have the effect of preventing or delaying the Closing, unless such remedial actions would not, individually or in the aggregate, reasonably be expected to be materially detrimental to the benefits to be derived by the Company and its affiliates as a result of the Acquisition and the other transactions contemplated by the Merger Agreement. Further, the Company and its affiliates will not be obligated to contest, administratively or in court, any litigated Proceeding under any applicable antitrust law seeking to enjoin the Acquisition and the other Transactions, or to impose any Remedial Actions (as such term is defined in the Merger Agreement) upon the Company, OPKO or GeneDx and their respective affiliates.
Sema4GeneDx and the Company have agreed to work together and promptly furnishsupply the other with any information which may be required and reasonable assistance as the other may request in order to effectuate any filings or applications pursuant to the other copies of all substantive written communications receivedMerger Agreement. Except where prohibited by them or any of their respective affiliates and any governmental authority with respectapplicable antitrust laws relating to the transactions contemplated by the Merger Agreement, and Sema4exchange of information, each of OPKO and the Company have agreed to permit counsel toParties (as defined in the other an opportunity to review in advance any proposed substantive written communications by Sema4Merger Agreement), on one hand, and the Company, (respectively) and/or its affiliates to any governmental authority concerning the transactions contemplated by the Merger Agreement and incorporate reasonable comments thereto. Sema4 and the Company have agreed to (a) giveon the other, prompt written notice of the commencement of any legal proceeding with respectshall use commercially reasonable efforts to the transactions contemplated by the Merger Agreement and (b) to the extent reasonably practicable,(i) consult with the other party prior to taking a position with respect to any such filing, (ii) permit the other party to review and discuss in advance, and consider in good faith, the views of its participationthe other in any substantive meeting or discussionconnection with any analyses, appearances, presentations, memoranda, briefs, white papers, arguments, opinions and proposals before making or submitting any of the foregoing to any governmental entityauthority in respect ofconnection with any filing, investigationinvestigations or inquiry concerningproceedings in connection with the Merger Agreement or the transactions contemplated thereunderAcquisition (including under any antitrust or fair trade applicable Law), (iii) coordinate with the other party in preparing and exchanging such information and (iv) promptly provide the other party (and its counsel) with copies of all filings, presentations or submissions (and a summary of any oral presentations) made by such party with any governmental authority in connection with the Merger Agreement or the Acquisition (though sensitive negotiation and deal valuation materials may be redacted); provided that the final determination as to the
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strategy for dealing with the FTC, the DOJ or any other applicable governmental authority shall be made by the Company.
Each of the Company and GeneDx has agreed not to participate in any meeting or material discussion with any governmental authorities with respect to any of the filings, applications, investigation, or other inquiry listed above without giving the other party prior notice of the meeting or discussion and, to the extent permitted by suchthe relevant governmental entity, give the other partyauthority, the opportunity to also attend and participate in such meeting or discussion.discussion (which, at the request of either party, shall be limited to outside antitrust counsel only).
Each of the Company and Sema4 has agreed to promptly and in good faith respond to any information or document requests from the Antitrust Division of the U.S. Department of Justice and the FTC.
Each of the Company and Sema4GeneDx have agreed to pay 50% of all filing fees required by governmental entities payable to the Antitrust Division and FTCincurred in connection with the transactions contemplated bysubmission of any regulatory filing or notice required to be made or given in connection with the Merger Agreement.Acquisition, and each did pay 50% of the required HSR Act filing fee.
Proxy Solicitation
The Company and Sema4 havehas agreed to, as promptly as practicable, (i) establish the record date for, duly call, give notice of, convene and hold, no later than 45 days after this proxy statement is mailed, the Special Meeting in accordance with the DGCL, (ii) cause this proxy statement to be disseminated to the Company’s stockholders in compliance with applicable law, and (iii) solicit proxies from the holders of common stock to vote in favor of each of the proposals contained in this proxy statement. The Company has agreed, through the Company’s board of directors, to recommend to its stockholders that they approve the proposals contained in this proxy statement (the “Company board recommendation”) and to include the Company board recommendation in this proxy statement, subject to the obligations described in this paragraph. Except as otherwise required by Applicable Legal Requirements, the Company board of directors will not (and no committee or subgroup thereof shall) change, withdraw, withhold, qualify or modify, or publicly propose to change, withdraw, withhold, qualify or modify, the Company board recommendation (a “Company change in recommendation”); provided, that the Company’s obligation to establish a record date for, duly call, give notice of, convene and hold the Special Meeting as contemplated by the foregoing shall not be affected by any Change in Recommendation. Notwithstanding the foregoing, if on a date for which the Special Meeting is scheduled, the Company has not received proxies representing a sufficient number of shares of common stock to obtain the stockholder approvals of the proposals contained in this proxy statement, whether or not a quorum is present, the Company shall have the right to make one or more successive postponements or adjournments of the Special Meeting; provided, that in the event of such postponement or adjournment, the Special Meeting shall be reconvened as promptly asreasonably practicable following such time as the reason for such postponement or adjournment has been resolved.
Prior to the date of this proxy statement, Sema4 has solicited the adoption of the Merger Agreement (the “Sema4 approval”) and received such Sema4 approval by unanimous written consent of the stockholders of Sema4capital stock (the “Sema4 stockholders”). Sema4, through the Sema4 board of directors, recommended to the Sema4 stockholders that they adopt the Merger Agreement (the “Sema4 board recommendation”).
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No Solicitation
During the period from the date of the Merger Agreement until(but in no event later than March 15, 2022), prepare (and OPKO and the earlierGeneDx Parties have agreed to provide reasonable assistance in connection therewith), and file with the SEC, the proxy statement. The Company has also agreed to use its reasonable best efforts to ensure that the proxy statement complies in all material respects with the applicable provisions of the terminationExchange Act and to use its reasonable best efforts to cause the proxy statement to be mailed to the holders of Class A common stock as promptly as practicable following the date on which the Company files with the SEC the proxy statement in definitive form, following confirmation from the staff of the Merger Agreement pursuantSEC (whether orally or in writing) that the comment process with respect to the proxy statement, if any, has concluded. The Company has also agreed to promptly (and in any event within one business day) notify OPKO upon the receipt of any comments from the SEC or any request from the SEC for amendments or supplements to the proxy statement, and, as promptly as practicable after receipt thereof, to provide OPKO with copies of all correspondences between it and its terms orrepresentatives, on the Closing , Sema4one hand, and the SEC, on the other hand, and all written comments with respect to the proxy statement received from the SEC and to advise OPKO of any oral comments with respect to the proxy statement received from the SEC. The Company has agreed not to use its reasonable best efforts to respond as promptly as practicable to any comments received from the SEC with respect to the proxy statement. The Company has further agreed to provide OPKO a reasonable opportunity to review and comment on documents or responses (including the proposed final version of such document or response) to be submitted to the SEC. OPKO and the GeneDx Parties have, in turn, agreed to reasonably cooperate to prepare appropriate responses thereto (and will provide each other with copies of any such responses given to the SEC) and make such modifications to the proxy statement as shall causebe reasonably appropriate.
No Solicitation
Each of OPKO and the GeneDx Parties have agreed that neither it nor any of its subsidiaries not toofficers and directors shall, and that it shall use its reasonable best efforts to cause its employees, equityholders, controlled affiliates, agents and their respective representatives not to, directly or indirectly:
•solicit, initiate, enter intoencourage, facilitate, entertain, discuss or continue discussions, negotiationsnegotiate any offer or transactions with,proposal for an Acquisition Proposal, or encourage or respondany of the foregoing which would be reasonably expected to any inquiries or proposals by, or provide any informationlead to any person (other than the Company and its agents, representatives, advisors) concerning any merger, sale of ownership interests and/or assets of Sema4, recapitalization or similar transaction (each, a “Sema4 Business Combination”)an Acquisition Proposal (as defined below);
•enter into any agreement regarding, continue or otherwise participateengage in any discussions or negotiations regarding, or cooperate in any way that would otherwise reasonably be expected to lead to a Sema4 Business Combination; or
•commence, continue or renew any due diligence investigation regarding a Company Business Combination.
In addition, Sema4 shall, and shall cause its subsidiaries and the Sema4 Stockholders to, and shall cause their respective representatives to, immediately cease any and all existing discussions or negotiations with any person with respect to any Sema4 Business Combination.
DuringAcquisition Proposal, furnish to any Person any non-public information with respect to any Acquisition Proposal or take any other action relating to (or which would reasonably be expected to be used for the period from the datepurpose of the Merger Agreement until the earlier of the termination of the Merger Agreement pursuantformulating an offer or proposal with respect to), or otherwise assist, cooperate with, facilitate or encourage any effort or attempt by any such Person with regard to, its terms or the Closing, the Company and Merger Sub shall not, and shall direct their respective representatives not to, directly or indirectly:any Acquisition Proposal;
•solicit, initiate, approve, agree to, accept, endorse or recommend any Acquisition Proposal;
•enter into any letter of intent or continue discussionssimilar document or transactions with,any Contract, agreement or encouragecommitment contemplating or respondotherwise relating to any inquiriesAcquisition Proposal; or proposals by,
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•submit any Acquisition Proposal to the vote of the stockholder of any GeneDx Party.
Each of OPKO, HoldCo and the Company, as applicable, has agreed to provide written notice to the Company of any offer or provideproposal (formal or informal) relating to, or that would reasonably be expected to lead to, an Acquisition Proposal or any request for nonpublic information or inquiry related to or which would reasonably be expected to lead to an Acquisition Proposal, and to keep the Company reasonably informed on a current basis in relation to any person (other than Sema4,such proposal or modification thereof.
“Acquisition Proposal” means any proposal or offer from any Person relating to any direct or indirect acquisition or purchase of a material portion of the Sema4 Stockholders and their respective representatives) concerningassets, net revenues or net income of the Company, or 50% or more of the aggregate equity interests of the Company, any tender offer or exchange offer that if consummated would result in any Person beneficially owning 50% or more of the aggregate equity interests of the Company, any merger, purchaseconsolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving the acquisition of ownership50% or more of the aggregate equity interests or assets of the Company, recapitalizationin each case, other than the Transactions, any material joint venture or similar business combination transaction (each, a “other strategic investment in or involving the Company, Business Combination”);
•enter intoincluding any agreement regarding, continuethird party financing, investment in 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
•commence, continue or renew any due diligence investigation regarding a Company Business Combination. The Company and Merger Sub shall, and shall cause their respective representatives to, immediately cease any and all existing discussions or negotiations with any person with respect to any Company Business Combination.
Each party to the Merger Agreement is to promptly (and in no event later than 24 hours after becoming aware of such inquiry, proposal, offer or submission) notify the other parties (and in the caserecapitalization of the Company’s receiptCompany. For the elimination of a Company Business Combination Proposal,doubt, the Company shall also provide notice to Sema4) if it or, to its knowledge, any of its or its representatives receives any inquiry, proposal, offer or submission with respect to a Sema4 Business Combination or Company Business Combination, as applicable (including the identity of the person making such inquiry or submitting such proposal, offer or submission), after the execution and delivery of the Merger Agreement. If either party or its representatives receivesPIPE Investment is not an inquiry, proposal, offer or submission with respect to a Sema4 Business Combination or Company Business Combination, as applicable, such party must provide the other parties with a copy of such inquiry, proposal, offer or submission (and in the case of the Company’s receipt, the Company shall also provide copies to Sema4).
As used in the Merger Agreement: “Intellectual Property” shall mean all worldwide rights, title and interest in or relating to intellectual property, whether protected, created or arising under the laws of the United States or any other jurisdiction, including: (a) all patents and patent applications, including provisional patent applications and similar filings and any and all substitutions, divisions, continuations, continuations-in-part, divisions, reissues, renewals, extensions, reexaminations, patents of addition, supplementary protection certificates, utility models,Acquisition Proposal.
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Restrictive Covenants
inventors’ certificates, or the like and any foreign equivalents of the foregoing (including certificates of invention and any applications therefor); (b) all trademarks, business marks, service marks, brand names, trade dress rights, logos, corporate names, and trade names, and other source or business identifiers and general intangibles of a like nature, together with the goodwill associated with any of the foregoing, along with all applications, registrations, intent-to-use registrations or similar reservations of marks, renewals and extensions thereof; (c) all registered and unregistered copyrights and applications for registration of copyright; (d) all internet domain names; (e) trade secrets, know-how, technology, discoveries and improvements, know-how, proprietary rights, formulae, confidential and proprietary information, technical information, techniques, inventions (including conceptions and/or reductions to practice), designs, drawings, procedures, processes, models, formulations, manuals and systems, whether or not patentable or copyrightable; (f) databases; and (g) all other intellectual property, intellectual property rights, proprietary information and proprietary rights.
Nasdaq Listing
Through the Closing, the Company has agreed to use reasonable best efforts to ensure it remains listed as a public company on, and for shares of Company common stock to be listed on, the Nasdaq. The Company has agreed to use commercially reasonable efforts to cause the common stock to be issued in connection with the merger (including the common stock to be issued pursuant to payment of the earnout consideration) to be approved for listing on Nasdaq as promptly as practicable following the issuance thereof, subject to official notice of issuance, prior to the Closing Date.
After the Closing, the Company shall use commercially reasonable efforts to: (a) continue the listing for trading of the Company common stock and Company Warrants on Nasdaq; and (b) in the event any Earn-Out Shares become issuable pursuant to the Merger Agreement, cause such Earn-Out Shares to be approved for listing on Nasdaq.
Indemnification and Directors’ and Officers’ Insurance
From and after the Closing, the Company has agreed that all rights to exculpation, indemnification and advancement of expenses now existing in favor of each present and former director and officer of the Sema4 Companies as provided in their respective certificates of incorporation (if applicable), bylaws and other organizational documents or in any indemnification agreement with respect to Sema4 Companies. Without limiting the foregoing, the Company has agreed to use reasonable best efforts to cause the Sema4 Companies to, (i) maintain forFor a period of not less than sixfour years from the Closing, OPKO has agreed not to, directly or indirectly, (a) solicit the provisions in its certificateemployment or services (whether as an employee, consultant, independent contractor or otherwise) of incorporation (if applicable), bylaws and other organizational documents concerningany employee of the indemnification and exoneration (including provisions relating to expense advancement)GeneDx Group as of officers and directors and (ii) not amend, repealClosing or otherwise modify such provisionsany person who had been an employee of the GeneDx Group within the 12-month period immediately preceding the Closing, without the Company’s prior written consent, or (b) hire in any respect that would adversely affect the rights of those persons thereunder, in each case, exceptcapacity (whether as required by law. The Company has agreed to assume, and be liable for, and shall use reasonable best efforts to cause the Sema4 Companies to honor, each of the covenants described in this paragraph.
Prior to the Closing, Sema4 has agreed to use reasonable best efforts to, purchase a “tail”an employee, consultant, independent contractor or “runoff” directors’ and officers’ liability insurance policy (the “D&O Tail”) in respect of acts or omissions occurring prior to the Closing covering eachotherwise) any Key Employee, unless such person that is a director or officer ofhas been terminated by the Company or any of its subsidiaries currently coveredaffiliates subsequent to the Closing and who has not been employed or engaged by directors’the GeneDx Group for a period of at least six months prior to the date of such hire, without the Company’s prior written consent; provided that “solicit the employment or services” shall be deemed not to include generalized searches for employees through media advertisements of general circulation, employment search firms, open job fairs or otherwise.
For a period of four years following the Closing, OPKO has agreed not to, directly or indirectly, engage in the GeneDx business anywhere in the world.
Insurance; D&O Indemnification
Subject to the terms and officers’ liabilityconditions of the Merger Agreement and the applicable terms and limitations of any such insurance policy, OPKO has agreed to (i) seek recovery on behalf of the Company for certain damages related to pre-Closing occurrences that are covered under OPKO’s occurrence-based third party liability insurance policies and (ii) delivery any proceeds recovered for such claims (calculated net of reasonable expenses incurred in procuring such recovery and any increase in premiums or retroactive premium adjustments or chargebacks paid by or on behalf of OPKO to the extent resulting from such claims, and taking into account the available coverage under each such available insurance policy) to the Company.
Each of the Company, OPKO and HoldCo agreed that all rights to indemnification, advancement of expenses and exculpation from liability for or in connection with acts or omissions occurring at any time prior to or on the Closing Date (including in connection with the Merger Agreement and the Transactions), that now exist in favor of any person who prior to or on the Closing Date is or was a current or former director, manager, officer or employee of any member of the GeneDx Group, or who at the request of OPKO, HoldCo or any of its subsidiaries on terms with respecttheir respective affiliates served prior to coverage, deductibles and amounts on less favorable than those of such policy in effector on the dateClosing Date as a director, officer, member, manager, employee, trustee or fiduciary of any other entity of any type, including as provided in the governing documents of any member of the Merger AgreementGeneDx Group, will survive the Closing and will continue in full force and effect following the Closing Date. In furtherance (and not in limitation of) the foregoing, for the six year period following the Closing. TheClosing Date, the Company shall use reasonable best effortshas agreed to cause the Sema4 CompaniesGeneDx Group to maintain in the governing documents of each applicable member of the GeneDx Group provisions with respect to indemnification, advancement of expenses and exculpation from liability that in each such respect are at least as favorable to each D&O Tailindemnified person as those contained in full force and effect for its full term and cause all obligations thereunder to be honored by the Sema4 Companies, as applicable, and no other party shall have any further obligation to purchase or pay for such insurance.
Financing
The Company has agreed not to permit any amendment or modification to be made to, or any waiver of any provision or remedy under, or any replacement of, any of the Subscription Agreement, in each case, without the prior written consent of Sema4 (such consent not to be unreasonably withheld, conditioned or delayed in respect ofmember’s governing
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documents as in effect on the date hereof, which provisions will not be amended, repealed or otherwise modified in any manner that would adversely affect the rights thereunder of any such amendment, modification, waiver or replacement that is notD&O indemnified person.
Notwithstanding the foregoing, OPKO’s directors and would not reasonably be expected to be materially adverse to Sema4 or the Sema4 Stockholders).
The Company has further agreed to use reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary proper and advisable to consummate the purchases contemplated by the subscription agreements on the terms and conditions described or contemplated therein.
Extension
The Company (on behalf of itself and Merger Sub) and Sema4 (on behalf of its stockholders) may (i) extend the time for performance of anyofficers insurance policies, in each case as in effect as of the obligations or other acts ofClosing Date, shall be the other party, (ii) waivefirst and primary recourse for any inaccuracies inindemnification to which any D&O indemnified person may be entitled under the representationsforegoing. For the six-year period following the Closing Date, OPKO agrees to treat any such claim for indemnification against its directors and warranties made to the other party containedofficers insurance policies as a Valid Pre-Closing Claim (as such term is defined in the Merger Agreement, and (iii) waive complianceAgreement) in accordance with anySection 5.1(a) of the agreements or conditions for the benefit of such party.Merger Agreement.
Registration Rights
In connection with the Closing, the Company and certain of the Sema4 Stockholders have agreed to enter into and comply with the terms of an amended and restated registration rights agreement in favor of any holder of Company common stock, treating shares of common stock held by such holder as registrable securities thereunder.
Other Covenants and Agreements
The Merger Agreement contains other covenants and agreements, including covenants related to:
•Sema4confidentiality restrictions and limitations on public statements pertaining to the Company cooperating on the preparation and efforts to make effective this proxy statement;Transactions;
•Sema4OPKO, GeneDx and the Company providing access, subject to certain specified restrictions and conditions, to the other party and its respective representatives reasonable access to Sema4'sGeneDx’s and the Company’s (as applicable) and its subsidiary’s properties, records, systems, contracts and commitments;
•Sema4the delivery of certain notices and use of commercially reasonable efforts by OPKO and the applicable GeneDx Party to obtain all consents, waivers and approvals from all persons that are necessary for the execution and delivery of, and the performance of its controlled affiliates, officers, directorsobligations pursuant to, the Merger Agreement and employees agreeing notthe ancillary agreements contemplated thereunder; GeneDx using commercially reasonable efforts to engageenter into certain new contracts in transactions involving securitiesaccordance with the terms of the Company without the Company’s prior written consent;
•Sema4 waiving claims to the Trust AccountMerger Agreement, and in the event thatnot entered into prior to the merger does not consummate;
•Closing, cooperating with the Company agreeingfollowing Closing to take all actions necessary(a) implement arrangements (including subleasing, sublicensing or appropriatesubcontracting) (i) to cause certain appointmentsprovide the underlying rights and benefits of GeneDx to the board ofCompany, the Company;
•Surviving Entity and their designated affiliates and (ii) for the Surviving Entity or the Company keeping currentor their designated affiliate to assume all GeneDx obligations thereunder and timely filing all reports(b) obtain any requisite consent, substitution, novation, or amendment required to be filed or furnished withtransfer the SEC and otherwise complying in all material respects with its reporting obligations under applicable securities laws;
•portion of such seller contract attributable to the GeneDx business to the Company, taking steps to exempt the acquisition of common stock from Section 16(a) of the Exchange Act pursuant to Rule 16b-3 thereunder;
•cooperation and reasonable best efforts between Sema4 and the Company in obtaining any necessary third-party consents required to consummate the merger;Surviving Entity, or their designated affiliate;
•agreement to promptly provide the other party with written notice of any event or development that would cause any closing conditions to not be satisfied or would require a supplement or amendment tocertain events and developments during the proxy statement;pre-closing period;
•delivery of monthly interim financial statements and audited consolidated financial statements of the Company agreeing to adopt a long-term incentive plan and employee stock purchase plan substantially inGeneDx Group for the form provided in the exhibits to the Merger Agreement;12-month period ended December 31, 2021;
•agreement relating tofiling of tax returns and payment of certain taxes following the Closing, the intended tax treatment of the transactions contemplated byTransactions, treatment of tax refunds received following the Merger Agreement;Closing, and handling of certain post-closing actions related to taxes;
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•confidentialityemployment terms and publicity relatingbenefits for continuing employees of the GeneDx Group following the Closing;
•negotiation, finalization and entry into a mutually agreed transition services agreement to address certain shared services and contracts following the Merger Agreement and the transactions contemplated thereby;Closing; and
•completion of the Company, on its own behalf and on behalf of its affiliates and representatives, has agreedPre-Closing Restructuring prior to a release of certain claims against Sema4, each Sema4 Stockholders, its affiliates and its and their respective related parties, and the Sema4 Stockholders (solely in their capacity as a stockholder of Sema4), on its own behalf and on behalf of each of its affiliates and representatives, have agreed to a release of certain claims against the Company and the Sema4 Companies, in each case subject to certain exceptions as set forth in the Merger Agreement.Closing.
Representations and Warranties
The Merger Agreement contains representations and warranties made by Sema4GeneDx to the Company relating to a number of matters, including but not limited to, the following:
•corporate organization and qualification;
•subsidiaries;
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•
capitalization;
•due authorization;
•no conflict; governmental consents and filings;capitalization;
•legal compliance; approvals;title to and sufficiency of assets;
•governmentalcompliance with environmental laws and regulations;
•absence of certain activities and changes;
•material contracts;
•non-contravention and restrictions on business;
•financial statements;
•no undisclosed liabilities;
•absence of certain changes or events;taxes;
•compliance with law;
•permits;
•regulatory matters;
•litigation;
•employment matters;
•employee benefit plans;
•labor relations;
•realintellectual property; tangible property
•taxes;
•environmental matters;
•brokers; third party expenses;
•intellectual property
•privacy, & cybersecurity; HIPAA Compliance;data and data security;
•agreements, contracts and commitments;transactions with certain persons;
•insurance;
•affiliate matters;no brokers;
•certain provided information;
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•absence of certain business practices;books and records;
•government grants and incentives;bank accounts;
•Office of Inspector General of the United States;customers, suppliers and third-party payors;
•suppliers and customers;inventory; and
•disclaimer of other warranties.
Certain of these representations and warranties are qualified as to “materiality” or “material adverse effect”. For purposes of the Merger Agreement, a “material adverse effect” with respect to Sema4GeneDx means any event, change, event,condition, circumstance, effect, development, occurrence or occurrence,state of facts that, individually or when aggregatedin the aggregate with all other changes, events,such effects, has, or occurrences has hadwould reasonably be expected to have, a materiallymaterial adverse effect on (a) the business, assets, financial condition (financial or otherwise), business, results of operations or assets of the Sema4 Companies, takenGeneDx Group (taken as a whole;whole) or (b) the ability of OPKO or the GeneDx Parties to perform their respective obligations under the Merger Agreement; provided however, that no change, event, occurrence or effect arising out of or relatedattributable to any of the following alone or in combination, shall be taken into account in determining whetherthe existence of a material“material adverse effect has occurred:effect” solely for purposes of clause (a) above: (i) conditions affecting the industry, financial
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markets or securities markets in, or the economy as a whole of, the United States, (ii) changes in law or accounting standards (or, in each case, any interpretation thereof) after the Closing Date, (iii) earthquakes, hostilities, acts of war, sabotage civil unrest or terrorism or any escalation or worsening of any such acts of war, sabotage, civil unrest or terrorism, or changes in global, national, regional, state or local political or social conditions; (ii) earthquakes, hurricanes, tornados, pandemics (including COVID-19), epidemics, disease outbreaks, ormilitary actions, epidemic, public health emergencies (as declared byevent or pandemic (including COVID-19 and any worsening thereof (including any COVID-19 response measures)), (iv) any actions required under the World Health OrganizationMerger Agreement or otherwise negotiated separately to obtain any approval or authorization under applicable antitrust or competition laws for the Health and Human Services Secretaryconsummation of the United States) or other natural or man-made disasters, or any worsening thereof; (iii) changes attributable toTransactions, (v) the public announcement or pendency of the transactions contemplated by the Merger Agreement and the consummation of the Transactions (including the impact thereofeffects of such announcement and pendency on relationships with customers, suppliers, governmental authorities, employees or governmental entities); (iv) changesother third-party relationships), (vii) any actions taken (or omitted to be taken) by or proposed changes in Applicable Legal Requirements, regulationsat the written request of the Company or interpretations thereof or decisionsas required by courts or any governmental entity after the date of the Merger Agreement, (including measures relating to the COVID-19 pandemic); (v) changes or proposed changes in GAAP (or any interpretation thereof) after the date of the Merger Agreement; (vi) any downturn in general economic conditions, including changes in the credit, debt, securities, financial, capital or reinsurance markets (including changes in interest or exchange rates, prices of any security or market index or commodity or any disruption of such markets), in each case, in the United States or anywhere else in the world; (vii) events or conditions generally affecting the industries and markets in which Sema4 operates; (viii) any failure, in and of itself, of the GeneDx Group to meet any internal or published projections, forecasts guidance, estimates, milestones, budgets or financialrevenue or operatingearnings predictions for any period (it being understood that the underlying causes of revenue, earnings, cash flowthe facts or cash position, provided that this clause (viii) shall not prevent a determination that any change, event, or occurrence underlyingoccurrences giving rise to such failure has resulted in a material adverse effect; or (ix) any actions required to be taken, or required not to be taken, pursuant to the terms of the Merger Agreement; provided, however, that if a change or effect related to clauses (iv) through (vii) disproportionately adversely affects the Sema4 Companies, taken as a whole, compared to other persons operating in the same industry as the Sema4 Companies, then such disproportionate impact may be taken into account in determining whether a material“material adverse effecteffect” has occurred.
occurred), except, in the case of the forgoing clauses (i), (ii) and (iii), to the extent such conditions, changes or events disproportionately affect the GeneDx Group relative to similarly situated industry participants (in which case the incremental disproportionate impact or impacts may be taken into account in determining whether there has been a “material adverse effect”). The Merger Agreement also contains representations and warranties made by the Company to Sema4GeneDx relating to a number of matters, including the following:
•corporate organization and qualification;
•company subsidiaries;authorization;
•capitalization;
•authority;non-contravention;
•compliance with laws;
•securities law matters;
•no conflict; required filings and consents;proceedings;
•compliance; approvals;no brokers;
•Company SEC reports and financial statements;no insolvency proceedings;
•absence of certain changes or events;
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•litigation;not an investment company;
•business activities; liabilities;
•Company material contracts;
•Company listing;
•equity financing amount;
•the Trust Account;anti-corruption laws;
•taxes;
•information supplied;compliance with environmental laws and regulations;
•employees; benefit plans;litigation;
•board approval; stockholder vote;
•title to assets;
•affiliate transactions;
•brokers;merger sub activities; and
•disclaimer of other warranties.
The representations and warranties in the Merger Agreement do not survive the effective time and, as described below under “— Termination”, if the Merger Agreement is validly terminated, there will be no liability under the representations and warranties of the parties, or otherwise under the Merger Agreement, unless a party willfully breached the Merger Agreement or committed intentional fraud in the making of the representations and warranties in the Merger Agreement.
This summary and the copy of the Merger Agreement attached to this proxy statement as Annex A are included solely to provide investors with information regarding the terms of the Merger Agreement. They are not intended to provide factual information about the parties or any of their respective subsidiaries or affiliates. The Merger Agreement contains representations and warranties by the Company and Sema4,GeneDx, which were made only for purposes of that agreement and as of specific dates. The representations, warranties and covenants in the Merger Agreement were made solely for the benefit of the parties to the Merger Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as
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facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those generally applicable to investors. Investors are not third-party beneficiaries under the Merger Agreement, and in reviewing the representations, warranties and covenants contained in the Merger Agreement or any descriptions thereof in this summary, it is important to bear in mind that such representations, warranties and covenants or any descriptions thereof were not intended by the parties to the Merger Agreement to be characterizations of the actual state of facts or condition of the Company, Sema4GeneDx or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in public disclosures.
Escrow Fund and Indemnification
Escrow Fund
At the Closing, the Company will (a) withhold from the Merger Consideration otherwise payable or issuable, as the case may be, $13,470,000 in cash and 8,314,815 shares of its Class A common stock (collectively, the “Escrow Amount”) and (b) deposit the Escrow Amount into a third-party escrow to be held for a period of 12 months following the Closing Date as a fund for OPKO’s indemnification obligations, as further described below. The Escrow Amount will be held and released subject to and in accordance with the terms and conditions set forth in the Merger Agreement and the Escrow Agreement.
Survival; Claims Period
The representations and warranties contained in the Merger Agreement that are not Fundamental Representations will survive the Closing until the date that is 12 months following the Closing Date and the Fundamental Representations shall survive until the expiration of the applicable statute of limitations. All of the covenants and other agreements of OPKO, the Company Parties, the Company and the Merger Subs in the Merger Agreement to be performed at or prior to the Closing shall survive until the date that is 12 months following the Closing Date and all other covenants and other agreements of such parties contained in the Merger Agreement will survive until fully performed or fulfilled.
The period during which the Acquirer Indemnified Parties may assert a claim for indemnification in respect of any of the specified matters set forth in clauses (c) through (f) below shall survive indefinitely, except for the Repayment Obligations Indemnity, which period shall expire on the date that is two years following the Closing Date.
OPKO Indemnification Obligations
From and after the Closing, subject to the terms and conditions set forth in the Merger Agreement, OPKO has agreed to indemnify, defend and hold harmless the Company and certain of its affiliates and representatives (the “Acquirer Indemnified Parties”) from and against any and all damages asserted against, suffered, sustained, accrued or incurred by such Acquirer Indemnified Party as a result of or relating to:
(a)the breach of, or any inaccuracy in, any representation or warranty of the GeneDx Parties or OPKO in the Merger Agreement or certain certificates delivered in connection with the Closing;
(b)any breach of or failure to perform any covenant or obligation of GeneDx or OPKO under this Agreement;
(c)any liabilities not related to the GeneDx business;
(d)any Indebtedness of the GeneDx Group or transaction expenses of the GeneDx Group to the extent not taken into account in the calculation of the Cash Consideration in accordance with the Merger Agreement;
(e)any Pre-Closing Taxes; or
(f)(i) certain repayment obligations, to the extent not taken into account in the calculation of the Cash Consideration (the “Repayment Obligations Indemnity”) and (ii) the Pre-Closing Restructuring.
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Company Indemnification Obligations
From and after the Closing, subject to the terms and conditions set forth in the Merger Agreement, the Company has agreed to indemnify, defend and hold harmless OPKO and its affiliates (excluding, after the Closing, the Surviving Entity and the other members of the GeneDx Group) representatives (the “OPKO Indemnified Parties” and together with the Acquirer Indemnified Parties, the “Indemnified Parties”) from and against any and all damages asserted against, suffered, sustained, accrued or incurred by such OPKO Indemnified Party as a result of or relating to:
(a)the breach of, or any inaccuracy in, any representation or warranty of the Company or the Merger Subs in the Merger Agreement or certain certificates delivered in connection with the Closing; or
(b)any breach of or failure to perform any covenant or obligation of the Company or the Merger Subs under this Agreement.
Limitations on Liability
In the case of General Claims (as such term is defined in the Merger Agreement): (a) the Indemnifying Party shall not be liable for, and no Indemnified Party shall have a right to deliver a claim notice in respect of, any such individual General Claim or series of such related General Claims arising out of the same or related facts and circumstances where the Damages are less than $25,000 (“De Minimis Claims”), and no De Minimis Claims shall be included in the calculation used to determine whether the Deductible shall have been satisfied; and (b) the Indemnifying Party shall not be liable for any such General Claims (or series of related General Claims) unless and until the aggregate of all indemnifiable Damages that may be recovered from such Indemnifying Party for General Claims exceeds $5,565,000 (the “Deductible”) and then such Indemnifying Party shall be liable only for those amount in excess of the Deductible; and (c) the maximum aggregate Liability of an Indemnifying Party with respect to General Claims shall not exceed an amount equal to the Escrow Amount.
Except in the case of (i) Fundamental Claims (as such term is defined in the Merger Agreement) involving Third Party Claims and (ii) fraud, no Indemnifying Party shall be liable under the Merger Agreement for an aggregate amount in excess of the actual amount of the Merger Consideration, exclusive of any Milestone Payments, paid to OPKO (it being agreed that, for purposes of calculating such amount, the shares of our Class A common stock received by OPKO shall be deemed to have a value equal to the Share Value); provided that, with respect to the Repayment Obligations Indemnity, OPKO’s maximum liability shall not exceed an amount equal to $35,000,000.
In the case of (i) Fundamental Claims (other than the Repayment Obligations Indemnity, which shall be limited as set forth above) involving Third Party Claims or (ii) fraud, no Indemnifying Party shall be liable under the Merger Agreement for an aggregate amount in excess of the actual amount of the Total Merger Consideration, inclusive of any Milestone Payments, paid to OPKO.
Additional Agreements
The Merger Agreement contains additional terms governing the process by which an Indemnified Party may bring and assert a claim for indemnification, the process by which an Indemnifying Party may dispute a claim for indemnification, the order of recovery against an Indemnifying Party and the control of the defense and settlement of any third-party claims.
Conditions to the MergerAcquisition
Conditions to Each Party’s Obligations
The respective obligations of each of Sema4 and the CompanyParty to complete the mergerAcquisition are subject to the satisfaction of the following conditions:
•the approval of the Stock Consideration Issuance Proposal and the Charter Amendment Proposal by the Company’s shareholders;
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•The approval by OPKO, as sole stockholder of Holdco, of the Merger Agreement and the transactions contemplated by the Merger Agreement by the requisite vote of the Sema4 stockholders;thereby;
•All filings with and approvals of any Governmental Authority required to be made or obtained prior to the Company must have $5,000,001 of net tangible assets (as determinedClosing in accordance with Rule 3a51-1(g)(i) of the Exchange Act) following the exercise by the holders of Company common stock issued in the Company’s IPO of securities and outstanding immediately before Closing of their right to convert their Company common stock into a pro rata share of the Trust Account in accordanceconnection with the Company’s organizational documents;
•Acquisition shall have been made or obtained and in full force and effect, and the applicable waiting period(s) under the HSR Act and, if required, any other applicable antitrust law in respect of the transactions contemplated by the Merger Agreement must have expired or been terminated; and
•there must be no provisionorder issued by any court of any Applicable Legal Requirement prohibiting, enjoining or making illegalcompetent jurisdiction preventing the consummation of the transactions contemplated by the Merger Agreement must beAcquisition in effect, and no temporary, preliminaryaction shall have been taken by any Governmental Authority seeking the foregoing, and no law or permanent restraining order prohibiting, enjoiningshall have been enacted or making illegalentered that makes the consummation of such transactions may be in effect.the Acquisition illegal.
Conditions to Obligations of the CompanyCompany’s Obligations
The obligation of the Company to complete the mergerAcquisition is also subject to the satisfaction, or waiver by the Company, of the following conditions:
•the accuracy of the representations and warranties of Sema4 related to organization, qualification, due authorization, brokersthe GeneDx Parties and third party expenses, must be true and correct in all material respects (without giving effect to any limitation as to “materiality” or “material adverse effect” or any similar limitation contain herein) on andOPKO as of the date of the Merger Agreement and on as of the Closing, Date as though made on and as of the Closing Date (exceptsubject to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty must be true and correct as of such earlier date); the representations and warranties of Sema4 set forth in the capitalization representation must be true and correct in all respects on and as of the date of the Agreement and on as of the Closing Date as though made on and as of the Closing Date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty must be true and correct as of such earlier date), except for any de minimis inaccuracies; and all other representations and warranties of Sema4 set forth in the Merger Agreement must be true and correct (without giving effect to any limitation as to “certain materiality” or “material adverse effect” or any similar limitation contained herein) on and as of the date of the Merger Agreement and on as of the Closing Date as though made on and as of the Closing Date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty must be true and correct as of such earlier date), except where the failure of such representations and warranties of the Company to be so true and correct, individually or in the aggregate, has not had and is not reasonably likely to have a material adverse effect; thresholds;
•Sema4each of OPKO and the GeneDx Parties must have performed or complied with all agreements and covenants required by the Merger Agreement to be performed or complied with by it at or prior to the Closing Date, in each case in all material respects;
•Sema4 must have delivered tono Order issued by any court of competent jurisdiction or other legal or regulatory restraint or prohibition materially limiting or restricting the Company a certificate signed by an officerCompany’s ownership, conduct or operation of Sema4 certifying thatGeneDx’s business following the two preceding conditions have been satisfied;
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•approvalClosing shall be in effect, and no proceeding seeking any of the transactions contemplated by the Merger Agreement must have been received from the Sema4 stockholders;foregoing shall be pending or threatened;
•no material adverse effect with respect to the GeneDx Group (taken as a whole) may have occurred since the date of the Merger Agreement that is continuing;
•HoldCo must have delivered the Required Financial Statements to the Company (subject to a grace period that may be available under applicable SEC rules);
•the GeneDx Parties and OPKO must have completed certain pre-closing restructuring transactions and received written confirmation from the IRS (or other evidence reasonably satisfactory to the Company) stating that GeneDx will retain its EIN following completion of the Transactions, as set out in the Merger Agreement;
•Katherine Stueland must have remained continuously employed on a full-time basis with GeneDx through the Closing, Ms. Stueland’s Key Employment Agreement must continue to be in full force and effect and no action shall have been taken by Ms. Stueland to repudiate or rescind such agreement and Ms. Stueland shall, as of the Closing, be ready, willing and able to perform the duties contemplated by the Key Employment Agreement following the Closing;
•a member of the GeneDx Group and the applicable Third Parties shall have entered into the Required Closing Contracts and delivered copies thereof to the Company; and
•Sema4GeneDx must have delivered, or caused to have been delivered, or must stand ready to deliver all of the certificates, instruments, contracts and other documents specified to be delivered by it hereunder, including copies of the documents to be delivered by the company pursuant to the Merger Agreement, duly executed by the applicable signatory or signatories specified therein, if any.
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Conditions to OPKO and GeneDx’s Obligations of Sema4
The obligation of Sema4OPKO and the GeneDx Parties to complete the mergerAcquisition is also subject to the satisfaction, or waiver by Sema4OPKO, of the following conditions:
•the accuracy of the representations and warranties of the Company related to organization, subsidiaries, authority in relation to the Merger Agreement and business activities must be true and correct in all material respects (without giving effect to any limitation as to “materiality” or “material adverse effect” or any similar limitation contain herein) on and as of the date of the Merger Agreement and on and as of the Closing, Date as though made on and as of the Closing Date (exceptsubject to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty must be true and correct as of such earlier date); the representations and warranties of the Company set forth in the capitalization representation must be true and correct in all respects on and as of the date of the Merger Agreement and on as of the Closing Date as though made on and as of the Closing Date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty must be true and correct as of such earlier date), except for any de minimis inaccuracies; and all other representations and warranties of the Company set forth in the Merger Agreement must be true and correct (without giving effect to any limitation as to “certain materiality” or “material adverse effect” or any similar limitation contained herein) on and as of the date of the Merger Agreement and on as of the Closing Date as though made on and as of the Closing Date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty must be true and correct as of such earlier date), except where the failure of such representations and warranties of the Company to be so true and correct, individually or in the aggregate, has not had and is not reasonably likely to have a material adverse effect; thresholds;
•the Company and Merger Sub must have performed or complied with all agreements and covenants required by the Merger Agreement to be performed or complied with by themit on or prior to the Closing Date, in each case in all material respects;
•the Company must have delivered to Sema4 a certificate, signed by an executive officer of the Company and dated as of the Closing Date, certifying that the two preceding conditions have been satisfied;
•the Company must have delivered or must stand ready to deliver all of the certificates, instruments, contracts and other documents specified to be delivered by it hereunder, including copies of the documents to be delivered by the Company pursuant to the Merger Agreement, duly executed by the Company and Merger Sub,Subs, as applicable;
•the Company certificate of incorporation must be amended and restated in the form attached to the Merger Agreement and the Company bylaws must be amended and restated in the form attached to the Merger Agreement;
•the Company must have made appropriate arrangements to have the Trust Account, less amounts paid and to be paid pursuant the Merger Agreement, available to the Company for payment of the cash payment amount to be paid at Closing, and the Company and Sema4 transaction costs at the Closing;
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•the funds contained in the Trust Account, together with the Subscription Agreements to be received substantially concurrently with the Closing, must equal or exceed $300,000,000, following (i) payment of the aggregate amount of cash proceeds that will be required to satisfy any exercise of the redemptions by the Company stockholders, and (ii) payment of all Company and Sema4 transaction costs;
•The shares of CompanyClass A common stock to be issued in connection with the MergerAcquisition must have been approved for listing on the Nasdaq.Nasdaq; and
•Nono material adverse effect must have occurred since the date of the Merger Agreement and be continuing.
Termination
Mutual termination rightsTermination Rights
The Merger Agreement may be terminated and the transactions abandoned:
•by mutual written consent of the Company and Sema4;OPKO;
•if the Acquisition is not completed by August 14, 2022, which date may be extended, by either the Company or Sema4party’s written notice, to October 14, 2022 if, the transactions contemplated by the Merger Agreementas of August 14, 2022, any one of certain conditions have not been consummated by November 9, 2021met (the “Outside Datetermination date”);, provided however, that the right to terminate isthe Merger Agreement under this provision will not be available to any party whose actionbreach of any covenant, agreement or failure to act has been aobligation hereunder was the principal cause of, or directly resulted in, the failure of the transactionsClosing to occur on or before such date and such action or failure to act constitutes a breach of the Merger Agreement;
•by either the Company or Sema4 if a governmental entity has issued an order or taken any other action, in any case having the effect of permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by the Merger Agreement, including the Merger, which order or other action is final and nonappealable;termination date; or
•by either the Company or Sema4,GeneDx if ata governmental entity has issued an order preventing the Special Meeting (including any adjournments thereof), the required approvals are not duly adopted by the stockholdersconsummation of the Company by the requisite vote under the DGCLMerger and the organizational documents of the Company.such order shall have become final and non-appealable.
Sema4 termination rightsOPKO Termination Rights
The Merger Agreement may be terminated and the transactions contemplated thereby abandoned:
•by Sema4, uponOPKO, by written notice to the Company, if there shall have been an inaccuracy in any representation or warranty made by, or a breach of any representation, warranty, covenant, agreement or agreement set forthobligation of, the Company or any of the Merger Subs in the Merger Agreement on the part ofand such inaccuracy or breach shall not have been cured within 30 days after receipt by the Company of written notice from OPKO of such inaccuracy or Merger Sub,breach and, if not cured within such period and at or if any representation or warrantyprior to the Closing, such breach would result in the failure of the Company or Merger Sub must have become untrue, in either case such thatcertain of the conditions set forth in the Merger Agreement would notto be satisfied as of the time of(provided that no such cure period shall be available or applicable to any such inaccuracy or breach or as of the time such representation or warranty must have become untrue; provided, that if such breach by the Company or Merger Sub is curable by the Company or Merger Sub prior to the Closing, then the Company must first provide written notice of such breach and may not terminate the Merger Agreement until the earlier of: (i) 30 days after delivery of written notice from Sema4 to the Company of such breach; and (ii) the Outside Date; provided, further, that each of the Company and Merger Sub continues to exercise commercially reasonable efforts to cure such breach (it being understood that Sema4 may not terminate the Merger Agreement if: (A) it must have materially breached the Merger Agreement and such breach has not been cured; or (B) if such breach by the Company or Merger Sub is cured during such 30-day period); orits nature cannot be cured).
•by Sema4, if the redemptions by the Company stockholders results in the trust account funds being insufficient to cover required payments at the Closing.
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Company termination rightsTermination Rights
The Merger Agreement may be terminated and the transactions contemplated thereby abandoned:
•abandoned by the Company, uponby written notice to OPKO, if there shall have been an inaccuracy in any representation or warranty made by, or a breach of any representation, warranty, covenant, agreement or agreement set forthobligation of, the GeneDx Parties or OPKO in the Merger Agreement onand such inaccuracy or breach shall not have been cured within 30 days after receipt by OPKO of written notice
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from the partCompany of Sema4such inaccuracy or breach and, if any representationnot cured within such period and at or warrantyprior to the Closing, such inaccuracy or breach would result in the failure of Sema4 must have become untrue, in either case such thatcertain of the conditions set forth in the Merger Agreement would notto be satisfied as of the time of(provided that no such cure period shall be available or applicable to any such breach or as of the time such representation or warranty must have become untrue; provided, that if such breach is curable by Sema4 prior to the Closing, then the Company must first provide written notice of such breach and may not terminate the Merger Agreement until the earlier of: (i) 30 days after delivery of written notice from the Company to Sema4 of such breach; and (ii) the Outside Date; provided, further, that Sema4 continues to exercise commercially reasonable efforts to cure such breach (it being understood that the Company may not terminate the Merger Agreement if: (A) it must have materially breached the Merger Agreement and such breach has not been cured; or (B) if such breach by Sema4 is cured during such 30-day period);its nature cannot be cured).
•by the Company within twenty-four hours of February 11, 2021 if the Sema4 approval is not obtained by such date.
Effect of Termination
In the event of termination of the Merger Agreement, such termination will be effective immediately upon the delivery of written notice of the terminating party to the other parties. If the Merger Agreement is validly terminated, the agreement will become void without any liability on the part of any of the parties, unless a party willfully breached the Merger Agreement or committed intentional fraudexcept in the making of the representations and warranties in the Merger Agreement. However, the provisions concerning Sema4’s waiverevent of any claims against the Trust Account, confidentiality, termination and certain other technical provisions will continueintentional misrepresentation made by, or a willful breach of any covenant, agreement or obligation of, such party in effect notwithstanding termination of the Merger Agreement.
Amendments
The Merger Agreement may be amended by the parties at any time by execution of an instrument in writing signed on behalf of each of OPKO and the parties; provided that, following the receipt of approval of the transactions contemplated by the Merger Agreement by the Sema4 stockholders, there shall be no amendment to the Merger Agreement (or any of the provisions hereof) which under the DGCL or other Applicable Legal Requirements would require further approval by the stockholders of Sema4 in accordance with the organizational documents of Sema4 without such approval.
1.First Amendment: Immediately prior to entering into the Merger Agreement, Sema4 allocated “earnout” restricted stock units (“Earnout RSUs”) to certain employees, to be granted following the closing of the merger, with such Earnout RSUs representing the opportunity to participate in the earnout (to the extent achieved and subject to the cap on earnout shares to be issued). In the event any such Earnout RSUs are forfeited following the closing of the merger (e.g., an employee is no longer employed by Sema4), the Merger Agreement provides for a forfeiture pool in respect of the earnout shares that were originally allocated to such forfeited Earnout RSUs, with such earnout shares to instead become available for issuance to other Sema4 stockholders and remaining holders of Earnout RSUs in the event the earnout is achieved. Sema4’s accountants interpreted two sentences in the Merger Agreement to provide for issuance of shares out of the forfeiture pool regardless of whether the earnout is achieved. The amendment clarifies that any earnout deemed to be included in the forfeiture pool will only be issued if the earnout is actually achieved.
2.Second Amendment: In order to avoid any possibility for confusion about the number of shares of CM Life Sciences shares to be issued at closing, counsel for Sema4 has requested a modification to the definition of “Closing Number of Securities” contained in the Merger Agreement. Specifically, the pro forma number of shares authorized to be issued at closing needs to include “in-the-money” options per calculations on a treasury stock basis, which can be immediately exercised for shares. While the “Per Share Amount” and other defined terms take this into account, the “Closing Number of Securities” definition does not expressly
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do so. The amendment will address this point to avoid any possible confusion or inconsistencies. It is simply a clarification of the way options were intended to be treated consistent with the other provisions of the Merger Agreement.Company.
Specific Performance
The parties to the Merger Agreement agree that it may be difficult to prove damages with reasonable certainty or to procure suitable substitute performance, and that injunctive relief and/or specific performance will not cause an undue hardship to the parties. Each of the parties to the Merger Agreement therefore agreeagreed that each such party shall be entitled to enforce specifically the terms and provisions of the Merger Agreement, without the necessity of proving the inadequacy of money damages as a remedy and without bond or other security being required, this being in addition to any other remedy to which they are entitled at law or in equity.
Stock Market Listing
Application will be made by the Company to have the shares of Company common stock to be issued in the merger approved for listing on Nasdaq, which is the principal trading market for existing shares of Company common stock. It is a condition to Sema4’s obligation to complete the merger that such approval is obtained, subject to official notice of issuance.
Fees and Expenses
Except with respect to all filing and other fees in connection with any filing under the HSR Act, 50% of which will be borne by the Company and 50% of which will be borne by Sema4,GeneDx, and certain other specified fees and expenses, all costs and expenses incurred in connection with the Merger Agreement will be paid by the party incurring such cost or expense.
Background of the Business CombinationAcquisition
The terms of the Business CombinationAcquisition are the result of negotiations among the representatives of CMLSSema4 and Sema4.GeneDx. The following is a brief description of the background of these negotiations and the resulting Business Combination.Acquisition.
CMLS is a blank check company incorporated in Delaware on July 10, 2020 and formed forSince the purposeconsummation of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similarits business combination with one or more businesses. Our intention was to capitalize on the substantial deal sourcing, investing and operating expertise of our management teamCMLS in July 2021, Sema4 has endeavored to identify opportunities to expand its capabilities through acquisitions and, combine with one or more businesses into that end, the life sciences industry, where there is an opportunityBoard established a standing transaction committee (the “Transaction Committee”) composed of Joshua Ruch, Michael Pellini and Eli Casdin to create significant shareholder value by assisting companies in accessingsupervise Sema4’s consideration of various proposed acquisitions. Believing that the public markets to provide capital to facilitateaddition of precision oncology, clinical genomics and rare disease testing capabilities would significantly enhance Sema4’s platform, Sema4 analyzed the growthprecision oncology, clinical genomics and rare disease market segments through the course of their business.
On September 4, 2020, we consummated our initial public offering (“IPO”) of 44,275,000 units, with each unit consisting of one share of Class A common stock and one warrant, generating total gross proceeds of $442,750,000. Prior to the consummation of our IPO, our Sponsor purchased 10,062,500 founder shares for an aggregate purchase price of $25,000, or approximately $0.002 per share. Simultaneously with the consummation of our IPO, we consummated the private sale of 7,236,667 warrants to our Sponsor and certain of our directors, each of which entitles the holder to purchase one share of CMLS Class A common stock at an exercise price of $11.50 per share, at a price of $1.50 per warrant, generating gross proceeds of approximately $10,855,000.
Prior to the consummation of our IPO, neither CMLS, nor anyone on its behalf, engaged in any substantive discussions, directly or indirectly, with any business combination target2021 with respect to an initial business combination with CMLS.various companies and technologies as potential acquisition candidates.
After our IPO, our officers and directorsIn March 2021, the Sema4 corporate development team began evaluating prospective businesses or assets to acquirethe rare disease market and identifying target companies that were attractive in our initial business combination. Mr. Casdin was familiar withthat space. On March 16, 2021 and through a number of companies that might be of interestmutual business connections, an introduction was made to CLMS based upon his experience in the life sciences industry and representatives of CMLS were contacted by, and representatives of CMLS contacted, numerous individuals,OPKO management team, along with their financial advisors, to explore potential opportunities of strategic alignment with their subsidiary, GeneDx.
On March 24, 2021, a call was arranged through OPKO’s advisors between Phillip Frost, OPKO’s Chairman and other entities regardingCEO, and Kareem Saad, Sema4’s Chief Business Officer, to share high level executive overviews and discuss the potential of a business transaction. A mutual non-disclosure agreement was signed by both parties on April 5, 2021 to facilitate each party’s respective due diligence, and a confidential information memorandum that detailed the overall business summary, a product breakdown and a financial overview was shared with the Sema4 corporate development team.
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combination opportunities. Our officersOPKO spent the following six months upgrading GeneDx’s executive leadership team, refocusing their business strategy and directorsconsidering several strategic paths including the potential to spin the company out as a standalone entity.
In early September 2021, during a discussion between Casdin Capital and their affiliates also provided adviceKatherine Stueland, GeneDx’s President and CEO, regarding target business candidates.
During this search process, CMLS and its board of directors considered and discussed approximately 20a potential business combination opportunities that were relevant in terms of sector and size. This group was narrowed down to a smaller group of high potential opportunities based on internal assessment of the companies’ operations, management teams and financial performance and prospects. Representatives of CMLS also discussed potential business combination opportunities with investment bankers and private equity sponsors who offered further insights on specific companiesinvestment by Casdin Capital in GeneDx, Eli Casdin suggested that a meeting among Sema4 and the search processGeneDx could be advantageous for both parties. During a subsequent call among Ms. Stueland, Mr. Casdin and Steven Rubin, it was agreed that Mr. Casdin would facilitate a broader introduction of Sema4 to OPKO.
On September 16, 2021, Ms. Stueland and representatives from GeneDx held a laboratory tour and meeting with members from Casdin Capital, including Eli Casdin, Shaun Rodriquez, and Ryan Blicker, at GeneDx’s facilities in general.Gaithersburg, MD.
CMLS sent draft letters of intent (each, an “LOI”)On September 21, 2021, Eric Schadt, Sema4’s Founder and CEO, met in person with Ms. Stueland to four companies between September 19, 2021 and October 12, 2021, which included Sema4. LOI drafts were sent only to companies that CMLS felt were real prospects to partner with and who were also looking to transition to the public markets. In considering potential targets, CMLS focused on companies that had potential scientific or othercontinue discussions around business advantages in the markets in which they operate, had strong and experienced management teams or key personnel and were expected to offer attractive risk-adjusted equity returns for CMLS stockholders. CMLS also considered the potential targets’ overall knowledge of the sector within which they operate, any existing relationships that the CMLS board of directors had with management, the backgrounds and experience of the key personnel of the potential targets, the size and maturity of the potential targets, including if any were ready for the public markets, and the growth profile of the potential targets. CMLS continued to evaluate and have discussions with potential targets until execution of an LOI with Sema4 on January 22, 2021 as described below, which contained a binding exclusivity provision.
With regards to the four companies to whom CMLS sent draft LOIs:
•Company A was presented as a competitive bidding process by an investment bank engaged by Company A. Representatives of the investment bank informed CMLS of the valuation Company A was seeking in the transaction. CMLS’ management was familiar with the company and the founding CEO and submitted an LOI with the goal of completing a deeper due diligence review. CMLS was granted access to the data room and deeper due diligence meetings were conducted to discuss Company A, CMLS’ vision for the company,synergies and the potential approachof combining both organizations. Both agreed to working together. Company A ultimately decidedconvene a follow-up meeting between members of both leadership teams to proceed with another SPAC business combination based on a significant strategic partnership opportunity.
•Company Bdive deeper into the respective businesses to determine if there was a companyviable path forward.
On October 1, 2021, Mr. Casdin met with Ms. Stueland, Dr. Frost and Mr. Rubin in which Casdin Capital had previously investedMiami, FL and an LOIit was extended to complete deeper due diligence with a view to finalizing potential valuation terms. Potential terms were discussed with Company B and they moved ahead with an alternative transaction after multiple conversations about the future path for the company.
•Company C was a company Casdin Capital had previously invested in. CMLS management concludedagreed that the complexity of the transaction would be significant and there were significant timing riskspotential benefits and synergies from a combination of GeneDx and Sema4 and further discussion was warranted. It was agreed that CMLSnext steps would include a tour of GeneDx’s facilities in Gaithersburg followed by a tour of Sema4’s facilities in Stamford, CT and New York, NY.
On October 5, 2021, members of the Sema4’s management team, led by Mr. Schadt, met with members of GeneDx’s management team, led by Ms. Stueland, at Sema4’s corporate headquarters in Stamford, CT. Both companies shared more detailed information on their respective corporate strategies, product and solution portfolios, go-to-market plans and solution portfolios, long term growth plans and financial profiles. A mutual determination was not comfortable bearing.
In parallelmade to pursue deeper exploratory diligence to assess the foregoing, CMLS was engaging with managementfeasibility of a merger of both organizations and to enter into negotiations on business terms. JP Morgan Chase, financial advisors to OPKO (“JP Morgan”), and Goldman Sachs, financial advisors to Sema4, as set forth below.were brought into the conversation to help broker and facilitate a potential transaction.
On October 6, 2020, Eli D. Casdin, CEO2021, Sema4’s Transaction Committee was fully briefed on conversations and approved a plan to enter into exploratory diligence with GeneDx to explore a potential acquisition and to proceed with the development of CMLS,a term sheet that outlines the business terms for the transaction.
On October 12, 2021, Sema4 then commenced a due diligence investigation of GeneDx, with the assistance of its financial, accounting, tax and Shaun Rodriguez, Chief Strategy Officerlegal advisors. Over the next several weeks, Sema4, with assistance from Goldman Sachs, financial advisor to Sema4, and Fenwick & West LLP, outside legal counsel to Sema4 (“Fenwick”), assessed various preliminary diligence materials received from GeneDx and worked on developing potential transaction strategies and structures for a potential acquisition of CMLS, contacted Eric Schadt, CEOGeneDx. Conversely, GeneDx along with a number of their advisors entered into a series of discussions with the Sema4 management team to assess technology, product, go-to-market and human resources aspects of the Sema4 business. During the due diligence period and throughout the course of negotiations with OPKO, the Transaction Committee met regularly with members of the Sema4 management team, Goldman Sachs and Fenwick to review progress on the proposed transaction, analyze the results of due diligence and provide input on proposed transaction terms.
On October 18, 2021, representatives of OPKO and GeneDx visited Sema4 headquarters in Stamford, CT and in New York, NY. Sema4 and GeneDx made presentations to each other’s management teams.
On October 21, 2021, the Transaction Committee authorized the submission to OPKO of a non-binding indication of interest (the “Non-Binding Indication”) for an acquisition of GeneDx by Sema4 for total consideration of up to $850 million in a taxable transaction, payable in the form of (i) an upfront cash payment of $150 million, (ii) upfront stock consideration with a value of $500 million in shares of Sema4’s Class A common stock (valued based on the average of the daily VWAP of the Class A common stock over the 30 trading days prior to the date that
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would be two days prior to the signing of a potential purchase agreement (a 30-day VWAP), referred to as the “Sema4 Stock Price”) and (iii) post-closing potential milestone-based consideration of up to $200 million in cash, shares of Class A common stock (based on the Sema4 Stock Price) or a mix thereof (such allocation to be determined by Sema4 in its sole discretion) to be paid upon the achievement of certain revenue targets following the closing of the transaction. The Non-Binding Indication also provided that the stock portion of the consideration to be paid in the transaction, including the milestone payments, would be subject to a two-year lock-up period and that following the lock-up period, any resale of the stock consideration would be subject to certain resale limitations.
On October 22, 2021, the Board met to discuss the potential acquisition of GeneDx, including a range of possible terms for such acquisition and financing options related to the cash consideration expected to be paid in the acquisition. Representatives of Goldman Sachs provided the Board preliminary financial analysis of Sema4 in an introductory call to inquire aboutand GeneDx. Representatives of Fenwick were also present at the statusmeeting. Representatives of Sema4 growth opportunities inmanagement, Goldman Sachs and Fenwick then reviewed with the diagnostic sectorBoard the proposed terms of a non-binding offer for the acquisition of GeneDx.
On October 23, 2021, Goldman Sachs conveyed initial feedback received from representatives of JP Morgan, regarding the Non-Binding Indication, which included a request for additional upfront consideration and a tax deferred transaction structure as well as rejection of a lock-up. Over the course of the following days, the Sema4 management team met regularly with Goldman Sachs and Fenwick to whether Sema4 might be interested in exploring accessconsider a response to the public markets ininitial OPKO feedback on the Non-Binding Indication.
On October 25, 2021, representatives of Sema4, Goldman Sachs and Fenwick met with the Transaction Committee to discuss revisions to the Non-Binding Indication. The Transaction Committee authorized the submission of a business combinationrevised Non-Binding Indication and, on October 26, 2021, a representative of Goldman Sachs delivered the revised Non-Binding Indication to JP Morgan on behalf of OPKO.
Over the following weeks, representatives of Goldman Sachs met with CMLS.representatives of JP Morgan to discuss the terms of the revised Non-Binding Indication and JP Morgan, on behalf of OPKO, proposed modifications that would, among other things, increase the total consideration, provide for a tax deferred transaction and modify other terms of the Non-Binding Indication. Goldman Sachs, Sema4 and Fenwick met regularly during the course of the negotiations and reported to the Transaction Committee on a regular basis.
On November 4, 2021, the Transaction Committee authorized Goldman Sachs to convey to JP Morgan unwillingness to do a tax-deferred transaction but willingness to (A) increase total consideration from up to $875 million to up to $900 million by adding $25 million to the up front equity consideration and (B) shorten the proposed lockup period applicable to the Sema4 equity issued in the transaction.
In response to the revised terms proposed by Goldman Sachs, JP Morgan proposed on the same day an increase in total consideration of up to $925 million, with the additional $25.0 million being paid in cash or Class A common stock, or a mix thereof, at Sema4’s option and a revision to the structure of the proposed milestone-based consideration.
The Transaction Committee met with representatives of Goldman Sachs, Fenwick and Sema4 on November 5, 2020, Messrs. Casdin2021 and Rodriguez hosted a dinner with Dr. SchadtNovember 8, 2021 to discuss Sema4, its current size, growth opportunities and Sema4’s interest in pursuingrevised terms for the transaction. On November 8, 2021, the Transaction Committee authorized Goldman Sachs to deliver to JP Morgan on behalf of OPKO a revised Non-Binding Indication providing for a taxable transaction with CMLS. During this dinner,total consideration of up to $925 million, with the parties discussed growth opportunities, competitive dynamics, strategic partnership ideas, considerations for valuationadditional $25 million payable in the form of post-closing potential milestone-based consideration, and information regarding CMLS.revised lock-up terms.
Shortly thereafter, CMLS commenced working with Jefferies LLC (“Jefferies”)On November 11, 2021, OPKO delivered a revised Non-Binding Indication to Sema4, which revised the terms of the prior draft Non-Binding Indication to provide, marketamong other things, for a tax deferred transaction structure and financial advicean increase in total consideration to up to $950 million, with the additional $25.0 million payable in the form of post-closing milestone-based consideration to the extent revenue targets are exceeded, and a proposal that OPKO would be entitled to nominate two directors to serve on the potential transactionBoard following the closing of the transaction.
On November 12, 2021, the Transaction Committee met to discuss the revised Non-Binding Indication received from OPKO. Representatives of Fenwick and Goldman Sachs were present at the industry generally. Jefferies was familiar with CMLS as the underwriter for CMLS’s initial public offering.meeting.
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On November 11, 2020, CMLS’s board of directors held13, Sema4 delivered a meetingfurther revised Non-Binding Indication to GeneDx proposing, among other things, a taxable transaction, one year lock-up and resale limitations on Class A common stock issued in the transaction and the board was briefed on a numberaddition of possible targets fromone mutually agreed GeneDx designee to the life science tools and diagnostic sectors, including Sema4 and Companies A, B and C referred to above. The board’s discussion focused onBoard following the perceived “readiness”closing of the transaction.
On November 15, 2021, Kareem Saad, Chief Business Officer of Sema4, spoke with Steve Rubin, Executive Vice President of OPKO to discuss the revised Non-Binding Indication and potential targetsalternatives to formally pursue a SPAC mergerwork toward an agreement on outstanding points. Mr. Saad and a public transition.Mr. Rubin agreed to meet later that week to suggest solutions and come to an agreement on terms.
On November 17, 2021, members of OPKO and GeneDx management met with members of Sema4 management at Sema4’s headquarters to negotiate the terms of the Non-Binding Indication. Representatives of OPKO and GeneDx’s outside legal counsel, Greenberg Traurig, LLP (“Greenberg Traurig”), and Fenwick, Goldman Sachs and certain members of Sema4 management attended via videoconference.
On November 18 2020, Keith Meister, Chairmanand 19, 2021, Mr. Saad met with Mr. Rubin regarding a revised transaction proposal, including a reduction of CMLS, Mr. Casdin$25 million in potential milestone payments in exchange for agreeing to structure the transaction as a tax-free reorganization, as well as certain other modifications.
On November 20, 2021, Sema4 delivered a further revised Non-Binding Indication to OPKO providing for, among other things, a tax-free reorganization transaction structure.
The parties negotiated the terms of the revised Non-Binding Indication over the next two days and, Mr. Rodriguez had a conversationon November 21, 2021, with Dr. Schadt regarding Sema4’s businessthe approval of the Transaction Committee, the parties executed the Non-Binding Indication.
Following November 21, 2021, GeneDx and the opportunities presented byOPKO, Sema4 with assistance from its advisors, including Goldman Sachs, Fenwick and Deloitte LLP, continued to engage in diligence activities with respect to GeneDx and a potential combination of GeneDx with CMLS.Sema4. In addition to reviewing information in the data room assembled by GeneDx, such diligence activities included multiple discussions and exchanges with GeneDx and its advisors, including Fenwick and Goldman Sachs, on various diligence matters and aspects of GeneDx including commercial, scientific, operations, finance, accounting, legal, intellectual property and human resources.
On November 25, 2020,24, 2021, representatives from Fenwick sent a videodraft Merger Agreement to representatives from Greenberg Traurig.
On December 2, 2021, representatives from Fenwick and audioGreenberg Traurig met by telephone conference was held betweento review the draft Merger Agreement.
On December 15, 2021, representatives from Greenberg Traurig sent a revised draft Merger Agreement to representatives from Fenwick. As part of CMLS, including Mr. Meister, Mr. Casdin, Mr. Rodriguezits comments to the Merger Agreement, OPKO proposed that certain stockholders of Sema4 enter into support agreements in respect of the proposed transaction.
On December 17, 2021, Fenwick delivered a draft Shareholder Agreement to representatives from Greenberg Traurig, providing for certain voting, lock-up, registration rights and other membersstandstill provisions relating to the shares of CMLS’s senior management team,Class A common stock to be issued to OPKO in connection with the closing of the transaction.
Between December 17, 2021 and December 24, 2021, due to changes in equity market conditions and Sema4’s market valuation, representatives of Sema4 including Dr. Schadt, James Coffin, Sema4’s President and Chief Operating Officer, Joel Sendek, Sema4’s Chief Financial Officer atOPKO negotiated revisions to the time, and other members of Sema4’s senior management team. During this conference, Sema4’s representatives went through a detailed overview of Sema4’s business.
On November 29, 2020 and December 1, 2020, additional meetings took place betweenaggregate consideration proposed to be paid in the CMLS team and the Sema4 leadership teamtransaction to continue to respond to due diligence questions.reflect such changes.
On December 8, 2020, CMLS leadership was introduced24, 2021, Sema4 and OPKO reached agreement on revised economic terms for the acquisition of GeneDx by Sema4, providing for, among other things, (i) $150 million in cash consideration to a subsetbe paid at the closing of the transaction, (ii) 80 million shares of Sema4 to be paid at the closing of the transaction, and (iii) up to $150 million in potential milestone-based consideration payable in cash and/or shares based on the achievement of certain revenue targets by GeneDx following the transaction, with any shares included in such milestone consideration valued on the basis of the Sema4 board to discuss CMLS’s vision and why the team believed this was the right transaction for the company.
On December 12, 2020, CMLS provided information and background materials to Sema4 on its management and Board, including materials regarding their experience in the life sciences industry, its capital and corporate structure in addition to a draft LOI in connection with seeking to further explore the potential for a business combination. The LOI outlined certain proposed terms for a possible business combination, including ascribing a pre-money equity value of $1.75 billion to Sema4; that sources of funds would be expected to include up to $443 million of cash available from the trust account and $300 million from existing Forward Purchase Agreements and from certain institutional investors under private placement agreements (the “PIPE transactions”). The merger consideration would be paid in a combination of up to $343 million cash consideration to sellers of Sema4, cash to the balance sheet and in shares of the Company’s common stock, at $10.00 per share.
Through the end of 2020, representatives of CMLS and Sema4 engaged in a number of discussions about the possibility of a combination between the two companies, and the possible terms of the LOI. CMLS engaged in additional due diligence at this time and, as a result of the discussions, concluded on an initial basis that a combination between CMLS and Sema4 presented strong prospects for CMLS’s shareholders. This initial conclusion was based on Sema4’s knowledge of the sector, the backgrounds and experience of Sema4’s key personnel, the size and maturity of the company, including its public market readiness, and the growth profile of the company.
On December 30, 2020, following the above-referenced conversations between the parties, CMLS delivered an updated draft of the LOI to Sema4 and its representatives, including Goldman Sachs & Co. LLC (“Goldman Sachs”). This draft of the LOI increased the pre-money equity value ascribed to Sema4 to $2 billion.
On January 5 and January 6, 2021, Fenwick comments to the LOI noted that the valuation and associated cash figures remained subject to further business discussion. Fenwick’s comments also, among other changes, (a) limited the Sema4 seller lock-up to directors, executives and 1% holders; (b) proposed that sponsor shares and warrants be subject to certain forfeiture terms; (c) proposed a price-based earn-out in favor of Sema4 sellers; and (d) proposed more detail around certain terms of a proposed LTIP and ESPP.
On January 8, 2021, CMLS returned a revised draft LOI with changes, among others, proposing different terms for the Sema4 seller earn-out shares, including number of trading days (30 consecutive trading days), measurement period (365 days) and price triggers, in each case, as more expressly set forth therein.
On January 14, 2021, the CMLS team and the Sema4 management team met virtually to discuss investor receptivity to their story at the JPMorgan Healthcare Conference. The meeting included Dr. Schadt, Dr. Coffin and Michelle Zimmerman, SVP & GM of Oncology Solutions, from Sema4. The Sema4 investment banking team were represented and led by Bartosz Ostenda and included Hank Y. Yeh, Isaac Scott-Young, Lizzie H. Carr andStock Price.
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Alexandria Brown. TheOn December 27, 2021, representatives from Sema4 team reviewed the presentation they had been sharingmet by telephonic conference with potential investors at the JPMorgan Healthcare Conferencerepresentatives from Fenwick and talked about investor engagement and feedback from the previous few days.
On January 21, 2021, based on the dialogue over the prior weeks, CMLS received additional comments to the LOI from Goldman Sachs and Fenwick, reflecting ongoing conversations betweento discuss the parties. Comments included that the transaction be detailed in a proxy statement and shares registered in a private placement, versus a registration statement on Form S-4; that up to 33% of the Sponsor’s shares and warrants be subject to forfeiture based on a sliding scale detailed in the LOI, tied to redemptions from the Trust Account; and a 24 month period for the price-based earn-out, with Company share price tied to 20 out of 30 trading days during such period.
On January 22, 2021, CMLS and Sema4 entered into the non-binding LOI with respect to the Business Combination, generally consistent with the terms that had been negotiated during the prior 24 days, but reserving or bracketing certain items to be further negotiated during the negotiation of definitive documentation, including (a) PIPE timing and (b) certainrevised terms of the LTIP and ESPP. The LOI contained a binding mutual exclusivity provision for a periodtransaction as well as issues presented in the revised draft Merger Agreement received from Greenberg Traurig on December 15, 2021 including, among other items, the possibility of up to 45 daysseeking support agreements from signing. In addition, on January 22, 2021, Dr. Schadt,certain Sema4 stockholders.
Over the CMLS leadership team including Mr. Casdin and Mr. Meister and the somecourse of the Sema4 board members including Andrew ElBardissi, David Windreich and Joshua Ruch met to discuss transaction strategy, merger and acquisition potential and the PIPE investor process.
On January 24, 2021, CMLS’s board of directors held a board meeting and the board was advised by Mr. Meister, Mr. Casdin and Mr. Rodriguez that the LOI had been executed. At the meeting, the board discussed the valuation and other terms of the LOI, Sema4’s position in its industry sector, the backgrounds and experience of Sema4’s key personnel, the size and maturity of Sema4 and its operations, including its public market readiness, and the growth profile of Sema4.
Following execution of the LOI,following weeks, the parties and their respective legal counsels began to draftnegotiated the Merger Agreement and negotiate theother definitive agreements governing the transaction and on January 23, 2021 CMLS and its advisors commenced detailedcompleted due diligence on Sema4, including on documents provided by Sema4 as part of the diligence process.diligence. The parties also prepared an investor presentation for meetings with certain targeted PIPE investors.
Oninvestors and, on January 25, 2021, CMLS’s5, 2022, Goldman Sachs began wall-crossing PIPE investors and GeneDx and Sema4’s management including Mr. Meister, Mr. Casdin and Dr. Schadt,team then began the PIPE investor information sessions with the wall-crossed investors, which continued over the next several days.following weeks. Sema4 also began to negotiate the terms of employment of Ms. Stueland, Kevin Feeley, GeneDx’s Chief Financial Officer, and Jennifer Brendel, GeneDx’s Chief Commercial Officer.
On January 28, 2021 and over5, 2022, representatives from Fenwick delivered a draft Support Agreement in respect of the next several weeks,transaction to representatives of CMLS’s team including, Mr. Casdin, Mr. Meister, Mr. RodriguezGreenberg Traurig and representatives of Sema4 including, Dr. Schadt, Kareem Saad, Sema4’s Chief Business Officercertain of the supporting stockholders. Following January 5, 2022, representatives of Fenwick, along with representatives of Greenberg Traurig and Daniel Clark, Sema4’s General Counsel, held telephonic conferences and virtual meetings to discuss commercial, financial and legal elementseach of Sema4’s business. Representatives of CMLS and Sema4 also discussed product development initiatives and associated timelines and budget considerations, competitive dynamics, operational matters, and potential opportunities for strategic partnerships or acquisitions to accelerate growth strategy.
On February 7, 2021, CMLS’s board of directors held a board meeting via video conference to discuss the business combination, commitments and support from existing and prospectivesupporting stockholders andnegotiated the terms of the definitive agreements.Support Agreement.
On February 9, 2021, CMLS’s boardJanuary 6 and January 7, 2022, Sema4 and representatives of directorsGoldman Sachs and Fenwick held informal information sessions for the Board to review key transaction terms and progress on negotiations for the acquisition, as well as the proposed roles of Katherine Stueland, Kevin Feeley and Jennifer Brendel following closing.
In addition, on January 6, 2022, Ms. Stueland’s personal counsel delivered an initial draft employment agreement for Ms. Stueland to Fenwick. On January 8, 2022, Fenwick delivered a revised draft employment agreement for Ms. Stueland to her personal counsel. Over the following days, the parties and their legal representatives negotiated the terms of such agreement in respect of Ms. Stueland’s outstanding equity awards, her GeneDx signing bonus and her anticipated Sema4 equity awards. Concurrently, the parties and their legal representatives negotiated the terms of employment agreements for Mr. Feeley and Ms. Brendel. On January 11, 2022, Fenwick delivered proposed final employment agreements for Ms. Stueland, Mr. Feeley and Ms. Brendel to their personal counsel and representatives from Greenberg Traurig.
In addition, on January 11, 2022, the Board held a meeting during which representatives of Goldman Sachs and Fenwick reviewed with the Board the terms of the proposed acquisition of GeneDx, including a review by Fenwick of the terms of the proposed definitive agreements and the results of Sema4’s due diligence review, and a review by Goldman Sachs of its financial analysis of GeneDx, Sema4 and the pro forma combination of Sema4 and GeneDx. Ms. Stueland attended a portion of the meeting to discuss and present her background and vision for GeneDx and the combined business with Sema4.
The Board met via video conferenceagain on January 14, 2022, with representatives of Goldman Sachs and Fenwick present, to review the proposed final terms of the acquisition of GeneDx by Sema4. Mr. Saad and a representative of Fenwick reviewed with the Board the terms of the proposed final Merger Agreement and other definitive agreements. Mr. Saad and a representative of Goldman Sachs then reviewed with the Board the terms of the proposed PIPE Investment for the cash consideration payable in the transaction and additional operating capital for the combined company. Representatives of Goldman Sachs next reviewed and discussed with the Board Goldman Sachs’ financial analysis of the aggregate consideration to be paid in the acquisition, and following such discussion, Goldman Sachs rendered its oral opinion to the Board, which it subsequently confirmed in writing, that, as of such date and based upon and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations set forth therein, the aggregate consideration to be paid in the acquisition of GeneDx was, as of the date of the opinion, fair, from a financial point of view, to Sema4. The Board unanimously voted in favor of proceeding with the business combination with Sema4. The board of directors executed a unanimous written consent approving the definitive agreement, the Subscription Agreements, the Amendmentapproval of the CMLS Certificate of Incorporationproposed Merger Agreement and the transactions contemplated thereby, including the merger of GeneDx with a subsidiary of Sema4 to result in GeneDx becoming a wholly-owned subsidiary of Sema4, as well as the Business Combination.proposed PIPE Investment.
On February 9, 2021,Following the parties entered intomeeting of the business combination agreementBoard, GeneDx and CMLSSema4 executed the Merger Agreement and other definitive agreements related to the transaction, and Sema4 entered into the Subscription Agreements for the Private Placement. PIPE Investment
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and the Support Agreements. Also on January 14, 2022, each of Ms. Stueland, Mr. Feeley and Ms. Brendel entered into employment agreements with Sema4, to become effective upon the closing of the acquisition.
On February 10, 2021, CMLSJanuary 17, 2022, each of GeneDx and Sema4 issued a press release announcingregarding the Business Combination and filed a Form 8-K announcingexecution of the Business Combination.Merger Agreement.
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CMLSSema4 Board of Directors’ Reasons for the Approval of the Business CombinationAcquisition
On February 9, 2021,January 14, 2022, in reaching unanimous resolution (i) that the terms and conditions of the Merger Agreement and the business combinationAcquisition are advisable, fair to and in the best interests of the Company and its stockholders, and (ii) to recommend that the stockholders adopt the Merger Agreement and approve the business combination, the Board considered and evaluated a number of factors, including, but not limited to, the factors discussed below. In light of the number and wide variety of factors considered in connection with its evaluation of the business combination,Acquisition, the Board did not consider it practicable to, and did not attempt to, quantify or otherwise assign relative weights to the specific factors that it considered in reaching its determination and supporting its decision. The Board viewed its decision as being based on all of the information available and the factors presented to and considered by it. In addition, individual directors may have given different weight to different factors. This explanation of the Company’s reasons for the business combinationAcquisition and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed under the section entitled “Cautionary Statement“Cautionary Note Regarding Forward-Looking Statements.Statements.”
Before reaching its decision on February 9, 2021,January 14, 2022, the Board of Directors considered the views of CMLSSema4 Management regarding the opportunity represented by the proposed transaction and the report from Management and the company’sCompany’s legal counsel on the results of their due diligence of Sema4.GeneDx. The diligence investigation included:
1.Public research on the life sciences industry and its prospects and review of Sema4’sGeneDx’s historical financial performance and forecasts;
2.Conference call meetings with Sema4’sGeneDx’s management and representatives regarding operations, company products and services, intellectual property, major suppliers, partners and customers, and growth prospects, both organic and through possible acquisitions, among other customary due diligence matters;
3.Review of Sema4’sGeneDx’s material business contracts and certain other legal and intellectual property due diligence; and
4.Financial and accounting due diligence.
In the prospectus for our IPO, we identified general criteria and guidelines that we believed would be considered in evaluating prospective target businesses, although we indicated we may enter into a business combination with a target business that does not meet these criteria and guidelines. The Board was of the view that Sema4 appeared to meet such criteria of having:
•Potential scientific or other business advantages or opportunities in the markets in which it operates;
•strong and experienced management teams or key personnel; and
•the potential to offer attractive risk-adjusted equity returns for our shareholders.
The Board considered a number of factors pertaining to the business combinationAcquisition as generally supporting its decision to enter into the Merger Agreement and the business combination,Acquisition, including but not limited to, the above and following material factors:
•Opportunities Arising from Sema4’s BusinessLeading Industry Position in Rare Diseases and Competitive Advantage of Data Asset. The Board considered that GeneDx has an industry leading rare disorder franchise, based on strong customer relationships with major hospitals and health systems around the world calling on medical geneticists and selling into the pediatric and rare disease channels. Further, the Board considered GeneDx’s approximately 300,000 clinical exomes and 2.1 million annotated phenotypes collected over the company’s nine year history. The Board estimated GeneDx’s clinical exome data asset to be the most extensive by any U.S. diagnostics company. Furthermore, the Board considered GeneDx’s estimated 70% market share among clinicians ordering exomes as evidence of superior positioning in the market.
•Strong Revenue Growth Model.Profile. The Board considered Sema4's focusthat GeneDx had estimated 2021 revenue of $116 million, representing 22% growth over the prior year, and estimated 2021 test volume of 145,000, representing 29% over the prior year, as well as the anticipated growth reflected in the projections prepared by GeneDx management.
•Experienced Management, Commercial and Laboratory Operations Team With Deep Genetics Expertise. The Board considered that GeneDx has an experienced management and engineering team,
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comprising over 100 MDs and PhDs and approximately 70 professionals in sales, marketing, product and business development. Katherine Stueland, Chief Executive Officer, has more than two decades of experience in the healthcare sector where she has overseen commercial organizations and corporate brand transformations, and helped bring the first cancer immunotherapy to market.
•Relationships with Health Systems. The Board considered that GeneDx has entrenched relationships with leading hospitals, based on its over 100 contracts with children’s hospitals in the opportunities arisingUnited States.
•Growth and Business Opportunities of the Acquisition. The Board believed the Acquisition would create a market-leading, AI-driven genomic and clinical data platform with differentiated products across all phases of life, allowing Sema4 to generate increased data from increased testing, grow its patient-centric model, open architecture for partnerships,patient base, increase its scale, and a collaborative focus on key industry partners, includingdeliver more clinically actionable insights. Additionally, the Board believed that GeneDx would enable Sema4 to enhance its reach into health systems and pharmaceutical companies that should drive growth, and thatbiopharma companies. In particular, the additional cash available to Sema4 fromBoard considered the transaction should permitfollowing opportunities presented by the Acquisition:
◦Health Systems. Opportunities for Sema4 to accelerate the uptake of GeneDx’s clinical exome sequencing into Sema4’s core channels, and for Sema4 to accelerate the adoption of its business plan beyondOncology solutions through GeneDx’s relationships.
◦Data. An opportunity for Sema4 to leverage GeneDx’s exome database with Sema4’s Centrellis platform to drive increased biopharma partnership opportunities.
◦Scale. An opportunity Sema4 to be the stand alone plan provided by Sema4.market leader in both Women’s Health and rare disease diagnostics.
◦Growth and Synergy. An opportunity for Sema4 to increase its revenues and accelerate its path to profitability.
•CommittedBenefit of Combining Management and Capable Management TeamBoard Members of both the Company and GeneDx. The Board considered that Sema4 has an experiencedGeneDx’s management and professionalkey employees becoming management team. Founder and Chief Executive Officer Eric Schadt has built groupskey employees of the Company as part of the Acquisition would provide the necessary experience and companies throughoutknowledge of GeneDx’s business and operations, and facilitate the industry to elucidate the complexity of human diseases,post-Acquisition transition and he has published more than 450 peer-reviewed papers in leading scientific journals and contributed to discoveries relating to the genetic basis of common human diseases such as diabetes, obesity, and Alzheimer’s disease. Sema4
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CFO Isaac Ro has over 20 years of financial leadership and experience, with a strong focus on the medical technology and life sciences space.
•Potential for Key Industry Partnerships. The Sema4 board and management team includes individuals with relationships across the industry that should allow Sema4 to strategically align itself for synergistic partnerships with other companies in the industry.
•Potential to Grow through both organic and inorganic opportunities.integration. The Board considered that Sema4 has the potential to grow organically with its team of data scientists and engineers focused on category-defining healthcare intelligence. In addition, Sema4 is in an industry with opportunities and rationale for inorganic growth through acquisitions of complementary businesses in addition to organic growth. The ability to take advantage of these opportunities is expected to be facilitated by the additional cash being made available to Sema4 as a result of the business combination.
•Benefit of adding members of CM Life’s Board to the board of Sema4. The Boardalso considered that the addition of membersa member of the CM Life BoardGeneDx’s management and board of directors, and an affiliate of OPKO, to the Sema4 boardBoard as part of the business combination willAcquisition would provide Sema4 with additional Boardboard members experienced in the life sciences industry generally and with experience as memberGeneDx’s business in particular. For more information about our decision-making process, please see the section entitled “The Acquisition —Sema4’s Board of Directors’ Reasons for the board of a public company.Acquisition.”
•FamiliarityDue Diligence. The Board considered the thoroughness of ManagementSema4’s due diligence examinations of GeneDx and discussions with Sema4GeneDx’s management and financial and legal advisors.
•Receipt of Fairness Opinion from its Financial Advisor in connection with the Acquisition. The factBoard considered that certain memberson January 14, 2022, at a meeting of managementthe Board, Goldman Sachs & Co. LLC (“Goldman Sachs”) rendered its oral opinion, subsequently confirmed in writing, that, as of CMLS associated with Casdin Capital had historical familiarity with Sema4January 14, 2022, and the information about Sema4’s businessbased upon and growth opportunities that was presentedsubject to the Board.factors and assumptions set forth therein, the $150 million in cash, the 80 million shares of the Company’s Class A common stock, and up to $150 million of contingent payments payable in cash and/or shares of Company’s Class A common Stock, based upon achievement of 2022 and 2023 revenue milestones, to be paid to acquire all of the issued and outstanding shares of capital stock of GeneDx pursuant to the Merger Agreement, was fair from a financial point of view to the Company. The full text of the written opinion of Goldman Sachs, dated January 14, 2022, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex C to this proxy statement. The opinion of Goldman Sachs is more fully described in the section of this proxy statement entitled “The Acquisition—Opinion of Sema4’s Financial Advisor.”
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•Other Alternatives. The Board believed that the proposed Business CombinationAcquisition represents an excellent opportunity for CM LifeSema4 and its stockholders based upon its view of the growth prospects and risks associated with Sema4GeneDx and its business, and at the time it approved the transaction had not identified another target that it determined would represent a preferred transaction opportunity.
•Terms of the Merger Agreement. The Board consideredbelieved that the financial and other terms and conditions of the Merger Agreement, including the parties’ representations, warranties and covenants, and the transactions contemplated thereby, including the Business Combination. In particular the Board noted the limited number of conditions to closingtheir respective obligations to consummate the Acquisition, are reasonable and were the product of arms’ length negotiations between the Company and its advisors and OPKO and its advisors and compare favorably with those in similar acquisition transactions considering GeneDx’s business, combination.results of operations, financial condition and prospects.
•PIPE Equity Commitment. A group of institutionalgrowth and life sciences investors, and our Sponsorincluding Pfizer, have committed approximately $350$200 million in PIPE subscriptions, $255 million of which are from investors not associated with our Sponsor.subscriptions. This was viewed as support from institutionalgrowth and life sciences investors for the opportunities represented by the transaction,Transactions, and provides for additionalcommitted capital forto fund the execution by Sema4 of its business plan afterCash Consideration and transaction costs and to fuel the transaction is completed.Company’s growth.
•Sellers Retained InterestStockholder Support. Sema4’s shareholders’ retentionThe Board also considered that the holders of a large stake inapproximately 61% of the business combination shows ongoing commitmentoutstanding Class A common stock were willing to enter into the Support Agreements originally proposed by OPKO, committing such holders to vote to approve the Stock Consideration Proposal, the PIPE Investment Proposal, the Special Designee Director Election Proposal, the Charter Amendment Proposal and support for the post-business combination company.Adjournment Proposal, which significantly reduces deal uncertainty.
The Board also considered a variety of uncertainties and risks and other potentially negative factors concerning the business combination,Acquisition, including, but not limited to, the following:
•Benefits Not Achieved. The risk that the potential benefits of the business combinationAcquisition may not be fully achieved, or may not be achieved within the expected timeframe.
•Dependence on Key Personnel. The fact that the business and growth of Sema4GeneDx is significantly dependent on its senior executives, including in particular its Chief Executive Officer.
•Liquidation of the Company. The risks and costs to the Company if the business combination is not completed, including the risk of diverting management focus and resources from other businesses combination opportunities, which could result in the Company being unable to effect a business combination, forcing the Company to liquidate.
•Stockholder Vote. The risk that the Company’s stockholders may fail to provide the votes necessary to effect the business combination.Acquisition.
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•Closing Conditions. The fact that completion of the business combinationAcquisition is conditioned on the satisfaction of certain closing conditions that are not within the Company’s control.conditions.
•Litigation. The possibility of litigation challenging the business combinationAcquisition or that an adverse judgment granting permanent injunctive relief could indefinitely enjoin consummation of the business combination.Acquisition.
•Fees and Expenses. The fees and expenses associated with completing the business combination.Acquisition.
•Other Risks. Various other risks associated with the business combination,Acquisition, the business of the Company and the business of Sema4GeneDx described under the section entitled “Risk Factors.“Risk Factors.”
In addition to considering the factors described above, the Board also considered that certain of the officersdirectors (including the members of the Transaction Committee) and directorsthe officers of the Company may have interests in the Business CombinationAcquisition (including in connection with the PIPE Investment) as individuals that are in addition to, and that may be different from, the interests of the Company’s shareholdersstockholders (see “The Business Combination “—The Acquisition—Interests of Certain Persons in the Business Combination”Transactions”). The Company’s independent directors reviewed and considered these interests during the negotiation of the Business CombinationAcquisition and in evaluating and approving, as members of the Company Board, the Business CombinationMerger Agreement and the transactions contemplated therein, including the Business Combination.Acquisition.
The Board concluded that the potential benefits that it expected the Company and its stockholders to achieve as a result of the business combinationAcquisition outweighed the potentially negative factors associated with the business combination.Acquisition. Accordingly,
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the Board unanimously determined that the Merger Agreement and the business combinationAcquisition were advisable, fair to, and in the best interests of, the Company and its stockholders. For
Certain Projected Financial Information
GeneDx Prospective Financial Information
In connection with the evaluation of the Acquisition, the Company’s management reviewed certain unaudited prospective financial information for GeneDx for fiscal years 2021 through 2025 prepared by GeneDx management. Following the Company’s diligence of GeneDx, the Company’s management made certain adjustments to the unaudited prospective financial information prepared by GeneDx management. The adjustments made by the Company’s management included a more conservative estimate on average selling prices (ASPs) for GeneDx’s diagnostic products, extending the timing required to drive adoption of GeneDx’s whole exome and genome sequencing solution into new markets, and lowering the productivity assumptions of GeneDx’s planned salesforce expansion. The adjustments made by the Company’s management were intended to reflect inherent uncertainties and risks in this type of unaudited prospective financial information. The Company’s management also provided growth and margin guidance for extending the unaudited prospective financial information through 2040 for purposes of Goldman Sachs’s financial analysis, as adjusted by the Company’s management. The unaudited prospective financial information for GeneDx, reflecting adjustments made by the Company’s management, is referred to in this proxy statement as the Adjusted GeneDx Projections. The Company is electing to provide the Adjusted GeneDx Projections in this section of the proxy statement to provide the Company’s stockholders access to certain non-public unaudited prospective financial information about our decision-making process, please seeGeneDx that was provided to the section entitled “Proposal No. 1 — ApprovalBoard in connection with its evaluation of the Business Combination — proposed transaction and to Goldman Sachs for its use and reliance in connection with its financial analyses and opinion as described in “The BoardAcquisition—Opinion of Directors’ Reasons for the Approval of the Business CombinationSema4’s Financial Advisor.”.
Comparable Company Analysis
CMLS management’s reviewThe Adjusted GeneDx Projections were developed from historical financial statements and reflect numerous assumptions and estimates that GeneDx’s and the Company’s management made in good faith at the time the Adjusted GeneDx Projections were prepared, including, without limitation, as to industry performance, general business, economic, regulatory, market and financial conditions and other future events. In particular, the Adjusted GeneDx Projections reflect the adjustments made by the Company’s management discussed above. These assumptions and estimates are inherently uncertain, may be beyond the control of the Business Combination included a comparable company analysis to assess the value that the public markets would likely ascribe to CMLS following a business combination with Sema4 and this analysis was shown to the CMLS Board. The comparable company analysis was prepared by CMLS management in consultation with Sema4’s management. The valuation analysis was based on public companies with diagnostic testing solutions in the areas of (1) women’s health and (2) oncology. The comparable companiesGeneDx or any other person, were selected by CMLS as publicly traded companies having common characteristics with Sema4, which primarily derived its revenuesmade as of the preparationdate the Adjusted GeneDx Projections was prepared, and may not be reflective of actual results, either since the date such information was prepared, now or in the future, in light of changed circumstances, economic conditions, or other developments.
Adjusted GeneDx Projections
For the Forecast Year Ended December 31,
(in millions, except percentages)2021E2022E2023E2024E2025E
(unaudited)
Revenue$116 $130 $174 $253 $337 
Adjusted Gross Profit(1)
23 42 69 220 151 
Adjusted Gross Margin (%)(2)
20 32 40 43 45 
EBITDA(3)
(22)(64)(49)4 40 
Adjusted Free Cash Flow(4)
(28)(80)(66)(28)17 
__________________
(1)Non-GAAP financial measure calculated as revenue less cost of services excluding certain one-time non-recurring items, including a one-time tax refund in 2021, and stock-based compensation expense in 2022–2025. The most directly comparable GAAP measure to Adjusted Gross Profit is gross profit. GeneDx’s and the Company’s management did not provide a reconciliation of the analysis from testing inprojected Adjusted Gross Profit to projected gross profit estimates because it was not possible to estimate, without unreasonable efforts, the areasimpact of women’s healthstock-based compensation expense on projected gross profit, which could be material.
(2)Non-GAAP financial measure calculated as adjusted gross profit divided by revenue. The most directly comparable GAAP measure to Adjusted Gross Margin is gross margin. GeneDx’s and oncology. The comparable companies in this analysis consisted of Progenity, Inc., Myriad Genetics, Inc., Natera, Inc., Invitae Corporation, Guardant Health, Inc., and NeoGenomics Laboratories, Inc. While these companies may share certain characteristics that are similar to those of Sema4, the CMLS BoardCompany’s management did not consider anyprovide a reconciliation of these companiesthe projected Adjusted Gross Margin to projected gross margin estimates because it was not possible to estimate, without unreasonable efforts, the impact of stock-based compensation expense on projected gross margin, which could be identical in nature to Sema4.
Using the most recent publicly available information, CMLS management derived each comparable company’s one-year forward enterprise value to revenue multiple for 2021 and then developed an average multiple for each therapeutic area (women’s health and oncology). The average multiple for each therapeutic area is provided in the table below:
Selected CompanyEV / CY21 Revenue
Women’s Health Comparable Companies (Progenity, Myriad Genetics, Natera)7.9x
Oncology Comparable Companies (Invitae, Guardant Health, NeoGenomics)20.3x
The CMLS management considered the projections provided by Sema4 and, in particular, Sema4’s projected revenues for 2021. Given the size and perceived growth potential of Sema4’s oncology business, CMLS management considered it appropriate to rely on the near term projected revenues for its valuation model. The average multiple for each therapeutic area was then applied to Sema4’s 2021 projected revenues within each respective solution to derive Sema4’s implied enterprise value. CMLS did include other revenue from Sema4’smaterial.
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Biopharma solutions but(3)Non-GAAP financial measure calculated as net loss adjusted for interest expense, depreciation and amortization and stock-based compensation expense. The most directly comparable GAAP measure to EBITDA is net loss. GeneDx’s and the Company’s management did not include Sema4’s 2021 projected COVID-19 testing revenues based on its assessment that these revenues were notprovide a core component of Sema4’s longer-term business.
Once Sema4’s implied enterprise value was derived, CMLS management applied a discount to reflect (1) recent and planned product launches in Sema4’s oncology business, and (2) the fact that the valuation of Natera, onereconciliation of the comparable companies in the women’s health segment, is favorably impacted by its emerging oncology business whileprojected EBITDA to projected net loss estimates because it was being usednot possible to value Sema4’s women’s health solution.estimate, without unreasonable efforts, the impact of interest expense, depreciation and amortization and stock-based compensation expense on projected net loss, which could be material.
Sema4’s implied enterprise value(4)Non-GAAP financial measure calculated as net loss plus depreciation and amortization, less capital expenditures, less stock-based compensation expense, and less (plus) changes in net working capital. The most directly comparable GAAP measure to Adjusted Free Cash Flow is summarized innet loss. GeneDx’s and the table below:
SolutionsEnterprise Value
Total Expected Enterprise Value (including Women’s Health, Oncology and Biopharma Solutions)2353
% Discount0.15
Total Adjusted$2,000 
The results of this analysis (as described above) supported the CMLS Board’s determination, based onCompany’s management did not provide a number of factors, that the Business Combination was fair to and in the best interests of CMLS and its stockholders. Due to the forward-looking nature of this projected information, specific quantificationsreconciliation of the amounts that wouldprojected Adjusted Free Cash Flow to projected net loss estimates because it was not possible to estimate, without unreasonable efforts, the impact of depreciation and amortization, capital expenditures, stock-based compensation expense and changes in net working capital on projected net loss, which could be required to reconcile such projected information to GAAP measures are not available and CMLS’s management believes that it is not feasible to provide accurate forecasted non-GAAP reconciliations. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures may not be comparable to similarly titled amounts used by other companies.material.
Ernst & Young LLP, Sema4’s independent auditors, has not audited, reviewed, examined, compiled nor applied agreed-upon procedures with respect to the accompanying projected financial information and, accordingly, Ernst & Young LLP does not express an opinion or any other form of assurance with respect thereto. The Ernst & Young LLP report included in this proxy statement/prospectus relates to Sema4’s previously issued financial statements. It does not extend to the projected financial information and should not be read to do so.
Certain Sema4 ProjectedCompany Prospective Financial Information
Sema4The Company does not generally publish its business plan and strategy or make external disclosure of its anticipated financial position or results of operations, other than providing, from time to time, estimated ranges of certain expected financial results and operational metrics for the current year in its regular earnings press releases. The Company does not as a matter of course makepublish detailed or long-term public forecasts or projections as to its future results. Sema4 provided its internally-derived forecasts, preparedfinancial performance due to the unpredictability of the underlying assumptions and estimates and uncertainty inherent in the first quarter of 2021, for eachCompany’s business.
In connection with the evaluation of the Acquisition, the Company’s management directed the preparation of, and approved, near, medium, and long term projections for fiscal years in the four-year period ending December 31, 20232021 through 2025 which are referred to CMLS for use as a component of its overall evaluation of Sema4. Such projected financial information is includedcollectively in this proxy statement because itas the Company Projections. The Company Projections reflected the Company’s management’s estimates as to the Company’s future performance and were prepared on a stand-alone basis assuming the Company would continue as an independent company without giving effect to the Acquisition. The Company is electing to provide the Company Projections in this section of the proxy statement to provide the Company’s stockholders access to certain non-public unaudited prospective financial information about the Company that was provided to the board of directors of CMLS forBoard in connection with its evaluation of the Business Combination.proposed transaction and to Goldman Sachs for its use and reliance in connection with its financial analyses and opinion as described in “The Acquisition —Opinion of Sema4’s Financial Advisor.”
The Company Projections were developed from historical financial statements and reflect numerous assumptions and estimates that the Company’s management made in good faith at the time the Company Projections were prepared, including, without limitation, as to industry performance, general business, economic, regulatory, market and financial conditions and other future events. In particular, the Company Projections assume: continued volume growth of the Company’s Women’s Health and Oncology diagnostic testing solutions; improvement in ASPs for the Company’s Oncology diagnostic testing solutions through molecular diagnostic services (“MolDx”) reimbursement initiatives; and that growth in the Company’s Other Revenue will outpace the Company’s Diagnostic Revenue growth, primarily driven by continued uptake of the Company’s offerings by the biopharmaceutical industry.
These assumptions and estimates are inherently uncertain, may be beyond the control of the Company or any other person, were made as of the date the Company Projections were prepared, and may not be reflective of actual results, either since the date such information was prepared, now or in the future, in light of changed circumstances, economic conditions, or other developments.
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Company Projections
As of and For the Forecast Year Ended December 31,
(in millions, except percentages)2021E2022E2023E2024E2025E
(unaudited)
Revenue$205 $220 $290 $361 $452 
Adjusted Gross Profit(1)
(12)11 64 144 238 
Adjusted Gross Margin (%)(2)
6 5 22 40 53 
Adjusted EBITDA(3)
(189)(213)(172)(103)(15)
Adjusted Free Cash Flow(4)
(198)(214)(175)(123)(37)
Year End Cash400 186 10 (112)(149)
__________________
(1)Non-GAAP financial measure calculated as revenue less cost of services, excluding stock-based compensation expense, and COVID-19 costs.The most directly comparable GAAP measure to Adjusted Gross Profit is gross profit. The Company’s management did not provide a reconciliation of the projected Adjusted Gross Profit to projected gross profit estimates because it was not possible to estimate, without unreasonable efforts, the impact of stock-based compensation expense on projected gross profit, which could be material.
(2)Non-GAAP financial measure calculated as adjusted gross profit divided by revenue. The most directly comparable GAAP measure to Adjusted Gross Margin is gross margin. The Company’s management did not provide a reconciliation of the projected Adjusted Gross Margin to projected gross margin estimates because it was not possible to estimate, without unreasonable efforts, the impact of stock-based compensation expense on projected gross margin, which could be material.
(3)Non-GAAP financial measure calculated as net loss adjusted for interest expense, net, depreciation and amortization, stock-based compensation expenses, transaction costs associated with the Company’s business combination, other income (expense), net, change in fair market value of warrant and earn-out contingent liabilities and COVID-19 costs. The most directly comparable GAAP measure to Adjusted EBITDA is net loss. The Company’s management did not provide a reconciliation of the projected Adjusted EBITDA to projected net loss estimates because it was not possible to estimate, without unreasonable efforts, the impact of interest expense, depreciation and amortization, stock-based compensation expense, other income (expense) and change in fair market value of warrant and earn-out contingent liabilities on projected net loss, which could be material.
(4)Non-GAAP financial measure calculated as net loss plus depreciation and amortization, less capital expenditures, less stock-based compensation, and less (plus) change in net working capital. The most directly comparable GAAP measure to Adjusted Free Cash Flow is net loss. The Company’s management did not provide a reconciliation of the projected Adjusted Free Cash Flow to projected net loss estimates because it was not possible to estimate, without unreasonable efforts, the impact of depreciation and amortization, capital expenditures, stock-based compensation expense and changes in net working capital on projected net loss, which could be material.
Pro Forma Prospective Financial Information
In connection with the evaluation of the Acquisition, the Company’s management directed the preparation of, and approved, pro forma projections for the combined company after giving effect to the Acquisition, which are referred to in this proxy statement as the “Pro Forma Projections.” The Pro Forma Projections were based on a summation of the Adjusted GeneDx Projections and the Company Projections, as adjusted to reflect the Company’s management’s expectations as to certain future synergies. The Company is electing to provide the Pro Forma Projections in this section of the proxy statement to provide the Company’s stockholders access to certain non-public unaudited prospective financial information about the combined company that was provided to the Board in connection with its evaluation of the proposed transaction and to Goldman Sachs for its use and reliance in connection with its financial analyses and opinion as described in “The Acquisition —Opinion of Sema4’s Financial Advisor.”
The Pro Forma Projections reflect numerous assumptions and estimates that the Company’s management made in good faith at the time such unaudited prospective financial information was prepared, including, without limitation, as to industry performance, general business, economic, regulatory, market and financial conditions and other future events. In particular, the Pro Forma Projections (i) assume approximately $11 million, $22 million and $28 million of revenue synergies in 2023, 2024 and 2025, respectively, (ii) assume approximately $15 million, $30 million, $29 million and $25 million of cost synergies in 2022, 2023, 2024 and 2025, respectively, and (iii) exclude one-time transaction expenses and integration expenses. These assumptions and estimates are inherently uncertain, may be beyond the control of the combined company or any other person, were made as of the date the Pro Forma Projections were prepared, and may not be reflective of actual results, either since the date such information was prepared, now or in the future, in light of changed circumstances, economic conditions, or other developments.
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Pro Forma Projections
For the Forecast Year Ended December 31,
(in millions, except percentages)2021E2022E2023E2024E2025E
(unaudited)
Revenue$321 $350 $475 $636 $817 
Adjusted Gross Profit(1)
11 58 155 275 408 
Adjusted Gross Margin (%)(2)
3 16 33 43 50 
Adjusted EBITDA(3)
(211)(262)(186)(61)(63)
Adjusted Free Cash Flow(4)
(226)(271)(199)(99)(33)
__________________
(1)Non-GAAP financial measure calculated as revenue less cost of services, excluding stock-based compensation expense, COVID-19 costs and a one-time tax refund. The most directly comparable GAAP measure to Adjusted Gross Profit is gross profit. The Company’s management did not provide a reconciliation of the pro forma projected Adjusted Gross Profit to pro forma projected gross profit estimates because it was not possible to estimate, without unreasonable efforts, the impact of stock-based compensation expense on pro forma projected gross profit, which could be material.
(2)Non-GAAP financial measure calculated as adjusted gross profit divided by revenue. The most directly comparable GAAP measure to Adjusted Gross Margin is gross margin. The Company’s management did not provide a reconciliation of the pro forma projected Adjusted Gross Margin to pro forma projected gross margin estimates because it was not possible to estimate, without unreasonable efforts, the impact of stock-based compensation expense on pro forma projected gross margin, which could be material.
(3)Non-GAAP financial measure calculated as net loss adjusted for interest expense, net, depreciation and amortization, stock-based compensation expenses, transaction costs associated with Company’s business combination, other income (expense), net, change in fair market value of warrant and earn-out contingent liabilities and COVID-19 costs. In addition, one-time transaction expenses and integration expenses related to the Acquisition are excluded. The most directly comparable GAAP measure to Adjusted EBITDA is net loss. The Company’s management did not provide a reconciliation of the pro forma projected Adjusted EBITDA to pro forma projected net loss estimates because it was not possible to estimate, without unreasonable efforts, the impact of interest expense, depreciation and amortization, stock-based compensation expense, other income (expense) and change in fair market value of warrant and earn-out contingent liabilities on pro forma projected net loss, which could be material.
(4)Non-GAAP financial measure calculated as net loss plus depreciation and amortization, less capital expenditures, less stock-based compensation expense, and less (plus) change in net working capital. In addition, one-time transaction expenses and integration expenses related to the Acquisition are excluded. The most directly comparable GAAP measure to Adjusted Free Cash Flow is net loss. The Company’s management did not provide a reconciliation of the pro forma projected Adjusted Free Cash Flow to pro forma projected net loss estimates because it was not possible to estimate, without unreasonable efforts, the impact of depreciation and amortization, capital expenditures, stock-based compensation expense and changes in net working capital on pro forma projected net loss, which could be material.
Important Information About Unaudited Prospective Financial Information
The unaudited prospective financial information presented above was not prepared with a view towardstoward public disclosure and the inclusion of the unaudited prospective financial information above should not be regarded as an indication that the Company, GeneDx, their respective affiliates, representatives or complianceadvisors or any other recipient of this information considered, or now considers, such information to be material or to be predictive of actual future results. None of the Company, GeneDx, or their respective affiliates, representatives or advisors assume any responsibility to stockholders of the Company if GeneDx’s, the Company’s or the combined company’s actual financial performance differs from the information presented above.
The unaudited prospective financial information summarized above was not prepared for purposes of public disclosure, nor was it prepared on a basis designed to comply with the published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of projections. Neither the Company’s nor GeneDx’s independent registered public accounting firms, Ernst & Young LLP and Ernst & Young LLP, respectively, nor any other independent accountants, compiled, examined or performed any procedures with respect to the prospective financial information summarized above, and has not expressed any opinion or any other form of assurance on this information or its achievability, and assume no responsibility for, and disclaims any association with, the unaudited prospective financial information. These projections wereThe reports of the independent registered public accounting firms included in this proxy statement relate to historical financial statements. They do not extend to any prospective financial information and should not be seen to do so.
The unaudited prospective financial information constitutes forward-looking information. Although presented with numerical specificity, the unaudited prospective financial information was prepared solely for internal use, using variables, estimates,
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and wereassumptions that are inherently uncertain and may be beyond the control of GeneDx, the Company or the combined company, and which may not intended for third-party use, including by investors or stockholders. You are cautioned notbe realized. The unaudited prospective financial information is subject to rely on the projections in making a decision regarding the transaction, as the projectionsmany risks and uncertainties. Important factors that may affect actual results and cause actual results to differ materially from actual results.
The projections reflect numerous assumptions, includingthe unaudited prospective financial information include risks and uncertainties relating to the Company’s and GeneDx’s businesses, industry performance, the regulatory environment, general business and economic conditions, market regulatory and financial conditions competitive uncertainties, and operational assumptions, all of which are difficult to predict and many of which are beyond Sema4’s control, such as thevarious risks and uncertainties containedother factors described in the sections titled “Risk Factors”, “Sema4 Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Cautionary Note Regarding Forward-Looking Statements.”.
The projectionsunaudited prospective financial information also assume the timely consummation of the Business Combination. The financial projections for revenue and adjusted gross margin (%) provided to CMLS’s board of directors are forward-looking statementsreflects assumptions that are based on growth assumptions, which are inherently subject to significant uncertaintieschange and contingencies, many of which are beyond Sema4’s control. There will be differences between actualsusceptible to multiple interpretations and projected results,to conditions, transactions or events that may occur and were not anticipated at the time the unaudited prospective financial information was prepared. In addition, the unaudited prospective financial information does not take into account any circumstances, transactions or events occurring after the date the unaudited prospective financial information was prepared. Accordingly, actual results will likely differ, and may bediffer materially, greater or materially less thanfrom those contained in the projections. While all projectionsunaudited prospective financial information. Neither the Company nor GeneDx can assure you that the financial results in the unaudited prospective financial information will be realized or that future financial results of GeneDx, the Company or the combined company will not materially vary from those in the unaudited prospective financial information.
No one has made or makes any representation to any stockholder of the Company or anyone else regarding the achievability of the unaudited prospective financial information set forth above. You are necessarily speculative, notably, statements regarding Sema4’s four-year business plancautioned not to rely on the unaudited prospective financial information.
The unaudited prospective financial information included above covers multiple years, and yearly forecasts, and summary financial projections are, without limitation, subject to material assumptions regarding Sema4’s ability to increase the number of billable tests and
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achieve reimbursement forthis information by its tests from third-party payers, Sema4’s ability to successfully execute its technology and business development plans and growth strategy, Sema4’s ability to compete in rapidly developing markets, Sema4’s ability to demonstrate the clinical utility of and continue to commercialize its platforms including Centrellis and Traversa, and the continuation of favorable regulations affecting the markets in which the Sema4 operates. Sema4 cautions that its assumptions may not materialize and that market developments and economic conditions may render such assumptions, although believed reasonable at the time they were made,nature becomes subject to greater uncertainty.uncertainty with each successive year. The unaudited prospective financial information should be evaluated, if at all, in conjunction with the Company’s and GeneDx’s historical financial statements included in this proxy statement and other information contained in the Company’s public filings with the SEC.
As described in more detail in the footnotes to the tables set forth above, given the forward-looking nature of the unaudited prospective financial information, specific quantifications of the amounts that would be required to reconcile it to GAAP measures are not available. The Company and GeneDx believe that there is a high degree of volatility with respect to certain GAAP measures and certain adjustments made to arrive at the relevant non-GAAP measures, which preclude the Company and GeneDx from providing accurate forecasted non-GAAP to GAAP reconciliations.
The inclusion of the projectionsunaudited prospective financial information in this proxy statement should not be regarded as an indication that Sema4the Company, GeneDx or itsany of their respective affiliates, advisors or representatives currently considerconsidered the projectionsunaudited prospective financial information to be a reliable predictionpredictive of actual future events, and reliancethe unaudited prospective financial information should not be placedrelied on the projections to make a decision regarding the transaction.
EXCEPT AS SET FORTH BELOW AND EXCEPT AS OTHERWISE REQUIRED BY APPLICABLE SECURITIES LAWS, SEMA4 DOES NOT INTEND TO MAKE PUBLICLY AVAILABLE ANY UPDATE OR OTHER REVISION TO THE PROJECTED FINANCIAL INFORMATION. THE PROJECTED FINANCIAL INFORMATION DOES NOT TAKE INTO ACCOUNT ANY CIRCUMSTANCES OR EVENTS OCCURRING AFTER THE DATE THAT INFORMATION WAS PREPARED. READERS OF THIS PROXY STATEMENT ARE CAUTIONED NOT TO RELY ON THE UNAUDITED PROJECTED FINANCIAL INFORMATION SET FORTH BELOW. NONE OF SEMA4, CMLS NOR ANY OF THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, ADVISORS OR OTHER REPRESENTATIVES HAS MADE OR MAKES ANY REPRESENTATION TO ANY SEMA4 STOCKHOLDER, CMLS STOCKHOLDER OR ANY OTHER PERSON REGARDING ULTIMATE PERFORMANCE COMPARED TO THE INFORMATION CONTAINED IN THE PROJECTED FINANCIAL INFORMATION OR THAT FINANCIAL AND OPERATING RESULTS WILL BE ACHIEVED.
Sema4 has not made any representations or warranties regarding the accuracy, reliability, appropriateness or completenessas such. None of the projections to anyone, including CMLS. None of Sema4’s board of directors, officers, managementCompany, GeneDx or any other representative of Sema4 has madetheir respective affiliates, advisors, officers, employees, directors or makesrepresentatives can give you any representation to any person regarding Sema4’s ultimate performance compared toassurance that actual results will not differ from the unaudited prospective financial information, contained in the projections, and except as set forth below, none of them intends to orthose persons undertakes any obligation to update or otherwise revise or reconcile the projectionsunaudited prospective financial information to reflect circumstances existing after the date when madesuch information was prepared or to reflect the occurrence of future events ifeven in the event that any or all of the assumptions underlying the projectionssuch unaudited prospective financial information are shown to be in error. Accordingly, the projections should not be looked upon as “guidance” of any sort. Sema4The Company does not intend to refer back to these projections in its future periodic reports filed under the Exchange Act.
The projections were prepared by, and are the responsibility of, Sema4’s management. Ernst & Young LLP, Sema4’s independent auditors, have not examined, compiledpublicly update or otherwise applied procedures with respectmake any other revision to the accompanying projectedunaudited prospective financial information presented herein and, accordingly, expresses no opinioninformation. None of the Company, GeneDx or any of their respective affiliates, advisors, officers, employees, directors or representatives makes any representation to any stockholder of the Company or any other formperson regarding actual performance compared to the unaudited prospective financial information or that the results reflected therein will be achieved. For the reasons described above, readers of assurance on it. The report of Ernst & Young LLP included in this proxy statement relatesare cautioned not to historicalplace undue, if any, reliance on the unaudited prospective financial information of Sema4. It does not extend to the projections and should not be read as if it does. You are encouraged to review the financial statements of Sema4 included in this proxy statement, as well as the financial information provided in the section titled “Selected Historical Consolidated Financial Data of Sema4” in this proxy statement and to not rely on any single financial measure.
The key elements of the projections provided to CMLS are summarized below (in millions of dollars, except percentages).
(in millions, except percentages)
2020E(1)
2021E2022E2023E
(unaudited)
Total revenue$190 $265 $360 $504 
Adjusted gross margin (%)22 32 41 54 
__________________
(1)In connection with the preparation and completion of Sema4’s 2020 year-end financial statements included elsewhere in this proxy statement, Sema4’s revenue for 2020 was revised to $179.3 million due to a change in estimates as a result of finalizing our accounting records.information.
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In connection with the preparation and completion of Sema4’s 2020 year-end financial statements included elsewhere in this proxy statement, management of CMLS and management of Sema4 discussed the previously provided projected financial information for the 2021 to 2023 period, and Sema4 reaffirmed to CMLS all such prior projections as of May 6, 2021 (the date the 2020 year-end financial statements were finalized).
Sema4’s forecasted financial information, which implied a 38% compound annual growth rate, or CAGR, in estimated revenue between 2021 and 2023, was prepared using a number of assumptions, including the following assumptions that Sema4’s management believed to be material:
•Sema4’s projected diagnostic test revenue reflects:
◦Women’s Health revenue continuing to support Sema4’s financial base and growing at a double-digit CAGR between 2021 and 2023, based on the continued strength of Sema4’s genomic testing solutions; and
◦Oncology revenue increasing at greater than 100% CAGR from 2021 to 2023, to approximately 27% of estimated revenue in 2023.
•Sema4’s projected other revenue reflects:
◦Increasing pharmaceutical and biotech partnership revenue driven by large strategic partnerships, with revenue from these partnerships increasing to approximately 18% of estimated revenue in 2023; and
◦Emerging secondary insights revenue starting in 2021.
Satisfaction of 80% Test
The Nasdaq rules require that the Company’s initial business combination must occur with one or more operating businesses or assets with a fair market value equal to at least 80% of the net assets held in the Trust Account (net of amounts disbursed to management for working capital purposes and excluding the amount of any deferred underwriting discount held in the Trust Account) at the time of the Company’s signing a definitive agreement in connection with its initial business combination. As of February 9, 2021, the date of the execution of the Merger Agreement, the value of the net assets held in the Trust Account was approximately $442,750,000 million and 80% thereof represents approximately $354,200,000 million. In reaching its conclusion that the merger meets the 80% asset test, the Company’s board of directors used as a fair market value the enterprise value of approximately $2 billion, which was implied based on the terms of the transactions agreed to by the parties in negotiating the Merger Agreement. In determining whether the enterprise value described above represents the fair market value of Sema4, the Company’s board of directors considered all of the factors described in this section and the section of this proxy statement entitled “Proposal No. 1 — Approval of the Business Combination — The Merger Agreement” and the fact that the purchase price for Sema4 was the result of an arm’s length negotiation. As a result, the Company’s board of directors concluded that the fair market value of the business acquired was significantly in excess of 80% of the net assets held in the Trust Account.
Interests of Certain Persons in the Business CombinationTransactions
In consideringOur directors and executive officers have no substantial interests, directly or indirectly, in the recommendationmatters set forth in the Acquisition (A) except to the extent of: (i) their ownership of shares of our Class A common stock (or rights to acquire shares), and (ii) that each officer and director are expected to be employed by and will continue to serve on Sema4’s Board to vote in favor offollowing the Business Combination, stockholders should be aware that aside from their interests as stockholders, our Sponsor and certain members of our Board and officers have interestsAcquisition (assuming, in the Business Combinationcase of Mr. Casdin, Mr. Ruch and Mr. Pellini, that each are different from, or in additionre-elected pursuant to those of other stockholders generally. Our Board was aware ofProposal No. 5), for which they each receive cash and considered these interests, among other matters, in evaluatingequity compensation, and negotiating the Business Combination, and in recommending to stockholders that they approve the Business Combination. Stockholders should take these interests into account in deciding whether to approve the Business Combination.
These interests include, among other things:
•the fact that our Initial Stockholders have agreed not to redeem any of the Founder Shares in connection with a stockholder vote to approve the Business Combination;
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•the fact that our Initial Stockholders will retain 11,068,750 Founder Shares upon the Closing;
•the fact that,(B) in connection with the Closing of our initial public offering, our Sponsor and certain ofPIPE Investment.
In connection with the Company’s directors (the “Private Placement Purchasers”) purchased an aggregate of 7,236,667 private placement warrants at a price of $1.50 per private placement warrant, and that if we do not consummate a business combination transaction byAcquisition, the applicable deadline, then the proceeds from the sale of the private placement warrants will be part of the liquidating distribution to the public stockholders and the warrants held by the Private Placement Purchasers will be worthless;
•the fact that our Initial Stockholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if we fail to complete an initial business combination by the applicable deadline;
•if the Trust Account is liquidated, including in the event we are unable to complete an initial business combination within the required time period, our SponsorCompany has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into an acquisition agreement or claims of any third party (other than our independent public accountants) for services rendered or products sold to us, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account;
•the continued indemnification of our existing directors and officers and the continuation of our directors’ and officers’ liability insurance after the Business Combination;
•the fact that Joshua Ruch, Michael Pellini and Rachel Sherman may join as board members of the post-combination company (dependent on the approval of the Director Election Proposal) and Nat Turner, Emily Leproust and Eli D. Casdin will continue as board members of the post-combination company, and each shall be entitled to receive compensation for serving on the board of directors of the post-combination company;
•the fact that our Sponsor, officers and directors will lose their entire investment in us and will not be reimbursed for any out-of-pocket expenses if an initial business combination is not consummated by the applicable deadline;
•that Corvex Master Fund LP, Corvex Select Equity Master Fund LP, Corvex Dynamic Equity Select Master Fund LP, and JS Capital LP, funds that are advised by an affiliate of the Sponsor, have entered into Subscription Agreements with the PIPE Investors. The PIPE Investors include certain existing equity holders of the Company, pursuant to which such affiliates have committed to purchase 240,000; 3,696,000; 64,000; and 500,000 sharessome of common stock inwhom are affiliated with certain directors of the Company. In particular, these PIPE Investment, respectively, for an aggregate commitment of approximately $2,400,000; $36,960,000; $640,000; $5,000,000, respectively; and
•thatInvestors include: Casdin Partners Master Fund, L.P, which has subscribed for 11,437,500 shares of Class A common stock and is affiliated with Mr. Casdin; entities affiliated with Rho Partners, which have subscribed for an aggregate of 2,124,000 shares of Class A common stock and are affiliated with Mr. Ruch; and Section 32 Fund, L.P., a fund thatwhich has subscribed for 1,250,000 shares of Class A common stock and is advised by an affiliateaffiliated with Mr. Pellini. Each of Messrs. Casdin, Ruch and Pellini are members our the Transaction Committee, which supervised Sema4’s consideration of the Sponsor, hasAcquisition. In addition, each of Casdin Partners Master Fund, L.P and Section 32 Fund 2, L.P. have entered into aSupport Agreements with Sema4. For more information, see “Certain Relationships and Related Party Transactions”.
Subscription Agreements and PIPE Investment
On January 14, 2022, concurrently with the execution of the Merger Agreement, Sema4 entered into the Subscription Agreement with the Company, pursuant to whichPIPE Investors. The PIPE Investors include certain existing equity holders of Sema4, some of whom own more than 5% of the affiliate has committed to purchase 5,000,000outstanding shares of Class A common stock and some of whom are affiliated with Sema4’s directors. Pursuant to, and on the terms and subject to the conditions of, the Subscription Agreements, Sema4 agreed to issue and sell to the PIPE Investors, in private placements to close substantially concurrently with the Closing, an aggregate of 50 million shares of Class A common stock at $4.00 per share, for an aggregate gross purchase price of $200 million, before fees and expenses. 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) upon the mutual written agreement of the parties to such Subscription Agreement; (c) if any of the conditions to closing of the PIPE Investment for an aggregate commitment of approximately $50,000,000.
These interests may influence our directorsset forth in making their recommendation that you vote in favorSection 2 of the approval ofSubscription Agreement are not satisfied (or waived, to the Business Combination.
Potential Purchases of Public Shares
Our Sponsorextent waivable) on or the Company’s or Sema4’s directors, officers or advisors, or any of their respective affiliates, may purchase public shares in privately negotiated transactions or in the open market prior to the special meeting, although theyearlier of the Closing Date or October 14, 2022 (the “Outside Date”), or become incapable of being satisfied on or prior to the earlier of the Closing Date or the Outside Date, and, as a result thereof, the transactions contemplated by the Subscription Agreements are under no obligationnot consummated at the closing of the PIPE Investment, and (d) the Outside Date. Each Subscriber may, by written notice to do so. Any such purchasesSema4, extend the Outside Date beyond October 14, 2022.
In addition, certain existing equity holders of Sema4 have agreed in their Subscription Agreements to certain covenants that are completed aftersubstantially similar to the record date forcovenants set forth in the special meeting may include an agreement with a selling stockholder that such stockholder, for so long as it remainsSupport Agreements.
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the record holderThe foregoing description of the sharesSubscription Agreements is subject to and qualified in question, will vote in favorits entirety by reference to the full text of the proposals presented at the special meeting and/or will not exercise its redemption rights with respect to the shares so purchased. The purposeform of such share purchases and other transactions would be to increase the likelihoodSubscription Agreement, a copy of that the proposals to be voted upon at the special meeting are approved by the requisite number of votes. In the event that such purchases do occur, the purchasers may seek to purchase shares from stockholders who would otherwise have voted against the Business Combination Proposal and elected to redeem their shares for a portion of the Trust Account. Any such privately negotiated purchases may be effected at purchase prices that are below or in excess of the per-share pro rata portion of the Trust Account. Any public shares held by or subsequently purchased by our affiliates may be voted in favor of the Business Combination Proposal and the other proposals presented at the special meeting. None of the Company’s Sponsor, directors, officers, advisors or their affiliates may make any such purchases when they are in possession of any material non-public information not disclosed to the seller or during a restricted period under Regulation M under the Exchange Act.
which is attached as Annex D.
Total Company Shares to be Issued in the Business CombinationAcquisition and the PIPE Investment
It is anticipated that, upon completion of the Business Combination, assuming no redemptions:Transactions, at the Closing, the Company expects that: (i) the Company’s public stockholders will retain an ownership interest of approximately 18.6% in the post-combination company (not including(including any shares beneficially owned by our Sponsor);PIPE Investors prior to the Transactions) will own approximately 65.1% of the outstanding shares of Class A common stock; (ii) the PIPE Investors (excluding any shares owned by the PIPE Investors prior to the Transactions) will own approximately 12.2%13.4% of the post-combination company (such that public stockholders, including PIPE Investors,outstanding shares of Class A common stock; and (iii) OPKO will own approximately 30.8% (adding the foregoing 2 subsets)21.5% of the post-combination company); (iii) our Initial Stockholders (including our Sponsor) will own approximately 4.6% (excluding warrants) of the post-combination company; and (iv) the former Sema4 equity holders are expected to hold, in the aggregate, approximately 64.6% of the issued and outstanding shares of the post-combination company. The foregoing percentages do not assume the issuance of 29,120,955 shares of CompanyClass A common stock that will at Closing be subject to stock options and RSUs, as further described in the pro forma capitalization table in the section entitled “stock.
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Unaudited Pro Forma Condensed Combined Financial Information — Description of the Transaction.” The ownership percentage with respect to the post-combination company following the Business Combination does not take into account (a) warrants to purchase common stock that will remain outstanding immediately following the Business Combination, (b) the issuance of Earn-Out Shares to the Sema4 equity holders should the earn-out conditions in the Merger Agreement be satisfied or (c) the issuance of any shares upon completion of the Business Combination under the Incentive Plan or the ESPP, copies of which are attached to this proxy statement as Annex D and Annex E, respectively Depending on the number of public shares redeemed, our current stockholders could own a majority of the voting rights in the post-combination company, but would not have effective control over the post-combination company. For more information, please see the sections entitled “Summary of the Proxy Statement — Impact of the Business Combination on the Company’s Public Float,” “Unaudited Pro Forma Condensed Combined Financial Information,” and “Proposal No. 5 — Approval of the Incentive Plan.”
Sources and Uses for the Business CombinationAcquisition
The following tables summarize the estimated sources and uses for funding the Business CombinationAcquisition (all numbers in millions):
Sources(1)
Uses(1)
$%$%
Seller Rollover$1,756.2 67.3 %$1,756.2 67.3 %
Additional PIPE Equity$350.0 13.4 %$— — %
SPAC Cash in Trust$442.8 17.0 %$— — %
Cash on Balance Sheet$59.3 2.3 %$533.9 20.5 %
Debt Repayment$— — %$12.9 0.5 %
Seller Equity$— — %$3.8 0.1 %
Secondary Proceeds$— — %$243.8 9.3 %
Estimated Transaction Costs & Expenses$— — %$57.6 2.2 %
Total
$2,608.2 100.0 %$2,608.2 100.0 %
SourcesUses
$%$%
PIPE Investment$200.0 %$— %
Stock Consideration(1)
$323.2 %$323.2 %
Cash Consideration$— %$150.0 %
Estimated Transaction Costs$— %$17.6 %
SMFR Balance Sheet Cash$— %$32.4 %
Total Upfront
$523.2 %$523.2 %
Milestone Payments(2)
$150.0 %$150.0 %
Total Upfront & Milestone Payments
$673.2 %$673.2 %
__________________
(1)The Stock Consideration is valued at a price of $4.04 per share, which is the closing price of our Class A common stock on January 14, 2022, which is the date of execution of the Merger Agreement.
(2)Assumes revenue target is met for each Milestone Payment and each Milestone Payment is satisfied through the issuance of shares of Class A common stock.
New Employment Arrangements
In connection with the execution of the Merger Agreement we entered into new employment agreements with Katherine Stueland, the Chief Executive Officer of GeneDx, Jennifer Brendel, the Chief Commercial Officer of GeneDx, and Kevin Feeley, the Chief Financial Officer of GeneDx. Each of the employment agreements will become effective as of the Closing, at which time Ms. Stueland will become our co-Chief Executive Officer, Ms. Brendel will become our Chief Growth Officer, and Mr. Feeley will become a Senior Vice President, Operations and the Head of GeneDx. The employment agreements provide for at-will employment and include a base salary of $675,000 for Ms. Stueland, $425,000 for Ms. Brendel and $400,000 for Mr. Feeley, a discretionary incentive bonus opportunity with a target amount of 100% of annual base salary for Ms. Stueland, 65% of annual base salary for Ms. Brendel and 40% of annual base salary for Mr. Feeley, an initial grant of stock options and restricted stock units with an aggregate grant-date value of $9,000,000 for Ms. Stueland, $1,750,000 for Ms. Brendel and $1,750,000 for Mr. Feeley, and standard employee benefit plan participation.
Pursuant to her employment agreement, if Ms. Stueland is terminated without “cause” or resigns for “good reason” (as such terms are defined in her employment agreement) other than in connection with a change in control, she will be entitled to receive 24 months of base salary continuation, 12 months of continued coverage under our group health plans, and accelerated vesting of a portion of her initial stock option grant, subject to her execution of a release of claims. If instead such termination occurs within the period commencing three months prior to (or the date on which we have commenced engagement with a change in control counterparty, if later) and ending 12 months following a change in control, Ms. Stueland will be entitled to receive 24 months of base salary continuation, a lump sum payment equal to two times her target annual bonus, 24 months of continued coverage under our group health plans, and accelerated vesting of her outstanding equity-based compensation awards, subject to her execution of a release of claims. Ms. Stueland’s employment agreement also includes restrictive covenants that would prohibit Ms. Stueland from soliciting our employees and exclusive consultants or competing with us during the 12-month period following her termination of employment.
Pursuant to their employment agreements, if either of Ms. Brendel or Mr. Feely is terminated without “cause” or resigns for “good reason” (as such terms are defined in their employment agreements) other than in connection with a change in control, they will be entitled to receive 9 months of base salary continuation and 12 months of continued coverage under our group health benefit plans, subject to his or her execution of a release of claims. If instead such termination occurs within the period commencing three months prior to and ending 12 months following a change in control, Ms. Brendel and Mr. Feeley would be entitled to receive 12 months of base salary
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______________continuation, a lump sum payment equal to one times his or her target annual bonus, 12 months of continued coverage under our group health benefit plans, and accelerated vesting of his or her outstanding equity-based compensation awards, subject to his or her execution of a release of claims. Ms. Brendel’s and Mr. Feeley’s employment agreements also include restrictive covenants that would prohibit Ms. Brendel or Mr. Feeley from soliciting our employees and exclusive consultants or competing with us during the 9-month period following their termination of employment.
(1)Amounts reflectedIn addition, pursuant to their employment agreements, each of Ms. Stueland, Ms. Brendel and Mr. Feely agreed that, during the nine-month period following the Closing, they will not: (i) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act, with respect to any shares of our Class A common stock, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the table are estimates based on certain assumptionseconomic consequences of CMLS’s and Sema4’s respective management teams asownership of March 31, 2021.
any of such shares, in cash or otherwise, or (iii) publicly announce any intention to effect any transaction specified in clause (i) or (ii).
Board of Directors of the Company Following the Business CombinationAcquisition
The following individuals will serve on the post-combination company’sCompany’s board of directors following the Closing:
•Nat Turner
•Emily LeproustDennis Charney;
•Eli D. CasdinCasdin;
•Emily Leproust;
•Eric SchadtSchadt;
•Jason Ryan;
•Joshua Ruch;
•Katherine Stueland;
•Keith Meister;
•Michael PelliniPellini;
•Jason Ryan
•Joshua RuchNat Turner;
•Rachel ShermanSherman; and
•Dennis CharneyRichard C. Pfenniger, Jr.
See the section entitled “Management After the Business CombinationAcquisition” for more information.
Support Agreements
CertificateOn January 14, 2022, we entered into the Support Agreements with OPKO and certain of Incorporation
Pursuant to the termsour stockholders (including certain stockholders that own more than 5% of the Merger Agreement, upon the Closing,outstanding shares of our current certificate of incorporation will be amended promptly to:
•change the post-combination company’s name to Sema4 Holdings Corp;
•delete provisions relating to our status as a blank check company;
•the charter provides for 380,000,000 classClass A common stock authorized and 1,000,000certain entities affiliated with our directors), whereby such stockholders have agreed to, among other things, (a) vote at any meeting of preferredour stockholders all of their shares of Class A common stock authorized. We would not expect this needsheld of record or beneficially: (i) to be increased based onapprove the pro forma cap table; and
•change the stockholder vote required to 66 2/3% in voting powerissuance of the stockStock Consideration pursuant to Merger Agreement and the issuance of the post-combination company in orderClass A common stock pursuant to the Subscription Agreements; (ii) to approve the appointment of the Specified Designees to the Board for stockholdersterms that expire no earlier than the end of the Second Milestone Period; (iii) to amend certain provisions ofapprove an amendment to our current Third Amended and Restated Certificate of Incorporation.Incorporation to increase the authorized shares of Class A common stock from 380,000,000 to 1,000,000,000; (iv) to approve any other proposal included in the proxy statement that is recommended by the Board as necessary to consummate the Transactions; (v) to approve
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any proposal that is recommended by the Board to adjourn the meeting to a later date, if there are not sufficient affirmative votes (in person or by proxy) to obtain the requested approvals on the date on which such meeting is held; and (vi) against any and all other proposals that could reasonably be expected to delay or impair our ability to consummate the Transactions; (b) provide a proxy to us to vote such shares accordingly (subject to the condition that a proxy statement has been filed with the SEC and provided to our stockholders); (c) be bound by certain other covenants and agreements related to the Transactions; and (d) be bound by certain transfer restrictions with respect to all or a percentage of their shares of Class A common stock, prior to the meeting, in each case, on the terms and subject to the conditions set forth in the Support Agreements.
The foregoing description of the Support Agreements is subject to and qualified in its entirety by reference to the full text of the form of Support Agreement, a copy of which is attached as Exhibit B to the Merger Agreement in Annex A hereto, and the terms of which are incorporated herein by reference.
Shareholder Agreements
In connection with the execution of the Merger Agreement, OPKO and certain individual stockholders of OPKO who hold 5% or more of OPKO’s common stock (each a “Lock-Up Holder”) entered into the Shareholder Agreements, whereby each agreed to certain transfer restrictions with respect to shares of Class A common stock included in the Merger Consideration or Milestone Payments that were distributed or otherwise transferred to it (such shares of Class A common stock, the “Lock-up Shares”) that will remain in place until, (a) with respect to the Stock Consideration, the date that is one year from the Closing Date (as defined in the Merger Agreement), (b) with respect to the stock portion of the first Milestone Payment, if any, the date that is one year from the date of issuance for such payment and (c) with respect to the stock portion of the second Milestone Payment, if any, the date that is six months from the date of issuance for such payment (the period described in (a), (b) and (c) are referred to as the “Lock-Up Period”).
Each Lock-Up Holder has also agreed in the Shareholders Agreements that, following the Lock-Up Period and for so long as such Lock-Up Holder is the record or beneficial owner of at least 5% of the issued and outstanding Class A common stock, such Lock-Up Holder shall not, without the Company’s consent, sell more than 25% of the shares of the Company’s Class A common stock it received in connection with the Acquisition in any 90-day period, except as part of a marketed sale process for which one lead bookrunner has been selected by Company in its sole discretion.
Each Lock-Up Holder has also agreed to vote all of his, her or its Lock-Up Shares in whatever manner is recommended by the Board for so long as such Lock-Up Holder is the record or beneficial owner of at least 5% of the issued and outstanding Class A common stock.
The Shareholder Agreements also provide that, for a period of twelve months from the Closing, the Lock-Up Holders shall not, without the consent of the Company’s Board or chief executive officer (a) acquire shares or voting securities in the Company, (b) make any solicitation of votes, or seek to advise on any vote of the Company’s securities, (c) form a “group” (with the meaning of Section 13(d)(3) of the Exchange Act) with respect to any voting securities of the Company, (e) propose any merger, business combination, tender offer, or similar transaction with respect to the Company, (f) solicit or provide information to any person with respect of a business combination or tender offer involving the Company, (g) advise, assist or knowingly encourage any other person with respect to the actions described in (a)-(g) above, (h) enter into any discussions or negotiations with respect to the foregoing, (i) take any action that could reasonably be expected to require disclosure on the part of the Company with respect to any of the foregoing, or (j) disclose any intention inconsistent with the foregoing.
The Company has agreed in the Shareholder Agreements to file a registration statement in respect of the Registrable Securities (as defined therein) within 30 days following the closing of the Acquisition and granted to the Lock-Up Holders certain customary shelf, piggyback and demand registration rights. The foregoing description of the Shareholder Agreements is subject to and qualified in its entirety by reference to the full text of the form of Shareholder Agreement, the form of which is attached as Exhibit A to the Merger Agreement in Annex A hereto, and the terms of which are incorporated herein by reference.
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Charter Amendment
The approval of the Charter Amendment Proposal is also a condition to the Closing under the Merger Agreement. Upon stockholder approval, we will file the Amendment and thereby amend our Charter to increase the number of authorized shares of our Class A common stock from 380,000,000 to 1,000,000,000. See “Proposal No. 4 – The Charter Amendment Proposal.”
Name; Headquarters
The name of the post-combination companyCompany after the Business CombinationAcquisition will continue to be Sema4 Holdings CorpCorp. and our headquarters will continue to be located at 333 Ludlow Street, North Tower, 8th Floor, Stamford, Connecticut 06902.
Redemption Rights
Pursuant to our current certificate of incorporation, holders of public shares may elect to have their shares redeemed for cash at the applicable redemption price per share calculated in accordance with our current certificate of incorporation. As of December 31, 2020, the estimated per share redemption price would have been approximately $10.00. If a holder exercises its redemption rights, then such holder will be exchanging its shares of our common stock for cash and will no longer own shares of the post-combination company. Such a holder will be entitled to receive cash for its public shares only if it properly demands redemption and delivers its shares (either physically or electronically) to our Transfer Agent in accordance with the procedures described herein.
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Each redemption of shares of common stock by our public stockholders will reduce the amount in the Trust Account. The Merger Agreement provides that our obligation to consummate the Business Combination is conditioned on the funds in the Trust Account, together with the funding of any amounts payable under the Subscription Agreements, being no less than an aggregate amount of $300,000,000 million following payment of redemptions and CMLS and Sema4 transaction costs. This condition to closing in the Merger Agreement is for the sole benefit of the parties thereto and may be waived by Sema4. If, as a result of redemptions of common stock by our public stockholders, this condition is not met (or waived), then we or Sema4 (as applicable) may elect not to consummate the Business Combination. In addition, in no event will we redeem shares of our common stock in an amount that would result in the Company’s failure to have net tangible assets equaling or exceeding $5,000,001 (so that we are not subject to the SEC’s “penny stock” rules). Holders of our outstanding public warrants do not have redemption rights in connection with the Business Combination. Please see the section entitled “Special Meeting of Company Stockholders — Redemption Rights” for the procedures to be followed if you wish to redeem your shares for cash.
Appraisal Rights
Appraisal rights are not available to our stockholders in connection with the Business Combination.
Acquisition.
Accounting Treatment
The Business CombinationAcquisition will be accounted for as a reverse recapitalizationusing the acquisition method of accounting in accordance with GAAP.Accounting Standards Codification (“ASC”) 805 - Business Combinations. Under thisthe acquisition method of accounting, the Company will be treated astotal purchase price is allocated to the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination will be treated as the equivalent of Sema4 issuing stock for the net assets of the Company, accompanied by a recapitalization whereby no goodwill or othertangible and identifiable intangible assets are recorded.
and liabilities assumed based on their relative fair values.
Material United StatesU.S. Federal Income Tax Considerations for Public Stockholders Exercising Redemption RightsConsequences of the Acquisition
The following is a discussion of certainsummary discusses the material U.S. federal income tax considerations for our publicconsequences of the merger together with the subsequent merger, to Sema4 stockholders that electwho are U.S. persons (as defined below). The following discussion is based on existing provisions of the Code, existing treasury regulations and current administrative rulings and court decisions, all of which are subject to have their common stock that are public shares redeemed for cash ifchange and to differing interpretations, possibly with retroactive effect. Any such change could affect the Business Combination is completed. continuing validity of this discussion.
This discussion applies only to public shares that are held as a “capital asset” forsummary does not discuss all U.S. federal income tax purposes (generally, property held for investment). This discussion does not describe all of the U.S. federal income tax consequencesconsiderations that may be relevant to anya particular holder based on such holder’s particularstockholder in light of his or her personal circumstances including the alternative minimum tax and the Medicare tax on net investment income, and the different consequences that may applyor to holders that arestockholders subject to special rulestreatment under U.S. federal income tax law, such as:laws, including:
•banks, financial institutionsdealers in securities or financial services entities;foreign currencies;
•broker-dealers;traders in securities or foreign currencies who elect the mark-to-market method of accounting
•governments or agencies or instrumentalities thereof;Sema4 stockholders who are not U.S. persons (as defined below);
•regulated investmenttax-exempt organizations;
•certain expatriates or stockholders who have a functional currency other than the U.S. dollar;
•financial institutions or insurance companies;
•real estate investment trusts;stockholders who acquired Sema4 common stock in connection with stock option or stock purchase plans or in other compensatory transactions;
•U.S. expatriatesstockholders exercising appraisal or former long-term residents of the United States;dissenters’ rights;
•personsstockholders that directly, indirectlypurchased or constructively own 5% or more (by vote or value) of our shares;
•persons that acquired our common stock pursuant to an exercise of employee share options, in connection with employee share incentive plans or otherwise as compensation;
•insurance companies;
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•dealers or traders subject to a mark-to-market method of accounting with respect tosold their shares of common stock;
•persons holdingSema4 common stock as part of a “straddle,” constructive sale, hedge, conversionwash sale; or other integrated transaction or similar transaction;
•U.S. holders (as defined below) whose functional currency is not the U.S. dollar;
•“specified foreign corporations” (including “controlled foreign corporations”), “passive foreignstockholders who hold Sema4 common stock as part of an integrated investment, companies”including a “straddle,” comprised of shares of Sema4 common stock and corporations that accumulate earnings to avoid U.S. federal income tax;
•partnerships (or entitiesone or arrangements classified as partnerships ormore other pass-through entities for U.S. federal income tax purposes) and any beneficial owners of such partnerships or other pass-through entities; and
•tax-exempt entities.positions.
If a partnership (or an(including any entity or arrangement, domestic or foreign, treated as a partnership or other pass-through entity for U.S. federal income tax purposes) holds shares ofSema4 common stock, that are public shares, the U.S. federal income tax treatment of the partners (or other beneficial owners) in the partnership or other pass-through entitya partner will generally will depend on the
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status and activities of the partners (or other beneficial owners)partner and the activities of the partnership or other pass-through entity.partnership. If you area holder is a partner (or other beneficial owner) in such a partnership or other pass-through entity holding Sema4 common stock, the holder should consult its tax advisors.
This discussion assumes that Sema4 stockholders hold their shares of Sema4 common stock you are urgedas capital assets within the meaning of Section 1221 of the Code (generally, as property held as an investment). This summary is limited to consult yourU.S. federal income tax advisor regardingaspects and does not address the tax consequences of the merger and the subsequent merger under non-U.S., state or local tax laws or any non-income tax laws (such as estate and gift tax laws). It also does not consider the impact of the alternative minimum tax or the Medicare contribution tax on net investment income. Accordingly, Sema4 stockholders should consult their tax advisors as to the specific tax consequences of the merger and the subsequent merger, including any applicable federal, state, local, non-U.S., and non-income tax consequences.
As used in this discussion, the term “U.S. person” means a redemptionbeneficial owner of shares ofSema4 common stock that are public shares.
This discussion is based on the Code, and administrative pronouncements, judicial decisions and final, temporary and proposed Treasury regulations as of the date hereof, which are subject to change, possibly on a retroactive basis, and changes to any of which subsequent to the date of this proxy statement may affect the tax consequences described herein. This discussion does not address any aspect of state, local or non-U.S. taxation, or any U.S. federal taxes other than income taxes (such as gift and estate taxes).
We have not sought, and do not intend to seek, a ruling from the U.S. Internal Revenue Service (the “IRS”) as to any U.S. federal income tax consequences described herein. The IRS may disagree with the discussion herein, and its determination may be upheld by a court. Moreover, there can be no assurance that future legislation, regulations, administrative rulings or court decisions will not adversely affect the accuracy of the statements in this discussion.
You are urged to consult your tax advisor with respect to the application of U.S. federal tax laws to your particular situation, as well as any tax consequences arising under the laws of any state, local or non-U.S. jurisdiction.
THIS DISCUSSION IS ONLY A SUMMARY OF CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS ASSOCIATED WITH THE REDEMPTION OF SHARES OF COMMON STOCK BY PUBLIC STOCKHOLDERS. EACH INVESTOR IN SHARES OF COMMON STOCK IS URGED TO CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO SUCH INVESTOR OF THE REDEMPTION OF SHARES OF COMMON STOCK, INCLUDING THE APPLICABILITY AND EFFECT OF ANY U.S. FEDERAL NON-INCOME, STATE, LOCAL, AND NON-U.S. TAX LAWS.
Redemption of Common Stock
In the event that a public stockholder’s shares of common stock are redeemed pursuant to the redemption provisions described in this proxy statement under the section entitled “Special Meeting of Company Stockholders — Redemption Rights,” the treatment of the redemptionwho, for U.S. federal income tax purposes, will depend on whether the redemption qualifies as a sale of shares of common stock under Section 302 of the Code. If the redemption qualifies as a sale of shares of common stock, a U.S. holder (as defined below) will be treated as described below under the section entitled “U.S. Holders — Taxation of Redemption Treated as a Sale of Common Stock,” and a Non-U.S. holder (as defined below) will be treated as described under the section entitled “Non-U.S. Holders — Taxation
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is:
of Redemption Treated as a Sale of Common Stock.” If the redemption does not qualify as a sale of shares of common stock, a holder will be treated as receiving a corporate distribution, with the tax consequences to a U.S. holder described below under the section entitled “U.S. Holders — Taxation of Redemption Treated as a Distribution,” and the tax consequences to a Non-U.S. holder described below under the section entitled “Non-U.S. Holders — Taxation of Redemption Treated as a Distribution.”
Whether a redemption of shares of common stock qualifies for sale treatment will depend largely on the total number of shares of our stock treated as held by the redeemed holder before and after the redemption (including any stock constructively owned by the holder as a result of owning warrants and any of our stock that a holder would directly or indirectly acquire pursuant to the Business Combination or the PIPE Investment) relative to all of our shares outstanding both before and after the redemption. The redemption of common stock generally will be treated as a sale of common stock (rather than as a corporate distribution) if the redemption: (i) is “substantially disproportionate” with respect to the holder; (ii) results in a “complete termination” of the holder’s interest in us; or (iii) is “not essentially equivalent to a dividend” with respect to the holder. These tests are explained more fully below.
In determining whether any of the foregoing tests result in a redemption qualifying for sale treatment, a holder takes into account not only shares of our stock actually owned by the holder, but also shares of our stock that are constructively owned by it under certain attribution rules set forth in the Code. A holder may constructively own, in addition to stock owned directly, stock owned by certain related individuals and entities in which the holder has an interest or that have an interest in such holder, as well as any stock that the holder has a right to acquire by exercise of an option, which would generally include common stock which could be acquired pursuant to the exercise of the warrants. Moreover, any of our stock that a holder directly or constructively acquires pursuant to the Business Combination or the PIPE Investment should be included in determining the U.S. federal income tax treatment of the redemption.
In order to meet the substantially disproportionate test, the percentage of our outstanding voting stock actually and constructively owned by the holder immediately following the redemption of shares of common stock must, among other requirements, be less than 80% of the percentage of our outstanding voting stock actually and constructively owned by the holder immediately before the redemption (taking into account both redemptions by other holders of common stock and the common stock to be issued pursuant to the Business Combination). There will be a complete termination of a holder’s interest if either (i) all of the shares of our stock actually and constructively owned by the holder are redeemed or (ii) all of the shares of our stock actually owned by the holder are redeemed and the holder is eligible to waive, and effectively waives in accordance with specific rules, the attribution of stock owned by certain family members and the holder does not constructively own any other shares of our stock (including any stock constructively owned by the holder as a result of owning warrants). The redemption of common stock will not be essentially equivalent to a dividend if the redemption results in a “meaningful reduction” of the holder’s proportionate interest in us. Whether the redemption will result in a meaningful reduction in a holder’s proportionate interest in us will depend on the particular facts and circumstances.
However, the IRS has indicated in a published ruling that even a small reduction in the proportionate interest of a small minority stockholder in a publicly held corporation who exercises no control over corporate affairs may constitute such a “meaningful reduction.”
If none of the foregoing tests is satisfied, then the redemption of shares of common stock will be treated as a corporate distribution to the redeemed holder and the tax effects to such U.S. holder will be as described below under the section entitled “U.S. Holders — Taxation of Redemption Treated as a Distribution,” and the tax effects to such Non-U.S. holder will be as described below under the section entitled “Non-U.S. Holders — Taxation of Redemption Treated as a Distribution.” After the application of those rules, any remaining tax basis of the holder in the redeemed common stock will be added to the holder’s adjusted tax basis in its remaining stock, or, if it has none, to the holder’s adjusted tax basis in its warrants or possibly in other stock constructively owned by it.
Each holder should consult with its own tax advisors as to the tax consequences of a redemption.
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U.S. Holders
This section applies to you if you are a “U.S. holder.” A U.S. holder is a public stockholder that is a beneficial owner of our shares of common stock who or that is, for U.S. federal income tax purposes:
•▪an individual who is a citizen or resident of the United States;
•▪a corporation (or other(including an entity taxabletreated as a corporation)corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States or of any state thereofof the United States or the District of Columbia;
•▪an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
•▪a trust if (i) a court within the United States is able to exercise primary supervision over the administration of suchthe trust and one or more “United States persons” (within the meaning of the Code)U.S. persons have the authority to control all substantial decisions of the trust; or a trust or (ii) the trust validly electedthat has a valid election in effect under applicable Treasury regulations to be treated as a United StatesU.S. person.
TaxationTreatment of Redemption Treatedthe Mergers as a Distribution.“Reorganization”
If our redemption of a U.S. holder’s shares of common stock is treated as a distribution, as discussed above underThe Parties intend to report and, except to the section entitled “Redemption of Common Stock,” the amount of cash received in the redemption generally will constitute a dividendextent otherwise required by Law, shall report, for U.S. federal income tax purposes, the merger and the subsequent merger, taken together, as a “reorganization” within the meaning of Section 368(a) of the Code.
Treatment of GeneDx Stockholders in the Proposed Merger
A GeneDx stockholder will recognize gain, but not loss, upon the exchange of GeneDx common stock for Sema4 Class A common stock and cash in the merger and the subsequent merger that is equal to the extent paid from our current or accumulated earningslesser of (i) the amount of cash received by the GeneDx stockholder (excluding any cash received in lieu of fractional shares) and profits, as determined under U.S. federal income tax principles. Distributions in(ii) the excess of our current and accumulated earnings and profits will constitute a return of capital that will be applied against and reduce (but not below zero) the U.S. holder’s adjusted“amount realized” by the GeneDx stockholder over the GeneDx stockholder’s tax basis in ourthe GeneDx common stock. Any remaining excessstock exchanged. The “amount realized” by the GeneDx stockholder will equal the sum of the fair market value of the Sema4 Class A common stock and the amount of cash (including any cash received in lieu of fractional shares) received by the GeneDx stockholder. The aggregate tax basis of Sema4 Class A common stock received by a GeneDx stockholder in the merger and the subsequent merger (including the basis in any fractional share for which cash is received) will be the same as the stockholder’s aggregate tax basis in GeneDx common stock surrendered in the merger and the subsequent merger, reduced by the amount of cash the GeneDx stockholder received (excluding any cash received in lieu of fractional shares), and increased by the amount of gain that the GeneDx stockholder recognizes (excluding any gain or loss from the deemed receipt and redemption of fractional shares described below). A GeneDx stockholder receiving cash in the merger and the subsequent merger in lieu of a fractional share of Sema4 Class A common stock will be treated as gain realized onif such fractional share were issued in the salemerger and the subsequent merger and then redeemed by Sema4 for cash, resulting in a recognition of the common stock and will be treated as described below under the section entitled “U.S. Holders — Taxation of Redemption Treated as a Sale of Common Stock.”
Dividends we pay to a U.S. holder that is a taxable corporation generally will qualify for the dividends received deduction if the requisite holding period is satisfied. With certain exceptions (including, but not limited to, dividends treated as investment income for purposes of investment interest deduction limitations), and provided certain holding period requirements are met, dividends we pay to a non-corporate U.S. holder generally will constitute “qualified dividend income” that will be subject to tax at reduced tax rates accorded to long-term capital gains. It is unclear whether the redemption rights with respect to the common stock described in this proxy statement may prevent a U.S. holder from satisfying the applicable holding period requirements with respect to the dividends received deduction or the reduced tax rates on qualified dividend income, as the case may be. If the holding period requirements are not satisfied, then U.S. corporate holders may not be able to qualify for the dividends received deduction and would have taxable income equal to the entire dividend amount, and non-corporate U.S. holders may be subject to tax on such dividend at regular ordinary income tax rates instead of the reduced tax rates that apply to qualified dividend income.
Taxation of Redemption Treated as a Sale of Common Stock.
If our redemption of a U.S. holder’s shares of common stock is treated as a sale, as discussed above under the section entitled “Redemption of Common Stock,” a U.S. holder generally will recognize capital gain or loss in an amountthat is equal to the difference, if any, between the amount realizedstockholder’s basis allocable to the fractional share and the U.S. holder’s adjusted tax basisamount of cash received therefor. The holding period of Sema4 Class A common stock received by a GeneDx stockholder in the sharesmerger and the subsequent merger will include the holding period of the GeneDx common stock redeemed. Anyheld by such capitalGeneDx stockholder.
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Any gain or loss recognized by a GeneDx stockholder will generally will be long-term capital gain or loss if the U.S. holder’sstockholder’s holding period for the GeneDx common stock so disposedis more than a year at the time of exceeds one year. It is unclear, however, whether the redemption rightsmerger and the subsequent merger. Individuals are eligible for reduced rates of taxation with respect to thelong-term capital gains. In some cases, if a holder actually or constructively owns Sema4 Class A common stock described in this proxy statement may suspend the running of the applicable holding period for this purpose. Long-term capital gains recognized by non-corporate U.S. holders may be eligible to be taxed at reduced rates. If the running of the holding period for the shares ofother than Sema4 Class A common stock is suspended, then non-corporate U.S. holders may not be able to satisfy the one-year holding period requirement for long-term capital gain treatment, in which case any gain on the sale of the shares of common stock would be subject to short-term capital gain treatment and would be taxed at regular ordinary income tax rates. The deductibility of capital losses is subject to limitations.
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Generally, the amount of gain or loss recognized by a U.S. holder is an amount equalreceived pursuant to the difference between (i) the sum of the amount of cashmerger and the fair market value of any property received in such sale and (ii)subsequent merger, the U.S. holder’s adjusted tax basis in its common stock so disposed of. A U.S. holder’s adjusted tax basis in its common stock generally will equal the U.S. holder’s acquisition cost less any prior distributions paid to the U.S. holder with respect to its shares of common stock that were treated as a return of capital.
U.S. holders who hold different blocks of common stock (shares of common stock purchased or acquired on different dates or at different prices) should consult their tax advisors to determine how the above rules apply to them.
Information Reporting and Backup Withholding
In general, information reporting requirements may apply to dividends paid to a U.S. holder and to the proceeds of the sale of shares of common stock unless the U.S. holder is an exempt recipient. Backup withholding may apply to such payments if the U.S. holder fails to provide a taxpayer identification number, a certification of exempt status or has been notified by the IRS that it is subject to backup withholding (and such notification has not been withdrawn).
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a credit against a U.S. holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided the required information is timely furnished to the IRS.
Non-U.S. Holders
This section applies to you if you are a “Non-U.S. holder.” A Non-U.S. holder is a public stockholder that is a beneficial owner of our common stock who or that is, for U.S. federal income tax purposes:
•a non-resident alien individual (other than certain former citizens and residents of the United States subject to U.S. tax as expatriates);
•a foreign corporation; or
•an estate or trust that is not a U.S. holder;
but generally does not include an individual who is present in the United States for 183 days or more in the taxable year of redemption. If you are such an individual, you should consult your tax advisor regarding the U.S. federal income tax consequences of a redemption of the common stock.
Taxation of Redemption Treated as a Distribution
If our redemption of a Non-U.S. holder’s shares of common stock is treated as a distribution, as discussed above under the section entitled “Redemption of Common Stock,” such the amount of cash received in the redemption generally will constitute a dividend for U.S. federal income tax purposes to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles) and, provided such dividend is not effectively connected with the Non-U.S. holder’s conduct of a trade or business within the United States, we will be required to withhold tax from the gross amount of the dividend at a rate of 30%, unless such Non-U.S. holder is eligible for a reduced rate of withholding tax under an applicable income tax treaty and timely provides proper certification of its eligibility for such reduced rate (usually on an IRS Form W-8BEN or W-8BEN-E). Distributions in excess of our current and accumulated earnings and profits will constitute a return of capital that will be applied against and reduce (but not below zero) the Non-U.S. holder’s adjusted tax basis in its shares of common stock. Any remaining excess willrecognized gain could be treated as gain realized onhaving the saleeffect of the common stock and will be treated as described below under the section entitled “Non-U.S. Holders — Taxation of Redemption Treated as a Sale of Common Stock.”
Because it may not be certain at the time a Non-U.S. holder is redeemed whether such Non-U.S. holder’s redemption will be treated as a sale of shares or a distribution constituting a dividend, and because such determination will depend in part on a Non-U.S. holder’s particular circumstances, we or the applicable withholding
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agent may not be able to determine whether (or to what extent) a Non-U.S. holder is treated as receiving a dividend for U.S. federal income tax purposes. Therefore, we or the applicable withholding agent may withhold tax at a rate of 30% (or such lower applicable tax rate as may be specified by an applicable income tax treaty) on the gross amount of any consideration paid to a Non-U.S. holder in redemption of such Non-U.S. holder’s common stock, unless (i) we or the applicable withholding agent have established special procedures allowing Non-U.S. holders to certify that they are exempt from such withholding tax and (ii) such Non-U.S. holders are able to certify that they meet the requirements of such exemption (e.g., because such Non-U.S. holders are not treated as receiving a dividend under the tests set forth in Section 302 tests described above underof the section entitled “RedemptionInternal Revenue Code, in which case such gain would be treated as dividend income. Because the possibility of Common Stock”). However, there can be no assurance that we or any applicable withholding agent will establish such special certification procedures. If we or an applicable withholding agent withhold excess amounts fromdividend treatment depends upon each holder’s particular circumstances, including the amount payable to a Non-U.S. holder, such Non-U.S. holder generally may obtain a refundapplication of any such excess amounts withheld by timely filing an appropriate claim for refund with the IRS. Non-U.S.constructive ownership rules, holders of GeneDx common stock should consult their own tax advisors regarding the application of the foregoing rules in light ofto their particular facts and circumstances and any applicable procedures or certification requirements.circumstances.
The withholding tax described above generally does not apply to dividends paid toFor a Non-U.S. holderGeneDx stockholder who provides an IRS Form W-8ECI, certifying that the dividends are effectively connected with the Non-U.S. holder’s conductacquired different blocks of a trade or business within the United States. Instead, any such effectively connected dividends will be subject to regular U.S. federal income tax as if the Non-U.S. holder were a U.S. resident, subject to an applicable income tax treaty providing otherwise. A Non-U.S. holder that is treated as a corporation for U.S. federal income tax purposes and is receiving effectively connected dividends may also be subject to an additional “branch profits tax” imposed at a rate of 30% (or a lower applicable treaty rate).
Taxation of Redemption Treated as a Sale of Common Stock
If our redemption of a Non-U.S. holder’s shares of common stock is treated as a sale, as discussed above under the section entitled “Redemption of Common Stock,” subject to the discussions of FATCA (as defined below) and backup withholding below, a Non-U.S. holder generally will not be subject to U.S. federal income or withholding tax in respect of gain recognized in connection with such redemption of common stock, unless:
•the gain is effectively connected with the conduct of a trade or business by the Non-U.S. holder within the United States (and, under certain income tax treaties, is attributable to a United States permanent establishment or fixed base maintained by the Non-U.S. holder); or
•we are or have been a “United States real property holding corporation” for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of the redemption or the period that the Non-U.S. holder held our common stock, and, in the case where shares of our common stock are regularly traded on an established securities market, the Non-U.S. holder has owned, directly or constructively, more than 5% of ourGeneDx common stock at any time withindifferent times and at different prices, realized gain or loss generally must be calculated separately for each identifiable block of shares exchanged in the shortermerger and the subsequent merger, and a loss realized on the exchange of one block of shares cannot be used to offset a gain realized on the five-year period preceding the redemption or such Non-U.S. holder’sexchange of another block of shares. In addition, holders’ basis and holding period for thein their shares of our common stock. It is unclear how the rules for determining the 5% threshold for this purpose would be applied with respect to ourSema4 Class A common stock including how a Non-U.S. holder’s ownershipmay be determined with reference to each block of warrants impacts the 5% threshold determination with respect to its Class AGeneDx common stock. In addition, there can be no assurance that our Class A common stock is or has been treated as regularly traded on an established securities market for this purpose.
Unless an applicable treaty provides otherwise, gain described in the first bullet point above will be subject to tax at generally applicable U.S. federal income tax rates as if the Non-U.S. holder were a U.S. resident. In the event the Non-U.S. holder is treated as a corporation for U.S. federal income tax purposes,Any such gain may also be subject to an additional “branch profits tax” imposed at a 30% rate (or a lower applicable treaty rate).If the second bullet point above applies to a Non-U.S. holder, gain recognized by such holder in connection with a redemption treated as a sale will be subject to tax at generally applicable U.S. federal income tax rates. In addition, we may be required to withhold U.S. federal income tax at a rate of 15% of the amount realized upon such redemption. We believe that we are not and have not been at any time since our formation a United States real property holding corporation and we
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do not expect to be a United States real property holding corporation immediately after the Business Combination is completed.
Information Reporting and Backup Withholding
We generally must report annually to the IRS and each Non-U.S. holder the amount of dividends paid to such holder and the tax withheld with respect to such dividends, regardless of whether withholding was required. Copies of the information returns reporting such dividends and withholding may also be made available to the tax authorities in the country in which the Non-U.S. holder resides under the provisions of an applicable income tax treaty.
A Non-U.S. Holder generally will be subject to backup withholding for dividends paid to such holder unless such holder certifies under penalties of perjury that it is a Non-U.S. holder (and the payor does not have actual knowledge or reason to know that such holder is a United States person as defined under the Code), or such holder otherwise establishes an exemption.
Information reporting and, depending on the circumstances, backup withholding generally will apply to the proceeds of a sale of common stock within the United States or conducted through certain U.S.-related financial intermediaries, unless the beneficial owner certifies under penalty of perjury that it is a Non-U.S. holder (and the payor does not have actual knowledge or reason to know that the beneficial owner is a United States person as defined under the Code), or such beneficial owner otherwise establishes an exemption.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a credit against a Non-U.S. holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.
FATCA Withholding Taxes.
Sections 1471 to 1474 of the Code (such Sections commonly referred to as the Foreign Account Tax Compliance Act, or “FATCA”) impose a 30% withholding tax on payments of dividends (including constructive dividends received pursuant to a redemption of stock) on our common stock to “foreign financial institutions” (which is broadly defined for this purpose and in general includes investment vehicles) and certain other non-U.S. entities unless various U.S. information reporting and due diligence requirements (generally relating to ownership by U.S. persons of interests in or accounts with those entities) have been satisfied, or an exemption applies to the payee (typically certified as to by the delivery of a properly completed IRS Form W-8BEN-E). If FATCA withholding is imposed, a beneficial owner that is not a foreign financial institution generally will be able to obtain a refund of any amounts withheld by filing a U.S. federal income tax return (which may entail significant administrative burden). Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules. Thirty percent withholding under FATCA was scheduled to apply to payments of gross proceeds from the sale or other disposition of property that produces U.S.-source interest or dividends (such as our common stock) beginning on January 1, 2019, but on December 13, 2018, the IRS released proposed regulations that, if finalized in their proposed form, would eliminate the obligation to withhold on gross proceeds. Such proposed Treasury regulations also delayed withholding on certain other payments received from other foreign financial institutions that are allocable, as provided for under final Treasury regulations, to payments of U.S.-source dividends, and other fixed, determinable, annual or periodic income. Although these proposed Treasury regulations are not final, taxpayers generally may rely on them until final Treasury regulations are issued. Non-U.S. holders should consult their tax advisors regarding the possible implicationsmanner in which cash and Sema4 common stock received in the exchange should be allocated among different blocks of FATCA onGeneDx common stock and with respect to identifying the bases or holding periods of the particular shares of Sema4 common stock received in the merger and the subsequent merger.
Neither Sema4 nor GeneDx will recognize any gain or loss as a redemptionresult of the merger and the subsequent merger. It is the intention of Sema4 and GeneDx that the merger and the subsequent merger, taken together, will be treated as a reorganization within the meaning of Section 368(a) of the Code. If GeneDx is unable to obtain an opinion in this regard after the registration statement of which this joint proxy statement/prospectus is a part is declared effective by the SEC, and the change in expected tax consequences is material, Sema4 and GeneDx will undertake to recirculate and re-solicit stockholders of GeneDx. If the merger and the subsequent merger, taken together, are not treated as a reorganization within the meaning of Section 368(a) of the Code, the merger and the subsequent merger, taken together, will be treated as a fully taxable transaction to GeneDx stockholders for U.S. federal income tax purposes.
Reporting and Backup Withholding
GeneDx stockholders who owned at least five percent (by vote or value) of the total outstanding stock of GeneDx or GeneDx stock with a tax basis of $1 million or more are required to attach a statement to their tax returns for the year in which the merger and the subsequent merger are completed that contains the information listed in Treasury Regulations Section 1.368-3(b). Such statement must include the stockholder’s tax basis in the stockholder’s GeneDx common stock and the fair market value of such stock.
Certain stockholders may be subject to information reporting and backup withholding with respect to cash received in the merger and the subsequent merger unless the stockholder comes within certain exempt categories and, when required, demonstrates this fact, or provides a correct taxpayer identification number (typically by completing and signing an IRS Form W-9), certifies as to no loss of exemption from backup withholding and that such holder is a U.S. person (including a U.S. resident alien) and otherwise complies with applicable requirements of the backup withholding rules. Any amount withheld as backup withholding is not an additional tax and may be refunded or credited against such stockholder’s U.S. federal income tax liability, provided that the required information is properly furnished in a timely manner to the IRS.
The foregoing discussion of U.S. federal income tax consequences is not intended to constitute a complete description of all tax consequences relating to the merger and the subsequent merger. The tax consequences of the merger and the subsequent merger to a GeneDx stockholder will depend upon the facts of the stockholder’s particular situation. Because individual circumstances may differ, GeneDx stockholders are urged to consult with their own tax advisor regarding the applicability of the rules discussed above and the particular tax effects of the merger and the subsequent merger, including the application of state, local, non-U.S. and non-income tax laws.
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Regulatory Matters
Under the HSR Act and the rules that have been promulgated thereunder by the FTC, certain transactions may not be consummated unless information has been furnished to the Antitrust Division and the FTC and certain waiting period requirements have been satisfied. The Business CombinationAcquisition is subject to these requirements and may not be completed until the expiration of a 30-day waiting period following the filing of the required Notification and Report Forms with the Antitrust Division and the FTC or until early termination is granted. If the FTC or the
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Antitrust Division makes a Second Request, the waiting period with respect to the Business CombinationAcquisition will be extended for an additional period of 30 calendar days, which will begin on the date on which the Company and Sema4GeneDx each certify compliance with the Second Request. Complying with a Second Request can take a significant period of time. On February 24, 2021,January 28, the Company and Sema4GeneDx filed the required forms under the HSR Act with the Antitrust Division and the FTC. The waiting period under the HSR Act with respect to the Business CombinationAcquisition expired on March 26, 2021.February 28, 2022.
At any time before or after consummation of the Business Combination,Acquisition, notwithstanding termination of the waiting period under the HSR Act, the applicable competition authorities could take such action under applicable antitrust laws as each deems necessary or desirable in the public interest, including seeking to enjoin the consummation of the Business Combination.Acquisition. Private parties may also seek to take legal action under the antitrust laws under certain circumstances. We cannot assure you that the Antitrust Division, the FTC, any state attorney general, or any other government authority will not attempt to challenge the Business CombinationAcquisition on antitrust grounds, and, if such a challenge is made, we cannot assure you as to its result. Neither the Company nor Sema4GeneDx is aware of any material regulatory approvals or actions that are required for completion of the Business CombinationAcquisition other than the expiration or early termination of the waiting period under the HSR Act. It is presently contemplated that if any such additional regulatory approvals or actions are required, those approvals or actions will be sought. There can be no assurance, however, that any additional approvals or actions will be obtained.
Opinion of Sema4’s Financial Advisor
Goldman Sachs rendered its opinion to the Board that, as of January 14, 2022, and based upon and subject to the factors and assumptions set forth therein, the (i) $150 million in cash, subject to closing adjustments pursuant to the Merger Agreement (the “Adjustments”), (ii) 80 million shares of Class A common stock of Sema4 and (iii) up to $150 million of contingent payments, payable in cash or shares of Class A common stock of Sema4, based upon achievement of 2022 and 2023 revenue milestones (collectively, the “Total Acquisition Consideration”), to be paid to acquire all of the issued at outstanding shares of capital stock of GeneDx pursuant to the Merger Agreement, was fair from a financial point of view to Sema4.
The full text of the written opinion of Goldman Sachs, dated January 14, 2022, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex C. Sema4’s stockholders are encouraged to read the opinion carefully in its entirety. The following is a summary of Goldman Sachs’ opinion and the methodology that Goldman Sachs used to render its opinion. The summary is qualified in its entirety by reference to the full text of the opinion.
Goldman Sachs provided advisory services and its opinion for the information and assistance of the Board in connection with its consideration of the Acquisition. The Goldman Sachs opinion is not a recommendation as to how any holder of shares of Sema4’s Class A common stock should vote with respect to the Acquisition or any other matter.
In connection with rendering the opinion described above and performing its related financial analyses, Goldman Sachs reviewed, among other things:
•Sema4’s Registration Statement on Form S-1, including the prospectus contained therein dated August 12, 2021;
•certain Quarterly Reports on Form 10-Q of Sema4;
•certain other communications from Sema4 and OPKO to their respective stockholders;
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•certain publicly available research analyst reports for Sema4 and OPKO;
•audited financial statements for GeneDx for the two fiscal years ended December 31, 2020;
•unaudited financial statements for GeneDx for the twelve month period ended December 31, 2021;
•certain internal financial analyses and forecasts for GeneDx as prepared by OPKO;
•certain internal financial analyses and forecasts for Sema4 and certain internal financial analyses and forecasts for GeneDx, in each case, as prepared by the management of Sema4 and approved for Goldman Sachs’ use by Sema4 (the “Forecasts”), including operating synergies projected to result from the transaction, as prepared by the management of Sema4 and approved for Goldman Sachs’ use by Sema4 (the “Synergies”) (for more information, see “—Certain Projected Financial Information”); and
•certain estimates as to the amount of the Adjustments and the contingent payments, in each case, as prepared by the management of Sema4 and approved for Goldman Sachs’ use by Sema4 (the “Estimates”).
Goldman Sachs also held discussions with members of the senior managements of Sema4, GeneDx and OPKO regarding their assessment of the strategic rationale for, and the potential benefits of, the Acquisition and the past and current business operations, financial condition and future prospects of GeneDx and Sema4; reviewed the reported price and trading activity for Sema4’s Class A common stock; compared certain financial information for GeneDx and certain financial and stock market information for Sema4 with similar financial and stock market information for certain other companies the securities of which were publicly traded; and performed such other studies and analyses, and considered such other factors, as Goldman Sachs deemed appropriate.
For purposes of rendering their opinion, Goldman Sachs, with Sema4’s consent, relied upon and assumed the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by, Goldman Sachs, without assuming any responsibility for independent verification thereof. In that regard, Goldman Sachs assumed, with Sema4’s consent, that the Forecasts, including the Synergies, and the Estimates were reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of Sema4. Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or other off-balance-sheet assets and liabilities) of Sema4 or OPKO or any of their respective subsidiaries, including GeneDx, and Goldman Sachs was not furnished with any such evaluation or appraisal. Goldman Sachs has assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the Acquisition will be obtained without any adverse effect on Sema4 or GeneDx or on the expected benefits of the Acquisition in any way meaningful to Goldman Sachs’ analysis. Goldman Sachs also assumed that the Acquisition will be consummated on the terms set forth in the Merger Agreement, without the waiver or modification of any term or condition the effect of which would be in any way meaningful to Goldman Sachs’ analysis.
Goldman Sachs’ opinion does not address the underlying business decision of Sema4 to engage in the Acquisition or the relative merits of the Acquisition as compared to any strategic alternatives that may be available to Sema4; nor does it address any legal, regulatory, tax or accounting matters. Goldman Sachs’ opinion addresses only the fairness from a financial point of view to Sema4, as of the date of the opinion, of the Total Acquisition Consideration to be paid by Sema4 to acquire all of the issued and outstanding shares of capital stock of GeneDx pursuant to the Merger Agreement. Goldman Sachs does not express any view on, and Goldman Sachs’ opinion does not address, any other term or aspect of the Merger Agreement or the Acquisition or any term or aspect of any other agreement or instrument contemplated by the Merger Agreement or entered into or amended in connection with the Acquisition, including any allocation of the Total Acquisition Consideration, any ongoing obligations of Sema4 or OPKO, any private placement of Sema4’s Class A common stock, the Pre-Closing Restructuring (as defined in the Merger Agreement), the fairness of the Acquisition to, or any consideration received in connection therewith by, the holders of any class of securities, creditors or other constituencies of Sema4, nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of Sema4, GeneDx or OPKO, or any class of such persons in connection with the Acquisition, whether relative to the Total Acquisition Consideration to be paid by Sema4 for all of the issued and outstanding shares of capital stock of GeneDx pursuant to the Merger Agreement or otherwise. Goldman Sachs is not expressing any opinion as to the
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prices at which shares of Sema4’s Class A common stock will trade at any time, as to the potential effects of volatility in the credit, financial and stock markets on Sema4, GeneDx or OPKO or the Acquisition or as to the impact of the Acquisition on the solvency or viability of Sema4, GeneDx or OPKO or the ability of Sema4, GeneDx or OPKO to pay their respective obligations when they come due. Goldman Sachs’ opinion is necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to Goldman Sachs as of, the date of its opinion, and Goldman Sachs assumes no responsibility for updating, revising or reaffirming its opinion based on circumstances, developments or events occurring after the date of its opinion. Goldman Sachs’ opinion was approved by a fairness committee of Goldman Sachs.
Summary of Material Financial Analyses
The following is a summary of the material financial analyses delivered by Goldman Sachs to the Board in connection with rendering the opinion described above. The following summary, however, does not purport to be a complete description of the financial analyses performed by Goldman Sachs, nor does the order of analyses described represent relative importance or weight given to those analyses by Goldman Sachs. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Goldman Sachs’ financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before January 14, 2022, the last trading day before the announcement of the Acquisition, and is not necessarily indicative of current market conditions.
For purposes of its analyses, Goldman Sachs calculated $488 million as the implied market value of the Total Acquisition Consideration, derived using the January 14, 2022 closing price per share of $4.04 for the portion of the Total Acquisition Consideration consisting of Sema4’s Class A common stock and, based on the Estimates provided by the management of Sema4 and approved for Goldman Sachs’ use, assumed the Adjustments net to a $15 million outflow of funds and no contingent payments were made because the revenue milestones were not achieved in the Forecasts.
Illustrative Discounted Cash Flow Analysis—GeneDx Standalone
Using discount rates ranging from 8.5% to 10.5%, Goldman Sachs discounted to present value estimates of unlevered free cash using projections for fiscal years 2022 through 2040 included in the Forecasts for standalone GeneDx (excluding Synergies) and applied perpetuity growth rates ranging from 2.5% to 3.5% for the terminal year. Goldman Sachs derived the discount rates using estimates of GeneDx’s weighted average cost of capital calculated by application of the capital asset pricing model, which requires certain company-specific inputs, including the company’s target capital structure weightings, the cost of long-term debt, after-tax yield on permanent excess cash, if any, future applicable marginal cash tax rate and a beta for the company, as well as certain financial metrics for the United States financial markets generally. The range of perpetuity growth rates was derived by Goldman Sachs utilizing its professional judgment and experience, taking into account, among other things, the Forecasts and market expectations regarding long-term economic growth of gross domestic product and inflation. The discounted unlevered cash flow analysis implied standalone intrinsic GeneDx enterprise values of between $1,048 million and $1,869 million.
Illustrative Enterprise Value Analysis—GeneDx Standalone
Goldman Sachs calculated ranges of illustrative GeneDx standalone enterprise values based on reference multiples of enterprise value to revenue.
Goldman Sachs also derived a range of illustrative enterprise values for GeneDx by multiplying (x) GeneDx projected 2021 revenue set forth in the Forecasts by (y) an enterprise value to revenue multiple range of 3.5x to 10.0x, and Goldman Sachs multiplied (x) GeneDx projected 2022 revenue set forth in the Forecasts by (y) an enterprise value to revenue multiple range of 4.0x to 7.5x. The enterprise value to revenue multiple ranges were derived by Goldman Sachs based on its professional judgment and experience, taking into account the enterprise value to revenue multiples for the GeneDx Selected Companies (as defined below). Goldman Sachs chose the GeneDx Selected Companies because they are publicly traded companies with operations that for purposes of analysis may be considered similar to certain operations of GeneDx. Estimates of 2021 and 2022 revenues for the
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GeneDx Selected Companies were based on Wall Street research. Please see the subsection entitled “Selected Public Company Comparables Analysis—GeneDx” below, for a list of the GeneDx Selected Companies and the enterprise value to revenue multiples for the GeneDx Selected Companies for 2021 and 2022. This analysis implied an enterprise value range of $405 million to $1,157 million based on 2021 figures and an enterprise value range of $521 million to $977 million based on 2022 figures.
Selected Public Company Comparables Analysis—GeneDx
Goldman Sachs reviewed and compared certain financial information for GeneDx to corresponding financial information, ratios and public market multiples for the following publicly traded corporations in the life sciences and diagnostics industry (the “GeneDx Selected Companies”):
•Natera, Inc.;
•Veracyte, Inc.;
•Invitae Corporation;
•Exact Sciences;
•Castle Biosciences, Inc.;
•NeoGenomics, Inc.;
•Personalis, Inc.; and
•Myriad Genetics, Inc.
Although none of the GeneDx Selected Companies is directly comparable to GeneDx, the companies included were chosen because they are publicly traded companies with operations that for purposes of analysis may be considered similar to certain operations of GeneDx.
Estimates of 2021 and 2022 revenues for the GeneDx Selected Companies were based on Wall Street research. The enterprise value to revenue multiples for these companies appear in the table below:
Comparable CompanyEV/2021E
Revenue		EV/2022E
Revenue
Natera, Inc.10.4x8.5x
Veracyte, Inc.9.9x7.5x
Invitae Corporation9.3x6.9x
Exact Sciences8.1x7.1x
Castle Biosciences, Inc.6.8x5.5x
NeoGenomics, Inc.6.4x5.5x
Personalis, Inc.3.3x4.2x
Myriad Genetics, Inc.2.8x2.9x
Illustrative Present Value of Future Share Price—Sema4 Standalone
Goldman Sachs performed an illustrative analysis of the implied present values of illustrative future values per share of Sema4’s Class A common stock. This analysis was designed to provide indications of the present values of theoretical future intrinsic values of Sema4’s Class A common stock. For this analysis, Goldman Sachs used the Sema4 standalone projections in the Forecasts for each of the fiscal years 2023 through 2025. Goldman Sachs calculated implied enterprise values for standalone Sema4 as of December 31, for each of the fiscal years 2022 through 2024, by applying enterprise value to revenue multiples of 6.0x to 8.0x against the next twelve months revenue projections for standalone Sema4 in the Forecasts. The illustrative enterprise value to revenue multiple range was derived by Goldman Sachs using its professional judgment and experience, taking into account current
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and historical multiples for Sema4, the range of Sema4 enterprise value to revenue multiples implied in Wall Street analyst forecasts, and enterprise value to revenue multiples for the Sema4 Selected Companies (as defined below). Goldman Sachs chose the Sema4 Selected Companies because they are publicly traded companies with operations that for purposes of analysis may be considered similar to certain operations of Sema4. Estimates of 2021 and 2022 revenues for the Sema4 Selected Companies were based on Wall Street research. Please see the subsection entitled “Selected Public Company Comparables Analysis—Sema4” below, for a list of the Sema4 Selected Companies and the enterprise value to revenue multiples for the Sema4 Selected Companies for 2021 and 2022. Goldman Sachs added the amount of net cash in the Forecasts for standalone Sema4 in order to derive a range of illustrative equity values. Goldman Sachs divided the results by the number of fully diluted outstanding shares of Sema4 Class A common stock provided by the management of Sema4 for standalone Sema4, to derive a range of implied future values per share of Class A common stock. Goldman Sachs discounted the implied per share future Class A common stock values back to January 14, 2022, using an illustrative discount rate of 9%, reflecting an estimate of Sema4’s cost of equity. Goldman Sachs derived this discount rate by application of the capital asset pricing model (the “Capital Asset Pricing Model”), which requires certain company-specific inputs, including a beta for the company, as well as certain financial metrics for the United States financial markets generally.
This analysis resulted in a range of implied present values per share of Sema4’s Class A common stock of $6.60 to $9.86. Goldman Sachs then adjusted the analysis to give effect to the PIPE Investment (but not the Acquisition), which resulted in a range of implied present values per share of Sema4’s Class A common stock of $6.14 to $8.93.
Selected Public Company Comparables Analysis—Sema4
Goldman Sachs reviewed and compared certain financial information for Sema4 to corresponding financial information, ratios and public market multiples for the following publicly traded corporations in the life sciences and diagnostics industry (the “Sema4 Selected Companies”):
•Guardant Health;
•Natera, Inc.;
•Veracyte, Inc.;
•Invitae Corporation;
•Exact Sciences;
•Castle Biosciences, Inc.;
•NeoGenomics, Inc.;
•Personalis, Inc.;
•Myriad Genetics, Inc.;
•Centogene; and
•Progenity.
Although none of the Sema4 Selected Companies is directly comparable to Sema4, the companies included were chosen because they are publicly traded companies with operations that for purposes of analysis may be considered similar to certain operations of Sema4.
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Estimates of 2021 and 2022 revenues for the Sema4 Selected Companies were based on Wall Street research. The enterprise value to revenue multiples for these companies appear in the table below:
Comparable CompanyEV/2021E
Revenue		EV/2022E
Revenue
Guardant Health23.1x18.1
Natera, Inc.10.4x8.5x
Veracyte, Inc.9.9x7.5x
Invitae Corporation9.3x6.9x
Exact Sciences8.1x7.1x
Castle Biosciences, Inc.6.8x5.5x
NeoGenomics, Inc.6.4x5.5x
Personalis, Inc.3.3x4.2x
Myriad Genetics, Inc.2.8x2.9x
Centogene0.4x1.3x
ProgenityNMNM
Illustrative Present Value of Future Share Price—Combined Company
Goldman Sachs performed an illustrative analysis of the implied present values of illustrative future values per share of Sema4’s Class A common stock on a pro forma basis, after giving effect to the Acquisition. This analysis was designed to provide indications of the present values of theoretical future intrinsic values of Sema4’s Class A common stock with a combined company. For this analysis, Goldman Sachs used the Sema4 combined company projections in the Forecasts for each of the fiscal years 2023 through 2025 including the Synergies. Goldman Sachs calculated implied enterprise values of the combined company as of December 31, for each of the fiscal years 2022 through 2024, by applying enterprise value to revenue multiples of 6.0x to 8.0x against the next twelve months revenue projections for the combined company in the Forecasts. The illustrative enterprise value to revenue multiple range was derived by Goldman Sachs using its professional judgment and experience, taking into account current and historical multiples for Sema4, the range of Sema4 enterprise value to revenue multiples implied in Wall Street analyst forecasts, and the multiples referenced above for Sema4 Selected Companies. Goldman Sachs chose the Sema4 Selected Companies because they are publicly traded companies with operations that for purposes of analysis may be considered similar to certain operations of Sema4. Estimates of 2021 and 2022 revenues for the Sema4 Selected Companies were based on Wall Street research. Please see the subsection entitled “Selected Public Company Comparables Analysis—Sema4” above, for a list of the Sema4 Selected Companies and the enterprise value to revenue multiples for the Sema4 Selected Companies for 2021 and 2022. Goldman Sachs added the projected amount of the net cash in the Forecasts for the combined company in order to derive a range of illustrative equity values for the combined company. Goldman Sachs divided the results by the number of fully diluted outstanding shares of Sema4’s Class A common stock provided by the management of Sema4 for the combined company, to derive a range of implied future values per share of Class A common stock. Goldman Sachs discounted the implied per share future Class A common stock values back to January 14, 2022, using an illustrative discount rate of 9%, reflecting an estimate of Sema4’s cost of equity. Goldman Sachs derived this discount rate by application of the Capital Asset Pricing Model, which requires certain company-specific inputs, including a beta for the company, as well as certain financial metrics for the United States financial markets generally. This analysis resulted in a range of implied present values per share of Class A common stock of the combined company of $6.92 to $11.58.
General
The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs’ opinion. In arriving at its fairness determination, Goldman Sachs considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination as to
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fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. No company used in the above analyses as a comparison is directly comparable to Sema4 or OPKO.
Goldman Sachs prepared these analyses for purposes of providing its opinion to the Board as to the fairness from a financial point of view, as of the date of the opinion, to Sema4 of the Acquisition Consideration to be paid to OPKO to acquire all of the issued and outstanding shares of capital stock of GeneDx pursuant to the Merger Agreement. These analyses do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of Sema4, OPKO, Goldman Sachs or any other person assumes responsibility if future results are materially different from those forecasts.
The Total Acquisition Consideration was determined through arm’s-length negotiations between Sema4 and OPKO and was approved by the Board. Goldman Sachs provided advice to Sema4 during these negotiations. Goldman Sachs did not, however, recommend any specific form or amount of consideration to Sema4 or the Board or that any specific form or amount of consideration constituted the only appropriate consideration for the Acquisition.
As described above, Goldman Sachs’ opinion to the Board was one of many factors taken into consideration by the Board in making its determination to approve the Merger Agreement. The foregoing summary does not purport to be a complete description of the analyses performed by Goldman Sachs in connection with the fairness opinion and is qualified in its entirety by reference to the written opinion of Goldman Sachs attached as Annex C.
Goldman Sachs and its affiliates are engaged in advisory, underwriting and financing, principal investing, sales and trading, research, investment management and other financial and non-financial activities and services for various persons and entities. Goldman Sachs and its affiliates and employees, and funds or other entities they manage or in which they invest or have other economic interests or with which they co-invest, may at any time purchase, sell, hold or vote long or short positions and investments in securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments of Sema4, OPKO, any of their respective affiliates and third parties, including the Icahn School of Medicine at Mount Sinai (“ISMMS”), a significant stockholder of Sema4, and affiliates of Phillip Frost, a significant stockholder of OKPO, or any currency or commodity that may be involved in the Acquisition. Goldman Sachs acted as financial advisor to Sema4 in connection with, and participated in certain of the negotiations leading to, the Acquisition. Goldman Sachs expects to receive fees for its services in connection with the Acquisition, contingent upon consummation of the Acquisition, and Sema4 has agreed to reimburse certain of Goldman Sachs’ expenses arising, and indemnify Goldman Sachs against certain liabilities that may arise, out of Goldman Sachs’ engagement. In addition, Goldman Sachs acted as placement agent to Sema4 on the PIPE Investment. Goldman Sachs expects to receive a fee for its role as placement agent for the PIPE Investment, contingent upon consummation of the PIPE Investment, and Sema4 has agreed to reimburse certain of Goldman Sachs’ expenses arising, and indemnify Goldman Sachs against certain liabilities that may arise, out of Goldman Sachs’ engagement as placement agent for the PIPE Investment. Goldman Sachs has provided certain financial advisory and/or underwriting services to Sema4 and/or its affiliates from time to time for which Goldman Sachs’ Investment Banking Division has received, and may receive, compensation, including having acted in 2021 as financial advisor to Legacy Sema4 in its de-SPAC transaction with CM Life Sciences, Inc. and as placement agent in its July 2020 Series C private placement. During the two year period ended January 14, 2022, Goldman Sachs has recognized compensation for financial advisory and/or underwriting services provided by its Investment Banking Division to Sema4 and/or its affiliates of approximately $11.6 million. Goldman Sachs also has provided certain advisory and/or underwriting services to ISMMS and/or its affiliates (collectively, “Mount Sinai”) from time to time for which Goldman Sachs’ Investment Banking Division has received, and may receive, compensation, including having acted as co-manager in a 2020 $400 million fixed rate debt offering by Mount Sinai Health System, an affiliate of ISMMS. During the two year period ended January 14, 2022, Goldman Sachs has recognized compensation for financial advisory and/or underwriting services provided by its Investment Banking Division to Mount Sinai and/or its affiliates of approximately $400,000. During the two year period ended January 14, 2022, Goldman Sachs did not recognize any compensation for financial advisory and/or underwriting services provided by its Investment Banking Division to OPKO and/or its affiliates. Goldman Sachs may also in the future provide
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financial advisory and/or underwriting services to Sema4, OPKO, Mount Sinai or Phillip Frost and their respective affiliates for which Goldman Sachs’ Investment Banking Division may receive compensation.
The Board selected Goldman Sachs as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the Acquisition. Pursuant to a letter agreement, dated January 10, 2022, Sema4 engaged Goldman Sachs to act as its financial advisor in connection with the Acquisition. The engagement letter between Sema4 and Goldman Sachs provides for a transaction fee that is estimated, based on the information available as of the date of announcement of the Acquisition, at approximately $8.5 million, all of which is contingent upon consummation of the Acquisition. In addition, Sema4 has agreed to reimburse Goldman Sachs for certain of its expenses, including attorneys’ fees and disbursements, and to indemnify Goldman Sachs and related persons against various liabilities, including certain liabilities under the federal securities laws.
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PROPOSAL NO. 1 - THE STOCK CONSIDERATION ISSUANCE APPROVAL
We are asking our stockholders to approve, for purposes of complying with applicable Nasdaq Listing Rules, the issuance of more than 20% of the Company’s outstanding Class A common stock in connection with the Acquisition, including the issuances pursuant to the Merger Agreement described below.
Why the Company Needs Stockholder Approval
Pursuant to Nasdaq Listing Rule 5635(a), stockholder approval is required prior to the Company’s issuance of Class A common stock or other securities convertible into or exercisable for Class A common stock, in connection with the acquisition of the stock or assets of another company, if such securities are not issued in a public offering and (i) the Class A common stock has, or will have upon issuance, voting power equal to or in excess of 20% of the voting power outstanding before the issuance of such securities, or (ii) the number of shares of Class A common stock to be issued is or will be equal to or in excess of 20% of the number of shares of Class A common stock outstanding before the issuance of such securities.
In connection with the Acquisition, we expect to issue (i) 80 million shares of Class A common stock in connection with the payment of the Stock Consideration, and (ii) 50 million shares of Class A common stock in the PIPE Investment. We may also issue, in our sole discretion, a maximum of up to approximately 30.9 million shares of Class A common stock in connection with the potential Milestone Payments. Because we may issue 20% or more of our outstanding Class A common stock when considering together the Stock Consideration, the PIPE Investment and the potential Milestone Payments, we are required to obtain stockholder approval of such issuance pursuant to Nasdaq Listing Rule 5635(a). For this reason, we are seeking the approval of our stockholders for the issuance of shares of our Class A common stock pursuant to the Merger Agreement.
In addition, the approval of the Stock Consideration Issuance Proposal is also a condition to the Closing under the Merger Agreement.
In the event that this proposal is not approved by Company stockholders, the Acquisition cannot be consummated. In the event that this proposal is approved by Company stockholders, but the Merger Agreement is terminated (without the Acquisition being consummated) prior to the issuance of shares of our Class A common stock pursuant to the Merger Agreement, such shares of Class A common stock will not be issued.
Vote Required for Approval
The Business CombinationAcquisition is conditioned on the approval of the Business Combination Proposal, the Nasdaq Stock Consideration Issuance Proposal, the Charter Approval Proposal, the ESPP Proposal and the Incentive Plan Proposal are approved at the Special Meeting.Charter Amendment Proposal. The proposals in this proxy statement (other than the Governance Proposal, the Auditor RatificationPIPE Investment Proposal and the Adjournment Proposal)Special Designee Director Election Proposal are conditioned on theupon stockholders’ approval of the Business Combination Proposal.
This Business CombinationStock Consideration Issuance Proposal (and consequently, the Merger Agreement and the transactions contemplated thereby, including the Business Combination)Charter Amendment Proposal. This Stock Consideration Issuance Proposal will be adopted and approved only if at least a majority of the votes cast at the Special Meeting vote “FOR” the Business CombinationStock Consideration Issuance Proposal. A stockholder’s failure to vote, as well as an abstention and broker non-vote, will have no effect on the Business CombinationStock Consideration Issuance Proposal. Abstentions and broker non-votes will be counted in connection with the determination of whether a valid quorum is established but will have no effect on the Business Combination Proposal.established.
Our Initial Stockholders have agreed to vote their shares of common stock “FOR” the Business Combination Proposal. As of the record date, our Sponsor, directors and officers own approximately 20% of our issued and outstanding shares of common stock.
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Recommendation of the Board of Directors
OUR BOARD OF DIRECTORS RECOMMENDS
THAT OUR STOCKHOLDERS VOTE “FOR”
THE BUSINESS COMBINATIONSTOCK CONSIDERATION ISSUANCE PROPOSAL.
The existence of financial and personal interests of one or more of the Company’s directors or officers may result in a conflict of interest on the part of such director(s) or officer(s) between what he, she or they may believe is in the best interests of the Company and its stockholders and what he, she or they may believe is best for himself, herself or themselves in determining to recommend that stockholders vote for the proposals. See the section above entitled “—“The Acquisition—Interests of Certain Persons in the Transactions” for a further discussion.
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PROPOSAL NO. 2 —- THE NASDAQ STOCK ISSUANCEPIPE INVESTMENT PROPOSAL
Overview
Assuming the Business CombinationStock Consideration Issuance Proposal isand the Charter Amendment Proposal are approved and adopted, we are asking our stockholders to approve, for purposes of complying with applicable listing rules of Nasdaq Listing Rules, the issuance of more than 20% of the Company’s outstanding Class A common stock in connection with the Business Combination,Acquisition, including the issuances described below.
Issuance of common stock to Sema4 equity holders under Merger Agreement
Subject to the terms and conditions of the Merger Agreement, each share of Sema4 Class B common stock issued and outstanding immediately prior to the effective time will be converted into 1/100th of a share of Sema4 Class A common stock as set forth in the Merger Agreement. Immediately thereafter, each share of Sema4 Common Stock and Sema4 Preferred Stock (other than Excluded Shares and Dissenting Shares) 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 merger consideration, with each Sema4 Stockholder being entitled to receive (collectively, clauses (i) through (iii), the “merger consideration”) (i) its pro rata share of the Closing Available Cash if such Sema4 Stockholder has made an election to receive cash, and, if further elected, such Sema4 Stockholder’s pro rata share excess amount of any closing available excess cash, provided that in no event will a Sema4 Stockholder’s cash payment exceed an amount equal to the product of such Sema4 Stockholder’s total outstanding shares multiplied by the Per Share Amount; (ii) a number of shares of Company Class A common stock equal to the quotient of: (A)(1) the product of (x) such Sema4 Stockholder’s total outstanding shares multiplied by the Per Share Amount minus (2) such Sema4 Stockholder’s stockholder cash payment amount divided by (B) $10.00; and (iii) its earn out pro rata share of any earn out shares to which such Sema4 Stockholder is entitled pursuant to the terms of the Merger Agreement (the “Earnout”), including the Earnout RSUs (as described below), which Earnout RSUs are subject to vesting and will not be legally issued and outstanding shares of Company common stock at the closing of the Business Combination (the “Closing”), in each case of clauses (i), (ii) and (iii), without interest, upon surrender of stock certificates representing all of such Sema4 Stockholder’s Sema4 Common Stock and Sema4 Preferred Stock and delivery of the other documents required pursuant to the Merger Agreement. As of the effective time, each Sema4 Stockholder shall cease to have any other rights in and to Sema4 and each certificate relating to ownership of shares of Sema4 Common Stock and Sema4 Preferred Stock (other than Excluded Shares) will only represent the right to receive the applicable portion of the merger consideration.
Each issued and outstanding share of common stock of Merger Sub shall be converted into and become one validly issued, fully paid and nonassessable share of common stock, par value $0.01 per share, of the entity surviving the merger (the “Surviving Corporation”), which shall constitute the only outstanding shares of capital stock of the Surviving Corporation. From and after the effective time, all certificates representing the common stock of Merger Sub shall be deemed for all purposes to represent the number of shares of common stock of the Surviving Corporation into which they were converted.
Each share of Sema4 Common Stock and Sema4 Preferred Stock held in Sema4’s treasury or owned by the Company, Merger Sub or Sema4 immediately prior to the effective time (each an “Excluded Share”), shall be cancelled and no consideration shall be paid or payable with respect thereto.
The numbers of shares of Company Class A common stock that Sema4 Stockholders are entitled to receive as a result of the Merger is based upon the number of shares of Company Class A common stock, and as otherwise contemplated by the Merger Agreement shall be adjusted to appropriately reflect the effect of any stock split, split-up, reverse stock split, stock dividend or distribution (including any dividend or distribution of securities convertible into Company Class A common stock), extraordinary cash dividend, reorganization, recapitalization, reclassification, combination, exchange of shares or other like change with respect to Company Class A common stock occurring on or after the date hereof and prior to the Closing.
Following the Closing, within five Business Days after the occurrence of a Triggering Event, the Company shall issue or cause to be issued to the Sema4 Stockholders (other than holders of Dissenting Shares) and the Earn-Out Service Providers, the following shares of Company Class A common stock (which shall be equitably adjusted for stock splits, reverse stock splits, stock dividends, reorganizations, recapitalizations, reclassifications, combination,
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exchange of shares or other like change or transaction with respect to Company Class A common stock occurring on or after the Closing, the “Earn-Out Shares”), upon the terms and subject to the conditions set forth in the Merger Agreement and other related agreements: (i) upon the occurrence of Triggering Event I, a one-time issuance of a number of Earn-Out Shares equal to 3.66% of the Earn-Out Total Outstanding Shares; (ii) upon the occurrence of Triggering Event II, a one-time issuance of a number of Earn-Out Shares equal to 3.67% of the Earn-Out Total Outstanding Shares; and (iii) upon the occurrence of Triggering Event III, a one-time issuance of a number of Earn-Out Shares equal to 3.67% of the Earn-Out Total Outstanding Shares. Upon the last day of any calendar year, the Company shall issue or cause to be issued to the Sema4 Stockholders (other than holders of Dissenting Shares) and the Earn-Out Service Providers the Earn-Out Shares that are in the Forfeiture Pool (as described below) as in effect as of such date and that would have been issuable to Sema4 Stockholders as a result of the occurrence of a Triggering Event had they not been made subject to an award of Earnout RSUs.
Sema4 Stockholders and the Earn-Out Service Providers shall be entitled to receive Earn-Out Shares upon each Triggering Event, provided, however that each Triggering Event may only occur once, if at all, and in no event shall the Sema4 Stockholders and Earn-Out Service Providers, in the aggregate, be entitled to receive more than an aggregate number of Earn-Out Shares equal to more than 11% of the Earn-Out Total Outstanding Shares. Earn-Out Shares will be issued from the Forfeiture Pool only if the applicable Triggering event occurs.
The Earnout RSUs will be subject to additional service-based vesting requirements, including but not limited to a requirement that the applicable Earn-Out Service Provider remain employed through the occurrence of the applicable Triggering Event. In the event that an Earn-Out Service Provider does not satisfy such vesting requirements, the Earn-Out Service Provider’s Earnout RSUs will be forfeited and the Earn-Out Shares subject to such Earnout RSUs will accumulate in the “Forfeiture Pool” until such time as they become issuable pursuant to the Merger Agreement as a result of the occurrence of a Triggering Event. Each grant of Earnout RSUs will encompass the applicable Earn-Out Service Provider’s opportunity to be issued Earn-Out Shares from the Forfeiture Pool, subject to the Earn-Out Service Provider remaining employed through the last day of the calendar year on which such Earn-Out Shares are issued. It is anticipated that the Earnout RSUs will be granted after the Closing, following the Company’s filing of a registration statement on Form S-8.
Upon the Closing, the former Sema4 equity holders are expected to hold, in the aggregate, approximately 64.6% of the issued and outstanding shares of Company common stock. The foregoing percentage excludes 29,120,955 options for the purchase of 29,120,955 shares of Company common stock, which are authorized and subject to stock options but will not yet be issued at closing, as further described in the pro forma capitalization table in the section entitled “Unaudited Pro Forma Condensed Combined Financial Information — Description of the Transaction.” Any cash not used to repurchase shares from Sema4 equity holders will remain on the balance sheet of the combined company.
Issuance of common stock to PIPE Investors
In connection with the Business Combination, the Company entered into the Subscription Agreements with the PIPE Investors, pursuant to which, among other things, the Company agreed to issue and sell, in private placements to close immediately prior to the Closing, an aggregate of 35,000,000 shares of common stock at $10.00 per share to the PIPE Investors, for an aggregate purchase price of $350,000,000.described below.
Why the Company Needs Stockholder Approval
Pursuant to Nasdaq Listing Rule 5635(a), stockholder approval is required prior to the Company’s issuance of Class A common stock or other securities convertible into or exercisable for Class A common stock, in connection with the acquisition of the stock or assets of another company, if such securities are not issued in a public offering and (i) the Class A common stock has, or will have upon issuance, voting power equal to or in excess of 20% of the voting power outstanding before the issuance of such securities, or (ii) the number of shares of Class A common stock to be issued is or will be equal to or in excess of 20% of the number of shares of Class A common stock outstanding before the issuance of such securities.
Additionally,In connection with the Acquisition, we expect to issue (i) 80 million shares of Class A common stock in connection with the payment of the Stock Consideration, and (ii) 50 million shares of Class A common stock in the PIPE Investment. We may also issue, in our sole discretion, a maximum of up to approximately 30.9 million shares of Class A common stock in connection with the potential Milestone Payments. Because we may issue 20% or more of our outstanding Class A common stock when considering together the Stock Consideration, the PIPE Investment and the potential Milestone Payments, we are required to obtain stockholder approval of such issuance pursuant to Nasdaq Listing Rule 5635(d), stockholder approval is required for a transaction other than a public offering involving the sale, issuance or potential issuance by an issuer of common stock (or securities convertible into or exercisable for common stock) at a price that is less than the lower of (i) the closing price
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immediately preceding the signing of the binding agreement or (ii) the average closing price of the common stock for the given trading days immediately preceding the signing of the binding agreement, if the number of shares of common stock (or securities convertible into or exercisable for common stock) to be issued equals to 20% or more of the common stock, or 20% or more of the voting power, outstanding before the issuance.
As described above, upon the consummation of the Business Combination, we expect to issue (1) up to 147,922,735 shares of our common stock to the Sema4 equity holders in accordance with the terms and subject to the conditions of the Merger Agreement, and (2) 35,000,000 shares of our common stock in the PIPE Investment, in accordance with the terms and subject to the conditions of the Subscription Agreements. Accordingly, the aggregate number of shares of our common stock that we will issue in connection with the Business Combination will exceed 20% of both the voting power and the number of shares of common stock outstanding before such issuance, and for5635(a). For this reason, we are seeking the approval of our stockholders for the issuance of shares of our common stockthe PIPE Shares pursuant to the Merger Agreement andSubscription Agreements, as the issuance of the PIPE Investment.Share is occurring in connection with the Acquisition.
In the event that this proposal is not approved by Company stockholders, the Business CombinationPIPE Investment cannot be consummated. In the event that this proposal is approved by Company stockholders, but the Merger Agreement is terminated (without the Business CombinationAcquisition being consummated) prior to the issuance of shares of our common stockthe PIPE Shares pursuant to the MergerSubscription Agreement, or the PIPE Investment, such shares of Class A common stock will not be issued.
Vote Required for Approval
The approval of the Nasdaq Stock IssuancePIPE Investment Proposal requires the affirmative vote of a majority of the votes cast by the stockholders present in person or represented by proxy and entitled to vote at the Special Meeting. Accordingly, under Delaware law, a Company stockholder’s failure to vote, as well as an abstention and broker non-vote, will have no effect on the Nasdaq Stock IssuancePIPE Investment Proposal. Abstentions and broker non-votes will be counted in connection with the determination of whether a valid quorum is established.
The Sponsor and each of our officer and directors have agreed to, among other things, vote in favor of this Nasdaq Stock Issuance Proposal. As of the date of this proxy statement, the Initial Stockholders own approximately 20% of the outstanding shares of our common stock.
This Proposal No. 2 is conditioned upon the approval of the Business CombinationStock Consideration Issuance Proposal and the Charter Amendment Proposal. If the Business CombinationStock Consideration Issuance Proposal or the Charter Amendment Proposal is not approved, this Proposal No. 2 will have no effect, even if approved by our stockholders.
Recommendation of the Board of Directors
OUR BOARD OF DIRECTORS RECOMMENDS
THAT OUR STOCKHOLDERS VOTE “FOR”
THE NASDAQ STOCK ISSUANCEPIPE INVESTMENT PROPOSAL.
The existence of financial and personal interests of one or more of the Company’s directors or officers may result in a conflict of interest on the part of such director(s) or officer(s) between what he, she or they may believe is in the best interests of the Company and its stockholders and what he, she or they may believe is best for himself, herself or themselves in determining to recommend that stockholders vote for the proposals. See the section above entitled “—“The Acquisition—Interests of Certain Persons in the Transactions” for a further discussion.
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PROPOSAL NO. 3 —- THE CHARTER APPROVALSPECIAL DESIGNEE DIRECTOR ELECTION PROPOSAL
Overview
OurAssuming the Stock Consideration Issuance Proposal and the Charter Amendment Proposal are approved and adopted and the Acquisition is consummated, we are asking our stockholders are also being asked to adopt the Amendedconsider and Restated Certificate of Incorporation in the form attached hereto as Annex B, which, in the judgment of our Board, is necessary and advisablevote upon a proposal to consummate the Business Combination.
The following is a summaryapprove by resolution of the key changes effected byClass A common stock, the Amended and Restated Certificate of Incorporation, but this summary is qualifiedelection, effective immediately in its entirety by reference toconnection with the full textClosing of the AmendedAcquisition, of two directors, Katherine Stueland and Restated CertificateRichard C. Pfenniger, Jr., to serve until the 2024 annual meeting of Incorporation, a copy of whichstockholders, each until such director’s respective successor is included as Annex B:
•Change the post-combination company’s nameduly elected and qualified, subject to Sema4 Holdings Corp. Currently, the Company’s name is CM Life Sciences, Inc. If this Proposal No. 3 is approved, the Company’s name will be Sema4 Holdings Corp.such director’s earlier death, resignation, disqualification or removal. The BoardCompany believes the name of the post-combination company should more closely align with the name of the post-Business Combination operating business and therefore has proposed this name change.
•Delete provisions relating to blank check company. Our board of directors has determined it is in the best interestinterests of the Company to eliminate provisions of our certificate of incorporation that are specific to our status as a blank check company. This deletion is desirable because these provisions will serve no purpose following consummation of the Business Combination. For example, these proposed amendments remove the requirement to dissolve CMLS and instead allow us to continue as a corporate entity with perpetual existence following consummation of the Business Combination.
•Change stockholder vote required to 66 2/3% in voting power of the Company in order for stockholders to (1) amendallow stockholders to vote upon the Bylaws (Article V), (2) change our classified board or its size, removeelection of newly appointed directors. In addition, the inclusion of this proposal is a director or fill vacancies (Article VI), (3) changerequirement under the limitations on personal liability of directors (Articles VII) and (4) make amendments to our bylaws or to certain provisions of the Amended and Restated Certificate of Incorporation (Articles V and X). These provisions in the Amended and Restated Certificate of Incorporation, which will require a supermajority vote to amend, address:Merger Agreement.
•amendments of the Bylaws (Articles V)
•the size of our board, our classified board structure, the term of directors and their removal, and filling of vacancies (Article VI),
•limitation on personal liability for a director’s breach of fiduciary duty (Article VII),
•the requirement that stockholders take action at a meeting rather than by written consent, the requirement that special meetings be called only by a majority of the entire board, board chairman, lead independent director or the chief executive officer and requirements with respect to advance notice of shareholder proposals, requirements relating to the amendment of our Bylaws (Article I).
OurSema4’s board of directors believescurrently consists of ten (10) directors, and is divided into three classes. Each class serves for three years, with the terms of office of the respective classes expiring in successive years.
Following approval of the Special Designee Director Election Approval by the stockholders, and following the Closing of the Acquisition, Sema4’s board of directors will take appropriate actions to effect the stockholders resolution to approve the Special Designee Director Election Approval.
Following the Closing of the Acquisition, it is expected that this change protects such provisions from arbitrary amendmentSema4’s board of directors will consist of twelve (12) directors, divided into three classes (Class I, II and prevents a simple majorityIII) with Class I consisting of stockholders from taking actionsthree (3) directors, Class II consisting of four (4) directors and Class III consisting of five (5) directors. It is contemplated that may be harmful toEli D. Casdin, Joshua Ruch and Michael Pellini will serve as Class I Directors, Rachel Sherman, Eric Schadt, Nat Turner and Dennis Charney will serve as Class II Directors, and Emily Leproust, Jason Ryan, Keith Meister, Katherine Stueland and Richard C. Pfenniger, Jr. will serve as Class III Directors. Information regarding Ms. Stueland and Mr. Pfenniger, as well as the majorityother members of our stockholders.the Board, is set forth in the section entitled “Management After the Acquisition.”
Vote Required for Approval
The approval of the Charter ApprovalSpecial Designee Director Proposal requires the affirmative vote of holders of a majority of our outstanding shares of common stockthe votes cast by the stockholders present in person or represented by proxy and entitled to vote at the Special Meeting. Accordingly, under Delaware law, a Company stockholder’s failure to vote, as well as an abstention from voting and a broker non-vote, will have no effect on the same effect asSpecial Designee Director Proposal. Abstentions and broker non-votes will be counted in connection with the determination of whether a vote “AGAINST” such Charter Approval Proposal.valid quorum is established.
This Proposal No. 3 is conditioned upon the approval of the Business CombinationStock Consideration Issuance Proposal and the Charter Amendment Proposal. If the Business CombinationStock Consideration Issuance Proposal or the Charter Amendment Proposal is not approved, this Proposal No. 3 will have no effect, even if approved by our stockholders.
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As of the date of this proxy statement, our Initial Stockholders have agreed to vote any shares of common stock owned by them in favor of this proposal.
Recommendation of the Board of Directors
OUR BOARD OF DIRECTORS RECOMMENDS
THAT OUR STOCKHOLDERS VOTE “FOR” PROPOSAL NO. 3.
The existence of financial and personal interests of one or more of the Company’s directors or officers may result in a conflict of interest on the part of such director(s) or officer(s) between what he or they may believe is in the best interests of the Company and its stockholders and what he or they may believe is best for himself or themselves in determining to recommend that stockholders vote for the proposals. See the section above entitled “Proposal No. 1 — Approval of the Business Combination — Interests of Certain Persons in the Transactions” for a further discussion.
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PROPOSAL NO. 4 — APPROVAL OF CERTAIN GOVERNANCE PROVISIONS IN THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
Overview
Our stockholders are also being asked to vote on a separate proposal with respect to certain governance provisions in the Amended and Restated Certificate of Incorporation, which are separately being presented in accordance with SEC guidance to give stockholders the opportunity to present their separate views on important corporate governance provisions and which will be voted upon on a non-binding advisory basis. This separate vote is not otherwise required by Delaware law separate and apart from the Charter Approval Proposal, but pursuant to SEC guidance, the Company is required to submit these provisions to its stockholders separately for approval. However, the stockholder vote regarding this proposal is advisory in nature, and is not binding on the Company or our board of directors (separate and apart from the approval of the Charter Approval Proposal). Furthermore, the Business Combination is not conditioned on the separate approval of the advisory charter proposals (separate and apart from approval of the Charter Approval Proposal). Accordingly, regardless of the outcome of the non-binding advisory vote on this proposal, the Company intends that the Amended and Restated Certificate of Incorporation will take effect at the Closing (assuming approval of the Charter Approval Proposal).
Proposal No. 4A: Change the Stockholder Vote Required to Amend the Certificate of Incorporation
Description of Amendment
The amendment would require the approval by affirmative vote of the holders of at least two-thirds of the common stock of the post-combination company to make any amendment to certain provisions of the post-combination company certificate of incorporation unless 2/3rds of the whole board of directors of the post-combination company approves such an amendment in which case such stockholder vote will require only a majority in voting power of the then outstanding stock of the post-combination company. These provisions in the Amended and Restated Certificate of Incorporation, which will require a supermajority vote to amend, address:
•amendments of the Bylaws (Articles V)
•the size of our board, our classified board structure, the term of directors and their removal, and filling of vacancies (Article VI),
•limitation on personal liability for a director’s breach of fiduciary duty (Article VII),
•the requirement that stockholders take action at a meeting rather than by written consent, the requirement that special meetings be called only by a majority of the entire board, board chairperson, lead independent director, the president or the chief executive officer and requirements with respect to advance notice of shareholder proposals, requirements relating to the amendment of our Bylaws (Article VIII).
Reasons for the Amendment
Our board of directors believes that this change protects such provisions from arbitrary amendment and prevents a simple majority of stockholders from taking actions that may be harmful to the majority of our stockholders or making changes to provisions that are intended to protect all stockholders.
Recommendation of the Board of Directors
OUR BOARD OF DIRECTORS RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” PROPOSAL NO. 4.
This Proposal No. 4 is conditioned upon the approval of the Business Combination Proposal. If the Business Combination Proposal is not approved, this Proposal No. 4 will have no effect, even if approved by our stockholders.
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As of the date of this proxy statement, our Initial Stockholders have agreed to vote any shares of common stock owned by them in favor of this proposal.
The existence of financial and personal interests of one or more of the Company’s directors or officers may result in a conflict of interest on the part of such director(s) or officer(s) between what he or they may believe is in the best interests of the Company and its stockholders and what he or they may believe is best for himself or themselves in determining to recommend that stockholders vote for the proposals. See the section above entitled “Proposal No. 1 — Approval of the Business Combination — Interests of Certain Persons in the Transactions” for a further discussion.
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PROPOSAL NO. 5 — APPROVAL OF THE INCENTIVE PLAN
Overview
The following is a summary description of the Incentive Plan as proposed to be adopted by the Company in connection with the Business Combination. This summary is not a complete statement of the Incentive Plan and is qualified in its entirety by reference to the complete text of the Incentive Plan, a copy of which is attached hereto as Annex D. The Company’s stockholder should refer to the Incentive Plan for more complete and detailed information regarding the terms and conditions of the Incentive Plan. Unless the context otherwise requires, references in this summary to “we”, “us” and “our” generally refer to CMLS in the present tense or the post-combination company from and after the Business Combination. The Incentive Plan will become effective as of the Closing Date, if it is approved by our stockholders.
Purpose of the Equity Incentive Plan
The purpose of the Incentive Plan is to enhance our ability to attract, retain and motivate persons who make (or are expected to make) important contributions by providing these individuals with equity ownership opportunities and/or equity-linked compensatory opportunities. Equity awards and equity-linked compensatory opportunities are intended to motivate high levels of performance and align the interests of directors, employees and consultants with those of stockholders by giving directors, employees and consultants the perspective of an owner with an equity or equity-linked stake in our company and providing a means of recognizing their contributions to our success. Our board of directors believes that equity awards are necessary to remain competitive in its industry and are essential to recruiting and retaining the highly qualified persons who help us meet our goals.
Summary of the Incentive Plan
The following summarizes the material terms of the Incentive Plan. This summary is qualified in its entirety to the full text of the Incentive Plan.
Shares reserved. We have initially reserved a number of shares of our common stock equal to 12% of the total number of shares of our common stock issued and outstanding as of immediately following the Closing (which we anticipate will equal approximately 28,591,978 shares, based on information available as of March 31, 2021 and assuming no redemptions), plus any reserved shares not issued or subject to outstanding grants under the Sema4 Incentive Plan on the effective date of the Incentive Plan, for issuance pursuant to awards granted under our Incentive Plan. The number of shares reserved for issuance under our Incentive Plan will increase automatically on January 1 of each of 2022 through 2031 by the number of shares equal to 5% of the aggregate number of outstanding shares of all classes of our common stock as of the immediately preceding December 31, or a lesser number as may be determined by our board of directors.
In addition, the shares set forth below will again be available for issuance pursuant to awards granted under our Incentive Plan:
•shares subject to options or SARs granted under our Incentive Plan that cease to be subject to the option or SAR for any reason other than exercise of the option or SAR;
•shares subject to awards granted under our Incentive Plan that are subsequently forfeited or repurchased by us at the original issue price;
•shares subject to awards granted under our Incentive Plan that otherwise terminate without such shares being issued;
•shares subject to awards granted under our Incentive Plan that are surrendered, cancelled, or exchanged for cash or a different award (or combination thereof);
•shares issuable upon the exercise of options or subject to other awards granted under the Sema4 Incentive Plan that cease to be subject to such options or other awards, by forfeiture or otherwise, after the effective date of the Incentive Plan;
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•shares subject to awards granted under the Sema4 Incentive Plan that are forfeited or repurchased by us at the original price after the effective date of the Incentive Plan; and
•shares subject to awards under the Sema4 Incentive Plan or our Incentive Plan that are used to pay the exercise price of an option or withheld to satisfy the tax withholding obligations related to any award.
Administration. Our Incentive Plan will be administered by our compensation committee, or by our board of directors acting in place of our compensation committee. Subject to the terms and conditions of the Incentive Plan, the administrator will have the authority, among other things, to select the persons to whom awards may be granted, construe and interpret our Incentive Plan as well as to determine the terms of such awards and prescribe, amend and rescind the rules and regulations relating to the plan or any award granted thereunder. The Incentive Plan provides that the administrator may delegate its authority, including the authority to grant awards, to one or more executive officers to the extent permitted by applicable law, provided that awards granted to non-employee directors may only be determined by our board of directors.
Options. The Incentive Plan provides for the grant of both incentive stock options intended to qualify under Section 422 of the Code, and nonqualified stock options to purchase shares of our common stock at a stated exercise price. Incentive stock options may only be granted to employees, including officers and directors who are also employees. The exercise price of stock options granted under the Incentive Plan must be at least equal to the fair market value of our common stock on the date of grant. Incentive stock options granted to an individual who holds, directly or by attribution, more than ten percent of the total combined voting power of all classes of our capital stock must have an exercise price of at least 110% the fair market value of our common stock on the date of grant.
Options may vest based on service or achievement of performance conditions, as determined by the administrator. The administrator may provide for options to be exercised only as they vest or to be immediately exercisable, with any shares issued on exercise being subject to our right of repurchase that lapses as the shares vest. In the event of a participant’s termination of service, an option is generally exercisable, to the extent vested, for a period of three months in the case of termination without cause (except due to a participant’s death or disability), for a period of 12 months in the case of termination due to the participant’s death or disability, or such longer or shorter period as the administrator may provide, and for a period of 24 months in the case of termination due to the participant’s retirement (consistent with our policies regarding retirement). Stock options generally terminate upon a participant’s termination of employment for cause. The maximum term of options granted under our Incentive Plan is ten years from the date of grant, except that the maximum permitted term of incentive stock options granted to an individual who holds, directly or by attribution, more than ten percent of the total combined voting power of all classes of our capital stock is five years from the date of grant.
Restricted stock awards. An RSA is an offer by us to grant or sell shares of our common stock subject to restrictions, which may lapse based on the satisfaction of service or achievement of performance conditions. The price, if any, of an RSA will be determined by the administrator. Unless otherwise determined by the administrator, vesting will cease on the date the participant no longer provides services to us and unvested shares may be forfeited to or repurchased by us.
Stock appreciation rights. A SAR provides for a payment, in cash or shares of our common stock (up to a specified maximum number of shares, if determined by the administrator), to the participant based upon the difference between the fair market value of our common stock on the date of exercise and a predetermined exercise price, multiplied by the number of shares. The exercise price of a SAR must be at least the fair market value of a share of our common stock on the date of grant. SARs may vest based on service or achievement of performance conditions. No SAR may have a term that is longer than ten years from the date of grant.
Restricted stock units. RSUs represent the right to receive the value of shares of our common stock at a specified date in the future and may be subject to vesting based on service or achievement of performance conditions. RSUs may be settled in cash, shares of our common stock or a combination of both as soon as practicable following vesting or on a later date subject to the terms of the Incentive Plan. No RSU may have a term that is longer than ten years from the date of grant.
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Performance awards. Performance awards granted pursuant to the Incentive Plan may be in the form of a cash bonus, or an award of performance shares or performance units denominated in shares of our common stock that may be settled in cash, property or by issuance of those shares, subject to the satisfaction or achievement of specified performance conditions.
Stock bonus awards. A stock bonus award provides for payment in the form of cash, shares of our common stock or a combination thereof, based on the fair market value of shares subject to such award as determined by the administrator. The awards may be granted as consideration for services already rendered, or at the discretion of the administrator, may be subject to vesting restrictions based on continued service or performance conditions.
Dividend equivalents rights. Our board of directors or the compensation committee thereof may permit participants holding RSUs to receive dividend equivalent payments if and when dividends are paid to stockholders. In the discretion of our board or the compensation committee thereof, such dividend equivalent payments may be paid in cash or shares of our common stock and may either be paid at the same time as dividend payments are made to stockholders or delayed until shares are issued pursuant to the RSU grants and may be subject to the same vesting or performance requirements as the RSUs.
Change of control. Our Incentive Plan provides that, in the event of a corporate transaction that constitutes a change of control of our company under the terms of the plan, outstanding awards will be subject to the agreement evidencing the change of control, which need not treat all outstanding awards in an identical manner, and may include one or more of the following: (i) the continuation of the outstanding awards; (ii) the assumption of the outstanding awards by the surviving corporation or its parent; (iii) the substitution by the surviving corporation or its parent of new options or equity awards for the outstanding awards; (iv) the full or partial acceleration of exercisability or vesting or lapse of the company’s right to repurchase or other terms of forfeiture and accelerated expiration of the award; or (v) the settlement of the full value of the outstanding awards (whether or not then vested or exercisable) in cash, cash equivalents, or securities of the successor entity with a fair market value equal to the required amount, as determined in accordance with the Incentive Plan, which payments may be deferred until the date or dates the award would have become exercisable or vested. Notwithstanding the foregoing, upon a change of control the vesting of all awards granted to our non-employee directors will accelerate and such awards will become exercisable, to the extent applicable, and vested in full immediately prior to the consummation of the change of control.
Adjustment. In the event of a change in the number of outstanding shares of our common stock without consideration by reason of a stock dividend, extraordinary dividend or distribution, spin-off, recapitalization, stock split, reverse stock split, subdivision, combination, consolidation reclassification, spin-off or similar change in our capital structure, proportional adjustments will be made to (i) the number and class of shares reserved for issuance under our Incentive Plan; (ii) the exercise prices, number and class of shares subject to outstanding options or SARs; (iii) the number and class of shares subject to other outstanding awards; and (iv) the maximum number and class of shares that may be issued as incentive stock options, subject to any required action by the board or our stockholders and compliance with applicable laws.
Exchange, repricing and buyout of awards. The administrator may, without prior stockholder approval, (i) reduce the exercise price of outstanding options or SARs without the consent of any participant and (ii) pay cash or issue new awards in exchange for the surrender and cancellation of any, or all, outstanding awards, subject to the consent of any affected participant to the extent required by the terms of the Incentive Plan.
Director compensation limits. No non-employee director may receive awards under our Incentive Plan with a grant date value that when combined with cash compensation received for his or her service as a director, exceed $750,000 in a calendar year, increased to $1,000,000 in the calendar year of his or her initial services as a non-employee director.
Clawback; transferability. All awards will be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by our board of directors or the compensation committee thereof or required by law during the term of service of the participant, to the extent set forth in such policy or applicable agreement.
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Except in limited circumstances, awards granted under our Incentive Plan may generally not be transferred in any manner other than by will or by the laws of descent and distribution.
Sub-plans. Subject to the terms of the Incentive Plan, the plan administrator may establish a sub-plan under the Incentive Plan and/or modify the terms of awards granted to participants outside of the United States to comply with any laws or regulations applicable to any such jurisdiction.
Amendment and termination. Our board of directors or compensation committee may amend our Incentive Plan at any time, subject to stockholder approval as may be required. Our Incentive Plan will terminate ten years from the date our board of directors adopts the plan, unless it is terminated earlier by our board of directors. No termination or amendment of the Incentive Plan may materially adversely affect any then-outstanding award without the consent of the affected participant, except as is necessary to comply with applicable laws or as otherwise provided by the terms of the Incentive Plan.
Material U.S. Federal Income Tax Consequences
The following is a general summary under current law of the principal United States federal income tax consequences related to awards under the Incentive Plan. This summary deals with the general federal income tax principles that apply and is provided only for general information. Other kinds of taxes, such as state, local and foreign income taxes and federal employment taxes, are not discussed. This summary is not intended as tax advice to participants, who should consult their own tax advisors.
Non-Qualified Stock Options. If an optionee is granted an NSO under the Incentive Plan, the optionee should not have taxable income on the grant of the option. Generally, the optionee should recognize ordinary income at the time of exercise in an amount equal to the fair market value of the shares acquired on the date of exercise, less the exercise price paid for the shares. The optionee’s basis in our common stock for purposes of determining gain or loss on a subsequent sale or disposition of such shares generally will be the fair market value of our common stock on the date the optionee exercises such option. Any subsequent gain or loss will be taxable as a long-term or short-term capital gain or loss. We or our subsidiaries or affiliates generally should be entitled to a federal income tax deduction at the time and for the same amount as the optionee recognizes ordinary income.
Incentive Stock Options. A participant receiving ISOs should not recognize taxable income upon grant. Additionally, if applicable holding period requirements are met, the participant should not recognize taxable income at the time of exercise. However, the excess of the fair market value of the shares of our common stock received over the option exercise price is an item of tax preference income potentially subject to the alternative minimum tax. If stock acquired upon exercise of an ISO is held for a minimum of two years from the date of grant and one year from the date of exercise and otherwise satisfies the ISO requirements, the gain or loss (in an amount equal to the difference between the fair market value on the date of disposition and the exercise price) upon disposition of the stock will be treated as a long-term capital gain or loss, and we will not be entitled to any deduction. If the holding period requirements are not met, the ISO will be treated as one that does not meet the requirements of the Code for ISOs and the participant will recognize ordinary income at the time of the disposition equal to the excess of the amount realized over the exercise price, but not more than the excess of the fair market value of the shares on the date the ISO is exercised over the exercise price, with any remaining gain or loss being treated as capital gain or capital loss. We or our subsidiaries or affiliates generally are not entitled to a federal income tax deduction upon either the exercise of an ISO or upon disposition of the shares acquired pursuant to such exercise, except to the extent that the participant recognizes ordinary income on disposition of the shares.
Other Awards. The current federal income tax consequences of other awards authorized under the Incentive Plan generally follow certain basic patterns: SARs are taxed and deductible in substantially the same manner as NSOs; nontransferable restricted stock subject to a substantial risk of forfeiture results in income recognition equal to the excess of the fair market value over the price paid, if any, only at the time the restrictions lapse (unless the recipient elects to accelerate recognition as of the date of grant through a Code Section 83(b) election); RSUs, dividend equivalents and other stock or cash-based awards are generally subject to tax at the time of payment. We or our subsidiaries or affiliates generally should be entitled to a federal income tax deduction at the time and for the same amount as the optionee recognizes ordinary income.
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Section 162(m) of the Code
In general, Section 162(m) of the Code limits the Company’s compensation deduction to $1,000,000 paid in any tax year to any “covered employee” as defined under Section 162(m). Section 162(m) may result in all or a portion of the awards granted under the Incentive Plan to “covered employees” failing to be deductible to the Company for federal income tax purposes.
Section 409A of the Code
Certain types of awards under the Incentive Plan may constitute, or provide for, a deferral of compensation subject to Section 409A of the Code. Unless certain requirements set forth in Section 409A of the Code are complied with, holders of such awards may be taxed earlier than would otherwise be the case (e.g., at the time of vesting instead of the time of payment) and may be subject to an additional 20% penalty tax (and, potentially, certain interest, penalties and additional state taxes). To the extent applicable, the Incentive Plan and awards granted under the Incentive Plan are intended to be structured and interpreted in a manner intended to either comply with or be exempt from Section 409A of the Code and the Department of Treasury regulations and other interpretive guidance that may be issued under Section 409A of the Code. To the extent determined necessary or appropriate by the plan administrator, the Incentive Plan and applicable award agreements may be amended to further comply with Section 409A of the Code or to exempt the applicable awards from Section 409A of the Code.
New Plan Benefits
Please see the section entitled “Executive Compensation of Sema4 — Employment Agreements with Sema4’s Named Executive Officers” for information regarding the stock options that we intend to grant to our named executive officers under the Incentive Plan following the closing of the Business Combination. The benefits to be received by other participants in the normal course under the Incentive Plan cannot be determined at this time because awards under the Incentive Plan are granted at the discretion of the compensation committee and the Board.
Vote Required for Approval
The approval of the Incentive Plan Proposal requires the affirmative vote of a majority of the votes cast by holders of outstanding shares of our common stock represented in person or by proxy and entitled to vote thereon at the Special Meeting. Accordingly, a Company stockholder’s failure to vote by proxy or to vote in person at the Special Meeting, as well as an abstention from voting and a broker non-vote with regard to the Incentive Plan Proposal will have no effect on the Adjournment Proposal. Abstentions will be counted in connection with the determination of whether a valid quorum is established.
Recommendation of the Board of Directors
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE EQUITY INCENTIVE PLANSPECIAL DESIGNEE ELECTION PROPOSAL.
The existence of financial and personal interests of one or more of the Company’s directors or officers may result in a conflict of interest on the part of such director(s) or officer(s) between what he, she or they may believe is in the best interests of the Company and its stockholders and what he, she or they may believe is best for himself, herself or themselves in determining to recommend that stockholders vote for the proposals. See the section above entitled “Proposal No. 1 — Approval of the Business Combination — The Acquisition—Interests of Certain Persons in the Transactions” for a further discussion.
187149

PROPOSAL NO. 6 — APPROVAL OF EMPLOYEE STOCK PURCHASE PLAN4 - THE CHARTER AMENDMENT PROPOSAL
OverviewOur stockholders are also being asked to adopt the Amendment to the Charter in the form attached hereto as Annex B, which, in the judgment of our Board, is necessary and advisable in connection with the consummation of the Acquisition and the PIPE Investment. In addition, the approval of the Charter Amendment Proposal is also a condition to the Closing under the Merger Agreement.
The following is a summary description of the ESPP as proposed to be adoptedkey changes effected by the Company in connection with the Business Combination. ThisAmendment, but this summary is not a complete statement of the ESPP and is qualified in its entirety by reference to the completefull text of the ESPP,Amendment, a copy of which is attached heretoincluded as Annex E. The Company’s stockholders should referB.
Our Charter currently provides for 380,000,000 shares of authorized Class A common stock. Our Board of Directors has adopted a resolution to amend our Charter to increase the ESPP for more complete and detailed information regarding the terms and conditions of the ESPP. Unless the context otherwise requires, references in this summary to “we”, “us”, and “our” generally refer to CMLS in the present tense or the post-combination company from and after the Business Combination. The ESPP will become effective as of the Closing Date, if it is approved by our stockholders.
Purpose of the ESPP
The purpose of the ESPP is to provide our employees with the opportunity to purchase our common stock through accumulated payroll deductions. We believe that the ESPP is a key factor in retaining existing employees, recruiting and retaining new employees and aligning the interests of our employees with those of our stockholders.
Summary of the ESPP
Shares Reserved. We have initially reserved aauthorized number of shares of ourClass A common stock equal to 2%1,000,000,000, subject to stockholder approval of the totalAmendment. No changes will be made to the number of authorized shares of our common stock issuedPreferred Stock.
Upon stockholder approval, we will file the Amendment and outstanding asthereby amend our Charter.
Purpose of immediately following the Closing (the “Initial ESPP Share Reserve”) for issuance and sale under the ESPP. We anticipate that the Initial ESPP Share Reserve will equal approximately 4,765,330 shares of our common stock, based on information available as of March 31, 2021 and assuming no redemptions. Amendment
The number of shares reserved for issuance and sale under our ESPP willproposed increase automatically on January 1 of each of 2022 through 2031 by the number of shares equal to 1% of the aggregate number of outstanding shares of all classes of our common stock as of the immediately preceding December 31, or a lesser number as may be determined by our compensation committee, or by our board of directors acting in place of our compensation committee. Subject to stock splits, recapitalizations, or similar events, no more than the number of shares of ourClass A common stock equalavailable for issuance under our Charter is required for the issuance of the Stock Consideration under the Merger Agreement and the issuance of the PIPE Shares under the Subscription Agreements. The approval of the Charter Amendment Proposal is also a condition to ten times the Initial ESPP Share ReserveClosing under the Merger Agreement. The proposed increase will also facilitate the Company’s ability to satisfy the potential Milestone Payments under the Merger Agreement through the issuance of shares of Class A common stock.
Our Board of Directors further believes that the proposed increase in the number of shares of Class A common stock available for issuance under our Charter is required for the continued growth and development of our business. In particular, when practical, we may attempt to fund our future merger and acquisition transactions and/or strategic collaborations and partnerships and other corporate development objectives through the issuance of shares, which we believe may be issued overless dilutive to stockholders than funding these activities from the termproceeds of typical equity financings. The Company currently is limited to 380,000,000 shares of Class A common stock available; the details from which this number is derived are provided below.
As of the ESPP.
Administration. Our ESPP will be administered by our compensation committee, or by our boardRecord Date, we had 245,016,425 shares of directors acting in place of our compensation committee, subject to the terms and conditions of the ESPP. Among other things, the administrator will have the authority to determine eligibility for participation in the ESPP, designate separate offerings under the plan, and construe, interpret and apply the terms of the plan.
Eligibility. Employees eligible to participate in any offering pursuant to the ESPP generally include any employee that is employed by us or certain of our designated subsidiaries at the beginning of the offering period. However, the administrator may exclude employees who do not meet eligibility requirements that our compensation committee may choose to impose (within the limits permitted by the Code), are customarily employed for 20 hours or less per week, are customarily employed for five months or less in a calendar year or certain highly-compensated employees as determined in accordance with applicable tax laws.Class A common stock outstanding. In addition, any employee who owns (or is deemed to own becauseas of attribution rules) 5% or more of the total combined voting power or value of all classes of our capital stock, or the capital stock of one of our qualifying subsidiaries, or who will own such amount because of participation in the ESPP, will not be eligible to participate in the ESPP. The administrator may impose additional restrictions on eligibility from time to time.date:
Offering Periods; Enrollment•. Under our ESPP, eligible employees will be offered the option to purchase21,994,972 shares of our Class A common stock at were reserved for issuance upon exercise of our outstanding warrants, including (a) 14,758,305 shares issuable by us upon the exercise of 14,758,305 public warrants, and (b) 7,236,667 shares issuable by us upon the exercise of 7,236,667 private placement warrants;
•27,145,816 shares of our Class A common stock were reserved for issuance upon exercise of outstanding options under the Mount Sinai Genomics, Inc. 2017 Equity Incentive Plan (the “2017 Plan”);
•16,402,807 shares of our Class A common stock were reserved for issuance upon exercise or vesting of outstanding options and restricted stock units (“RSUs”) granted under the Sema4 Holdings Corp. 2021 Equity Incentive Plan (the “2021 EIP”);
•16,331,812 shares of Class A common stock (the “Earn-Out Shares”) were initially reserved for issuance to certain former stockholders of Mount Sinai Genomics, Inc. d/b/a discount over a seriesSema4 (“Legacy Sema4”) pursuant to that certain Agreement and Plan of offering periods through accumulated payroll deductions overMerger, dated as of February 9, 2021 (as amended, the period. The length“Prior Merger Agreement”), by and among CM Life Sciences, Inc. (“CMLS”), S-IV Sub, Inc. (“Merger Sub”) and Legacy Sema4; and
•2,689,764 shares of Class A common stock (the “Earn-Out RSU Shares”) were initially reserved for issuance upon the offering periods under ESPP will be determined by the plan administrator and may be upvesting of certain RSU awards (“Earn-Out RSUs”) that were granted to twenty-seven (27) months long. Each offering period may itself consist of one or more purchase periods. When the first offering period commences, our employees who meet the eligibility requirements for participation in that offering period will be eligible to enroll. For subsequent offering periods, new participants will be required to enroll in a timely manner. Once an employee is enrolled, participation will be automatic in subsequence offering periods.certain former
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Participation inequity award holders of Legacy Sema4 and certain employees of the ESPP ends automatically upon a participant’s termination of employment. A participant may withdraw his or her participation from the ESPP at any time by submitting written noticeCompany pursuant to the company.Prior Merger Agreement.
Offerings; Contributions; Limitations. The purchase price for shares purchased underBased upon the ESPP during any given purchase period will be 85% of the lesser of the fair market value of our common stock on (i) the first trading day of the applicable offering period or (ii) the last trading day of the purchase period. The ESPP permits participants to purchase shares of our common stock through payroll deductions of a percentage of their eligible compensation, which may not be less than one percent (1%) and may be up to a maximum of fifteen percent (15%) or such lower limit set by the plan administrator. No participant may purchase more than 2,500 shares of our common stock during any one purchase period, and may not subscribe for more than $25,000 in fair market value of shares of our common stock (determined as of the date the offering period commences) in any calendar year in which the offering is in effect. The administrator in its discretion, may set a lower maximum number of shares which may be purchased.
Adjustments upon recapitalization. If theforegoing number of outstanding and reserved shares of ourClass A common stock, is changed by stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in our capital structure without consideration, then the administrator will proportionately adjust the number and classwe have 50,418,404 shares of Class A common stock that isremaining available for other purposes, including 27,017,323 shares of Class A common stock available for future equity grants under the ESPP, the purchase price2021 EIP and number7,229,799 shares of shares any participant has elected to purchase as well as the maximum number of shares which may be purchased by participants.
Corporate Transaction. If the post-combination company experiences a corporate transaction as determinedClass A common stock available for future grants under the terms of the ESPP, any offering period thenSema4 Holdings Corp. 2021 Employee Stock Purchase Plan (the “ESPP”).
The proposed increase in effect will be shortened and terminated on a final purchase date established by the administrator. The final purchase date will occur on or prior to the effective date of change of control transaction, and our ESPP will terminate on the closing of the change of control.
Transferability. Participants may generally not assign, transfer, pledge or otherwise dispose of payroll deductions credited to his or her account, or any rights with regard to an election to purchase shares pursuant to the ESPP other than by will or the laws of descent or distribution.
Amendment; termination. The board or compensation committee may amend, suspend or terminate the ESPP at any time without stockholder consent, except as to the extent such amendment would increase the number of shares available for issuance under our Charter is intended to allow the ESPP, changeCompany to consummate the class or designationissuances of employees eligible for participationshares of Class A common stock contemplated by the Acquisition and the PIPE Investment, as well as to provide the Board of Directors with authority, without further action of the stockholders, to issue additional shares of Class A common stock from time to time in such amounts as the plan or otherwise as required by law. IfBoard of Directors deems necessary. Without limitation of the ESPP is terminated,foregoing, following the administrator may elect to terminate all outstanding offering periods immediately, upon the next purchase date (whichClosing, additional shares may be sooner than originally scheduled) issued in connection with (1) the satisfaction of the potential Milestone Payments under the Merger Agreement, (2) future merger and acquisition transactions, strategic collaborations and partnerships and/or upon the last day of such offering period. If any offering period is terminated prior to its scheduled completion, all amounts credited to participants which have not been used to purchase shares will be returned to participants as soon as administratively practicable. Unless earlier terminated, the ESPP will terminated upon the earlier to occur oflicensing arrangements involving the issuance of allour securities, (3) future capital raising transactions through the sale of Class A common stock and/or securities convertible into or exercisable for Class A common stock in the private and/or public equity markets; (4) the provision of equity incentives to employees, officers, directors or consultants; and (5) other corporate purposes.
In the absence of a proportionate increase in our earnings and book value, an increase in the aggregate number of outstanding shares of Class A common stock reserved forcaused by the issuance of the additional shares, pursuant to the Merger Agreement, the Subscription Agreements or otherwise, would dilute the earnings per share (including projected future earnings per share) and book value per share of all outstanding shares of our Class A common stock. If such factors were reflected in the price per share of the Class A common stock, the potential realizable value of a stockholder’s investment could be adversely affected. An issuance of additional shares of Class A common stock could therefore have an adverse effect on the potential realizable value of a stockholder’s investment.
Rights of Additional Authorized Shares
All newly authorized shares of Class A common stock will be identical to the shares of Class A common stock now authorized and outstanding. The Amendment will not affect the rights of current holders of our Class A common stock, none of whom have preemptive or similar rights to acquire the newly authorized shares pursuant to our Charter.
Effects of the Proposal
The issuance of the Stock Consideration under the ESPP,Merger Agreement and the PIPE Shares under the Subscription Agreements will have an immediate dilutive effect on the proportionate voting power or the 10th anniversaryother rights of the effective date.
Material U.S. Federal Income Tax Consequences
Company’s existing stockholders at the Closing, and future issuances of additional could have a similar dilutive effect. The following is a general summary under current law of the principal United States federal income tax consequences related to participationproposed increase in the ESPP. This summary deals with the general federal income tax principles that apply and is provided only for general information. Some kinds of taxes, such as state, local and foreign income taxes and federal employment taxes, are not discussed. This summary is not intended as tax advice to participants, who should consult their own tax advisors.
For federal income tax purposes, a participant in the ESPP generally will not recognize taxable income on the grant of an option under the ESPP, nor will the Company be entitled to any deduction at that time. Additionally, if applicable holding period requirements are met, the participant should not recognize taxable income at the time of exercise.
If stock acquired upon exercise of an option acquired under the ESPP is held for a minimum of two years from the date of grant and one year from the date of exercise, the participant (or the participant’s estate) will recognize ordinary income measured as the lesser of (1) the excess of the fair market value of the shares at the time of such
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sale or disposition (or death) over the purchase price or (2) the excess of the fair market value of the shares on the date the option was granted over the purchase price. Any additional gain will be treated as long-term capital gain.
If the holding period requirements are not met, the participant will recognize ordinary income at the time of the disposition equal to the excess of the fair market value of the shares on the date the option is exercised over the purchase price, with any remaining gain or loss being treated as capital gain or capital loss. However, if the holding period requirements are not met and the amount realized at the time of disposition is less than the fair market value of the shares at the time of exercise, the participant will recognize ordinary income to the extent of the excess of the fair market value of such shares on the date the option was exercised over the purchase price for such shares, and a capital loss to the extent the fair market value of such shares on the exercise date exceeds the amount realized upon disposition.
We or our subsidiaries or affiliates generally are not entitled to a federal income tax deduction upon either the exercise of an option or upon disposition of the shares acquired pursuant to such exercise, except to the extent that the participant recognizes ordinary income on disposition of the shares.
New Plan Benefits
Because theauthorized number of shares that may be purchased under the ESPP will depend on each employee’s voluntary election to participate and on the fair market value of ourClass A common stock could have other effects on our stockholders. The increase could deter takeovers, in that additional shares could be issued (within the limits imposed by applicable law) in one or more transactions that could make a change in control or takeover of us more difficult. For example, additional shares could be issued by us so as to dilute the stock ownership or voting rights of persons seeking to obtain control. Similarly, the issuance of additional shares to certain persons allied with our management could have the effect of making it more difficult to remove our current management by diluting the stock ownership or voting rights of persons seeking to cause such removal. Our Board of Directors, however, does not intend or view the Charter Amendment Proposal as an anti-takeover measure, nor does it contemplate its use in this manner at various future dates,any time in the actual number of shares that may be purchased by any individual cannot be determined in advance.foreseeable future.
Vote Required for Approval
The approval of the Employee Stock Purchase PlanCharter Amendment Proposal requires the affirmative vote of holders of a majority of the votes cast by holders ofour outstanding shares of ourClass A common stock represented in person or by proxy and entitled to vote thereon at the Special Meeting. Accordingly, a Company
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stockholder’s failure to vote, by proxy or to vote in person at the Special Meeting, as well as an abstention from voting and a broker non-vote, with regard to the Employee Stock Purchase Plan Proposal will have nothe same effect on the Employee Stock Purchaseas a vote “AGAINST” such Charter Amendment Proposal. Abstentions will be counted in connection with the determination of whether a valid quorum is established.
Recommendation of the Board of Directors
OUR BOARD OF DIRECTORS RECOMMENDS
THAT OUR STOCKHOLDERS VOTE “FOR” PROPOSAL NO. 6.
THE CHARTER AMENDMENT PROPOSAL.
The existence of financial and personal interests of one or more of the Company’s directors or officers may result in a conflict of interest on the part of such director(s) or officer(s) between what he, she or they may believe is in the best interests of the Company and its stockholders and what he, she or they may believe is best for himself, herself or themselves in determining to recommend that stockholders vote for the proposals. See the section above entitled “Proposal No. 1 — Approval of the Business Combination — TheAcquisition—Interests of Certain Persons in the Transactions” for a further discussion.
190152

PROPOSAL NO. 7 —5 - THE CLASS I DIRECTOR ELECTION PROPOSAL
Overview
The Company’sSema4’s board of directors is currently divided into three classes,classes. Each class serves for three years, with only one class of directors being elected in each year and each class (except for those directors appointed prior to our first annual meeting of stockholders) serving a three-year term. In accordance with Nasdaq corporate governance requirements, we are not required to hold an annual meeting until one year after our first fiscal year end following our listing on Nasdaq. The termthe terms of office of the respective classes expiring in successive years. Directors and director nominees in Class I directors, consisting of Dr. George and Dr. Leproust, will expire at the Special Meeting, at which time Dr. Leproust will stand for re-election. Dr. George is not seeking re-election and will resign as a director and as a member of the nominating and corporate governance committee immediately prior to the conclusion of the special meeting (unless the condition precedent proposals are not approved, as set forth below).
If the condition precedent proposals are not approved, Dr. George and Dr. Leproust, will stand for re-election to a three-year term in Class I and their the termelection at this meeting. The terms of office of each of the Company’s two Class I directors would begin upon the conclusion of the Special Meeting.
Director Nominees
The Company’s stockholders are being asked to consider and vote upon a proposal to elect 9 directors to serve on the Board, effective at the Closing, for a three-year term. At each annual meeting of stockholders, a class of directors will be subject to re-election for a three-year term. As a result, only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms, until the election and qualification of his or her successor, or his or her earlier death, resignation or removal. Our Board has nominated the following 9 nominees for election as a director to serve on the post-combination company’s board of directors in the classes set forth below:
•Eli Casdin
Class I
•Michael Pellini
Class I
•Joshua Ruch
Class I
•Dennis Charney
Class II
•Eric Schadt
Class II
•Rachel Sherman
Class II
•Nat Turner
Class II
•Emily Leproust
Class III
•Jason Ryan
Class III
These 9 nominees will be elected, subject to obtaining necessary regulatory approval of the applicable authorities, if the condition precedent proposals are approved by the stockholders at the special meeting.
Our directors currently serving in Class II and Class III have terms that extend beyonddo not expire until the special meeting, these directors have tendered their contingent resignations from their current terms, conditioned upon the approvalannual meetings of the condition precedent proposals, including the Charter Approval Proposal. These resignations will take effect immediately priorstockholders to the Closing.
Alternatively, if the condition precedent proposals are not approved, Dr. Georgebe held in 2023 and Dr. Leproust, will stand2024, respectively. Our Nominating and Corporate Governance Committee recommended to our Board of Directors, and our Board of Directors nominated Eli D. Casdin, Joshua Ruch and Michael Pellini, each of whom is currently serving as a Class I director, for re-electionelection as Class I directors at the Special Meeting. At the recommendation of our Nominating and Corporate Governance Committee, our Board of Directors proposes that each of the Class I nominees be elected as a Class I director for a three-year term of three years expiring at the 2024 annual meeting of stockholders orto be held in 2025 and until their respectivesuch director’s successor have beenis duly elected and qualified or until theirsuch director’s earlier death, resignation, retirementdisqualification or removal.
For more information on the experience of Dennis Charney, Eli Casdin, Emily Leproust, Eric Schadt, Jason Ryan, Joshua Ruch, Michael Pellini, Nat Turner and Rachel Sherman, see the section entitled “Management After the Business Combination.”
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Vote Required for Approval
The election of directors is decidedEach director will be elected by a plurality of the votes cast by the stockholders present in person (which would include presenceonline at the virtual special meeting)Special Meeting or represented by proxy at the Special Meeting and entitled to vote on the election of directors. This means that the three individuals nominated for election to the Board of Directors at the Special Meeting receiving the highest number of “FOR” votes will be elected. You may either vote “FOR” any of the nominees or “WITHHOLD” your vote with respect to any of the nominees. Shares represented by proxies will be voted “FOR” the election of each of the directorClass I nominees, will be elected if they receive more affirmative votes than any other nominee forunless the same position. Stockholdersproxy is marked to withhold authority to so vote. You may not cumulate their votes with respect toin the election of directors. If any nominee for any reason is unable to serve, the proxies may be voted for such substitute nominee as the proxy holders, who are officers of our company, might determine. Each nominee has consented to being named in this proxy statement and to serve if elected. Proxies may not be voted for more than three directors.
FailureNominees to votethe Board of Directors
The nominees and their ages as of December 31, 2021 are provided in the table below. Additional biographical information for each nominee is set forth in the text below the table.
NameAgeClass
Eli D. Casdin(1)(2)
48Class I
Joshua Ruch(1)(2)
72Class I
Michael Pellini56Class I
__________________
(1)Member of our Nominating and Corporate Governance Committee
(2)Member of our Compensation Committee
Eli D. Casdin has served as a member of our Board since July 2020, and previously served as the Chief Executive Officer of CMLS from July 2020 to July 2021. Mr. Casdin founded Casdin Capital, LLC, an investment firm focused on the life sciences and healthcare industry, in November 2011 and currently serves as its Chief Investment Officer. Mr. Casdin also serves on the boards of directors of SomaLogic, Inc., a protein biomarker discovery and clinical diagnostics company (formerly, CM Life Sciences II Inc., a special purpose acquisition company (“CMLS II”)), since September 2021 (having previously served as the Chief Executive Officer of CMLS II from February 2021 to September 2021), and EQRx, Inc., a pharmaceutical company (formerly, CM Life Sciences III Inc., a special purpose acquisition company (“CMLS III”)), since December 2021 (having previously served as the Chief Executive Officer of CMLS III from February 2021 to December 2021). In addition, Mr. Casdin serves on the boards of directors of Century Therapeutics, Inc., a biotechnology company, since February 2021, Absci Corp, a drug and target discovery company, since December 2020, and Tenaya Therapeutics, Inc., a biotechnology company, since August 2019, and previously served on the board of directors of Exact Sciences Corp., a molecular diagnostics company focused on early cancer detection, treatment and monitoring, from October 2017 to September 2020. Mr. Casdin holds an M.B.A. from Columbia Business School and a B.S. degree from Columbia University School of General Studies. Mr. Casdin’s qualifications to serve on our Board include his extensive leadership experience as an executive officer of an investment firm, his extensive public and private company directorship experience in the life sciences and healthcare sectors, and his expertise in finance, capital markets, and the biotechnology industry.
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Michael Pellini, M.D., has served as a member of our Board since July 2021, and previously served as a member of Legacy Sema4’s board of directors from August 2019 to July 2020. Since December 2017, Dr. Pellini has served as a Managing Partner of Section 32, LLC, a technology and life sciences-based venture capital fund. Dr. Pellini held roles of increasing responsibility at Foundation Medicine, Inc., a molecular information company, which was acquired by proxy orF. Hoffmann-La Roche Ltd. in 2018, from May 2011 until its acquisition, including as Chairman of the board of directors, Chief Executive Officer and President. From April 2008 to voteApril 2011, Dr. Pellini held the position of President and Chief Operating Officer at Clarient, Inc., a medical diagnostic services company, which was acquired by General Electric Healthcare Company in person (which would include voting2010, and also served on Clarient’s board of directors from May 2007 to April 2009. Dr. Pellini also previously served as Vice President, Life Sciences at Safeguard Scientifics, Inc., a private equity and venture capital firm from March 2007 to April 2008. Dr. Pellini currently serves as a member of the virtual special meeting)board of directors of Adaptive Biotechnologies Corporation, the GO2 Foundation, the Personalized Medicine Coalition, Singular Genomics Systems, Inc., the Mission Hospital Foundation and several private companies. Dr. Pellini earned an M.D. from Jefferson Medical College (now the Sidney Kimmel Medical College of Thomas Jefferson University), an abstentionM.B.A. from voting, orDrexel University, and a broker non-vote will have no effectB.A. in Economics from Boston College. Dr. Pellini’s broad experience in the technology, health care and life sciences industries as an investor, and his years of senior management experience at public biotechnology companies, provides him with the qualifications and skills to serve as a director on our Board.
Joshua Ruch has served as a member of our Board since July 2021, and previously served as the Chairman of our Board from July 2021 to January 2022 and as a member of Legacy Sema4’s board of directors from November 2017 to July 2021. Mr. Ruch is also a managing partner and co-founder of Rho Capital Partners, an investment and venture capital management company focused on innovative technology, and has held such positions since the founding of Rho Capital Partners in 1981. Prior to co-founding Rho Capital Partners and Rho Ventures in 1981, Mr. Ruch worked as an investment banker at Salomon Brothers in New York, a multinational investment bank. In addition to Sema4, Mr. Ruch is also a trustee of the Mount Sinai Health System, Carnegie Hall and the National Humanities Center, and is a member of the Board of Governors of the Technion – Israel Institute of Technology and the Steering Committee of the Jacobs Institute. Mr. Ruch received an M.B.A. from the Harvard Business School and a B.S. in electrical engineering from the Technion – Israel Institute of Technology in Haifa, Israel. Mr. Ruch’s broad experience as an investor and serving on the electionboards of directors.emerging technology companies, including health care and biotechnology companies, qualifies him to serve on our Board.
Continuing Directors
The electiondirectors who are serving for terms that end after the Special Meeting and their ages as of nine director nomineesFebruary 22, 2022 are provided in the table below. Additional biographical information for each continuing director is set forth in the text below the table.
NameAgeClass
Eric Schadt57Class II
Rachel Sherman(1)(2)
64Class II
Nat Turner36Class II
Dennis Charney(3)
70Class II
Emily Leproust(3)
49Class III
Jason Ryan47Class III
Keith Meister(3)
48Class III
__________________
(1)Member of our Nominating and Corporate Governance Committee
(2)Member of our Compensation Committee
(3)Member of our Audit Committee
Family Relationships
There are no familial relationships among any of our directors and executive officers.
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Director Election Proposal is conditioned onCompensation
Please see the approvalsection entitled “Executive Compensation—Director Compensation of the condition precedent proposals, including the Charter Approval Proposal. If the condition precedent proposals, including the Charter Approval Proposal, are not approved, two directors will be electedSema4” for a summary of payments made to a three-year term in Class I.our directors.
Recommendation of the Board of Directors
OUR BOARD OF DIRECTORS RECOMMENDS
THAT OUR STOCKHOLDERS VOTE “FOR”
THE CLASS I DIRECTOR ELECTION OF EACH OF THE DIRECTOR NOMINEES TO THE BOARD OF DIRECTORSPROPOSAL.
The existence of financial and personal interests of one or more of the Company’s directors or officers may result in a conflict of interest on the part of such director(s) or officer(s) between what he, she or they may believe is in the best interests of the Company and its stockholders and what he, she or they may believe is best for himself, herself or themselves in determining to recommend that stockholders vote for the proposals. See the section above entitled “Proposal No. 1 — Approval of the Business Combination — The Acquisition—Interests of Certain Persons in the Transactions” for a further discussion.
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PROPOSAL NO. 8 —6 - THE AUDITOR RATIFICATION PROPOSAL
Our audit committee has selected Ernst & Young LLP as our principal independent registered public accounting firm to perform the audit of our consolidated financial statements for the fiscal year ending December 31, 2022. Ernst & Young LLP has served as the Company’s independent registered public accounting firm since firm since the closing of the business combination and the independent registered public accounting firm of Legacy Sema4 prior to the closing of the business combination. We expect that representatives of Ernst & Young LLP will be present at the Special Meeting, will be able to make a statement if they so desire and will be available to respond to appropriate questions.
At the Special Meeting, the stockholders are being asked to ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2022. Although ratification by stockholders is not required by law, our audit committee is submitting the selection of Ernst & Young LLP to our stockholders because we value our stockholders’ views on our independent registered public accounting firm and as a matter of good corporate governance. If this proposal does not receive the affirmative approval of a majority of the votes cast on the proposal, the audit committee would reconsider the appointment. Notwithstanding its selection and even if our stockholders ratify the selection, our audit committee, in its discretion, may appoint another independent registered public accounting firm at any time during the year if the audit committee believes that such a change would be in our best interests and the interests of our stockholders.
Change of Independent Registered Public Accounting Firm
In 2021, Sema4 chose not to renew the engagement of WithumSmith+Brown, PC, or Withum, which was then serving as CMLS’s independent registered public accounting firm prior to the closing of the business combination. During 2021, Ernst & Young LLP was engaged to perform professional services in conjunction with the transaction between Legacy Sema4, and CMLS, which included financial statement audits of 2020, 2019 and 2018 and auditor assistance with merger activities and associated regulatory filings. Ernst & Young LLP was the independent registered public accounting firm of Legacy Sema4 and performed these financial statement audits in that capacity. The engagement of Ernst & Young LLP was approved by the Audit Committee of the Board as of August 13, 2021. Fee amounts for all services performed during 2021, including the audit fees and auditor assistance with merger activities and associated regulatory filings, are reflected in the table below.
Withum’s reports on the Company’s consolidated financial statements as of December 31, 2020, did not contain any adverse opinion or a disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles.
During the period from July 10, 2020 (inception) through December 31, 2020 and the subsequent period through July 22, 2021, there were no disagreements, within the meaning of Item 304(a)(1)(iv) of Regulation S-K promulgated under the Exchange Act, or Regulation S-K, and the related instructions thereto, with Withum on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Withum, would have caused it to make reference to the subject matter of the disagreements in connection with its reports. Also during this same period, there were no reportable events within the meaning of Item 304(a)(1)(v) of Regulation S-K and the related instructions thereto.
The Audit Committee approved the appointment of Ernst & Young LLP as Sema4’s new independent registered public accounting firm, effective as of August 13, 2021. During the fiscal year ended December 31, 2020 and the interim periods through June 30, 2021, neither Sema4 nor anyone acting on its behalf consulted with Ernst & Young LLP regarding any of the matters described in Items 304(a)(2)(i) and (ii) of Regulation S-K.
Independent Registered Public Accounting Firm Fees and Services
The following table presents fees for professional audit services rendered by Ernst & Young LLP for the audit of our annual consolidated financial statements for the years ended December 31, 2021 and 2020.
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Principal Accountant Fees and Services
Fees Billed to Sema4Fiscal Year 2021Fiscal Year 2020
Audit fees(1)
$1,400,000 $2,766,250 
Audit-related fees(2)
300,000 — 
Tax fees(3)
— — 
All other fees(4)
1,778 2,601 
Total fees$1,701,778 $2,768,851 
__________________
(1)“Audit fees” include fees for audit services primarily related to the audit of our annual consolidated financial statements; the review of our quarterly consolidated financial statements; consents, and assistance with and review of documents filed with the SEC; and other accounting and financial reporting consultation and research work billed as audit fees or necessary to comply with the standards of the Public Company Accounting Oversight Board (United States) and the SPAC merger transaction and subsequent SEC filings including registration statements.
(2)“Audit-related fees” include fees related to performing Sema4’s internal control environment assessment.
(3)“Tax fees” include fees for tax compliance and advice. Tax advice fees encompass a variety of permissible services, including technical tax advice related to federal and state income tax matters; assistance with sales tax; assistance with tax matters related to acquisitions and assistance with tax audits.
(4)“All other fees” include fees for services other than the services described in the above three categories, principally comprised of support services.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm
The audit committee’s policy is to pre-approve all audit and permissible non-audit services rendered by Ernst & Young LLP, our independent registered public accounting firm. The audit committee pre-approves specified services in defined categories of audit services, audit-related services and tax services up to specified amounts, as part of the audit committee’s approval of the scope of the engagement of Ernst & Young LLP or on an individual case-by-case basis before Ernst & Young LLP is engaged to provide a service. The audit committee has determined that the rendering of the services other than audit services by Ernst & Young LLP is compatible with maintaining the principal accountant’s independence.
Recommendation of the Board of Directors
OUR BOARD OF DIRECTORS RECOMMENDS
THAT OUR STOCKHOLDERS VOTE “FOR”
THE AUDITOR RATIFICATION PROPOSAL.
The existence of financial and personal interests of one or more of the Company’s directors or officers may result in a conflict of interest on the part of such director(s) or officer(s) between what he, she or they may believe is in the best interests of the Company and its stockholders and what he, she or they may believe is best for himself, herself or themselves in determining to recommend that stockholders vote for the proposals. See the section above entitled “The Acquisition—Interests of Certain Persons in the Transactions” for a further discussion.
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PROPOSAL NO. 7 - THE ADJOURNMENT PROPOSAL
Overview
The Adjournment Proposal, if adopted, will allow our Board to adjourn the Special Meeting to a later date or dates to permit further solicitation of proxies. The Adjournment Proposal will only be presented to our stockholders in the event that there are insufficient votes for, or otherwise in connection with the approval of any of the Business Combination Proposal,proposals presented at the Nasdaq Stock Issuance Proposal, the Charter Approval Proposal, the Incentive Plan Proposal or the ESPP Proposal, but no other proposal if the Business Combination Proposal, the Nasdaq Stock Issuance Proposal, the Charter Approval Proposal, the Incentive Plan Proposal and the ESPP Proposal are approved.Special Meeting.
Consequences if the Adjournment Proposal is Not Approved
If the Adjournment Proposal is not approved by our stockholders, our Board may not be able to adjourn the Special Meeting to a later date in the event that there are insufficient votes for, or otherwise in connection with, the approval of any of the Business Combination Proposal,proposals presented at the Nasdaq Stock Issuance Proposal, the Charter Approval Proposal, the Incentive Plan Proposal, the ESPP Proposal, the Governance Proposal or any other proposal.Special Meeting.
Vote Required for Approval
The approval of the Adjournment Proposal requires the affirmative vote of a majority of the votes cast by the stockholders present in person or represented by proxy and entitled to vote at the Special Meeting. Accordingly, a Company stockholder’s failure to vote, as well as an abstention from voting and a broker non-vote, will have no effect on the Adjournment Proposal. Abstentions and broker non-votes will be counted in connection with the determination of whether a valid quorum is established but will have no effect on the Adjournment Proposal.established.
Recommendation of the Board of Directors
OUR BOARD OF DIRECTORS RECOMMENDS
THAT OUR STOCKHOLDERS VOTE “FOR”
THE ADJOURNMENT PROPOSAL.
The existence of financial and personal interests of one or more of the Company’s directors or officers may result in a conflict of interest on the part of such director(s) or officer(s) between what he, she or they may believe is in the best interests of the Company and its stockholders and what he, she or they may believe is best for himself, herself or themselves in determining to recommend that stockholders vote for the proposals. See the section above entitled “Proposal No. 1 — Approval of the Business Combination — InterestsThe Acquisition —Interests of Certain Persons in the Transactions” for a further discussion.
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PROPOSAL NO. 9 — THE AUDITOR RATIFICATION PROPOSALSEMA4’S BUSINESS
Overview
The Company’s audit committee has appointed WithumWho We Are
We are a patient-centered, health intelligence company with a mission to use artificial intelligence, or AI, and machine learning to enable personalized medicine for all. Our integrated information platform leverages longitudinal patient data, AI-driven predictive modeling, and genomics in combination with other molecular and high-dimensional data in our efforts both to deliver better outcomes for patients and to transform the practice of medicine, including how disease is diagnosed, treated, and prevented.
We have established one of the largest, most comprehensive, and fastest growing integrated health information platforms, collecting and leveraging genomic and clinical data in partnership with patients, healthcare providers and an extensive ecosystem of life science industry contributors. We are now generating and processing over 47 petabytes of data per month, growing by more than 1 petabyte per month, and maintaining a database that includes approximately 12 million de-identified clinical records, including more than 500,000 with genomic profiles, integrated in a way that enables physicians to proactively diagnose and manage disease. This expanding database is a virtuous cycle of data: new data enables us to further develop, train, and refine predictive models and drive differentiated insights, which models and insights we deploy through our next generation diagnostic and research solutions and portals to support clinicians and researchers and engage patients, all of which interactions generate more data to continue the cycle.
Today, by providing differentiated insights through diagnostic testing solutions to physicians and patients across the United States, or U.S., in itsareas such as reproductive health, or Women’s Health, population health, and oncology, or Oncology, we are reimbursed by payors, providers, and patients for providing these services. In collaboration with pharmaceutical and biotech, or Biopharma, companies, we receive payments for a broad range of services relating to the aggregated data on our information platform, such as consenting and recontacting patients, the development and implementation of a wide range of predictive models, including drug discovery programs, conducting real-world evidence studies, and aiding in the identification and recruitment of patients into clinical trials. Over the next several years, we expect to focus on expanding the revenue from our health system and Biopharma partners, while also working to continue to grow the volumes and revenues from our diagnostics test solutions.
While there are many companies seeking to harness the potential of “big data” to address the challenges within the healthcare ecosystem, we believe that few have the scale of our company combined with our revenue-generating diagnostics testing business and origins as a company conceived and nurtured within a world-class health system. These characteristics have enabled us to build a significant and highly differentiated technological and informational asset positioned to drive precision medicine solutions into the standard of care in an unparalleled way.
Our World Class Team and Unique Origins
Sema4 was founded by Eric Schadt, Ph.D. as part of Icahn School of Medicine at Mount Sinai’s Department of Genetics and Genomic Sciences and the Icahn Institute for Genomics and Multiscale Biology. Dr. Schadt is a world-renowned expert on constructing predictive models of disease that link molecular data to physiology to enable clinical medicine. He has published more than 450 peer-reviewed papers in leading scientific journals, with a public citation or h-index of 137, and contributed to discoveries relating to the genetic basis of common human diseases such as cancer, diabetes, obesity, and Alzheimer’s disease. As of December 31, 2021, we have approximately 1200 employees, including over 160 Ph.D.-level data scientists whose collective work has been recognized in areas such as data science, network modeling, multiscale biotechnology and genomics.
Sema4 was established out of the Mount Sinai Health System (which we refer to together with our related entities as Mount Sinai) and commenced operations in June 2017 as a commercial entity that could effectively engage diverse patient populations and health care institutions at scale, founded on the idea that more information, deeper AI-driven learning, and increased engagement of patients and their providers will improve diagnosis, treatment, and prevention of disease. We have since established and deployed our comprehensive and integrated
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genomics and information platforms, and intend to continue to expand our scale and reach through organic and inorganic growth.
Our Purpose-Built, Flexible Platforms Address Immediate and Untapped Market Opportunities
With the rapid decline in next generation sequencing costs and the increased accessibility of large scale, commoditized computer hardware and storage information products through the cloud, we expect that our core information platform, Centrellis®, supported and fueled by our genomic analysis platform, Traversa™, will be well-positioned to drive improved clinical outcomes competitively in the healthcare market.
Our information platform was built to be highly adaptable to different data types and different diseases and health conditions, with the aim to deliver precision medicine and improved health outcomes across a patient’s entire life cycle. Accordingly, we expect our platforms to capitalize on a wide range of growth opportunities, and we intend to apply capital over time to make targeted acquisitions to accelerate our ability to reach a wider range of patients, integrate more deeply into clinical workflows, and address the significant, unaddressed white space for health intelligence in the healthcare ecosystem. These include a broad range of therapeutic segments, beyond our existing focus of our diagnostics solutions for Women’s Health, and Oncology, where we believe there is an immediate need for precision medicine solutions such as in autoimmune disorders, where medical care represented over $100 billion of spend in the U.S. in 2011, rare diseases, which is estimated to cost the U.S. healthcare system over $400 billion annually, and cardiovascular disease, where direct medical spend represents approximately $200 billion annually.
By combining our data-driven approach and our deep understanding of health system workflows, we have developed a holistic health information platform, Centrellis, to transform the disease diagnosis and treatment paradigm for the entire healthcare ecosystem: patients, physicians, health systems, payers, and Biopharma companies. The Centrellis platform is comprised of a data management backend that supports a wide array of databases, data warehouses, and knowledge bases, a data analytics layer to mine the data and construct predictive models that provide differentiated insights, and a series of application programmable interfaces to enable tool and software applications to access the data and models. Centrellis serves as the underlying foundation of our precision medicine solution and comprises a sophisticated data management and analytics engine. In the data management layer, our platform processes and stores data in a highly structured and accessible way, which is then analyzed by an advanced insights engine in the analytics layer that deploys state-of-the-art AI, probabilistic causal reasoning and machine learning approaches, and complementary analytics capabilities to deliver increasingly accurate insights to patients, providers, and researchers across a broad range of applications. Centrellis is designed to transform treatment decisions across multiple therapeutic areas by engaging large-scale, high-dimensional data and querying the predictive models of disease and wellness using patient-specific data to derive highly personalized, clinically actionable insights. Centrellis supports various applications, such as delivery of personalized and actionable treatment insights into clinical reports, clinical trial matching, real-world evidence trials and clinical decision support, through an advanced programmable interface, or API, layer.
We have also developed a comprehensive genomic platform, Traversa™, to serve as the backbone of our screening and diagnostic products and with the capacity to deliver molecular data that can be re-accessed, analyzed and delivered throughout a patient’s lifetime. Traversa is designed to simultaneously assay at clinical-grade coverage all known medically relevant regions of the genome, as well as survey the entirety of the human genome, to surface signals that might be medically relevant to a patient in the future. Traversa is integrated with the Centrellis information platform and is designed to adapt at the rate of learning and to match the significant pace of information and knowledge growth, especially in the genomics arena, to allow us to provide actionable, accurate, and cutting-edge insights from complex and comprehensive data assets. We also expect this platform to enable us to scale our operations and to improve our margins in generating secondary insights for patients and providers.
We Are Building Richer Longitudinal Data Through Deeper Patient and Provider Engagement
We engage with patients, physicians, and health systems as partners and based on principles of transparency, choice, and consent. Driven by our direct engagement with patients and strategic relationships with multiple health systems, the database we have built contains extensive electronic medical record, or EMR, data, totaling
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approximately 12 million de-identified clinical records, many with genomic profiles, and has been designed to enable Centrellis to draw from our extensive data assets in a way that enables physicians to proactively diagnose and manage disease. We expect our current and targeted strategic relationships will provide us with access to additional active patient cohorts and datasets to fuel this growth and perpetuate our iterative, data-driven business model, including by rapidly scaling our diagnostic test solutions franchise with physicians and patients through direct engagement with multiple health system partners.
In addition to providing a majority of our current revenue and generating hundreds of thousands of genomic profiles, our established diagnostic test solutions also allow us to engage patients directly as partners, both as part of their clinical care and also acting on their behalf, with appropriate informed consent, to acquire, organize and manage any health data generated on them through the course of their care, all of which contributes to the further development of our genomics and information platforms. Further, we have demonstrated patients’ willingness to partner with us. For example, over 80% of diagnostics solutions patients and users who engaged with our patient portal have given us their informed consent to retrieve, organize, and manage their health records and data, and to facilitate their access to and sharing of that data, as well as additional data that patients share and create through their use of our expanding suite of digital experience products.
Our Established Diagnostic Solutions Are Scaling Rapidly
We currently operate a mature diagnostic business that generates revenue and engages with patients through our varied and sophisticated diagnostics and screening offerings. Our population health offerings are designed to run through our Traversa platform and give us the ability to inform on thousands of diseases and conditions, from rare disorders, to drug safety, to risk profiles across a broad range of common human diseases of significant public health concern. We have developed an array of diagnostic and screening solutions to inform across a patient’s life course, ranging from reproductive health and newborn screening to drug safety and oncology. Our Women’s Health solutions sequence and analyze an industry-leading number of genes, and use Centrellis’ interpretive information tools to translate raw sequencing and clinical data efficiently and accurately into digestible clinical reports that guide decision making by patients and physicians. Our Oncology diagnostic solutions feature both somatic tumor profiling and hereditary cancer screenings, along with a foundational whole exome and whole transcriptome sequencing approach.
Centrellis enables the complex interpretations of these data to identify key driver genes, activated and suppressed pathways, molecular subtypes, therapeutic interventions and matching to clinical trials. We believe our array of diverse diagnostic solutions, built on our differentiated grounding in scientific excellence and coupled with an end-to-end full-service model, have led to our rapidly growing customer bases in Women’s Health and Oncology and increasing traction with health systems, as well as deep, trusting engagement with patients.
We Are Embedding Our Solutions Through Innovative, Deep Relationships
Our origins in and subsequent work with Mount Sinai have provided us with an extensive understanding of health systems, patient, and physician workflows as well as the complex interconnectivities that define patient-physician relationships. We have used this knowledge to develop our integrated health system collaboration model, where we have the capabilities necessary to integrate across health system workflows as a holistic health intelligence partner in order to deploy our comprehensive genomics and information platforms, our data curation and harmonization capabilities, and our patient and provider engagement software applications. Our solutions support our health system partners across their operations, helping them integrate a new standard of care and creating a deep relationship with us that helps both partners realize the potential of the relationship. In addition to creating diagnostic revenue and a clinical relationship with our health system partners and their patients, this engagement provides us with access to insights informed by analyzed and processed EMRs from the health system, as well as the expansive molecular information we generate from our genomics platform as the health system’s precision medicine partner. Learning from our long-standing relationship with Mount Sinai, we have refined a health system engagement model that is both operational and economic and designed to maximize both our and our health system partner’s value from the relationship.
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We are currently activating and expanding our relationships with several leading health systems that will expand our access to data and that we expect will position our platforms for rapid growth and broad commercial opportunities, and have recently signed contracts with three new health systems in support of this strategy. These systems include: AdventHealth, Avera Health, and Northshore University HealthSystem.
Our AdventHealth partnership builds upon the current AdventHealth Genomics and Personalized Health Program to offer genomic solutions to patients across a number of services and specialties. Together, we will conduct data structuring and curation of the combined genomic and clinical data to enable clinicians and scientists to advance research and discovery to improve patient care. We are initially focused on accelerating research in the central Florida division, which includes 18 hospitals and emergency departments, and accounts for more than two million patient visits annually. Nationally, AdventHealth has 51 hospitals and over 100 care sites across 9 states.
Our Avera Health partnership initially focuses on advancing oncology care, enabling Avera Health’s providers and patients to benefit from data-driven insights that inform targeted cancer treatments. Avera Health’s providers will be able to leverage Centrellis, to curate, structure and integrate clinical and genomic data to support both cancer research and clinical care at Avera Health. We will deliver predictive disease network models and clinically actionable insights, empowering Avera Health’s providers to further improve the prevention, detection, and treatment of cancer for their patients. We are also offering digital tools, which give Avera Health’s providers the ability to readily search for cohorts of patients based on clinical criteria, view a patient’s treatment history that is contained in the curated data as an interactive timeline, and more systematically match patients to clinical trials.
At NorthShore University HealthSystem, we are enabling a data-driven genomics program to help clinicians and patients detect, and treat diseases at an early stage, when they are most treatable. As part of the program, NorthShore University HealthSystem’s clinicians and patients will have access to our information-rich genomic solutions for hereditary cancer, population health, pharmacogenomics, and rare expanded carrier screening. Importantly, by combining clinical information with genomic analysis, physicians will be better positioned to administer more personalized, holistic care plans by both drawing insights on how genetic variants will impact patients’ chances of developing disease and determining the most appropriate treatment options. In addition to guiding clinicians, the program is expected to make it easier for NorthShore University HealthSystem patients to understand the implications of genomic findings.
Centered on Centrellis and Traversa, we have also established and continue to seek strategic relationships with Biopharma companies to enable innovation across the entire drug lifecycle, from next generation drug discovery and development, to post-market efficacy surveillance, to informing on bioavailability, toxicity, tolerability, and other features critical to drug development. We have demonstrated the ability to integrate across all aspects of the next generation therapeutic and drug development process, including: biomarker identification as part of early stage drug discovery; identification, validation and prioritization of drug targets; clinical trial patient recruitment; real-world evidence studies; and identifying new markets and indications for existing assets. We believe our solutions allow our Biopharma partners to harness the potential of big data to enable the development of next generation precision medicine therapeutics.
Centrellis: Our Health Information Platform Solution
By combining our data-driven approach and our deep understanding of health system workflows, we have developed a holistic health information platform, Centrellis, to transform the disease diagnosis and treatment paradigm for the entire healthcare ecosystem: patients, physicians, health systems, payers, and Biopharma companies. Centrellis is the culmination of our critical competencies and goals as a company:
•technologies aimed at patient and provider engagement,
•the generation, aggregation and standardization of multi-dimensional data, and
•the modeling and generation of differentiated, domain-specific insights
Driven by the virtuous cycle and interconnection of our clinical diagnostics products, rich data assets, database engineering and data science applications, we continue to evolve and deploy our platform to facilitate a better
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understanding of disease and wellness and improve the standard of care through information driven knowledge and understanding.
Provider Engagement Technologies: Our Next Generation Tools
We have built comprehensive solutions in Centrellis that enable clinicians, researchers, and patients to engage with the relevant structured health data and to leverage our predictive models of disease and wellness and produce clinically actionable insights.
For clinicians and researchers, we have designed Centrellis’s adaptive learning capabilities and tools to enable health systems and clinicians to manage their patient care, research, and health data in one place and to adapt to rapidly changing scientific and clinical norms through an advanced programmable interface, or API, layer, including:
•Integration and on-boarding for health systems and practices that connects data from EMRs and disparate and varied databases,
•Searching and analyzing cohorts of patients, allowing an assessment of their patient populations and quality of care in real-time,
•Enabling clinical decision support and personalized and actionable treatment insights into clinical reports,
•Identifying patients who are candidates for certain clinical genomic analyses,
•Managing the clinical analysis ordered for their patients, from ordering, tracking, resulting, and reanalyzing based on new findings,
•Supporting clinical care and research by matching patients to available clinical trials based on highly personalized inclusion and exclusion metrics, and
•Informing on administrative decisions including as they relate to patient growth, total cost of care, and risk identification and mitigation.
Patient Engagement Technologies: Building Trust and Providing Value Through Clinical Partnership
We are dedicated to giving patients control of their own health data, and in support of this goal, we have designed patient access to Centrellis through our patient portal. Patients have demonstrated their trust by engaging with us and providing consent for us to collect and store their EMR data. After creating an account, patients are able to manage and track the clinical analysis that we are performing for them, including by being able to track, receive, and understand the initial insights into their clinical tests and data (including expanded carrier screening, or ECS, tests, and hereditary cancer tests), and to access our supporting clinical services, such as genetic counseling. Our patient portal also provides patients with the opportunity to partner with us to collect, manage, and regularly update their health data from their disparate healthcare providers, and help participants engage with their data through user-friendly applications, such as their genomic ancestry, personalized residual risk calculations, and other clinical and educational insights and information through important health events, like their pregnancy journey. For patients who have indicated their willingness to participate in research studies, our platform also provides integrated digital informed consenting and research program participation, through transparent, institutional review board approved processes, including targeted clinical trials offerings that provide relevant alternatives and access to the latest scientific trials.
Activating Data Through Generation, Curation and Engineering
We designed Centrellis to create an accessible and usable database that can support interpretation consistently across patient populations represented within the broad healthcare ecosystem. Centrellis aggregates large-scale and diverse data, abstract and structure informative unstructured data, and finally integrate the data into an accessible, web-scalable data warehouse that employs a common data model across a broad series of databases. Unstructured data derived from EMR and associated data are run through multiple pipelines leveraging machine learning-enabled
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natural language processing, augmented as needed by human annotators, to extract information and knowledge from that data and then structure and implement extensive quality assurance processes for the resulting annotations. Our multiscale, integrative strategy allows us to connect the processed EMR data with complex biological data from many sources, such as the genome, proteome, transcriptome, epigenome, and microbiome. Our standardization of the genomic and EMR data also allows us to pursue strategic relationships in the Biopharma industry, connecting Biopharma companies with clinicians and researchers to create computational models of disease, discover and validate targets and biomarkers, help design clinical trials and recruit patients, and support the collection of real-world data and evidence.
We not only collect data from external sources, but also generate clinical-grade genomic datasets in our clinical and research processes, which further fuels the richness of the data from which Centrellis draws. Our genomic infrastructure enables us to convert bio-samples into datasets that span a range of genomic modalities, from DNA and RNA sequencing to epigenomic profiling, as well as different next generation sequencing technologies, including long-read, single molecule sequencing, low pass whole genome sequencing, and additional transformative technologies. Together with our diagnostic solutions, we use this multi-technology approach to ensure we generate data to comprehensively cover clinically actionable insights from and common variation in the genome, enabling the diagnosis of rare conditions and diseases or risk of passing on mutations to offspring that may cause severe disease, predicting risks of developing diseases such as cancer, predicting tolerability of various therapeutics, and creating broad genomic health profiles through the use of polygenic risk scores.
Our Advanced Domain-Specific AI Informatics for Insight Generation
Finally, we believe our informatics and analysis capabilities form a meaningful connection between the web of databases that we have created in our data warehouse and the utility of Centrellis to our users. Based on our informatics engine, Centrellis generates deep interpretive insights derived from large-scale, multi-omic data, taking advantage of our deeper data generation capabilities, and provides actionable treatment recommendations and innovative research findings. These insights are provided to patients, clinicians, researchers, and partners through the tools described above.
We are also continuing to develop these models and insights. Our researchers have developed a methodology to integrate diverse multi-omics data, including genomic, transcriptomic, and proteomic data, into causal probabilistic networks that help us to understand disease processes and identify key biomarkers through advanced network analysis. Our scientists have pioneered the use of DNA variation information to statistically infer causal relationships among any number of traits that have common genetic variance components. These approaches allow our teams to infer directed causal relationships among a pair of traits with shared genetic variance components, which then can be more systematically applied to traits to infer probabilistic causal network structures that can be mined for a broad range of discoveries. We also designed Centrellis with a high degree of flexibility to allow the platform to adjust to the rapidly changing and advancing health information landscape, highlighted by our Traversa genomic analysis platform, which we believe will lead to improved cost profiles over time as assays transition to whole genome sequencing at increasing resolutions.
As we collect and analyze additional datasets, our platform enables the virtuous cycle of data, and we are able to further refine our products and hone our capabilities to provide enhanced analysis of these data. More data and more insights generate further data and insights to support our models. We have constructed automated pipelines to continuously search the literature and research repositories to expand and distill our knowledge graphs, which are in turn queried to provide the interpretations and insights delivered to users of our systems. To support our interpretations and insights, we utilize internal experts as needed to help resolve conflicting findings to improve upon the actionable insights we deliver to physicians and patients.
Traversa: Our Genomics Platform for Optimizing Screening and Diagnostic Genomics Products and Population Health Initiatives
Traversa is our comprehensive genomics platform that has been designed to serve as the backbone of our genomic analysis products, and we are in the process of transitioning all of our genomic analyses to this platform. For products on the Traversa platform, we generate data on all known medically relevant regions of the genome at
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clinical-grade coverage, as well as low-pass whole genome data to span all common variation in the genome. We also ask for the patient’s consent to biobank the corresponding samples for future clinical testing. While we report on the specific genes analyzed at the request of the clinician and patient, these baseline data and bio-banked samples allow us to respond to requests for additional analysis quickly by generating “in silico” interpretations on genomic data already existing on a patient and to surface signals that might be medically relevant across a patient’s life course.
When deployed at across an entire health system, as we intend with our health system partners, Traversa will enable data driven collaborations and initiatives with health systems by establishing comprehensive clinical and genomic data profiles with patient consent. Particularly where integrated with EMR data, Traversa provides health systems with a unique opportunity to deploy population health management programs because of the robust data from which those programs will draw and because of the efficiencies it will create across the health ecosystem by eliminating the repetition of the most time-consuming and costly aspects of genomic analysis, including sample collection and preparation and the generation of sequence data. Using Traversa, clinicians and health systems will have the freedom to advance patient care by allowing clinicians to establish clinical utility and drive adoption of new analysis products, which we believe will consequently expedite improved reimbursements against lower total production costs for those offerings.
We Collect and Manage Rich, Longitudinal Data Built from Diverse Sources
The health information database that we have created draws from many complementary sources, which we manage in accordance with patient consent and preferences, our regulatory obligations, and our transparent privacy policy and practices. These data are housed in a complex, cloud-based data lake that allows us to manage the various rights and obligations for each dataset at a granular level, including patient-specific requests with regard to their data.
This database includes data generated in the performance of our clinical services to patients and clinicians, including Women’s Health and Oncology testing, as well as additional data that patients provide to us through their engagement with our patient portal and research programs. In addition, we participate in health information exchanges and public database programs, including through the National Institutes of Health. We also generate and collect data by collaborating with our research partners and provide sequencing and analysis services in connection with research programs. We further leverage the data rights provided by patients and secured through our strategic relationships, such as our independent registered public accounting firmoncology information partnership with VieCure that by the end of 2022 is expected to provide us with access to multiple cancer centers and data from all of their active cancer patients, with the number of newly diagnosed active cancer patients growing substantially each year. Additionally, we support health systems and other clinical service providers by applying our Centrellis tools to their clinical workflows and medical record databases, and we receive certain rights to work with anonymized datasets and to partner with the health systems in their ongoing clinical and research programs. We have provided such services extensively for Mount Sinai and are in the process of expanding this program with additional health systems, including Advent Health, Avera and NorthShore. For more information regarding our data arrangements with Mount Sinai, see “Certain Relationships and Related Party Transactions—Sema4”.
Our Established Diagnostics Solutions
Our existing diagnostics solutions business centers around Women’s Health and Oncology and our industry-leading diagnostic solutions are powered by Centrellis and delivered through a full-service model that efficiently integrates into provider workflows. Currently, we derive the majority of our revenue from these established diagnostic test solutions.
Our Elements Women’s Health Solutions
Our deep foundation in Women’s Health began before Sema4’s formation within Mount Sinai, where our lab—then called the “Mount Sinai Genetics Testing Lab”—pursued the goal of providing compassionate patient care to a highly diverse population while advancing science through education, research, and outreach. We pioneered accurate and precise pre-conception genetic screening, and we have continued to build upon that work, expanding our focus into a multi-generational and pan-ethnic view of the health of individual women and their families. Sema4
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Elements™, our portfolio of data-science driven products and services to support reproductive and generational health, highlights our continued focused effort to accelerate the expansion of genomic diagnostic solutions, secondary insights, platform solutions and enriching health system value to drive continued growth in our Women’s Health business, including by leveraging our state-of-the-art genomic infrastructure and Centrellis platform.
Carrier Screening: Deriving population-health insights from genomic data to differentiate our industry-leading tests
Our Expanded Carrier Screen, or ECS, test is one of the most comprehensive and accurate carrier screening tests available in the market, covering up to 502 genes. We provide a comprehensive solution to physician practices to enable them not only to deliver sophisticated differential insights and care management guidance in support of the clinician’s care plan for the patient, but to also do so with minimal impact on the practice’s operation, helping to ensure physician offices are not overwhelmed by the amount of information and follow up that can be necessitated by carrier screening.
Our ECS solution uses proprietary technology to identify a patient’s molecular ancestry on a genome-wide level for personalized residual risk assessments by analyzing patient-specific genealogical information that is critical to better understand a patient’s chance for passing on inherited disease. This technology has been designed to increase the accuracy of the residual risks reported to patients, in comparison to competing products that determine residual risk based on using self-reported ancestry information that does not reflect the population groups represented in the patient’s genome. Our solution also provides patients with personalized residual risk education, along with the option to view their molecular ancestry report in the Sema4 patient portal.
Our Non-invasive Prenatal Testing Solutions
Our Noninvasive Prenatal Testing is a comprehensive noninvasive prenatal test, that screens for autosomal and sex chromosome aneuploidies. Our advanced sequencing technology has been designed to provide reliable results down to approximately 2% fetal fraction, the amount of fetal cell-free DNA in the maternal blood sample, and has been designed to have a low failure rate, which helps reduce the need for redraws, limits unnecessary invasive procedures, and improves time to results.
Expansive development in prenatal screening allows our team to advance scientific efforts to deliver Genome Wide Screening and includes the ability to detect additional whole chromosome aneuploidies and copy number variations, or CNVs. We believe an updated bioinformatics pipeline will help to further reduce false positives. We expect to release new versions of our code in 2022, which we believe will help improve the positive predictive value for CNV calling through fetal fraction enrichment and CNV normalization through nucleosome positioning and fragment characteristics.
We are developing these future test versions to enable the detection of single gene disorders, such as cystic fibrosis and sickle cell disease. This testing may be used for at risk couples to screen a pregnancy for genomic analysis of a specific disorder or as a general screening tool with a panel of diseases. We believe these code enhancements will also facilitate validation of polyploidy, fetal zygosity and molar pregnancy detection, all of which are important aspects of screening pregnancies for chromosomal abnormalities and are not widely available through non-invasive testing.
Our Natalis Newborn Screening Solutions
Our Natalis test is an extension of our screening portfolio allowing for detection of heritable conditions from pre-conception, pregnancy and childhood. Newborn Screening, or NBS, detects heritable conditions that are amenable to medical management in newborns and young children. Natalis screens for 193 conditions where knowledge of the condition by the pediatrician may result in prescribing treatment with medications, dietary modifications, or other therapies to improve the baby’s health. All positives are confirmed using biochemical and molecular analysis. Natalis screens for up to five times as many conditions as the newborn screening programs run by certain state governments.
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Our Signal Precision Oncology Solutions
We believe that our Centrellis platform, combined with our comprehensive whole exome and whole transcriptome tumor profiling and hereditary cancer and pharmacogenomics genomic testing solutions, will make a meaningful difference in transforming cancer care. We have developed the “Sema4 Signal®” portfolio to be leveraged individually or as part of a holistic solution for precision oncology care. The Sema4 Signal portfolio features the integration of our germline and somatic tests with our informatics and data science tools, enabled by customized services to meet patient and provider needs to help drive more personalized care. The Sema4 Signal products include our oncology genomic test solutions, our molecular and clinical data curation and annotation capabilities to inform on the genomic information in the context of the patient’s previous and current medical records, and various software applications to enable engagement of these data and complex results to facilitate clinical decisions, research discoveries and drug development.
The Sema4 Signal Hereditary Cancer Solution
Our Sema4 Signal Hereditary Cancer solution determines if a patient carries an inherited genetic change that increases the risk of cancer or informs on cancer treatment. It is used to inform personalized medical management decisions to aid early detection and prevention of cancer, as well as to determine the most appropriate treatment approaches if cancer occurs, and strategies to reduce risk of additional cancers.
We offer one of the most comprehensive sets of panels on the U.S. market, and deliver this solution supported by the Traversa platform to enable us to adapt our panels as new discoveries on clinically actionable variants are made, so we can adapt at the rate of learning. Our solution includes tools to enable testing at the point of care or outside the office, including a digital family screening questionnaire to identify individuals who would benefit from testing, digital ordering via an EMR portal, video-based education, saliva procurement in the patient’s home, proactive billing investigation, pre-and post-test genetic counselling and family outreach to enable cascade testing.
Our Hereditary Cancer Solution is a unique product in our portfolio in that it is sold in connection with our Oncology, Women's Health and population health solutions. For affected cancer patients, integrating hereditary cancer with our Sema4 Signal Whole Exome and Transcriptome and our informatics offerings, which incorporating real world evidence, integrates available data needed to better personalized clinical care decisions. For unaffected patients, our Sema4 Signal Hereditary Cancer solution is incorporated into both our Women’s Health and Population Health products and services to support early identification and treatment of cancer risk.
Our Signal Whole Exome and Transcriptome Solution
We believe our Sema4 Signal Whole Exome and Transcriptome solution is one of the most comprehensive molecular profiling solutions from a commercial entity to receive New York State approval. Our profiling platform integrates tumor-normal matched whole exome sequencing, or “WES”, with whole transcriptome sequencing, or WTS, to deliver clinically actionable information about somatic and germline alterations in solid tumors and hematologic malignancies. This solution provides for access to a holistic view of a patient’s genome and insights into novel fusions, splice variants, and molecular pathways. It also provides for germline findings for cancer and non-cancer genes, as per American College of Medical Genetics guidelines, with relevance to comorbidities, such as familial hypercholesterolemia, and certain drug interactions.
We deliver the WES/WTS solution using a number of proprietary tools housed in Centrellis, including our cancer knowledge-base, which contains comprehensive structured data and learnings on clinically relevant variants, including curated maps that link relevant clinical trials to variants that serve as eligibility biomarkers for the trials, as annotated by Ph.D. oncology experts. Our variant interpretation station for oncology automates clinical reporting by managing the variant curation process and recommending suitable therapies. This AI-driven genomic platform is updated regularly with recent medical literature and prioritizes clinically-significant variants, enabling providers to quickly review and leverage actionable insights.
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Sema4 Signal Informatics Solutions
To complement the genomics diagnostic solutions, the Sema4 Signal products leverage Centrellis’s provider engagement technologies, described above, including to automatically abstract, annotate, and combine oncology specific datasets, including clinical medical record data, imaging, and genomics. This clinical-genomic data set is provided back to health systems and providers and is powered by our digital applications to drive better personalized care for patients, including clinical trial recruitment, improved system-wide quality of care and increased financial and research activity.
Regulatory and Payer Relations Strategy
We have developed and are advancing our strategy to drive increased reimbursement and higher average selling prices, or ASPs, for our Sema4 Signal Oncology solutions. As part of this strategy, we will take advantage of a Medicare Administrative Contractor (MAC), National Government Services (NGS), update to a Local Coverage Decision (LCD) titled Genomic Sequence Analysis Panels in the Treatment of Solid Organ Neoplasms under which qualifying CGP tests are covered for patients insured by Medicare, who are living with advanced cancer and meet other clinical criteria.
In addition, we are expanding our presence in select markets where Palmetto GBA is the MAC and the MolDx program they administer provides opportunities to apply for coverage under existing or future LCDs. Specifically, we have, or intend to, submit Technical Assessments for coverage and reimbursement of WES/WTS and other tumor profiling solutions based on existing MolDx LCDs.
Beyond the testing, we are exploring the regulatory and market access landscape as it relates to the governance and reimbursement of real-world evidence and AI driven clinical decision-making tools. As we demonstrate the clinical utility of information driven solutions, these emerging areas will become relevant.
Our COVID-19 Testing Initiative
In response to the outbreak of the worldwide COVID-19 pandemic, in the first quarter of 2020, we rapidly leveraged our existing technologies and infrastructure capabilities, supplemented by a requisite set of technologies and services, to offer a comprehensive COVID-19 diagnostic testing service for our customers. However, on December 15, 2021, we announced that we decided to discontinue COVID-19 testing services by March 31, 2022 and began notifying our COVID-19 testing solutions customers of this decision. Nationwide and regional lab capacity for COVID-19 testing has increased since we entered the market for COVID-19 testing in the first half of 2020. Management believes it is the appropriate time to discontinue this line of services and dedicate all of our efforts and resources to our core mission to transform healthcare by using artificial intelligence to enable the delivery of precision medicine as the standard of care.
Our Solution for Health Systems and Providers
Our origins within a large academic medical center helped us establish our integrated health system collaboration model, where we seek to integrate our platform across numerous health system workflows to enable precision medicine solutions using Centrellis, from Women’s Health, to Oncology, to patient wellness. Our provider and health system engagement offerings include patient and provider portals, facilitating scheduling of patient appointments, patient consenting, pre-test and post-test genetic counseling, results delivery and patient record management, among other tools and applications that are designed to allow physicians to better engage contextualized information around their patients to improve decision making.
Our Health System Engagement Model
We believe we have developed a compelling value proposition for our initial health system partners, with distinguishing features including our focus on serving local community populations, our track-record of delivering digital or technology-enabled standards of care, and our investment in precision medicine and adoption of genomic diagnostic solutions, with our desire to have predictive insights permeate all service lines and the general patient
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experience in their system. In addition to our deep relationship with Mount Sinai, we have contracted to deploy Centrellis in additional health systems, which we expect will expand our impact and reach.
We have refined a health system engagement model designed to maximize both our and our partner health system’s value from the relationship. We balance clinical-grade and research-based projects in order to deliver value in an economically sustainable manner and establish health and economic performance metrics that form the basis of quarterly steering committee reviews with the program’s executive sponsors. Our model focuses on:
•Embedding our genomic analyses as a standard of care for Women’s Health, Oncology and/or specific diseases, which includes our full-service model including patient and provider education, patient engagement, genetic counseling and integration with the health systems’ clinical workflow and EMR,
•Enhancing existing health system data sets by leveraging our data curation capabilities for both structured and unstructured data to identify clinical utility that can be used by health system providers, researchers and administration,
•Developing software applications to facilitate deeper engagement of the enhanced health system data we produce, such as reconstructing and visualizing patient health journeys, identifying patient cohorts based on any number of filter criteria, and characterizing outcomes of patients in response to different treatments prescribed,
•Establishing population health programs where health system patients are invited to broad population genetic screening, and
•Developing mutually beneficial research collaboration programs that leverage the strengths of our and our health system partners.
Our Solutions Create Mutually Beneficially Value for Us and Our Health System Partners
We pursue strategic relationships with health systems that evaluate financial returns on a holistic basis. We evaluate success on a long-term basis and recognize that the primary aim of every health system is to provide superior patient care with improved health economics. As such, we continue to use the proceeds from our July 2021 business combination and related private placement financing (which we refer to as the “Prior PIPE Investment”) to accelerate growth in our health system relationships by further investing in research-oriented projects, as well as data curation, platform integrations, and building standards of care to operationalize our testing programs. Starting with Mount Sinai and extending throughout our network, we intend to cross-validate and scale our technologies across health systems, as we seek to enable patients by leveraging data and tools across systems and patient populations in a network model so each partner can benefit from what is being learned across the healthcare ecosystem.
We Act as a Broker and Catalyst for Commercial Engagement Between Health System and Biopharma Companies
While health systems and Biopharma companies have an established ability to collaborate effectively and will continue to partner directly, we believe that our network in both segments of the healthcare ecosystem and ability to add value to these relationships through data engineering makes us well-positioned as a valued collaborator for both types of organizations. Biopharma collaborations are often not the focus for health systems, as they have high start-up costs to develop relationships that extend to patient care. We can support our health system partners by working more collaboratively with them to understand their capabilities and how those capabilities are complemented by our enhancement of a health systems’ data assets and clinical-genomic data generation capabilities, and by facilitating solutions that can be provided jointly to Biopharma companies.
Our Biopharma Solutions Engage and Enable Our Partners
We have established and continue to seek strategic relationships with Biopharma companies to enable drug discovery, development, and commercialization. We have demonstrated the ability to integrate across the pharmaceutical life cycle as a result of the unique data and patient and provider engagements developed in our
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health system relationships and information-driven diagnostics solutions, combined with our powerful analytics capabilities and software solutions.
The Biopharma industry has become increasingly competitive as it moves toward the more precise targeting of patients in crowded disease segments, and we believe this trend positions us as a key partner for Biopharma companies to build a competitive advantage by unlocking the power of big data and enabling next generation precision medicine.
We Strive for Interconnected Strategic Relationships
We serve our Biopharma customers through a unique combination of clinical testing services, clinical and research study design and execution, and advanced data and analytics capabilities.
Our competitive advantage in this space comes from leveraging comprehensive data generated via testing, integrating these deep molecular profiles with clinical patient information, and representing this comprehensive patient data in the Centrellis platform. This enables us to create direct and real time integration of clinical and genetic data with providers connected to drug discovery research, real world evidence studies, and other therapy development opportunities. We are also able to utilize our solutions and unique data assets to enroll patients into clinical trials and to connect Biopharma partners to patient populations matching eligibility criteria for their trials, to facilitate patients receiving novel therapies still under development, and to perform broad genomic and transcriptomic sequencing on health system partner sample banks in collaboration with Biopharma partners.
In our engagement with Biopharma customers, we are focused on a range of disease conditions, including oncology, autoimmune and inflammatory disorders, and rare diseases. Our disease-agnostic approach provides us with the flexibility to support our Biopharma partners across varied therapeutic areas. We continue to work with our Biopharma partners to identify their specific needs and broaden the scope of our disease coverage accordingly.
We believe that, because of our core capabilities and differentiated approach, we are well-positioned to support next-generation drug discovery, development, and commercialization. We further believe our ability to generate deep, clinical-grade multi-omic datasets renders us a valuable genomic testing solution provider for precision medicine Biopharma products. Through direct engagement of providers and patients, we assist Biopharma partners in a patient-centric approach to research and clinical development. By obtaining and curating high-dimensional data in our Centrellis platform, we deliver novel insights that help to de-risk the development of next generation therapeutics, provide for pharmacologic proof of concept via the integration of genomic and clinical data support, reduce development costs, enhance the patient experience, and increase speed to market.
Sema4’s Solutions for BioPharma Customers
We engage with our Biopharma customers to develop and deliver unique goods and services for the particular issues that each customer faces. We believe that our Biopharma partners can realize significant value when collaborating with our team to utilize a more integrated, end-to-end solution that leverages our core set of capabilities, including longitudinal patient data, AI-driven predictive modeling, and genomics. We have demonstrated the ability to develop these deep, integrated strategic relationships with Biopharma companies. For example, our five-year collaborative study with Sanofi S.A., or Sanofi, is centered on discovery of new insights into the biological mechanisms and other factors implicated in asthma to help drive Sanofi’s next generation of asthma targets as well as to enhance Sanofi’s understanding of the relevant populations for both its current and in-development therapies and the therapies marketed by others. This asthma study is currently recruiting nearly 1,200 patients, and involves comprehensive clinical characterization of patients and controls, longitudinal monitoring of patient conditions through various applications and devices, collection of biological samples for molecular profiling and generation and integration of DNA and RNA sequencing data with clinical and device acquired data. The study is also leveraging the integrated, longitudinal data to construct models of asthma to stratify patients into subtypes, and seeking to better understand treatments relevant to different subtypes or where there is unmet need for further drug discovery efforts. Along with Sanofi, we will collect traditional clinical data, genomics, immunological, environmental, and sensor data from mobile devices to enable sophisticated analyses and to include advanced causal network modeling.
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In general, our Biopharma strategy focuses on three main offering areas:
•Genomic Testing and Analysis Solutions: We serve as a comprehensive clinical testing lab, offering a broad menu of molecular, cytogenic and biochemical testing services for our Biopharma partners. Our technology development group enables us to apply innovative profiling technologies such as long-read, single-cell and spatial molecular profiling approaches to help address our Biopharma partners’ challenges. The data generated by these capabilities, when combined with our analytics services, can produce insights that inform on disease biology, improve and accelerate the drug development process, and help ensure that patients can be made aware of relevant treatment options.
•Data and Analytics Solutions: Centrellis enables us to provide our Biopharma partners with unique, data-driven insights that can help to accelerate the development of precision medicines, utilizing HIPAA-compliant, de-identified datasets. Using advanced analytics and causal network modeling, we work with partners to organize high-dimensional data in ways that facilitate the identification of statistically-inferred causal relationships that enable the identification, validation and prioritization of biomarkers and targets; identify molecular subtypes of disease; and predict patient disease progression, prognosis, drug response, adverse events, and other clinical outcomes. We believe that one of our particular strengths is our data science team, which is comprised of experts published in leading scientific journals. We work with collaborators, researchers, and key opinion leaders to build new models of disease and deliver insights to Biopharma partners that can further optimize their operations.
•Clinical Trial Enablement Solutions: We believe that Centrellis, combined with our active, direct engagement of patients and providers in our Women’s Health and, by extension, rare disorders, Oncology, and population health solutions, positions us well to assist Biopharma partners in their clinical development activities. We have developed a number of software as a service, or SaaS, products to enable Biopharma clinical development, including a clinical trial patient matching product and a clinical trial design product that work with our longitudinal clinic-genomic dataset. Given our patient consent structure, we have the ability to re-contact patients who may benefit from a Biopharma sponsor’s trial. We have developed novel, technology-enabled workflows and solutions that allow us to search for and identify relevant patients in a manner that fully maintains patient confidentiality, and work with providers to assess and enroll these patients in clinical trials. The breadth of search and precision of this method of patient recruitment can substantially improve trial timelines versus traditional recruitment methods. We also assist prominent Biopharma partners seeking to use high-quality genomic analysis to assess patient eligibility for clinical trials. We believe our clinical testing services and data solutions make us a key partner for supporting efficient clinical trials.
Research and Development
We have invested a substantial amount of time and expense into research and development for our technology and test offerings, which requires the continuous improvement of software capabilities to analyze data and process customer orders. Our research and development efforts focus on several key areas, including multiscale biotechnology, assay development across sequencing technologies, data science and engineering, and the development of network-based models. We expect our research and development activities to increase as we innovate and expand the application of our current and future platforms including Traversa and Centrellis.
Our internationally recognized research team includes leaders in data science, network modeling, multiscale biotechnology and genomics. As noted above, our CEO, Eric Schadt, is a world-renowned expert on constructing predictive models of disease that link molecular biology to physiology to enable clinical medicine. He has published more than 450 peer-reviewed papers in leading scientific journals, with a public citation or “h-” index of 137, and has contributed to discoveries relating to the genetic basis of common human diseases such as cancer, diabetes, obesity, and Alzheimer’s disease. Under the leadership of our CEO, our research team comprises more than 160 Ph.D.-level scientists, complemented by additional physician scientists and certified technicians as of December 31, 2021. Ongoing collaborations with scientists and clinicians at the Mount Sinai and other healthcare systems allows our research to remain patient-centered and clinically relevant.
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Intellectual Property
We have intellectual property rights pertaining to all elements of our platforms and solutions. Our success and ability to compete depend in part on securing and preserving enforceable patent, trade secret, trademark and other intellectual property rights; operating without having competitors infringe, misappropriate or otherwise circumvent these rights; operating without infringing the proprietary rights of others; and obtaining and maintaining licenses for technology development or product commercialization.
Patents
The fields of genomic and health information analysis present limited opportunities for patent protection, based on well-known legal precedents. As result, our patent protection strategy is to protect our non-gene specific technology and our specific biomarkers. In this regard, as of December 31, 2021, we have four pending utility patent applications and one provisional patent application. The pending utility patent applications include a U.S. patent application related to a genome annotation software platform for annotating genomic intervals that are clinically relevant for analysis, a U.S. patent application related to a genetic carrier screening process, and U.S. and European patent applications related to therapeutic treatment for subjects having certain polymorphic markers associated with specific human leukocyte antigen alleles. If patents are issued from the currently pending applications, the earliest patents will begin expiring in 2040, subject to potential extensions of the patent term that will be calculated based on the length of the patent examination process.
Trade Secrets
We have a trade secrecy program to prevent disclosure of our trade secrets to others, except under stringent conditions of confidentiality when disclosure is critical to our business. We protect trade secrets and know-how by establishing confidentiality agreements and invention assignment agreements with our employees, consultants, scientific advisors, contractors, and collaborators. These agreements provide that all confidential information developed or made known during the course of an individual or entities’ relationship with us must be kept confidential during and after the relationship. These agreements also provide that all inventions resulting from work performed for us or relating to our business and conceived or completed during the period of employment or assignment, as applicable, will be our exclusive property. In addition, we take other appropriate precautions, such as physical and technological security measures, to guard against misappropriation of our proprietary information by third parties.
Although we take steps to protect our proprietary information and trade secrets, including through contractual means with our employees and consultants, third parties may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or disclose our technology. Accordingly, we may not be able to meaningfully protect our trade secrets. For more information regarding the risks related to our intellectual property, see the section entitled “Risk Factors—Risks Related to Our Intellectual Property and Trade Secrets.”
Trademarks
We own various trademarks, applications and unregistered trademarks in the U.S and other commercially important markets, including our company name, product and service names and other trade or service marks. Our trademark portfolio is designed to protect the brands for our products and services, both current and in the pipeline.
Regulation
Reimbursement
Patients who have diagnostic tests ordered or are prescribed treatments by providers performing the prescribed services, generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Sales of our products and services will therefore depend substantially on the extent to which the costs of our products and services will be paid by third-party payors, including health maintenance, managed care and similar healthcare
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management organizations, or reimbursed by government health administration authorities, such as Medicare and Medicaid and private health insurers.
In the United States, our ability to commercialize and the commercial success of our product and service offerings will depend in part on the extent to which governmental payor programs at the federal and state levels, including Medicare and Medicaid, private health insurers and other third-party payors provide coverage for and establish adequate reimbursement levels for these offerings. Government authorities, private health insurers and other organizations generally decide which devices they will pay for and establish reimbursement levels for healthcare. Medicare is a federally funded program for the elderly and disabled managed by Centers for Medicare & Medicaid Services, or CMS, through local contractors that administer coverage and reimbursement for certain healthcare items and services. Medicaid is an insurance program for certain categories of patients whose income and assets fall below state defined levels, and is funded jointly by federal and state governments and managed by each state. Similarly, the federal government manages other healthcare programs, including the Veterans Health Administration, the Indian Health Service, and Tricare, the healthcare program for military personnel, retirees, and related beneficiaries. Many states have also created pharmacy assistance programs for individuals who do not qualify for federal programs. In the U.S., private health insurers and other third-party payors often provide reimbursement for products and services based in part on the coverage and payment rates set by the Medicare or Medicaid programs.
Federal programs in the U.S. also sometimes impose price controls through mandatory ceiling prices on purchases by federal agencies and federally funded hospitals and clinics and mandatory rebates on retail pharmacy prescriptions paid by Medicaid and Tricare. These restrictions and limitations influence the purchase of healthcare services and products. Legislative proposals to reform healthcare or reduce costs under government programs may result in lower reimbursement for our products and services or exclusion of our products and services from coverage. In addition, government programs like Medicaid include what are in effect substantial penalties for increasing commercial prices of certain products over the rate of inflation which can affect realization and return on investment.
Increasing efforts by governmental and third-party payors to cap or reduce healthcare costs may cause such organizations to limit both coverage and level of reimbursement for newly approved healthcare products. At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological program pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
As a result of the above trends, we may need to conduct expensive studies in order to demonstrate the medical necessity and cost effectiveness of our products and services, in addition to the costs required to obtain FDA approvals. Our products and services may not be considered medically necessary or cost effective, or the discount percentages required to secure coverage may not yield an adequate margin over cost.
Many hospitals implement a controlled and defined process for covering and approving diagnostic tests and medical devices. Any marketing efforts that are determined to have violated such policies could result in the denial or removal of our products from that hospital’s list of approved products.
Moreover, a payor’s decision to provide coverage for a diagnostic product does not imply that an adequate reimbursement rate will be approved. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in device development. Legislative proposals to reform healthcare or reduce costs under government insurance programs may result in lower reimbursement for our products and services or exclusion of our products and services from coverage. The cost containment measures that healthcare payor and providers are instituting and any healthcare reform could significantly reduce our revenue from the sale of any approved products and services. We cannot provide any assurances that we will be able to obtain and maintain third-party coverage or adequate reimbursement for our products and services in whole or in part.
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In addition, amendments to the False Claims Act impose severe penalties for the knowing and improper retention of overpayments collected from governmental payors. Within 60 days of identifying and quantifying an overpayment, a provider is required to notify CMS or the Medicare contractor of the overpayment and the reason for it and return the overpayment. These amendments could subject our procedures for identifying and processing payments to greater scrutiny. Overpayments may occur from time to time in the healthcare industry without any fraudulent intent. For example, overpayments may result from mistakes in reimbursement claim forms or from improper processing by governmental payor. We maintain protocols intended to identify any overpayments. From time to time, we may identify overpayments and be required to refund those amounts to governmental payors.
Clinical Laboratory Improvement Act
Our clinical reference laboratories in Connecticut are required to hold certain federal certificates to conduct our business. Under the Clinical Laboratory Improvement Act of 1988, or CLIA, we are required to hold a certificate applicable to the type of laboratory examinations we perform and to comply with standards covering personnel, facilities administration, inspections, quality control, quality assurance and proficiency testing.
As of December 31, 2021, we have a current certificate under CLIA to perform testing at our laboratory locations in Stamford and Branford, Connecticut. To renew this CLIA certificate, we are subject to survey and inspection every two years to assess compliance with program standards. Moreover, CLIA inspectors may make random inspections of our clinical reference laboratories. The regulatory and compliance standards applicable to the testing we perform may change over time, and any such changes could have a material effect on our business.
If our clinical reference laboratory is out of compliance with CLIA requirements, we may be subject to sanctions such as suspension, limitation or revocation of our CLIA certificate, as well as directed plan of correction, state on-site monitoring, civil money penalties, civil injunctive suit or criminal penalties. We must maintain CLIA compliance and certification to be eligible to bill for diagnostic services provided to Medicare and Medicaid beneficiaries. If we were to be found out of compliance with CLIA requirements and subjected to sanction, our business could be harmed.
State Laboratory Testing
We are is required to maintain a license to conduct testing in Connecticut. Connecticut laws establish standards for day-to-day operations of our laboratories in Stamford and Branford, Connecticut. If our clinical reference laboratories are out of compliance with Connecticut standards, the Connecticut Department of Health Services, or CDHS, may suspend, restrict or revoke our license to operate our clinical reference laboratories, assess substantial civil money penalties, or impose specific corrective action plans. Any such actions could materially affect our business. As of December 31, 2021, we maintain a current license in good standing with CDHS. However, we cannot provide assurance that CDHS will at all times in the future find us to be in compliance with all such laws.
Several states require the licensure of out-of-state laboratories that accept specimens from those states. For example, New York requires a laboratory to hold a permit which is issued after an on-site inspection and approval of testing methodology and has various requirements over and above CLIA and the College of American Pathologists, or CAP, Laboratory Accreditation Program, including those for personnel qualifications, proficiency testing, physical facility, equipment, and quality control standards. Our laboratory holds the required licenses for California, New York, Maryland, Pennsylvania, and Rhode Island.
Each of our clinical reference laboratories in Connecticut is required to be licensed on a test-specific basis by New York State as an out of state laboratory and our products, as laboratory-developed tests, or LDTs, must be approved by the New York State Department of Health, or NYDOH, before they are performed on samples from New York. Each Sema4 laboratory is licensed by New York, and we are currently approved for testing samples from New York. We are subject to periodic inspection by the NYDOH and we are required to demonstrate ongoing compliance with NYDOH regulations and standards.
Other states may adopt similar licensure requirements in the future, which may require us to modify, delay or stop our operations in such jurisdictions. Complying with licensure requirements in new jurisdictions may be expensive, time-consuming, and subject us to significant and unanticipated delays. If we identify any other state
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with such requirements, or if we are contacted by any other state advising us of such requirements, we intend to follow instructions from the state regulators as to how we should comply with such requirements.
Food and Drug Administration
Laboratory Developed Tests
We provide our tests as LDTs. CMS and certain state agencies regulate the performance of LDTs (as authorized by CLIA and state law, respectively). Historically, the FDA, has exercised enforcement discretion with respect to most LDTs and has not required laboratories that furnish LDTs to comply with the agency's requirements for medical devices (e.g., establishment registration, device listing, quality systems regulations, premarket clearance or premarket approval, and post-market controls). Nevertheless, the FDA may decide to regulate certain LDTs on a case-by-case basis at any time.
Legislative proposals addressing the FDA's oversight of LDTs have been introduced in previous Congresses, and we expect that new legislative proposals will be introduced from time-to-time. The likelihood that Congress will pass such legislation and the extent to which such legislation may affect the FDA's plans to regulate certain LDTs as medical devices is difficult to predict at this time.
If the FDA ultimately regulates certain LDTs as medical devices, whether via final guidance, final regulation, or as instructed by Congress, our tests may be subject to certain additional regulatory requirements. Complying with the FDA's requirements for medical devices can be expensive, time-consuming, and subject us to significant or unanticipated delays. Insofar as we may be required to obtain premarket clearance or approval to perform or continue performing an LDT, we cannot assure you that we will be able to obtain such authorization. Even if we obtain regulatory clearance or approval where required, such authorization may not be for the intended uses that we believe are commercially attractive or are critical to the commercial success of our tests. As a result, the application of the FDA's medical device requirements to our tests could materially and adversely affect our business, financial condition, and results of operations.
Failure to comply with applicable FDA regulatory requirements may trigger a range of enforcement actions by the FDA including warning letters, civil monetary penalties, injunctions, criminal prosecution, recall or seizure, operating restrictions, partial suspension or total shutdown of operations, and denial of or challenges to applications for clearance or approval, as well as significant adverse publicity.
Pre-Market Approval
We may obtain FDA premarket approval, or PMA, for some of our tests including its matched whole exome sequencing, or WES, and whole transcriptome sequencing, or WTS, tests. Devices subject to FDA regulation must undergo premarket review prior to commercialization unless the device is exempt from such review, and we expect that we will be required to perform non-inferiority studies showing comparable results between the Sema4 Signal WES/WTS LDT and third party, FDA-approved tests with regard to certain therapeutic drugs prescribed to ovarian cancer patients, colorectal cancer patients, and non-small cell lung cancer patients. We are currently evaluating an updated pre-submission letter to the FDA with regard to the studies necessary for ovarian cancer and is working to secure access to the subjects necessary to perform this study. With regard to the studies necessary for colorectal cancer patients and non-small cell lung cancer patients, we submitted our pre-submission package and held a pre-submission meeting with the FDA in 2020, and are working to secure access to the subjects necessary to perform this study. Further, the regulations governing the approvals place substantial restrictions on how the tests will be marketed and sold, specifically, by prescription only. In addition, as a condition of Sema4’s FDA approval, we may be required to conduct post-approval studies.
Additionally, manufacturers of medical devices must comply with various regulatory requirements under the Food, Drug, and Cosmetic Act, or FDCA, and regulations thereunder, including, but not limited to, quality system regulations, unless they are exempt, facility registration, product listing, labeling requirements, and certain post-market surveillance requirements. Entities that fail to comply with FDA requirements can be liable for criminal or civil penalties, such as recalls, detentions, orders to cease manufacturing, and restrictions on labeling and promotion, among other potential sanctions.
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We may develop new diagnostic products and services that are regulated by the FDA as medical devices. The regulatory review and approval process for medical devices can be costly, timely, and uncertain. This process may involve, among other things, successfully completing additional clinical trials and submitting a premarket clearance notice or filing a premarket approval application with the FDA. If premarket review is required by the FDA, there can be no assurance that our tests will be cleared or approved on a timely basis, if at all. In addition, there can be no assurance that the labeling claims cleared or approved by the FDA will be consistent with our current claims or adequate to support continued adoption of and reimbursement for our products. Ongoing compliance with FDA regulations could increase the cost of conducting our business, subject us to FDA inspections and other regulatory actions, and potentially subject us to penalties in the event we fail to comply with such requirements.
HIPAA and HITECH
Under the administrative simplification provisions of the Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, the U.S. Department of Health and Human Services issued regulations that establish uniform standards governing the conduct of certain electronic healthcare transactions and protecting the privacy and security of protected health information used or disclosed by most healthcare providers and other covered entities and their business associates, including the business associates' subcontractors. We perform activities that may implicate HIPAA, such as providing clinical laboratory testing services and entering into specific kinds of relationships with covered entities and business associates of covered entities. As a covered entity and as a business associate of other covered entities (with whom we have entered into business associate agreements), we are required to comply with the four principal regulations with which have been issued in final form under HIPAA and HITECH: privacy regulations, security regulations, the breach notification rule, and standards for electronic transactions, which establish standards for common healthcare transactions.
The HITRUST CSF was developed to address the multitude of security, privacy, and regulatory challenges facing organizations. By including federal and state regulations, standards, frameworks, and incorporating a risk-based approach, the HITRUST CSF helps organizations address these challenges through a comprehensive and flexible framework of prescriptive and scalable security and privacy controls. The HITRUST CSF Includes, harmonizes, and cross-references existing, globally recognized standards, regulations, and business requirements, including ISO, EU GDPR, NIST, and PCI. On December 10, 2021, we met the HITRUST Assurance Program requirements for the CSF v9.4 Risk-based, 2-year (r2) certification criteria for our Centrellis Platform, for hosting and curating Patient data.
The privacy regulations cover the use and disclosure of protected health information by covered entities as well as business associates, which are defined to include subcontractors that create, receive, maintain, or transmit protected health information on behalf of a business associate. They also set forth certain rights that an individual has with respect to his or her protected health information maintained by a covered entity, including the right to access or amend certain records containing protected health information, or to request restrictions on the use or disclosure of protected health information. The security regulations establish requirements for safeguarding the confidentiality, integrity, and availability of protected health information that is electronically transmitted or electronically stored. HITECH, among other things, established certain health information security breach notification requirements. A covered entity must notify any individual whose protected health information is breached according to the specifications set forth in the breach notification rule. The HIPAA privacy and security regulations establish a uniform federal "floor" and do not supersede state laws that are more stringent or provide individuals with greater rights with respect to the privacy or security of, and access to, their records containing protected health information or insofar as such state laws apply to personal information that is broader in scope than protected health information as defined under HIPAA. Massachusetts, for example, has a state law that protects the privacy and security of personal information of Massachusetts residents.
There are significant civil and criminal fines and other penalties that may be imposed for violating HIPAA. A covered entity or business associate is also liable for civil money penalties for a violation that is based on an act or omission of any of its agents, including a downstream business associate, as determined according to the federal common law of agency. Additionally, to the extent that we submit electronic healthcare claims and payment
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transactions that do not comply with the electronic data transmission standards established under HIPAA and HITECH, payments to us may be delayed or denied.
Federal and State Fraud and Abuse Laws
In the U.S., there are various fraud and abuse laws with which we must comply, and we are potentially subject to regulation by various federal, state and local authorities, including CMS, other divisions of the U.S. Department of Health and Human Services including the Office of Inspector General, the U.S. Department of Justice, and individual U.S. Attorney offices within the Department of Justice, and state and local governments.
In the U.S., the federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, overtly, covertly, in cash or in kind to induce or in return for the furnishing, arranging for the furnishing of, purchasing, leasing, ordering or arranging for or recommending purchasing, leasing or ordering of any good, facility, service or item for which payment may be made in whole or in part by a federal healthcare program. Courts have stated that a financial arrangement may violate the Anti-Kickback Statute if any one purpose of the arrangement is to encourage patient referrals or other federal healthcare program business, regardless of whether there are other legitimate purposes for the arrangement. The definition of "remuneration" has been broadly interpreted to include anything of value, including gifts, discounts, credit arrangements, payments of cash, consulting fees, waivers of co-payments, ownership interests, and providing anything at less than its fair market value.
Although the Anti-Kickback Statute contains several exceptions, it is broad and may technically prohibit many innocuous or beneficial arrangements within the healthcare industry. Further, the U.S. Department of Health and Human Services issued a series of regulatory "safe harbors." These safe harbor regulations set forth certain provisions, which, if met, will assure healthcare providers and other parties that they will not be prosecuted under the federal Anti-Kickback Statute. Although full compliance with the statutory exceptions or regulatory safe harbors ensures against prosecution under the federal Anti-Kickback Statute, the failure of a transaction or arrangement to fit within a specific statutory exception or regulatory safe harbor does not necessarily mean that the transaction or arrangement is illegal or that prosecution under the federal Anti-Kickback Statute will be pursued. Penalties for federal anti-kickback violations are severe, and include imprisonment, criminal fines, civil money penalties, and exclusion from participation in federal healthcare programs. Many states also have anti-kickback statutes, some of which may apply to items or services reimbursed by any third-party payor, including commercial insurers.
There are also federal laws related to healthcare fraud and false statements, among others, relating to healthcare matters. The healthcare fraud statute prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private payors. A violation of this statute is a felony and may result in fines, imprisonment, or exclusion from governmental payor programs such as the Medicare and Medicaid programs. The false statements statute prohibits knowingly and willfully falsifying, concealing, or covering up a material fact, or making any materially false, fictitious, or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items, or services. A violation of this statute is a felony and may result in fines, imprisonment, or exclusion from governmental payor programs.
Another development affecting the healthcare industry is the increased enforcement of the federal False Claims Act and, in particular, actions brought pursuant to the False Claims Act's "whistleblower" or "qui tam" provisions. The False Claims Act imposes liability on any person or entity that, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment by a federal governmental payor program. The qui tam provisions of the False Claims Act allow a private individual to bring actions on behalf of the federal government alleging that the defendant has defrauded the federal government by submitting a false claim to the federal government and permit such individuals to share in any amounts paid by the entity to the government in fines or settlement. When an entity is determined to have violated the False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties ranging from $5,500 to $11,000 for each false claim.
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In addition, various states have enacted false claim laws analogous to the federal False Claims Act, although many of these state laws apply where a claim is submitted to any third-party payor and not merely a governmental payor program.
Additionally, the civil monetary penalties statute imposes penalties against any person or entity that, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or for a claim that is false or fraudulent. This law also prohibits the offering or transfer of remuneration to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary's selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state healthcare program, unless an exception applies.
On October 25, 2018, the Substance Use-Disorder Prevention that Promoted Opioid Recovery and Treatment for Patients and Communities Act of 2018, or the SUPPORT Act, was enacted. The SUPPORT Act included the Eliminating Kickbacks in Recovery Act of 2018, or EKRA, which establishes an all-payor anti-kickback prohibition that extends to arrangements with recovery homes, clinical laboratories and clinical treatment facilities. EKRA includes a number of statutory exceptions, and directs agencies to develop further exceptions. Current exceptions in some cases reference and in others differ from the Anti-Kickback Statute safe harbors. Significantly, the prohibitions apply with respect to the soliciting or receipt of remuneration for any referrals to recovery homes, clinical treatment facilities, or clinical laboratories, whether or not related to treating substance use disorders. Further, the prohibitions cover the payment or offer of remuneration to induce a referral to, or in exchange for, an individual using the services of, such providers. This law creates additional risk that relationships with referral sources could be problematic.
Physician Referral Prohibitions
Under a federal law directed at "self-referral," commonly known as the "Stark Law," there are prohibitions, with certain exceptions, on referrals for certain designated health services, including laboratory services, that are covered by the Medicare program by physicians who personally, or through an immediate family member, have a financial relationship with the entity to which the referrals for designated health services are made. The prohibition also extends to payment for any testing referred in violation of the Stark Law. A person who engages in a scheme to circumvent the Stark Law's referral prohibition may be fined up to $100,000 for each such arrangement or scheme. In addition, any person who presents or causes to be presented a claim to the Medicare program in violation of the Stark Law is subject to civil monetary penalties of up to $15,000 per service, an assessment of up to three times the amount claimed and possible exclusion from participation in federal healthcare programs. In addition, any person who presents or causes to be presented a claim to the Medicare program in violation of the Stark Law is subject to civil monetary penalties of up to $15,000 per service, an assessment of up to three times the amount claimed, and possible exclusion from participation in federal or state health care programs. Bills submitted in violation of the Stark Law may not be paid by Medicare, and any person collecting any amounts with respect to any such prohibited bill is obligated to refund such amounts. Many states have comparable laws that are not limited to Medicare referrals. The Stark Law also prohibits state receipt of Federal Medicaid matching funds for prohibited referrals, but this provision of the Stark Law has not been implemented by regulations. In addition, some courts have held that the submission of claims to Medicaid that would be prohibited as self-referrals under the Stark Law for Medicare could implicate the False Claims Act.
Corporate Practice of Medicine
Numerous states have enacted laws prohibiting business corporations, such as Sema4, from practicing medicine and employing or engaging physicians to practice medicine, generally referred to as the prohibition against the corporate practice of medicine. These laws are designed to prevent interference in the medical decision-making process by anyone who is not a licensed physician. For example, California's Medical Board has indicated that determining what diagnostic tests are appropriate for a particular condition and taking responsibility for the ultimate overall care of the patient, including providing treatment options available to the patient, would constitute the unlicensed practice of medicine if performed by an unlicensed person. Violation of these corporate practice of medicine laws may result in civil or criminal fines, as well as sanctions imposed against us and/or the professional
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through licensure proceedings. Typically, such laws are only applicable to entities that have a physical presence in the state.
Genetic Privacy and Testing Laws
We are subject to myriad laws designed to establish safeguards regarding the conduct of genomic testing and analysis and to protect against the misuse of genetic information and human biological specimens, collectively, “samples”, from which genetic information can be derived. These laws vary in their scope and in the nature of their requirements and restrictions. For example, certain genetic privacy laws prohibit the retention of samples after performing a genomic analysis in addition to prohibiting the use or disclosure of genetic information for certain purposes, such as research, without appropriate informed consent from the individual or without sufficient anonymization. The applicability of such informed consent requirements may also depend on the identifiability of the genetic information or sample and the purposes of which it is used. Other laws may impose additional requirements, including requirements regarding institutional review board review and approval for certain research uses of genetic information or samples requirements to implement certain security controls in connection with the transfer of genetic information. We must comply with such genetic privacy and testing laws in our collection, use, disclosure, and retention of genetic information and samples.
Other Health and Medical Regulations
The federal physician payment transparency requirements, or Physician Payments Sunshine Act, and its implementing regulations, which requires applicable manufacturers of covered drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the State Children’s Health Insurance Program, with certain exceptions, to annually report to HHS information related to certain payments or other transfers of value made or distributed to physicians, defined to include doctors, dentists, optometrists, podiatrists and chiropractors, and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. The SUPPORT Act, under a provision entitled “Fighting the Opioid Epidemic with Sunshine,” extends the Physician Payments Sunshine Act to payments and transfers of value to physician assistants, nurse practitioners and other mid-level healthcare providers, with reporting requirements going into effect in 2022 for payments and transfers of value made to these practitioners in 2021.
In addition to its comprehensive regulation of health and safety in the workplace in general, the Occupational Safety and Health Administration has established extensive requirements aimed specifically at laboratories and other healthcare-related facilities. In addition, because our operations require employees to use certain hazardous chemicals, we also must comply with regulations on hazard communication and hazardous chemicals in laboratories. These regulations require us, among other things, to develop written programs and plans, which must address methods for preventing and mitigating employee exposure, the use of personal protective equipment, and training.
Our commercialization activities subject us to regulations of the Department of Transportation, the U.S. Postal Service, and the Centers for Disease Control and Prevention that apply to the surface and air transportation of clinical laboratory specimens.
We are also subject to applicable state billing laws. Some states require that payment be made only to the person or entity who performed or supervised the service, while other states have passed anti-mark up and disclosure laws, an alternative but less enforceable approach to direct billing. Under these laws the non-performing person or entity is allowed to bill the client, but is prohibited from marking up the service, and required to disclose each charge to the patient, or patient’s insurer. Additionally, some states have strictly passed disclosure laws that require the non-performing person or entity to disclose to patients or the patient’s insurer the actual charges for all laboratory services.
Privacy and Data Protection Laws
There are a growing number of jurisdictions all over the world that have privacy and data protection laws. These laws are typically triggered by a company’s establishment or physical location in the jurisdiction, data processing activities that take place in the jurisdiction, and/or the processing of personal information about individuals located
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in that jurisdiction. Certain international privacy and data protection laws, such as those in the European Union, can be more restrictive and prescriptive than those in the U.S., while other jurisdictions can have laws less restrictive or prescriptive than those in the U.S. Enforcement of these laws vary from jurisdiction to jurisdiction, with a variety of civil or criminal penalties, or private rights of action.
The European Union’s General Data Protection Regulation, or GDPR, took effect on May 25, 2018. The GDPR extraterritorially applies to a business outside the European Union that offers goods or services to, or monitors the behavior of individuals who are located in the European Union. The GDPR imposes strict requirements on controllers and processors of personal data, including enhanced protections for “special categories” of personal data, which includes sensitive information such as health and genetic information of data subjects in the European Union. The GDPR also grants individuals various rights in relation to their personal data including the rights of access, rectification, objection to certain processing and deletion. The GDPR provides an individual with an express right to seek legal remedies if the individual believes his or her rights have been violated. Failure to comply with the requirements of the GDPR or the related national data protection laws of the member states of the European Union, which may deviate from or be more restrictive than the GDPR, may result in significant administrative fines issued by European Union regulators.
As of December 31, 2020, The United Kingdom of Great Britain and Northern Ireland, or UK, are no longer subject to EU law. Therefore, the GDPR will be brought into UK law as the ‘UK GDPR’ via a statutory instrument which will make technical amendments to the GDPR so that it works in a UK-only context. In Europe, there are also national laws that provide additional controls around the processing of health data.
The Payment Card Industry Data Security Standard, or PCI DSS, was issued by the Payment Card Industry Security Standards Council and establishes industry standards for the processing of payment card information. While the PCI DSS requirements do not have the force of law, the penalties for noncompliance could include exclusion from payment card systems. To the extent that we collect payment card information when receiving payments of insurance premiums or payments for our products or services, we comply with PCI DSS as applicable to our payment environment and PCI DSS merchant level, which is determined by our volume of payment card transactions per year.
FTC Act
As an entity regulated by the Federal Trade Commission, or FTC, we are subject to the FTC’s enforcement power under Section 5 of the Federal Trade Commission Act, or FTC Act. The FTC has policed privacy and data security through its broad power under Section 5 of the FTC Act. Under Section 5, “unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful.” Deceptive trade practices are defined by the FTC as material representations, omissions or practices that are likely to mislead a consumer acting reasonably in the circumstances to the consumer’s detriment. The FTC defines an “unfair” trade practice as one that “causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and is not outweighed by countervailing benefits to consumers or competition.”
The FTC has refrained from providing a checklist of uniformly acceptable data security practices or focusing on one single practice as actionable. Instead, the FTC has taken a holistic approach and relied on industry standards and other norms to identify a particular set of practices that, taken together, constitute adequate security practices for companies collecting personal information. In evaluating whether a data security practice is unfair, the FTC focuses largely on “substantial injury to consumers.” The harm need not be monetary or physical, though such injuries are commonly considered “substantial.” Further, the harm can consist of a risk rather than an actual loss.
CAN-SPAM Act
The Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, or CAN-SPAM Act, establishes rules for commercial electronic mail messages, gives recipients the right to opt out of certain messages, and establishes penalties for violations. We comply with the CAN-SPAM Act in connection with our transmittal of commercial electronic mail messages, or Commercial Email Messages. Commercial Email Messages do not include emails that are informational or are transactional or relationship messages.
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TCPA
The Telephone Consumer Protection Act of 1991, or TCPA, restricts the making of telemarketing calls and the use of automatic telephone dialing systems, artificial or prerecorded voice messages, SMS text messages, and facsimile transmissions. It also specifies several technical requirements for fax machines, autodialers, and voice messaging systems, principally with provisions requiring identification and contact information of the entity using the device to be contained in the message. We comply with TCPA in connection with our transmittal of automated, artificial, or prerecorded phone calls, SMS text messages, facsimile transmissions, and push notifications.
California Consumer Privacy Act
The California Consumer Privacy Act, or CCPA, is a comprehensive consumer privacy law that took effect on January 1, 2020, and regulates how certain for-profit businesses that do business in California collect, use, and disclose the personal information of consumers who reside in California. Among other things, the CCPA confers to California consumers the right to receive notice of the categories of personal information to be collected by a business, how the business will use and share the personal information, and the third parties who will receive the personal information; the rights to access, delete, or transfer personal information; and the right to receive equal service and pricing from a business after exercising a consumer right granted by the CCPA. In addition, the CCPA allows California consumers the right to opt out of the “sale” of their personal information, which the CCPA defines broadly as any disclosure of personal information to a third party in exchange for monetary or other valuable consideration. The CCPA also requires a business to implement reasonable security procedures to safeguard personal information against unauthorized access, use, or disclosure.
The CCPA does not apply to personal information that is Protected Health Information under HIPAA. The CCPA also does not apply to a HIPAA Covered Entity to the extent that the Covered Entity maintains patient information in the same manner as Protected Health Information. We are subject to the CCPA with respect to personal information we collect from California consumers that is neither PHI under HIPAA nor patient information that we maintain in the same manner as Protected Health Information.
The California Attorney General has authority to enforce the CCPA and its implementing regulations against covered businesses beginning on July 1, 2020. The CCPA provides for civil penalties for violations, as well as private right of action for data breaches that result from a business’ failure to implement reasonable security procedures.
Competition
Our competitors include companies that offer molecular genetic testing and other clinical diagnostic, life science research, drug discovery services, data services and healthcare analytics, and consumer genetics products. Principal competitors include companies such as Myriad Genetics, Inc., Ambry Genetics Corporation, Color Genomics, Inc., Invitae Corporation, Natera, Inc., Tempus Labs, Inc., Quest Diagnostics, Inc., Laboratory Corporation of America Holdings (or LabCorp), Exact Sciences Corp., 10x Genomics, Inc., Guardant Health, Inc., and Adaptive Biotechnologies, Twist Biosciences Corp., and Schrödinger, Inc., as well as other commercial and academic diagnostic and analytic service providers. In addition to the companies that currently offer traditional genetic testing services and research centers, other established and emerging healthcare, information technology and service companies may commercialize competitive products including informatics, analysis, integrated genetic tools and services for health and wellness.
We believe the principal competitive factors in our market are:
•Patient-centric approach;
•Breadth, depth, and quality of data assets;
•Price and quality of tests;
•Turnaround time of testing results;
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•Coverage and reimbursement arrangements with third-party payors;
•Depth and clinical applicability of interpretive insights;
•Degree of utility of patient and provider facing applications;
•Breadth of interpretive insights beyond just one episode of care;
•Convenience of testing;
•Brand recognition of test provider;
•Additional value-added services and informatics tools;
•Accessibility of results;
•Client service;
•Quality of website content; and
•Reliability
We believe that we compare favorably with our competitors on the basis of these factors. However, many of our competitors and potential competitors have longer operating histories, larger customer bases, greater brand recognition and market penetration, substantially greater financial, technological and research and development resources and selling and marketing capabilities, more experience dealing with third-party payors. As a result, they may be able to respond more quickly to changes in customer requirements, devote greater resources to the development, promotion and sale of their tests than Sema4 does, or sell their tests at prices designed to win significant levels of market share. We may not be able to compete effectively against these organizations.
Environmental Matters
Sema4’s operations require the use of hazardous materials (including biological materials) that subject it to a variety of federal, state, and local environmental and safety laws and regulations. Some of these regulations provide for strict liability, holding a party potentially liable without regard to fault or negligence. We could be held liable for damages and fines as a result of our, or our partners’, business operations should contamination of the environment or individual exposure to hazardous substances occur. We cannot predict how changes in laws or new regulations will affect our business operations or the cost of compliance.
Raw Materials and Suppliers
We rely on a limited number of suppliers, or, in some cases, sole suppliers, including Agilent Technologies, Inc., Illumina, Inc., Life Technologies Corporation, Agena Biosciences, Inc., MRC-Holland, Asuragen Inc., PerkinElmer Health Sciences, Inc., Fisher Scientific, Integra Biosciences Corporation, Thomas Scientific, Qiagen Inc., USA Scientific, Inc., Promega Corporation, Integrated DNA Technologies Incorporated, and Kapa Biosystems Inc., for certain laboratory reagents, as well as sequencers and other equipment and materials which we use in our laboratory operations. Our laboratory operations could be interrupted if we encounter delays or difficulties in securing these reagents, sequencers or other equipment or materials, and if we cannot obtain an acceptable substitute. Any such interruption could significantly affect our business, financial condition, results of operations and reputation. We believe that there are only a few other manufacturers that are currently capable of supplying and servicing the equipment necessary for our laboratory operations, including sequencers and various associated reagents. The use of equipment or materials provided by these replacement suppliers would require us to alter our laboratory operations. Transitioning to a new supplier would be time consuming and expensive, may result in interruptions in our laboratory operations, could affect the performance specifications of its laboratory operations or could require that we revalidate our tests. We cannot assure you that we would be able to secure alternative equipment, reagents, and other materials, or bring such equipment, reagents, and materials online and revalidate them without experiencing interruptions in our workflow. If we encounter delays or difficulties in securing,
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reconfiguring, or revalidating the equipment and reagents we require for our tests, our business and reputation could be adversely affected.
Customers
We provide our health information products and services to a broad range of customers, including health plans (including managed care organizations and other health insurance providers); clinicians; hospitals; employers; patients; federally qualified health centers; and Biopharma companies. In addition, during 2020 and 2021, the customers for our COVID-19 tests included state governments.
Depending on the billing arrangement and applicable law, the clinician or healthcare entity that orders our products or services may not be responsible for paying for the products or services ordered for their patients. In certain circumstances, the patient may be responsible for payment, and in others we seek payment from third party payers, such as a commercial health insurance company, Medicare or a Medicaid program, pursuant to contracts established between us and such third parties.
During 2021, reimbursement from health plans represented 79% and 76% of our diagnostic test revenue and total revenue, respectively. In 2021, two health plans each represented 10% or more of our consolidated total revenue, and no other health plans or other customers represented 10% or more of our consolidated total revenue.
Human Capital
Sema4 is mission driven. Our employees are passionate about changing healthcare and impacting lives. We attract entrepreneurs who are comfortable with ambiguity and thrive on innovation and thoughtful discourse. We empower our employees to iterate and rapidly execute on ideas.
It is our People Team’s mission to connect people to purpose. We achieve this through enablement of excellence across the employment journey, through stewardship of an engaged and inclusive culture, by growing individual, team and organizational capability, in delivering simplification and innovation, and by sharing data-driven people insights that transform our organization. All of this is in service of driving our business forward and optimizing patient health outcomes.
We are delivering a competitive package of compensation and benefits that aims to attract and retain strong talent, in a very competitive talent marketplace. As of December 31, 2021, we had approximately 1,200 employees, of which 54% are women and 46% are men. Our headcount grew by approximately 33% in 2021, and we hired approximately 500 employees in that timeframe, as a part of scaling our operations in connection with our transition to a public company and meeting our strategic priorities.
Our Diversity and Inclusion Council seeks to improve diversity, inclusion, equality, and global understanding by promoting dialogue, encouraging respectful understanding, providing information, participating in policy development, overseeing diversity education and training, and helping to foster respect for all employees. In 2022, we will be hosting our inaugural BIPOC Initiative Genomics Symposium, inviting select Ph.D. students and post doctorates for a two-day research symposium to strengthen our diverse hiring practices. Each attendee will present their original research, and will learn about science and career opportunities at Sema4.
We believe that our corporate culture fosters innovation, creativity, and teamwork. In this past year, we launched several programs and processes, which intend to help build a driven culture of alignment, development, compliance, and respect. We are in our second year of formal performance management processes, which are used to drive organizational alignment and includes tracking top-down business priorities and people development goals. The launch of two promotion cycles focus and enable employee career growth and mobility. We also implemented formal people manager learning, in order to build stronger people management skills for our leaders. We have optimized processes and transformed our people management solution in order to have greater systems capability, access to robust reporting, and to strengthen our analytical horsepower.
We have implemented a comprehensive compliance infrastructure, which advises Sema4 individuals and business affiliates on how to prevent, detect, report, and resolve matters of fraud, waste, threats, and abuse related to
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institutional policies and federal, state, and local laws and regulations. We have implemented various committees, councils and boards such as the Diversity & Inclusion Council, Data Governance Board, and IRB Review Board. These groups provide guidance for our employees, to empower them to perform according to our legal and ethical standards. We observe legal, regulatory, and industry trends and comprehensively adapt internal policies and practices as needed. We educate our Board members, executives, and other key employees about conflicts of interest and advise how to prevent and detect potential or actual conflicts of interest to safeguard from inappropriate external influence or impropriety.
We look to further strengthen our people infrastructure in 2022 through enhanced engagement surveys, values and behaviors programming, and formal talent reviews, with development planning.
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SEMA4’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the financial statements and related notes of the Company, included elsewhere in this proxy statement. This discussion contains forward-looking statements reflecting our current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” appearing elsewhere in this proxy statement.
Overview
We are a patient-centered, health intelligence company with a mission to use artificial intelligence, or AI, and machine learning to enable personalized medicine for all. By leveraging leading data scientists and technology, our platform powers remarkable and unique insights that transform the practice of medicine including how disease is diagnosed, treated, and prevented.
We were established out of Icahn School of Medicine at Mount Sinai or ISMMS, and commenced operations in June 2017 as a commercial entity that could effectively engage diverse patient populations and health care institutions at scale. We have since established and deployed our comprehensive and integrated genomic and clinical data platform and established a mature diagnostic testing business. We now maintain a database that includes more than 12 million de-identified individual clinical records, many with genomic profiles. We also manage a data asset over 47 petabytes in size, that has been expanding at more than 1 petabyte per month with an accelerating growth rate.
Currently, we derive the majority of our revenue from our diagnostic test solutions. Our diagnostic business generates revenue and engages with healthcare professionals working with patients primarily through our Women’s Health and Oncology solutions.
Our Women’s Health solutions sequence and analyze an industry-leading number of genes and use interpretive information tools to translate raw sequencing and clinical data efficiently and accurately into digestible clinical reports that guide decision-making by patients and physicians. Our Oncology diagnostic solutions feature both somatic tumor profiling and hereditary cancer screenings, along with a foundational whole exome and whole transcriptome sequencing approach. Our Sema4 Signal Hereditary Cancer solution determines if a patient carries an inherited genetic change that increases the risk of cancer or informs on cancer treatment. We believe our Signal Whole Exome and Transcriptome solution is one of the most comprehensive molecular profiling solutions from a commercial entity to receive New York State approval. Beginning in May of 2020, we also expanded our diagnostic testing services to include testing for the presence of COVID-19, which we intend to discontinue by March 31, 2022.
We have also expanded beyond diagnostic testing to enter into service agreements with third parties to provide diagnostic testing, research, and related data aggregation reporting services. We have established and continue to seek strategic relationships with pharmaceutical and biotech, or Biopharma, companies to enable innovation across the entire drug lifecycle, from next-generation drug discovery and development, to post-market efficacy surveillance, to informing on bioavailability, toxicity, tolerability, and other features critical to drug development.

Factors Affecting Our Performance
We believe several important factors have impacted, and will continue to impact, our performance and results of operations. While each of these areas presents significant opportunities for us, they also pose significant risks and challenges that we must address. See the section titled “Risk Factors” for more information.
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Number of resulted tests
We historically reported both accessioned and resulted tests as important factors impacting our performance. A test is resulted once the appropriate workflow is completed and details are provided to the ordered patients or healthcare professional for reviews, which corresponds to the timing of our revenue recognition. We believe the number of resulted tests in any period is more important and useful to our investors because it directly correlates with long-term patient relationships and the size of our genomic database. Therefore, we do not plan to report the number of accessioned tests.
Success obtaining and maintaining reimbursement
Our ability to increase the number of billable tests and our revenue therefrom will depend on our success in achieving reimbursement for our tests from third-party payors. Reimbursement by a payor may depend on several factors, including a payor’s determination that a test is appropriate, medically necessary, cost-effective, and has received prior authorization. Since each payor makes its own decision as to whether to establish a policy or enter into a contract to provide coverage for our tests, as well as the amount it will reimburse us for a test, seeking these approvals is a time-consuming and costly process.
In cases where we or our partners have established reimbursement rates with third-party payors, we face additional challenges in complying with their procedural requirements for reimbursement. These requirements often vary from payor to payor and are reassessed by third-party payors regularly. As a result, in the past we have needed additional time and resources to comply with the requirements.
We expect to continue to focus our resources on increasing the adoption of, and expanding coverage and reimbursement for, our current and any future tests we may develop or acquire. If we fail to expand and maintain broad adoption of, and coverage and reimbursement for, our tests, our ability to generate revenue and our future business prospects may be adversely affected.
Ability to lower the costs associated with performing our tests
Reducing the costs associated with performing our diagnostic tests is both our focus and a strategic objective. We source, and will continue to source, components of our diagnostic testing workflows from third parties. We also rely upon third-party service providers for data storage and workflow management.
Increasing adoption of our services by existing and new customers
Our performance depends on our ability to retain and broaden the adoption of our services with existing customers as well as our ability to attract new customers. Our success in retaining and gaining new customers is dependent on the market’s confidence in our services and the willingness of customers to continue to seek more comprehensive and integrated genomic and clinical data insights.
Investment in platform innovation to support commercial growth
We are seeking to leverage and deploy our Centrellis and Traversa platforms to develop a pipeline of future disease-specific research and diagnostic and therapeutic products and services. We have limited experience in the development or commercialization of clinical or research products in connection with our database and our Centrellis platform.
We operate in a rapidly evolving and highly competitive industry. Our business faces changing technologies, shifting provider and patient needs, and frequent introductions of rival products and services. To compete successfully, we must accurately anticipate technology developments and deliver innovative, relevant, and useful products, services, and technologies on time. As our business evolves, the competitive pressure to innovate will encompass a wider range of products and services. We must continue to invest significant resources in research and development, including investments through acquisitions and partnerships. These investments are critical to the enhancement of our current diagnostics and health information and data science technologies from which existing and new service offerings are derived.
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We expect to incur significant expenses to advance these development efforts, but they may not be successful. New potential services may fail at any stage of development and, if we determine that any of our current or future services are unlikely to succeed, we may abandon them without any return on our investment. If we are unsuccessful in developing additional services, our growth potential may be impaired.

Key Performance Indicators
We use the following key financial and operating metrics to evaluate our business and operations, measure our performance, identify trends affecting our business, project our future performance, and make strategic decisions. These key financial and operating metrics should be read in conjunction with the following discussion of our results of operations and financial condition together with our consolidated financial statements and the related notes and other financial information included elsewhere in this proxy statement.
The principal focus of our commercial operations is to offer our diagnostic tests through both our direct sales force and laboratory distribution partners. Test volume correlates with genomic database size and long-term patient relationships. Thus, test volumes drive database diversity and enable potential identification of variants of unknown significance and population-specific insights. The number of tests resulted is a key indicator that we use to assess the operational efficiency of our business. Once the appropriate workflow is completed, the test is resulted and details are provided to ordered patients or healthcare professionals for reviews.
During the year ended December 31, 2021, we resulted 709,942 tests in our laboratories, 418,053 tests of which were for COVID-19, compared to the period ended December 31, 2020, in which we resulted approximately 540,407 tests in our laboratories, 332,764 of which were for COVID-19. This 31% increase in resulted volume from 2020 to 2021 largely resulted from newly entered service agreements for COVID-19 testing as well as an increase in non-COVID-19 institutional testing. During the year ended December 31, 2019, we resulted approximately 155,497 tests in our laboratories, none of which were for COVID-19. The 248% increase in resulted volume from 2019 to 2020 largely resulted from newly entered service agreements for COVID-19 testing, offset by a slowdown in the base diagnostic business during the beginning of the COVID-19 pandemic given that many of our customers, including hospitals and clinics, had suspended non-emergency appointments and services.
As discussed above, we no longer report the number of accessioned tests as a key performance indicator because the number of resulted tests more directly correlates with long-term patient relationships and the size of our genomic database.

COVID-19 Impact
The ongoing COVID-19 pandemic has had, and continues to have, an extensive impact on the global health and economic environments since the initial outbreak in March 2020.
Beginning in April 2020, our diagnostic test volumes decreased significantly as compared to the prior year as a result of the COVID-19 pandemic and the related limitations and priorities across the healthcare system. In response, beginning in May 2020, we entered into several service agreements with state governments and healthcare institutions to provide testing for the presence of COVID-19 infection. COVID-19 test volumes grew significantly from the introduction of the service offering through the remainder of 2020 and further increased in 2021. To support the rapid expansion of COVID-19 test volumes, we increased our workforce through both temporary contractors and employees. In addition, while most of our revenues from genetic testing rely upon reimbursements from third party payors, healthcare institutions, and individuals, the majority of our COVID-19 test revenues rely upon reimbursements from state governments and healthcare institutions. In addition, COVID-19 testing yields lower revenues per tests and incurs lower costs to perform each test. We have also experienced a slowdown in receivable collections since the onset of the pandemic, but do not expect those collection trends to continue.
As part of our response to the ongoing COVID-19 pandemic, we have implemented various strategies to mitigate operating risks, reduce costs and improve cash collections. We have made significant advance purchases of test-related inventory in order to reduce the risk of potential business interruptions related to supply chain disruption. We also contracted with third-party vendors to collect and test COVID-19 samples to reduce operating risks related to employee health. Temporary COVID-19 austerity measures included cancellation of the 2020 annual merit
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compensation increase, temporary salary reductions from May through July 2020 and deferral of the 401(k) employer match from May through December 2020. The employer match was reinstated in January 2021, and the deferred portion was funded on March 9, 2021. To support our sales employees with commission-based compensation structure, we implemented temporary minimum commissions during the second quarter of 2020. No such minimums were in place in any quarter after the second quarter nor are any such minimums expected to be implemented again in the near term. No employee layoffs were implemented as part of these austerity measures.
As conditions improve, we are focused on overhauling our revenue cycle, and as part of transformational activities hired a Chief Revenue Officer and established a revenue cycle Center of Excellence. As part of our efforts to improve our collection efficiency and overall financial health, we are also undergoing various process transformations within the Order-to-Cash and Procure-to-Pay cycles.
While test volumes have since improved, we continue to experience changes in the mix of tests due to the impact of the COVID-19 and its variants. We anticipate that demand for COVID-19 tests will decrease as vaccines continue to be developed and deployed to the general population. For this reason, we announced in December 2021 that we had decided to discontinue COVID-19 testing services by March 31, 2022 and began notifying our COVID-19 testing solutions customers of this decision. We intend to dedicate all of our efforts and resources to our core mission to transform healthcare by using artificial intelligence to enable the delivery of precision medicine as the standard of care, and do not expect declines for our other revenue streams during 2022. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19 or its variants, the actions taken to contain it or treat it and the economic impact on local, regional, national and international markets and supply chains. Therefore, the COVID-19 pandemic could continue to have a material impact on our results of operations, cash flows and financial condition for the foreseeable future.
In March 2020, the Coronavirus Aid, Relief and Economic Security Act, or the CARES Act, was signed into law which was a stimulus bill that, among other things, provided assistance to qualifying businesses and individuals and included funding for the healthcare system. We received $5.4 million in 2020 as part of the stimulus, comprised of $2.6 million received under the Provider Relief Fund, or PRF, distribution and $2.8 million received under the Employee Retention Credit, or ERC, distribution. During 2021, we received an additional $5.6 million under the PRF distribution.
PRF distributions to healthcare providers are not loans and will not be required to be repaid; however, as a condition to receiving these payments, providers must agree to certain terms and conditions and submit sufficient documentation demonstrating that the funds are being used for healthcare-related expenses or lost revenue attributable to the COVID-19 pandemic. We have concluded it is probable that all terms and conditions associated with the PRF distribution have been met. As a result, we recorded the PRF distributions in other income (expense), net in the statements of operations and comprehensive loss during the periods in which we received the distributions.
ERC distributions are refundable tax credits for 50% of qualified wages paid to employees during the pandemic. A company is eligible for the ERC if it has not received a Paycheck Protection Program loan under the Cares Act and (1) its operations have been fully or partially suspended because of COVID-19 or (2) its gross receipts in a calendar quarter in 2020 declined by more than 50% from the same period in 2019. At the time of applying for the ERC, we concluded that it was reasonably possible the eligibility requirements would be met; however, due to a change in circumstances, we are re-evaluating our position. As such, we deferred the recognition of the ERC distribution and recorded the proceeds in other liabilities on the consolidated balance sheets as of December 31, 2021 and 2020.
At this time, we are not certain of the availability, extent or impact of any future relief provided under the CARES Act or other stimulus initiatives.
Recent Developments
In January 2022, we and our wholly-owned subsidiaries, Orion Merger Sub I, Inc., or Merger Sub I, and Orion Merger Sub II, LLC, or Merger Sub II, entered into an Agreement and Plan of Merger and Reorganization, or the
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Merger Agreement, with GeneDx, Inc., a New Jersey corporation, or GeneDx, and a wholly-owned subsidiary of OPKO Health, Inc., or OPKO, GeneDx Holding 2, Inc., or Holdco, and OPKO to acquire 100% of GeneDx. Subject to the terms and conditions of the Merger Agreement, we will pay consideration to OPKO for the Acquisition of (i) $150 million in cash at the closing of the Acquisition, subject to certain adjustments as provided in the Merger Agreement, (ii) 80 million shares of our Class A common stock to be issued at the closing of the Acquisition and (iii) up to $150 million payable following the closing of the Acquisition, if certain revenue-based milestones are achieved for each of the fiscal years ending December 31, 2022 and December 31, 2023. These milestone payments, if and to the extent earned under the terms of the Merger Agreement, will be satisfied through the payment and/or issuance of a combination of cash and shares of our Class A common stock (valued at $4.86 per share), with such mix to be determined in our sole discretion.
The completion of the Acquisition is subject to a number of closing conditions (which, as of the date of this proxy statement, have not been met), including certain regulatory and other third party approvals, the consummation of a pre-closing restructuring and certain approvals of our stockholders related to the Acquisition). The Acquisition is expected to close in the first half of 2022. If this pending Acquisition is consummated, consistent with our business model, we expect to leverage the combined health information database of Sema4 and GeneDx to partner with additional health systems and biopharma companies to transform patient care and therapeutic development and enable precision medicine for all.
Concurrently with the execution of the Merger Agreement, we entered into the Subscription Agreements with the PIPE Investors. The PIPE Investment will be consummated substantially concurrently with the closing of the Acquisition.

Components of Results of Operations
Revenue
We derive the majority of our revenue from diagnostic testing services, which primarily relate to Women’s Health, Oncology and COVID-19. We also recognize revenue from collaboration service agreements with Biopharma companies and other third parties pursuant to which we provide diagnostic testing and related data aggregation reporting services. As discussed above, in December 2021, we announced that we decided to discontinue COVID-19 testing services by March 31, 2022 and begun notifying its COVID-19 testing solutions customers of this decision.
We recognize revenue when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration which we expect to be entitled to in exchange for those goods or services.
Diagnostic Test Revenue
We primarily generate revenue from performing diagnostic testing services for three groups of customers: healthcare professionals working with patients with third-party insurance coverage or without third-party insurance coverage or those who elect to self-pay; and institutional clients, such as hospitals, clinics, state governments and reference laboratories. Customers are billed upon delivery of test results. The amount of revenue recognized for diagnostic testing services depends on a number of factors, such as contracted rates with our customers and third-party insurance providers, insurance reimbursement policies, payor mix, historical collection experience, price concessions and other business and economic conditions and trends. To date, the majority of our diagnostic test revenue has been earned from orders received for patients with third-party insurance coverage.
Our ability to increase our diagnostic test revenue will depend on our ability to increase our market penetration, obtain contracted reimbursement coverage from third-party payers, enter into contracts with institutions, and increase our reimbursement rate for tests performed.
Other Revenue
We generate revenue from providing diagnostic testing and related data aggregation reporting services under both short-term and long-term project-based collaboration service agreements with third parties. The terms of these
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contracts generally include non-refundable upfront payments, which we record as contract liabilities, and variable payments based upon the achievement of certain milestones during the contract term.
With respect to existing collaboration service agreements, our revenue may fluctuate period to period due to the pattern in which we may deliver our services, our ability to achieve milestones, the timing of costs incurred, changes in estimates of total anticipated costs that we expect to incur during the contract period, and other events that may not be within our control. Our ability to increase our revenue will depend on our ability to enter into contracts with third-party partners.
Cost of Services
The cost of services reflect the aggregate costs incurred in performing services. These costs include expenses for reagents and laboratory supplies, personnel-related expenses (comprising salaries and benefits) and stock-based compensation for employees directly involved in revenue generating activities, shipping and handling fees, costs of third-party reference lab testing and phlebotomy services and allocated genetic counseling, facility and IT costs associated with delivery services. Allocated costs include depreciation of laboratory equipment, facility occupancy, and information technology costs. The cost of services are recorded as the services are performed.
We expect the cost of services to generally increase in line with the anticipated growth in diagnostic testing volume and services we provide under our collaboration service agreements. However, we expect the cost per test to decrease over the long term due to the efficiencies we may gain from improved utilization of our laboratory capacity, automation, and other value engineering initiatives. These expected reductions may be offset by new tests which often have a higher cost per test during the introductory phases before we can gain efficiencies. The cost per test may fluctuate from period to period.
Research and Development Expenses
Research and development expenses represent costs incurred to develop our technology and future test offerings. These costs are principally associated with our efforts to develop the software we use to analyze data and process customer orders. These costs primarily consist of personnel-related expenses (comprising salaries and benefits), stock-based compensation for employees performing research and development, innovation and product development activities, costs of reagents and laboratory supplies, costs of consultants and third-party services, equipment and related depreciation expenses, non-capitalizable software development costs, research funding to our research partners as part of research and development agreements and allocated facility and information technology costs associated with genomics medical research. Research and development costs are generally expensed as incurred and certain non-refundable advanced payments provided to our research partners are expensed as the related activities are performed.
We generally expect our research and development expenses to continue to increase as we innovate and expand the application of our platforms. However, we expect research and development expenses to decrease as a percentage of revenue in the long term, although the percentage may fluctuate from period to period due to the timing and extent of our development and commercialization efforts and fluctuations in our compensation-related charges.
Selling and Marketing Expenses
Selling and marketing expenses primarily consist of personnel-related expenses (comprising salaries, and benefits) and stock-based compensation for employees performing commercial sales, account management, marketing, and allocation of genetic counseling services related to medical education. Selling and marketing costs are expensed as incurred.
We generally expect our selling and marketing expenses will continue to increase in absolute dollars as we expand our commercial sales and marketing and counseling teams and increase marketing activities. However, we expect selling and marketing expenses to decrease as a percentage of revenue in the long term, subject to fluctuations from period to period due to the timing and magnitude of these expenses.
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General and Administrative Expenses
General and administrative expenses primarily consist of personnel-related expenses (comprising salaries and benefits) and stock-based compensation for employees in executive leadership, legal, finance and accounting, human resources, information technology, strategy and other administrative functions. In addition, these expenses include office occupancy and information technology costs. General and administrative costs are expensed as incurred.
We generally expect our general and administrative expenses to continue to increase in absolute dollars as we increase headcount and incur costs associated with operating as a public company, including expenses related to legal, accounting, and regulatory matters; maintaining compliance with requirements of the Nasdaq and of the SEC; director and officer insurance premiums and investor relations. We expect these expenses to decrease as a percentage of revenue in the long term as revenue increases, although the percentage may fluctuate from period to period due to fluctuations in our compensation-related charges.
Related Party Expenses
Related party expenses primarily consist of amounts incurred in connection with transactions occurred with ISMMS for expenses under our transition services agreement, or TSA, with ISMMS which expired at the end of the first quarter of 2021, and other service agreements. Additional information can be found in our consolidated financial statements in Note 7, “Related Party Transactions” included elsewhere in this proxy statement.
We generally expect related party expenses to decrease as we establish our own internal and external resources to fulfill the administrative and other services we have historically procured from ISMMS.
Interest Income
Interest income primarily consists of interest earned on money market funds.
Interest Expense
Interest expense consists of interest costs related to our capital leases and our long-term debt arrangements, including unused line fee and the amortization of deferred transaction costs related to the loan and security agreement entered into with Silicon Valley Bank to provide a $125 million revolving credit facility described elsewhere in this proxy statement.
Other Income, Net
Other income, net primarily consists of funding received under the CARES Act. We recognized $2.6 million of the $5.4 million of funding received under the CARES Act as other income, net on the statements of operations and comprehensive loss during the year endingended December 31, 2020. We recognized $5.6 million of additional funding received under the CARES Act during the year ended December 31, 2021 and the amount is included in other income, net for the year ended December 31, 2021. In addition, the loss incurred due to early payment penalties recognized upon extinguishment of debt of $0.3 million is included in other income, net.
Results of Operations
A discussion regarding our financial condition and results of consolidated operations for the year ended December 31, 2021 compared to the year ended December 31, 2020 and for the year ended December 31, 2020 compared to the year ended December 31, 2019 is presented below.
Certain expenses were previously misclassified as cost of services and they are now reported as selling and marketing. The adjustment is reflected in the amounts reported below for years ended December 31, 2021, 2020 and 2019. Refer to Note 2, “Summary of Significant Accounting Policies” to our consolidated financial statements for further information included elsewhere in this proxy statement.


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Comparison of the Years Ended December 31, 2021 and 2020
The following table sets forth our results of operations for the periods presented:
Year Ended December 31,

20212020
(Restated)

(in thousands)
Revenue
Diagnostic test revenue$205,100 $175,351 
Other revenue7,095 3,971 
Total revenue212,195 179,322 
Cost of services228,797 175,296 
Gross (loss) profit(16,602)4,026 
Research and development105,162 72,700 
Selling and marketing112,738 63,183 
General and administrative205,988 100,742 
Related party expenses5,659 9,395 
Loss from operations(446,149)(241,994)
Other income (expense):

 Change in fair market value of warrant and earn-out contingent liabilities198,401 — 
Interest income79 506 
Interest expense(2,835)(2,474)
Other income, net5,114 2,622 
Total other income (expense), net200,759 654 
Loss before income taxes(245,390)(241,340)
Income tax provision— — 
Net loss and comprehensive loss(245,390)(241,340)
Redeemable convertible preferred stock dividends— — 
Net loss attributable to common stockholders$(245,390)$(241,340)
Revenue
Change
Year Ended December 31,2020 to 2021
20212020$%
(dollars in thousands)
Diagnostic test revenue$205,100 $175,351 $29,749 17 %
Other revenue7,095 3,971 3,124 79 %
Total revenue$212,195 $179,322 $32,873 18 %
Total revenue increased by $32.9 million, or 18%, to $212.2 million for the year ended December 31, 2021, from $179.3 million for the year ended December 31, 2020.
Diagnostic test revenue increased by $29.7 million, or 17%, to $205.1 million for the year ended December 31, 2021, from $175.4 million for the year ended December 31, 2020. The increase was primarily attributable to a 135% increase in oncology test volumes, a 38% increase in women’s health test volumes and an overall increase in volumes of 31%, partially offset by the change in the mix of tests performed and reduced reimbursement rates. COVID-19 testing was introduced in May of 2020, which had a lower impact on total test
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volume during the year ended December 31, 2020, compared to the year ended December 31, 2021 (with COVID-19 test volumes growing 26% year over year) .
Other revenue increased by $3.1 million, or 79%, to $7.1 million for the year ended December 31, 2021, from $4.0 million for the year ended December 31, 2020. The increase was primarily attributable to growth in collaboration service activities due to the execution of third-party contracts which generated $3.7 million more in revenues in 2021 compared to 2020. This was partially offset by reduced revenues recognized related to an existing third-party contract by $0.8 million.
Cost of Services (2020 amount restated)
Change
Year Ended December 31,2020 to 2021
20212020$%
(dollars in thousands)
Cost of services$228,797 $175,296 $53,501 31 %
Cost of services increased by $53.5 million, or 31%, to $228.8 million for the year ended December 31, 2021, from $175.3 million for the year ended December 31, 2020. The increase was primarily driven by the following cost components: a $9.7 million increase in stock-based compensation expense primarily driven by the increase in fair value of the liability-classified awards until July 22, 2021, the closing date of our business combination and an increase in the number of stock-based compensation awards granted; a $7.9 million increase in personnel-related expenses driven by an increase in average headcount; a $8.2 million increase in consulting and outside service costs driven by temporary hires contracted to perform COVID-19 testing activities; a $5.0 million increase in logistical expenses and other lab services as a result of an increase in operations; a $9.6 million increase in reagents and laboratory supplies expense due primarily to the 32% increase in volumes; a $2.4 million increase in software expenses due to increased cloud storage and expanded computing capacity requirements from New York City to Stamford, Connecticut for testing data; a $2.1 million increase in the inventory obsolescence reserve for expiring COVID-19 and certain carrier screening testing kits; a $2.2 million increase in occupancy expenses; a $5.1 million increase in depreciation expenses in connection with our laboratory move at the end of 2020, with production activities commencing at the Stamford facility in the first quarter of 2021 and a $1.3 million increase in equipment maintenance and general office expenses.
Research and Development
Change
Year Ended December 31,2020 to 2021
20212020$%
(dollars in thousands)
Research and development$105,162 $72,700 $32,462 45 %
Research and development expenses increased by $32.5 million, or 45%, to $105.2 million for the year ended December 31, 2021, from $72.7 million for the year ended December 31, 2020. The increase was primarily attributable to the following cost components: a $20.5 million increase in stock-based compensation expense driven by the increase in fair value of the liability-classified awards until the closing date of the business combination and an increase in the number of stock-based compensation awards granted; a $0.9 million increase in software expenses due to increased cloud storage; a $0.3 million increase in personnel-related expenses driven by an increase in average headcount a $4.8 million increase in depreciation expenses; a $3.6 million increase in expenses for reagents, laboratory supplies and laboratory software for research and development; and a $2.2 million increase in consulting fees.
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Selling and Marketing (2020 amount restated)
Change
Year Ended December 31,2020 to 2021
20212020$%
(dollars in thousands)
Selling and marketing$112,738 $63,183 $49,555 78 %
Selling and marketing expenses increased by $49.6 million, or 78%, to $112.7 million for the year ended December 31, 2021, from $63.2 million for the year ended December 31, 2020. The increase was primarily attributable to the following cost components: an $17.3 million increase in stock-based compensation expense driven by the increase in fair value of the liability-classified awards until the closing date of the business combination and an increase in the number of stock-based compensation awards granted; a $19.6 million increase in personnel-related expenses driven by increased headcount; a $4.1 million increase in consulting service expenses mainly to support revenue cycle transformation initiatives; a $3.2 million increase in information technology-related expenses; a $1.8 million increase in other administrative and office expenses; a $2.0 million increase in travel and business expenses due to the lifting of COVID-19 travel restrictions and a $1.5 million increase in counseling services.
General and Administrative
Change
Year Ended December 31,2020 to 2021
20212020$%
(dollars in thousands)
General and administrative$205,988 $100,742 $105,246 104 %
General and administrative expenses increased by $105.3 million, or 104%, to $206.0 million for the year ended December 31, 2021, from $100.7 million for the year ended December 31, 2020. The increase was primarily attributable to the following cost components: an $51.7 million increase in stock-based compensation expense driven by the increase in fair value of the liability-classified awards until the closing date of the business combination and an increase in the number of stock-based compensation awards granted; a $21.1 million increase in professional services incurred mainly in connection with the business combination transaction; a $20.0 million increase in personnel-related expenses driven by an increase in average headcount including executive headcount; a $5.0 million increase in software expenses due to increased cloud storage requirements; a $7.0 million increase in insurance expenses driven by the commencement of director’s insurance policy; and a $0.8 million increase in capital taxes as a result of the business combination transaction. These increases were partially offset by a $0.4 million decrease in occupancy and depreciation expenses in connection with our laboratory move from New York City to Stamford, Connecticut.
Related Party Expenses
Change
Year Ended December 31,2020 to 2021
20212020$%
(dollars in thousands)
Related party expenses$5,659 $9,395 $(3,736)(40)%
Related party expenses decreased by $3.7 million, or 40%, to $5.7 million for the year ended December 31, 2021, from $9.4 million for the year ended December 31, 2020. The decrease was primarily attributable to the following cost components: a $3.2 million decrease in rent and facility expenses driven by a reduction of office and lab space leased from ISMMS pursuant to the TSA which ended in the first quarter of 2021; and a $0.5 million decrease in fees associated with information technology support pursuant to the TSA with ISMMS.
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Interest Income
Change
Year Ended December 31,2020 to 2021
20212020$%
(dollars in thousands)
Interest income$79 $506 $(427)(84)%
Interest income decreased by $0.4 million, or 84%, to $0.1 million for the year ended December 31, 2021, from $0.5 million for the year ended December 31, 2020. The decrease was due to declines in interest rates on money market fund accounts.
Interest Expense
Change
Year Ended December 31,2020 to 2021
20212020$%
(dollars in thousands)
Interest expense$2,835 $2,474 $361 15 %
Interest expense increased by $0.4 million, or 15%, to $2.8 million for the year ended December 31, 2021, from $2.5 million for the year ended December 31, 2020. The increase was driven by new capital lease obligations for our Stamford laboratory facility which commenced operations in 2021 as well as the unused line fee and the amortization of deferred transaction costs related to the loan and security agreement entered into with Silicon Valley Bank at the end of 2021.
Other Income, Net
Change
Year Ended December 31,2020 to 2021
20212020$%
(dollars in thousands)
Other income, net$5,114 $2,622 $2,492 95 %
Other income, net increased by $2.5 million or 95% to $5.1 million for the year ended December 31, 2021, from $2.6 million for the year ended December 31, 2020. The increase in other income, net was primarily attributable to the $5.6 million in funding that we received and recognized as other income under the CARES Act in the first quarter of 2021, partially offset by $0.3 million in penalties related to an early repayment of debt. This is compared to $2.6 million in funding received in 2020.

195

Comparison of the Years Ended December 31, 2020 and 2019
The following table sets forth our results of operations for the periods presented:
Year Ended December 31,

2020 (Restated)2019
(Restated)

(in thousands)
Revenue

Diagnostic test revenue$175,351 $191,667 
Other revenue3,971 4,507 
Total revenue179,322 196,174 
Cost of services175,296 113,389 
Gross profit4,026 82,785 
Research and development72,700 34,910 
Selling and marketing63,183 39,352 
General and administrative100,742 29,484 
Related party expenses9,395 9,452 
Loss from operations(241,994)(30,413)
Other income (expense):

Interest income506 988 
Interest expense(2,474)(783)
Other income, net2,622 504 
Total other income, net654 709 
Loss before income taxes(241,340)(29,704)
Income tax provision— — 
Net loss and comprehensive loss(241,340)(29,704)
Redeemable convertible preferred stock dividends— 3,039 
Net loss attributable to common stockholders$(241,340)$(32,743)
Revenue
Change
2019 to 2020
20202019$%
Diagnostic test revenue$175,351 $191,667 $(16,316)(9)%
Other revenue3,971 4,507 (536)(12)%
Total revenue$179,322 $196,174 $(16,852)(9)%
Total revenue decreased by $16.9 million, or 9%, to $179.3 million for the year ended December 31, 2020, from $196.2 million for the year ended December 31, 2019.
Diagnostic test revenue decreased by $16.3 million, or 9%, to $175.4 million for the year ended December 31, 2020, from $191.7 million for the year ended December 31, 2019. The decrease was primarily attributable to a change in the mix of tests performed coupled with reduced reimbursement rates. The Company experienced an increase in volumes of 248%, primarily driven by the introduction of COVID-19 testing in May 2020. Despite these increased volumes, diagnostic test revenue decreased due to lower pricing on COVID-19 testing relative to other diagnostic tests and an overall decrease in average pricing on Women’s Health and Oncology testing.
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Other revenue decreased by $0.5 million, or 12%, to $4.0 million for the year ended December 31, 2020, from $4.5 million for the year ended December 31, 2019. The decrease was primarily attributable to the completion of one significant third-party contract in 2019 and the completion of one significant contract with ISMMS in early 2020. This decrease was partially offset by growth in collaboration service activities due to the execution of two new third-party contracts in 2020. Other revenues are expected to continue to be driven predominately by services performed pursuant to contracts with third parties.
Cost of Services (2020 and 2019 amounts restated)
Change
2019 to 2020
20202019$%
Cost of services$175,296 $113,389 $61,907 55 %
Cost of services increased by $61.9 million, or 55%, to $175.3 million for the year ended December 31, 2020, from $113.4 million for the year ended December 31, 2019. The increase was primarily attributable to the following cost components: a $17.5 million increase in reagents and laboratory supplies expense due primarily to the 248% increase in resulted volumes coupled with the lower per test cost of performing COVID-19 tests relative to our other tests; a $12.2 million increase in stock-based compensation expenses primarily driven by the increase in fair value of the liability-classified awards; an $11.1 million increase in personnel-related expenses driven by an increase in average headcount, partially offset by COVID-19 austerity measures; a $6.4 million increase in third party reference laboratory expenses due to an increase in tests performed by such third parties; a $4.6 million increase in expenses for other services such as genetic counseling, shipping and phlebotomy services; a $4.4 million increase in depreciation and amortization expenses driven by laboratory sequencing equipment acquired in 2020 and an increase in capitalized software as compared to the prior year; a $3.6 million increase in outside labor costs driven by temporary hires contracted in 2020 to perform COVID-19 testing activities as well as an increase in consultants supporting collaboration services; a $0.2 million increase in software expenses due to increased cloud storage and expanded computing capacity requirements for testing data; a $1.3 million increase in equipment-related expenses, including maintenance expenses on existing equipment and purchases of minor equipment in 2020; and a $0.5 million increase in occupancy costs.
Research and Development
2019 to 2020
20202019$%
Research and development$72,700 $34,910 $37,790 108 %
Research and development expense increased by $37.8 million, or 108%, to $72.7 million for the year ended December 31, 2020, from $34.9 million for the year ended December 31, 2019. The increase was primarily attributable to the following cost components: a $25.4 million increase in stock-based compensation expenses primarily due to an increase in fair value of the liability-classified awards and an increase in the number of stock-based compensation awards granted; a $9.3 million increase in personnel-related expenses driven by increased average headcount and retention bonuses offered to employees impacted by the relocation of our New York laboratory in December of 2020, partially offset by COVID-19 austerity measures; a $1.7 million increase in expenses for reagents, laboratory supplies and laboratory software for research and development use; and a $1.1 million increase in consulting and outside services, primarily due to an increase in the number of, and required investment in, research and development studies.
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Selling and Marketing (2020 and 2019 amounts restated)
Change
2019 to 2020
20202019$%
Selling and marketing$63,183 $39,352 $23,831 61 %
Selling and marketing expense increased by $23.8 million, or 61%, to $63.2 million for the year ended December 31, 2020, from $39.4 million for the year ended December 31, 2019. The increase was primarily attributable to the following cost components: a $11.4 million increase in personnel-related expenses driven by an increase in average headcount, partially offset by COVID-19 austerity measures; a $11.1 million increase in stock-based compensation expenses primarily due to an increase in the fair value of the liability-classified awards and an increase in the number of outstanding awards due to increase in the number of stock-based compensation awards granted; a $1.5 million increase in commissions due to an increase in sales employee headcount and the implementation of temporary minimum commissions offered to sales employees in response to the COVID-19 pandemic; a $1.0 million increase in other lab service; and a $0.6 million increase in software expenses due to increased cloud storage requirements. These increases were partially offset by a $1.8 million decrease in travel and business expenses due to reduced business travel during the COVID-19 pandemic.
General and Administrative
Change
2019 to 2020
20202019$%
General and administrative$100,742 $29,484 $71,258 242 %
General and administrative expense increased by $71.3 million, or 242%, to $100.7 million for the year ended December 31, 2020, from $29.5 million for the year ended December 31, 2019. The increase was primarily attributable to the following cost components: a $66.0 million increase in stock-based compensation expenses due to an increase in the fair value of the liability-classified awards and an increase in the number of outstanding awards due to increase in the number of stock-based compensation awards granted; a $1.4 million increase in occupancy expenses due to the execution of additional third party leases; and a $1.3 million increase in personnel-related expenses due to an increase in general and administrative headcount, partially offset by COVID-19 austerity measures.
Related Party Expenses
Change
2019 to 2020
20202019$%
Related party expenses$9,395 $9,452 $(57)(1)%
Related party expenses decreased by $0.1 million, or 0.6%, to $9.4 million for the year ended December 31, 2020, from $9.5 million for the year ended December 31, 2019. The decrease was primarily attributable to a $1.7 million decrease in service fees associated with a reduction of leased ISMMS employees, a $1.0 million decrease in fees associated with information technology support pursuant to the TSA with ISMMS and decreases in other various services provided by ISMMS pursuant to the TSA and service agreements. These decreases were partially offset by a $2.0 million increase in rent and facility expenses driven by additional office and lab space leased from ISMMS pursuant to the transition services agreement and a $0.5 million increase in consultant costs driven by an increase in research and development efforts performed by ISMMS under consulting agreements.
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Interest Income
Change
2019 to 2020
20202019$%
Interest income$506 $988 $(482)(49)%
Interest income decreased by $0.5 million, or 49%, to $0.5 million for the year ended December 31, 2020, from $1.0 million for the year ended December 31, 2019. The decrease was due to declines in interest rates on money market deposit accounts and reductions in the average cash balances held throughout the year in these interest-bearing accounts.
Interest Expense
Change
2019 to 2020
20202019$%
Interest expense$2,474 $783 $1,691 216 %
Interest expense increased by $1.7 million, or 216%, to $2.5 million for the year ended December 31, 2020, from $0.8 million for the year ended December 31, 2019. The increase was driven by an increase in capital lease obligations, an increase in our interest-bearing loan balance with the Connecticut Department of Economic and Community Development, or the DECD, and a new interest-bearing bank loan executed in 2020.
Other Income, Net
Change
2019 to 2020
20202019$%
Other income, net$2,622 $504 $2,118 420 %
Other income, net increased by $2.1 million or 420% to $2.6 million for the year ended December 31, 2020, from $0.5 million for the year ended December 31, 2019. The increase in other income, net was primarily attributable to $2.6 million in funding that we received under the CARES Act.

Reconciliation of Non-GAAP Financial Measures
In addition to our results determined in accordance with GAAP, we believe the following non-GAAP measures are useful in evaluating our operating performance. We use the following non-GAAP financial information to evaluate our ongoing operations, as a component in determining employee bonus compensation, and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. However, non-GAAP financial information is presented for supplemental informational purposes only and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial
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measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.
Non-GAAP financial measures have limitations as analytical tools and you should not consider them in isolation, or as substitutes for analysis of our results as reported under GAAP. We may in the future incur expenses similar to the adjustments in the presentation of Non-GAAP financial measures. Other limitations include that Non-GAAP financial measures do not reflect:
•all expenditures or future requirements for capital expenditures or contractual commitments;
•changes in our working capital needs;
•provision for income taxes, which may be a necessary element of our costs and ability to operate;
•the costs of replacing the assets being depreciated, which will often have to be replaced in the future;
•the non-cash component of employee compensation expense; and
•the impact of earnings or charges resulting from matters we consider not to be reflective, on a recurring basis, of our ongoing operations
Adjusted Gross Profit and Adjusted Gross Margin
Adjusted Gross Profit is a non-GAAP financial measure that we define as revenue less cost of services, excluding stock-based compensation expense, labor costs due to our move, and COVID-19 costs. We define Adjusted Gross Margin as our Adjusted Gross Profit divided by our revenue. We believe these non-GAAP financial measures are useful in evaluating our operating performance compared to that of other companies in our industry, as these metrics generally eliminate the effects of certain items that may vary from company to company for reasons unrelated to overall operating performance.
The following is a reconciliation of revenue to our Adjusted Gross Profit and Adjusted Gross Margin for the years ended December 31, 2021, 2020 and 2019 (in thousands):
Year Ended December 31,
20212020
(Restated)		2019
(Restated)
Revenue$212,195 $179,322 $196,174 
Cost of services228,797 175,296 113,389 
Gross (Loss) Profit
(16,602)4,026 82,785 
(8)%2 %42 %
Add:
Stock-based compensation expense$22,567 12,942 710 
Labor costs due to laboratory move (1)
— 16,391 — 
COVID-19 costs (2)
— 3,179 — 
Adjusted Gross Profit
$5,965 $36,538 $83,495 
Adjusted Gross Margin
3 %20 %43 %
__________________
(1)Represents labor costs in respect of laboratory employees' time spent to support our laboratory move from New York City to Stamford, Connecticut in 2020. During the move, our laboratory employees dedicated their time to re-validating and re-establishing instruments and equipment, rebuilding interface, obtaining a CLIA license, and other tasks to make sure the move was done correctly. For GAAP purposes we included these activities in Cost of Services. However, as the laboratory move and effort spent by our employees are one-time activities, we adjusted our Gross Profit to reflect management’s view of our normal operations.
(2)Represents labor costs in respect laboratory employees’ downtime. During the second quarter of 2020, we did not reduce the workforce in our laboratory due to the COVID-19 pandemic. However, we suffered significantly due to the decrease in volume in Women's Health and other products. Accordingly, we have adjusted our Gross Profit to reflect the management-assessed impact from the decrease in productivity of existing laboratory employees due to the COVID-19 pandemic in the second quarter of 2020.
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Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure that we define as net loss adjusted for interest expense (income), net, depreciation and amortization, stock-based compensation expenses, transaction costs, other (income) expense, net, COVID-19 costs and change in fair market value of warrant and earn-out contingent liabilities and. We believe Adjusted EBITDA is useful in evaluating our operating performance compared to that of other companies in our industry, as this metric generally eliminates the effects of certain factors that may vary from company to company for reasons unrelated to overall operating performance.
The following is a reconciliation of our net loss to Adjusted EBITDA for the years ended December 31, 2021, 2020, and 2019 (in thousands):
Year Ended December 31,
202120202019
Net loss$(245,390)$(241,340)$(29,704)
Interest expense (income), net (1)
2,756 1,968 (205)
Depreciation and amortization21,807 11,734 6,407 
Stock-based compensation expense219,421 120,231 5,482 
Transaction costs (2)
5,496 — — 
Other (income) expense, net (3)
(5,291)(2,622)(504)
COVID-19 costs (4)
— 3,179 — 
Change in fair market value of warrant and earn-out contingent liabilities (5)
(198,401)— — 
Adjusted EBITDA$(199,602)$(106,850)$(18,524)
__________________
(1)Represents the total of interest expense related to our capital leases and interest-bearing loans and interest income on money market funds.
(2)Represents professional service costs incurred in connection with pursuing the business combination transaction that did not meet the requirement for capitalization.
(3)For fiscal year 2020 and 2021, primarily consists of funding received under the CARES Act Provider Relief Fund.
(4)Represents labor costs in respect laboratory employees’ downtime. During the second quarter of 2020, we did not reduce the workforce in our laboratory due to the COVID-19 pandemic. However, we suffered significantly due to the decrease in volume in Women's Health and other products. Accordingly, we have adjusted our Gross Profit to reflect the management-assessed impact from the decrease in productivity of existing laboratory employees due to the COVID-19 pandemic in the second quarter of 2020.
(5)For the year ended December 31, 2021, represents the change in fair market value of the liabilities associated with our public warrants, private placement warrants and the earn-out shares issuable under the terms of the merger agreement for our business combination.


Liquidity and Capital Resources
On July 22, 2021, we completed the business combination with CMLS, consummated the Prior PIPE Investment and received net cash proceeds of $510 million. Management determined that the cash proceeds received from the business combination provides us with sufficient liquidity to meet our obligations for at least twelve months from the date of the filing of our Annual Report on Form 10-K for the year ended December 31, 2021.
Furthermore, on November 15, 2021, we entered into a loan and security agreement, or the SVB Agreement, with Silicon Valley Bank, or SVB, whereby SVB agreed to provide a $125 million revolving credit facility with a maturity date of November 15, 2024. No amounts were drawn as of December 31, 2021. Advances under the SVB Agreement will bear interest at a floating rate per annum equal to the greater of (1) 4.00% and (2) the prime rate plus an applicable margin
Accordingly, the consolidated financial statements included elsewhere in this proxy statement have been prepared on a basis that assumes we will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business. Nevertheless, we may also seek additional funding in the future through the sale of common or preferred equity or convertible debt securities, the entry into other credit facilities or another form of third-party funding or by seeking other debt financing. In particular, if the Acquisition is consummated, we expect to issue 50 million shares of our Class A common stock for an aggregate purchase price equal to $200 million pursuant to the PIPE Investment.
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Material Cash Requirements for Known Contractual Obligations and Commitments
The following is a description of commitments for known and reasonably likely cash requirements as of December 31, 2021 and December 31, 2020. We anticipate fulfilling such commitments with our existing cash and cash equivalents, which amounted to $400.6 million and $108.1 million as of December 31, 2021 and December 31, 2020, respectively, or through additional capital raised to finance our operations.
Our future minimum payments under non-cancellable operating lease and capital lease agreements were $68.3 and $65.6 million, respectively as of December 31, 2021. The timing of these future payments, by year, can be found in our consolidated financial statements in Note 9, “Commitments and Contingencies,” included elsewhere within this proxy statement.
Our future contractual purchase commitments were $23.1 million as of December 31, 2021. The timing of these future payments, by year, can be found in our consolidated financial statements in Note 9, “Commitments and Contingencies,” included elsewhere within this proxy statement.


Cash Flows
Year Ended
December 31,
202120202019
(in thousands)
Net cash used in operating activities$(190,434)$(93,128)$(18,728)
Net cash used in investing activities(20,786)(31,974)(15,456)
Net cash provided by financing activities493,729 129,056 148,012 
Operating Activities
Net cash used in operating activities during the year ended December 31, 2021 was $190.4 million, which was primarily attributable to a net loss of $245.4 million and a change in fair value of the warrant and earn-out contingent liabilities of $198.4 million, partially offset by non-cash depreciation and amortization of $21.8 million, non-cash stock-based compensation expense of $219.4 million, and a reserve against obsolete inventory of $2.1 million. The net change in our operating assets and liabilities primarily reflected a $5.5 million decrease in accounts receivable due to a decrease in institutional customer receivables which is in line with the respective revenue stream, a $10.6 million increase in inventories driven by a higher volume of purchases to support increasing testing volumes, a $14.3 million increase in prepaid expenses and other current assets mainly driven by new insurance policy premiums paid during the year, a $25.9 million increase in accounts payable and accrued expenses due to additional volume in the fourth quarter related to COVID-19 testing, resulting in increased related accruals and extended payment terms for large vendors, and a $3.2 million increase in other current liabilities mainly driven increased bonus accruals.
Net cash used in operating activities during the year ended December 31, 2020 was $93.1 million, which was primarily attributable to a net loss of $241.3 million, partially offset by non-cash depreciation and amortization of $11.7 million, non-cash stock-based compensation expense of $120.2 million and a net change in our operating assets and liabilities of $13.8 million. The net change in our operating assets and liabilities primarily reflected an increase in accounts receivable of $10.6 million driven by a slowdown in collections due to the COVID-19 pandemic, a $9.0 million increase in inventories in preparation for the move of certain laboratory operations to a new location in December 2020, an increase in accounts payable and accrued expenses of $14.8 million due to timing of vendor payments and increased spending during the year related to COVID-19 diagnostic testing and a $16.0 million increase in other current liabilities driven by higher personnel-related accruals due to increased headcount at 2020 year-end as compared to 2019 year-end, as well as an increase in accrued payroll taxes due to the deferral of U.S. payroll taxes as part of the CARES Act.
Net cash used in operating activities during the year ended December 31, 2019 was $18.7 million, which was primarily attributable to a net loss of $29.7 million and a net change in our operating assets and liabilities of
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$0.7 million, partially offset by non-cash depreciation and amortization of $6.4 million and non-cash stock-based compensation expense of $5.5 million. The net change in our operating assets and liabilities primarily reflected an increase in accounts receivable of $4.6 million driven by increase in testing volumes and billings, an $8.0 million increase in inventories driven by anticipated future growth due to a year-over-year increase in testing volumes for the year ended December 31, 2019 as compared to the year ended December 31, 2018, a $4.4 million increase in other assets due to security deposits on certain office and laboratory locations, an increase in accounts payable and accrued expenses of $12.8 million due to increased operating expenditures in line with the growth of the business and a $4.5 million increase in other current liabilities driven by higher personnel-related accruals due to increased headcount at 2019 year-end as compared to 2018 year-end.
Investing Activities
Net cash used in investing activities during the year ended December 31, 2021 was $20.8 million, which was attributable to $9.4 million in purchases of property and equipment and $11.4 million of costs related to development of internal-use software assets.
Net cash used in investing activities during the year ended December 31, 2020 was $32.0 million, which was attributable to $24.1 million in purchases of property and equipment and $7.9 million of costs related to development of internal-use software assets.
Net cash used in investing activities during the year ended December 31, 2019 was $15.4 million, which was attributable to $11.9 million in purchases of property and equipment and $3.5 million of costs related to development of internal-use software assets.
Financing Activities
Net cash provided by financing activities during the year ended December 31, 2021 was $493.7 million, which was attributable to the consummation of our business combination including: $350.0 million from the Prior PIPE Investment proceeds; $442.7 million from an equity infusion from the business combination, net of redemptions; offset by $230.7 million in the cash payments to certain Legacy Sema4 stockholders; payment of transaction costs of $51.8 million; and $3.8 million of stock appreciate rights pay-outs. These amounts were further offset by an $8.7 million repayment of long-term debt and $3.7 million of capital lease principal payments.
Net cash provided by financing activities during the year ended December 31, 2020 was $129.0 million, which was primarily attributable to $117.3 million in net cash proceeds from the issuance of our Series C redeemable convertible preferred stock and $15.9 million in net cash proceeds from the issuance of long-term debt. These increases were partially offset by $4.0 million in principal payments on our capital lease obligations and $0.2 million in principal payments on our long-term debt obligations.
Net cash provided by financing activities during the year ended December 31, 2019 was $148.0 million, which was attributable to $118.8 million in net cash proceeds from the issuance of our Series B redeemable convertible preferred stock and $30.9 million in capital contributions from ISMMS, partially offset by $1.7 million in principal payments on our capital lease obligations.


Critical Accounting Policies and Estimates
We have prepared our consolidated financial statements in accordance with GAAP. Our preparation of these consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities and related disclosures at the date of the financial statements, as well as revenue and expense recorded during the reporting periods. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and or other relevant assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
See Note 2, “Summary of Significant Accounting Policies” to our consolidated financial statements for further discussion on our accounting policies. We have identified below our accounting policies that we believe could
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potentially generate materially different results if we were to change underlying assumptions, estimates and/or judgments. Although actual results may differ from those estimates, we believe the estimates are reasonable and appropriate.
Revenue Recognition
We recognize revenue when, or as, performance obligations under the terms of a contract are satisfied, which occurs when control of the promised products or services are transferred to a customer. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products or services to a customer. Our contracts require significant judgments in determining the transaction price and satisfying performance obligations.
Diagnostic test revenue
We estimate a transaction price in arrangements with third-party insurance payors based on historical collection experience, contractual provisions and insurance reimbursement policies, payor mix, and other relevant information for applicable payor portfolios. The portfolio approach is used as a practical expedient to account for categories of diagnostic test contracts as collective groups rather than on an individual contract basis. Management believes that revenue recognized by utilizing the portfolio approach approximates the revenue that would have been recognized if an individual contract approach was used. For orders received for self-pay patients, we determine a transaction price associated with services rendered in consideration of implicit price concessions that are granted to such orders. The estimates for implicit price concessions require significant judgment and are based upon management’s assessment of expected net collections, business and economic conditions, historical trends, trends in federal, state and private employer health care coverage and other collection indicators. For institutional clients, the customer is the institution. We determine a transaction price associated with services rendered in accordance with the contractual rates established with each customer.
We monitor these estimates at each reporting period based on actual cash collections in order to assess whether a revision to the estimate is required. Both the initial estimate and any subsequent revision to the estimate contain uncertainty and require the use of judgment in the estimation of the transaction price and application of the constraint for variable consideration. If actual results in the future vary from our estimates, we will adjust these estimates, which could affect revenue and earnings in the period such variances become known. A 1% decrease or increase in our collection rate from third-party insurance payors, which we believe could be a reasonably likely change, would result in an unfavorable or favorable adjustment to diagnostic test revenue of approximately $16.2 million.
Other revenue
We also recognize revenue from service agreements and collaboration agreements with Biopharma companies and other third parties pursuant to which we provide diagnostic testing and related data aggregation reporting services. Certain of these contracts provide non-refundable upfront payments, which we record as contract liabilities, and variable payments based upon the achievement of certain milestones during the contract term. Milestone payments are a form of variable consideration that are included in the transaction price only when it is probable that doing so will not result in a significant reversal of cumulative revenue recognized when the uncertainty associated with the milestone is subsequently resolved.
For certain service or collaboration contracts that require us to transfer control of the service over time, we recognize revenue over time using an input measure based on costs incurred on the basis that this measure best reflects the pattern of transfer of control of the services to the customer. The measure of progress is developed using our best estimate of the performance period and the anticipated costs to be incurred to perform such services, including any subcontracted service costs.
Capitalized Internal-Use Software Costs
We capitalize certain costs related to the development of our software applications for internal use. Capitalization begins during the application development stage, once the preliminary project stage has been completed. If a project constitutes an enhancement to existing software, we assess whether the enhancement creates
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additional functionality to the software, thus qualifying the work incurred for capitalization. Costs incurred prior to meeting these criteria together with costs incurred for training and maintenance are expensed as incurred. Once the project is available for general release, capitalization ceases and we estimate the useful life of the asset and begin amortization. We exercise judgment in determining the point at which various projects may be capitalized, in assessing the ongoing value of the capitalized costs and in determining the estimated useful lives over which the costs are amortized. We periodically assess whether triggering events are present which would indicate that the internal-use software is impaired. To the extent that we change our estimates related to internal-use software, the amount of internal-use software development costs we capitalize and amortize could change in future periods.
Earn-out Contingent Liability
We estimate the fair value of the total earn-out shares based on a Monte Carlo simulation valuation model. The fair value of the earn-out contingent liability is sensitive to expected volatility estimated based on selected guideline public companies and the Company’s common stock price which is sensitive to changes in the forecasts of earnings and/or the relevant operating metrics. The model used requires the use of assumptions regarding variables that are complex, subjective and generally require judgment to determine.
Stock-Based Compensation
Stock-based compensation for all employee and non-employee stock-based awards, including restricted stock units, is measured at fair value on the date of grant and recognized over the service period. The fair value of restricted stock units are calculated based on the fair value of our common stock on the date of grant, while the fair value of stock options are calculated using a Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires the use of assumptions regarding a number of variables that are complex, subjective and generally require significant judgment to determine. Changes in the assumptions can materially affect the fair value and ultimately how much stock-based compensation expense is recognized. Key assumptions include expected volatility, expected term, risk-free interest rate and dividend yield. The volatility is estimated based on the average volatility for comparable publicly traded companies over a period equal to the expected term of stock option grants. When selecting these comparable companies, we considered the enterprise value, risk profiles, position within the industry, and whether there was sufficient historical share price information to meet the expected life of the stock-based awards. The expected term of the Company’s options has been determined utilizing the “simplified” method as the awards granted are qualified as “plain-vanilla” options. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for bonds with maturities consistent with the expected holding periods corresponding with the expected term of the option. We estimate zero dividend yield as we have not historically paid dividends on common stock and do not anticipate paying dividends in the foreseeable future.
Income Taxes
We account for income taxes in accordance with ASC Topic 740, “Income Taxes,” under which deferred income taxes are provided for temporary differences between the financial reporting and tax basis of our assets and liabilities. We reduce deferred tax assets, if necessary, by a valuation allowance if it is more likely than not that we will not realize some or all of our deferred tax assets. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations.
We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position.

JOBS Act Accounting Election
We are an “emerging growth company” within the meaning of the JOBS Act. The JOBS Act allows an emerging growth company to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. We have elected to use this extended transition period and, as a result, our financial statements may not be comparable to companies that comply with public company effective dates. We also intend to rely on other exemptions provided by the JOBS Act,
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including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act.
We will remain an emerging growth company until the earliest of (1) September 1, 2025, (2) the last day of the fiscal year in which we have total annual gross revenue of at least $1.07 billion, (3) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our Class A common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year or (4) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

Recent Accounting Pronouncements
Information on recent accounting pronouncements can be found in Sema4’s audited consolidated financial statements in Note 2, “Summary of Significant Accounting Policies” included elsewhere in this proxy statement.
Internal Controls
Material Weaknesses
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.
In connection with the preparation of Legacy Sema4's audited financial statements for the years ended December 31, 2020, 2019 and 2018, we identified material weaknesses in our internal controls over financial reporting, as of December 31, 2020. These material weaknesses had not been fully remediated as of December 31, 2021. In addition, during 2021, management identified a misclassification of certain costs included within cost of services for the years ended December 31, 2021, 2020 and 2019. The material weaknesses identified related to the fact that we did not design and maintain accounting policies, procedures and controls to ensure complete, accurate and timely financial reporting in accordance with U.S. GAAP. Specifically, the material weaknesses identified included the following:
•We did not design and maintain accounting policies, processes and controls to analyze, account for and report our revenue arrangements in accordance with ASC 606, Revenue from Contracts with Customers, and ASC 605, Revenue Recognition.
•We did not design and maintain formal accounting policies, procedures and controls to achieve complete, accurate and timely financial accounting, reporting and disclosures, including controls over the preparation and review of account reconciliations, journal entries and classification of certain costs; the accounting for cost capitalization policies in accordance with ASC 330, Inventory, and ASC 350-40, Intangibles – Goodwill and Other – Internal-Use Software; and the application of ASC 840, Leases, ASC 340-40, Contracts with Customers and SEC Regulation S-X Article 5.
•We had not developed and effectively communicated to our employees our accounting policies and procedures, which resulted in inconsistent practices. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.
•Our accounting and operating systems lacked controls over access, and program change management that are needed to ensure access to financial data is adequately restricted to appropriate personnel.
•We do not have sufficient, qualified finance and accounting staff with the appropriate U.S. GAAP technical accounting expertise to identify, evaluate and account for accounting and financial reporting, and effectively design and implement systems and processes that allow for the timely production of accurate financial information in accordance with internal financial reporting timelines, commensurate with our size and the nature and complexity of our operations. As a result, we did not design and maintain formal
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accounting policies, processes and controls related to complex transactions necessary for an effective financial reporting process.
Remediation Plan
Our management is actively engaged and committed to taking the steps necessary to remediate the control deficiencies that constituted the material weaknesses. During 2021, we made the following enhancements to our control environment:
•In May 2021, we hired a permanent Chief Accounting Officer with substantial technical accounting and internal controls experience, whose responsibilities include working with our Chief Financial Officer, existing employees and third-party consultants to improve the design, implementation, execution and supervision of our controls.
•We added accounting and information technology employees with appropriate experience, certification, education and training to the organization to strengthen our internal accounting team, to provide oversight, structure and reporting lines, and to provide additional review over our disclosures. This includes hiring a Corporate Controller, whose primary responsibilities include working with third-party consultants to improve the design, implementation, execution, and supervision of our controls. We expect to continue evaluating our needs for additional personnel. We expect to provide enhanced training to existing and new employees in order to enhance the level of communication and understanding of controls with personnel that provide key information and perform key roles within our financial accounting and reporting group.
•We engaged outside consultants to assist in the design, implementation, and documentation of internal controls that address the relevant risks, are properly designed, and provide for appropriate evidence of performance of the internal controls; and
•We engaged outside consultants to assist us in the evaluation of our Enterprise Resource Planning (“ERP”) system in order to mitigate the internal control gaps and limitations with the current configuration, and to enhance the information technology general controls environment.
•Our remediation activities are continuing during 2022. In addition to the above actions, we expect to engage in additional activities, including, but not limited to:
•Hiring more technical accounting resources to enhance our control environment;
•Engaging external consultants to provide support and to assist us in our evaluation of more complex applications of GAAP, and to assist us with documenting and assessing our accounting policies and procedures until we have sufficient technical accounting resources;
•Implementing business process-level controls across all significant accounts and information technology general controls across all relevant systems. This includes providing training for control owners that will present expectations as it relates to the control design, execution and monitoring of such controls, including enhancements to the documentation to evidence the execution of the controls; and
•Implementing improvements to our ERP system to enhance the accuracy of our financial records, enable the enforcement of systematic segregation of duties, and to improve our information technology general controls environment.
We continue to enhance corporate oversight over process-level controls and structures to ensure that there is appropriate assignment of authority, responsibility, and accountability to enable remediation of our material weaknesses. We believe that our remediation plan will be sufficient to remediate the identified material weaknesses and strengthen our controls. As we continue to evaluate, and work to improve our controls, management may determine that additional measures to address control deficiencies or modifications to the remediation plan are necessary.
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While we have performed certain remediation activities to strengthen our controls to address the identified material weaknesses, control weaknesses are not considered remediated until new internal controls have been operational for a period of time, are tested, and management concludes that these controls are operating effectively. We will continue to monitor the effectiveness of our remediation measures in connection with our future assessments of the effectiveness of internal control over financial reporting and disclosure controls and procedures, and we will make any changes to the design of our plan and take such other actions that we deem appropriate given the circumstances.
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GENEDX’S BUSINESS
In this section, “GeneDx” or “we”, “us” and “our” refer to GeneDx, Inc. unless specifically stated otherwise.
Overview
GeneDx is a patient-centric health information company and leader in delivering clinical genomic answers to an ever-increasing community of patients, families and healthcare providers. With more than 20 years of experience in diagnosing rare disorders and diseases, we have pioneered panels, exome and whole genome sequencing and have developed a proprietary genomic interpretation and information services platform in support of healthcare partners and patients globally. We create, follow, and are informed by cutting-edge science and technology. With one of the most sophisticated datasets of genomic information, we are able to identify new disease-causing genes, advancing the field of medicine through the detection, discovery, and diagnosis of genetic diseases.
Purpose
We operate with the conviction that what is best for our customers (patients, their families and the clinicians, payers and partners who serve them) must be embedded in every aspect of our work. We believe that:
•genomic information has broad utility, and every person should have access to their genome—delivered expertly, ethically and responsibly—to guide health decisions throughout life;
•the transition from hypothesis-based to genome-guided healthcare will improve outcomes for patients and the healthcare system;
•genomics will radically transform therapeutic development, bringing better therapies to patients, faster; and
•patients should control and have the ability to direct the use of their genomic information to benefit both themselves and advance scientific understanding that helps others.
In support of these beliefs, we value:
•Equity: the right of all to have access to information that may improve their health;
•Simplicity: healthcare is complicated. Genetic information is complex. Our job is to make it as simple as possible to access an answer that improves health outcomes. We value the understanding simplicity creates; and
•Transparency: transparency and accountability for ourselves and our partners to safeguard the confidence and trust of patients, customers and partners.
Through this value system, we aim to revolutionize healthcare and change lives by unlocking the answers from within, applying genomics to bring better health to patients around the world.
GeneDx’s Genomic Testing
When patients present with complex issues, a genetic diagnosis may be possible, but a traditional genetic panel test may be too narrow to identify the cause. The human genome is composed of three billion “letters”, or base pairs, of DNA. The exome is the portion of the genome that encodes for proteins, the molecular machines that allow cells to function. Changes in the genome and exome can cause many different diseases.
Some genetic disorders present with very specific symptoms; therefore, tests that read the “letters” of a single gene or a small panel of genes, may be appropriate. However, for many other genetic diseases, patients can present with overlapping symptoms. Finding the correct diagnosis is not always straight-forward and may require multiple tests, costly evaluations, invasive procedures, and long hospital stays. Exome and genome sequencing may find answers that more targeted genetic tests miss and are especially useful when the timing is critical and test results may direct or alter medical management.
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Founded by scientists from the U.S. National Institutes of Health (“NIH”) in 2000, GeneDx has a proven track record of expertise in genetic testing, having launched next generation sequencing panels in 2008, pioneered exome sequencing in 2012 and has now sequenced more than 300,000 exomes to date. We have performed more than one-million genetic tests and have developed the following:
•a curated database of disease-associated genomic variants;
•proprietary bioinformatics and variant interpretation pipelines; and
•rapid exome and whole genome sequencing testing options.
The current status quo of genetic testing generally requires repeated and fragmented testing, which in many cases, is conducted too late. Additionally, targeted genetic tests and panels have been largely commoditized and may leave physicians, healthcare partners and patients searching for deeper answers and enhanced utility. We believe that the scalable exome and whole genome interpretation that we can deliver at speed, no longer requiring a long, complex, expensive, expert-guided search, has the potential to make most other genetic tests obsolete.
Advanced technology with a human touch
With approximately 250 genetic counselors, M.D./Ph.D. scientists, and clinical and molecular genomics specialists, we believe that GeneDx is the industry’s leading genetic testing expert.
Our years of exome sequencing experience provides an enormous phenotyped clinical genomic dataset, including more than 2.1 million structured phenotypes with 60% as parent-child trios. Of particular importance, we have invested resources over time to annotate the phenotypes and sequence the parents, because they improve the diagnostic outcome of each case but also because that data improves the interpretation of future cases. We now have nearly twice as many expertly annotated disease-causing variants as the largest public resource, ClinVar, across more genes, which we have built over the course of a decade of clinical work.
Internally developed with over one-million sequenced specimens, we believe that our database leads to more and more reliable diagnostic test results. Combined with our proprietary, state-of-the-art variant identification software, we believe that our ability to deliver highly accurate test results makes finding definitive diagnoses, even in complex cases, possible. As the number of new patients we test increases, so does our database and as new data increases, so does the potential for greater insights. By comparing new cases against the data from previous cases, we may eventually confirm whether a genetic variant is significant. Once new findings are identified, we aim to proactively reach out to healthcare providers and offer to reanalyze their patients’ previous results. Over time, we expect to fully automate this reanalysis process in a convenient, easy to understand, frictionless method. Implemented with expert oversight, our advanced interpretation methods incorporate automation, bioinformatics, and machine learning, enabling efficient discovery of genetic differences at previously undetectable levels.
GeneDx’s Strategy to Lead
Leveraging these capabilities, we aim to be the global market leader in the development and delivery of reliable, actionable, scalable exome and genome sequencing, and related interpretation and information services. GeneDx’s strategy focuses on the following initiatives:
•expanding the utilization of exome and genome sequencing as the first- or second-tier test over most other germline tests among genetics experts;
•expanding the utilization of industry-leading exome and genome sequencing beyond the experts into the non-expert space globally, creating a new standard of care that enables faster diagnoses, reduces suffering, and helps healthcare systems save money. In the near term, we expect that our principal target markets will be settings with the most vulnerable patients who can benefit the most including, but not limited to, NICU and Pediatric Developmental Disorders; and
•opening new markets and geographies and unlocking the value of our dataset with independently scalable cloud-base interpretation and information service offerings.
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Industry Background and Market Opportunity
Targeted genetic tests and panel testing currently make up the overwhelming majority of medical diagnostics tests ordered today, and GeneDx offers such targeted genetics tests and panel testing. They require that clinicians know what they are looking for and how to find the test that could identify it. The foregoing is hypothesis-based medicine. We firmly believe that affordable, scalable and actionable genomic testing is the future of medicine, in which we sequence once, query often. The barrier to that affordable genome is very high—and not just due to sequencing costs—which are coming down. The less-discussed barrier lies in the ability to process a genome’s wealth of information—quickly, scalably—and deliver a result on which a clinician can easily act to help a patient.
While panel testing can be valuable, it has an inherent limitation as we move toward genetic-based care. Panels can lead to incomprehensive results and an inefficient process. Exome and whole genome testing provide the broadest view into the genome, as such testing can examine all 20,000 genes, whereas panels look at anywhere from two to a few hundred genes. While many of our competitors have grown through a focus on panels, we have focused on exome and whole genome sequencing, developing structured gene-disease knowledge curated by a group of experts to power automated interpretation and reporting.
From a business perspective, the genetic testing industry is highly fragmented: there are dozens of market participants, most of which are tackling the same problem test-by-test with thousands of panels across dozens of clinical areas. It is highly inefficient. But what we are all striving for is the consolidation of the space—who can provide all the answers, and create one test that obviates the need for most others.
In addition to its panel testing business, GeneDx intends to grow primarily by expanding its current market-leading exome position through commercial expansion of its current offerings in the NICU and PP/ID setting, as well as introducing interpretation and information services to clinicians, researchers and biopharmaceutical partners.
Over the long term, GeneDx intends to transform its industry-leading exome into whole genome testing, supported with the launch of a new customer experience platform for non-geneticists, patients and caregivers and evidence generation to establish the clinical and economic benefits of screening.
Customers and Seasonality
GeneDx receives payment for its products and services from business-to-business clients, third-party payers, patients and from other healthcare partners. Substantially all of its revenue for the year ended December 31, 2021 was primarily derived from diagnostic test reports. We expect over time to achieve a mix of diagnostic test revenue, revenue from screening products and information and interpretation services.
Less than five percent of GeneDx’s revenues for the year ended December 31, 2021 were derived from referral sources outside of the United States; however, we expect that, over time, the mix of U.S. vs. rest of world revenue will draw closer to parity.
GeneDx has historically experienced higher revenue in its fourth quarter compared to the first three quarters of the calendar year due in part to seasonal demand for its tests from patients who have met their annual insurance deductibles.
Competition
GeneDx’s competitors include companies that offer molecular genetic testing and consulting services, including specialty and reference laboratories that offer traditional single- and multi-gene tests, as well as biopharmaceutical companies. In addition, there are a large number of new entrants into the market for genetic information, ranging from informatics and analysis pipeline developers, to focused, integrated providers of genetic tools and services for health and wellness, including Illumina, Inc. which is also one of GeneDx’s suppliers. In addition to the companies that currently offer traditional genetic testing services and research centers, other established and emerging healthcare, information technology and service companies may commercialize competitive products including informatics, analysis, integrated genetic tools and services for health and wellness. Principal competitors include
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companies such as Exact Sciences, Invitae, Guardant Health, Myriad, Natera, Neogenomics, Personalis, and Prevention Genetics, as well as other commercial and academic labs.
GeneDx Corporate Office
GeneDx’s corporate office and the location of its 90,000 square-foot laboratory is 207 Perry Parkway, Gaithersburg, Maryland 20877, which is a leased space.
Market Information, Holders and Dividends.
GeneDx is currently an indirect, wholly-owned subsidiary of OPKO Health, Inc., and there is no established public trading market for any of GeneDx’s securities. Following the consummation of the Acquisition, GeneDx will become an indirect, wholly-owned subsidiary of Sema4. GeneDx has never paid cash dividends on its outstanding equity.
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GENEDX’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Factors Affecting Our Performance
We believe several important factors have impacted, and will continue to impact, our performance and results of operations. While each of these areas presents significant opportunities for us, they also pose significant risks and challenges that we must address. See the section titled “Risk Factors” for more information.
Comparison for The Years Ended December 31, 2021 and December 31, 2020
(In thousands)20212020Change% Change
Revenues    
Revenue from services$116,595 $94,712 $21,883 23 %
Other— 308 (308)(100)%
Total revenues116,595 95,020 21,575 23 %
Costs and expenses:    
Cost of revenue84,361 74,367 9,994 13 %
Selling, general and administrative52,439 41,583 10,856 26 %
Research and development12,377 9,110 3,267 36 %
Amortization of intangible assets16,813 16,813 — — %
Total costs and expenses165,990 141,873 24,117 17 %
Operating loss$(49,395)$(46,853)$(2,542)(5)%
Other income (expense)(44)(87)43 49 %
Income tax benefit12,547 12,037 510 4 %
Net loss and comprehensive loss$(36,892)$(34,903)$(1,989)(6)%
Revenue. Revenue from services increased $21.9 million, or 23%, to $116.6 million for the year ended December 31, 2021, from $94.7 million for the year ended December 31, 2020. The increase was primarily attributable to the following components:
•resulted test volumes of 146,982 increased 33% from 110,478 in 2020;
•exome and whole genome sequencing (WGS) revenue increased $22.5 million, resulting from a 45% increase in resulted test volumes partially offset by a decrease of $11.2 million from reduced test reimbursement resulting from a shift in overall payor mix towards third party and government payers;
•non-exome, non-WGS revenue increased $14.0 million from a 30% increase in test resulted volumes, which was partially offset by a decrease of $4.6 million from reduced test reimbursement resulting from increased commoditization and increased denial rates;
•biopharma and data services revenue increased $0.6 million; and
•estimated collection amounts are subject to the complexities and ambiguities of billing, reimbursement regulations and claims processing, as well as considerations unique to Medicare and Medicaid programs, and require us to consider the potential for retroactive adjustments when estimating variable consideration in the recognition of revenue in the period the related services are rendered. For the years ended December 31, 2021 and 2020, we recognized revenue reductions due to changes in estimates of implicit price concessions for performance obligations satisfied in prior periods of $4.2 million and $4.8 million, respectively.
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Other revenue consisted of $0.3 million for the year ended December 31, 2020 from funds distributed to healthcare providers for related expenses or lost revenues that are attributable to the COVID-19 pandemic. No such amounts were received in 2021.
Cost of revenue. Cost of revenue increased $10.0 million, or 13%, to $84.4 million for the year ended December 31, 2021, from $74.4 million for the year ended December 31, 2020. The increase was primarily attributable to the following components: increased reagent, supply and specimen collection costs of $8.4 million; an increase of $5.5 million in personnel-related expenses driven by increased testing volumes; increased depreciation and amortization of $0.9 million; and an increase in shared-based compensation of $0.2 million, partially offset by a discrete benefit of $5.5 million upon receipt of a multi-year sales & use tax refund from the State of Maryland. Our cost per patient encounter (on the basis of laboratory accessions in the period), inclusive of all volumes, improved 9% in 2021 compared to the year ended December 31, 2020.
Selling, general and administrative expenses. Selling, general and administrative expenses increased $10.9 million, or 26%, to $52.4 million for the year ended December 31, 2021, from $41.6 million for the year ended December 31, 2020. Selling, general and administrative expenses increased primarily due to the following components: increased information-technology related and other third party professional fees and license costs of $4.2 million to support the implementation of our expansion of various enterprise systems and other enablement technologies; increased sales and marketing personnel cost of $2.2 million; higher human resource, talent acquisition and onboarding costs of $1.7 to support expansions in our workforce; an increase of $1.2 million in non-cash share-based expense; $0.7 million related to professional fees in connection with the potential separation of GeneDx from OPKO; and $0.4 million increased facility costs, partially offset by $0.5 million lower billing cost.
Research and development expenses. The following table summarizes the components of our research and development expenses:
Research and Development ExpensesFor the years ended December 31,
 20212020
Research and development employee-related expenses$10,042 $6,844 
Other internal research and development expenses2,335 2,266 
Total research and development expenses$12,377 $9,110 
Research and development increased $3.3 million, or 36%, to $12.4 million for the year ended December 31, 2021 from $9.1 million for the year ended December 31, 2020 primarily due to increase personnel-related costs due to increased headcount across laboratory automation and robotics, bioinformatics and data research & development activities, as well as an increase of $0.2 million in share-based compensation expense.
Amortization of intangible assets. Amortization of intangible assets was $16.8 million for both the years ended December 31, 2021 and 2020. Amortization expense reflects the amortization of acquired intangible assets with defined useful lives.
Income tax benefit. Our income tax benefit for the years ended December 31, 2021 and 2020 was $12.5 million and $12.0 million, respectively, and reflects results using our expected effective tax rate. For the year ended December 31, 2020, the tax rate differed from the U.S. federal statutory rate of 21% primarily due to the impact of certain discrete tax events and the difference in state taxes.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2021, we had cash and cash equivalents of approximately $144 thousand.
Net cash used in operations for the year ended December 31, 2021 was $22.9 million primarily attributable to our net loss of $36.9 million and the net change in deferred income taxes of $12.6 million partially offset by non-cash depreciation and amortization expense of $21.9 million. Net cash used in operations for the year ended December 31, 2020 was $11.9 million primarily attributable to our net loss of $34.9 million and the net change in
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deferred income taxes of $12.2 million partially offset by non-cash depreciation and amortization expense of $20.9 million.
Net cash used in investing activities for the years ended December 31, 2021 and December 31, 2020 primarily reflects capital expenditures of $13.0 million and $9.8 million, respectively, predominantly related to the expansion and improvement to our newly outfitted 90,000 square-foot laboratory and to purchases of additional next generation sequencing equipment.
Net cash provided by financing activities for the year ended December 31, 2021 and December 31, 2020 includes equity contributions from BioReference Laboratories, Inc. (“BioReference”), our direct party company, of $35.9 million and $21.3 million, respectively, to fund operations. We have not generated sustained positive cash flow sufficient to offset our operating and other expenses.
In November 2015, BioReference and certain of its subsidiaries, including GeneDx, entered into a credit agreement with JPMorgan Chase Bank, N.A. (“CB”), as lender and administrative agent which was amended and restated on August 30, 2021 (the “A&R Credit Agreement”). The A&R Credit Agreement provides for a $75.0 million secured revolving credit facility and includes a $20.0 million sub-facility for swingline loans and a $20.0 million sub-facility for the issuance of letters of credit. The A&R Credit Agreement matures on August 30, 2024 and is guaranteed by all of BioReference’s domestic subsidiaries. The A&R Credit Agreement is also secured by substantially all assets of BioReference and its domestic subsidiaries, as well as a non-recourse pledge by BioReference’s partent company of its equity interest in BioReference. Availability under the A&R Credit Agreement is based on a borrowing base composed of BioReference’s eligible accounts receivables, which includes GeneDx, as specified therein. As of December 31, 2021, $64.8 million remained available for borrowing under the A&A Credit Agreement.
At BioReference’s option, borrowings under the A&R Credit Agreement (other than swingline loans) bear interest at (i) the CB floating rate (defined as the higher of (a) the prime rate and (b) the LIBOR rate (adjusted for statutory reserve requirements for Eurocurrency liabilities) for an interest period of one month plus 2.50%) plus an applicable margin of 0.75% or (ii) the LIBOR rate (adjusted for statutory reserve requirements for Eurocurrency liabilities) plus an applicable margin of 1.75%. Swingline loans will bear interest at the CB floating rate plus the applicable margin. The A&R Credit Agreement also calls for other customary fees and charges, including an unused commitment fee of 0.375% if the average quarterly availability is 50% or more of the revolving commitment, or 0.25% if the average quarterly availability is less than or equal to 50% of the revolving commitments
We believe that the cash and cash equivalents on hand as of December 31, 2021, cash from operations and the amounts available to be borrowed under the A&R Credit Agreement are sufficient to meet our anticipated cash requirements for operations and debt service beyond the next 12 months. We based this estimate on assumptions that may prove to be wrong or are subject to change, and we may be required to use our available cash resources sooner than we currently expect. If we acquire additional assets or companies, we will need additional funds. Our future cash requirements, and the timing of those requirements, will depend on a number of factors, including the potential for funds to be available upon closing of the acquisition of GeneDx by Sema4 Holdings Corp., which announced in January 2022 that it executed an Agreement and Plan of Merger and Reorganization with GeneDx, and its parent company, the availability of financing, payor claims, and legal proceedings that may arise, including, without limitation class action and derivative litigation to which we are subject, and our ability to obtain insurance coverage for such claims. We have not generated sustained positive cash flow and if we are not able to secure additional funding when needed, we may have to reduce our marketing or sales efforts or cease operations.
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The following table provides information as of December 31, 2021, with respect to the amounts and timing of our known contractual obligation payments due by period.
Contractual obligations
(in thousands)20222023202420252026ThereafterTotal
Open purchase orders14,492 — — — — — 14,492 
Operating Leases(396)1,048 1,659 1,715 1,773 9,116 14,915 
Total14,096 1,048 1,659 1,715 1,773 9,116 29,407 
Quantitative and Qualitative Disclosures about Market Risk
We are subject to general economic and political conditions such as recessions, wage and input cost inflation, governmental COVID-19 shut down mandates as a result of the pandemic and, potential acts of war or terrorism. We are not exposed to material market or interest rate risk in the ordinary course of our business given our limited cash position and no outstanding debt as of the periods presented.
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EXECUTIVE COMPENSATION OF SEMA4
Executive Compensation Overview
Objectives of our Executive Compensation Program
The main objectives of our executive compensation program are to create a competitive total rewards package to attract, retain and incent qualified executive officers who will lead us to long-term success and enhance stockholder value based on the balanced attainment of short-term performance objectives and long-term strategic goals. Each element of our compensation program supports these objectives.
Compensation of our Named Executive Officers
The following tables and accompanying narrative disclosure set forth information about the compensation earned by our named executive officers for the year ended December 31, 2021, who were:
•Eric Schadt, Ph.D., our Chief Executive Officer,
•Isaac Ro, our Chief Financial Officer, and
•James Coffin, Ph.D., our former President and Chief Operating Officer.
The named executive officers’ compensation primarily consists of (1) base salary, (2) annual discretionary cash bonus and (3) equity incentive awards. Our named executive officers, during their employment with us, are also eligible to participate in the same retirement and health and welfare benefit plans as its other full-time employees.
2021 Summary Compensation Table
The following table presents summary information regarding the total compensation for services rendered in all capacities that was awarded to and earned by our named executive officers during the year ended December 31, 2021.
Name and Principal PositionYearSalary ($)
Bonus ($)(1)
Stock Awards
($)(2)
Option
Awards
($)(2)
All Other Compensation ($)(3)
Total ($)
Eric Schadt, Ph.D. Chief Executive Officer and Director
2021650,000 513,000 10,699,239 3,867,064 41,533 15,770,836 
2020643,846 540,000 — 1,770,474 13,756 2,968,076 
Isaac Ro
Chief Financial Officer
2021353,846 139,333 7,897,167 2,633,103 16,615 11,040,064 
James Coffin, Ph.D.
Former President and Chief Operating Officer(4)
2021530,397 180,370 3,155,535 1,104,874 17,400 4,988,576 
2020524,615 363,000 623,189 — 11,169 1,521,973 
__________________
(1)The amounts reported reflect the annual performance-based cash bonus amounts awarded to our named executive officers for their service in 2021. For additional information regarding the bonus compensation, see “Narrative Disclosure to the Summary Compensation Table—2021 Bonuses.”
(2)Amounts represent the grant date fair value of the restricted stock units and stock options awarded to the named executive officer during 2021 in accordance with FASB Accounting Standards Codification Topic 718. The assumptions used in determining the grant date fair value of the restricted stock units and stock options are set forth in Note 10 of the notes to our audited consolidated financial statements included in this proxy statement. In determining the total value of the equity awards, we have considered all grants issued during the year as earned by the respective executive officers.
(3)The amounts reported in this column represent our matching contributions made on behalf of our named executive officers under our 401(k) plan and other personal benefits including reimbursement for travel costs in the amount of $24,133.
(4)Dr. Coffin left the Company in February 2022. Amounts reported include payments in respect of his 2021 bonus pursuant to our separation agreement with Dr. Coffin.
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Narrative Disclosure to the Summary Compensation Table
2021 Bonuses
Under their employment agreements, Dr. Eric Schadt and Mr. Ro are entitled to receive annual bonuses based on the achievement of certain corporate and individual performance objectives. Prior to his leaving the Company, Dr. Coffin was also entitled to receive annual bonuses based on the achievement of corporate performance objectives. For the 2021 bonuses, the target annual bonuses for Dr. Schadt and Mr. Ro were equal to 100% and 50%, respectively, of their respective annual base salaries. In February 2022, based on the achievement of corporate and individual performance objectives, the Compensation Committee determined to award bonuses for 2021 to Dr. Schadt, and to Mr. Ro on a pro rata basis based on his hire date, as set forth in the table above. Further, pursuant to a separation agreement we entered into with Dr. Coffin in January 2022, we agreed to pay Dr. Coffin a 2021 bonus in the amount reflected in the table above.
2021 Equity Awards
Our company offers stock options as well as service-based RSUs to our named executive officers as the long-term incentive component of our compensation program. Stock options allow employees to purchase shares of our Class A common stock at a price per share at least equal to the fair market value of our Class A common stock on the date of grant and may or may not be intended to qualify as “incentive stock options” for U.S. federal income tax purposes. All of our named executive officers received RSU awards in recognition of their service to us and to further incentivize continued performance. Generally, our equity-based awards vest over four years, subject to the employee’s continued employment with us on each vesting date. In connection with the Prior Merger Agreement and following the closing of the business combination, we also granted RSUs in the form of “Earnout RSUs” to our named executive officers that vest subject to certain market-based and service-based vesting conditions. In December 2021, we also issued stock bonuses to our employees who were hired on or before June 30, 2021, including our named executive officers, in connection with the termination of our sabbatical leave program. The stock bonuses were fully vested as of the date of issuance.
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Outstanding Equity Awards at 2021 Fiscal Year-End
The following table sets forth information concerning outstanding equity awards held by each of our named executive officers as of December 31, 2021.
Option Awards(1)

Stock Awards(1)
NameGrant DateNumber of Securities Underlying Unexercised Options Exercisable (#)Number of Securities Underlying Unexercised Options Unexercisable (#)Option Exercise Price ($)Option Expiration DateNumber of Shares or Units of Stock That Have Not Vested (#)
Market Value of Shares or Units of Stock That Have Not Vested ($)(*)
Eric Schadt
6/1/2017(2)
4,829,521 — $0.1529 5/31/2027— — 
10/17/2019(3)
851,357 510,815 $0.7659 10/16/2029— — 
2/18/2020(4)
1,300,203 1,011,285 $0.7659 2/17/2030— — 
10/1/2021(5)
52,541 788,125 $7.62 9/30/2031— — 
10/1/2021(5)
1,182,187 $5,272,552 
12/9/2021(6)
— — — — 223,830 $309,334 
12/9/2021(7)
— — — — 35,054 $48,444 
12/9/2021(8)
— — — — 197,635 $273,133 
12/9/2021(8)
— — — — 83,818 $115,836 
12/9/2021(9)
— — — — 201,720 $278,778 
Isaac Ro
10/1/2021(10)
108,507 470,197 $7.62 9/30/2031— — 
10/1/2021(10)
— — — — 812,500 $3,623,750 
12/9/2021(11)
— — — — 197,848 $273,428 
James Coffin
8/31/2017(12)
2,167,093 — $0.1529 8/30/2027— — 
2/18/2020(4)
457,659 355,961 $0.7659 2/17/2030— — 
10/1/2021(5)
15,011 225,179 $7.62 9/30/2031— — 
10/1/2021(5)
— — — — 337,767 $1,506,442 
12/9/2021(6)
— — — — 189,119 $261,363 
12/9/2021(13)
— — — — 29,056 $40,155 
12/9/2021(14)
— — — — 41,946 $57,968 
__________________
(*)The closing market price of our Class A common stock on December 31, 2021 was $4.46 per share.
(1)The outstanding stock options were granted under our 2021 Equity Incentive Plan and Legacy Sema4’s 2017 Equity Incentive Plan, as applicable. The outstanding RSUs were granted under our 2021 Equity Incentive Plan and pursuant to the Prior Merger Agreement, as applicable.
(2)The shares underlying the stock option are fully vested.
(3)The stock option vests at in quarterly installments over a four-year period. 100% of the shares underlying the stock option will vest (a) in the event that the service provider’s option is not assumed or replaced by the buyer in connection with a change of control transaction or (b) upon termination of the service provider’s employment by us without cause or by the service provider for good reason in connection with a change in control transaction.
(4)The stock option vests in quarterly installments over a four-year period. 100% of the shares underlying the stock option will vest (a) in the event that the service provider’s option is not assumed or replaced by the buyer in connection with a change of control transaction or (b) upon termination of the service provider’s employment by us without cause or by the service provider for good reason in connection with a change in control transaction.
(5)The stock options and RSU vest in quarterly installments over a four-year period. 100% of the shares underlying the stock options and RSUs will vest (a) in the event that the service provider’s option is not assumed or replaced by the buyer in connection with a change of control transaction or (b) upon termination of the service provider’s employment by us without cause or by the service provider for good reason in connection with a change in control transaction.
(6)The RSUs were granted pursuant to the Prior Merger Agreement. The vesting of the RSUs is conditioned on the satisfaction of both a service requirement and a market-based requirement. The service requirement is deemed satisfied as of the grant date.
(7)The RSUs were granted pursuant to the Prior Merger Agreement. The vesting of the RSUs is conditioned on the satisfaction of both a service requirement and a market-based requirement. The service requirement is deemed satisfied as of the grant date with respect to 12,254 of the RSUs, and will be satisfied with respect to the remainder of the RSUs over four vesting periods, subject to the officer’s continued service to us on each service-based vesting date.
(8)The RSUs were granted pursuant to the Prior Merger Agreement. The vesting of the RSUs is conditioned on the satisfaction of both a service requirement and a market-based requirement. The service requirement is deemed satisfied as of the grant date with respect to 54,532
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of the RSUs, and will be satisfied with respect to the remainder of the RSUs over five semi-annual periods, subject to the officer’s continued service to us on each service-based vesting date.
(9)The RSUs were granted pursuant to the Prior Merger Agreement. The vesting of the RSUs is conditioned on the satisfaction of both a service requirement and a market-based requirement. The service requirement is deemed satisfied as of the grant date with respect to 100,737 of the RSUs, and will be satisfied with respect to the remainder of the RSUs over eight quarterly periods, subject to the officer’s continued service to us on each service-based vesting date.
(10)1/8th of the total shares underlying the stock options and RSUs vested on October 25, 2021, 1/16th of the total shares vested on November 8, 2021, and the RSUs thereafter vests as to 1/16th of the total shares underlying the award in quarterly installments until fully vested on February 8, 2025, subject to the officer's continued service to us on each vesting date. 100% of the shares underlying the stock options and RSUs will vest (a) in the event that the service provider’s option is not assumed or replaced by the buyer in connection with a change of control transaction or (b) upon termination of the service provider’s employment by us without cause or by the service provider for good reason in connection with a change in control transaction.
(11)The RSUs were granted pursuant to the Prior Merger Agreement. The vesting of the RSUs is conditioned on the satisfaction of both a service requirement and a market-based requirement. The service requirement is deemed satisfied as of the grant date with respect to 24,701 of the RSUs, and will be satisfied with respect to the remainder of the RSUs over 14 quarterly periods, subject to the officer’s continued service to us on each service-based vesting date.
(12)The shares underlying the stock option are fully vested.
(13)The RSUs were granted pursuant to the Prior Merger Agreement. The vesting of the RSUs is conditioned on the satisfaction of both a service requirement and a market-based requirement. The service requirement is deemed satisfied as of the grant date with respect to 6,263 of the RSUs, and will be satisfied with respect to the remainder of the RSUs over six quarterly periods, subject to the officer’s continued service to us on each service-based vesting date. Dr. Coffin left the Company in February 2022.
(14)The RSUs were granted pursuant to the Prior Merger Agreement. The vesting of the RSUs is conditioned on the satisfaction of both a service requirement and a market-based requirement. The service requirement is deemed satisfied as of the grant date with respect to 29,196 of the RSUs, and will be satisfied with respect to the remainder of the RSUs over four vesting periods, subject to the officer’s continued service to us on each service-based vesting date. Dr. Coffin left the Company in February 2022.
Employment Agreements with Our Current Named Executive Officers
Each of our current named executive officers has entered into an employment agreement with us that provides for at-will employment and includes each named executive officer’s base salary, a discretionary incentive bonus opportunity and standard employee benefit plan participation. The employment agreements provide for an annual base salary of $675,000 and a target annual bonus of 100% of annual base salary, in the case of Dr. Schadt, and an annual base salary of $400,000 and a target annual bonus of 50% of annual base salary, in the case of Mr. Ro. The employment agreements also provide for the potential payments and benefits upon a termination of employment or in connection with a change in control as described below in “—Potential Payments upon Termination or Change in Control.” In addition, Dr’s Schadt’s and Mr. Ro’s employment agreements provided for each to receive certain equity-based incentive awards following the closing of the business combination, which awards were granted under the 2021 Equity Incentive Plan (the “2021 EIP”) and are subject to service-based vesting conditions. For more information, see“—Outstanding Equity Awards at 2021 Fiscal Year-End.”
In addition, pursuant to their employment agreements, each of Dr. Schadt and Mr. Ro agreed that, during the nine-month period following the closing of our business combination, he will not: (i) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act, with respect to any shares of our Class A common stock, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any of such shares, in cash or otherwise, or (iii) publicly announce any intention to effect any transaction specified in clause (i) or (ii).
Potential Payments upon Termination or Change in Control
Pursuant to his employment agreement, if Dr. Schadt is terminated without “cause” or resigns for “good reason” (as such terms are defined in his employment agreement) other than in connection with a change in control, he will be entitled to receive 24 months of base salary continuation and continued coverage under our group health benefit plans, subject to his execution of a release of claims. If instead such termination occurs within the period commencing three months prior to and ending 12 months following a change in control, he will be entitled to receive 24 months of base salary continuation, a lump sum payment equal to two times his target annual bonus, 24 months of continued coverage under our group health benefit plans, and accelerated vesting of his outstanding equity-based compensation awards, subject to his execution of a release of claims.
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Pursuant to his employment agreement, if Mr. Ro is terminated without “cause” or resigns for “good reason” (as such terms are defined in his employment agreement) other than in connection with a change in control, he will be entitled to receive 9 months of base salary continuation and 12 months of continued coverage under our group health benefit plans, subject to his execution of a release of claims. If instead such termination occurs within the 12-month period following a change in control, he will be entitled to receive 12 months of base salary continuation, a lump sum payment equal to one times his target annual bonus, 12 months of continued coverage under our group health benefit plans, and accelerated vesting of his outstanding equity-based compensation awards, subject to his execution of a release of claims.
As described above in “—Outstanding Equity Awards at 2021 Fiscal Year-End”, a portion of the stock options held by Dr. Schadt would vest upon a change in control transaction.
Separation Agreement with Our Former Named Executive Officer
In connection with Dr. Coffin’s departure from our company in February 2022, we and Dr. Coffin entered into a separation agreement (the “Separation Agreement”), pursuant to which Dr. Coffin received the following severance benefits in exchange for his execution of release of claims:
•a severance payment equal to 12 months of Dr. Coffin’s annual base salary in the amount of $550,000;
•a discretionary 2021 annual bonus payment in the amount of $180,370;
•12 months of reimbursement of COBRA continuation benefits;
•accelerated vesting of 25,425 stock options that were otherwise scheduled to vest on February 2, 2022 in the amount of $58,233, which is calculated based on the fair value estimated as of the effective date of his Separation Agreement; and
•an extended period to exercise certain of Dr. Coffin’s vested stock options through May 30, 2022.
Equity Compensation Plans and Other Benefit Plans
2021 Equity Incentive Plan
Our 2021 Equity Incentive Plan, or the 2021 EIP, was adopted by our Board and approved by our stockholders in July 2021. The following summarizes the material terms of the 2021 EIP. This summary is qualified in its entirety to the full text of the 2021 EIP.
Shares reserved. We initially reserved 32,734,983 shares of Class A common stock for issuance pursuant to awards granted under the 2021 EIP, which includes shares of our Class A common stock previously reserved but unissued under Legacy Sema4’s 2017 Equity Incentive Plan that became available for issuance under the 2021 Plan. The number of shares reserved for issuance under the 2021 EIP will increase automatically on January 1 of each of 2022 through 2031 by the number of shares equal to 5% of the aggregate number of outstanding shares of all classes of our Class A common stock as of the immediately preceding December 31, or a lesser number as may be determined by our Board. On January 25, 2022, an additional 12,128,941 shares became available for future issuance under the 2021 EIP pursuant to the plan’s evergreen provision.
In addition, the shares set forth below will again be available for issuance pursuant to awards granted under our 2021 EIP:
•shares subject to options or SARs granted under our 2021 EIP that cease to be subject to the option or SAR for any reason other than exercise of the option or SAR;
•shares subject to awards granted under our 2021 EIP that are subsequently forfeited or repurchased by us at the original issue price;
•shares subject to awards granted under our 2021 EIP that otherwise terminate without such shares being issued;
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•shares subject to awards granted under our 2021 EIP that are surrendered, cancelled, or exchanged for cash or a different award (or combination thereof);
•shares issuable upon the exercise of options or subject to other awards granted under the 2021 EIP that cease to be subject to such options or other awards, by forfeiture or otherwise, after the effective date of the 2021 EIP;
•shares subject to awards granted under the 2021 EIP that are forfeited or repurchased by us at the original price after the effective date of the 2021 EIP; and
•shares subject to awards under the 2021 EIP that are used to pay the exercise price of an option or withheld to satisfy the tax withholding obligations related to any award.
Administration. Our 2021 EIP will be administered by our compensation committee, or by our Board acting in place of our compensation committee. Subject to the terms and conditions of the 2021 EIP, the administrator will have the authority, among other things, to select the persons to whom awards may be granted, construe and interpret our 2021 EIP as well as to determine the terms of such awards and prescribe, amend and rescind the rules and regulations relating to the plan or any award granted thereunder. The 2021 EIP provides that the administrator may delegate its authority, including the authority to grant awards, to one or more executive officers to the extent permitted by applicable law, provided that awards granted to non-employee directors may only be determined by our Board.
Options. The 2021 EIP provides for the grant of both incentive stock options intended to qualify under Section 422 of the Code, and nonqualified stock options to purchase shares of our Class A common stock at a stated exercise price. Incentive stock options may only be granted to employees, including officers and directors who are also employees. The exercise price of stock options granted under the 2021 EIP must be at least equal to the fair market value of our Class A common stock on the date of grant. Incentive stock options granted to an individual who holds, directly or by attribution, more than ten percent of the total combined voting power of all classes of our capital stock must have an exercise price of at least 110% the fair market value of our Class A common stock on the date of grant.
Options may vest based on service or achievement of performance conditions, as determined by the administrator. The administrator may provide for options to be exercised only as they vest or to be immediately exercisable, with any shares issued on exercise being subject to our right of repurchase that lapses as the shares vest. In the event of a participant’s termination of service, an option is generally exercisable, to the extent vested, for a period of three months in the case of termination without cause (except due to a participant’s death or disability), for a period of 12 months in the case of termination due to the participant’s death or disability, or such longer or shorter period as the administrator may provide, and for a period of 24 months in the case of termination due to the participant’s retirement (consistent with our policies regarding retirement). Stock options generally terminate upon a participant’s termination of employment for cause. The maximum term of options granted under our 2021 EIP is ten years from the date of grant, except that the maximum permitted term of incentive stock options granted to an individual who holds, directly or by attribution, more than ten percent of the total combined voting power of all classes of our capital stock is five years from the date of grant.
Restricted stock awards (“RSA”). An RSA is an offer by us to grant or sell shares of our Class A common stock subject to restrictions, which may lapse based on the satisfaction of service or achievement of performance conditions. The price, if any, of an RSA will be determined by the administrator. Unless otherwise determined by the administrator, vesting will cease on the date the participant no longer provides services to us and unvested shares may be forfeited to or repurchased by us.
Stock appreciation rights (“SAR”). A SAR provides for a payment, in cash or shares of our Class A common stock (up to a specified maximum number of shares, if determined by the administrator), to the participant based upon the difference between the fair market value of our Class A common stock on the date of exercise and a predetermined exercise price, multiplied by the number of shares. The exercise price of a SAR must be at least the fair market value of a share of our Class A common stock on the date of grant. SARs may vest based on service or achievement of performance conditions. No SAR may have a term that is longer than ten years from the date of grant.
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Restricted stock units (“RSU”). An RSU represents the right to receive the value of shares of our Class A common stock at a specified date in the future and may be subject to vesting based on service or achievement of performance conditions. RSUs may be settled in cash, shares of our Class A common stock or a combination of both as soon as practicable following vesting or on a later date subject to the terms of the 2021 EIP. No RSU may have a term that is longer than ten years from the date of grant.
Performance awards. Performance awards granted pursuant to the 2021 EIP may be in the form of a cash bonus, or an award of performance shares or performance units denominated in shares of our Class A common stock that may be settled in cash, property or by issuance of those shares, subject to the satisfaction or achievement of specified performance conditions.
Stock bonus awards. A stock bonus award provides for payment in the form of cash, shares of our Class A common stock or a combination thereof, based on the fair market value of shares subject to such award as determined by the administrator. The awards may be granted as consideration for services already rendered, or at the discretion of the administrator, may be subject to vesting restrictions based on continued service or performance conditions.
Dividend equivalents rights. Our Board or the compensation committee thereof may permit participants holding RSUs to receive dividend equivalent payments if and when dividends are paid to stockholders. In the discretion of our board or the compensation committee thereof, such dividend equivalent payments may be paid in cash or shares of our Class A common stock and may either be paid at the same time as dividend payments are made to stockholders or delayed until shares are issued pursuant to the RSU grants and may be subject to the same vesting or performance requirements as the RSUs.
Change of control. Our 2021 EIP provides that, in the event of a corporate transaction that constitutes a change of control of our company under the terms of the plan, outstanding awards will be subject to the agreement evidencing the change of control, which need not treat all outstanding awards in an identical manner, and may include one or more of the following: (i) the continuation of the outstanding awards; (ii) the assumption of the outstanding awards by the surviving corporation or its parent; (iii) the substitution by the surviving corporation or its parent of new options or equity awards for the outstanding awards; (iv) the full or partial acceleration of exercisability or vesting or lapse of the company’s right to repurchase or other terms of forfeiture and accelerated expiration of the award; or (v) the settlement of the full value of the outstanding awards (whether or not then vested or exercisable) in cash, cash equivalents, or securities of the successor entity with a fair market value equal to the required amount, as determined in accordance with the 2021 EIP, which payments may be deferred until the date or dates the award would have become exercisable or vested. Notwithstanding the foregoing, upon a change of control the vesting of all awards granted to our non-employee directors will accelerate and such awards will become exercisable, to the extent applicable, and vested in full immediately prior to the consummation of the change of control.
Adjustment. In the event of a change in the number of outstanding shares of our Class A common stock without consideration by reason of a stock dividend, extraordinary dividend or distribution, spin-off, recapitalization, stock split, reverse stock split, subdivision, combination, consolidation reclassification, spin-off or similar change in our capital structure, proportional adjustments will be made to (i) the number and class of shares reserved for issuance under our 2021 EIP; (ii) the exercise prices, number and class of shares subject to outstanding options or SARs; (iii) the number and class of shares subject to other outstanding awards; and (iv) the maximum number and class of shares that may be issued as incentive stock options, subject to any required action by the board or our stockholders and compliance with applicable laws.
Exchange, repricing and buyout of awards. The administrator may, without prior stockholder approval, (i) reduce the exercise price of outstanding options or SARs without the consent of any participant and (ii) pay cash or issue new awards in exchange for the surrender and cancellation of any, or all, outstanding awards, subject to the consent of any affected participant to the extent required by the terms of the 2021 EIP.
Director compensation limits. No non-employee director may receive awards under our 2021 EIP with a grant date value that when combined with cash compensation received for his or her service as a director, exceed
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$750,000 in a calendar year, increased to $1,000,000 in the calendar year of his or her initial services as a non-employee director.
Clawback; transferability. All awards will be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by our Board or the compensation committee thereof or required by law during the term of service of the participant, to the extent set forth in such policy or applicable agreement. Except in limited circumstances, awards granted under our 2021 EIP may generally not be transferred in any manner other than by will or by the laws of descent and distribution.
Sub-plans. Subject to the terms of the 2021 EIP, the plan administrator may establish a sub-plan under the 2021 EIP and/or modify the terms of awards granted to participants outside of the United States to comply with any laws or regulations applicable to any such jurisdiction.
Amendment and termination. Our Board or compensation committee may amend our 2021 EIP at any time, subject to stockholder approval as may be required. Our 2021 EIP will terminate ten years from the date our Board adopts the plan, unless it is terminated earlier by our Board. No termination or amendment of the 2021 EIP may materially adversely affect any then-outstanding award without the consent of the affected participant, except as is necessary to comply with applicable laws or as otherwise provided by the terms of the 2021 EIP.
2017 Stock Incentive Plan
Legacy Sema4’s 2017 Equity Incentive Plan (the “2017 EIP”) was adopted by Legacy Sema4’s board of directors and approved by its stockholders in April 2017. The 2017 EIP allowed for the grant of stock options, stock appreciation rights, restricted stock, and RSUs. As of December 31, 2021, we had 27,671,750 shares of our Class A common stock reserved for issuance pursuant to outstanding awards granted under the 2017 EIP. We terminated the 2017 EIP upon the effective date of the 2021 EIP, which was July 21, 2021. Any awards granted under the 2017 EIP that remained outstanding as of such date continue to be subject to the terms of the 2017 EIP and applicable award agreements until such awards are exercised or amended or until they terminate or expire by their terms.
2021 Employee Stock Purchase Plan
The 2021 Employee Stock Purchase Plan (the “ESPP”) was adopted by our Board and approved by our stockholders in July 2021. The following summarizes the material terms of the ESPP. This summary is qualified in its entirety to the full text of the ESPP. We have not yet established an offering period under the ESPP.
Shares Reserved. We have initially reserved 4,804,011 shares of our Class A common stock equal for issuance and sale under the ESPP. The number of shares reserved for issuance and sale under our ESPP will increase automatically on January 1 of each of 2022 through 2031 by the number of shares equal to 1% of the aggregate number of outstanding shares of all classes of our Class A common stock as of the immediately preceding December 31, or a lesser number as may be determined by our compensation committee, or by our Board acting in place of our compensation committee. Subject to stock splits, recapitalizations, or similar events, no more than the number of shares of our Class A common stock equal to ten times the Initial ESPP Share Reserve may be issued over the term of the ESPP. On January 25, 2022, an additional 2,425,788 shares became available for future issuance under the ESPP pursuant to the plan’s evergreen provision.
Administration. Our ESPP will be administered by our compensation committee, or by our Board acting in place of our compensation committee, subject to the terms and conditions of the ESPP. Among other things, the administrator will have the authority to determine eligibility for participation in the ESPP, designate separate offerings under the plan, and construe, interpret and apply the terms of the plan.
Eligibility. Employees eligible to participate in any offering pursuant to the ESPP generally include any employee that is employed by us or certain of our designated subsidiaries at the beginning of the offering period. However, the administrator may exclude employees who do not meet eligibility requirements that our compensation committee may choose to impose (within the limits permitted by the Code), are customarily employed for 20 hours or less per week, are customarily employed for five months or less in a calendar year or certain highly-compensated employees as determined in accordance with applicable tax laws. In addition, any employee who owns (or is deemed
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to own because of attribution rules) 5% or more of the total combined voting power or value of all classes of our capital stock, or the capital stock of one of our qualifying subsidiaries, or who will own such amount because of participation in the ESPP, will not be eligible to participate in the ESPP. The administrator may impose additional restrictions on eligibility from time to time.
Offering Periods; Enrollment. Under our ESPP, eligible employees will be offered the option to purchase shares of our Class A common stock at a discount over a series of offering periods through accumulated payroll deductions over the period. The length of the offering periods under ESPP will be determined by the plan administrator and may be up to twenty-seven (27) months long. Each offering period may itself consist of one or more purchase periods. When the first offering period commences, our employees who meet the eligibility requirements for participation in that offering period will be eligible to enroll. For subsequent offering periods, new participants will be required to enroll in a timely manner. Once an employee is enrolled, participation will be automatic in subsequence offering periods. Participation in the ESPP ends automatically upon a participant’s termination of employment. A participant may withdraw his or her participation from the ESPP at any time by submitting written notice to the company.
Offerings; Contributions; Limitations. The purchase price for shares purchased under the ESPP during any given purchase period will be 85% of the lesser of the fair market value of our Class A common stock on (i) the first trading day of the applicable offering period or (ii) the last trading day of the purchase period. The ESPP permits participants to purchase shares of our Class A common stock through payroll deductions of a percentage of their eligible compensation, which may not be less than one percent (1%) and may be up to a maximum of fifteen percent (15%) or such lower limit set by the plan administrator. No participant may purchase more than 2,500 shares of our Class A common stock during any one purchase period, and may not subscribe for more than $25,000 in fair market value of shares of our Class A common stock (determined as of the date the offering period commences) in any calendar year in which the offering is in effect. The administrator in its discretion, may set a lower maximum number of shares which may be purchased.
Adjustments upon recapitalization. If the number of outstanding shares of our Class A common stock is changed by stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in our capital structure without consideration, then the administrator will proportionately adjust the number and class of common stock that is available under the ESPP, the purchase price and number of shares any participant has elected to purchase as well as the maximum number of shares which may be purchased by participants.
Corporate Transaction. If the post-combination company experiences a corporate transaction as determined under the terms of the ESPP, any offering period then in effect will be shortened and terminated on a final purchase date established by the administrator. The final purchase date will occur on or prior to the effective date of change of control transaction, and our ESPP will terminate on the closing of the change of control.
Transferability. Participants may generally not assign, transfer, pledge or otherwise dispose of payroll deductions credited to his or her account, or any rights with regard to an election to purchase shares pursuant to the ESPP other than by will or the laws of descent or distribution.
Amendment; Termination. The board or compensation committee may amend, suspend or terminate the ESPP at any time without stockholder consent, except as to the extent such amendment would increase the number of shares available for issuance under the ESPP, change the class or designation of employees eligible for participation in the plan or otherwise as required by law. If the ESPP is terminated, the administrator may elect to terminate all outstanding offering periods immediately, upon the next purchase date (which may be sooner than originally scheduled) or upon the last day of such offering period. If any offering period is terminated prior to its scheduled completion, all amounts credited to participants which have not been used to purchase shares will be returned to participants as soon as administratively practicable. Unless earlier terminated, the ESPP will terminated upon the earlier to occur of the issuance of all shares of common stock reserved for issuance under the ESPP, or the 10th anniversary of the effective date.
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401(k) Plan
We sponsor a retirement savings plan established on January 1, 2018 that is intended to qualify for favorable tax treatment under Section 401(a) of the IRC, and contains a cash or deferred feature that is intended to meet the requirements of Section 401(k) of the IRC. Participants may make pre-tax and certain after-tax (Roth) salary deferral contributions to the plan from their eligible earnings up to the statutorily prescribed annual limit under the IRC. Participants who are 50 years of age or older may contribute additional amounts based on the statutory limits for catch-up contributions. Participant contributions are held in trust as required by law. No minimum benefit is provided under the plan. The plan provides for employer safe harbor matching contributions equal to 100% of an employee’s salary deferrals that do not exceed 6% of the employee’s compensation. An employee’s interest in his or her deferrals and safe harbor matching contributions is 100% vested when contributed.
Other Benefits
Our named executive officers, while employed by us, are eligible to participate in our employee benefit plans on the same basis as our other employees, including our health and welfare plans. We generally do not provide our named executive officers with perquisites or other personal benefits. However, we do reimburse our named executive officers for their necessary and reasonable business and travel expenses incurred in connection with their services to us.
Compensation Committee Interlocks and Insider Participation
The directors who were members of our compensation committee during 2021 were Joshua Ruch, Rachel Sherman and Nat Turner. None of them at any time has been one of our officers or employees. None of our executive officers serves, or in the past has served, as a member of the Board or compensation committee of any entity that has directedone or more of its executive officers serving on our Board or our compensation committee.
Director Compensation
Non-Employee Director Compensation Policy
We adopted a non-employee director compensation policy that management submitis designed to enable us to attract and retain, on a long-term basis, highly qualified non-employee directors. Our non-employee directors will receive an annual cash retainer of $40,000, payable quarterly, and a grant of stock options and RSUs with an aggregate grant-date value of $200,000, which will vest on the earlier of the first anniversary of the grant date and the next annual meeting of our stockholders. New non-employee directors will receive a grant of stock options RSUs upon joining our Board with an aggregate grant-date value of $400,000, which will vest over the three-year period following the grant date.
Members of our audit committee will receive an additional annual cash retainer of $10,000, and the chairperson of our audit committee will receive an additional cash retainer of $20,000 (in lieu of the annual retainer for membership on the audit committee). Members of our compensation committee will receive an additional annual cash retainer of $7,500, and the chairperson of our compensation committee will receive an additional cash retainer of $15,000 (in lieu of the annual retainer for membership on the compensation committee). Members of our nominating and governance committee will receive an additional annual cash retainer of $5,000, and the chairperson of our nominating and governance committee will receive an additional cash retainer of $10,000 (in lieu of the annual retainer for membership on the compensation committee).
Executive Chairman Compensation
In January 2022, our Board appointed Jason Ryan as Executive Chairman and entered into an executive chairman agreement (the “Executive Chairman Agreement”) with Mr. Ryan. Prior to this appointment, Mr. Ryan served as a non-employee director of our Board. The Executive Chairman Agreement provides for an annual base salary of $540,000. In connection with the appointment, we issued to our Executive Chairman an option to purchase 429,730 shares of our Class A common stock, 247,525 service-based RSUs and 126,980 performance-based stock units, which awards will vest in full on the earlier of (a) December 31, 2022, and (b) a change in control of our company subject to Mr. Ryan’s continued service as our Executive Chairman through such date and, in the case of
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the performance-based RSUs, subject to the achievement of certain performance-based vesting conditions. The Executive Chairman Agreement will terminate on December 31, 2022 unless terminated earlier in accordance with its terms or extended by the mutual agreement of our Board and Mr. Ryan.
2021 Director Compensation Table
The following table sets forth the compensation earned by or paid to our non-employee directors for services provided during the year ended December 31, 2021, other than Keith Meister who joined the Board in January 2022. Dr. Schadt did not receive any compensation for his service as a director during fiscal year 2021, while also serving as Chief Executive Officer. Other than as described below, none of our non-employee directors received any fees or reimbursement of any expenses (other than customary expenses in connection with the attendance of meetings of our Board) or any equity or non-equity awards in the year ended December 31, 2021. Please see the section entitled “—2021 Summary Compensation Table” for a summary of payments made to Dr. Schadt.
NameFees Earned or Paid in Cash($)
Option Awards($)(1)(4)
Restricted
Stock and
Other
Securities
($)(1)(4)
All Other Compensation ($)(2)
Total($)
Joshua Ruch47,500 201,911 199,985 — 449,396 
Dennis Charney, M.D.— — — — — 
Eli D. Casdin20,000 101,401 99,992 — 221,393 
Emily Leproust, Ph.D.25,000 101,401 99,992 — 226,393 
Jason Ryan(3)
30,000 201,911 199,985 — 431,896 
Michael Pellini, M.D.20,000 201,911 199,985 — 421,896 
Nat Turner23,750 101,401 99,992 — 225,143 
Rachel Sherman, M.D., M.P.H., F.A.C.P.20,000 101,401 143,797 50,000 315,198 
__________________
(1)The amounts reported in this column represent the aggregate grant date fair value of the independent registered publicawards granted under the 2021 EIP and pursuant to the Prior Merger Agreement, as applicable, to our directors during the year ended December 31, 2021, as computed in accordance with FASB ASC Topic 718. The assumptions used in determining the grant date fair value of the awards reported in the Option Awards and Restricted Stock and Other Securities columns are set forth in Note 10 to our financial statements included elsewhere in this proxy statement. Note that the amounts reported in this column reflect the aggregate accounting firmcost for ratificationthese awards granted during the year, and do not necessarily correspond to the actual economic value that may be received by the Company’s stockholders atdirector from the special meeting. Withum hasawards.
(2)The amounts reported in this column represents payments under director legacy and other charitable award programs.
(3)Mr. Ryan served as a non-employee director until January 2022.
(4)The following table sets forth information regarding the aggregate number of shares of our Class A common stock underlying outstanding stock options held by our non-employee directors as of December 31, 2021 and the aggregate number of unvested shares of our Class A common stock underlying outstanding RSU awards held by our non-employee directors as of December 31, 2021:
NameShares Underlying
Unexercised Stock Options		Unvested Shares of
Restricted Stock Units
Joshua Ruch44,572 25,672 
Dennis Charney, M.D.— — 
Eli D. Casdin22,286 12,836 
Emily Leproust, Ph.D.22,286 12,836 
Jason Ryan44,572 25,672 
Michael Pellini, M.D.44,572 25,672 
Nat Turner22,286 12,836 
Rachel Sherman, M.D., M.P.H., F.A.C.P.385,509 
44,533 (1)
__________________
(1)Includes 31,697 Earnout RSUs granted in connection with the Prior Merger Agreement.
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EXECUTIVE COMPENSATION OF GENEDX
As discussed above, GeneDx is currently part of OPKO and not an independent company. Decisions about GeneDx’s executive compensation and benefits to date have been made by the Compensation Committee of the OPKO Board of Directors (the “OPKO Compensation Committee”) and OPKO senior management. Accordingly, this section focuses on OPKO’s compensation and benefit programs and decisions for 2021. Katherine Stueland, GeneDx’s Chief Executive Officer, who will be appointed Co-Chief Executive Officer of Sema4 following the Closing, is GeneDx’s sole named executive officer (the “Named Executive Officer”). Following the Closing, Ms. Stueland’s executive compensation will be determined by Sema4’s Board of Directors and in accordance with the Sema4 Stueland Employment Agreement (as defined below), and accordingly Ms. Stueland’s executive compensation and the benefits programs to which she will be entitled will not be the same as those discussed below.
Summary Compensation Table
The following table sets out the compensation for the Named Executive Officer for the year ended December 31, 2021:
Name and Principal PositionYear
Salary ($)(1)
Bonus ($)
Stock Awards ($)(2) (3)
Option Awards ($)(2)
All Other Compensation ($)(4)
Total Compensation ($)
Katherine Stueland, Chief Executive Officer of GeneDx
2021285,577137,5002,500,000963,00011,6003,897,677
__________________
(1)Ms. Stueland became the Chief Executive Officer and President of GeneDx on June 21, 2021. Her annual base salary is $550,000.
(2)Reflects the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. The assumptions used in calculating the amounts are discussed in Note 10 of OPKO’s audited our financial statements for the year ended December 31, 2020.2021 included in OPKO’s Annual Report on Form 10-K filed with the SEC on March 1, 2022.
Neither our bylaws nor(3)Consists of RSUs granted by OPKO to Ms. Stueland on June 21, 2021. See “—Outstanding Equity Awards at 2021 Fiscal Year-End” below.
(4)Includes contributions made by OPKO under its 401(k) Plan during fiscal year 2021 in the amount of $11,600 for Ms. Stueland.

Narrative to Summary Compensation Table
Stueland GeneDx Employment Agreement
GeneDx entered into an indefinite Employment Agreement with Ms. Stueland on June 7, 2021 (as amended, the “GeneDx Stueland Employment Agreement”), to serve as GeneDx’s Chief Executive Officer and President commencing on June 21, 2021. The GeneDx Stueland Employment Agreement provides for (i) an annual base salary of $550,000, subject to annual review and increase (but not decrease) by GeneDx or OPKO’s, as applicable, board of directors and (ii) eligibility to receive an annual bonus of up to $225,000 based upon satisfaction of performance-based goals and other governing documentsindividual and company metrics agreed upon between Ms. Stueland and GeneDx or law require stockholder ratificationOPKO’s, as applicable, board of directors. The GeneDx Stueland Employment Agreement further provides for a $2,500,000 sign on bonus (the “Sign-On Bonus”), payable in cash, of which $1,000,000 was paid on June 21, 2021, and, subject to Ms. Stueland’s continued employment, $750,000 will be payable on each of June 21, 2022 and June 21, 2023, provided that, upon the occurrence of certain events prior to June 21, 2023, including a change of control of GeneDx, Ms. Stueland shall be entitled to receive the Sign-On Bonus in full. Additionally, pursuant to the GeneDx Stueland Employment Agreement, OPKO granted Ms. Stueland restricted stock units on June 21, 2021 with respect to shares of OPKO common stock with a value of $2,500,000 as of the appointmentdate of Withum, as our independent registered public accounting firm. However, the Board is submittinggrant (the “OPKO RSUs”), of which 50% vest on June 21, 2022 and the appointmentremaining 50% vest on December 21, 2022, provided that the OPKO RSUs shall become immediately vested in full upon the occurrence of Withum,certain events, including a change of control of GeneDx. Ms. Stueland also received options to purchase 450,000 shares of OPKO’s common stock (the “Initial Option”) under OPKO’s equity incentive plan, with an exercise price equal to $3.78, the closing stock price of OPKO’s common stock on the day of grant, which Initial Option vests annually in four equal installments over a four year period beginning on June 21, 2021, provided that, upon the occurrence of certain events prior to June 21, 2022, including a change of control of GeneDx, the vesting of the Initial Option shall be immediately accelerated in full. OPKO further agreed to grant Ms. Stueland options to purchase 450,000 shares of OPKO’s
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common stock on June 21, 2022 (the “Additional Option”) under OPKO’s equity incentive plan, with an exercise price equal to closing stock price of OPKO’s common stock on the day of grant, and terms identical to the stockholdersoptions described in the preceding sentence, except that the four year vesting period will begin on June 21, 2022, provided that should Ms. Stueland’s employment be terminated without cause or upon resignation by her for ratificationgood reason within twelve months of a change of control of GeneDx, or within three months prior to such change of control, the vesting of the Additional Option shall be immediately accelerated in full.
In connection with the execution of the Merger Agreement, GeneDx and Ms. Stueland entered into a certain amendment to the GeneDx Stueland Employment Agreement, dated as of January 14, 2022 (the “GeneDx Stueland Employment Agreement Amendment”), pursuant to which Ms. Stueland agreed, among other things, that (i) she shall not be permitted to exercise the Initial Option, (ii) at the Effective Time, the Initial Option shall be automatically cancelled and forfeited without any payment to her, (iii) OPKO is not required to grant her the Additional Option, provided the Closing occurs, and (iv) OPKO has no further obligations under the GeneDx Stueland Employment Agreement from and after the Closing, including no obligation to pay her the balance of the Sign-On Bonus. Pursuant to the GeneDx Stueland Employment Agreement Amendment, OPKO acknowledged and agreed that all outstanding OPKO RSUs will become immediately vested in full immediately prior to the Closing, subject to Ms. Stueland’s continued employment with GeneDx.
Ms. Stueland is also entitled to participate in OPKO’s employee benefit arrangements, on terms and conditions no less favorable than those available to any other similarly situated senior executive and is entitled to expense reimbursement for reasonable out-of-pocket expenses incurred in the course of her duties and in connection with her relocation from Seattle, Washington to Gaithersburg, Maryland.
The GeneDx Stueland Employment Agreement contains restrictive covenants, including confidentiality of information, assignment of certain intellectual property, non-competition, non-solicitation and non-disparagement covenants. The confidentiality covenant and non-disparagement covenants have an indefinite term, and the non-competition and non-solicitation covenants are effective both during the executive’s employment with GeneDx and until the one year anniversary of her termination of employment. In addition, the GeneDx Stueland Employment Agreement further provides for severance benefits, as described below under “—Potential Payments Upon Termination and Change in Control.”
Base Salaries
OPKO has sought to establish and maintain competitive annual base salaries for its executive officers, including the Named Executive Officer, by utilizing available resources. OPKO provided fixed salary compensation to its named executive officers and the Named Executive Officer based on their responsibilities and individual experience, taking into account competitive market compensation paid by other companies for similar positions within the diagnostics and laboratory industries. In general, OPKO historically targeted executive officer compensation and base salary to fall within the median range for equivalent or similar positions of executives at peer group companies.
Discretionary Annual Bonus.
In addition to base salaries, OPKO’s Compensation Committee has had the authority to award discretionary annual bonuses to the Named Executive Officer based on corporate and individual performance. Incentives, as a matterpercent of goodsalary, increase with executive rank so that, as rank increases, a greater portion of total annual cash compensation is based on annual corporate practice. Ifand individual performance. Furthermore, as an executive’s rank increases, a greater percentage of that executive’s cash bonus is based on corporate performance, rather than individual performance. In 2022, Ms. Stueland was awarded a cash bonus of $137,500 for work performed in 2021.
Equity Compensation.
OPKO believes that equity compensation should be a primary component of its executive compensation program because it aligns the stockholders failinterests of its executive officers with the long-term performance of OPKO. Stock options are a critical element of OPKO’s long-term incentive strategy. The primary purpose of stock options is to ratifyprovide OPKO’s employees with a personal and financial interest in its success through stock ownership, thereby aligning the selection,interests of such persons with those of OPKO’s stockholders. Under OPKO’s employee stock option
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program, options are granted at fair market value at the Company’s audit committee will reconsider whether or notdate of grant, and options granted under the program become exercisable only after a vesting period, which is subject to continue to retain that firm. Evencontinued employment. Consequently, employees benefit from stock options only if the selectionmarket value of OPKO’s common stock increases over time. With respect to these stock options, OPKO recognizes compensation expense based on FASB ASC Topic 718.
The OPKO Compensation Committee typically grants stock options to its employees under the OPKO Health, Inc. 2016 Equity Incentive Plan (the “2016 Equity Incentive Plan”) and previously the 2007 Equity Incentive Plan. As with base salaries and discretionary cash bonuses, there is ratified,no set formula or performance criteria, which determines the audit committeeamount of the equity award for OPKO’s employees, including the Named Executive Officer. Nor does the OPKO Compensation Committee assign any relative weight to any specific factors or criteria it considers when granting stock options. Rather, the OPKO Compensation Committee exercises its judgment and discretion by considering all factors it deems relevant at the time of such grants, including the internally generated peer group survey previously discussed and OPKO’s performance during the most recent fiscal year. For the Named Executive Officer, the decisions by the OPKO Compensation Committee regarding grants of stock options are made based almost entirely upon the recommendation of OPKO’s Chief Executive Officer, and includes his subjective determination based on his assessment of the executive officer’s current position with OPKO, the executive officer’s past and expected future performance and the other factors discussed in the determination of base salaries.
Restrictions on Hedging
OPKO’s officers and personnel are prohibited from pledging OPKO’s common stock, purchasing OPKO’s securities on margin, engaging in short selling OPKO’s common stock, buying or selling puts or calls in connection with OPKO’s securities and engaging in derivative transactions involving OPKO’s securities, without prior written consent from OPKO’s acting compliance officer. In addition, OPKO’s directors and executive officers, as well as certain other employees, generally may purchase or sell OPKO securities only during permitted windows, which generally begin on the first full business day following the issuance of its discretionearnings releases and continuing until two weeks prior to the end of the fiscal quarter.
Outstanding Equity Awards at 2021 Fiscal Year-End
The following table provides information regarding outstanding equity awards made to the Named Executive Officer as of December 31, 2021.
Option AwardsStock Awards
Name
Number of securities underlying unexercised options (#) exercisable
Number of securities underlying unexercised options (#) unexercisable (1)
Equity incentive plan awards: Number of securities underlying unexercised unearned options (#)
Option exercise price ($)Option expiration date
Number of shares or units of stock that have not vested (#)
Market value of shares of units of stock that have not vested ($)(2)
Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#)
Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested shares ($)
Katherine Stueland— 450,000 — 3.78 06/20/2031$— $2,500,000 $— $— 
__________________
(1)Options vest in four equal annual tranches, commencing on June 21, 2022, and expire on June 20, 2031. In connection with the GeneDx Stueland Employment Agreement Amendment Option, Ms. Stueland and OPKO agreed that such options shall be automatically cancelled and forfeited without any payment to her at the Effective Time.
(2)Consists of RSUs granted on June 21, 2021, and 50% of such RSUs vest on June 21, 2022, with the remaining 50% scheduled to vest on December 21, 2022, provided that the OPKO RSUs shall become immediately vested in full upon the occurrence of certain events, including a change of control of GeneDx. In connection with the GeneDx Stueland Employment Agreement Amendment, OPKO acknowledged and agreed that all outstanding OPKO RSUs will become immediately vested in full immediately prior to the Closing.
Other Elements of Compensation
Severance and Change-in-Control Benefits.
The Named Executive Officer is entitled to severance or change of control benefits as described below in “—Potential Payments Upon Termination and Change in Control—Stueland”.
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401(k) Profit Sharing Plan. 
OPKO has adopted a tax-qualified 401(k) Profit Sharing Plan (the “401(k) Plan”) covering all qualified employees. The effective date of the 401(k) Plan was January 2008. Participants may directelect a salary reduction of at least 1% as a contribution to the appointment401(k) Plan, up to the statutorily prescribed annual limit for tax-deferred contributions ($19,500 for employees under age 50 and an additional $6,500 for employees 50 and above in 2020). In 2008, OPKO adopted the Roth contribution for employee elections. The 401(k) Plan permits employer matching of up to 4% of a different independent registered public accounting firmparticipant’s salary up to the statutory limits. In 2010, OPKO elected a safe harbor contribution at 4% of annual compensation. All of OPKO’s safe harbor contributions are immediately vested.
Other Compensation.
The Named Executive Officer has standard benefits that are offered to all full-time, exempt employees of OPKO. These standard benefits include health, dental and life insurance, and short and long-term disability.
Potential Payments Upon Termination and Change in Control
Stueland
Pursuant to the terms of the GeneDx Stueland Employment Agreement, if Ms. Stueland’s employment is terminated (i) by GeneDx without “cause” (as defined in the GeneDx Stueland Employment Agreement) and not due to her death or disability or (ii) for “good reason” (as defined in the GeneDx Stueland Employment Agreement) by Ms. Stueland, Ms. Stueland will be entitled to receive the following severance payments in a lump cash payment within thirty (30) days of the date of termination, in addition to certain accrued obligations (including any time duringearned but unpaid prior year annual bonus):
•an amount equal to 12 months’ base salary;
•an amount equal to the target bonus for the year if it determinesof termination of employment;
•an amount equal to twelve (12) months of the employer portion of GeneDx’s or OPKO’s, as applicable, group health plan premiums that such company would have paid for Ms. Stueland and her dependents if she remained an active participant during such twelve (12) months; and
•any remaining portion of the Sign-On Bonus not yet paid to Ms. Stueland
In addition, upon a “change of control” (as defined in the GeneDx Stueland Employment Agreement), Ms. Stueland’s termination without cause or her resignation for good reason, the OPKO RSUs will immediately vest. Prior to June 21, 2022, upon a change would beof control, Ms. Stueland’s termination without cause or her resignation for good reason, or after June 21, 2022, upon Ms. Stueland’s termination without cause or her resignation for good reason within three months before, or 12 months after, a change of control, the Initial Option and Additional Option (as applicable) granted pursuant to the GeneDx Stueland Employment Agreement described above will immediately vest.
Ms. Stueland and OPKO agreed in the best interestsGeneDx Stueland Employment Agreement to revise certain of the Companyterms of the GeneDx Stueland Employment Agreement, including the affect on Ms. Stueland’s equity awards and OPKO’s obligations to Ms. Stueland, from and after the Closing, as more fully described in “—Narrative to Summary Compensation Table—Stueland GeneDx Employment Agreement” above.
Upon a termination of Ms. Stueland’s employment for cause or due to her death or as a result of her disability, Ms. Stueland will be entitled to certain accrued obligations (including any earned but unpaid prior year annual bonus).
GeneDx’s obligation to provide the severance payments and benefits described above are contingent upon Ms. Stueland’s execution and non-revocation of a release of claims against GeneDx and its stockholders.parent entities and affiliates.
Representatives
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Director Compensation
Each of Withum are expectedOPKO’s non-employee directors is currently entitled to be present atreceive an annual retainer of $30,000, payable in quarterly installments, an option to acquire 50,000 shares of OPKO’s common stock upon initial appointment to the specialOPKO’s board of directors and an option to acquire 30,000 shares each year thereafter on the date of OPKO’s annual meeting via telephone. They will haveof stockholders. Richard Pfenniger is the Lead Independent Director and chairman of the Audit Committee of OPKO’s Board of Directors. Accordingly, he is entitled to receive (1) an opportunityadditional annual retainer of $10,000, payable in quarterly installments, and an option to make a statement if they so desireacquire 15,000 shares of OPKO’s common stock each year on the date of the OPKO’s annual meeting of stockholders, (2) an additional annual retainer of $15,000, payable in quarterly installments, and will be available(3) an option to respond to appropriate questions.
Vote Required for Approvalacquire 15,000 shares of OPKO’s common stock each year on the date of OPKO’s annual meeting of stockholders.
The approvalfollowing table sets forth information with respect to compensation earned by Mr. Pfenniger for fiscal year 2021.
Annual Compensation
NameFees Earned or Paid in Cash ($)Stock Award ($)
Option Awards ($)(4)
Non-Equity Incentive Plan Compensation ($)Change in Nonqualified Deferred Compensation Earnings ($)All Other Compensation ($)Total ($)
Richard C. Pfenniger, Jr.49,323 — 139,200 — — — 188,523 
Actions Taken in Connection with the Closing
Stueland Sema4 Employment Agreement
In connection with the execution of the Auditor Ratification Proposal requiresMerger Agreement, Sema4 and Ms. Stueland entered into a certain Employment Agreement, dated as of January 14, 2022 (the “Sema4 Stueland Employment Agreement”), pursuant to which Sema4 agreed, immediately following the affirmative voteClosing, to employ Ms. Stueland as the Co-Chief Executive Officer of holdersSema4 for a term of three years, which shall automatically renew for successive one year terms unless earlier terminated (such period from the commencement of employment under the termination thereof, the “Term”). The Sema4 Stueland Employment Agreement contemplates a majoritybase salary of $675,000 per year, subject to review by the votes cast by our stockholders present in person (which would include presenceSema4’s Board at the virtual special meeting) or represented by proxy at the special meetingleast annually, and entitled to vote thereon at the special meeting. Failure to vote by proxy or to vote in person (which would include voting at the virtual special meeting) or an abstention from voting will have no effecta performance bonus based on the outcomeachievement of the Auditor Ratification Proposal. The transaction is not conditioned on the approval of the Auditor Ratification Proposalcertain goals for Sema4 and/or Ms. Stueland as mutually agreed by Ms. Stueland and the Auditor Ratification Proposal is not conditioned on the approval of any other proposal.
Recommendation of the Board of Directors
OUR BOARD UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE AUDITOR RATIFICATION PROPOSAL.
The existence at the beginning of financial and personal interests ofeach calendar year, with a target amount equal to one or morehundred percent of the Company’s directors or officers may result inbase salary. Ms. Stueland will receive a conflictcash bonus equal to the lesser of interest(i) $1,500,000 and (ii) the amount treated as a “Transaction Expense” for purposes of the Merger Agreement on account of clause (i) of the “Stueland Employment Agreement Obligations,” within the meaning of the Merger Agreement, which will be payable within the first full payroll period following the Closing. As soon as practicable after the Sema4 Stueland Employment Agreement’s effective date, subject to approval of Sema4’s Board, Sema4 will grant Ms. Stueland an option to purchase shares of Class A common stock with a grant-date value equal to $4,500,000, with an exercise price equal to the closing price of the Class A common stock on the partdate of such director(s) or officer(s) between what he or they may believe isgrant, and a number of restricted stock units with a grant-date value equal to $4,500,000. Such equity awards described in the best interestspreceding sentence will be subject to the terms of the 2021 EIP, and will vest and become exercisable as follows: 25% on the first anniversary of the Closing, 25% on the second anniversary of the Closing and 6.25% on a quarterly basis thereafter through the fourth anniversary of the Closing.
Ms. Stueland will also be entitled to participate in Sema4’s employee benefit arrangements provided to the Company’s most senior executive officers and is entitled to expense reimbursement for out-of-pocket expenses in accordance with Company policies and its stockholdersup to four weeks of vacation per year.
The Sema4 Stueland Employment Agreement contains restrictive covenants, including confidentiality of information, assignment of certain intellectual property, non-competition and what henon-solicitation covenants. The confidentiality covenant has an indefinite term, and the non-competition and non-solicitation covenants are effective both during the Ms. Stueland’s employment with Sema4 and until the one year anniversary of her termination of employment.
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Pursuant to the terms of the Sema4 Stueland Employment Agreement, if Ms. Stueland’s employment is terminated (i) by Sema4 without “cause” (as defined in the Sema4 Stueland Employment Agreement) and not due to her death or they may believe is bestdisability or (ii) for himself“good reason” (as defined in the Sema4 Stueland Employment Agreement) by Ms. Stueland, Ms. Stueland will be entitled, subject to certain conditions, to receive the following severance payments, in addition to certain accrued obligations (including any earned but unpaid prior year annual bonus):
•twenty four (24) months’ of continued base salary;
•up to twenty four (24) months of reimbursement of the employer portion of COBRA health insurance coverage; and
•accelerated vesting of the unvested portion of the Sema4 Initial Option with an aggregate grant date value equal to the amount treated as a “Transaction Expense” for purposes of the Merger Agreement on account of clause (ii) of the “Stueland Employment Agreement Obligations” (as defined in the Merger Agreement).
In addition, inside the “Change in Control Period” (as defined in the Sema4 Stueland Employment Agreement), upon Ms. Stueland’s termination without cause or themselvesher resignation for good reason, Sema4 will pay Ms. Stueland a lump sum in determiningan amount equal to recommend that stockholders votetwo hundred percent (200%) of her target performance bonus for the proposals. Seecalendar year in which her employment terminated and the sectionvesting of all unvested equity based compensation awards held by Ms. Stueland shall be immediately accelerated and, if applicable, exercisable.
Upon a termination of Ms. Stueland’s employment for cause or due to her death or as a result of her disability, Ms. Stueland will be entitled to certain accrued obligations (including any earned but unpaid prior year annual bonus).
Sema4’s obligation to provide the severance payments and benefits described above entitled “Proposal No. 1 — Approvalare contingent upon Ms. Stueland’s execution and non-revocation of the Business Combination — Interestsa release of Certain Persons in the Transactions” for a further discussion.claims against Sema4.
194233

INFORMATION ABOUT THE COMPANYGOLDEN PARACHUTE COMPENSATION OF GENEDX
General
We are a blank check company incorporatedThe following table sets forth the information required by Item 402(t) of Regulation S-K regarding the compensation for the Named Executive Officer that is based on July 10, 2020or otherwise relates to the Acquisition, assuming that the Acquisition was consummated on March 15, 2022 (which is the date assumed solely for the purposes of this golden parachute disclosure), and that the Named Executive Officer’s employment was terminated on the day that resulted in her receipt of the maximum amount of severance benefits under the Sema4 Stueland Employment Agreement as a Delaware corporation forresult of a termination of employment following a change of control event, together with the purposevalue of effectingthe unvested equity awards that would be accelerated as a merger, capital stock exchange, asset acquisition, stock purchase, reorganizationresult of the Acquisition. The amounts shown in the table do not include the value of payments or similar business combinationbenefits that would have been earned, or any amounts associated with oneequity awards that have vested or more businesses. We have neither engaged in any operations nor generated any revenuewould vest pursuant to date. Basedtheir terms, on our business activities, we are a “shell company” as defined under the Exchange Act because we have no operations and nominal assets consisting almost entirely of cash.
As of December 31, 2020, we had not commenced any operations. All activity for the period from July 10, 2020 (inception) through December 31, 2020 relates to our formation, the initial public offering, and, subsequentor prior to the initial pubic offering, identifying a target company for a Business Combination. We willassumed effective date of the Acquisition or the value of payments or benefits that are not generate any operating revenues until afterbased on or otherwise related to the completionAcquisition.
For purposes of our initial Business Combination, atcalculating the earliest. We will generate non-operating incomepotential payments set forth in the formtable below, GeneDx has assumed that (a) the Acquisition will become effective on March 15, 2022, (b) unless otherwise noted, that the date of interest income fromtermination of employment of the proceeds derived fromNamed Executive Officer is March 15, 2022; (c) the initial public offering.
On September 4, 2020, we consummated our initial public offering of 44,275,000 unitsOPKO common stock price is $3.85 per share (the “units”) which includes the full exercise by the underwriter of its over-allotment option in the amount of 5,775,000 units, at a purchaseaverage closing price of $10.00 per unit. Each unit consists of one share of common stock, $0.0001 par value per share and one warrant. Each warrant entitles the holder thereof to purchase one-third of one share ofOPKO common stock for $11.50 per share, provided that if we have not consummated our initial business combination within 15 months from the closingfive trading days immediately following the date of announcement of the initial public offering, each warrant will entitleAcquisition); and (d) no withholding taxes are applicable to any payments set forth in the holder thereoftable. The amounts shown in the table are estimates only, are based on assumptions and information available to purchase one-third of one share of common stock atdate, and do not reflect any cutback that may be applied to the payments and benefits otherwise payable to the Named Executive Officer to put her in a price of $11.50 per whole share, subject to adjustmentbetter after-tax position in either case. The units were sold at an offering price of $10.00 per unit, generating gross proceeds of $442,750,000.
Simultaneously with the consummationevent of the initial public offering, we completed the private placementimposition of an aggregate of 7,236,667 warrants to the Sponsorany excise taxes under Sections 280G and certain4999 of the independent directorsInternal Revenue Code, as contemplated by GeneDx Stueland Employment Agreement or 2016 Equity Incentive Plan, as applicable. The actual amounts that may be paid upon an individual’s termination of employment, if any, can only be determined at the actual time of such termination.
NameCash ($)Equity ($)Pension/NQDC ($)Perquisites/Benefits ($)Tax reimbursement ($)Other ($)Total Compensation ($)
Katherine Stueland
2,850,000(1)
2,577,798(2)
—
19,800(3)
——5,447,597.00 
__________________
(1)Cash. The estimated amount shown in this column represents 24 months of base salary continuation payable in the event of a pricequalifying termination of $1.50 per warrant, generating gross proceedsMs. Stueland’s employment and the $1,500,000 cash bonus that Ms. Stueland will receive from Sema4 within the first full payroll period following the Closing. The salary continuation payments are “double-trigger” benefits in that they will be paid to Ms. Stueland only if she experiences a qualifying termination of $10,855,000.employment following the Closing. The $1,500,000 cash bonus is a “single-trigger” benefit in that will be paid shortly following the Closing, whether or not Ms. Stueland’s employment is later terminated.
Upon(2)Equity. The estimated amount shown in this column represents (a) $31,500, which the closingvalue of the initial public offering and the private placement, $442,750,000 million ($10.00 per unit)Initial Option that would be expected to be treated as “Transaction Expense” for purposes of the net proceeds fromMerger Agreement on account of clause (ii) of the sale of units in the initial public offering and the private placements was placed in the Trust Account maintained by Continental Stock Transfer & Trust Company, acting as trustee. The proceeds held in the Trust Account were invested in U.S. government securities,“Stueland Employment Agreement Obligations,” within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 180 days or less or in any open-ended investment company that holds itself out as a money market fund selected byMerger Agreement, and (b) $2,546,298, which is the Company meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7value of the Investment Company Act, as determined byOPKO RSUs which will become fully vested immediately prior to the Company, untilClosing, subject to Ms. Stueland’s continued employment with GeneDx, in each case based on an OPKO common stock price of $3.85 per share. The amount described in clause (a) is a “double-trigger” benefit in that Ms. Stueland will receive this acceleration benefit only if she experiences a qualifying termination of employment following the earlier of: (i) the completion ofClosing. The amount described in clause (b) is a business combination and (ii) the distribution of the Trust Account, as described below.
Initial Business Combination
The Nasdaq rules require“single-trigger” benefit in that we must consummate an initial business combination with one or more operating businesses or assets with a fair market value equal to at least 80% of the net assets held in the Trust Account (net of amounts disbursed to management for working capital purposes, if permitted, and excluding the amount of any deferred underwriting commissions) at the time of our signing a definitive agreementMs. Stueland will receive this acceleration benefit in connection with an initial business combination. Ourthe Closing, whether or not Ms. Stueland’s employment is later terminated.
(3)Perquisites/Benefits. The estimated amount shown in this column represents the value of the continued medical, dental, and vision benefits that Ms. Stueland would receive for a period of 24 months following a qualifying termination of employment. This is a “double-trigger” benefit in that it will be provided to Ms. Stueland only if she experiences a qualifying termination of employment following the Closing.
Indemnification of Sema4 Directors and Officers
Sema4’s Charter contains provisions limiting the liability of directors, and Sema4’s Bylaws provide that it will indemnify each of its directors to the fullest extent permitted under Delaware law. Sema4’s Charter and Bylaws also provide Sema4’s Board with discretion to indemnify officers and employees when determined appropriate by the Board.
Sema4 has determined that the Business Combination meets the 80% test.
Redemption Rights for Holdersentered into indemnification agreements with each of Public Shares
Pursuant to our current certificate of incorporation, we are providing our public stockholdersits directors and executive officers and certain other key employees. In connection with the opportunity to redeem, upon the Closing shares of common stock for cash equal to the pro rata share of the aggregate amount on deposit (as of two business days priorAcquisition, Sema4 expects to the Closing) in the Trust Account that holds the proceeds of our IPO (including interest not previously released to the Company to pay franchise and income taxes), subject to certain limitations. For illustrative purposes, based on the balanceenter into indemnification agreements with each of the Trust Accountnew directors and executive officer, as applicable. The indemnification agreements provide that Sema4 will indemnify each of approximately $442 million asits directors, executive officers, and such other key employees against any and all expenses incurred by that director, executive officer, or other key employee because of January 29, 2021, the estimated per share redemption price would have been approximately $10.00. Public stockholders may elect to redeem their shares even if they vote for the Business Combination. Any request to redeem public shares, once made, may be withdrawn at any time until the deadline for exercisinghis or her status
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redemption requests and thereafter, with our consent, untilas one of the Closing. If we receive valid redemption requests from holders of public shares priorSema4’s directors, executive officers, or other key employees, to the redemption deadline, we may, at our sole discretion,fullest extent permitted by Delaware law, Sema4’s Charter and its Bylaws. In addition, the indemnification agreements provide that, to the fullest extent permitted by Delaware law, Sema4 will advance all expenses incurred by its directors, executive officers, and other key employees in connection with a legal proceeding involving his or her status as a director, executive officer, or key employee. For information on the indemnification of GeneDx’s officers and directors following the redemption deadlineAcquisition, see the section entitled “The Acquisition—Covenants and until the date of Closing, seek and permit withdrawals by one or more of such holders of their redemption requests. We may select which holders to seek such withdrawals of redemption requests from based on any factors we may deem relevant, and the purpose of seeking such withdrawals may be to increase the funds held in the Trust Account, including where we otherwise would not satisfy the closing condition that the amount in the Trust Account and the proceeds from the PIPE Investment equal or exceed $300,000,000.Agreements—Insurance; D&O Indemnification.”
Submission of Our Initial Business Combination to a Stockholder Vote
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The Special Meeting of our stockholders to which this proxy statement relates is to solicit your approval of the Business Combination. Unlike many other blank check companies, our public stockholders are not required to vote against the Business Combination in order to exercise their redemption rights. If the Business Combination is not completed, then public stockholders electing to exercise their redemption rights will not be entitled to receive such payments. Our Initial Stockholders, including our Sponsor, have agreed to vote any shares of common stock owned by them in favor of the Business Combination.

EmployeesMANAGEMENT OF SEMA4
We currently have three executive officers. Members of our management team are not obligated to devote any specific number of hours to our matters, but they intend to devote as much of their time as they deem necessary to our affairs until we have completed an initial business combination. We presently expect our officers to devote such amount of time as they reasonably believe is necessary to our business, and the amount of time that Eli Casdin or any other members of our management will devote in any time period will vary based on the current stage of the business combination process.DIRECTORS AND EXECUTIVE OFFICERS
Management
Directors, Executive OfficerThe following table sets forth the names, ages as of February 22, 2022, and Corporate Governance.
Our current directorscertain other information regarding our executive officers and executive officer are as follows:directors:
NameAgeTitlePosition
Eli D. CasdinExecutive Officers:47
Eric Schadt, Ph.D.57Chief Executive Officer and Director
Keith A. MeisterJason Ryan47Executive Chairman and Director
Brian EmesIsaac Ro3844Chief Financial Officer and Secretary
Shaun RodriguezDaniel Clark, J.D.42Secretary and General Counsel
Anthony Prentice49Chief Product Officer
Kareem Saad43Chief StrategyBusiness Officer
Sean GeorgeKaren White4751Chief People Officer
Non-Employee Directors:
Dennis Charney, M.D.(5)
70Director
Munib Islam
Eli D. Casdin(4)(6)
4748Director
Emily Leproust, Ph.D.(5)
49Director
Keith A. Meister(1)
48Director
Michael Pellini, M.D.56Director
Joshua Ruch(2)(4)
72Director
Rachel Sherman, M.D., M.P.H., F.A.C.P.(3)(6)
64Director
Nat Turner3536Director
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Eli Casdin(1)Chair of the Audit Committee
(2)Chair of the Compensation Committee
(3)Chair of the Nominating and Corporate Governance Committee
(4)Member of the Nominating and Corporate Governance Committee
(5)Member of the Audit Committee
(6)Member of the Compensation Committee
Executive Officers
Eric Schadt, Ph.D., has beenserved as our Chief Executive Officer and as a member of our Board since July 2021. Dr. Schadt was the founder of Legacy Sema4 and previously served as its Chief Executive Officer and as a member of its board of directors from June 2017 to July 2021. Dr. Schadt also serves as the Dean for Precision Medicine, and Mount Sinai Professor in Predictive Health and Computational Biology at the Icahn School of Medicine at Mount Sinai. Dr. Schadt was previously Founding Director of the Icahn Institute for Genomics and Multiscale Biology from September 2011 to June 2017, and Professor and Chair of the Department of Genetics and Genomic Sciences from August 2011 to June 2017. Dr. Schadt previously served as the Chief Scientific Officer at Pacific Biosciences of California, a biotechnology company, from May 2009 to July 2012, and as an Executive Director at Merck from July 2001 to May 2009. Dr. Schadt also currently serves on numerous boards of directors and scientific advisory boards for various private companies. Dr. Schadt earned his Ph.D. from the University of California, Los Angeles, his M.A. from the University of California, Davis, and his B.S. from California Polytechnic State University-San Luis Obispo. Dr. Schadt’s expertise in computational biology, genomics, health systems operating experience, and knowledge of Sema4’s business, years of senior management experience at a biotechnology company, and his service as a director of other biopharmaceutical companies provide him with the qualifications and skills to serve as a director on our Board.
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Jason Ryan has served as a member of our Board since July 2021, and as our Executive Chairman since January 2022. Mr. Ryan served as Chief Operating and Financial Officer of Magenta Therapeutics, Inc., a biotechnology company, from January 2019 to November 2020. Prior to joining Magenta Therapeutics, Inc., Mr. Ryan previously served as Chief Financial Officer of Foundation Medicine, Inc., a molecular information company which became a wholly-owned subsidiary of Roche Holdings, Inc., from March 2015 to November 2018. Prior to his position as Chief Financial Officer of Foundation Medicine, Inc., Mr. Ryan served in various other finance roles at Foundation Medicine, including as Senior Vice President of Finance. Prior to joining Foundation Medicine, Inc., Mr. Ryan led the finance and strategic planning functions of various other life science companies including Taligen Therapeutics, Inc., Codon Devices Inc. and Genomics Collaborative, Inc. Mr. Ryan joined the board of directors of Singular Genomics Systems, Inc. in April 2021, and previously served on the board of directors of ArcherDX, Inc. (which was acquired by Invitae Corporation) from April 2020 to October 2020. He began his career at Deloitte & Touche LLP. Mr. Ryan holds an M.B.A. from Babson College and a B.S. in economics from Bates College, and earned a C.P.A. in Massachusetts. Mr. Ryan’s extensive finance experience and his leadership experience in the life sciences and biopharmaceutical industries qualifies him to serve as a director on our Board.
Isaac Ro has served as our Chief Financial Officer since July 2021. Mr. Ro previously served as Legacy Sema4’s Chief Financial Officer from February 2021 to July 2021. Mr. Ro previously served as the Chief Financial Officer of Thrive Earlier Detection Corp., a company focused on early detection cancer screening, from June 2019 to February 2021, through Thrive’s sale to Exact Sciences Corporation in January 2021. From July 2010 to June 2019, Mr. Ro held roles of increasing responsibility at Goldman Sachs leading the U.S. Medical Technology team, including as Vice President. Prior to Goldman Sachs, Mr. Ro served as a Director at SVB Leerink from June 2004 to July 2010. Mr. Ro holds a B.A. in History, with honors, from Middlebury College.
Daniel Clark, J.D., has served as our General Counsel since July 2021. Mr. Clark previously served as Legacy Sema4’s General Counsel from March 2016 to July 2021 and Secretary from March 2016 to July 2021. From 2015 to May 2017, Mr. Clark served as the Senior Contracts Manager – Genetics & Genomics at Mount Sinai Innovation Partners. Prior to joining Mount Sinai Innovation Partners, Mr. Clark practiced with two leading law firms in New York, clerked for Judge Frederic Block in the Eastern District of New York, and helped found a boutique startup law firm. Mr. Clark received his J.D. from the University of Michigan School of Law, cum laude, and his B.A. in Economics and Philosophy from Pomona College, cum laude. Mr. Clark also traveled as a Thomas J. Watson Fellow.
Anthony Prentice has served as our Chief Product Officer since July 2021. Mr. Prentice previously served as Legacy Sema4’s Chief Product Officer from September 2016 to July 2021. Prior to joining Sema4, Mr. Prentice served in various roles of increasing responsibility at American Express from May 2005 to September 2016, including as the Vice President of Mobile Payments from August 2011 to September 2016 and as the Vice President of Gold Card Product Management from April 2010 to October 2011. Prior to joining American Express, Mr. Prentice served as the Director of Category Management at Starbucks Corp from 2002 to 2005, and as an Engagement Manager at McKinsey & Company from 1998 to 2002. Mr. Prentice earned an M.B.A. from Columbia University and his B.S. in Mechanical Engineering from Cornell University.
Kareem Saad has served as our Chief Business Officer since July 2021. Mr. Saad previously served as Legacy Sema4’s Chief Business Officer from January 2021 to July 2021. Mr. Saad also previously served as the Chief Strategy Officer at Sema4 from October 2017 to January 2020. Prior to rejoining Sema4, Mr. Saad served as the President and Chief Operating Officer of Apervita, Inc., a healthcare technology company, from February 2020 to January 2021. Mr. Saad previously served as the Chief Commercial Officer and EVP of Strategy and Business Development of SourceMed, a healthcare technology company, between January 2015 and June 2017. Prior to joining SourceMed, Mr. Saad served as a National Sales Director and Manager in Dell’s Healthcare and Life Sciences division between June 2009 and July 2013, and as a Business Segment Executive in IBM’s Healthcare Life Sciences group from November 2001 to February 2006. Mr. Saad received an M.B.A. with a concentration in Economics and Finance from the University of Chicago and a B.S. in Biochemistry and Molecular Biology with a minor in Computer Science from the University of British Columbia.
Karen White has served as our Chief People Officer since July 2021. Ms. White previously served as Legacy Sema4’s Chief People Officer from September 2020 to July 2021. Prior to joining Sema4, Ms. White was Vice
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President of Human Resources for Commercial Solutions at Syneos Health, Inc., a biopharmaceutical outsource services organization, from June 2016 to September 2020. Prior to the merger of inVentiv Health, Inc. and INC Research Holdings, Inc. in August 2017, and later rebranding to Syneos Health in January 2018, Ms. White served as Managing Director of Human Capital at inVentiv Health from June 2016 to August 2017. Prior to that, Ms. White served as Director of Talent Development at Memorial Sloan Kettering Cancer Center where she was employed from October 2011 to June 2016. Before October 2011, Ms. White held various positions at large global organizations such as Goldman Sachs Group Inc., International Business Machines Corp., and PricewaterhouseCoopers. Ms. White earned her M.B.A. from The George Washington University and her B.A. from Hobart and William Smith Colleges.
Non-Employee Directors
Dennis Charney, M.D., has served as a member of our Board since July 2021, and previously served as a member of Legacy Sema4’s board of directors from June 2017 to July 2021. Dr. Charney has served as the Anne and Joel Ehrenkranz Dean of the Icahn School of Medicine at Mount Sinai since March 2007, and as President for Academic Affairs for the Mount Sinai Health System since September 2013. From March 2005 to March 2007, Dr. Charney served as Dean for Academic and Scientific Affairs of the Icahn School of Medicine at Mount Sinai and Senior Vice President for Health Services of The Mount Sinai Medical Center. From 2007-2013, Dr. Charney served as the Dean of the School and Executive Vice President for Academic Affairs of the Medical Center. Dr. Charney first joined the Icahn School of Medicine at Mount Sinai in 2004 as Dean of Research. Prior to joining the Icahn School of Medicine at Mount Sinai, Dr. Charney led the Mood and Anxiety Disorder Research Program and the Experimental Therapeutics and Pathophysiology Branch at the National Institute of Mental Health, and he served as Professor of Psychiatry with tenure at Yale University from January 1990 to January 2000. Dr. Charney received his M.D. from Penn State College of Medicine and his B.A. from Rutgers University. Dr. Charney completed a residency in clinical psychiatry at Yale University School of Medicine and a fellowship in biological psychiatry at Connecticut Mental Health Center. Dr. Charney’s extensive medical and clinical experience in the biotechnology industry qualifies him to serve as a director on our Board.
Eli D. Casdin has served as a member of our Board since July 2020, and previously served as the Chief Executive Officer of CMLS from July 2020 to July 2021. Mr. Casdin founded Casdin Capital, LLC, an investment firm focused on the life sciences and healthcare industry, in November 2011 and currently serves as its Chief Investment Officer. Since December 2020 and January 2021, Mr. Casdin has also served as Chief Executive Officerserves on the boards of directors of SomaLogic, Inc., a protein biomarker discovery and a director ofclinical diagnostics company (formerly, CM Life Sciences II Inc. (Nasdaq: CMII), a special purpose acquisition company (“CMLS II”)), since September 2021 (having previously served as the Chief Executive Officer of CMLS II from February 2021 to September 2021), and EQRx, Inc., a pharmaceutical company (formerly, CM Life Sciences III Inc., respectively, both blank check companies.a special purpose acquisition company (“CMLS III”)), since December 2021 (having previously served as the Chief Executive Officer of CMLS III from February 2021 to December 2021). In addition, Mr. Casdin serves on the boards of directors of Century Therapeutics, Inc., a biotechnology company, since February 2021, Absci Corp, a drug and target discovery company, since December 2020, and Tenaya Therapeutics, Inc., a biotechnology company, since August 2019, and previously served on the board of directors of Exact Sciences Corp. (Nasdaq: EXAS)., a molecular diagnostics company focused on early cancer detection, treatment and monitoring, from October 2017 to September 2020. Mr. Casdin holds an M.B.A. from Columbia Business School and a B.S. degree from Columbia University School of General Studies and an MBA from Columbia Business School. HisStudies. Mr. Casdin’s qualifications to serve on our board of directorsBoard include his extensive leadership experience as an executive officer of an investment firm, his extensive public and private company directorship experience in the life sciences and healthcare sectors, and his expertise in finance, capital markets, and the biotechnology industry.
Emily Leproust, Ph.D., has served as a member of our Board since September 2020. Dr. Leproust has been President and Chief Executive Officer of Twist Bioscience Corp., a biotechnology company, since co-founding Twist in 2013. Since October 2018, she has also served as Chair of the board of directors for Twist. Prior to co-founding Twist, Dr. Leproust served in various positions at Agilent Technologies, Inc., an analytical instrumentation development and manufacturing company, most recently as its Director, Applications and Chemistry R&D from February 2009 to April 2013. Dr. Leproust holds a Ph.D. in Organic Chemistry from the University of Houston and a M.Sc. in Industrial Chemistry from the Lyon School of Industrial Chemistry. Dr. Leproust’s qualifications to serve on our Board include her extensive professional and educational experience in the life sciences industry.
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Keith Meister has beenserved as a member of our Board since January 2022, and previously served as the Chairman of our boardthe Board of directors sinceCMLS from July 2020.2020 to July 2021. He founded Corvex Management LP, a New York based investment manager, in December 2010 and since its inception has served as its Managing
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Partner and Chief Investment Officer. From 2003 to 2010, Mr. Meister served as Chief Executive Officer and then Principal Executive Officer and Vice Chairman of the Boardboard of Icahn Enterprises L.P. (Nasdaq: IEP), the primary investment vehicle for Carl Icahn. In addition, Mr. Meister currently servespreviously served as Chairman of CM Life SciencesCMLS II Inc. (Nasdaq: CMII) and CM Life Sciences III Inc., sincefrom December 2020 to September 2021 and CMLS III from January 2021 respectively.to December 2021. Mr. Meister also serves on the Board of Directors of MGM Resorts International, (NYSE: MGM), a global hospitality and entertainment company, and its affiliate Roar Digital. Mr. Meister has previously served on the Boardboard of Directorsdirectors of numerous other public companies in his career, including Yum! Brands Inc. (NYSE: YUM), The Williams Companies, Inc. (NYSE: WMB), ADT, Inc. (NYSE: ADT), Ralcorp Holdings, Inc. and Motorola, Inc. (now Motorola Solutions, Inc., NYSE: MSI/Motorola Mobility, Inc.). He is Chairman of the board of the Harlem Children’s Zone and also serves on the board of trustees of the American Museum of Natural History. Mr. Meister holds a B.A. degree in government from Harvard College where he graduated cum laude. His qualifications to serve on our board of directors include his extensive leadership experience as managing partner and executive officer of an investment firm and a diversified holding company, his extensive public company directorship experience in a variety of industries, and his expertise in finance, capital markets, strategic development, and risk management.
Brian EmesMichael Pellini, M.D., has beenserved as a member of our Board since July 2021, and previously served as a member of Legacy Sema4’s board of directors from August 2019 to July 2020. Since December 2017, Dr. Pellini has served as a Managing Partner of Section 32, LLC, a technology and life sciences-based venture capital fund. Dr. Pellini held roles of increasing responsibility at Foundation Medicine, Inc., a molecular information company, which was acquired by F. Hoffmann-La Roche Ltd. in 2018, from May 2011 until its acquisition, including as Chairman of the board of directors, Chief FinancialExecutive Officer and Secretary since July 2020. Mr. Emes isPresident. From April 2008 to April 2011, Dr. Pellini held the position of President and Chief Operating Officer at Clarient, Inc., a medical diagnostic services company, which was acquired by General Electric Healthcare Company in 2010, and also the Chief Financial Officerserved on Clarient’s board of Corvex Management LP,directors from May 2007 to April 2009. Dr. Pellini also previously served as Vice President, Life Sciences at Safeguard Scientifics, Inc., a New York based investment manager, which he joined in January 2013. Since December 2020private equity and January 2021, Mr. Emesventure capital firm from March 2007 to April 2008. Dr. Pellini currently serves as Chief Financial Officera member of CM Life Sciences II Inc. (Nasdaq: CMII) and CM Life Sciences IIIthe board of directors of Adaptive Biotechnologies Corporation, the GO2 Foundation, the Personalized Medicine Coalition, Singular Genomics Systems, Inc., respectively. Mr. Emes holdsthe Mission Hospital Foundation and several private companies. Dr. Pellini earned an M.D. from Jefferson Medical College (now the Sidney Kimmel Medical College of Thomas Jefferson University), an M.B.A. from Drexel University, and a B.S. degreeB.A. in financeEconomics from Boston College. Dr. Pellini’s broad experience in the technology, health care and marketing from Elon University’s Martha & Spencer Love Schoollife sciences industries as an investor, and his years of Business,senior management experience at public biotechnology companies, provides him with the qualifications and isskills to serve as a licensed certified public accountant.director on our Board.
Shaun Rodriguez has been our Chief Strategy Officer since July 2020. Mr. Rodriguez joined Casdin Capital, LLC, an investment firm focused on the life sciences and healthcare industry, in July 2015 as a Senior Research Analyst and currently serves as its Director of Life Science Research. His coverage universe at Casdin Capital, LLC focuses on life science tools, diagnostics, health technology and services, and industrial applications of biotechnology. Since December 2020 and January 2021, Mr. Rodriguez currently serves as Chief Financial Officer of CM Life Sciences II Inc. (Nasdaq: CMII) and CM Life Sciences III Inc., respectively. From February 2011 to July 2015, Mr. Rodriguez served as Director and Senior Research Analyst in the healthcare equity research group of Cowen Inc. (Nasdaq: COWN), an investment bank and financial services company. Mr. Rodriguez holds a Ph.D. in biological sciences from Harvard University.
Sean GeorgeJoshua Ruch has served as a directormember of our Board since completionJuly 2021, and previously served as the Chairman of our Board from July 2021 to January 2022 and as a member of Legacy Sema4’s board of directors from November 2017 to July 2021. Mr. Ruch is also a managing partner and co-founder of Rho Capital Partners, an investment and venture capital management company focused on innovative technology, and has held such positions since the founding of Rho Capital Partners in 1981. Prior to co-founding Rho Capital Partners and Rho Ventures in 1981, Mr. Ruch worked as an investment banker at Salomon Brothers in New York, a multinational investment bank. In addition to Sema4, Mr. Ruch is also a trustee of the Initial Public Offering in September 2020. Dr. George has been Co-Founder, PresidentMount Sinai Health System, Carnegie Hall and Chief Executive Officerthe National Humanities Center, and is a member of Invitae Corporation (NYSE: NVTA) since January 2017the Board of Governors of the Technion – Israel Institute of Technology and a director since 2010. He also served as Invitae’s Presidentthe Steering Committee of the Jacobs Institute. Joshua received an M.B.A. from the Harvard Business School and Chief Operating Officer from August 2012 to January 2017 and as Chief Executive from January 2010 to August 2012. Prior to Invitae, he served as COO at Navigenics, Inc. an early pioneer in personalized genetics from 2007 to November 2009. Before joining Navigenics, Dr. George served in a variety of product, operating and commercial roles at Affymetrix, Inc., Invitrogen Corporation and Molecular Probes, Inc. Dr. George holds a B.S. in Molecular Geneticselectrical engineering from UCLA,the Technion – Israel Institute of Technology in Haifa, Israel. Mr. Ruch’s broad experience as an M.S. in Molecular Biology from UC Santa Barbara,investor and a Ph.D. in Molecular Genetics from UC Santa Cruz. His qualificationsserving on the boards of emerging technology companies, including health care and biotechnology companies, qualifies him to serve on our board of directors include his extensive experience in the life sciences sector and his leadership experience guiding an early stage company from startup to market leader.Board.
Munib IslamRachel Sherman, M.D.,M.P.H., F.A.C.P., has served as a directormember of our Board since completion of the Initial Public Offering in September 2020. Mr. IslamJuly 2021, and previously served as Co-Chief Investment Officer and a Partner at Third Point LLC, an investment management firm, from July 2019 through 2020. Prior to becoming co-Chief Investment Officer, he served as Headmember of Equities at Third Point from 2011 to July 2019, where he spearheaded research on Third Point’s strategic block investments globally. From 2008 to 2011, Mr. Islam worked at Highbridge Capital, an investment management firm, where he was a Managing Director and Portfolio Manager of Highbridge’s European Value Equities fund. Mr. Islam previously served on the Board and Executive Selection and Audit Committees of Baxter International, Inc. (NYSE: BAX) from 2015 to 2019, and he currently sits on the Boards of the Stanford Business School Trust and the Brearley School in New York City. Mr. Islam holds a B.A. in Economics from Dartmouth College, where he graduated magna cum laude, and an MBA from the Graduate School of Business at Stanford University. His qualifications to serve on ourLegacy Sema4’s board of directors include his significant experiencefrom March 2020 to July 2021. Dr. Sherman is currently the President of Rachel Sherman Partners LLC, a drug development, regulatory, and policy consulting firm she founded in governance, evaluation2019, and a clinical lecturer at Harvard Pilgrim Health Care Institute. Dr. Sherman also currently serves as a member of investment opportunities, capital allocation, investment managementthe Board of Directors for Aptinyx Inc., a biopharmaceutical company. From May 2017 to January 2019, Dr. Sherman served as Principal Deputy Commissioner at the U.S. Food and financial research.Drug Administration
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Emily Leproust(the “FDA”), haswhere she spent nearly 30 years in medical product development and regulation. Dr. Sherman also served in additional roles at the FDA including as a director since completiondeputy commissioner for Medical Products and Tobacco in the Office of the Initial Public Offering in September 2020. Dr. Leproust has been PresidentCommissioner and Chief Executive Officer of Twist Bioscience Corp. (Nasdaq: TWST) since co-founding Twist in 2013. Since October 2018, she has also served as Chairdirector of the boardOffice of directorsMedical Policy in the Center for Twist. Prior to Twist,Drug Evaluation and Research. Dr. Leproust served in various positions at Agilent Technologies, Inc. (NYSE: A), most recently as its Director, Applications and Chemistry R&DSherman earned an M.D. from February 2009 to April 2013. Dr. Leproust holds a M.Sc. in Industrial Chemistry from the LyonMount Sinai School of Industrial ChemistryMedicine, an M.P.H from The School of Hygiene and Public Health at Johns Hopkins University and an A.B. in mathematics from Washington University (St. Louis). Dr. Sherman’s medical and regulatory experience across a Ph.D. in Organic Chemistry frombroad range of subject matters, including biosimilars, expedited drug development, prescription drug promotion, and active post-market surveillance provides her with the University of Houston. Her qualifications and skills to serve on our board of directors include her extensive professional and educational experience in the life sciences industry.Board.
Nat Turner has served as a directormember of our Board since completion of the Initial Public Offering in September 2020.July 2021. Mr. Turner has beenis currently CEO of Collectors Universe, an authentication and grading company for collectible coins, trading cards, video games, autographs, and memorabilia. Mr. Turner is also Chairman of Flatiron Health, Inc., and Director on the Board of Directors for Clover Health Investments Corp. Previously, Mr. Turner was the Co-Founder and Chief Executive Officer of Flatiron Health, Inc., a healthcare technology company focusing on accelerating oncology research and improving patient care, from June 2012 until April 2021, and was acquired by Roche Holding AG since June 2012. Previously,in April 2018. Prior to that, Mr. Turner co-founded and served as Chief Executive Officer of Invite Media, Inc., an advertising technology company, from March 2007 until it was acquired by Google Inc. (Nasdaq: GOOGL) in June 2010, after which he remained at Google until June 2012. Mr. Turner received a B.S., cum laude, in Economics with concentrations in entrepreneurship and marketing from The Wharton School of the University of Pennsylvania. HisMr. Turner’s qualifications to serve on our board of directorsBoard include his significant experience in the life sciences industry, both as an executive and as an angel investor.
Board Leadership StructureThere are no familial relationships among our executive officers or directors.
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MANAGEMENT AFTER THE ACQUISITION
All of our current officers and Roledirectors will continue to serve as such following the Acquisition. It is also anticipated that upon consummation of the acquisition, Ms. Stueland will become the new Co-Chief Executive Officer of the Company. Following the Acquisition, our directors and executive officers will be as follows:
NameAgePosition
Executive Officers
Eric Schadt, Ph.D.57Co-Chief Executive Officer and Director
Katherine Stueland46Co-Chief Executive Officer and Director
Jason Ryan47Executive Chairman and Director
Isaac Ro44Chief Financial Officer
Shawn Assad47Chief Accounting Officer
Daniel Clark, J.D.42Secretary and General Counsel
Anthony Prentice49Chief Product Officer
Kareem Saad43Chief Business Officer
Karen White51Chief People Officer
Non-Employee Directors
Dennis Charney, M.D.70Director
Eli D. Casdin48Director
Emily Leproust, Ph.D.49Director
Keith Meister48Director
Michael Pellini, M.D.56Director
Richard C. Pfenniger, Jr.66Director
Joshua Ruch72Director
Rachel Sherman, M.D., M.P.H., F.A.C.P.64Director
Nat Turner36Director
Executive Officers
For information regarding Mr. Schadt, Mr. Ryan, Mr. Ro, Mr. Assad, Mr. Clark, Mr. Prentice, Mr. Saad and Ms. White please refer to “Management of Sema4” above.
Katherine Stuelandhas been the President and Chief Executive Officer of GeneDx since June 2021, and will serve as Sema4’s Co-Chief Executive Officer following the completion of the Acquisition. Prior to joining GeneDx, Ms. Stueland served as the Chief Commercial Officer at Invitae Corporation, a biotechnology company, from October 2016 to June 2021 and as the Head of Communications and Investor Relations at Invitae Corporation from November 2013 to October 2016, during which time she helped Invitae Corporation transition from a private to a public company. Ms. Stueland previously served as the Principal at Vivo Communications, a technology company, from January 2013 to December 2013, and as the Vice President of Communications and Investor Relations at Dendreon Corporation, a biotechnology company, from September 2009 to June 2012. Ms. Stueland previously served on the board of the Rivkin Center, a non-profit organization dedicated to the treatment and prevention of cancer in Risk Oversightwomen. Ms. Stueland earned a B.S. in English language and literature from Miami University of Ohio. Ms. Stueland’s extensive leadership experience as an executive officer of biotechnology companies and knowledge of GeneDx’s business provide her with the qualifications and skills to serve as a director on our Board.
The Board’s oversightNon-Employee Directors
For information regarding Mr. Charney, Mr. Casdin, Ms. Leproust, Mr. Meister, Mr. Pellini, Mr. Ruch, Ms. Sherman, and Mr. Turner please refer to “Management of riskSema4” above.
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Richard C. Pfenniger, Jr., is administered directly througha private investor and has previously served as Interim CEO of Vein Clinics of America, Inc., a privately held company that specializes in the treatment of vein disease, from May 2014 to February 2015 and as Interim CEO of IntegraMed America, Inc., a privately held company that manages outpatient fertility medical centers, from January 2013 to June 2013. He served as Chief Executive Officer and President for Continucare Corporation, a provider of primary care physician and practice management services, from 2003 until 2011, and served as Chairman of the Board of Directors of Continucare Corporation from 2002 until 2011. Previously, Mr. Pfenniger served as the Chief Executive Officer and Vice Chairman of Whitman Education Group, Inc. from 1997 through June 2003. Prior to joining Whitman, he served as the Chief Operating Officer of IVAX from 1994 to 1997, and, from 1989 to 1994, he served as the Senior Vice President-Legal Affairs and General Counsel of IVAX Corporation. Prior thereto he was engaged in the private practice of law. Mr. Pfenniger currently serves as a whole, or through its audit committee. Various reportsdirector of OPKO Health, Inc., a medical test and presentations regarding risk management are presented tomedication company focused on diagnostics and pharmaceuticals, GP Strategies Corporation, a corporate education and training company, and Asensus Surgical, Inc., a medical device company. He also serves as the Vice Chairman of the Board to identifyof Trustees and manage risk. The audit committee addresses risks that fall within the committee’s area of responsibility. For example, the audit committee is responsible for overseeing the quality and objectivityas a member of the Company’sExecutive Committee of the Phillip and Patricia Frost Museum of Science. Mr. Pfenniger previously served as a director of BioCardia, Inc., clinical-stage regenerative medicine company developing novel therapeutics for cardiovascular diseases, IntegraMed America, Inc., a private specialty healthcare services company offering products and services to patients and providers in the fertility and vein care segments of the health industry, Vein Clinics of America and Wright Investors’ Services Holdings, Inc., an investment management and financial statementsadvisory firm. Mr. Pfenniger’s experience as a chief executive officer, chief operating officer and general counsel, and knowledge of the independent audit thereof. Management furnishes information regarding riskhealthcare business provide him with the qualifications and skills to theserve as a director on our Board.
Classified Board as requested.
Number and Terms of Office of Officers and Directors
OurThe board of directors consists of six members. Our board isthe Company are divided into three staggered classes withof directors. At each annual meeting of stockholders, a class of directors are subject to re-election for a three-year term. As a result, only one class of directors beingwill be elected inat each year,annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms. The directors are divided among the three classes as follows:
•the Class I directors will be Eli D. Casdin, Joshua Ruch and with each class (except for those directors appointed prior to ourMichael Pellini and their terms will expire at the first annual meeting of stockholders) serving a three-year term. The term of office of stockholders held in 2022;
•the first class ofClass II directors consisting of Sean Georgewill be Rachel Sherman, Eric Schadt, Nat Turner and Emily Leproust,Dennis Charney, and their terms will expire at the Special Meeting. The term of office of the second class of directors, consisting of Munib Islam and Nat Turner, will expire at our second annual meeting of stockholders. The term of office of stockholders held in 2023; and
•the third class ofClass III directors consisting of Eli Casdinwill be Emily Leproust, Jason Ryan and KiethKeith Meister and their terms will expire at ourthe third annual meeting of stockholders. Subject to any other special rights applicable tostockholders held in 2024.
Each director’s term continues until the stockholders, any vacancies on our boardelection and qualification of directors may be filled by the affirmative vote of a majority of the directors presenthis or her successor, or his or her earlier death, resignation or removal. Our Charter and voting at the meeting of our board that includes any directors representing our Sponsor then on our board, or by a majority of the holders of our common stock.
Our officers are appointed byrestated bylaws authorize only the board of directors and serve atto fill vacancies on the discretionboard. Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. This classification of the board of directors rather than for specific terms of office. Our board of directors is authorized to appoint persons to the offices set forth in our bylaws as it deems appropriate. Our bylaws provide that our officers may consist of a Chairman of the Board, Chief Executive Officer, Chief Financial Officer, President, Vice Presidents, Secretary, Treasurer, Assistant Secretaries and such other offices asCompany may be determined byhave the boardeffect of directors.delaying or preventing changes in control of the Company.
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CORPORATE GOVERNANCE OF SEMA4
Director Independence
The listing standardsrules of Nasdaq require that a majority of our Boardthe Company’s board of directors be independent. An “independent director” is defined generally as a person other than an executive officer or employee of the company or its subsidiariesCompany or any other individual having a relationship which, in the opinion of the company’sissuer’s board of directors, would interfere with the director’s exercise of independent judgmentjudgement in carrying out the responsibilities of a director. Our Board has determined that each of Sean George, Emily Leproust, Munib Islamindividual currently serving on our board, other than Dr. Schadt and Nat Turner are “independent directors”Mr. Ryan, qualifies as defined in Rule 10A-3 of the Exchange Act and the rules of Nasdaq, and Kieth Miester is an “independent director”
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as defined inindependent director under Nasdaq listing standards.
Board of Directors
Our independent directors have regularly scheduled meetings at which only independent directors are present.Board oversees our business affairs and works with our CEO and other senior management to determine our strategy and mission. In fulfilling its responsibilities, our Board is involved in strategic and operational planning, financial reporting, governance, compliance and risk oversight.
CommitteesResults of Operations
A discussion regarding our financial condition and results of consolidated operations for the year ended December 31, 2021 compared to the year ended December 31, 2020 and for the year ended December 31, 2020 compared to the year ended December 31, 2019 is presented below.
Certain expenses were previously misclassified as cost of services and they are now reported as selling and marketing. The adjustment is reflected in the amounts reported below for years ended December 31, 2021, 2020 and 2019. Refer to Note 2, “Summary of Significant Accounting Policies” to our consolidated financial statements for further information included elsewhere in this proxy statement.


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Comparison of the BoardYears Ended December 31, 2021 and 2020
The following table sets forth our results of Directorsoperations for the periods presented:
Our board
Year Ended December 31,

20212020
(Restated)

(in thousands)
Revenue
Diagnostic test revenue$205,100 $175,351 
Other revenue7,095 3,971 
Total revenue212,195 179,322 
Cost of services228,797 175,296 
Gross (loss) profit(16,602)4,026 
Research and development105,162 72,700 
Selling and marketing112,738 63,183 
General and administrative205,988 100,742 
Related party expenses5,659 9,395 
Loss from operations(446,149)(241,994)
Other income (expense):

 Change in fair market value of warrant and earn-out contingent liabilities198,401 — 
Interest income79 506 
Interest expense(2,835)(2,474)
Other income, net5,114 2,622 
Total other income (expense), net200,759 654 
Loss before income taxes(245,390)(241,340)
Income tax provision— — 
Net loss and comprehensive loss(245,390)(241,340)
Redeemable convertible preferred stock dividends— — 
Net loss attributable to common stockholders$(245,390)$(241,340)
Revenue
Change
Year Ended December 31,2020 to 2021
20212020$%
(dollars in thousands)
Diagnostic test revenue$205,100 $175,351 $29,749 17 %
Other revenue7,095 3,971 3,124 79 %
Total revenue$212,195 $179,322 $32,873 18 %
Total revenue increased by $32.9 million, or 18%, to $212.2 million for the year ended December 31, 2021, from $179.3 million for the year ended December 31, 2020.
Diagnostic test revenue increased by $29.7 million, or 17%, to $205.1 million for the year ended December 31, 2021, from $175.4 million for the year ended December 31, 2020. The increase was primarily attributable to a 135% increase in oncology test volumes, a 38% increase in women’s health test volumes and an overall increase in volumes of directors has three standing committees:31%, partially offset by the change in the mix of tests performed and reduced reimbursement rates. COVID-19 testing was introduced in May of 2020, which had a lower impact on total test
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volume during the year ended December 31, 2020, compared to the year ended December 31, 2021 (with COVID-19 test volumes growing 26% year over year) .
Other revenue increased by $3.1 million, or 79%, to $7.1 million for the year ended December 31, 2021, from $4.0 million for the year ended December 31, 2020. The increase was primarily attributable to growth in collaboration service activities due to the execution of third-party contracts which generated $3.7 million more in revenues in 2021 compared to 2020. This was partially offset by reduced revenues recognized related to an audit committee,existing third-party contract by $0.8 million.
Cost of Services (2020 amount restated)
Change
Year Ended December 31,2020 to 2021
20212020$%
(dollars in thousands)
Cost of services$228,797 $175,296 $53,501 31 %
Cost of services increased by $53.5 million, or 31%, to $228.8 million for the year ended December 31, 2021, from $175.3 million for the year ended December 31, 2020. The increase was primarily driven by the following cost components: a $9.7 million increase in stock-based compensation committeeexpense primarily driven by the increase in fair value of the liability-classified awards until July 22, 2021, the closing date of our business combination and an increase in the number of stock-based compensation awards granted; a $7.9 million increase in personnel-related expenses driven by an increase in average headcount; a $8.2 million increase in consulting and outside service costs driven by temporary hires contracted to perform COVID-19 testing activities; a $5.0 million increase in logistical expenses and other lab services as a result of an increase in operations; a $9.6 million increase in reagents and laboratory supplies expense due primarily to the 32% increase in volumes; a $2.4 million increase in software expenses due to increased cloud storage and expanded computing capacity requirements from New York City to Stamford, Connecticut for testing data; a $2.1 million increase in the inventory obsolescence reserve for expiring COVID-19 and certain carrier screening testing kits; a $2.2 million increase in occupancy expenses; a $5.1 million increase in depreciation expenses in connection with our laboratory move at the end of 2020, with production activities commencing at the Stamford facility in the first quarter of 2021 and a nominating$1.3 million increase in equipment maintenance and corporate governance committee. Allgeneral office expenses.
Research and Development
Change
Year Ended December 31,2020 to 2021
20212020$%
(dollars in thousands)
Research and development$105,162 $72,700 $32,462 45 %
Research and development expenses increased by $32.5 million, or 45%, to $105.2 million for the year ended December 31, 2021, from $72.7 million for the year ended December 31, 2020. The increase was primarily attributable to the following cost components: a $20.5 million increase in stock-based compensation expense driven by the increase in fair value of the membersliability-classified awards until the closing date of the business combination and an increase in the number of stock-based compensation awards granted; a $0.9 million increase in software expenses due to increased cloud storage; a $0.3 million increase in personnel-related expenses driven by an increase in average headcount a $4.8 million increase in depreciation expenses; a $3.6 million increase in expenses for reagents, laboratory supplies and laboratory software for research and development; and a $2.2 million increase in consulting fees.
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Selling and Marketing (2020 amount restated)
Change
Year Ended December 31,2020 to 2021
20212020$%
(dollars in thousands)
Selling and marketing$112,738 $63,183 $49,555 78 %
Selling and marketing expenses increased by $49.6 million, or 78%, to $112.7 million for the year ended December 31, 2021, from $63.2 million for the year ended December 31, 2020. The increase was primarily attributable to the following cost components: an $17.3 million increase in stock-based compensation expense driven by the increase in fair value of the liability-classified awards until the closing date of the business combination and an increase in the number of stock-based compensation awards granted; a $19.6 million increase in personnel-related expenses driven by increased headcount; a $4.1 million increase in consulting service expenses mainly to support revenue cycle transformation initiatives; a $3.2 million increase in information technology-related expenses; a $1.8 million increase in other administrative and office expenses; a $2.0 million increase in travel and business expenses due to the lifting of COVID-19 travel restrictions and a $1.5 million increase in counseling services.
General and Administrative
Change
Year Ended December 31,2020 to 2021
20212020$%
(dollars in thousands)
General and administrative$205,988 $100,742 $105,246 104 %
General and administrative expenses increased by $105.3 million, or 104%, to $206.0 million for the year ended December 31, 2021, from $100.7 million for the year ended December 31, 2020. The increase was primarily attributable to the following cost components: an $51.7 million increase in stock-based compensation expense driven by the increase in fair value of the liability-classified awards until the closing date of the business combination and an increase in the number of stock-based compensation awards granted; a $21.1 million increase in professional services incurred mainly in connection with the business combination transaction; a $20.0 million increase in personnel-related expenses driven by an increase in average headcount including executive headcount; a $5.0 million increase in software expenses due to increased cloud storage requirements; a $7.0 million increase in insurance expenses driven by the commencement of director’s insurance policy; and a $0.8 million increase in capital taxes as a result of the business combination transaction. These increases were partially offset by a $0.4 million decrease in occupancy and depreciation expenses in connection with our laboratory move from New York City to Stamford, Connecticut.
Related Party Expenses
Change
Year Ended December 31,2020 to 2021
20212020$%
(dollars in thousands)
Related party expenses$5,659 $9,395 $(3,736)(40)%
Related party expenses decreased by $3.7 million, or 40%, to $5.7 million for the year ended December 31, 2021, from $9.4 million for the year ended December 31, 2020. The decrease was primarily attributable to the following cost components: a $3.2 million decrease in rent and facility expenses driven by a reduction of office and lab space leased from ISMMS pursuant to the TSA which ended in the first quarter of 2021; and a $0.5 million decrease in fees associated with information technology support pursuant to the TSA with ISMMS.
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Interest Income
Change
Year Ended December 31,2020 to 2021
20212020$%
(dollars in thousands)
Interest income$79 $506 $(427)(84)%
Interest income decreased by $0.4 million, or 84%, to $0.1 million for the year ended December 31, 2021, from $0.5 million for the year ended December 31, 2020. The decrease was due to declines in interest rates on money market fund accounts.
Interest Expense
Change
Year Ended December 31,2020 to 2021
20212020$%
(dollars in thousands)
Interest expense$2,835 $2,474 $361 15 %
Interest expense increased by $0.4 million, or 15%, to $2.8 million for the year ended December 31, 2021, from $2.5 million for the year ended December 31, 2020. The increase was driven by new capital lease obligations for our Stamford laboratory facility which commenced operations in 2021 as well as the unused line fee and the amortization of deferred transaction costs related to the loan and security agreement entered into with Silicon Valley Bank at the end of 2021.
Other Income, Net
Change
Year Ended December 31,2020 to 2021
20212020$%
(dollars in thousands)
Other income, net$5,114 $2,622 $2,492 95 %
Other income, net increased by $2.5 million or 95% to $5.1 million for the year ended December 31, 2021, from $2.6 million for the year ended December 31, 2020. The increase in other income, net was primarily attributable to the $5.6 million in funding that we received and recognized as other income under the CARES Act in the first quarter of 2021, partially offset by $0.3 million in penalties related to an early repayment of debt. This is compared to $2.6 million in funding received in 2020.

195

Comparison of the Years Ended December 31, 2020 and 2019
The following table sets forth our results of operations for the periods presented:
Year Ended December 31,

2020 (Restated)2019
(Restated)

(in thousands)
Revenue

Diagnostic test revenue$175,351 $191,667 
Other revenue3,971 4,507 
Total revenue179,322 196,174 
Cost of services175,296 113,389 
Gross profit4,026 82,785 
Research and development72,700 34,910 
Selling and marketing63,183 39,352 
General and administrative100,742 29,484 
Related party expenses9,395 9,452 
Loss from operations(241,994)(30,413)
Other income (expense):

Interest income506 988 
Interest expense(2,474)(783)
Other income, net2,622 504 
Total other income, net654 709 
Loss before income taxes(241,340)(29,704)
Income tax provision— — 
Net loss and comprehensive loss(241,340)(29,704)
Redeemable convertible preferred stock dividends— 3,039 
Net loss attributable to common stockholders$(241,340)$(32,743)
Revenue
Change
2019 to 2020
20202019$%
Diagnostic test revenue$175,351 $191,667 $(16,316)(9)%
Other revenue3,971 4,507 (536)(12)%
Total revenue$179,322 $196,174 $(16,852)(9)%
Total revenue decreased by $16.9 million, or 9%, to $179.3 million for the year ended December 31, 2020, from $196.2 million for the year ended December 31, 2019.
Diagnostic test revenue decreased by $16.3 million, or 9%, to $175.4 million for the year ended December 31, 2020, from $191.7 million for the year ended December 31, 2019. The decrease was primarily attributable to a change in the mix of tests performed coupled with reduced reimbursement rates. The Company experienced an increase in volumes of 248%, primarily driven by the introduction of COVID-19 testing in May 2020. Despite these three committeesincreased volumes, diagnostic test revenue decreased due to lower pricing on COVID-19 testing relative to other diagnostic tests and an overall decrease in average pricing on Women’s Health and Oncology testing.
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Other revenue decreased by $0.5 million, or 12%, to $4.0 million for the year ended December 31, 2020, from $4.5 million for the year ended December 31, 2019. The decrease was primarily attributable to the completion of one significant third-party contract in 2019 and the completion of one significant contract with ISMMS in early 2020. This decrease was partially offset by growth in collaboration service activities due to the execution of two new third-party contracts in 2020. Other revenues are comprised solelyexpected to continue to be driven predominately by services performed pursuant to contracts with third parties.
Cost of independent directorsServices (2020 and 2019 amounts restated)
Change
2019 to 2020
20202019$%
Cost of services$175,296 $113,389 $61,907 55 %
Cost of services increased by $61.9 million, or 55%, to $175.3 million for the year ended December 31, 2020, from $113.4 million for the year ended December 31, 2019. The increase was primarily attributable to the following cost components: a $17.5 million increase in reagents and laboratory supplies expense due primarily to the 248% increase in resulted volumes coupled with the lower per test cost of performing COVID-19 tests relative to our other tests; a $12.2 million increase in stock-based compensation expenses primarily driven by the increase in fair value of the liability-classified awards; an $11.1 million increase in personnel-related expenses driven by an increase in average headcount, partially offset by COVID-19 austerity measures; a $6.4 million increase in third party reference laboratory expenses due to an increase in tests performed by such third parties; a $4.6 million increase in expenses for other services such as genetic counseling, shipping and phlebotomy services; a $4.4 million increase in depreciation and amortization expenses driven by laboratory sequencing equipment acquired in 2020 and an increase in capitalized software as compared to the prior year; a $3.6 million increase in outside labor costs driven by temporary hires contracted in 2020 to perform COVID-19 testing activities as well as an increase in consultants supporting collaboration services; a $0.2 million increase in software expenses due to increased cloud storage and expanded computing capacity requirements for testing data; a $1.3 million increase in equipment-related expenses, including maintenance expenses on existing equipment and purchases of minor equipment in 2020; and a $0.5 million increase in occupancy costs.
Research and Development
2019 to 2020
20202019$%
Research and development$72,700 $34,910 $37,790 108 %
Research and development expense increased by $37.8 million, or 108%, to $72.7 million for the year ended December 31, 2020, from $34.9 million for the year ended December 31, 2019. The increase was primarily attributable to the following cost components: a $25.4 million increase in stock-based compensation expenses primarily due to an increase in fair value of the liability-classified awards and an increase in the number of stock-based compensation awards granted; a $9.3 million increase in personnel-related expenses driven by increased average headcount and retention bonuses offered to employees impacted by the relocation of our New York laboratory in December of 2020, partially offset by COVID-19 austerity measures; a $1.7 million increase in expenses for reagents, laboratory supplies and laboratory software for research and development use; and a $1.1 million increase in consulting and outside services, primarily due to an increase in the number of, and required investment in, research and development studies.
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Selling and Marketing (2020 and 2019 amounts restated)
Change
2019 to 2020
20202019$%
Selling and marketing$63,183 $39,352 $23,831 61 %
Selling and marketing expense increased by $23.8 million, or 61%, to $63.2 million for the year ended December 31, 2020, from $39.4 million for the year ended December 31, 2019. The increase was primarily attributable to the following cost components: a $11.4 million increase in personnel-related expenses driven by an increase in average headcount, partially offset by COVID-19 austerity measures; a $11.1 million increase in stock-based compensation expenses primarily due to an increase in the fair value of the liability-classified awards and an increase in the number of outstanding awards due to increase in the number of stock-based compensation awards granted; a $1.5 million increase in commissions due to an increase in sales employee headcount and the implementation of temporary minimum commissions offered to sales employees in response to the COVID-19 pandemic; a $1.0 million increase in other lab service; and a $0.6 million increase in software expenses due to increased cloud storage requirements. These increases were partially offset by a $1.8 million decrease in travel and business expenses due to reduced business travel during the COVID-19 pandemic.
General and Administrative
Change
2019 to 2020
20202019$%
General and administrative$100,742 $29,484 $71,258 242 %
General and administrative expense increased by $71.3 million, or 242%, to $100.7 million for the year ended December 31, 2020, from $29.5 million for the year ended December 31, 2019. The increase was primarily attributable to the following cost components: a $66.0 million increase in stock-based compensation expenses due to an increase in the fair value of the liability-classified awards and an increase in the number of outstanding awards due to increase in the number of stock-based compensation awards granted; a $1.4 million increase in occupancy expenses due to the execution of additional third party leases; and a $1.3 million increase in personnel-related expenses due to an increase in general and administrative headcount, partially offset by COVID-19 austerity measures.
Related Party Expenses
Change
2019 to 2020
20202019$%
Related party expenses$9,395 $9,452 $(57)(1)%
Related party expenses decreased by $0.1 million, or 0.6%, to $9.4 million for the year ended December 31, 2020, from $9.5 million for the year ended December 31, 2019. The decrease was primarily attributable to a $1.7 million decrease in service fees associated with a reduction of leased ISMMS employees, a $1.0 million decrease in fees associated with information technology support pursuant to the TSA with ISMMS and decreases in other various services provided by ISMMS pursuant to the TSA and service agreements. These decreases were partially offset by a $2.0 million increase in rent and facility expenses driven by additional office and lab space leased from ISMMS pursuant to the transition services agreement and a $0.5 million increase in consultant costs driven by an increase in research and development efforts performed by ISMMS under consulting agreements.
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Interest Income
Change
2019 to 2020
20202019$%
Interest income$506 $988 $(482)(49)%
Interest income decreased by $0.5 million, or 49%, to $0.5 million for the year ended December 31, 2020, from $1.0 million for the year ended December 31, 2019. The decrease was due to declines in interest rates on money market deposit accounts and reductions in the average cash balances held throughout the year in these interest-bearing accounts.
Interest Expense
Change
2019 to 2020
20202019$%
Interest expense$2,474 $783 $1,691 216 %
Interest expense increased by $1.7 million, or 216%, to $2.5 million for the year ended December 31, 2020, from $0.8 million for the year ended December 31, 2019. The increase was driven by an increase in capital lease obligations, an increase in our interest-bearing loan balance with the Connecticut Department of Economic and Community Development, or the DECD, and a new interest-bearing bank loan executed in 2020.
Other Income, Net
Change
2019 to 2020
20202019$%
Other income, net$2,622 $504 $2,118 420 %
Other income, net increased by $2.1 million or 420% to $2.6 million for the year ended December 31, 2020, from $0.5 million for the year ended December 31, 2019. The increase in other income, net was primarily attributable to $2.6 million in funding that we received under the CARES Act.

Reconciliation of Non-GAAP Financial Measures
In addition to our results determined in accordance with GAAP, we believe the rules of Nasdaqfollowing non-GAAP measures are useful in evaluating our operating performance. We use the following non-GAAP financial information to evaluate our ongoing operations, as a component in determining employee bonus compensation, and the SEC.
Audit Committee
The members offor internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. However, non-GAAP financial information is presented for supplemental informational purposes only and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our audit committee are Sean George, Munib Islam and Emily Leproust. Mr. Islam serves as chairman of the audit committee. Each of Sean George, Munib Islam and Emily Leproust meet the independent director standard under Nasdaq listing rules and under Rule 10A-3(b)(1) of the Exchange Act.
Each member of the audit committee is financially literate and our board of directors has determined that Mr. Islam qualifies as an “audit committee financial expert” as defined in applicable SEC rules and has accountingindustry, may calculate similarly-titled non-GAAP measures differently or related financial management expertise.
We have adopted an audit committee charter, which details the principal functions of the audit committee, including:
1.assisting board oversight of  (1) the integrity of our financial statements, (2) our compliance with legal and regulatory requirements, (3) our independent auditor’s qualifications and independence, and (4) the performance of our internal audit function and independent auditors; the appointment, compensation, retention, replacement, and oversight of the work of the independent auditors and anymay use other independent registered public accounting firm engaged by us;
2.pre-approving all audit and non-audit services to be provided by the independent auditors or any other registered public accounting firm engaged by us, and establishing pre-approval policies and procedures; reviewing and discussing with the independent auditors all relationships the auditors have with us in ordermeasures to evaluate their continued independence;
3.setting clear policiesperformance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for audit partner rotation in compliance with applicable laws and regulations; obtaining and reviewing a report, at least annually, from the independent auditors describing (1) the independent auditor’s internal quality-control procedures and (2) any material issues raised bycomparison. A reconciliation is provided below for each non-GAAP financial measure to the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to dealdirectly comparable financial measure stated in accordance with such issues;
4.meetingGAAP. Investors are encouraged to review and discuss our annual auditedthe related GAAP financial statements and quarterly financial statements with managementmeasures and the independent auditor, including reviewing our specific disclosures under “The Company’s Management’s Discussion and Analysisreconciliation of Financial Condition and Results of Operations”; reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such transaction; and
5.reviewing with management, the independent auditors, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding ourthese non-GAAP financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities.
Compensation Committee
The members of our compensation committee are Munib Islam, Emily Leproust and Nat Turner. Dr. Leproust serves as chairman of the compensation committee, each of whom is independent.
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measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.
Non-GAAP financial measures have limitations as analytical tools and you should not consider them in isolation, or as substitutes for analysis of our results as reported under GAAP. We have adopted a compensation committee charter, which detailsmay in the principal functionsfuture incur expenses similar to the adjustments in the presentation of the compensation committee, including:Non-GAAP financial measures. Other limitations include that Non-GAAP financial measures do not reflect:
1.•reviewingall expenditures or future requirements for capital expenditures or contractual commitments;
•changes in our working capital needs;
•provision for income taxes, which may be a necessary element of our costs and approvingability to operate;
•the costs of replacing the assets being depreciated, which will often have to be replaced in the future;
•the non-cash component of employee compensation expense; and
•the impact of earnings or charges resulting from matters we consider not to be reflective, on an annuala recurring basis, the corporate goalsof our ongoing operations
Adjusted Gross Profit and objectives relevantAdjusted Gross Margin
Adjusted Gross Profit is a non-GAAP financial measure that we define as revenue less cost of services, excluding stock-based compensation expense, labor costs due to our Chief Executive Officer’s compensation,move, and COVID-19 costs. We define Adjusted Gross Margin as our Adjusted Gross Profit divided by our revenue. We believe these non-GAAP financial measures are useful in evaluating our Chief Executive Officer’soperating performance compared to that of other companies in lightour industry, as these metrics generally eliminate the effects of such goalscertain items that may vary from company to company for reasons unrelated to overall operating performance.
The following is a reconciliation of revenue to our Adjusted Gross Profit and objectivesAdjusted Gross Margin for the years ended December 31, 2021, 2020 and determining2019 (in thousands):
Year Ended December 31,
20212020
(Restated)		2019
(Restated)
Revenue$212,195 $179,322 $196,174 
Cost of services228,797 175,296 113,389 
Gross (Loss) Profit
(16,602)4,026 82,785 
(8)%2 %42 %
Add:
Stock-based compensation expense$22,567 12,942 710 
Labor costs due to laboratory move (1)
— 16,391 — 
COVID-19 costs (2)
— 3,179 — 
Adjusted Gross Profit
$5,965 $36,538 $83,495 
Adjusted Gross Margin
3 %20 %43 %
__________________
(1)Represents labor costs in respect of laboratory employees' time spent to support our laboratory move from New York City to Stamford, Connecticut in 2020. During the move, our laboratory employees dedicated their time to re-validating and approvingre-establishing instruments and equipment, rebuilding interface, obtaining a CLIA license, and other tasks to make sure the remuneration (if any)move was done correctly. For GAAP purposes we included these activities in Cost of Services. However, as the laboratory move and effort spent by our employees are one-time activities, we adjusted our Gross Profit to reflect management’s view of our Chief Executive Officer based on such evaluation;normal operations.
2.(2)reviewing and making recommendations toRepresents labor costs in respect laboratory employees’ downtime. During the second quarter of 2020, we did not reduce the workforce in our board of directors with respectlaboratory due to the compensation, and any incentive-compensation and equity-based plans that are subjectCOVID-19 pandemic. However, we suffered significantly due to board approval of all of our other officers;
3.reviewing our executive compensation policies and plans;
4.implementing and administering our incentive compensation equity-based remuneration plans;
5.assisting managementthe decrease in complying with our proxy statement and annual report disclosure requirements;
6.approving all special perquisites, special cash paymentsvolume in Women's Health and other special compensation and benefit arrangements forproducts. Accordingly, we have adjusted our officers and employees;
7.producing a report on executive compensationGross Profit to be includedreflect the management-assessed impact from the decrease in our annual proxy statement; and
8.reviewing, evaluating and recommending changes, if appropriate,productivity of existing laboratory employees due to the remuneration for directors.
Notwithstanding the foregoing, as indicated above, no compensation of any kind, including finders, consulting or other similar fees, will be paid to any of our existing stockholders, officers, directors or any of their respective affiliates, prior to, or for any services they render in order to effectuate the consummation of an initial business combination.
Accordingly, it is likely that prior to the consummation of an initial business combination, the compensation committee will only be responsible for the review and recommendation of any compensation arrangements to be entered into in connection with such initial business combination.
The charter also provides that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, independent legal counsel or other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee will consider the independence of each such adviser, including the factors required by Nasdaq and the SEC.
Nominating and Corporate Governance Committee
The members of our nominating and corporate governance are Sean George, Munib Islam and Kieth Miester. Dr. George serves as chair of the nominating and corporate governance committee, each of whom is independent.
We have adopted a nominating and corporate governance committee charter, which details the purpose and responsibilities of the nominating and corporate governance committee, including:
1.identifying, screening and reviewing individuals qualified to serve as directors, consistent with criteria approved by the board, and recommending to the board of directors candidates for nomination for election at the annual meeting of stockholders or to fill vacancies on the board of directors;
2.developing and recommending to the board of directors and overseeing implementation of our corporate governance guidelines;
3.coordinating and overseeing the annual self-evaluation of the board of directors, its committees, individual directors and managementCOVID-19 pandemic in the governancesecond quarter of the company; and2020.
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4.reviewing onAdjusted EBITDA
Adjusted EBITDA is a regular basisnon-GAAP financial measure that we define as net loss adjusted for interest expense (income), net, depreciation and amortization, stock-based compensation expenses, transaction costs, other (income) expense, net, COVID-19 costs and change in fair market value of warrant and earn-out contingent liabilities and. We believe Adjusted EBITDA is useful in evaluating our operating performance compared to that of other companies in our industry, as this metric generally eliminates the effects of certain factors that may vary from company to company for reasons unrelated to overall corporate governance and recommending improvements as and when necessary.operating performance.
The charter also providesfollowing is a reconciliation of our net loss to Adjusted EBITDA for the years ended December 31, 2021, 2020, and 2019 (in thousands):
Year Ended December 31,
202120202019
Net loss$(245,390)$(241,340)$(29,704)
Interest expense (income), net (1)
2,756 1,968 (205)
Depreciation and amortization21,807 11,734 6,407 
Stock-based compensation expense219,421 120,231 5,482 
Transaction costs (2)
5,496 — — 
Other (income) expense, net (3)
(5,291)(2,622)(504)
COVID-19 costs (4)
— 3,179 — 
Change in fair market value of warrant and earn-out contingent liabilities (5)
(198,401)— — 
Adjusted EBITDA$(199,602)$(106,850)$(18,524)
__________________
(1)Represents the total of interest expense related to our capital leases and interest-bearing loans and interest income on money market funds.
(2)Represents professional service costs incurred in connection with pursuing the business combination transaction that did not meet the nominatingrequirement for capitalization.
(3)For fiscal year 2020 and corporate governance committee may,2021, primarily consists of funding received under the CARES Act Provider Relief Fund.
(4)Represents labor costs in its sole discretion, retain or obtainrespect laboratory employees’ downtime. During the advicesecond quarter of and terminate, any search firm2020, we did not reduce the workforce in our laboratory due to be usedthe COVID-19 pandemic. However, we suffered significantly due to identify director candidates, and will be directly responsible for approving the search firm’s feesdecrease in volume in Women's Health and other retention terms.products. Accordingly, we have adjusted our Gross Profit to reflect the management-assessed impact from the decrease in productivity of existing laboratory employees due to the COVID-19 pandemic in the second quarter of 2020.
We have not formally established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess. In general, in identifying and evaluating nominees for director, the board of directors considers educational background, diversity of professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of our stockholders.
Committee Membership, Meetings and Attendance
Each of the audit committee, compensation committee and nominating and corporate governance committee of our Board is comprised entirely of independent directors.
During(5)For the year ended December 31, 2020:
•2021, represents the change in fair market value of the liabilities associated with our Board held two meetings;public warrants, private placement warrants and the earn-out shares issuable under the terms of the merger agreement for our business combination.
•our audit committee held one meeting;
•
Liquidity and Capital Resources
On July 22, 2021, we completed the business combination with CMLS, consummated the Prior PIPE Investment and received net cash proceeds of $510 million. Management determined that the cash proceeds received from the business combination provides us with sufficient liquidity to meet our obligations for at least twelve months from the date of the filing of our Annual Report on Form 10-K for the year ended December 31, 2021.
Furthermore, on November 15, 2021, we entered into a loan and security agreement, or the SVB Agreement, with Silicon Valley Bank, or SVB, whereby SVB agreed to provide a $125 million revolving credit facility with a maturity date of November 15, 2024. No amounts were drawn as of December 31, 2021. Advances under the SVB Agreement will bear interest at a floating rate per annum equal to the greater of (1) 4.00% and (2) the prime rate plus an applicable margin
Accordingly, the consolidated financial statements included elsewhere in this proxy statement have been prepared on a basis that assumes we will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business. Nevertheless, we may also seek additional funding in the future through the sale of common or preferred equity or convertible debt securities, the entry into other credit facilities or another form of third-party funding or by seeking other debt financing. In particular, if the Acquisition is consummated, we expect to issue 50 million shares of our compensation committee held no meetings;Class A common stock for an aggregate purchase price equal to $200 million pursuant to the PIPE Investment.
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Material Cash Requirements for Known Contractual Obligations and Commitments
The following is a description of commitments for known and reasonably likely cash requirements as of December 31, 2021 and December 31, 2020. We anticipate fulfilling such commitments with our existing cash and cash equivalents, which amounted to $400.6 million and $108.1 million as of December 31, 2021 and December 31, 2020, respectively, or through additional capital raised to finance our operations.
Our future minimum payments under non-cancellable operating lease and capital lease agreements were $68.3 and $65.6 million, respectively as of December 31, 2021. The timing of these future payments, by year, can be found in our consolidated financial statements in Note 9, “Commitments and Contingencies,” included elsewhere within this proxy statement.
•Our future contractual purchase commitments were $23.1 million as of December 31, 2021. The timing of these future payments, by year, can be found in our consolidated financial statements in Note 9, our nominating“Commitments and corporate governance committee held no meetings.Contingencies,” included elsewhere within this proxy statement.
Each of our incumbent directors attended or participated

Cash Flows
Year Ended
December 31,
202120202019
(in thousands)
Net cash used in operating activities$(190,434)$(93,128)$(18,728)
Net cash used in investing activities(20,786)(31,974)(15,456)
Net cash provided by financing activities493,729 129,056 148,012 
Operating Activities
Net cash used in at least half of the meetings of the respective committees of which he is a member held during the period such incumbent director was a directoroperating activities during the year ended December 31, 2020.2021 was $190.4 million, which was primarily attributable to a net loss of $245.4 million and a change in fair value of the warrant and earn-out contingent liabilities of $198.4 million, partially offset by non-cash depreciation and amortization of $21.8 million, non-cash stock-based compensation expense of $219.4 million, and a reserve against obsolete inventory of $2.1 million. The net change in our operating assets and liabilities primarily reflected a $5.5 million decrease in accounts receivable due to a decrease in institutional customer receivables which is in line with the respective revenue stream, a $10.6 million increase in inventories driven by a higher volume of purchases to support increasing testing volumes, a $14.3 million increase in prepaid expenses and other current assets mainly driven by new insurance policy premiums paid during the year, a $25.9 million increase in accounts payable and accrued expenses due to additional volume in the fourth quarter related to COVID-19 testing, resulting in increased related accruals and extended payment terms for large vendors, and a $3.2 million increase in other current liabilities mainly driven increased bonus accruals.
Net cash used in operating activities during the year ended December 31, 2020 was $93.1 million, which was primarily attributable to a net loss of $241.3 million, partially offset by non-cash depreciation and amortization of $11.7 million, non-cash stock-based compensation expense of $120.2 million and a net change in our operating assets and liabilities of $13.8 million. The net change in our operating assets and liabilities primarily reflected an increase in accounts receivable of $10.6 million driven by a slowdown in collections due to the COVID-19 pandemic, a $9.0 million increase in inventories in preparation for the move of certain laboratory operations to a new location in December 2020, an increase in accounts payable and accrued expenses of $14.8 million due to timing of vendor payments and increased spending during the year related to COVID-19 diagnostic testing and a $16.0 million increase in other current liabilities driven by higher personnel-related accruals due to increased headcount at 2020 year-end as compared to 2019 year-end, as well as an increase in accrued payroll taxes due to the deferral of U.S. payroll taxes as part of the CARES Act.
Net cash used in operating activities during the year ended December 31, 2019 was $18.7 million, which was primarily attributable to a net loss of $29.7 million and a net change in our operating assets and liabilities of
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$0.7 million, partially offset by non-cash depreciation and amortization of $6.4 million and non-cash stock-based compensation expense of $5.5 million. The net change in our operating assets and liabilities primarily reflected an increase in accounts receivable of $4.6 million driven by increase in testing volumes and billings, an $8.0 million increase in inventories driven by anticipated future growth due to a year-over-year increase in testing volumes for the year ended December 31, 2019 as compared to the year ended December 31, 2018, a $4.4 million increase in other assets due to security deposits on certain office and laboratory locations, an increase in accounts payable and accrued expenses of $12.8 million due to increased operating expenditures in line with the growth of the business and a $4.5 million increase in other current liabilities driven by higher personnel-related accruals due to increased headcount at 2019 year-end as compared to 2018 year-end.
Investing Activities
Net cash used in investing activities during the year ended December 31, 2021 was $20.8 million, which was attributable to $9.4 million in purchases of property and equipment and $11.4 million of costs related to development of internal-use software assets.
Net cash used in investing activities during the year ended December 31, 2020 was $32.0 million, which was attributable to $24.1 million in purchases of property and equipment and $7.9 million of costs related to development of internal-use software assets.
Net cash used in investing activities during the year ended December 31, 2019 was $15.4 million, which was attributable to $11.9 million in purchases of property and equipment and $3.5 million of costs related to development of internal-use software assets.
Financing Activities
Net cash provided by financing activities during the year ended December 31, 2021 was $493.7 million, which was attributable to the consummation of our business combination including: $350.0 million from the Prior PIPE Investment proceeds; $442.7 million from an equity infusion from the business combination, net of redemptions; offset by $230.7 million in the cash payments to certain Legacy Sema4 stockholders; payment of transaction costs of $51.8 million; and $3.8 million of stock appreciate rights pay-outs. These amounts were further offset by an $8.7 million repayment of long-term debt and $3.7 million of capital lease principal payments.
Net cash provided by financing activities during the year ended December 31, 2020 was $129.0 million, which was primarily attributable to $117.3 million in net cash proceeds from the issuance of our Series C redeemable convertible preferred stock and $15.9 million in net cash proceeds from the issuance of long-term debt. These increases were partially offset by $4.0 million in principal payments on our capital lease obligations and $0.2 million in principal payments on our long-term debt obligations.
Net cash provided by financing activities during the year ended December 31, 2019 was $148.0 million, which was attributable to $118.8 million in net cash proceeds from the issuance of our Series B redeemable convertible preferred stock and $30.9 million in capital contributions from ISMMS, partially offset by $1.7 million in principal payments on our capital lease obligations.


Critical Accounting Policies and Estimates
We encouragehave prepared our consolidated financial statements in accordance with GAAP. Our preparation of these consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities and related disclosures at the date of the financial statements, as well as revenue and expense recorded during the reporting periods. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and or other relevant assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
See Note 2, “Summary of Significant Accounting Policies” to our consolidated financial statements for further discussion on our accounting policies. We have identified below our accounting policies that we believe could
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potentially generate materially different results if we were to change underlying assumptions, estimates and/or judgments. Although actual results may differ from those estimates, we believe the estimates are reasonable and appropriate.
Revenue Recognition
We recognize revenue when, or as, performance obligations under the terms of a contract are satisfied, which occurs when control of the promised products or services are transferred to a customer. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products or services to a customer. Our contracts require significant judgments in determining the transaction price and satisfying performance obligations.
Diagnostic test revenue
We estimate a transaction price in arrangements with third-party insurance payors based on historical collection experience, contractual provisions and insurance reimbursement policies, payor mix, and other relevant information for applicable payor portfolios. The portfolio approach is used as a practical expedient to account for categories of diagnostic test contracts as collective groups rather than on an individual contract basis. Management believes that revenue recognized by utilizing the portfolio approach approximates the revenue that would have been recognized if an individual contract approach was used. For orders received for self-pay patients, we determine a transaction price associated with services rendered in consideration of implicit price concessions that are granted to such orders. The estimates for implicit price concessions require significant judgment and are based upon management’s assessment of expected net collections, business and economic conditions, historical trends, trends in federal, state and private employer health care coverage and other collection indicators. For institutional clients, the customer is the institution. We determine a transaction price associated with services rendered in accordance with the contractual rates established with each customer.
We monitor these estimates at each reporting period based on actual cash collections in order to assess whether a revision to the estimate is required. Both the initial estimate and any subsequent revision to the estimate contain uncertainty and require the use of judgment in the estimation of the transaction price and application of the constraint for variable consideration. If actual results in the future vary from our estimates, we will adjust these estimates, which could affect revenue and earnings in the period such variances become known. A 1% decrease or increase in our collection rate from third-party insurance payors, which we believe could be a reasonably likely change, would result in an unfavorable or favorable adjustment to diagnostic test revenue of approximately $16.2 million.
Other revenue
We also recognize revenue from service agreements and collaboration agreements with Biopharma companies and other third parties pursuant to which we provide diagnostic testing and related data aggregation reporting services. Certain of these contracts provide non-refundable upfront payments, which we record as contract liabilities, and variable payments based upon the achievement of certain milestones during the contract term. Milestone payments are a form of variable consideration that are included in the transaction price only when it is probable that doing so will not result in a significant reversal of cumulative revenue recognized when the uncertainty associated with the milestone is subsequently resolved.
For certain service or collaboration contracts that require us to transfer control of the service over time, we recognize revenue over time using an input measure based on costs incurred on the basis that this measure best reflects the pattern of transfer of control of the services to the customer. The measure of progress is developed using our best estimate of the performance period and the anticipated costs to be incurred to perform such services, including any subcontracted service costs.
Capitalized Internal-Use Software Costs
We capitalize certain costs related to the development of our software applications for internal use. Capitalization begins during the application development stage, once the preliminary project stage has been completed. If a project constitutes an enhancement to existing software, we assess whether the enhancement creates
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additional functionality to the software, thus qualifying the work incurred for capitalization. Costs incurred prior to meeting these criteria together with costs incurred for training and maintenance are expensed as incurred. Once the project is available for general release, capitalization ceases and we estimate the useful life of the asset and begin amortization. We exercise judgment in determining the point at which various projects may be capitalized, in assessing the ongoing value of the capitalized costs and in determining the estimated useful lives over which the costs are amortized. We periodically assess whether triggering events are present which would indicate that the internal-use software is impaired. To the extent that we change our estimates related to internal-use software, the amount of internal-use software development costs we capitalize and amortize could change in future periods.
Earn-out Contingent Liability
We estimate the fair value of the total earn-out shares based on a Monte Carlo simulation valuation model. The fair value of the earn-out contingent liability is sensitive to expected volatility estimated based on selected guideline public companies and the Company’s common stock price which is sensitive to changes in the forecasts of earnings and/or the relevant operating metrics. The model used requires the use of assumptions regarding variables that are complex, subjective and generally require judgment to determine.
Stock-Based Compensation
Stock-based compensation for all employee and non-employee stock-based awards, including restricted stock units, is measured at fair value on the date of grant and recognized over the service period. The fair value of restricted stock units are calculated based on the fair value of our common stock on the date of grant, while the fair value of stock options are calculated using a Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires the use of assumptions regarding a number of variables that are complex, subjective and generally require significant judgment to determine. Changes in the assumptions can materially affect the fair value and ultimately how much stock-based compensation expense is recognized. Key assumptions include expected volatility, expected term, risk-free interest rate and dividend yield. The volatility is estimated based on the average volatility for comparable publicly traded companies over a period equal to the expected term of stock option grants. When selecting these comparable companies, we considered the enterprise value, risk profiles, position within the industry, and whether there was sufficient historical share price information to meet the expected life of the stock-based awards. The expected term of the Company’s options has been determined utilizing the “simplified” method as the awards granted are qualified as “plain-vanilla” options. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for bonds with maturities consistent with the expected holding periods corresponding with the expected term of the option. We estimate zero dividend yield as we have not historically paid dividends on common stock and do not anticipate paying dividends in the foreseeable future.
Income Taxes
We account for income taxes in accordance with ASC Topic 740, “Income Taxes,” under which deferred income taxes are provided for temporary differences between the financial reporting and tax basis of our assets and liabilities. We reduce deferred tax assets, if necessary, by a valuation allowance if it is more likely than not that we will not realize some or all of our deferred tax assets. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations.
We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position.

JOBS Act Accounting Election
We are an “emerging growth company” within the meaning of the JOBS Act. The JOBS Act allows an emerging growth company to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. We have elected to use this extended transition period and, as a result, our financial statements may not be comparable to companies that comply with public company effective dates. We also intend to rely on other exemptions provided by the JOBS Act,
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including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act.
We will remain an emerging growth company until the earliest of (1) September 1, 2025, (2) the last day of the fiscal year in which we have total annual gross revenue of at least $1.07 billion, (3) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our Class A common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year or (4) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

Recent Accounting Pronouncements
Information on recent accounting pronouncements can be found in Sema4’s audited consolidated financial statements in Note 2, “Summary of Significant Accounting Policies” included elsewhere in this proxy statement.
Internal Controls
Material Weaknesses
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.
In connection with the preparation of Legacy Sema4's audited financial statements for the years ended December 31, 2020, 2019 and 2018, we identified material weaknesses in our internal controls over financial reporting, as of December 31, 2020. These material weaknesses had not been fully remediated as of December 31, 2021. In addition, during 2021, management identified a misclassification of certain costs included within cost of services for the years ended December 31, 2021, 2020 and 2019. The material weaknesses identified related to the fact that we did not design and maintain accounting policies, procedures and controls to ensure complete, accurate and timely financial reporting in accordance with U.S. GAAP. Specifically, the material weaknesses identified included the following:
•We did not design and maintain accounting policies, processes and controls to analyze, account for and report our revenue arrangements in accordance with ASC 606, Revenue from Contracts with Customers, and ASC 605, Revenue Recognition.
•We did not design and maintain formal accounting policies, procedures and controls to achieve complete, accurate and timely financial accounting, reporting and disclosures, including controls over the preparation and review of account reconciliations, journal entries and classification of certain costs; the accounting for cost capitalization policies in accordance with ASC 330, Inventory, and ASC 350-40, Intangibles – Goodwill and Other – Internal-Use Software; and the application of ASC 840, Leases, ASC 340-40, Contracts with Customers and SEC Regulation S-X Article 5.
•We had not developed and effectively communicated to our employees our accounting policies and procedures, which resulted in inconsistent practices. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.
•Our accounting and operating systems lacked controls over access, and program change management that are needed to ensure access to financial data is adequately restricted to appropriate personnel.
•We do not have sufficient, qualified finance and accounting staff with the appropriate U.S. GAAP technical accounting expertise to identify, evaluate and account for accounting and financial reporting, and effectively design and implement systems and processes that allow for the timely production of accurate financial information in accordance with internal financial reporting timelines, commensurate with our size and the nature and complexity of our operations. As a result, we did not design and maintain formal
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accounting policies, processes and controls related to complex transactions necessary for an effective financial reporting process.
Remediation Plan
Our management is actively engaged and committed to taking the steps necessary to remediate the control deficiencies that constituted the material weaknesses. During 2021, we made the following enhancements to our control environment:
•In May 2021, we hired a permanent Chief Accounting Officer with substantial technical accounting and internal controls experience, whose responsibilities include working with our Chief Financial Officer, existing employees and third-party consultants to improve the design, implementation, execution and supervision of our controls.
•We added accounting and information technology employees with appropriate experience, certification, education and training to the organization to strengthen our internal accounting team, to provide oversight, structure and reporting lines, and to provide additional review over our disclosures. This includes hiring a Corporate Controller, whose primary responsibilities include working with third-party consultants to improve the design, implementation, execution, and supervision of our controls. We expect to continue evaluating our needs for additional personnel. We expect to provide enhanced training to existing and new employees in order to enhance the level of communication and understanding of controls with personnel that provide key information and perform key roles within our financial accounting and reporting group.
•We engaged outside consultants to assist in the design, implementation, and documentation of internal controls that address the relevant risks, are properly designed, and provide for appropriate evidence of performance of the internal controls; and
•We engaged outside consultants to assist us in the evaluation of our Enterprise Resource Planning (“ERP”) system in order to mitigate the internal control gaps and limitations with the current configuration, and to enhance the information technology general controls environment.
•Our remediation activities are continuing during 2022. In addition to the above actions, we expect to engage in additional activities, including, but not limited to:
•Hiring more technical accounting resources to enhance our control environment;
•Engaging external consultants to provide support and to assist us in our evaluation of more complex applications of GAAP, and to assist us with documenting and assessing our accounting policies and procedures until we have sufficient technical accounting resources;
•Implementing business process-level controls across all significant accounts and information technology general controls across all relevant systems. This includes providing training for control owners that will present expectations as it relates to the control design, execution and monitoring of such controls, including enhancements to the documentation to evidence the execution of the controls; and
•Implementing improvements to our ERP system to enhance the accuracy of our financial records, enable the enforcement of systematic segregation of duties, and to improve our information technology general controls environment.
We continue to enhance corporate oversight over process-level controls and structures to ensure that there is appropriate assignment of authority, responsibility, and accountability to enable remediation of our material weaknesses. We believe that our remediation plan will be sufficient to remediate the identified material weaknesses and strengthen our controls. As we continue to evaluate, and work to improve our controls, management may determine that additional measures to address control deficiencies or modifications to the remediation plan are necessary.
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While we have performed certain remediation activities to strengthen our controls to address the identified material weaknesses, control weaknesses are not considered remediated until new internal controls have been operational for a period of time, are tested, and management concludes that these controls are operating effectively. We will continue to monitor the effectiveness of our remediation measures in connection with our future assessments of the effectiveness of internal control over financial reporting and disclosure controls and procedures, and we will make any changes to the design of our plan and take such other actions that we deem appropriate given the circumstances.
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GENEDX’S BUSINESS
In this section, “GeneDx” or “we”, “us” and “our” refer to GeneDx, Inc. unless specifically stated otherwise.
Overview
GeneDx is a patient-centric health information company and leader in delivering clinical genomic answers to an ever-increasing community of patients, families and healthcare providers. With more than 20 years of experience in diagnosing rare disorders and diseases, we have pioneered panels, exome and whole genome sequencing and have developed a proprietary genomic interpretation and information services platform in support of healthcare partners and patients globally. We create, follow, and are informed by cutting-edge science and technology. With one of the most sophisticated datasets of genomic information, we are able to identify new disease-causing genes, advancing the field of medicine through the detection, discovery, and diagnosis of genetic diseases.
Purpose
We operate with the conviction that what is best for our customers (patients, their families and the clinicians, payers and partners who serve them) must be embedded in every aspect of our work. We believe that:
•genomic information has broad utility, and every person should have access to their genome—delivered expertly, ethically and responsibly—to guide health decisions throughout life;
•the transition from hypothesis-based to genome-guided healthcare will improve outcomes for patients and the healthcare system;
•genomics will radically transform therapeutic development, bringing better therapies to patients, faster; and
•patients should control and have the ability to direct the use of their genomic information to benefit both themselves and advance scientific understanding that helps others.
In support of these beliefs, we value:
•Equity: the right of all to have access to information that may improve their health;
•Simplicity: healthcare is complicated. Genetic information is complex. Our job is to make it as simple as possible to access an answer that improves health outcomes. We value the understanding simplicity creates; and
•Transparency: transparency and accountability for ourselves and our partners to safeguard the confidence and trust of patients, customers and partners.
Through this value system, we aim to revolutionize healthcare and change lives by unlocking the answers from within, applying genomics to bring better health to patients around the world.
GeneDx’s Genomic Testing
When patients present with complex issues, a genetic diagnosis may be possible, but a traditional genetic panel test may be too narrow to identify the cause. The human genome is composed of three billion “letters”, or base pairs, of DNA. The exome is the portion of the genome that encodes for proteins, the molecular machines that allow cells to function. Changes in the genome and exome can cause many different diseases.
Some genetic disorders present with very specific symptoms; therefore, tests that read the “letters” of a single gene or a small panel of genes, may be appropriate. However, for many other genetic diseases, patients can present with overlapping symptoms. Finding the correct diagnosis is not always straight-forward and may require multiple tests, costly evaluations, invasive procedures, and long hospital stays. Exome and genome sequencing may find answers that more targeted genetic tests miss and are especially useful when the timing is critical and test results may direct or alter medical management.
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Founded by scientists from the U.S. National Institutes of Health (“NIH”) in 2000, GeneDx has a proven track record of expertise in genetic testing, having launched next generation sequencing panels in 2008, pioneered exome sequencing in 2012 and has now sequenced more than 300,000 exomes to date. We have performed more than one-million genetic tests and have developed the following:
•a curated database of disease-associated genomic variants;
•proprietary bioinformatics and variant interpretation pipelines; and
•rapid exome and whole genome sequencing testing options.
The current status quo of genetic testing generally requires repeated and fragmented testing, which in many cases, is conducted too late. Additionally, targeted genetic tests and panels have been largely commoditized and may leave physicians, healthcare partners and patients searching for deeper answers and enhanced utility. We believe that the scalable exome and whole genome interpretation that we can deliver at speed, no longer requiring a long, complex, expensive, expert-guided search, has the potential to make most other genetic tests obsolete.
Advanced technology with a human touch
With approximately 250 genetic counselors, M.D./Ph.D. scientists, and clinical and molecular genomics specialists, we believe that GeneDx is the industry’s leading genetic testing expert.
Our years of exome sequencing experience provides an enormous phenotyped clinical genomic dataset, including more than 2.1 million structured phenotypes with 60% as parent-child trios. Of particular importance, we have invested resources over time to annotate the phenotypes and sequence the parents, because they improve the diagnostic outcome of each case but also because that data improves the interpretation of future cases. We now have nearly twice as many expertly annotated disease-causing variants as the largest public resource, ClinVar, across more genes, which we have built over the course of a decade of clinical work.
Internally developed with over one-million sequenced specimens, we believe that our database leads to more and more reliable diagnostic test results. Combined with our proprietary, state-of-the-art variant identification software, we believe that our ability to deliver highly accurate test results makes finding definitive diagnoses, even in complex cases, possible. As the number of new patients we test increases, so does our database and as new data increases, so does the potential for greater insights. By comparing new cases against the data from previous cases, we may eventually confirm whether a genetic variant is significant. Once new findings are identified, we aim to proactively reach out to healthcare providers and offer to reanalyze their patients’ previous results. Over time, we expect to fully automate this reanalysis process in a convenient, easy to understand, frictionless method. Implemented with expert oversight, our advanced interpretation methods incorporate automation, bioinformatics, and machine learning, enabling efficient discovery of genetic differences at previously undetectable levels.
GeneDx’s Strategy to Lead
Leveraging these capabilities, we aim to be the global market leader in the development and delivery of reliable, actionable, scalable exome and genome sequencing, and related interpretation and information services. GeneDx’s strategy focuses on the following initiatives:
•expanding the utilization of exome and genome sequencing as the first- or second-tier test over most other germline tests among genetics experts;
•expanding the utilization of industry-leading exome and genome sequencing beyond the experts into the non-expert space globally, creating a new standard of care that enables faster diagnoses, reduces suffering, and helps healthcare systems save money. In the near term, we expect that our principal target markets will be settings with the most vulnerable patients who can benefit the most including, but not limited to, NICU and Pediatric Developmental Disorders; and
•opening new markets and geographies and unlocking the value of our dataset with independently scalable cloud-base interpretation and information service offerings.
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Industry Background and Market Opportunity
Targeted genetic tests and panel testing currently make up the overwhelming majority of medical diagnostics tests ordered today, and GeneDx offers such targeted genetics tests and panel testing. They require that clinicians know what they are looking for and how to find the test that could identify it. The foregoing is hypothesis-based medicine. We firmly believe that affordable, scalable and actionable genomic testing is the future of medicine, in which we sequence once, query often. The barrier to that affordable genome is very high—and not just due to sequencing costs—which are coming down. The less-discussed barrier lies in the ability to process a genome’s wealth of information—quickly, scalably—and deliver a result on which a clinician can easily act to help a patient.
While panel testing can be valuable, it has an inherent limitation as we move toward genetic-based care. Panels can lead to incomprehensive results and an inefficient process. Exome and whole genome testing provide the broadest view into the genome, as such testing can examine all 20,000 genes, whereas panels look at anywhere from two to a few hundred genes. While many of our competitors have grown through a focus on panels, we have focused on exome and whole genome sequencing, developing structured gene-disease knowledge curated by a group of experts to power automated interpretation and reporting.
From a business perspective, the genetic testing industry is highly fragmented: there are dozens of market participants, most of which are tackling the same problem test-by-test with thousands of panels across dozens of clinical areas. It is highly inefficient. But what we are all striving for is the consolidation of the space—who can provide all the answers, and create one test that obviates the need for most others.
In addition to its panel testing business, GeneDx intends to grow primarily by expanding its current market-leading exome position through commercial expansion of its current offerings in the NICU and PP/ID setting, as well as introducing interpretation and information services to clinicians, researchers and biopharmaceutical partners.
Over the long term, GeneDx intends to transform its industry-leading exome into whole genome testing, supported with the launch of a new customer experience platform for non-geneticists, patients and caregivers and evidence generation to establish the clinical and economic benefits of screening.
Customers and Seasonality
GeneDx receives payment for its products and services from business-to-business clients, third-party payers, patients and from other healthcare partners. Substantially all of its revenue for the year ended December 31, 2021 was primarily derived from diagnostic test reports. We expect over time to achieve a mix of diagnostic test revenue, revenue from screening products and information and interpretation services.
Less than five percent of GeneDx’s revenues for the year ended December 31, 2021 were derived from referral sources outside of the United States; however, we expect that, over time, the mix of U.S. vs. rest of world revenue will draw closer to parity.
GeneDx has historically experienced higher revenue in its fourth quarter compared to the first three quarters of the calendar year due in part to seasonal demand for its tests from patients who have met their annual insurance deductibles.
Competition
GeneDx’s competitors include companies that offer molecular genetic testing and consulting services, including specialty and reference laboratories that offer traditional single- and multi-gene tests, as well as biopharmaceutical companies. In addition, there are a large number of new entrants into the market for genetic information, ranging from informatics and analysis pipeline developers, to focused, integrated providers of genetic tools and services for health and wellness, including Illumina, Inc. which is also one of GeneDx’s suppliers. In addition to the companies that currently offer traditional genetic testing services and research centers, other established and emerging healthcare, information technology and service companies may commercialize competitive products including informatics, analysis, integrated genetic tools and services for health and wellness. Principal competitors include
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companies such as Exact Sciences, Invitae, Guardant Health, Myriad, Natera, Neogenomics, Personalis, and Prevention Genetics, as well as other commercial and academic labs.
GeneDx Corporate Office
GeneDx’s corporate office and the location of its 90,000 square-foot laboratory is 207 Perry Parkway, Gaithersburg, Maryland 20877, which is a leased space.
Market Information, Holders and Dividends.
GeneDx is currently an indirect, wholly-owned subsidiary of OPKO Health, Inc., and there is no established public trading market for any of GeneDx’s securities. Following the consummation of the Acquisition, GeneDx will become an indirect, wholly-owned subsidiary of Sema4. GeneDx has never paid cash dividends on its outstanding equity.
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GENEDX’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Factors Affecting Our Performance
We believe several important factors have impacted, and will continue to impact, our performance and results of operations. While each of these areas presents significant opportunities for us, they also pose significant risks and challenges that we must address. See the section titled “Risk Factors” for more information.
Comparison for The Years Ended December 31, 2021 and December 31, 2020
(In thousands)20212020Change% Change
Revenues    
Revenue from services$116,595 $94,712 $21,883 23 %
Other— 308 (308)(100)%
Total revenues116,595 95,020 21,575 23 %
Costs and expenses:    
Cost of revenue84,361 74,367 9,994 13 %
Selling, general and administrative52,439 41,583 10,856 26 %
Research and development12,377 9,110 3,267 36 %
Amortization of intangible assets16,813 16,813 — — %
Total costs and expenses165,990 141,873 24,117 17 %
Operating loss$(49,395)$(46,853)$(2,542)(5)%
Other income (expense)(44)(87)43 49 %
Income tax benefit12,547 12,037 510 4 %
Net loss and comprehensive loss$(36,892)$(34,903)$(1,989)(6)%
Revenue. Revenue from services increased $21.9 million, or 23%, to $116.6 million for the year ended December 31, 2021, from $94.7 million for the year ended December 31, 2020. The increase was primarily attributable to the following components:
•resulted test volumes of 146,982 increased 33% from 110,478 in 2020;
•exome and whole genome sequencing (WGS) revenue increased $22.5 million, resulting from a 45% increase in resulted test volumes partially offset by a decrease of $11.2 million from reduced test reimbursement resulting from a shift in overall payor mix towards third party and government payers;
•non-exome, non-WGS revenue increased $14.0 million from a 30% increase in test resulted volumes, which was partially offset by a decrease of $4.6 million from reduced test reimbursement resulting from increased commoditization and increased denial rates;
•biopharma and data services revenue increased $0.6 million; and
•estimated collection amounts are subject to the complexities and ambiguities of billing, reimbursement regulations and claims processing, as well as considerations unique to Medicare and Medicaid programs, and require us to consider the potential for retroactive adjustments when estimating variable consideration in the recognition of revenue in the period the related services are rendered. For the years ended December 31, 2021 and 2020, we recognized revenue reductions due to changes in estimates of implicit price concessions for performance obligations satisfied in prior periods of $4.2 million and $4.8 million, respectively.
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Other revenue consisted of $0.3 million for the year ended December 31, 2020 from funds distributed to healthcare providers for related expenses or lost revenues that are attributable to the COVID-19 pandemic. No such amounts were received in 2021.
Cost of revenue. Cost of revenue increased $10.0 million, or 13%, to $84.4 million for the year ended December 31, 2021, from $74.4 million for the year ended December 31, 2020. The increase was primarily attributable to the following components: increased reagent, supply and specimen collection costs of $8.4 million; an increase of $5.5 million in personnel-related expenses driven by increased testing volumes; increased depreciation and amortization of $0.9 million; and an increase in shared-based compensation of $0.2 million, partially offset by a discrete benefit of $5.5 million upon receipt of a multi-year sales & use tax refund from the State of Maryland. Our cost per patient encounter (on the basis of laboratory accessions in the period), inclusive of all volumes, improved 9% in 2021 compared to the year ended December 31, 2020.
Selling, general and administrative expenses. Selling, general and administrative expenses increased $10.9 million, or 26%, to $52.4 million for the year ended December 31, 2021, from $41.6 million for the year ended December 31, 2020. Selling, general and administrative expenses increased primarily due to the following components: increased information-technology related and other third party professional fees and license costs of $4.2 million to support the implementation of our expansion of various enterprise systems and other enablement technologies; increased sales and marketing personnel cost of $2.2 million; higher human resource, talent acquisition and onboarding costs of $1.7 to support expansions in our workforce; an increase of $1.2 million in non-cash share-based expense; $0.7 million related to professional fees in connection with the potential separation of GeneDx from OPKO; and $0.4 million increased facility costs, partially offset by $0.5 million lower billing cost.
Research and development expenses. The following table summarizes the components of our research and development expenses:
Research and Development ExpensesFor the years ended December 31,
 20212020
Research and development employee-related expenses$10,042 $6,844 
Other internal research and development expenses2,335 2,266 
Total research and development expenses$12,377 $9,110 
Research and development increased $3.3 million, or 36%, to $12.4 million for the year ended December 31, 2021 from $9.1 million for the year ended December 31, 2020 primarily due to increase personnel-related costs due to increased headcount across laboratory automation and robotics, bioinformatics and data research & development activities, as well as an increase of $0.2 million in share-based compensation expense.
Amortization of intangible assets. Amortization of intangible assets was $16.8 million for both the years ended December 31, 2021 and 2020. Amortization expense reflects the amortization of acquired intangible assets with defined useful lives.
Income tax benefit. Our income tax benefit for the years ended December 31, 2021 and 2020 was $12.5 million and $12.0 million, respectively, and reflects results using our expected effective tax rate. For the year ended December 31, 2020, the tax rate differed from the U.S. federal statutory rate of 21% primarily due to the impact of certain discrete tax events and the difference in state taxes.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2021, we had cash and cash equivalents of approximately $144 thousand.
Net cash used in operations for the year ended December 31, 2021 was $22.9 million primarily attributable to our net loss of $36.9 million and the net change in deferred income taxes of $12.6 million partially offset by non-cash depreciation and amortization expense of $21.9 million. Net cash used in operations for the year ended December 31, 2020 was $11.9 million primarily attributable to our net loss of $34.9 million and the net change in
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deferred income taxes of $12.2 million partially offset by non-cash depreciation and amortization expense of $20.9 million.
Net cash used in investing activities for the years ended December 31, 2021 and December 31, 2020 primarily reflects capital expenditures of $13.0 million and $9.8 million, respectively, predominantly related to the expansion and improvement to our newly outfitted 90,000 square-foot laboratory and to purchases of additional next generation sequencing equipment.
Net cash provided by financing activities for the year ended December 31, 2021 and December 31, 2020 includes equity contributions from BioReference Laboratories, Inc. (“BioReference”), our direct party company, of $35.9 million and $21.3 million, respectively, to fund operations. We have not generated sustained positive cash flow sufficient to offset our operating and other expenses.
In November 2015, BioReference and certain of its subsidiaries, including GeneDx, entered into a credit agreement with JPMorgan Chase Bank, N.A. (“CB”), as lender and administrative agent which was amended and restated on August 30, 2021 (the “A&R Credit Agreement”). The A&R Credit Agreement provides for a $75.0 million secured revolving credit facility and includes a $20.0 million sub-facility for swingline loans and a $20.0 million sub-facility for the issuance of letters of credit. The A&R Credit Agreement matures on August 30, 2024 and is guaranteed by all of BioReference’s domestic subsidiaries. The A&R Credit Agreement is also secured by substantially all assets of BioReference and its domestic subsidiaries, as well as a non-recourse pledge by BioReference’s partent company of its equity interest in BioReference. Availability under the A&R Credit Agreement is based on a borrowing base composed of BioReference’s eligible accounts receivables, which includes GeneDx, as specified therein. As of December 31, 2021, $64.8 million remained available for borrowing under the A&A Credit Agreement.
At BioReference’s option, borrowings under the A&R Credit Agreement (other than swingline loans) bear interest at (i) the CB floating rate (defined as the higher of (a) the prime rate and (b) the LIBOR rate (adjusted for statutory reserve requirements for Eurocurrency liabilities) for an interest period of one month plus 2.50%) plus an applicable margin of 0.75% or (ii) the LIBOR rate (adjusted for statutory reserve requirements for Eurocurrency liabilities) plus an applicable margin of 1.75%. Swingline loans will bear interest at the CB floating rate plus the applicable margin. The A&R Credit Agreement also calls for other customary fees and charges, including an unused commitment fee of 0.375% if the average quarterly availability is 50% or more of the revolving commitment, or 0.25% if the average quarterly availability is less than or equal to 50% of the revolving commitments
We believe that the cash and cash equivalents on hand as of December 31, 2021, cash from operations and the amounts available to be borrowed under the A&R Credit Agreement are sufficient to meet our anticipated cash requirements for operations and debt service beyond the next 12 months. We based this estimate on assumptions that may prove to be wrong or are subject to change, and we may be required to use our available cash resources sooner than we currently expect. If we acquire additional assets or companies, we will need additional funds. Our future cash requirements, and the timing of those requirements, will depend on a number of factors, including the potential for funds to be available upon closing of the acquisition of GeneDx by Sema4 Holdings Corp., which announced in January 2022 that it executed an Agreement and Plan of Merger and Reorganization with GeneDx, and its parent company, the availability of financing, payor claims, and legal proceedings that may arise, including, without limitation class action and derivative litigation to which we are subject, and our ability to obtain insurance coverage for such claims. We have not generated sustained positive cash flow and if we are not able to secure additional funding when needed, we may have to reduce our marketing or sales efforts or cease operations.
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The following table provides information as of December 31, 2021, with respect to the amounts and timing of our known contractual obligation payments due by period.
Contractual obligations
(in thousands)20222023202420252026ThereafterTotal
Open purchase orders14,492 — — — — — 14,492 
Operating Leases(396)1,048 1,659 1,715 1,773 9,116 14,915 
Total14,096 1,048 1,659 1,715 1,773 9,116 29,407 
Quantitative and Qualitative Disclosures about Market Risk
We are subject to general economic and political conditions such as recessions, wage and input cost inflation, governmental COVID-19 shut down mandates as a result of the pandemic and, potential acts of war or terrorism. We are not exposed to material market or interest rate risk in the ordinary course of our business given our limited cash position and no outstanding debt as of the periods presented.
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EXECUTIVE COMPENSATION OF SEMA4
Executive Compensation Overview
Objectives of our Executive Compensation Program
The main objectives of our executive compensation program are to create a competitive total rewards package to attract, retain and incent qualified executive officers who will lead us to long-term success and enhance stockholder value based on the balanced attainment of short-term performance objectives and long-term strategic goals. Each element of our compensation program supports these objectives.
Compensation of our Named Executive Officers
The following tables and accompanying narrative disclosure set forth information about the compensation earned by our named executive officers for the year ended December 31, 2021, who were:
•Eric Schadt, Ph.D., our Chief Executive Officer,
•Isaac Ro, our Chief Financial Officer, and
•James Coffin, Ph.D., our former President and Chief Operating Officer.
The named executive officers’ compensation primarily consists of (1) base salary, (2) annual discretionary cash bonus and (3) equity incentive awards. Our named executive officers, during their employment with us, are also eligible to participate in the same retirement and health and welfare benefit plans as its other full-time employees.
2021 Summary Compensation Table
The following table presents summary information regarding the total compensation for services rendered in all capacities that was awarded to and earned by our named executive officers during the year ended December 31, 2021.
Name and Principal PositionYearSalary ($)
Bonus ($)(1)
Stock Awards
($)(2)
Option
Awards
($)(2)
All Other Compensation ($)(3)
Total ($)
Eric Schadt, Ph.D. Chief Executive Officer and Director
2021650,000 513,000 10,699,239 3,867,064 41,533 15,770,836 
2020643,846 540,000 — 1,770,474 13,756 2,968,076 
Isaac Ro
Chief Financial Officer
2021353,846 139,333 7,897,167 2,633,103 16,615 11,040,064 
James Coffin, Ph.D.
Former President and Chief Operating Officer(4)
2021530,397 180,370 3,155,535 1,104,874 17,400 4,988,576 
2020524,615 363,000 623,189 — 11,169 1,521,973 
__________________
(1)The amounts reported reflect the annual performance-based cash bonus amounts awarded to our named executive officers for their service in 2021. For additional information regarding the bonus compensation, see “Narrative Disclosure to the Summary Compensation Table—2021 Bonuses.”
(2)Amounts represent the grant date fair value of the restricted stock units and stock options awarded to the named executive officer during 2021 in accordance with FASB Accounting Standards Codification Topic 718. The assumptions used in determining the grant date fair value of the restricted stock units and stock options are set forth in Note 10 of the notes to our audited consolidated financial statements included in this proxy statement. In determining the total value of the equity awards, we have considered all grants issued during the year as earned by the respective executive officers.
(3)The amounts reported in this column represent our matching contributions made on behalf of our named executive officers under our 401(k) plan and other personal benefits including reimbursement for travel costs in the amount of $24,133.
(4)Dr. Coffin left the Company in February 2022. Amounts reported include payments in respect of his 2021 bonus pursuant to our separation agreement with Dr. Coffin.
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Narrative Disclosure to the Summary Compensation Table
2021 Bonuses
Under their employment agreements, Dr. Eric Schadt and Mr. Ro are entitled to receive annual bonuses based on the achievement of certain corporate and individual performance objectives. Prior to his leaving the Company, Dr. Coffin was also entitled to receive annual bonuses based on the achievement of corporate performance objectives. For the 2021 bonuses, the target annual bonuses for Dr. Schadt and Mr. Ro were equal to 100% and 50%, respectively, of their respective annual base salaries. In February 2022, based on the achievement of corporate and individual performance objectives, the Compensation Committee determined to award bonuses for 2021 to Dr. Schadt, and to Mr. Ro on a pro rata basis based on his hire date, as set forth in the table above. Further, pursuant to a separation agreement we entered into with Dr. Coffin in January 2022, we agreed to pay Dr. Coffin a 2021 bonus in the amount reflected in the table above.
2021 Equity Awards
Our company offers stock options as well as service-based RSUs to our named executive officers as the long-term incentive component of our compensation program. Stock options allow employees to purchase shares of our Class A common stock at a price per share at least equal to the fair market value of our Class A common stock on the date of grant and may or may not be intended to qualify as “incentive stock options” for U.S. federal income tax purposes. All of our named executive officers received RSU awards in recognition of their service to us and to further incentivize continued performance. Generally, our equity-based awards vest over four years, subject to the employee’s continued employment with us on each vesting date. In connection with the Prior Merger Agreement and following the closing of the business combination, we also granted RSUs in the form of “Earnout RSUs” to our named executive officers that vest subject to certain market-based and service-based vesting conditions. In December 2021, we also issued stock bonuses to our employees who were hired on or before June 30, 2021, including our named executive officers, in connection with the termination of our sabbatical leave program. The stock bonuses were fully vested as of the date of issuance.
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Outstanding Equity Awards at 2021 Fiscal Year-End
The following table sets forth information concerning outstanding equity awards held by each of our named executive officers as of December 31, 2021.
Option Awards(1)

Stock Awards(1)
NameGrant DateNumber of Securities Underlying Unexercised Options Exercisable (#)Number of Securities Underlying Unexercised Options Unexercisable (#)Option Exercise Price ($)Option Expiration DateNumber of Shares or Units of Stock That Have Not Vested (#)
Market Value of Shares or Units of Stock That Have Not Vested ($)(*)
Eric Schadt
6/1/2017(2)
4,829,521 — $0.1529 5/31/2027— — 
10/17/2019(3)
851,357 510,815 $0.7659 10/16/2029— — 
2/18/2020(4)
1,300,203 1,011,285 $0.7659 2/17/2030— — 
10/1/2021(5)
52,541 788,125 $7.62 9/30/2031— — 
10/1/2021(5)
1,182,187 $5,272,552 
12/9/2021(6)
— — — — 223,830 $309,334 
12/9/2021(7)
— — — — 35,054 $48,444 
12/9/2021(8)
— — — — 197,635 $273,133 
12/9/2021(8)
— — — — 83,818 $115,836 
12/9/2021(9)
— — — — 201,720 $278,778 
Isaac Ro
10/1/2021(10)
108,507 470,197 $7.62 9/30/2031— — 
10/1/2021(10)
— — — — 812,500 $3,623,750 
12/9/2021(11)
— — — — 197,848 $273,428 
James Coffin
8/31/2017(12)
2,167,093 — $0.1529 8/30/2027— — 
2/18/2020(4)
457,659 355,961 $0.7659 2/17/2030— — 
10/1/2021(5)
15,011 225,179 $7.62 9/30/2031— — 
10/1/2021(5)
— — — — 337,767 $1,506,442 
12/9/2021(6)
— — — — 189,119 $261,363 
12/9/2021(13)
— — — — 29,056 $40,155 
12/9/2021(14)
— — — — 41,946 $57,968 
__________________
(*)The closing market price of our Class A common stock on December 31, 2021 was $4.46 per share.
(1)The outstanding stock options were granted under our 2021 Equity Incentive Plan and Legacy Sema4’s 2017 Equity Incentive Plan, as applicable. The outstanding RSUs were granted under our 2021 Equity Incentive Plan and pursuant to the Prior Merger Agreement, as applicable.
(2)The shares underlying the stock option are fully vested.
(3)The stock option vests at in quarterly installments over a four-year period. 100% of the shares underlying the stock option will vest (a) in the event that the service provider’s option is not assumed or replaced by the buyer in connection with a change of control transaction or (b) upon termination of the service provider’s employment by us without cause or by the service provider for good reason in connection with a change in control transaction.
(4)The stock option vests in quarterly installments over a four-year period. 100% of the shares underlying the stock option will vest (a) in the event that the service provider’s option is not assumed or replaced by the buyer in connection with a change of control transaction or (b) upon termination of the service provider’s employment by us without cause or by the service provider for good reason in connection with a change in control transaction.
(5)The stock options and RSU vest in quarterly installments over a four-year period. 100% of the shares underlying the stock options and RSUs will vest (a) in the event that the service provider’s option is not assumed or replaced by the buyer in connection with a change of control transaction or (b) upon termination of the service provider’s employment by us without cause or by the service provider for good reason in connection with a change in control transaction.
(6)The RSUs were granted pursuant to the Prior Merger Agreement. The vesting of the RSUs is conditioned on the satisfaction of both a service requirement and a market-based requirement. The service requirement is deemed satisfied as of the grant date.
(7)The RSUs were granted pursuant to the Prior Merger Agreement. The vesting of the RSUs is conditioned on the satisfaction of both a service requirement and a market-based requirement. The service requirement is deemed satisfied as of the grant date with respect to 12,254 of the RSUs, and will be satisfied with respect to the remainder of the RSUs over four vesting periods, subject to the officer’s continued service to us on each service-based vesting date.
(8)The RSUs were granted pursuant to the Prior Merger Agreement. The vesting of the RSUs is conditioned on the satisfaction of both a service requirement and a market-based requirement. The service requirement is deemed satisfied as of the grant date with respect to 54,532
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of the RSUs, and will be satisfied with respect to the remainder of the RSUs over five semi-annual periods, subject to the officer’s continued service to us on each service-based vesting date.
(9)The RSUs were granted pursuant to the Prior Merger Agreement. The vesting of the RSUs is conditioned on the satisfaction of both a service requirement and a market-based requirement. The service requirement is deemed satisfied as of the grant date with respect to 100,737 of the RSUs, and will be satisfied with respect to the remainder of the RSUs over eight quarterly periods, subject to the officer’s continued service to us on each service-based vesting date.
(10)1/8th of the total shares underlying the stock options and RSUs vested on October 25, 2021, 1/16th of the total shares vested on November 8, 2021, and the RSUs thereafter vests as to 1/16th of the total shares underlying the award in quarterly installments until fully vested on February 8, 2025, subject to the officer's continued service to us on each vesting date. 100% of the shares underlying the stock options and RSUs will vest (a) in the event that the service provider’s option is not assumed or replaced by the buyer in connection with a change of control transaction or (b) upon termination of the service provider’s employment by us without cause or by the service provider for good reason in connection with a change in control transaction.
(11)The RSUs were granted pursuant to the Prior Merger Agreement. The vesting of the RSUs is conditioned on the satisfaction of both a service requirement and a market-based requirement. The service requirement is deemed satisfied as of the grant date with respect to 24,701 of the RSUs, and will be satisfied with respect to the remainder of the RSUs over 14 quarterly periods, subject to the officer’s continued service to us on each service-based vesting date.
(12)The shares underlying the stock option are fully vested.
(13)The RSUs were granted pursuant to the Prior Merger Agreement. The vesting of the RSUs is conditioned on the satisfaction of both a service requirement and a market-based requirement. The service requirement is deemed satisfied as of the grant date with respect to 6,263 of the RSUs, and will be satisfied with respect to the remainder of the RSUs over six quarterly periods, subject to the officer’s continued service to us on each service-based vesting date. Dr. Coffin left the Company in February 2022.
(14)The RSUs were granted pursuant to the Prior Merger Agreement. The vesting of the RSUs is conditioned on the satisfaction of both a service requirement and a market-based requirement. The service requirement is deemed satisfied as of the grant date with respect to 29,196 of the RSUs, and will be satisfied with respect to the remainder of the RSUs over four vesting periods, subject to the officer’s continued service to us on each service-based vesting date. Dr. Coffin left the Company in February 2022.
Employment Agreements with Our Current Named Executive Officers
Each of our current named executive officers has entered into an employment agreement with us that provides for at-will employment and includes each named executive officer’s base salary, a discretionary incentive bonus opportunity and standard employee benefit plan participation. The employment agreements provide for an annual base salary of $675,000 and a target annual bonus of 100% of annual base salary, in the case of Dr. Schadt, and an annual base salary of $400,000 and a target annual bonus of 50% of annual base salary, in the case of Mr. Ro. The employment agreements also provide for the potential payments and benefits upon a termination of employment or in connection with a change in control as described below in “—Potential Payments upon Termination or Change in Control.” In addition, Dr’s Schadt’s and Mr. Ro’s employment agreements provided for each to receive certain equity-based incentive awards following the closing of the business combination, which awards were granted under the 2021 Equity Incentive Plan (the “2021 EIP”) and are subject to service-based vesting conditions. For more information, see“—Outstanding Equity Awards at 2021 Fiscal Year-End.”
In addition, pursuant to their employment agreements, each of Dr. Schadt and Mr. Ro agreed that, during the nine-month period following the closing of our business combination, he will not: (i) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act, with respect to any shares of our Class A common stock, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any of such shares, in cash or otherwise, or (iii) publicly announce any intention to effect any transaction specified in clause (i) or (ii).
Potential Payments upon Termination or Change in Control
Pursuant to his employment agreement, if Dr. Schadt is terminated without “cause” or resigns for “good reason” (as such terms are defined in his employment agreement) other than in connection with a change in control, he will be entitled to receive 24 months of base salary continuation and continued coverage under our group health benefit plans, subject to his execution of a release of claims. If instead such termination occurs within the period commencing three months prior to and ending 12 months following a change in control, he will be entitled to receive 24 months of base salary continuation, a lump sum payment equal to two times his target annual bonus, 24 months of continued coverage under our group health benefit plans, and accelerated vesting of his outstanding equity-based compensation awards, subject to his execution of a release of claims.
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Pursuant to his employment agreement, if Mr. Ro is terminated without “cause” or resigns for “good reason” (as such terms are defined in his employment agreement) other than in connection with a change in control, he will be entitled to receive 9 months of base salary continuation and 12 months of continued coverage under our group health benefit plans, subject to his execution of a release of claims. If instead such termination occurs within the 12-month period following a change in control, he will be entitled to receive 12 months of base salary continuation, a lump sum payment equal to one times his target annual bonus, 12 months of continued coverage under our group health benefit plans, and accelerated vesting of his outstanding equity-based compensation awards, subject to his execution of a release of claims.
As described above in “—Outstanding Equity Awards at 2021 Fiscal Year-End”, a portion of the stock options held by Dr. Schadt would vest upon a change in control transaction.
Separation Agreement with Our Former Named Executive Officer
In connection with Dr. Coffin’s departure from our company in February 2022, we and Dr. Coffin entered into a separation agreement (the “Separation Agreement”), pursuant to which Dr. Coffin received the following severance benefits in exchange for his execution of release of claims:
•a severance payment equal to 12 months of Dr. Coffin’s annual base salary in the amount of $550,000;
•a discretionary 2021 annual bonus payment in the amount of $180,370;
•12 months of reimbursement of COBRA continuation benefits;
•accelerated vesting of 25,425 stock options that were otherwise scheduled to vest on February 2, 2022 in the amount of $58,233, which is calculated based on the fair value estimated as of the effective date of his Separation Agreement; and
•an extended period to exercise certain of Dr. Coffin’s vested stock options through May 30, 2022.
Equity Compensation Plans and Other Benefit Plans
2021 Equity Incentive Plan
Our 2021 Equity Incentive Plan, or the 2021 EIP, was adopted by our Board and approved by our stockholders in July 2021. The following summarizes the material terms of the 2021 EIP. This summary is qualified in its entirety to the full text of the 2021 EIP.
Shares reserved. We initially reserved 32,734,983 shares of Class A common stock for issuance pursuant to awards granted under the 2021 EIP, which includes shares of our Class A common stock previously reserved but unissued under Legacy Sema4’s 2017 Equity Incentive Plan that became available for issuance under the 2021 Plan. The number of shares reserved for issuance under the 2021 EIP will increase automatically on January 1 of each of 2022 through 2031 by the number of shares equal to 5% of the aggregate number of outstanding shares of all classes of our Class A common stock as of the immediately preceding December 31, or a lesser number as may be determined by our Board. On January 25, 2022, an additional 12,128,941 shares became available for future issuance under the 2021 EIP pursuant to the plan’s evergreen provision.
In addition, the shares set forth below will again be available for issuance pursuant to awards granted under our 2021 EIP:
•shares subject to options or SARs granted under our 2021 EIP that cease to be subject to the option or SAR for any reason other than exercise of the option or SAR;
•shares subject to awards granted under our 2021 EIP that are subsequently forfeited or repurchased by us at the original issue price;
•shares subject to awards granted under our 2021 EIP that otherwise terminate without such shares being issued;
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•shares subject to awards granted under our 2021 EIP that are surrendered, cancelled, or exchanged for cash or a different award (or combination thereof);
•shares issuable upon the exercise of options or subject to other awards granted under the 2021 EIP that cease to be subject to such options or other awards, by forfeiture or otherwise, after the effective date of the 2021 EIP;
•shares subject to awards granted under the 2021 EIP that are forfeited or repurchased by us at the original price after the effective date of the 2021 EIP; and
•shares subject to awards under the 2021 EIP that are used to pay the exercise price of an option or withheld to satisfy the tax withholding obligations related to any award.
Administration. Our 2021 EIP will be administered by our compensation committee, or by our Board acting in place of our compensation committee. Subject to the terms and conditions of the 2021 EIP, the administrator will have the authority, among other things, to select the persons to whom awards may be granted, construe and interpret our 2021 EIP as well as to determine the terms of such awards and prescribe, amend and rescind the rules and regulations relating to the plan or any award granted thereunder. The 2021 EIP provides that the administrator may delegate its authority, including the authority to grant awards, to one or more executive officers to the extent permitted by applicable law, provided that awards granted to non-employee directors may only be determined by our Board.
Options. The 2021 EIP provides for the grant of both incentive stock options intended to attendqualify under Section 422 of the Code, and nonqualified stock options to purchase shares of our Class A common stock at a stated exercise price. Incentive stock options may only be granted to employees, including officers and directors who are also employees. The exercise price of stock options granted under the 2021 EIP must be at least equal to the fair market value of our Class A common stock on the date of grant. Incentive stock options granted to an individual who holds, directly or by attribution, more than ten percent of the total combined voting power of all classes of our capital stock must have an exercise price of at least 110% the fair market value of our Class A common stock on the date of grant.
Options may vest based on service or achievement of performance conditions, as determined by the administrator. The administrator may provide for options to be exercised only as they vest or to be immediately exercisable, with any shares issued on exercise being subject to our right of repurchase that lapses as the shares vest. In the event of a participant’s termination of service, an option is generally exercisable, to the extent vested, for a period of three months in the case of termination without cause (except due to a participant’s death or disability), for a period of 12 months in the case of termination due to the participant’s death or disability, or such longer or shorter period as the administrator may provide, and for a period of 24 months in the case of termination due to the participant’s retirement (consistent with our policies regarding retirement). Stock options generally terminate upon a participant’s termination of employment for cause. The maximum term of options granted under our 2021 EIP is ten years from the date of grant, except that the maximum permitted term of incentive stock options granted to an individual who holds, directly or by attribution, more than ten percent of the total combined voting power of all classes of our capital stock is five years from the date of grant.
Restricted stock awards (“RSA”). An RSA is an offer by us to grant or sell shares of our Class A common stock subject to restrictions, which may lapse based on the satisfaction of service or achievement of performance conditions. The price, if any, of an RSA will be determined by the administrator. Unless otherwise determined by the administrator, vesting will cease on the date the participant no longer provides services to us and unvested shares may be forfeited to or repurchased by us.
Stock appreciation rights (“SAR”). A SAR provides for a payment, in cash or shares of our Class A common stock (up to a specified maximum number of shares, if determined by the administrator), to the participant based upon the difference between the fair market value of our Class A common stock on the date of exercise and a predetermined exercise price, multiplied by the number of shares. The exercise price of a SAR must be at least the fair market value of a share of our Class A common stock on the date of grant. SARs may vest based on service or achievement of performance conditions. No SAR may have a term that is longer than ten years from the date of grant.
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Restricted stock units (“RSU”). An RSU represents the right to receive the value of shares of our Class A common stock at a specified date in the future and may be subject to vesting based on service or achievement of performance conditions. RSUs may be settled in cash, shares of our Class A common stock or a combination of both as soon as practicable following vesting or on a later date subject to the terms of the 2021 EIP. No RSU may have a term that is longer than ten years from the date of grant.
Performance awards. Performance awards granted pursuant to the 2021 EIP may be in the form of a cash bonus, or an award of performance shares or performance units denominated in shares of our Class A common stock that may be settled in cash, property or by issuance of those shares, subject to the satisfaction or achievement of specified performance conditions.
Stock bonus awards. A stock bonus award provides for payment in the form of cash, shares of our Class A common stock or a combination thereof, based on the fair market value of shares subject to such award as determined by the administrator. The awards may be granted as consideration for services already rendered, or at the discretion of the administrator, may be subject to vesting restrictions based on continued service or performance conditions.
Dividend equivalents rights. Our Board or the compensation committee thereof may permit participants holding RSUs to receive dividend equivalent payments if and when dividends are paid to stockholders. In the discretion of our board or the compensation committee thereof, such dividend equivalent payments may be paid in cash or shares of our Class A common stock and may either be paid at the same time as dividend payments are made to stockholders or delayed until shares are issued pursuant to the RSU grants and may be subject to the same vesting or performance requirements as the RSUs.
Change of control. Our 2021 EIP provides that, in the event of a corporate transaction that constitutes a change of control of our company under the terms of the plan, outstanding awards will be subject to the agreement evidencing the change of control, which need not treat all outstanding awards in an identical manner, and may include one or more of the following: (i) the continuation of the outstanding awards; (ii) the assumption of the outstanding awards by the surviving corporation or its parent; (iii) the substitution by the surviving corporation or its parent of new options or equity awards for the outstanding awards; (iv) the full or partial acceleration of exercisability or vesting or lapse of the company’s right to repurchase or other terms of forfeiture and accelerated expiration of the award; or (v) the settlement of the full value of the outstanding awards (whether or not then vested or exercisable) in cash, cash equivalents, or securities of the successor entity with a fair market value equal to the required amount, as determined in accordance with the 2021 EIP, which payments may be deferred until the date or dates the award would have become exercisable or vested. Notwithstanding the foregoing, upon a change of control the vesting of all awards granted to our non-employee directors will accelerate and such awards will become exercisable, to the extent applicable, and vested in full immediately prior to the consummation of the change of control.
Adjustment. In the event of a change in the number of outstanding shares of our Class A common stock without consideration by reason of a stock dividend, extraordinary dividend or distribution, spin-off, recapitalization, stock split, reverse stock split, subdivision, combination, consolidation reclassification, spin-off or similar change in our capital structure, proportional adjustments will be made to (i) the number and class of shares reserved for issuance under our 2021 EIP; (ii) the exercise prices, number and class of shares subject to outstanding options or SARs; (iii) the number and class of shares subject to other outstanding awards; and (iv) the maximum number and class of shares that may be issued as incentive stock options, subject to any required action by the board or our stockholders and compliance with applicable laws.
Exchange, repricing and buyout of awards. The administrator may, without prior stockholder approval, (i) reduce the exercise price of outstanding options or SARs without the consent of any participant and (ii) pay cash or issue new awards in exchange for the surrender and cancellation of any, or all, outstanding awards, subject to the consent of any affected participant to the extent required by the terms of the 2021 EIP.
Director compensation limits. No non-employee director may receive awards under our 2021 EIP with a grant date value that when combined with cash compensation received for his or her service as a director, exceed
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$750,000 in a calendar year, increased to $1,000,000 in the calendar year of his or her initial services as a non-employee director.
Clawback; transferability. All awards will be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by our Board or the compensation committee thereof or required by law during the term of service of the participant, to the extent set forth in such policy or applicable agreement. Except in limited circumstances, awards granted under our 2021 EIP may generally not be transferred in any manner other than by will or by the laws of descent and distribution.
Sub-plans. Subject to the terms of the 2021 EIP, the plan administrator may establish a sub-plan under the 2021 EIP and/or modify the terms of awards granted to participants outside of the United States to comply with any laws or regulations applicable to any such jurisdiction.
Amendment and termination. Our Board or compensation committee may amend our 2021 EIP at any time, subject to stockholder approval as may be required. Our 2021 EIP will terminate ten years from the date our Board adopts the plan, unless it is terminated earlier by our Board. No termination or amendment of the 2021 EIP may materially adversely affect any then-outstanding award without the consent of the affected participant, except as is necessary to comply with applicable laws or as otherwise provided by the terms of the 2021 EIP.
2017 Stock Incentive Plan
Legacy Sema4’s 2017 Equity Incentive Plan (the “2017 EIP”) was adopted by Legacy Sema4’s board of directors and approved by its stockholders in April 2017. The 2017 EIP allowed for the grant of stock options, stock appreciation rights, restricted stock, and RSUs. As of December 31, 2021, we had 27,671,750 shares of our Class A common stock reserved for issuance pursuant to outstanding awards granted under the 2017 EIP. We terminated the 2017 EIP upon the effective date of the 2021 EIP, which was July 21, 2021. Any awards granted under the 2017 EIP that remained outstanding as of such date continue to be subject to the terms of the 2017 EIP and applicable award agreements until such awards are exercised or amended or until they terminate or expire by their terms.
2021 Employee Stock Purchase Plan
The 2021 Employee Stock Purchase Plan (the “ESPP”) was adopted by our Board and approved by our stockholders in July 2021. The following summarizes the material terms of the ESPP. This summary is qualified in its entirety to the full text of the ESPP. We have not yet established an offering period under the ESPP.
Shares Reserved. We have initially reserved 4,804,011 shares of our Class A common stock equal for issuance and sale under the ESPP. The number of shares reserved for issuance and sale under our ESPP will increase automatically on January 1 of each of 2022 through 2031 by the number of shares equal to 1% of the aggregate number of outstanding shares of all classes of our Class A common stock as of the immediately preceding December 31, or a lesser number as may be determined by our compensation committee, or by our Board acting in place of our compensation committee. Subject to stock splits, recapitalizations, or similar events, no more than the number of shares of our Class A common stock equal to ten times the Initial ESPP Share Reserve may be issued over the term of the ESPP. On January 25, 2022, an additional 2,425,788 shares became available for future issuance under the ESPP pursuant to the plan’s evergreen provision.
Administration. Our ESPP will be administered by our compensation committee, or by our Board acting in place of our compensation committee, subject to the terms and conditions of the ESPP. Among other things, the administrator will have the authority to determine eligibility for participation in the ESPP, designate separate offerings under the plan, and construe, interpret and apply the terms of the plan.
Eligibility. Employees eligible to participate in any offering pursuant to the ESPP generally include any employee that is employed by us or certain of our designated subsidiaries at the beginning of the offering period. However, the administrator may exclude employees who do not meet eligibility requirements that our compensation committee may choose to impose (within the limits permitted by the Code), are customarily employed for 20 hours or less per week, are customarily employed for five months or less in a calendar year or certain highly-compensated employees as determined in accordance with applicable tax laws. In addition, any employee who owns (or is deemed
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to own because of attribution rules) 5% or more of the total combined voting power or value of all classes of our capital stock, or the capital stock of one of our qualifying subsidiaries, or who will own such amount because of participation in the ESPP, will not be eligible to participate in the ESPP. The administrator may impose additional restrictions on eligibility from time to time.
Offering Periods; Enrollment. Under our ESPP, eligible employees will be offered the option to purchase shares of our Class A common stock at a discount over a series of offering periods through accumulated payroll deductions over the period. The length of the offering periods under ESPP will be determined by the plan administrator and may be up to twenty-seven (27) months long. Each offering period may itself consist of one or more purchase periods. When the first offering period commences, our employees who meet the eligibility requirements for participation in that offering period will be eligible to enroll. For subsequent offering periods, new participants will be required to enroll in a timely manner. Once an employee is enrolled, participation will be automatic in subsequence offering periods. Participation in the ESPP ends automatically upon a participant’s termination of employment. A participant may withdraw his or her participation from the ESPP at any time by submitting written notice to the company.
Offerings; Contributions; Limitations. The purchase price for shares purchased under the ESPP during any given purchase period will be 85% of the lesser of the fair market value of our Class A common stock on (i) the first trading day of the applicable offering period or (ii) the last trading day of the purchase period. The ESPP permits participants to purchase shares of our Class A common stock through payroll deductions of a percentage of their eligible compensation, which may not be less than one percent (1%) and may be up to a maximum of fifteen percent (15%) or such lower limit set by the plan administrator. No participant may purchase more than 2,500 shares of our Class A common stock during any one purchase period, and may not subscribe for more than $25,000 in fair market value of shares of our Class A common stock (determined as of the date the offering period commences) in any calendar year in which the offering is in effect. The administrator in its discretion, may set a lower maximum number of shares which may be purchased.
Adjustments upon recapitalization. If the number of outstanding shares of our Class A common stock is changed by stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in our capital structure without consideration, then the administrator will proportionately adjust the number and class of common stock that is available under the ESPP, the purchase price and number of shares any participant has elected to purchase as well as the maximum number of shares which may be purchased by participants.
Corporate Transaction. If the post-combination company experiences a corporate transaction as determined under the terms of the ESPP, any offering period then in effect will be shortened and terminated on a final purchase date established by the administrator. The final purchase date will occur on or prior to the effective date of change of control transaction, and our ESPP will terminate on the closing of the change of control.
Transferability. Participants may generally not assign, transfer, pledge or otherwise dispose of payroll deductions credited to his or her account, or any rights with regard to an election to purchase shares pursuant to the ESPP other than by will or the laws of descent or distribution.
Amendment; Termination. The board or compensation committee may amend, suspend or terminate the ESPP at any time without stockholder consent, except as to the extent such amendment would increase the number of shares available for issuance under the ESPP, change the class or designation of employees eligible for participation in the plan or otherwise as required by law. If the ESPP is terminated, the administrator may elect to terminate all outstanding offering periods immediately, upon the next purchase date (which may be sooner than originally scheduled) or upon the last day of such offering period. If any offering period is terminated prior to its scheduled completion, all amounts credited to participants which have not been used to purchase shares will be returned to participants as soon as administratively practicable. Unless earlier terminated, the ESPP will terminated upon the earlier to occur of the issuance of all shares of common stock reserved for issuance under the ESPP, or the 10th anniversary of the effective date.
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401(k) Plan
We sponsor a retirement savings plan established on January 1, 2018 that is intended to qualify for favorable tax treatment under Section 401(a) of the IRC, and contains a cash or deferred feature that is intended to meet the requirements of Section 401(k) of the IRC. Participants may make pre-tax and certain after-tax (Roth) salary deferral contributions to the plan from their eligible earnings up to the statutorily prescribed annual meetingslimit under the IRC. Participants who are 50 years of stockholders.age or older may contribute additional amounts based on the statutory limits for catch-up contributions. Participant contributions are held in trust as required by law. No minimum benefit is provided under the plan. The plan provides for employer safe harbor matching contributions equal to 100% of an employee’s salary deferrals that do not exceed 6% of the employee’s compensation. An employee’s interest in his or her deferrals and safe harbor matching contributions is 100% vested when contributed.
Other Benefits
Our named executive officers, while employed by us, are eligible to participate in our employee benefit plans on the same basis as our other employees, including our health and welfare plans. We generally do not provide our named executive officers with perquisites or other personal benefits. However, we do reimburse our named executive officers for their necessary and reasonable business and travel expenses incurred in connection with their services to us.
Compensation Committee Interlocks and Insider Participation
The directors who were members of our compensation committee during 2021 were Joshua Ruch, Rachel Sherman and Nat Turner. None of them at any time has been one of our officers or employees. None of our executive officers currently serves, or in the past year has served, as a member of the Board or compensation committee of any entity that has one or more of its executive officers serving on our board of directors.Board or our compensation committee.
Code of EthicsDirector Compensation
Non-Employee Director Compensation Policy
We have adopted a Codenon-employee director compensation policy that is designed to enable us to attract and retain, on a long-term basis, highly qualified non-employee directors. Our non-employee directors will receive an annual cash retainer of Business Conduct$40,000, payable quarterly, and Ethics applicablea grant of stock options and RSUs with an aggregate grant-date value of $200,000, which will vest on the earlier of the first anniversary of the grant date and the next annual meeting of our stockholders. New non-employee directors will receive a grant of stock options RSUs upon joining our Board with an aggregate grant-date value of $400,000, which will vest over the three-year period following the grant date.
Members of our audit committee will receive an additional annual cash retainer of $10,000, and the chairperson of our audit committee will receive an additional cash retainer of $20,000 (in lieu of the annual retainer for membership on the audit committee). Members of our compensation committee will receive an additional annual cash retainer of $7,500, and the chairperson of our compensation committee will receive an additional cash retainer of $15,000 (in lieu of the annual retainer for membership on the compensation committee). Members of our nominating and governance committee will receive an additional annual cash retainer of $5,000, and the chairperson of our nominating and governance committee will receive an additional cash retainer of $10,000 (in lieu of the annual retainer for membership on the compensation committee).
Executive Chairman Compensation
In January 2022, our Board appointed Jason Ryan as Executive Chairman and entered into an executive chairman agreement (the “Executive Chairman Agreement”) with Mr. Ryan. Prior to this appointment, Mr. Ryan served as a non-employee director of our Board. The Executive Chairman Agreement provides for an annual base salary of $540,000. In connection with the appointment, we issued to our directors, officers and employees. We filed a copyExecutive Chairman an option to purchase 429,730 shares of our CodeClass A common stock, 247,525 service-based RSUs and 126,980 performance-based stock units, which awards will vest in full on the earlier of Business Conduct(a) December 31, 2022, and Ethics as an exhibit to the registration statement(b) a change in connection with our initial public offering. You are able to review this document by accessing our public filings at the SEC’s web site at www.sec.gov. In addition, a copy of the Code of Business Conduct and Ethics and the charters of the committeescontrol of our boardcompany subject to Mr. Ryan’s continued service as our Executive Chairman through such date and, in the case of directors can be provided without charge upon request from us in writing at 667 Madison Ave, New York, NY 10065, or by telephone at (212) 474-6745. If we make any amendments to our Code of Business Conduct and Ethics other than technical, administrative or other non-substantive amendments, or grant any waiver, including any implicit waiver, from a provision of the Code of Business Conduct and Ethics applicable to our principal executive officer, principal financial officer principal accounting officer or controller or persons performing similar functions requiring disclosure under applicable SEC or Nasdaq rules, we will disclose the nature of such amendment or waiver on our website. The information included on our website is not incorporated by reference into this proxy statement or in any other report or document we file with the SEC, and any references to our website are intended to be inactive textual references only.
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Conflicts of Interest
Our officers have agreed to present to us all target business opportunities that have a fair market value of at least 80% of the assets held in the Trust Account (net of amounts disbursed to management for working capital purposes, if permitted, and excluding the amount of any deferred underwriting commissions) prior to presenting them to any other entity,performance-based RSUs, subject to any fiduciarythe achievement of certain performance-based vesting conditions. The Executive Chairman Agreement will terminate on December 31, 2022 unless terminated earlier in accordance with its terms or contractual obligations they may have. The membersextended by the mutual agreement of our management team areBoard and Mr. Ryan.
2021 Director Compensation Table
The following table sets forth the compensation earned by or paid to our non-employee directors for services provided during the year ended December 31, 2021, other than Keith Meister who joined the Board in January 2022. Dr. Schadt did not otherwise obligated to present us withreceive any opportunitycompensation for a potential business combination of which they become aware, unless presented to such member solely in his or her capacityservice as a director or officer of the company. Our current certificate of incorporation provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacityduring fiscal year 2021, while also serving as a director or officerChief Executive Officer. Other than as described below, none of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue, and to the extent the directornon-employee directors received any fees or officer is permitted to refer that opportunity to us without violating another legal obligation.
Potential investors should also be awarereimbursement of the following other potential conflicts of interest:
•Our executive officers and directors are not required to, and will not, commit their full time to our affairs, which may result in a conflict of interest in allocating their time between our operations and our search for a business combination and their other businesses. We do not intend to have any full-time employees prior to the completion of the Business Combination. Each of our executive officers is engaged in several other business endeavors for which he may be entitled to substantial compensation, and our executive officers are not obligated to contribute any specific number of hours per week to our affairs.
•Our initial stockholders purchased founder shares prior to the date of the IPO and purchased private placement warrants in a transaction simultaneous to the IPO.
•In the course of their other business activities, our officers and directors may become aware of investment and business opportunities which may be appropriate for presentation to us as well as the other entities with which they are affiliated. Our management may have conflicts of interest in determining to which entity a particular business opportunity should be presented.
•Our Initial Stockholders have agreed to waive their redemption rights with respect to any Founder Shares and any public shares held by themexpenses (other than customary expenses in connection with the consummationattendance of meetings of our initial business combination. Additionally,Board) or any equity or non-equity awards in the year ended December 31, 2021. Please see the section entitled “—2021 Summary Compensation Table” for a summary of payments made to Dr. Schadt.
NameFees Earned or Paid in Cash($)
Option Awards($)(1)(4)
Restricted
Stock and
Other
Securities
($)(1)(4)
All Other Compensation ($)(2)
Total($)
Joshua Ruch47,500 201,911 199,985 — 449,396 
Dennis Charney, M.D.— — — — — 
Eli D. Casdin20,000 101,401 99,992 — 221,393 
Emily Leproust, Ph.D.25,000 101,401 99,992 — 226,393 
Jason Ryan(3)
30,000 201,911 199,985 — 431,896 
Michael Pellini, M.D.20,000 201,911 199,985 — 421,896 
Nat Turner23,750 101,401 99,992 — 225,143 
Rachel Sherman, M.D., M.P.H., F.A.C.P.20,000 101,401 143,797 50,000 315,198 
__________________
(1)The amounts reported in this column represent the aggregate grant date fair value of the awards granted under the 2021 EIP and pursuant to the Prior Merger Agreement, as applicable, to our Initial Stockholders have agreeddirectors during the year ended December 31, 2021, as computed in accordance with FASB ASC Topic 718. The assumptions used in determining the grant date fair value of the awards reported in the Option Awards and Restricted Stock and Other Securities columns are set forth in Note 10 to waive their redemption rights with respect to any Founder Shares held by them if we fail to consummate our initial business combination within 18 months afterfinancial statements included elsewhere in this proxy statement. Note that the closing of our initial public offering. If weamounts reported in this column reflect the aggregate accounting cost for these awards granted during the year, and do not complete our initial business combination within such applicable time period,necessarily correspond to the proceedsactual economic value that may be received by the director from the awards.
(2)The amounts reported in this column represents payments under director legacy and other charitable award programs.
(3)Mr. Ryan served as a non-employee director until January 2022.
(4)The following table sets forth information regarding the aggregate number of the sale of the private placement warrants held in the Trust Account will be used to fund the redemption of our public shares and the private placement warrants will expire worthless. With certain limited exceptions, the Founder Shares will not be transferable, assignable by our Sponsor until the earlier of: (A) one year after the completion of our initial business combination or (B) subsequent to our initial business combination, (x) if the last sale price of our Class A common stock equals or exceeds $12.00 per share (as adjusted forunderlying outstanding stock splits, stock dividends, reorganizations, recapitalizationsoptions held by our non-employee directors as of December 31, 2021 and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after our initial business combination, or (y) the date on which we complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in allaggregate number of unvested shares of our stockholders having the right to exchange their shares of common stock for cash, securities or other property. With certain limited exceptions, the private placement warrants and theClass A common stock underlying such warrants,outstanding RSU awards held by our non-employee directors as of December 31, 2021:
NameShares Underlying
Unexercised Stock Options		Unvested Shares of
Restricted Stock Units
Joshua Ruch44,572 25,672 
Dennis Charney, M.D.— — 
Eli D. Casdin22,286 12,836 
Emily Leproust, Ph.D.22,286 12,836 
Jason Ryan44,572 25,672 
Michael Pellini, M.D.44,572 25,672 
Nat Turner22,286 12,836 
Rachel Sherman, M.D., M.P.H., F.A.C.P.385,509 
44,533 (1)
__________________
(1)Includes 31,697 Earnout RSUs granted in connection with the Prior Merger Agreement.
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EXECUTIVE COMPENSATION OF GENEDX
As discussed above, GeneDx is currently part of OPKO and not an independent company. Decisions about GeneDx’s executive compensation and benefits to date have been made by the Compensation Committee of the OPKO Board of Directors (the “OPKO Compensation Committee”) and OPKO senior management. Accordingly, this section focuses on OPKO’s compensation and benefit programs and decisions for 2021. Katherine Stueland, GeneDx’s Chief Executive Officer, who will be appointed Co-Chief Executive Officer of Sema4 following the Closing, is GeneDx’s sole named executive officer (the “Named Executive Officer”). Following the Closing, Ms. Stueland’s executive compensation will be determined by Sema4’s Board of Directors and in accordance with the Sema4 Stueland Employment Agreement (as defined below), and accordingly Ms. Stueland’s executive compensation and the benefits programs to which she will be entitled will not be transferable, assignablethe same as those discussed below.
Summary Compensation Table
The following table sets out the compensation for the Named Executive Officer for the year ended December 31, 2021:
Name and Principal PositionYear
Salary ($)(1)
Bonus ($)
Stock Awards ($)(2) (3)
Option Awards ($)(2)
All Other Compensation ($)(4)
Total Compensation ($)
Katherine Stueland, Chief Executive Officer of GeneDx
2021285,577137,5002,500,000963,00011,6003,897,677
__________________
(1)Ms. Stueland became the Chief Executive Officer and President of GeneDx on June 21, 2021. Her annual base salary is $550,000.
(2)Reflects the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. The assumptions used in calculating the amounts are discussed in Note 10 of OPKO’s audited financial statements for the year ended December 31, 2021 included in OPKO’s Annual Report on Form 10-K filed with the SEC on March 1, 2022.
(3)Consists of RSUs granted by OPKO to Ms. Stueland on June 21, 2021. See “—Outstanding Equity Awards at 2021 Fiscal Year-End” below.
(4)Includes contributions made by OPKO under its 401(k) Plan during fiscal year 2021 in the amount of $11,600 for Ms. Stueland.

Narrative to Summary Compensation Table
Stueland GeneDx Employment Agreement
GeneDx entered into an indefinite Employment Agreement with Ms. Stueland on June 7, 2021 (as amended, the “GeneDx Stueland Employment Agreement”), to serve as GeneDx’s Chief Executive Officer and President commencing on June 21, 2021. The GeneDx Stueland Employment Agreement provides for (i) an annual base salary of $550,000, subject to annual review and increase (but not decrease) by GeneDx or saleable by our SponsorOPKO’s, as applicable, board of directors and (ii) eligibility to receive an annual bonus of up to $225,000 based upon satisfaction of performance-based goals and other individual and company metrics agreed upon between Ms. Stueland and GeneDx or its permitted transferees until 30 days afterOPKO’s, as applicable, board of directors. The GeneDx Stueland Employment Agreement further provides for a $2,500,000 sign on bonus (the “Sign-On Bonus”), payable in cash, of which $1,000,000 was paid on June 21, 2021, and, subject to Ms. Stueland’s continued employment, $750,000 will be payable on each of June 21, 2022 and June 21, 2023, provided that, upon the completionoccurrence of our initial business combination. Since our Sponsor and officers and directors may directly or indirectly owncertain events prior to June 21, 2023, including a change of control of GeneDx, Ms. Stueland shall be entitled to receive the Sign-On Bonus in full. Additionally, pursuant to the GeneDx Stueland Employment Agreement, OPKO granted Ms. Stueland restricted stock units on June 21, 2021 with respect to shares of OPKO common stock with a value of $2,500,000 as of the date of the grant (the “OPKO RSUs”), of which 50% vest on June 21, 2022 and warrants, our officers and directors may havethe remaining 50% vest on December 21, 2022, provided that the OPKO RSUs shall become immediately vested in full upon the occurrence of certain events, including a conflictchange of interestcontrol of GeneDx. Ms. Stueland also received options to purchase 450,000 shares of OPKO’s common stock (the “Initial Option”) under OPKO’s equity incentive plan, with an exercise price equal to $3.78, the closing stock price of OPKO’s common stock on the day of grant, which Initial Option vests annually in determining whetherfour equal installments over a particular target business is an appropriate business with whichfour year period beginning on June 21, 2021, provided that, upon the occurrence of certain events prior to effectuate our initial business combination.June 21, 2022, including a change of control of GeneDx, the vesting of the Initial Option shall be immediately accelerated in full. OPKO further agreed to grant Ms. Stueland options to purchase 450,000 shares of OPKO’s
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•common stock on June 21, 2022 (the “Our officersAdditional Option”) under OPKO’s equity incentive plan, with an exercise price equal to closing stock price of OPKO’s common stock on the day of grant, and directors may haveterms identical to the options described in the preceding sentence, except that the four year vesting period will begin on June 21, 2022, provided that should Ms. Stueland’s employment be terminated without cause or upon resignation by her for good reason within twelve months of a conflictchange of interestcontrol of GeneDx, or within three months prior to such change of control, the vesting of the Additional Option shall be immediately accelerated in full.
In connection with respectthe execution of the Merger Agreement, GeneDx and Ms. Stueland entered into a certain amendment to evaluating a particular business combination if the retention or resignationGeneDx Stueland Employment Agreement, dated as of January 14, 2022 (the “GeneDx Stueland Employment Agreement Amendment”), pursuant to which Ms. Stueland agreed, among other things, that (i) she shall not be permitted to exercise the Initial Option, (ii) at the Effective Time, the Initial Option shall be automatically cancelled and forfeited without any such officerspayment to her, (iii) OPKO is not required to grant her the Additional Option, provided the Closing occurs, and directors was included by a target business as a condition(iv) OPKO has no further obligations under the GeneDx Stueland Employment Agreement from and after the Closing, including no obligation to pay her the balance of the Sign-On Bonus. Pursuant to the GeneDx Stueland Employment Agreement Amendment, OPKO acknowledged and agreed that all outstanding OPKO RSUs will become immediately vested in full immediately prior to the Closing, subject to Ms. Stueland’s continued employment with GeneDx.
Ms. Stueland is also entitled to participate in OPKO’s employee benefit arrangements, on terms and conditions no less favorable than those available to any agreement with respectother similarly situated senior executive and is entitled to our initial business combination.
•Our Sponsor, officers or directors may have a conflictexpense reimbursement for reasonable out-of-pocket expenses incurred in the course of interest with respect to evaluating a business combinationher duties and financing arrangements as we may obtain loans from our Sponsor or an affiliate of our Sponsor or any of our officers or directors to finance transaction costs in connection with her relocation from Seattle, Washington to Gaithersburg, Maryland.
The GeneDx Stueland Employment Agreement contains restrictive covenants, including confidentiality of information, assignment of certain intellectual property, non-competition, non-solicitation and non-disparagement covenants. The confidentiality covenant and non-disparagement covenants have an intended initial business combination. Upindefinite term, and the non-competition and non-solicitation covenants are effective both during the executive’s employment with GeneDx and until the one year anniversary of her termination of employment. In addition, the GeneDx Stueland Employment Agreement further provides for severance benefits, as described below under “—Potential Payments Upon Termination and Change in Control.”
Base Salaries
OPKO has sought to $1,500,000establish and maintain competitive annual base salaries for its executive officers, including the Named Executive Officer, by utilizing available resources. OPKO provided fixed salary compensation to its named executive officers and the Named Executive Officer based on their responsibilities and individual experience, taking into account competitive market compensation paid by other companies for similar positions within the diagnostics and laboratory industries. In general, OPKO historically targeted executive officer compensation and base salary to fall within the median range for equivalent or similar positions of executives at peer group companies.
Discretionary Annual Bonus.
In addition to base salaries, OPKO’s Compensation Committee has had the authority to award discretionary annual bonuses to the Named Executive Officer based on corporate and individual performance. Incentives, as a percent of salary, increase with executive rank so that, as rank increases, a greater portion of total annual cash compensation is based on annual corporate and individual performance. Furthermore, as an executive’s rank increases, a greater percentage of that executive’s cash bonus is based on corporate performance, rather than individual performance. In 2022, Ms. Stueland was awarded a cash bonus of $137,500 for work performed in 2021.
Equity Compensation.
OPKO believes that equity compensation should be a primary component of its executive compensation program because it aligns the interests of its executive officers with the long-term performance of OPKO. Stock options are a critical element of OPKO’s long-term incentive strategy. The primary purpose of stock options is to provide OPKO’s employees with a personal and financial interest in its success through stock ownership, thereby aligning the interests of such working capital loans may be convertible into additional warrants at a pricepersons with those of $1.50 per warrant at theOPKO’s stockholders. Under OPKO’s employee stock option of the lender. Such warrants would be identical to the private placement warrants, including as to exercisability and exercise price.
The conflicts described above may not be resolved in our favor.
In general, officers and directors of a corporation incorporated under the laws of the State of Delaware are required to present business opportunities to a corporation if:
•the corporation could financially undertake the opportunity;
•the opportunity is within the corporation’s line of business; and
•it would not be fair to our company and its stockholders for the opportunity not to be brought to the attention of the corporation.
Accordingly, as a result of multiple business affiliations, our officers and directors may have similar legal obligations relating to presenting business opportunities meeting the above-listed criteria to multiple entities. Our officers and directors currently have certain relevant fiduciary duties or contractual obligations to such other entities (as well as to us). Our officers have also agreed not to participate in the formation of, or become an officer or director of, any other SPAC with a class of securities intended to be registered under the Exchange Act which has publicly filed a registration statement with the SEC until we have entered into a definitive agreement regarding our initial business combination or we have failed to complete our initial business combination within the required time period. Our current certificate of incorporation provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue, and to the extent the director or officer is permitted to refer that opportunity to us without violating another legal obligation.
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Belowprogram, options are granted at fair market value at the date of grant, and options granted under the program become exercisable only after a vesting period, which is subject to continued employment. Consequently, employees benefit from stock options only if the market value of OPKO’s common stock increases over time. With respect to these stock options, OPKO recognizes compensation expense based on FASB ASC Topic 718.
The OPKO Compensation Committee typically grants stock options to its employees under the OPKO Health, Inc. 2016 Equity Incentive Plan (the “2016 Equity Incentive Plan”) and previously the 2007 Equity Incentive Plan. As with base salaries and discretionary cash bonuses, there is no set formula or performance criteria, which determines the amount of the equity award for OPKO’s employees, including the Named Executive Officer. Nor does the OPKO Compensation Committee assign any relative weight to any specific factors or criteria it considers when granting stock options. Rather, the OPKO Compensation Committee exercises its judgment and discretion by considering all factors it deems relevant at the time of such grants, including the internally generated peer group survey previously discussed and OPKO’s performance during the most recent fiscal year. For the Named Executive Officer, the decisions by the OPKO Compensation Committee regarding grants of stock options are made based almost entirely upon the recommendation of OPKO’s Chief Executive Officer, and includes his subjective determination based on his assessment of the executive officer’s current position with OPKO, the executive officer’s past and expected future performance and the other factors discussed in the determination of base salaries.
Restrictions on Hedging
OPKO’s officers and personnel are prohibited from pledging OPKO’s common stock, purchasing OPKO’s securities on margin, engaging in short selling OPKO’s common stock, buying or selling puts or calls in connection with OPKO’s securities and engaging in derivative transactions involving OPKO’s securities, without prior written consent from OPKO’s acting compliance officer. In addition, OPKO’s directors and executive officers, as well as certain other employees, generally may purchase or sell OPKO securities only during permitted windows, which generally begin on the first full business day following the issuance of its earnings releases and continuing until two weeks prior to the end of the fiscal quarter.
Outstanding Equity Awards at 2021 Fiscal Year-End
The following table provides information regarding outstanding equity awards made to the Named Executive Officer as of December 31, 2021.
Option AwardsStock Awards
Name
Number of securities underlying unexercised options (#) exercisable
Number of securities underlying unexercised options (#) unexercisable (1)
Equity incentive plan awards: Number of securities underlying unexercised unearned options (#)
Option exercise price ($)Option expiration date
Number of shares or units of stock that have not vested (#)
Market value of shares of units of stock that have not vested ($)(2)
Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#)
Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested shares ($)
Katherine Stueland— 450,000 — 3.78 06/20/2031$— $2,500,000 $— $— 
__________________
(1)Options vest in four equal annual tranches, commencing on June 21, 2022, and expire on June 20, 2031. In connection with the GeneDx Stueland Employment Agreement Amendment Option, Ms. Stueland and OPKO agreed that such options shall be automatically cancelled and forfeited without any payment to her at the Effective Time.
(2)Consists of RSUs granted on June 21, 2021, and 50% of such RSUs vest on June 21, 2022, with the remaining 50% scheduled to vest on December 21, 2022, provided that the OPKO RSUs shall become immediately vested in full upon the occurrence of certain events, including a change of control of GeneDx. In connection with the GeneDx Stueland Employment Agreement Amendment, OPKO acknowledged and agreed that all outstanding OPKO RSUs will become immediately vested in full immediately prior to the Closing.
Other Elements of Compensation
Severance and Change-in-Control Benefits.
The Named Executive Officer is entitled to severance or change of control benefits as described below in “—Potential Payments Upon Termination and Change in Control—Stueland”.
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401(k) Profit Sharing Plan. 
OPKO has adopted a tax-qualified 401(k) Profit Sharing Plan (the “401(k) Plan”) covering all qualified employees. The effective date of the 401(k) Plan was January 2008. Participants may elect a salary reduction of at least 1% as a contribution to the 401(k) Plan, up to the statutorily prescribed annual limit for tax-deferred contributions ($19,500 for employees under age 50 and an additional $6,500 for employees 50 and above in 2020). In 2008, OPKO adopted the Roth contribution for employee elections. The 401(k) Plan permits employer matching of up to 4% of a participant’s salary up to the statutory limits. In 2010, OPKO elected a safe harbor contribution at 4% of annual compensation. All of OPKO’s safe harbor contributions are immediately vested.
Other Compensation.
The Named Executive Officer has standard benefits that are offered to all full-time, exempt employees of OPKO. These standard benefits include health, dental and life insurance, and short and long-term disability.
Potential Payments Upon Termination and Change in Control
Stueland
Pursuant to the terms of the GeneDx Stueland Employment Agreement, if Ms. Stueland’s employment is terminated (i) by GeneDx without “cause” (as defined in the GeneDx Stueland Employment Agreement) and not due to her death or disability or (ii) for “good reason” (as defined in the GeneDx Stueland Employment Agreement) by Ms. Stueland, Ms. Stueland will be entitled to receive the following severance payments in a lump cash payment within thirty (30) days of the date of termination, in addition to certain accrued obligations (including any earned but unpaid prior year annual bonus):
•an amount equal to 12 months’ base salary;
•an amount equal to the target bonus for the year of termination of employment;
•an amount equal to twelve (12) months of the employer portion of GeneDx’s or OPKO’s, as applicable, group health plan premiums that such company would have paid for Ms. Stueland and her dependents if she remained an active participant during such twelve (12) months; and
•any remaining portion of the Sign-On Bonus not yet paid to Ms. Stueland
In addition, upon a “change of control” (as defined in the GeneDx Stueland Employment Agreement), Ms. Stueland’s termination without cause or her resignation for good reason, the OPKO RSUs will immediately vest. Prior to June 21, 2022, upon a change of control, Ms. Stueland’s termination without cause or her resignation for good reason, or after June 21, 2022, upon Ms. Stueland’s termination without cause or her resignation for good reason within three months before, or 12 months after, a change of control, the Initial Option and Additional Option (as applicable) granted pursuant to the GeneDx Stueland Employment Agreement described above will immediately vest.
Ms. Stueland and OPKO agreed in the GeneDx Stueland Employment Agreement to revise certain of the terms of the GeneDx Stueland Employment Agreement, including the affect on Ms. Stueland’s equity awards and OPKO’s obligations to Ms. Stueland, from and after the Closing, as more fully described in “—Narrative to Summary Compensation Table—Stueland GeneDx Employment Agreement” above.
Upon a termination of Ms. Stueland’s employment for cause or due to her death or as a result of her disability, Ms. Stueland will be entitled to certain accrued obligations (including any earned but unpaid prior year annual bonus).
GeneDx’s obligation to provide the severance payments and benefits described above are contingent upon Ms. Stueland’s execution and non-revocation of a release of claims against GeneDx and its parent entities and affiliates.
231

Director Compensation
Each of OPKO’s non-employee directors is currently entitled to receive an annual retainer of $30,000, payable in quarterly installments, an option to acquire 50,000 shares of OPKO’s common stock upon initial appointment to the OPKO’s board of directors and an option to acquire 30,000 shares each year thereafter on the date of OPKO’s annual meeting of stockholders. Richard Pfenniger is the Lead Independent Director and chairman of the Audit Committee of OPKO’s Board of Directors. Accordingly, he is entitled to receive (1) an additional annual retainer of $10,000, payable in quarterly installments, and an option to acquire 15,000 shares of OPKO’s common stock each year on the date of the OPKO’s annual meeting of stockholders, (2) an additional annual retainer of $15,000, payable in quarterly installments, and (3) an option to acquire 15,000 shares of OPKO’s common stock each year on the date of OPKO’s annual meeting of stockholders.
The following table summarizingsets forth information with respect to compensation earned by Mr. Pfenniger for fiscal year 2021.
Annual Compensation
NameFees Earned or Paid in Cash ($)Stock Award ($)
Option Awards ($)(4)
Non-Equity Incentive Plan Compensation ($)Change in Nonqualified Deferred Compensation Earnings ($)All Other Compensation ($)Total ($)
Richard C. Pfenniger, Jr.49,323 — 139,200 — — — 188,523 
Actions Taken in Connection with the entitiesClosing
Stueland Sema4 Employment Agreement
In connection with the execution of the Merger Agreement, Sema4 and Ms. Stueland entered into a certain Employment Agreement, dated as of January 14, 2022 (the “Sema4 Stueland Employment Agreement”), pursuant to which ourSema4 agreed, immediately following the Closing, to employ Ms. Stueland as the Co-Chief Executive Officer of Sema4 for a term of three years, which shall automatically renew for successive one year terms unless earlier terminated (such period from the commencement of employment under the termination thereof, the “Term”). The Sema4 Stueland Employment Agreement contemplates a base salary of $675,000 per year, subject to review by the Sema4’s Board at least annually, and a performance bonus based on the achievement of certain goals for Sema4 and/or Ms. Stueland as mutually agreed by Ms. Stueland and the Board of Directors at the beginning of each calendar year, with a target amount equal to one hundred percent of the base salary. Ms. Stueland will receive a cash bonus equal to the lesser of (i) $1,500,000 and (ii) the amount treated as a “Transaction Expense” for purposes of the Merger Agreement on account of clause (i) of the “Stueland Employment Agreement Obligations,” within the meaning of the Merger Agreement, which will be payable within the first full payroll period following the Closing. As soon as practicable after the Sema4 Stueland Employment Agreement’s effective date, subject to approval of Sema4’s Board, Sema4 will grant Ms. Stueland an option to purchase shares of Class A common stock with a grant-date value equal to $4,500,000, with an exercise price equal to the closing price of the Class A common stock on the date of grant, and a number of restricted stock units with a grant-date value equal to $4,500,000. Such equity awards described in the preceding sentence will be subject to the terms of the 2021 EIP, and will vest and become exercisable as follows: 25% on the first anniversary of the Closing, 25% on the second anniversary of the Closing and 6.25% on a quarterly basis thereafter through the fourth anniversary of the Closing.
Ms. Stueland will also be entitled to participate in Sema4’s employee benefit arrangements provided to the Company’s most senior executive officers and directors currentlyis entitled to expense reimbursement for out-of-pocket expenses in accordance with Company policies and up to four weeks of vacation per year.
The Sema4 Stueland Employment Agreement contains restrictive covenants, including confidentiality of information, assignment of certain intellectual property, non-competition and non-solicitation covenants. The confidentiality covenant has an indefinite term, and the non-competition and non-solicitation covenants are effective both during the Ms. Stueland’s employment with Sema4 and until the one year anniversary of her termination of employment.
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Pursuant to the terms of the Sema4 Stueland Employment Agreement, if Ms. Stueland’s employment is terminated (i) by Sema4 without “cause” (as defined in the Sema4 Stueland Employment Agreement) and not due to her death or disability or (ii) for “good reason” (as defined in the Sema4 Stueland Employment Agreement) by Ms. Stueland, Ms. Stueland will be entitled, subject to certain conditions, to receive the following severance payments, in addition to certain accrued obligations (including any earned but unpaid prior year annual bonus):
•twenty four (24) months’ of continued base salary;
•up to twenty four (24) months of reimbursement of the employer portion of COBRA health insurance coverage; and
•accelerated vesting of the unvested portion of the Sema4 Initial Option with an aggregate grant date value equal to the amount treated as a “Transaction Expense” for purposes of the Merger Agreement on account of clause (ii) of the “Stueland Employment Agreement Obligations” (as defined in the Merger Agreement).
In addition, inside the “Change in Control Period” (as defined in the Sema4 Stueland Employment Agreement), upon Ms. Stueland’s termination without cause or her resignation for good reason, Sema4 will pay Ms. Stueland a lump sum in an amount equal to two hundred percent (200%) of her target performance bonus for the calendar year in which her employment terminated and the vesting of all unvested equity based compensation awards held by Ms. Stueland shall be immediately accelerated and, if applicable, exercisable.
Upon a termination of Ms. Stueland’s employment for cause or due to her death or as a result of her disability, Ms. Stueland will be entitled to certain accrued obligations (including any earned but unpaid prior year annual bonus).
Sema4’s obligation to provide the severance payments and benefits described above are contingent upon Ms. Stueland’s execution and non-revocation of a release of claims against Sema4.
233

GOLDEN PARACHUTE COMPENSATION OF GENEDX
The following table sets forth the information required by Item 402(t) of Regulation S-K regarding the compensation for the Named Executive Officer that is based on or otherwise relates to the Acquisition, assuming that the Acquisition was consummated on March 15, 2022 (which is the date assumed solely for the purposes of this golden parachute disclosure), and that the Named Executive Officer’s employment was terminated on the day that resulted in her receipt of the maximum amount of severance benefits under the Sema4 Stueland Employment Agreement as a result of a termination of employment following a change of control event, together with the value of the unvested equity awards that would be accelerated as a result of the Acquisition. The amounts shown in the table do not include the value of payments or benefits that would have fiduciary dutiesbeen earned, or contractual obligations:any amounts associated with equity awards that have vested or would vest pursuant to their terms, on or prior to the assumed effective date of the Acquisition or the value of payments or benefits that are not based on or otherwise related to the Acquisition.
For purposes of calculating the potential payments set forth in the table below, GeneDx has assumed that (a) the Acquisition will become effective on March 15, 2022, (b) unless otherwise noted, that the date of termination of employment of the Named Executive Officer is March 15, 2022; (c) the OPKO common stock price is $3.85 per share (the average closing price per share of OPKO common stock for the five trading days immediately following the date of announcement of the Acquisition); and (d) no withholding taxes are applicable to any payments set forth in the table. The amounts shown in the table are estimates only, are based on assumptions and information available to date, and do not reflect any cutback that may be applied to the payments and benefits otherwise payable to the Named Executive Officer to put her in a better after-tax position in the event of the imposition of any excise taxes under Sections 280G and 4999 of the Internal Revenue Code, as contemplated by GeneDx Stueland Employment Agreement or 2016 Equity Incentive Plan, as applicable. The actual amounts that may be paid upon an individual’s termination of employment, if any, can only be determined at the actual time of such termination.
INDIVIDUALENTITYENTITY’S BUSINESSAFFILIATION
Eli CasdinNameCash ($)Equity ($)Pension/NQDC ($)Perquisites/Benefits ($)Tax reimbursement ($)Other ($)Total Compensation ($)
Katherine Stueland
Casdin Capital, LLC2,850,000(1)
Investment managerChief Investment Officer
Exact Sciences Corp.BiotechnologyDirector
C2i GenomicsBiotechnologyDirector
DNA ScriptBiotechnologyDirector
EQRx, Inc.BiotechnologyDirector
Genomatica, Inc.BiotechnologyDirector
New York Genome CenterBiotechnologyDirector
Sexton BiotechnologiesBiotechnologyDirector
Tenaya Therapeutics, Inc.BiotechnologyDirector
Thrive Earlier Detection Corp.BiotechnologyDirector
Prominex Inc.BiotechnologyDirector
Keith Meister
Corvex Management LP2,577,798(1)(2)
Investment manager—Managing Partner and Chief Investment Officer Director
MGM Resorts InternationalHospitality and entertainmentDirector
Roar Digital, LLCSports betting and online gamingDirector
Brian Emes
Corvex Management LP19,800(1)(3)
Investment manager—Chief Financial Officer—5,447,597.00 
__________________
(1)Cash. The estimated amount shown in this column represents 24 months of base salary continuation payable in the event of a qualifying termination of Ms. Stueland’s employment and the $1,500,000 cash bonus that Ms. Stueland will receive from Sema4 within the first full payroll period following the Closing. The salary continuation payments are “double-trigger” benefits in that they will be paid to Ms. Stueland only if she experiences a qualifying termination of employment following the Closing. The $1,500,000 cash bonus is a “single-trigger” benefit in that will be paid shortly following the Closing, whether or not Ms. Stueland’s employment is later terminated.
(2)Equity. The estimated amount shown in this column represents (a) $31,500, which the value of the Initial Option that would be expected to be treated as “Transaction Expense” for purposes of the Merger Agreement on account of clause (ii) of the “Stueland Employment Agreement Obligations,” within the meaning of the Merger Agreement, and (b) $2,546,298, which is the value of the OPKO RSUs which will become fully vested immediately prior to the Closing, subject to Ms. Stueland’s continued employment with GeneDx, in each case based on an OPKO common stock price of $3.85 per share. The amount described in clause (a) is a “double-trigger” benefit in that Ms. Stueland will receive this acceleration benefit only if she experiences a qualifying termination of employment following the Closing. The amount described in clause (b) is a “single-trigger” benefit in that Ms. Stueland will receive this acceleration benefit in connection with the Closing, whether or not Ms. Stueland’s employment is later terminated.
(3)Perquisites/Benefits. The estimated amount shown in this column represents the value of the continued medical, dental, and vision benefits that Ms. Stueland would receive for a period of 24 months following a qualifying termination of employment. This is a “double-trigger” benefit in that it will be provided to Ms. Stueland only if she experiences a qualifying termination of employment following the Closing.
Indemnification of Sema4 Directors and Officers
Sema4’s Charter contains provisions limiting the liability of directors, and Sema4’s Bylaws provide that it will indemnify each of its directors to the fullest extent permitted under Delaware law. Sema4’s Charter and Bylaws also provide Sema4’s Board with discretion to indemnify officers and employees when determined appropriate by the Board.
Sema4 has entered into indemnification agreements with each of its directors and executive officers and certain other key employees. In connection with the Closing of the Acquisition, Sema4 expects to enter into indemnification agreements with each of the new directors and executive officer, as applicable. The indemnification agreements provide that Sema4 will indemnify each of its directors, executive officers, and such other key employees against any and all expenses incurred by that director, executive officer, or other key employee because of his or her status
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as one of the Sema4’s directors, executive officers, or other key employees, to the fullest extent permitted by Delaware law, Sema4’s Charter and its Bylaws. In addition, the indemnification agreements provide that, to the fullest extent permitted by Delaware law, Sema4 will advance all expenses incurred by its directors, executive officers, and other key employees in connection with a legal proceeding involving his or her status as a director, executive officer, or key employee. For information on the indemnification of GeneDx’s officers and directors following the Acquisition, see the section entitled “The Acquisition—Covenants and Agreements—Insurance; D&O Indemnification.”
235

MANAGEMENT OF SEMA4
DIRECTORS AND EXECUTIVE OFFICERS
Management
The following table sets forth the names, ages as of February 22, 2022, and certain other information regarding our executive officers and directors:
Shaun Rodriguez
Casdin Capital, LLC(1)
Name		Investment managerAgeDirector of Life Science ResearchPosition
GeneMatters, LLCExecutive Officers:BiotechnologyDirector
Prominex Inc.Eric Schadt, Ph.D.BiotechnologyDirector
Sean GeorgeInvitae CorporationBiotechnologyChief Executive Officer
Emily LeproustTwist Bioscience Corp.BiotechnologyPresident, Chief Executive Officer and Chair of the Board
Nat TurnerFlatiron Health, Inc.Biotechnology57Chief Executive Officer and Director
Clover Health, Inc.Jason RyanBiotechnology47Executive Chairman and Director
Isaac Ro44Chief Financial Officer
Daniel Clark, J.D.42Secretary and General Counsel
Anthony Prentice49Chief Product Officer
Kareem Saad43Chief Business Officer
Karen White51Chief People Officer
Non-Employee Directors:
Dennis Charney, M.D.(5)
70Director
Zenreach, Inc.
Eli D. Casdin(4)(6)
Biotechnology48Director
Emily Leproust, Ph.D.(5)
49Director
Keith A. Meister(1)
48Director
Michael Pellini, M.D.56Director
Joshua Ruch(2)(4)
72Director
Rachel Sherman, M.D., M.P.H., F.A.C.P.(3)(6)
64Director
Nat Turner36Director
__________________
(1)Including with respect to one or more investment funds, clients and accounts for which such entity acts as investment advisor.
Accordingly, if anyChair of the above executive officers or directors becomes aware of a business combination opportunity which is suitable for anyAudit Committee
(2)Chair of the above entities to which he or she has current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such business combination opportunity to such entity, and only present it to us if such entity rejects the opportunity. We do not believe, however, that anyCompensation Committee
(3)Chair of the foregoing fiduciary duties or contractual obligations will materially affectNominating and Corporate Governance Committee
(4)Member of the Nominating and Corporate Governance Committee
(5)Member of the Audit Committee
(6)Member of the Compensation Committee
Executive Officers
Eric Schadt, Ph.D., has served as our abilityChief Executive Officer and as a member of our Board since July 2021. Dr. Schadt was the founder of Legacy Sema4 and previously served as its Chief Executive Officer and as a member of its board of directors from June 2017 to complete our initialJuly 2021. Dr. Schadt also serves as the Dean for Precision Medicine, and Mount Sinai Professor in Predictive Health and Computational Biology at the Icahn School of Medicine at Mount Sinai. Dr. Schadt was previously Founding Director of the Icahn Institute for Genomics and Multiscale Biology from September 2011 to June 2017, and Professor and Chair of the Department of Genetics and Genomic Sciences from August 2011 to June 2017. Dr. Schadt previously served as the Chief Scientific Officer at Pacific Biosciences of California, a biotechnology company, from May 2009 to July 2012, and as an Executive Director at Merck from July 2001 to May 2009. Dr. Schadt also currently serves on numerous boards of directors and scientific advisory boards for various private companies. Dr. Schadt earned his Ph.D. from the University of California, Los Angeles, his M.A. from the University of California, Davis, and his B.S. from California Polytechnic State University-San Luis Obispo. Dr. Schadt’s expertise in computational biology, genomics, health systems operating experience, and knowledge of Sema4’s business, combination. Our current certificateyears of incorporation provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely insenior management experience at a biotechnology company, and his or her capacityservice as a director or officer of our companyother biopharmaceutical companies provide him with the qualifications and such opportunity is one we are legally and contractually permittedskills to undertake and would otherwise be reasonable for us to pursue, and to the extent theserve as a director or officer is permitted to refer that opportunity to us without violating another legal obligation.
We are not prohibited from pursuing an initial business combination with a company that is affiliated with our Sponsor, officers or directors. In the event we seek to complete our initial business combination with such a company, we, or a committee of independent directors, would obtain an opinion from an independent investment
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banking firm, or from an independent valuation or appraisal firm that regularly prepares fairness opinions, that such an initial business combination is fair to our company from a financial point of view.
Our Sponsor, officers and directors have agreed to vote any Founder Shares held by them and any public shares purchased during or after the offering (including in open market and privately negotiated transactions) in favor of our Business Combination.
Limitation on Liability and Indemnification of Officers and Directors
Our current certificate of incorporation provides that our officers and directors will be indemnified by us to the fullest extent authorized by Delaware law, as it now exists or may in the future be amended. In addition, our current certificate of incorporation provides that our directors will not be personally liable for monetary damages to us or our stockholders for breaches of their fiduciary duty as directors, unless they violated their duty of loyalty to us or our stockholders, acted in bad faith, knowingly or intentionally violated the law, authorized unlawful payments of dividends, unlawful stock purchases or unlawful redemptions, or derived an improper personal benefit from their actions as directors.
We have entered into agreements with our officers and directors to provide contractual indemnification in addition to the indemnification provided for in our current certificate of incorporation. Our bylaws permit us to secure insurance on behalf of any officer, director or employee for any liability arising out of his or her actions, regardless of whether Delaware law would permit such indemnification. We have purchased a policy of directors’ and officers’ liability insurance that insures our officers and directors against the cost of defense, settlement or payment of a judgment in some circumstances and insures us against our obligations to indemnify our officers and directors.
These provisions may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against officers and directors, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against officers and directors pursuant to these indemnification provisions.
We believe that these provisions, the directors’ and officers’ liability insurance and the indemnity agreements are necessary to attract and retain talented and experienced officers and directors.
Executive Compensation
In August 2020, our Sponsor transferred 25,000 Founder Shares to each of Mr. Islam, Dr. Leproust and Mr. Turner. None of our executive officers or directors have received any cash compensation for services rendered to us. Our Sponsor, executive officers and directors, or any of their respective affiliates will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable Business Combinations. Our audit committee will review on a quarterly basis all payments that were made to our Sponsor, executive officers or directors, or our or their affiliates. Any such payments prior to an initial Business Combination will be made from funds held outside the Trust Account. Other than quarterly audit committee review of such reimbursements, we do not expect to have any additional controls in place governing our reimbursement payments to our directors and executive officers for their out-of-pocket expenses incurred in connection with our activities on our behalf in connection with identifying and consummating an initial Business Combination. Other than these reimbursements, no compensation of any kind, including finder’s and consulting fees, will be paid by the company to our Sponsor, executive officers and directors, or any of their respective affiliates, prior to completion of our initial Business Combination.
After the completion of our initial Business Combination, directors or members of our management team who remain with us may be paid consulting or management fees from the combined company. All of these fees will be fully disclosed to stockholders, to the extent then known, in the proxy solicitation materials or tender offer materials furnished to our stockholders in connection with a proposed Business Combination. We have not established any limit on the amount of such fees that may be paid by the combined company to our directors or members of management. It is unlikely the amount of such compensation will be known at the time of the proposed Business
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Combination, because the directors of the post-combination business will be responsible for determining executive officer and director compensation. Any compensation to be paid to our executive officers will be determined, or recommended to the board of directors for determination, either by a compensation committee constituted solely by independent directors or by a majority of the independent directors on our board of directors.
We do not intend to take any action to ensure that members of our management team maintain their positions with us after the consummation of our initial Business Combination, although it is possible that some or all of our executive officers and directors may negotiate employment or consulting arrangements to remain with us after our initial Business Combination. The existence or terms of any such employment or consulting arrangements to retain their positions with us may influence our management’s motivation in identifying or selecting a target business but we do not believe that the ability of our management to remain with us after the consummation of our initial Business Combination will be a determining factor in our decision to proceed with any potential Business Combination. We are not party to any agreements with our executive officers and directors that provide for benefits upon termination of employment.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth information available to us at March 31, 2021 with respect to our common stock held by:
•each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock;
•each of our executive officers and directors; and
•all our executive officers and directors as a group.
The following table is based on 44,275,000 shares of Class A common stock and 11,068,750 shares of Class B common stock outstanding as of March 31, 2021. Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them. The following table does not reflect record or beneficial ownership of the Private Placement Warrants as these are not exercisable within 60 days of March 31, 2021.
Name and Address of Beneficial Owner (1)
Number of Shares Beneficially Owned (2)
Percentage of Outstanding Common Stock
CMLS Holdings, LLC (our Sponsor) (3)
10,993,75019.9 %
Eli Casdin (3)
10,993,75019.9 %
Keith Meister (3)
10,993,75019.9 %
Brian Emes—— 
Shaun Rodriguez—— 
Sean George—— 
Munib Islam25,000*
Emily Leproust25,000*
Nat Turner25,000*
Sachem Head Capital Management LP (4)
3,465,0007.8 %
Magnetar Financial LLC (5)
2,898,2316.5 %
BlueCrest Capital Management Limited (6)
2,500,0005.6 %
Millennium Management LLC (7)
2,467,2885.6 %
All directors, officers and director nominees as a group (8 individuals)11,068,75020.0 %
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*Less than one percent.
(1)Unless otherwise noted, the business address of each of the following entities or individuals is c/o Corvex Management LP, 667 Madison Avenue, New York, New York 10065.Board.
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(2)Jason RyanInterests shown consist of shares of Class A common stock and shares of Class B common stock. The Class B common stock will automatically convert into Class A common stock concurrently with or immediately following the consummation has served as a member of our initial Business CombinationBoard since July 2021, and as our Executive Chairman since January 2022. Mr. Ryan served as Chief Operating and Financial Officer of Magenta Therapeutics, Inc., a biotechnology company, from January 2019 to November 2020. Prior to joining Magenta Therapeutics, Inc., Mr. Ryan previously served as Chief Financial Officer of Foundation Medicine, Inc., a molecular information company which became a wholly-owned subsidiary of Roche Holdings, Inc., from March 2015 to November 2018. Prior to his position as Chief Financial Officer of Foundation Medicine, Inc., Mr. Ryan served in various other finance roles at Foundation Medicine, including as Senior Vice President of Finance. Prior to joining Foundation Medicine, Inc., Mr. Ryan led the finance and strategic planning functions of various other life science companies including Taligen Therapeutics, Inc., Codon Devices Inc. and Genomics Collaborative, Inc. Mr. Ryan joined the board of directors of Singular Genomics Systems, Inc. in April 2021, and previously served on the board of directors of ArcherDX, Inc. (which was acquired by Invitae Corporation) from April 2020 to October 2020. He began his career at Deloitte & Touche LLP. Mr. Ryan holds an M.B.A. from Babson College and a one-for-one basis, subject to adjustment, as describedB.S. in economics from Bates College, and earned a C.P.A. in Massachusetts. Mr. Ryan’s extensive finance experience and his leadership experience in the section entitled “Descriptionlife sciences and biopharmaceutical industries qualifies him to serve as a director on our Board.
Isaac Ro has served as our Chief Financial Officer since July 2021. Mr. Ro previously served as Legacy Sema4’s Chief Financial Officer from February 2021 to July 2021. Mr. Ro previously served as the Chief Financial Officer of Securities”Thrive Earlier Detection Corp., a company focused on early detection cancer screening, from June 2019 to February 2021, through Thrive’s sale to Exact Sciences Corporation in January 2021. From July 2010 to June 2019, Mr. Ro held roles of increasing responsibility at Goldman Sachs leading the U.S. Medical Technology team, including as Vice President. Prior to Goldman Sachs, Mr. Ro served as a Director at SVB Leerink from June 2004 to July 2010. Mr. Ro holds a B.A. in History, with honors, from Middlebury College.
Daniel Clark, J.D., has served as our prospectus filedGeneral Counsel since July 2021. Mr. Clark previously served as Legacy Sema4’s General Counsel from March 2016 to July 2021 and Secretary from March 2016 to July 2021. From 2015 to May 2017, Mr. Clark served as the Senior Contracts Manager – Genetics & Genomics at Mount Sinai Innovation Partners. Prior to joining Mount Sinai Innovation Partners, Mr. Clark practiced with two leading law firms in New York, clerked for Judge Frederic Block in the SEC pursuantEastern District of New York, and helped found a boutique startup law firm. Mr. Clark received his J.D. from the University of Michigan School of Law, cum laude, and his B.A. in Economics and Philosophy from Pomona College, cum laude. Mr. Clark also traveled as a Thomas J. Watson Fellow.
Anthony Prentice has served as our Chief Product Officer since July 2021. Mr. Prentice previously served as Legacy Sema4’s Chief Product Officer from September 2016 to Rule 424(b)(4) (File No. 333‑246251). Excludes Class A common stock issuable pursuantJuly 2021. Prior to joining Sema4, Mr. Prentice served in various roles of increasing responsibility at American Express from May 2005 to September 2016, including as the Vice President of Mobile Payments from August 2011 to September 2016 and as the Vice President of Gold Card Product Management from April 2010 to October 2011. Prior to joining American Express, Mr. Prentice served as the Director of Category Management at Starbucks Corp from 2002 to 2005, and as an Engagement Manager at McKinsey & Company from 1998 to 2002. Mr. Prentice earned an M.B.A. from Columbia University and his B.S. in Mechanical Engineering from Cornell University.
Kareem Saad has served as our Chief Business Officer since July 2021. Mr. Saad previously served as Legacy Sema4’s Chief Business Officer from January 2021 to July 2021. Mr. Saad also previously served as the Chief Strategy Officer at Sema4 from October 2017 to January 2020. Prior to rejoining Sema4, Mr. Saad served as the President and Chief Operating Officer of Apervita, Inc., a healthcare technology company, from February 2020 to January 2021. Mr. Saad previously served as the Chief Commercial Officer and EVP of Strategy and Business Development of SourceMed, a healthcare technology company, between January 2015 and June 2017. Prior to joining SourceMed, Mr. Saad served as a National Sales Director and Manager in Dell’s Healthcare and Life Sciences division between June 2009 and July 2013, and as a Business Segment Executive in IBM’s Healthcare Life Sciences group from November 2001 to February 2006. Mr. Saad received an M.B.A. with a concentration in Economics and Finance from the University of Chicago and a B.S. in Biochemistry and Molecular Biology with a minor in Computer Science from the University of British Columbia.
Karen White has served as our Chief People Officer since July 2021. Ms. White previously served as Legacy Sema4’s Chief People Officer from September 2020 to July 2021. Prior to joining Sema4, Ms. White was Vice
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President of Human Resources for Commercial Solutions at Syneos Health, Inc., a biopharmaceutical outsource services organization, from June 2016 to September 2020. Prior to the forward purchase agreements,merger of inVentiv Health, Inc. and INC Research Holdings, Inc. in August 2017, and later rebranding to Syneos Health in January 2018, Ms. White served as Managing Director of Human Capital at inVentiv Health from June 2016 to August 2017. Prior to that, Ms. White served as Director of Talent Development at Memorial Sloan Kettering Cancer Center where she was employed from October 2011 to June 2016. Before October 2011, Ms. White held various positions at large global organizations such shares will only be issued concurrently with the closingas Goldman Sachs Group Inc., International Business Machines Corp., and PricewaterhouseCoopers. Ms. White earned her M.B.A. from The George Washington University and her B.A. from Hobart and William Smith Colleges.
Non-Employee Directors
Dennis Charney, M.D., has served as a member of our initial Business Combination.Board since July 2021, and previously served as a member of Legacy Sema4’s board of directors from June 2017 to July 2021. Dr. Charney has served as the Anne and Joel Ehrenkranz Dean of the Icahn School of Medicine at Mount Sinai since March 2007, and as President for Academic Affairs for the Mount Sinai Health System since September 2013. From March 2005 to March 2007, Dr. Charney served as Dean for Academic and Scientific Affairs of the Icahn School of Medicine at Mount Sinai and Senior Vice President for Health Services of The Mount Sinai Medical Center. From 2007-2013, Dr. Charney served as the Dean of the School and Executive Vice President for Academic Affairs of the Medical Center. Dr. Charney first joined the Icahn School of Medicine at Mount Sinai in 2004 as Dean of Research. Prior to joining the Icahn School of Medicine at Mount Sinai, Dr. Charney led the Mood and Anxiety Disorder Research Program and the Experimental Therapeutics and Pathophysiology Branch at the National Institute of Mental Health, and he served as Professor of Psychiatry with tenure at Yale University from January 1990 to January 2000. Dr. Charney received his M.D. from Penn State College of Medicine and his B.A. from Rutgers University. Dr. Charney completed a residency in clinical psychiatry at Yale University School of Medicine and a fellowship in biological psychiatry at Connecticut Mental Health Center. Dr. Charney’s extensive medical and clinical experience in the biotechnology industry qualifies him to serve as a director on our Board.
(3)Eli D. Casdin Thehas served as a member of our Board since July 2020, and previously served as the Chief Executive Officer of CMLS from July 2020 to July 2021. Mr. Casdin founded Casdin Capital, LLC, an investment firm focused on the life sciences and healthcare industry, in November 2011 and currently serves as its Chief Investment Officer. Mr. Casdin also serves on the boards of directors of SomaLogic, Inc., a protein biomarker discovery and clinical diagnostics company (formerly, CM Life Sciences II Inc., a special purpose acquisition company (“CMLS II”)), since September 2021 (having previously served as the Chief Executive Officer of CMLS II from February 2021 to September 2021), and EQRx, Inc., a pharmaceutical company (formerly, CM Life Sciences III Inc., a special purpose acquisition company (“CMLS III”)), since December 2021 (having previously served as the Chief Executive Officer of CMLS III from February 2021 to December 2021). In addition, Mr. Casdin serves on the boards of directors of Century Therapeutics, Inc., a biotechnology company, since February 2021, Absci Corp, a drug and target discovery company, since December 2020, and Tenaya Therapeutics, Inc., a biotechnology company, since August 2019, and previously served on the board of directors of Exact Sciences Corp., a molecular diagnostics company focused on early cancer detection, treatment and monitoring, from October 2017 to September 2020. Mr. Casdin holds an M.B.A. from Columbia Business School and a B.S. degree from Columbia University School of General Studies. Mr. Casdin’s qualifications to serve on our Board include his extensive leadership experience as an executive officer of an investment firm, his extensive public and private company directorship experience in the life sciences and healthcare sectors, and his expertise in finance, capital markets, and the biotechnology industry.
Emily Leproust, Ph.D., has served as a member of our Board since September 2020. Dr. Leproust has been President and Chief Executive Officer of Twist Bioscience Corp., a biotechnology company, since co-founding Twist in 2013. Since October 2018, she has also served as Chair of the board of directors for Twist. Prior to co-founding Twist, Dr. Leproust served in various positions at Agilent Technologies, Inc., an analytical instrumentation development and manufacturing company, most recently as its Director, Applications and Chemistry R&D from February 2009 to April 2013. Dr. Leproust holds a Ph.D. in Organic Chemistry from the University of Houston and a M.Sc. in Industrial Chemistry from the Lyon School of Industrial Chemistry. Dr. Leproust’s qualifications to serve on our Board include her extensive professional and educational experience in the life sciences industry.
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Keith Meister has served as a member of our Board since January 2022, and previously served as the Chairman of the Board of ManagersCMLS from July 2020 to July 2021. He founded Corvex Management LP, a New York based investment manager, in December 2010 and since its inception has served as its Managing Partner and Chief Investment Officer. From 2003 to 2010, Mr. Meister served as Chief Executive Officer and then Principal Executive Officer and Vice Chairman of the board of Icahn Enterprises L.P., the primary investment vehicle for Carl Icahn. In addition, Mr. Meister previously served as Chairman of CMLS Holdings LLC is comprised of Mr. CasdinII from December 2020 to September 2021 and CMLS III from January 2021 to December 2021. Mr. Meister who share votingalso serves on the Board of Directors of MGM Resorts International, a global hospitality and investment discretion with respect to the common stock held of record by CMLS Holdings LLC. C-LSH LLCentertainment company, and M-LSH LLC are the members of CMLS Holdings LLC, and Mr. Casdin andits affiliate Roar Digital. Mr. Meister arehas previously served on the managing membersboard of C-LSH LLCdirectors of numerous other public companies in his career, including Yum! Brands Inc., The Williams Companies, Inc., ADT, Inc., Ralcorp Holdings, Inc. and M-LSH LLC, respectively. As such, eachMotorola, Inc. (now Motorola Solutions, Inc.). He is Chairman of the foregoing may be deemed to have or share beneficial ownershipboard of the Class B common stock held directly by CMLS Holdings LLC. EachHarlem Children’s Zone and also serves on the board of C-LSH LLC, M-LSH LLC and Messrs. Casdin and Meister disclaims beneficial ownership of these shares except to the extent of its or his respective pecuniary interest therein.
(4)According to a Schedule 13G filed with the SEC on September 11, 2020, each of Sachem Head Capital Management LP, Uncas GP LLC, Sachem Head GP LLC and Scott D. Ferguson has shared voting and dispositive power with regard to 3,465,000 shares of Class A common stocktrustees of the Company. The business address for each is 250 West 55th Street, 34th Floor, New York, New York 10019.
(5)AccordingAmerican Museum of Natural History. Mr. Meister holds a B.A. degree in government from Harvard College where he graduated cum laude. His qualifications to a Schedule 13G filed with the SECserve on February 12, 2021, each of Magnetar Financial LLC, Magnetar Capital Partners LP, Supernova Management LLC and Alec N. Litowitz shares voting and dispositive power with regard to 2,898,231 shares of Class A common stock of the Company. The business address for each is 1603 Orrington Avenue, 13th Floor, Evanston, IL 60201.
(6)According to a Schedule 13G filed with the SEC on September 11, 2020, each of BlueCrest Management Limited and Michael Platt share voting and dispositive power with regard to 2,500,000 shares of Class A common stock of the Company. The business address for each is Ground Floor, Harbour Reach, La Rue de Carteret, St. Helier, Jersey, Channel Islands, JE2 4HR.
(7)According to Amendment No. 1 to Schedule 13G filed with the SEC on January 19, 2021, each of Millennium Management LLC, Millennium Group Management LLC and Israel A. Englander share voting and dispositive power with regard to 2,632,318 shares of Class A common stock of the Company. The business address for each is 666 Fifth Avenue, New York, New York 10103.
Our Initial Stockholders beneficially own approximately 20% of the issued and outstanding common stock. Because of this ownership block, our Initial Stockholders may be able to effectively influence the outcome of all other matters requiring approval by our stockholders, including amendments to our second amended and restated certificate of incorporation and approval of significant corporate transactions including our initial Business Combination.
We have no compensation plans under which equity securities are authorized for issuance.
Pre-Approval Policy
Our audit committee was formed upon the consummation of our Initial Public Offering. As a result, the audit committee did not pre-approve all of the foregoing services, although any services rendered prior to the formation of our audit committee were approved by our board of directors. Since the formationdirectors include his extensive leadership experience as managing partner and executive officer of an investment firm and a diversified holding company, his extensive public company directorship experience in a variety of industries, and his expertise in finance, capital markets, strategic development, and risk management.
Michael Pellini, M.D., has served as a member of our audit committee,Board since July 2021, and previously served as a member of Legacy Sema4’s board of directors from August 2019 to July 2020. Since December 2017, Dr. Pellini has served as a Managing Partner of Section 32, LLC, a technology and life sciences-based venture capital fund. Dr. Pellini held roles of increasing responsibility at Foundation Medicine, Inc., a molecular information company, which was acquired by F. Hoffmann-La Roche Ltd. in 2018, from May 2011 until its acquisition, including as Chairman of the board of directors, Chief Executive Officer and President. From April 2008 to April 2011, Dr. Pellini held the position of President and Chief Operating Officer at Clarient, Inc., a medical diagnostic services company, which was acquired by General Electric Healthcare Company in 2010, and also served on Clarient’s board of directors from May 2007 to April 2009. Dr. Pellini also previously served as Vice President, Life Sciences at Safeguard Scientifics, Inc., a going-forward basis,private equity and venture capital firm from March 2007 to April 2008. Dr. Pellini currently serves as a member of the audit committee hasboard of directors of Adaptive Biotechnologies Corporation, the GO2 Foundation, the Personalized Medicine Coalition, Singular Genomics Systems, Inc., the Mission Hospital Foundation and will pre-approve all auditing servicesseveral private companies. Dr. Pellini earned an M.D. from Jefferson Medical College (now the Sidney Kimmel Medical College of Thomas Jefferson University), an M.B.A. from Drexel University, and permitted non-audit services to be performed for us by our auditors, including the fees and terms thereof (subject to the de minimis exceptions for non-audit services describeda B.A. in Economics from Boston College. Dr. Pellini’s broad experience in the Exchange Act which are approved bytechnology, health care and life sciences industries as an investor, and his years of senior management experience at public biotechnology companies, provides him with the audit committee priorqualifications and skills to serve as a director on our Board.
Joshua Ruch has served as a member of our Board since July 2021, and previously served as the completionChairman of our Board from July 2021 to January 2022 and as a member of Legacy Sema4’s board of directors from November 2017 to July 2021. Mr. Ruch is also a managing partner and co-founder of Rho Capital Partners, an investment and venture capital management company focused on innovative technology, and has held such positions since the founding of Rho Capital Partners in 1981. Prior to co-founding Rho Capital Partners and Rho Ventures in 1981, Mr. Ruch worked as an investment banker at Salomon Brothers in New York, a multinational investment bank. In addition to Sema4, Mr. Ruch is also a trustee of the audit).Mount Sinai Health System, Carnegie Hall and the National Humanities Center, and is a member of the Board of Governors of the Technion – Israel Institute of Technology and the Steering Committee of the Jacobs Institute. Joshua received an M.B.A. from the Harvard Business School and a B.S. in electrical engineering from the Technion – Israel Institute of Technology in Haifa, Israel. Mr. Ruch’s broad experience as an investor and serving on the boards of emerging technology companies, including health care and biotechnology companies, qualifies him to serve on our Board.
Rachel Sherman, M.D.,M.P.H., F.A.C.P., has served as a member of our Board since July 2021, and previously served as a member of Legacy Sema4’s board of directors from March 2020 to July 2021. Dr. Sherman is currently the President of Rachel Sherman Partners LLC, a drug development, regulatory, and policy consulting firm she founded in 2019, and a clinical lecturer at Harvard Pilgrim Health Care Institute. Dr. Sherman also currently serves as a member of the Board of Directors for Aptinyx Inc., a biopharmaceutical company. From May 2017 to January 2019, Dr. Sherman served as Principal Deputy Commissioner at the U.S. Food and Drug Administration
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(the “FDA”), where she spent nearly 30 years in medical product development and regulation. Dr. Sherman also served in additional roles at the FDA including as deputy commissioner for Medical Products and Tobacco in the Office of the Commissioner and director of the Office of Medical Policy in the Center for Drug Evaluation and Research. Dr. Sherman earned an M.D. from Mount Sinai School of Medicine, an M.P.H from The School of Hygiene and Public Health at Johns Hopkins University and an A.B. in mathematics from Washington University (St. Louis). Dr. Sherman’s medical and regulatory experience across a broad range of subject matters, including biosimilars, expedited drug development, prescription drug promotion, and active post-market surveillance provides her with the qualifications and skills to serve on our Board.
Nat Turner has served as a member of our Board since July 2021. Mr. Turner is currently CEO of Collectors Universe, an authentication and grading company for collectible coins, trading cards, video games, autographs, and memorabilia. Mr. Turner is also Chairman of Flatiron Health, Inc., and Director on the Board of Directors for Clover Health Investments Corp. Previously, Mr. Turner was the Co-Founder and Chief Executive Officer of Flatiron Health, Inc., a healthcare technology company focusing on accelerating oncology research and improving patient care, from June 2012 until April 2021, and was acquired by Roche Holding AG in April 2018. Prior to that, Mr. Turner co-founded and served as Chief Executive Officer of Invite Media, Inc., an advertising technology company, from March 2007 until it was acquired by Google Inc. in June 2010, after which he remained at Google until June 2012. Mr. Turner received a B.S., cum laude, in Economics with concentrations in entrepreneurship and marketing from The Wharton School of the University of Pennsylvania. Mr. Turner’s qualifications to serve on our Board include his significant experience in the life sciences industry, both as an executive and as an angel investor.
There are no familial relationships among our executive officers or directors.
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MANAGEMENT AFTER THE COMPANY’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSACQUISITION
TheAll of our current officers and directors will continue to serve as such following discussion and analysis should be read in conjunction with the financial statements and related notesAcquisition. It is also anticipated that upon consummation of the Company, included elsewhere in this proxy statement. This discussion contains forward-looking statements reflectingacquisition, Ms. Stueland will become the new Co-Chief Executive Officer of the Company. Following the Acquisition, our current expectations, estimatesdirectors and assumptions concerning eventsexecutive officers will be as follows:
NameAgePosition
Executive Officers
Eric Schadt, Ph.D.57Co-Chief Executive Officer and Director
Katherine Stueland46Co-Chief Executive Officer and Director
Jason Ryan47Executive Chairman and Director
Isaac Ro44Chief Financial Officer
Shawn Assad47Chief Accounting Officer
Daniel Clark, J.D.42Secretary and General Counsel
Anthony Prentice49Chief Product Officer
Kareem Saad43Chief Business Officer
Karen White51Chief People Officer
Non-Employee Directors
Dennis Charney, M.D.70Director
Eli D. Casdin48Director
Emily Leproust, Ph.D.49Director
Keith Meister48Director
Michael Pellini, M.D.56Director
Richard C. Pfenniger, Jr.66Director
Joshua Ruch72Director
Rachel Sherman, M.D., M.P.H., F.A.C.P.64Director
Nat Turner36Director
Executive Officers
For information regarding Mr. Schadt, Mr. Ryan, Mr. Ro, Mr. Assad, Mr. Clark, Mr. Prentice, Mr. Saad and financial trends that may affect our future operating results or financial position. Actual results and the timingMs. White please refer to “Management of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the sections entitled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” appearing elsewhere in this proxy.
Overview
We are a blank check company incorporated in Delaware on July 10, 2020 and formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. We are not limited to a particular industry or sector for purposes of consummating a business combination. We have focused our search for an initial business combination in the life sciences sector. Our Sponsor is CMLS Holdings LLC, a Delaware limited liability company (the “SponsorSema4”). above.
Our registration statement on Form S-1 forKatherine Stuelandhas been the initial public offering (the “Initial Public Offering”) was declared effective on September 1, 2020. On September 4, 2020 we consummated the Initial Public OfferingPresident and Chief Executive Officer of 44,275,000 units (the “Units”), which includes the full exercise by the underwriter of its over-allotment option in the amount of 5,775,000 UnitsGeneDx since June 2021, and with respect to the shares of common stock included in the Units offered, the “Public Shares”), generating gross proceeds of $442 million and incurring underwriting commissions of $8.8 million.
Each unit consists of one share of common stock and one-third of a redeemable warrant (a “Public Warrant”). A whole Public Warrant initially entitled the holder to purchase one share of common stock at a price of $11.50 per share, subject to adjustment in either case.
Simultaneously with the closing of the Initial Public Offering and the Over-Allotment, we consummated the private placement (“Private Placement”) of 7,236,667 warrants (the “Private Placement Warrants”) at a price of $1.50 per private placement warrant, with our Sponsor and Mr. Islam and Dr. Leproust, generating gross proceeds of approximately $ 10 million. Each private placement warrant has the same termswill serve as the Public Warrants.
Upon the closing of the Initial Public Offering, the Over-Allotment and the Private Placement, approximately $ $442 million ($10.00 per Unit) of the net proceeds of the sale of the Units in the Initial Public Offering and the Private Placement Warrants in the Private Placement was placed in a U.S.-based trust account at J.P. Morgan Chase Bank, N.A. maintained by Continental Stock Transfer & Trust Company, acting as trustee (the “Trust Account”). The proceeds held in the Trust Account were invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act 1940, as amended (the “Investment Company Act”), with a maturity of 180 days or less or in any open ended investment company that holds itself out as a money market fund selected by us meeting the conditions of paragraphs (d)(2), (d)(3) and (d)(4) of Rule 2a-7 of the Investment Company Act, as determined by us, until the earlier of: (i)Sema4’s Co-Chief Executive Officer following the completion of the Acquisition. Prior to joining GeneDx, Ms. Stueland served as the Chief Commercial Officer at Invitae Corporation, a business combination, (ii)biotechnology company, from October 2016 to June 2021 and as the redemptionHead of anyCommunications and Investor Relations at Invitae Corporation from November 2013 to October 2016, during which time she helped Invitae Corporation transition from a private to a public shares properly submitted in connection withcompany. Ms. Stueland previously served as the Principal at Vivo Communications, a stockholder votetechnology company, from January 2013 to amend our sixth amendedDecember 2013, and restated certificateas the Vice President of incorporationCommunications and Investor Relations at Dendreon Corporation, a biotechnology company, from September 2009 to modifyJune 2012. Ms. Stueland previously served on the substance or timingboard of our obligation to redeem 100% of our public shares if we do not completethe Rivkin Center, a business combination within the combination period (as described below), and (iii) the redemption of our public shares if we are unable to complete a business combination within the combination period, subject to applicable law.
In order to protect the amounts held in the Trust Account, our Sponsor has agreed to be liable to us if andnon-profit organization dedicated to the extent any claims bytreatment and prevention of cancer in women. Ms. Stueland earned a third party for services rendered or products soldB.S. in English language and literature from Miami University of Ohio. Ms. Stueland’s extensive leadership experience as an executive officer of biotechnology companies and knowledge of GeneDx’s business provide her with the qualifications and skills to us, orserve as a prospective target business with which we have entered into a written letterdirector on our Board.
Non-Employee Directors
For information regarding Mr. Charney, Mr. Casdin, Ms. Leproust, Mr. Meister, Mr. Pellini, Mr. Ruch, Ms. Sherman, and Mr. Turner please refer to “Management of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of  (i) $10.00 per public share or (ii) the actual amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that suchSema4” above.
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liability will not apply to any claims byRichard C. Pfenniger, Jr., is a third party or prospective target business who executedprivate investor and has previously served as Interim CEO of Vein Clinics of America, Inc., a waiver of any and all rights to the moniesprivately held company that specializes in the Trust Account (whether or not such waiver is enforceable) nor will it applytreatment of vein disease, from May 2014 to any claims under the Company’s indemnityFebruary 2015 and as Interim CEO of IntegraMed America, Inc., a privately held company that manages outpatient fertility medical centers, from January 2013 to June 2013. He served as Chief Executive Officer and President for Continucare Corporation, a provider of primary care physician and practice management services, from 2003 until 2011, and served as Chairman of the underwritersBoard of Directors of Continucare Corporation from 2002 until 2011. Previously, Mr. Pfenniger served as the Chief Executive Officer and Vice Chairman of Whitman Education Group, Inc. from 1997 through June 2003. Prior to joining Whitman, he served as the Chief Operating Officer of IVAX from 1994 to 1997, and, from 1989 to 1994, he served as the Senior Vice President-Legal Affairs and General Counsel of IVAX Corporation. Prior thereto he was engaged in the private practice of law. Mr. Pfenniger currently serves as a director of OPKO Health, Inc., a medical test and medication company focused on diagnostics and pharmaceuticals, GP Strategies Corporation, a corporate education and training company, and Asensus Surgical, Inc., a medical device company. He also serves as the Vice Chairman of the Initial Public Offering against certain including liabilities underBoard of Trustees and as a member of the Securities ActExecutive Committee of 1933,the Phillip and Patricia Frost Museum of Science. Mr. Pfenniger previously served as amended (the “Securities Act”). However, we have not asked the Sponsora director of BioCardia, Inc., clinical-stage regenerative medicine company developing novel therapeutics for cardiovascular diseases, IntegraMed America, Inc., a private specialty healthcare services company offering products and services to reserve for such indemnification obligations, nor have we independently verified whether the Sponsor has sufficient funds to satisfy its indemnity obligationspatients and we believe that the Sponsor’s only assets are securities of ours. Therefore, we cannot assure that the Sponsor would be able to satisfy those obligations. None of our officers or directors will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses. Moreover,providers in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third party claims. We will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businesses or other entities with which we do business, execute agreements with us waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Our management has broad discretion with respect to the specific applicationfertility and vein care segments of the net proceedshealth industry, Vein Clinics of America and Wright Investors’ Services Holdings, Inc., an investment management and financial advisory firm. Mr. Pfenniger’s experience as a chief executive officer, chief operating officer and general counsel, and knowledge of the Initial Public Offering,healthcare business provide him with the Over-Allotment,qualifications and the Private Placement, although substantially allskills to serve as a director on our Board.
Classified Board of the net proceeds are intended to be applied toward consummating a business combination.Directors
Sema4 Business Combination Announcement
On February 10, 2021, the Company announced that it executed an Agreement and PlanThe board of Merger (the “Merger Agreement”) with Mount Sinai Genomics, Inc., a Delaware corporation, d/b/a Sema4 (“Sema4”) and the other parties thereto (the transactions contemplated by the Merger Agreement, including the Merger (as defined below), the “Sema4 Business Combination”). Specifically, the Company entered into the Merger Agreement with Sema4 and S-IV Sub, Inc., a Delaware corporation and a direct, wholly-owned subsidiarydirectors of the Company (“Merger Sub”). Pursuantare divided into three staggered classes of directors. At each annual meeting of stockholders, a class of directors are subject to re-election for a three-year term. As a result, only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms. The directors are divided among the three classes as follows:
•the Class I directors will be Eli D. Casdin, Joshua Ruch and Michael Pellini and their terms will expire at the first annual meeting of stockholders held in 2022;
•the Class II directors will be Rachel Sherman, Eric Schadt, Nat Turner and Dennis Charney, and their terms will expire at the second annual meeting of stockholders held in 2023; and
•the Class III directors will be Emily Leproust, Jason Ryan and Keith Meister and their terms will expire at the third annual meeting of stockholders held in 2024.
Each director’s term continues until the election and qualification of his or her successor, or his or her earlier death, resignation or removal. Our Charter and restated bylaws authorize only the board of directors to fill vacancies on the board. Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the Merger Agreement, CMLS will acquire Sema4 through the merger of Merger Sub with and into Sema4, with Sema4 surviving as a wholly-owned subsidiary of CMLS (the “Merger”)
The Sema4 Business Combination is expected to close in the second quarter of 2021, following the receiptdirectors. This classification of the required approval by CMLS’s stockholders and the satisfactionboard of certain other customary closing conditions.
At the effective timedirectors of the Merger (the “Effective Time”), each shareCompany may have the effect of Sema4 class B common stock, par value $0.00001 per share (“Sema4 Class B Common Stock”) issued and outstanding as of immediately prior to the Effective Time will be converted into 1/100th of a share of Sema4 class A common stock, par value $0.00001 per share (“Sema4 Class A Common Stock”, together with Sema4 Class B Common Stock, “Sema4 Common Stock”)delaying or preventing changes in accordance with Sema4’s organizational documents.
Immediately thereafter, each share of Sema4 Common Stock and Sema4’s series A-1 preferred stock, series A-2 preferred stock, series B preferred stock and series C preferred stock (collectively, “Sema4 Capital Stock”) issued and outstanding immediately prior to the Effective Time (other than Excluded Shares and Dissenting Shares (each as defined in the Merger Agreement)) will be converted into the right to receive a portioncontrol of the total closing merger consideration, with each Sema4 stockholder being entitled to receive the following:
(a)if such stockholder has made a cash election as set forth and in accordance with the terms of the Merger Agreement, a portion of the specified aggregate amount of cash consideration payable under the terms of the Merger Agreement (such aggregate amount not to exceed $343,000,000) and pursuant to the terms of such stockholder’s cash election; and
(b)a number of shares of common stock, par value $0.0001 per share, of CMLS (the “Common Stock”) equal to the quotient of: (i) (A) the product of (x) such stockholder’s total shares of Sema4 Capital Stock multiplied by (y) the per share amount calculated in accordance with the Merger Agreement minus (B) the amount of cash payable to such stockholder pursuant to its cash election, if any, divided by (ii) $10.
In addition, at the Effective Time, each outstanding option to purchase Sema4 Capital Stock, each outstanding and unsettled restricted stock unit in respect of shares of Sema4 Capital Stock and each outstanding stockCompany.
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appreciation right will be rolled over into options to purchase Common Stock, restricted stock units in respectCORPORATE GOVERNANCE OF SEMA4
Director Independence
The rules of Common Stock and stock appreciation rights in respect of Common Stock, all as further set forth in and in accordance with the termsNasdaq require that a majority of the Merger Agreement.
In addition to the payment of cash, issuance of Common Stock and rollover of other Sema4 equity awards described above as of the Effective Time, in the event that the closing sale price of Common Stock exceeds certain price thresholds for 20 out of any 30 consecutive trading days during the period of time commencing upon the expiration of the lock-up period applicable to the Sponsor under the Letter Agreement, dated as of August 27, 2021, by and among the Company, Sponsor and each of the executive officers and directors of the Company and ending on the second anniversary of the closing of the Merger, an additional number of shares equal to an amount up to an aggregate of 11% of the shares of Common Stock that would have been issuable upon closing of the Merger to the stockholders of the Company if no cash elections were made and the closing cash payment amount under the Merger Agreement was $0.00 (the “Earn-Out Shares”) shall become issuable, in accordance with the terms of the Merger Agreement following the achievement of those certain price thresholds, to the stockholders of Sema4 as of immediately prior to the closing of the Merger; provided that theCompany’s board of directors of Sema4 (orbe independent. An “independent director” is defined generally as a duly authorized committee thereof) may, prior toperson other than an executive officer or employee the closingCompany or any other individual having a relationship which, in the opinion of the Merger, allocateissuer’s board of directors, would interfere with the exercise of independent judgement in carrying out the responsibilities of a portiondirector. Our Board has determined that each individual currently serving on our board, other than Dr. Schadt and Mr. Ryan, qualifies as an independent director under Nasdaq listing standards.
Board of such Earn-Out Shares to be issued to service providers of Sema4 in the form of restricted stock units of the Company.Directors
Going Concern
For the period from July 10, 2020 (inception) through September 30, 2020, cash used in operating activities was $365,808. Net loss of $56,923 was affected by interest earned on marketable securities held in the Trust Account of $2,790Our Board oversees our business affairs and changes in operating assets and liabilities, which used $306,095 of cash from operating activities.
As of December 31, 2020, we had cash and marketable securities held in the Trust Account of $442,763,951. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less taxes payable and deferred underwriting commissions) to complete our initial Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our initial Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies. During the period ended December 31, 2020, we did not withdraw any interest income from the Trust Account.
As of December 31, 2020, we had $1,094,681 of cash held outside of the Trust Account. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in connectionworks with our initial Business Combination,CEO and other senior management to determine our Sponsor or an affiliate ofstrategy and mission. In fulfilling its responsibilities, our Sponsor or certain of our officersBoard is involved in strategic and directors may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we would repay such loaned amounts. In the event that a Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants identical to the Private Placement Warrants, at a price of $1.50 per warrant at the option of the lender.
We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligenceoperational planning, financial reporting, governance, compliance and negotiating a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our Business Combination. Moreover, we may need to obtain additional financing either to complete our initial Business Combination or because we become obligated to redeem a significant number of our Public Shares upon consummation of our initial Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with therisk oversight.
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completion of our initial Business Combination. If we are unable to complete our initial Business Combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. In addition, following our initial Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (the “COVID-19 outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve. The impact of the COVID-19 outbreak on the Company’s results of operations, financial position and cash flows will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions. These developments and the impact of the COVID-19 outbreak on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, our results of operations, financial position and cash flows may be materially adversely affected.

ResultsWho We Are
We are a patient-centered, health intelligence company with a mission to use artificial intelligence, or AI, and machine learning to enable personalized medicine for all. Our integrated information platform leverages longitudinal patient data, AI-driven predictive modeling, and genomics in combination with other molecular and high-dimensional data in our efforts both to deliver better outcomes for patients and to transform the practice of Operationsmedicine, including how disease is diagnosed, treated, and prevented.
We have neither engaged in any operations nor generated any revenues to date. Our only activities through December 31, 2020 were organizational activities, the consummationestablished one of the Initial Public Offering, described below,largest, most comprehensive, and identifyingfastest growing integrated health information platforms, collecting and leveraging genomic and clinical data in partnership with patients, healthcare providers and an extensive ecosystem of life science industry contributors. We are now generating and processing over 47 petabytes of data per month, growing by more than 1 petabyte per month, and maintaining a target companydatabase that includes approximately 12 million de-identified clinical records, including more than 500,000 with genomic profiles, integrated in a way that enables physicians to proactively diagnose and manage disease. This expanding database is a virtuous cycle of data: new data enables us to further develop, train, and refine predictive models and drive differentiated insights, which models and insights we deploy through our next generation diagnostic and research solutions and portals to support clinicians and researchers and engage patients, all of which interactions generate more data to continue the cycle.
Today, by providing differentiated insights through diagnostic testing solutions to physicians and patients across the United States, or U.S., in areas such as reproductive health, or Women’s Health, population health, and oncology, or Oncology, we are reimbursed by payors, providers, and patients for providing these services. In collaboration with pharmaceutical and biotech, or Biopharma, companies, we receive payments for a broad range of services relating to the aggregated data on our initial Business Combination. We do notinformation platform, such as consenting and recontacting patients, the development and implementation of a wide range of predictive models, including drug discovery programs, conducting real-world evidence studies, and aiding in the identification and recruitment of patients into clinical trials. Over the next several years, we expect to generate any operatingfocus on expanding the revenue from our health system and Biopharma partners, while also working to continue to grow the volumes and revenues until afterfrom our diagnostics test solutions.
While there are many companies seeking to harness the completionpotential of “big data” to address the challenges within the healthcare ecosystem, we believe that few have the scale of our initial Business Combination. We generate non-operating income in the form of interest income on marketable securities held in the Trust Account. We will incur expensescompany combined with our revenue-generating diagnostics testing business and origins as a resultcompany conceived and nurtured within a world-class health system. These characteristics have enabled us to build a significant and highly differentiated technological and informational asset positioned to drive precision medicine solutions into the standard of beingcare in an unparalleled way.
Our World Class Team and Unique Origins
Sema4 was founded by Eric Schadt, Ph.D. as part of Icahn School of Medicine at Mount Sinai’s Department of Genetics and Genomic Sciences and the Icahn Institute for Genomics and Multiscale Biology. Dr. Schadt is a world-renowned expert on constructing predictive models of disease that link molecular data to physiology to enable clinical medicine. He has published more than 450 peer-reviewed papers in leading scientific journals, with a public company (for legal, financial reporting, accountingcitation or h-index of 137, and auditing compliance), as well as for due diligence expenses in connection with completing our initial Business Combination.
As a result of the restatement described in Note 2 of the notescontributed to discoveries relating to the financial statements included herein, we classify the Warrants issued in connection with our Initial Public Offeringgenetic basis of common human diseases such as liabilities at their fair valuecancer, diabetes, obesity, and adjust the warrant instrument to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statementAlzheimer’s disease. As of operations.
For the period from July 10, 2020 (inception) through December 31, 2020, we had a net loss of $39,907,599, which consists of operating costs of $206,195, a change in the fair value of the warrant liability of $38,510,584, transaction costs of $1,204,771 offset by interest income on marketable securities held in the Trust Account of $13,951.
For the three months ended March 31, 2021, we had a net loss of $58,471,923, which consists of operating costs of $1,845,458, offset by interest income on marketable securities heldhave approximately 1200 employees, including over 160 Ph.D.-level data scientists whose collective work has been recognized in the Trust Account of $10,919,areas such as data science, network modeling, multiscale biotechnology and a change in the valuegenomics.
Sema4 was established out of the warrant liabilityMount Sinai Health System (which we refer to together with our related entities as Mount Sinai) and commenced operations in June 2017 as a commercial entity that could effectively engage diverse patient populations and health care institutions at scale, founded on the idea that more information, deeper AI-driven learning, and increased engagement of 56,637,684.
Liquiditypatients and Capital Resources
On September 4, 2020, we consummated the Initial Public Offeringtheir providers will improve diagnosis, treatment, and prevention of 44,275,000 Units, which included the full exercise by the underwriters of the over-allotment option to purchase an additional 5,775,000 Units, at $10.00 per Unit, generating gross proceeds of $442,750,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 7,236,667 Private Placement Warrants todisease. We have since established and deployed our Sponsor at a price of $1.50 per warrant, generating gross proceeds of $10,855,000.
Following the Initial Public Offering, the exercise of the over-allotment optioncomprehensive and the sale of the Private Placement Warrants, a total of $442,750,000 was placed in the Trust Account. We incurred $24,895,463 in transaction costs, including $8,855,000 of underwriting fees, $15,496,250 of deferred underwriting fees and $544,213 of other offering costs.
For the period from July 10, 2020 (inception) through December 31, 2020, cash used in operating activities was $386,106. Net loss of $39,907,599 was affected by interest earned on marketable securities held in the Trustintegrated
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Accountgenomics and information platforms, and intend to continue to expand our scale and reach through organic and inorganic growth.
Our Purpose-Built, Flexible Platforms Address Immediate and Untapped Market Opportunities
With the rapid decline in next generation sequencing costs and the increased accessibility of $13,951,large scale, commoditized computer hardware and storage information products through the cloud, we expect that our core information platform, Centrellis®, supported and fueled by our genomic analysis platform, Traversa™, will be well-positioned to drive improved clinical outcomes competitively in the healthcare market.
Our information platform was built to be highly adaptable to different data types and different diseases and health conditions, with the aim to deliver precision medicine and improved health outcomes across a non-cash chargepatient’s entire life cycle. Accordingly, we expect our platforms to capitalize on a wide range of growth opportunities, and we intend to apply capital over time to make targeted acquisitions to accelerate our ability to reach a wider range of patients, integrate more deeply into clinical workflows, and address the significant, unaddressed white space for health intelligence in the healthcare ecosystem. These include a broad range of therapeutic segments, beyond our existing focus of our diagnostics solutions for Women’s Health, and Oncology, where we believe there is an immediate need for precision medicine solutions such as in autoimmune disorders, where medical care represented over $100 billion of spend in the U.S. in 2011, rare diseases, which is estimated to cost the U.S. healthcare system over $400 billion annually, and cardiovascular disease, where direct medical spend represents approximately $200 billion annually.
By combining our data-driven approach and our deep understanding of health system workflows, we have developed a holistic health information platform, Centrellis, to transform the disease diagnosis and treatment paradigm for the changeentire healthcare ecosystem: patients, physicians, health systems, payers, and Biopharma companies. The Centrellis platform is comprised of a data management backend that supports a wide array of databases, data warehouses, and knowledge bases, a data analytics layer to mine the data and construct predictive models that provide differentiated insights, and a series of application programmable interfaces to enable tool and software applications to access the data and models. Centrellis serves as the underlying foundation of our precision medicine solution and comprises a sophisticated data management and analytics engine. In the data management layer, our platform processes and stores data in a highly structured and accessible way, which is then analyzed by an advanced insights engine in the fair valueanalytics layer that deploys state-of-the-art AI, probabilistic causal reasoning and machine learning approaches, and complementary analytics capabilities to deliver increasingly accurate insights to patients, providers, and researchers across a broad range of warrant liabilitiesapplications. Centrellis is designed to transform treatment decisions across multiple therapeutic areas by engaging large-scale, high-dimensional data and querying the predictive models of $38,510,584, transaction costsdisease and wellness using patient-specific data to derive highly personalized, clinically actionable insights. Centrellis supports various applications, such as delivery of $1,204,771personalized and changes in operating assetsactionable treatment insights into clinical reports, clinical trial matching, real-world evidence trials and liabilities, which used $179,911clinical decision support, through an advanced programmable interface, or API, layer.
We have also developed a comprehensive genomic platform, Traversa™, to serve as the backbone of cash from operating activities.
Forour screening and diagnostic products and with the three months ended March 31, 2021, cash used in operating activities was $467,266. Net losscapacity to deliver molecular data that can be re-accessed, analyzed and delivered throughout a patient’s lifetime. Traversa is designed to simultaneously assay at clinical-grade coverage all known medically relevant regions of $58,471,923 was affected by interest earned on marketable securities heldthe genome, as well as survey the entirety of the human genome, to surface signals that might be medically relevant to a patient in the Trust Accountfuture. Traversa is integrated with the Centrellis information platform and is designed to adapt at the rate of $10,919, change in warrant liabilitieslearning and to match the significant pace of $56,637,684,information and changes in operating assets and liabilities, which used $1,377,892 of cash from operating activities.
As of March 31, 2021, we had cash and marketable securities heldknowledge growth, especially in the Trust Account of $442,774,870.genomics arena, to allow us to provide actionable, accurate, and cutting-edge insights from complex and comprehensive data assets. We intendalso expect this platform to use substantially all of the funds heldenable us to scale our operations and to improve our margins in the Trust Account, including any amounts representing interest earned on the Trust Account (less taxes payablegenerating secondary insights for patients and deferred underwriting commissions) to complete our initial Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our initial Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies. During the period ended March 31, 2021, we did not withdraw any interest income from the Trust Account.
As of March 31, 2021, we had $627,415 of cash held outside of the Trust Account. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in connection with our initial Business Combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we would repay such loaned amounts. In the event that a Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants identical to the Private Placement Warrants, at a price of $1.50 per warrant at the option of the lender.providers.
We do not believeAre Building Richer Longitudinal Data Through Deeper Patient and Provider Engagement
We engage with patients, physicians, and health systems as partners and based on principles of transparency, choice, and consent. Driven by our direct engagement with patients and strategic relationships with multiple health systems, the database we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our Business Combination. Moreover, we may need to obtain additional financing either to complete our initial Business Combinationbuilt contains extensive electronic medical record, or because we become obligated to redeem a significant number of our Public Shares upon consummation of our initial Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our initial Business Combination. If we are unable to complete our initial Business Combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. In addition, following our initial Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
Related Party Transactions
Founder Shares
On July 16, 2020 our Sponsor purchased an aggregate 10,062,500 Founder Shares for a total purchase price of $25,000, or approximately $0.002 per share. In August 2020, our Sponsor transferred 25,000 Founder Shares to each of Munib Islam, Emily Leproust and Nat Turner. On September 1, 2020, we effected a 1:1.1 stock split of our Class B common stock, resulting in our Sponsor holding an aggregate of 10,993,750 Founder Shares and there being an aggregate of 11,068,750 Founder Shares outstanding. The purchase price of the Founder Shares was determined by dividing the amount of cash contributed to the Company by the number of Founder Shares issued. The Founder Shares may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder.EMR, data, totaling
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The Initial Stockholders have agreedapproximately 12 million de-identified clinical records, many with genomic profiles, and has been designed to (i) waive their redemption rightsenable Centrellis to draw from our extensive data assets in a way that enables physicians to proactively diagnose and manage disease. We expect our current and targeted strategic relationships will provide us with respectaccess to their Founder Sharesadditional active patient cohorts and public shares in connectiondatasets to fuel this growth and perpetuate our iterative, data-driven business model, including by rapidly scaling our diagnostic test solutions franchise with the completionphysicians and patients through direct engagement with multiple health system partners.
In addition to providing a majority of our initialcurrent revenue and generating hundreds of thousands of genomic profiles, our established diagnostic test solutions also allow us to engage patients directly as partners, both as part of their clinical care and also acting on their behalf, with appropriate informed consent, to acquire, organize and manage any health data generated on them through the course of their care, all of which contributes to the further development of our genomics and information platforms. Further, we have demonstrated patients’ willingness to partner with us. For example, over 80% of diagnostics solutions patients and users who engaged with our patient portal have given us their informed consent to retrieve, organize, and manage their health records and data, and to facilitate their access to and sharing of that data, as well as additional data that patients share and create through their use of our expanding suite of digital experience products.
Our Established Diagnostic Solutions Are Scaling Rapidly
We currently operate a mature diagnostic business combination, (ii) waive their redemption rightsthat generates revenue and engages with respectpatients through our varied and sophisticated diagnostics and screening offerings. Our population health offerings are designed to their Founder Sharesrun through our Traversa platform and give us the ability to inform on thousands of diseases and conditions, from rare disorders, to drug safety, to risk profiles across a broad range of common human diseases of significant public shares in connectionhealth concern. We have developed an array of diagnostic and screening solutions to inform across a patient’s life course, ranging from reproductive health and newborn screening to drug safety and oncology. Our Women’s Health solutions sequence and analyze an industry-leading number of genes, and use Centrellis’ interpretive information tools to translate raw sequencing and clinical data efficiently and accurately into digestible clinical reports that guide decision making by patients and physicians. Our Oncology diagnostic solutions feature both somatic tumor profiling and hereditary cancer screenings, along with a stockholder votefoundational whole exome and whole transcriptome sequencing approach.
Centrellis enables the complex interpretations of these data to approveidentify key driver genes, activated and suppressed pathways, molecular subtypes, therapeutic interventions and matching to clinical trials. We believe our array of diverse diagnostic solutions, built on our differentiated grounding in scientific excellence and coupled with an amendmentend-to-end full-service model, have led to our current certificaterapidly growing customer bases in Women’s Health and Oncology and increasing traction with health systems, as well as deep, trusting engagement with patients.
We Are Embedding Our Solutions Through Innovative, Deep Relationships
Our origins in and subsequent work with Mount Sinai have provided us with an extensive understanding of incorporationhealth systems, patient, and physician workflows as well as the complex interconnectivities that define patient-physician relationships. We have used this knowledge to modifydevelop our integrated health system collaboration model, where we have the substance or timingcapabilities necessary to integrate across health system workflows as a holistic health intelligence partner in order to deploy our comprehensive genomics and information platforms, our data curation and harmonization capabilities, and our patient and provider engagement software applications. Our solutions support our health system partners across their operations, helping them integrate a new standard of care and creating a deep relationship with us that helps both partners realize the potential of the relationship. In addition to creating diagnostic revenue and a clinical relationship with our obligationhealth system partners and their patients, this engagement provides us with access to redeem 100% of our public shares if we do not complete our initial business combination within 18 monthsinsights informed by analyzed and processed EMRs from the closing ofhealth system, as well as the initial public offering orexpansive molecular information we generate from our genomics platform as the health system’s precision medicine partner. Learning from our long-standing relationship with Mount Sinai, we have refined a health system engagement model that is both operational and economic and designed to provide for redemption in connection with a business combinationmaximize both our and (iii) waive their rights to liquidating distributionsour health system partner’s value from the Trust Account with respect to their Founder Shares if we fail to complete our initial business combination within 18 months from the closing of the initial public offering, although they will be entitled to liquidating distributions from the Trust Account with respect to any public shares they hold if we fail to complete our initial business combination within the prescribed time frame.
Private Placement
Simultaneously with the closing of the Initial Public Offering, the Sponsor and certain of the Company’s independent directors purchased an aggregate of 7,236,667 private placement warrants, at a price of $1.50 per private placement warrant, for an aggregate purchase price of $10,855,000. The Sponsor purchased 6,903,335 private placement warrants, and each of Mr. Islam and Dr. Leproust (and/or one or more entities controlled by them) purchased 166,666 private placement warrants. Additionally, on October of 2020, the Sponsor also sold 166,667 private placement warrants to an entity associated with Mr. Turner for $1.50 per private placement warrant. Each Private Placement Warrant is exercisable to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment. Proceeds from the sale of the private placement warrants were added to the net proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the private placement warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the private placement warrants will expire worthless.
Furthermore, as described in the section entitled “The Business Combination Proposal — Related Agreements — Forfeiture Agreement”, pursuant to the terms of the Forfeiture Agreement, up to a maximum of 33% of private placement warrants held by the Sponsor may be automatically cancelled immediately prior to the closing of the Business Combination with Sema4.
Promissory Note – Related Party
On July 16, 2020, the Sponsor issued an unsecured promissory note to the Company (the “Promissory Note”), pursuant to which the Company could borrow up to an aggregate principal amount of $300,000. The Promissory Note was non-interest bearing and payable on the earlier of (i) December 31, 2020 or (ii) the consummation of the Initial Public Offering. The outstanding balance under the Promissory Note of $165,081 was repaid at the closing of the Initial Public Offering on September 4, 2020.
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes may be repaid upon completion of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of the notes may be converted upon completion of a Business Combination into warrants at a price of $1.50 per warrant. Such warrants would be identical to the Private Placement Warrants. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. As of December 31, 2020, there were no amounts outstanding under the Working Capital Loans.relationship.
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Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than as described below.
Registration Rights
Pursuant to a registration rights agreement entered into on September 1, 2020, as amended on February 9, 2021, the holders of the Founder Shares, Private Placement Warrants and securities that may be issued upon conversion of Working Capital Loans and forward purchase shares are entitled to registration rights. The holders of these securities will be entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriter is entitled to a deferred fee of $0.35 per Unit, or $15,496,250 in the aggregate. The deferred fee will become payable to the underwriter from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Forward Purchase Agreement
The Company entered into separate forward purchase agreements with affiliates of the Sponsor, Casdin Capital, LLC (“Casdin”) and Corvex Management LP (“Corvex”), in their capacities as investment advisors on behalf of one or more investment funds, clients or accounts managed by each of Casdin and Corvex, respectively (collectively, their “Clients”), pursuant to which, subject to the conditions described below, they will cause the Clients to purchase from the Company up to an aggregate amount of 15,000,000 shares of Class A common stock, or the forward purchase shares, for $10.00 per forward purchase share, or an aggregate amount of up to $150,000,000, in a private placement that will close concurrently with the closing of a Business Combination. The amount of forward purchase shares sold pursuant to the forward purchase agreements will be determined in the Company’s discretion based on the Company’s need for additional capital to consummate a Business Combination. Under each forward purchase agreement, the Company is required to approach Casdin and Corvex if it proposes to raise additional capital by issuing any equity, or securities convertible into, exchangeable or exercisable for equity securities in connection with a Business Combination. The respective obligations of Casdin and Corvex to purchase forward purchase shares will, among other things, be conditioned on the Company completing a Business Combination with a company engaged in a business that is within the investment objectives of the Clients purchasing forward purchase shares and on the Business Combination (including the target assets or business, and the terms of the Business Combination) being reasonably acceptable to such Clients as determined by Casdin or Corvex, as relevant, as investment advisors on behalf of such Clients. Each of Casdin and Corvex will have the right to transfer a portion of its purchase obligation under the forward purchase agreement to third parties, subject to compliance with applicable securities laws. To the extent that the Company obtains alternative financing to fund the initial Business Combination and the Clients participate in such financing, the aggregate commitment under the forward purchase agreement will be reduced by the amount of such alternative financing.
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We had identified the following as its critical accounting policies:
Warrant Liability
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We accountare currently activating and expanding our relationships with several leading health systems that will expand our access to data and that we expect will position our platforms for rapid growth and broad commercial opportunities, and have recently signed contracts with three new health systems in support of this strategy. These systems include: AdventHealth, Avera Health, and Northshore University HealthSystem.
Our AdventHealth partnership builds upon the current AdventHealth Genomics and Personalized Health Program to offer genomic solutions to patients across a number of services and specialties. Together, we will conduct data structuring and curation of the combined genomic and clinical data to enable clinicians and scientists to advance research and discovery to improve patient care. We are initially focused on accelerating research in the central Florida division, which includes 18 hospitals and emergency departments, and accounts for more than two million patient visits annually. Nationally, AdventHealth has 51 hospitals and over 100 care sites across 9 states.
Our Avera Health partnership initially focuses on advancing oncology care, enabling Avera Health’s providers and patients to benefit from data-driven insights that inform targeted cancer treatments. Avera Health’s providers will be able to leverage Centrellis, to curate, structure and integrate clinical and genomic data to support both cancer research and clinical care at Avera Health. We will deliver predictive disease network models and clinically actionable insights, empowering Avera Health’s providers to further improve the prevention, detection, and treatment of cancer for their patients. We are also offering digital tools, which give Avera Health’s providers the ability to readily search for cohorts of patients based on clinical criteria, view a patient’s treatment history that is contained in the curated data as an interactive timeline, and more systematically match patients to clinical trials.
At NorthShore University HealthSystem, we are enabling a data-driven genomics program to help clinicians and patients detect, and treat diseases at an early stage, when they are most treatable. As part of the program, NorthShore University HealthSystem’s clinicians and patients will have access to our information-rich genomic solutions for hereditary cancer, population health, pharmacogenomics, and rare expanded carrier screening. Importantly, by combining clinical information with genomic analysis, physicians will be better positioned to administer more personalized, holistic care plans by both drawing insights on how genetic variants will impact patients’ chances of developing disease and determining the most appropriate treatment options. In addition to guiding clinicians, the program is expected to make it easier for NorthShore University HealthSystem patients to understand the implications of genomic findings.
Centered on Centrellis and Traversa, we have also established and continue to seek strategic relationships with Biopharma companies to enable innovation across the entire drug lifecycle, from next generation drug discovery and development, to post-market efficacy surveillance, to informing on bioavailability, toxicity, tolerability, and other features critical to drug development. We have demonstrated the ability to integrate across all aspects of the next generation therapeutic and drug development process, including: biomarker identification as part of early stage drug discovery; identification, validation and prioritization of drug targets; clinical trial patient recruitment; real-world evidence studies; and identifying new markets and indications for existing assets. We believe our solutions allow our Biopharma partners to harness the potential of big data to enable the development of next generation precision medicine therapeutics.
Centrellis: Our Health Information Platform Solution
By combining our data-driven approach and our deep understanding of health system workflows, we have developed a holistic health information platform, Centrellis, to transform the disease diagnosis and treatment paradigm for the Warrants issuedentire healthcare ecosystem: patients, physicians, health systems, payers, and Biopharma companies. Centrellis is the culmination of our critical competencies and goals as a company:
•technologies aimed at patient and provider engagement,
•the generation, aggregation and standardization of multi-dimensional data, and
•the modeling and generation of differentiated, domain-specific insights
Driven by the virtuous cycle and interconnection of our clinical diagnostics products, rich data assets, database engineering and data science applications, we continue to evolve and deploy our platform to facilitate a better
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understanding of disease and wellness and improve the standard of care through information driven knowledge and understanding.
Provider Engagement Technologies: Our Next Generation Tools
We have built comprehensive solutions in Centrellis that enable clinicians, researchers, and patients to engage with the relevant structured health data and to leverage our predictive models of disease and wellness and produce clinically actionable insights.
For clinicians and researchers, we have designed Centrellis’s adaptive learning capabilities and tools to enable health systems and clinicians to manage their patient care, research, and health data in one place and to adapt to rapidly changing scientific and clinical norms through an advanced programmable interface, or API, layer, including:
•Integration and on-boarding for health systems and practices that connects data from EMRs and disparate and varied databases,
•Searching and analyzing cohorts of patients, allowing an assessment of their patient populations and quality of care in real-time,
•Enabling clinical decision support and personalized and actionable treatment insights into clinical reports,
•Identifying patients who are candidates for certain clinical genomic analyses,
•Managing the clinical analysis ordered for their patients, from ordering, tracking, resulting, and reanalyzing based on new findings,
•Supporting clinical care and research by matching patients to available clinical trials based on highly personalized inclusion and exclusion metrics, and
•Informing on administrative decisions including as they relate to patient growth, total cost of care, and risk identification and mitigation.
Patient Engagement Technologies: Building Trust and Providing Value Through Clinical Partnership
We are dedicated to giving patients control of their own health data, and in support of this goal, we have designed patient access to Centrellis through our patient portal. Patients have demonstrated their trust by engaging with us and providing consent for us to collect and store their EMR data. After creating an account, patients are able to manage and track the clinical analysis that we are performing for them, including by being able to track, receive, and understand the initial insights into their clinical tests and data (including expanded carrier screening, or ECS, tests, and hereditary cancer tests), and to access our supporting clinical services, such as genetic counseling. Our patient portal also provides patients with the opportunity to partner with us to collect, manage, and regularly update their health data from their disparate healthcare providers, and help participants engage with their data through user-friendly applications, such as their genomic ancestry, personalized residual risk calculations, and other clinical and educational insights and information through important health events, like their pregnancy journey. For patients who have indicated their willingness to participate in research studies, our platform also provides integrated digital informed consenting and research program participation, through transparent, institutional review board approved processes, including targeted clinical trials offerings that provide relevant alternatives and access to the latest scientific trials.
Activating Data Through Generation, Curation and Engineering
We designed Centrellis to create an accessible and usable database that can support interpretation consistently across patient populations represented within the broad healthcare ecosystem. Centrellis aggregates large-scale and diverse data, abstract and structure informative unstructured data, and finally integrate the data into an accessible, web-scalable data warehouse that employs a common data model across a broad series of databases. Unstructured data derived from EMR and associated data are run through multiple pipelines leveraging machine learning-enabled
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natural language processing, augmented as needed by human annotators, to extract information and knowledge from that data and then structure and implement extensive quality assurance processes for the resulting annotations. Our multiscale, integrative strategy allows us to connect the processed EMR data with complex biological data from many sources, such as the genome, proteome, transcriptome, epigenome, and microbiome. Our standardization of the genomic and EMR data also allows us to pursue strategic relationships in the Biopharma industry, connecting Biopharma companies with clinicians and researchers to create computational models of disease, discover and validate targets and biomarkers, help design clinical trials and recruit patients, and support the collection of real-world data and evidence.
We not only collect data from external sources, but also generate clinical-grade genomic datasets in our clinical and research processes, which further fuels the richness of the data from which Centrellis draws. Our genomic infrastructure enables us to convert bio-samples into datasets that span a range of genomic modalities, from DNA and RNA sequencing to epigenomic profiling, as well as different next generation sequencing technologies, including long-read, single molecule sequencing, low pass whole genome sequencing, and additional transformative technologies. Together with our diagnostic solutions, we use this multi-technology approach to ensure we generate data to comprehensively cover clinically actionable insights from and common variation in the genome, enabling the diagnosis of rare conditions and diseases or risk of passing on mutations to offspring that may cause severe disease, predicting risks of developing diseases such as cancer, predicting tolerability of various therapeutics, and creating broad genomic health profiles through the use of polygenic risk scores.
Our Advanced Domain-Specific AI Informatics for Insight Generation
Finally, we believe our informatics and analysis capabilities form a meaningful connection between the web of databases that we have created in our data warehouse and the utility of Centrellis to our users. Based on our informatics engine, Centrellis generates deep interpretive insights derived from large-scale, multi-omic data, taking advantage of our deeper data generation capabilities, and provides actionable treatment recommendations and innovative research findings. These insights are provided to patients, clinicians, researchers, and partners through the tools described above.
We are also continuing to develop these models and insights. Our researchers have developed a methodology to integrate diverse multi-omics data, including genomic, transcriptomic, and proteomic data, into causal probabilistic networks that help us to understand disease processes and identify key biomarkers through advanced network analysis. Our scientists have pioneered the use of DNA variation information to statistically infer causal relationships among any number of traits that have common genetic variance components. These approaches allow our teams to infer directed causal relationships among a pair of traits with shared genetic variance components, which then can be more systematically applied to traits to infer probabilistic causal network structures that can be mined for a broad range of discoveries. We also designed Centrellis with a high degree of flexibility to allow the platform to adjust to the rapidly changing and advancing health information landscape, highlighted by our Traversa genomic analysis platform, which we believe will lead to improved cost profiles over time as assays transition to whole genome sequencing at increasing resolutions.
As we collect and analyze additional datasets, our platform enables the virtuous cycle of data, and we are able to further refine our products and hone our capabilities to provide enhanced analysis of these data. More data and more insights generate further data and insights to support our models. We have constructed automated pipelines to continuously search the literature and research repositories to expand and distill our knowledge graphs, which are in turn queried to provide the interpretations and insights delivered to users of our systems. To support our interpretations and insights, we utilize internal experts as needed to help resolve conflicting findings to improve upon the actionable insights we deliver to physicians and patients.
Traversa: Our Genomics Platform for Optimizing Screening and Diagnostic Genomics Products and Population Health Initiatives
Traversa is our comprehensive genomics platform that has been designed to serve as the backbone of our genomic analysis products, and we are in the process of transitioning all of our genomic analyses to this platform. For products on the Traversa platform, we generate data on all known medically relevant regions of the genome at
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clinical-grade coverage, as well as low-pass whole genome data to span all common variation in the genome. We also ask for the patient’s consent to biobank the corresponding samples for future clinical testing. While we report on the specific genes analyzed at the request of the clinician and patient, these baseline data and bio-banked samples allow us to respond to requests for additional analysis quickly by generating “in silico” interpretations on genomic data already existing on a patient and to surface signals that might be medically relevant across a patient’s life course.
When deployed at across an entire health system, as we intend with our health system partners, Traversa will enable data driven collaborations and initiatives with health systems by establishing comprehensive clinical and genomic data profiles with patient consent. Particularly where integrated with EMR data, Traversa provides health systems with a unique opportunity to deploy population health management programs because of the robust data from which those programs will draw and because of the efficiencies it will create across the health ecosystem by eliminating the repetition of the most time-consuming and costly aspects of genomic analysis, including sample collection and preparation and the generation of sequence data. Using Traversa, clinicians and health systems will have the freedom to advance patient care by allowing clinicians to establish clinical utility and drive adoption of new analysis products, which we believe will consequently expedite improved reimbursements against lower total production costs for those offerings.
We Collect and Manage Rich, Longitudinal Data Built from Diverse Sources
The health information database that we have created draws from many complementary sources, which we manage in accordance with patient consent and preferences, our regulatory obligations, and our transparent privacy policy and practices. These data are housed in a complex, cloud-based data lake that allows us to manage the various rights and obligations for each dataset at a granular level, including patient-specific requests with regard to their data.
This database includes data generated in the performance of our clinical services to patients and clinicians, including Women’s Health and Oncology testing, as well as additional data that patients provide to us through their engagement with our patient portal and research programs. In addition, we participate in health information exchanges and public database programs, including through the National Institutes of Health. We also generate and collect data by collaborating with our research partners and provide sequencing and analysis services in connection with research programs. We further leverage the data rights provided by patients and secured through our strategic relationships, such as our oncology information partnership with VieCure that by the end of 2022 is expected to provide us with access to multiple cancer centers and data from all of their active cancer patients, with the number of newly diagnosed active cancer patients growing substantially each year. Additionally, we support health systems and other clinical service providers by applying our Centrellis tools to their clinical workflows and medical record databases, and we receive certain rights to work with anonymized datasets and to partner with the health systems in their ongoing clinical and research programs. We have provided such services extensively for Mount Sinai and are in the process of expanding this program with additional health systems, including Advent Health, Avera and NorthShore. For more information regarding our data arrangements with Mount Sinai, see “Certain Relationships and Related Party Transactions—Sema4”.
Our Established Diagnostics Solutions
Our existing diagnostics solutions business centers around Women’s Health and Oncology and our industry-leading diagnostic solutions are powered by Centrellis and delivered through a full-service model that efficiently integrates into provider workflows. Currently, we derive the majority of our revenue from these established diagnostic test solutions.
Our Elements Women’s Health Solutions
Our deep foundation in Women’s Health began before Sema4’s formation within Mount Sinai, where our lab—then called the “Mount Sinai Genetics Testing Lab”—pursued the goal of providing compassionate patient care to a highly diverse population while advancing science through education, research, and outreach. We pioneered accurate and precise pre-conception genetic screening, and we have continued to build upon that work, expanding our focus into a multi-generational and pan-ethnic view of the health of individual women and their families. Sema4
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Elements™, our portfolio of data-science driven products and services to support reproductive and generational health, highlights our continued focused effort to accelerate the expansion of genomic diagnostic solutions, secondary insights, platform solutions and enriching health system value to drive continued growth in our Women’s Health business, including by leveraging our state-of-the-art genomic infrastructure and Centrellis platform.
Carrier Screening: Deriving population-health insights from genomic data to differentiate our industry-leading tests
Our Expanded Carrier Screen, or ECS, test is one of the most comprehensive and accurate carrier screening tests available in the market, covering up to 502 genes. We provide a comprehensive solution to physician practices to enable them not only to deliver sophisticated differential insights and care management guidance in support of the clinician’s care plan for the patient, but to also do so with minimal impact on the practice’s operation, helping to ensure physician offices are not overwhelmed by the amount of information and follow up that can be necessitated by carrier screening.
Our ECS solution uses proprietary technology to identify a patient’s molecular ancestry on a genome-wide level for personalized residual risk assessments by analyzing patient-specific genealogical information that is critical to better understand a patient’s chance for passing on inherited disease. This technology has been designed to increase the accuracy of the residual risks reported to patients, in comparison to competing products that determine residual risk based on using self-reported ancestry information that does not reflect the population groups represented in the patient’s genome. Our solution also provides patients with personalized residual risk education, along with the option to view their molecular ancestry report in the Sema4 patient portal.
Our Non-invasive Prenatal Testing Solutions
Our Noninvasive Prenatal Testing is a comprehensive noninvasive prenatal test, that screens for autosomal and sex chromosome aneuploidies. Our advanced sequencing technology has been designed to provide reliable results down to approximately 2% fetal fraction, the amount of fetal cell-free DNA in the maternal blood sample, and has been designed to have a low failure rate, which helps reduce the need for redraws, limits unnecessary invasive procedures, and improves time to results.
Expansive development in prenatal screening allows our team to advance scientific efforts to deliver Genome Wide Screening and includes the ability to detect additional whole chromosome aneuploidies and copy number variations, or CNVs. We believe an updated bioinformatics pipeline will help to further reduce false positives. We expect to release new versions of our code in 2022, which we believe will help improve the positive predictive value for CNV calling through fetal fraction enrichment and CNV normalization through nucleosome positioning and fragment characteristics.
We are developing these future test versions to enable the detection of single gene disorders, such as cystic fibrosis and sickle cell disease. This testing may be used for at risk couples to screen a pregnancy for genomic analysis of a specific disorder or as a general screening tool with a panel of diseases. We believe these code enhancements will also facilitate validation of polyploidy, fetal zygosity and molar pregnancy detection, all of which are important aspects of screening pregnancies for chromosomal abnormalities and are not widely available through non-invasive testing.
Our Natalis Newborn Screening Solutions
Our Natalis test is an extension of our screening portfolio allowing for detection of heritable conditions from pre-conception, pregnancy and childhood. Newborn Screening, or NBS, detects heritable conditions that are amenable to medical management in newborns and young children. Natalis screens for 193 conditions where knowledge of the condition by the pediatrician may result in prescribing treatment with medications, dietary modifications, or other therapies to improve the baby’s health. All positives are confirmed using biochemical and molecular analysis. Natalis screens for up to five times as many conditions as the newborn screening programs run by certain state governments.
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Our Signal Precision Oncology Solutions
We believe that our Centrellis platform, combined with our comprehensive whole exome and whole transcriptome tumor profiling and hereditary cancer and pharmacogenomics genomic testing solutions, will make a meaningful difference in transforming cancer care. We have developed the “Sema4 Signal®” portfolio to be leveraged individually or as part of a holistic solution for precision oncology care. The Sema4 Signal portfolio features the integration of our germline and somatic tests with our informatics and data science tools, enabled by customized services to meet patient and provider needs to help drive more personalized care. The Sema4 Signal products include our oncology genomic test solutions, our molecular and clinical data curation and annotation capabilities to inform on the genomic information in the context of the patient’s previous and current medical records, and various software applications to enable engagement of these data and complex results to facilitate clinical decisions, research discoveries and drug development.
The Sema4 Signal Hereditary Cancer Solution
Our Sema4 Signal Hereditary Cancer solution determines if a patient carries an inherited genetic change that increases the risk of cancer or informs on cancer treatment. It is used to inform personalized medical management decisions to aid early detection and prevention of cancer, as well as to determine the most appropriate treatment approaches if cancer occurs, and strategies to reduce risk of additional cancers.
We offer one of the most comprehensive sets of panels on the U.S. market, and deliver this solution supported by the Traversa platform to enable us to adapt our panels as new discoveries on clinically actionable variants are made, so we can adapt at the rate of learning. Our solution includes tools to enable testing at the point of care or outside the office, including a digital family screening questionnaire to identify individuals who would benefit from testing, digital ordering via an EMR portal, video-based education, saliva procurement in the patient’s home, proactive billing investigation, pre-and post-test genetic counselling and family outreach to enable cascade testing.
Our Hereditary Cancer Solution is a unique product in our portfolio in that it is sold in connection with our Initial Public OfferingOncology, Women's Health and population health solutions. For affected cancer patients, integrating hereditary cancer with our Sema4 Signal Whole Exome and Transcriptome and our informatics offerings, which incorporating real world evidence, integrates available data needed to better personalized clinical care decisions. For unaffected patients, our Sema4 Signal Hereditary Cancer solution is incorporated into both our Women’s Health and Population Health products and services to support early identification and treatment of cancer risk.
Our Signal Whole Exome and Transcriptome Solution
We believe our Sema4 Signal Whole Exome and Transcriptome solution is one of the most comprehensive molecular profiling solutions from a commercial entity to receive New York State approval. Our profiling platform integrates tumor-normal matched whole exome sequencing, or “WES”, with whole transcriptome sequencing, or WTS, to deliver clinically actionable information about somatic and germline alterations in accordancesolid tumors and hematologic malignancies. This solution provides for access to a holistic view of a patient’s genome and insights into novel fusions, splice variants, and molecular pathways. It also provides for germline findings for cancer and non-cancer genes, as per American College of Medical Genetics guidelines, with relevance to comorbidities, such as familial hypercholesterolemia, and certain drug interactions.
We deliver the WES/WTS solution using a number of proprietary tools housed in Centrellis, including our cancer knowledge-base, which contains comprehensive structured data and learnings on clinically relevant variants, including curated maps that link relevant clinical trials to variants that serve as eligibility biomarkers for the trials, as annotated by Ph.D. oncology experts. Our variant interpretation station for oncology automates clinical reporting by managing the variant curation process and recommending suitable therapies. This AI-driven genomic platform is updated regularly with recent medical literature and prioritizes clinically-significant variants, enabling providers to quickly review and leverage actionable insights.
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Sema4 Signal Informatics Solutions
To complement the genomics diagnostic solutions, the Sema4 Signal products leverage Centrellis’s provider engagement technologies, described above, including to automatically abstract, annotate, and combine oncology specific datasets, including clinical medical record data, imaging, and genomics. This clinical-genomic data set is provided back to health systems and providers and is powered by our digital applications to drive better personalized care for patients, including clinical trial recruitment, improved system-wide quality of care and increased financial and research activity.
Regulatory and Payer Relations Strategy
We have developed and are advancing our strategy to drive increased reimbursement and higher average selling prices, or ASPs, for our Sema4 Signal Oncology solutions. As part of this strategy, we will take advantage of a Medicare Administrative Contractor (MAC), National Government Services (NGS), update to a Local Coverage Decision (LCD) titled Genomic Sequence Analysis Panels in the Treatment of Solid Organ Neoplasms under which qualifying CGP tests are covered for patients insured by Medicare, who are living with advanced cancer and meet other clinical criteria.
In addition, we are expanding our presence in select markets where Palmetto GBA is the MAC and the MolDx program they administer provides opportunities to apply for coverage under existing or future LCDs. Specifically, we have, or intend to, submit Technical Assessments for coverage and reimbursement of WES/WTS and other tumor profiling solutions based on existing MolDx LCDs.
Beyond the testing, we are exploring the regulatory and market access landscape as it relates to the governance and reimbursement of real-world evidence and AI driven clinical decision-making tools. As we demonstrate the clinical utility of information driven solutions, these emerging areas will become relevant.
Our COVID-19 Testing Initiative
In response to the outbreak of the worldwide COVID-19 pandemic, in the first quarter of 2020, we rapidly leveraged our existing technologies and infrastructure capabilities, supplemented by a requisite set of technologies and services, to offer a comprehensive COVID-19 diagnostic testing service for our customers. However, on December 15, 2021, we announced that we decided to discontinue COVID-19 testing services by March 31, 2022 and began notifying our COVID-19 testing solutions customers of this decision. Nationwide and regional lab capacity for COVID-19 testing has increased since we entered the market for COVID-19 testing in the first half of 2020. Management believes it is the appropriate time to discontinue this line of services and dedicate all of our efforts and resources to our core mission to transform healthcare by using artificial intelligence to enable the delivery of precision medicine as the standard of care.
Our Solution for Health Systems and Providers
Our origins within a large academic medical center helped us establish our integrated health system collaboration model, where we seek to integrate our platform across numerous health system workflows to enable precision medicine solutions using Centrellis, from Women’s Health, to Oncology, to patient wellness. Our provider and health system engagement offerings include patient and provider portals, facilitating scheduling of patient appointments, patient consenting, pre-test and post-test genetic counseling, results delivery and patient record management, among other tools and applications that are designed to allow physicians to better engage contextualized information around their patients to improve decision making.
Our Health System Engagement Model
We believe we have developed a compelling value proposition for our initial health system partners, with distinguishing features including our focus on serving local community populations, our track-record of delivering digital or technology-enabled standards of care, and our investment in precision medicine and adoption of genomic diagnostic solutions, with our desire to have predictive insights permeate all service lines and the general patient
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experience in their system. In addition to our deep relationship with Mount Sinai, we have contracted to deploy Centrellis in additional health systems, which we expect will expand our impact and reach.
We have refined a health system engagement model designed to maximize both our and our partner health system’s value from the relationship. We balance clinical-grade and research-based projects in order to deliver value in an economically sustainable manner and establish health and economic performance metrics that form the basis of quarterly steering committee reviews with the guidance containedprogram’s executive sponsors. Our model focuses on:
•Embedding our genomic analyses as a standard of care for Women’s Health, Oncology and/or specific diseases, which includes our full-service model including patient and provider education, patient engagement, genetic counseling and integration with the health systems’ clinical workflow and EMR,
•Enhancing existing health system data sets by leveraging our data curation capabilities for both structured and unstructured data to identify clinical utility that can be used by health system providers, researchers and administration,
•Developing software applications to facilitate deeper engagement of the enhanced health system data we produce, such as reconstructing and visualizing patient health journeys, identifying patient cohorts based on any number of filter criteria, and characterizing outcomes of patients in ASC 815-40-15-7D under whichresponse to different treatments prescribed,
•Establishing population health programs where health system patients are invited to broad population genetic screening, and
•Developing mutually beneficial research collaboration programs that leverage the Warrants dostrengths of our and our health system partners.
Our Solutions Create Mutually Beneficially Value for Us and Our Health System Partners
We pursue strategic relationships with health systems that evaluate financial returns on a holistic basis. We evaluate success on a long-term basis and recognize that the primary aim of every health system is to provide superior patient care with improved health economics. As such, we continue to use the proceeds from our July 2021 business combination and related private placement financing (which we refer to as the “Prior PIPE Investment”) to accelerate growth in our health system relationships by further investing in research-oriented projects, as well as data curation, platform integrations, and building standards of care to operationalize our testing programs. Starting with Mount Sinai and extending throughout our network, we intend to cross-validate and scale our technologies across health systems, as we seek to enable patients by leveraging data and tools across systems and patient populations in a network model so each partner can benefit from what is being learned across the healthcare ecosystem.
We Act as a Broker and Catalyst for Commercial Engagement Between Health System and Biopharma Companies
While health systems and Biopharma companies have an established ability to collaborate effectively and will continue to partner directly, we believe that our network in both segments of the healthcare ecosystem and ability to add value to these relationships through data engineering makes us well-positioned as a valued collaborator for both types of organizations. Biopharma collaborations are often not meet the focus for health systems, as they have high start-up costs to develop relationships that extend to patient care. We can support our health system partners by working more collaboratively with them to understand their capabilities and how those capabilities are complemented by our enhancement of a health systems’ data assets and clinical-genomic data generation capabilities, and by facilitating solutions that can be provided jointly to Biopharma companies.
Our Biopharma Solutions Engage and Enable Our Partners
We have established and continue to seek strategic relationships with Biopharma companies to enable drug discovery, development, and commercialization. We have demonstrated the ability to integrate across the pharmaceutical life cycle as a result of the unique data and patient and provider engagements developed in our
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health system relationships and information-driven diagnostics solutions, combined with our powerful analytics capabilities and software solutions.
The Biopharma industry has become increasingly competitive as it moves toward the more precise targeting of patients in crowded disease segments, and we believe this trend positions us as a key partner for Biopharma companies to build a competitive advantage by unlocking the power of big data and enabling next generation precision medicine.
We Strive for Interconnected Strategic Relationships
We serve our Biopharma customers through a unique combination of clinical testing services, clinical and research study design and execution, and advanced data and analytics capabilities.
Our competitive advantage in this space comes from leveraging comprehensive data generated via testing, integrating these deep molecular profiles with clinical patient information, and representing this comprehensive patient data in the Centrellis platform. This enables us to create direct and real time integration of clinical and genetic data with providers connected to drug discovery research, real world evidence studies, and other therapy development opportunities. We are also able to utilize our solutions and unique data assets to enroll patients into clinical trials and to connect Biopharma partners to patient populations matching eligibility criteria for equity treatmenttheir trials, to facilitate patients receiving novel therapies still under development, and must be recorded as liabilities. Accordingly,to perform broad genomic and transcriptomic sequencing on health system partner sample banks in collaboration with Biopharma partners.
In our engagement with Biopharma customers, we classifyare focused on a range of disease conditions, including oncology, autoimmune and inflammatory disorders, and rare diseases. Our disease-agnostic approach provides us with the Warrants as liabilities atflexibility to support our Biopharma partners across varied therapeutic areas. We continue to work with our Biopharma partners to identify their fair valuespecific needs and adjustbroaden the Warrantsscope of our disease coverage accordingly.
We believe that, because of our core capabilities and differentiated approach, we are well-positioned to fair value at each reporting period. This liability is subjectsupport next-generation drug discovery, development, and commercialization. We further believe our ability to re-measurement at each balance sheet date until exercised,generate deep, clinical-grade multi-omic datasets renders us a valuable genomic testing solution provider for precision medicine Biopharma products. Through direct engagement of providers and any changepatients, we assist Biopharma partners in fair value is recognizeda patient-centric approach to research and clinical development. By obtaining and curating high-dimensional data in our statementCentrellis platform, we deliver novel insights that help to de-risk the development of operations. The fairnext generation therapeutics, provide for pharmacologic proof of concept via the integration of genomic and clinical data support, reduce development costs, enhance the patient experience, and increase speed to market.
Sema4’s Solutions for BioPharma Customers
We engage with our Biopharma customers to develop and deliver unique goods and services for the particular issues that each customer faces. We believe that our Biopharma partners can realize significant value when collaborating with our team to utilize a more integrated, end-to-end solution that leverages our core set of capabilities, including longitudinal patient data, AI-driven predictive modeling, and genomics. We have demonstrated the ability to develop these deep, integrated strategic relationships with Biopharma companies. For example, our five-year collaborative study with Sanofi S.A., or Sanofi, is centered on discovery of new insights into the biological mechanisms and other factors implicated in asthma to help drive Sanofi’s next generation of asthma targets as well as to enhance Sanofi’s understanding of the Warrants issuedrelevant populations for both its current and in-development therapies and the therapies marketed by others. This asthma study is currently recruiting nearly 1,200 patients, and involves comprehensive clinical characterization of patients and controls, longitudinal monitoring of patient conditions through various applications and devices, collection of biological samples for molecular profiling and generation and integration of DNA and RNA sequencing data with clinical and device acquired data. The study is also leveraging the integrated, longitudinal data to construct models of asthma to stratify patients into subtypes, and seeking to better understand treatments relevant to different subtypes or where there is unmet need for further drug discovery efforts. Along with Sanofi, we will collect traditional clinical data, genomics, immunological, environmental, and sensor data from mobile devices to enable sophisticated analyses and to include advanced causal network modeling.
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In general, our Biopharma strategy focuses on three main offering areas:
•Genomic Testing and Analysis Solutions: We serve as a comprehensive clinical testing lab, offering a broad menu of molecular, cytogenic and biochemical testing services for our Biopharma partners. Our technology development group enables us to apply innovative profiling technologies such as long-read, single-cell and spatial molecular profiling approaches to help address our Biopharma partners’ challenges. The data generated by these capabilities, when combined with our analytics services, can produce insights that inform on disease biology, improve and accelerate the drug development process, and help ensure that patients can be made aware of relevant treatment options.
•Data and Analytics Solutions: Centrellis enables us to provide our Biopharma partners with unique, data-driven insights that can help to accelerate the development of precision medicines, utilizing HIPAA-compliant, de-identified datasets. Using advanced analytics and causal network modeling, we work with partners to organize high-dimensional data in ways that facilitate the IPOidentification of statistically-inferred causal relationships that enable the identification, validation and prioritization of biomarkers and targets; identify molecular subtypes of disease; and predict patient disease progression, prognosis, drug response, adverse events, and other clinical outcomes. We believe that one of our particular strengths is our data science team, which is comprised of experts published in leading scientific journals. We work with collaborators, researchers, and key opinion leaders to build new models of disease and deliver insights to Biopharma partners that can further optimize their operations.
•Clinical Trial Enablement Solutions: We believe that Centrellis, combined with our active, direct engagement of patients and providers in our Women’s Health and, by extension, rare disorders, Oncology, and population health solutions, positions us well to assist Biopharma partners in their clinical development activities. We have developed a number of software as a service, or SaaS, products to enable Biopharma clinical development, including a clinical trial patient matching product and a clinical trial design product that work with our longitudinal clinic-genomic dataset. Given our patient consent structure, we have the ability to re-contact patients who may benefit from a Biopharma sponsor’s trial. We have developed novel, technology-enabled workflows and solutions that allow us to search for and identify relevant patients in a manner that fully maintains patient confidentiality, and work with providers to assess and enroll these patients in clinical trials. The breadth of search and precision of this method of patient recruitment can substantially improve trial timelines versus traditional recruitment methods. We also assist prominent Biopharma partners seeking to use high-quality genomic analysis to assess patient eligibility for clinical trials. We believe our clinical testing services and data solutions make us a key partner for supporting efficient clinical trials.
Research and Development
We have invested a substantial amount of time and expense into research and development for our technology and test offerings, which requires the continuous improvement of software capabilities to analyze data and process customer orders. Our research and development efforts focus on several key areas, including multiscale biotechnology, assay development across sequencing technologies, data science and engineering, and the development of network-based models. We expect our research and development activities to increase as we innovate and expand the application of our current and future platforms including Traversa and Centrellis.
Our internationally recognized research team includes leaders in data science, network modeling, multiscale biotechnology and genomics. As noted above, our CEO, Eric Schadt, is a world-renowned expert on constructing predictive models of disease that link molecular biology to physiology to enable clinical medicine. He has been estimated usingpublished more than 450 peer-reviewed papers in leading scientific journals, with a Monte Carlo simulation methodologypublic citation or “h-” index of 137, and has contributed to discoveries relating to the genetic basis of common human diseases such as cancer, diabetes, obesity, and Alzheimer’s disease. Under the leadership of the date of the IPOour CEO, our research team comprises more than 160 Ph.D.-level scientists, complemented by additional physician scientists and such Warrants’ quoted market pricecertified technicians as of December 31, 2020. The Private Placement Warrants were valued using a Modified Black Scholes Option Pricing Model.2021. Ongoing collaborations with scientists and clinicians at the Mount Sinai and other healthcare systems allows our research to remain patient-centered and clinically relevant.
Class A Common Stock Subject to Possible Redemption
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Intellectual Property
We accounthave intellectual property rights pertaining to all elements of our platforms and solutions. Our success and ability to compete depend in part on securing and preserving enforceable patent, trade secret, trademark and other intellectual property rights; operating without having competitors infringe, misappropriate or otherwise circumvent these rights; operating without infringing the proprietary rights of others; and obtaining and maintaining licenses for technology development or product commercialization.
Patents
The fields of genomic and health information analysis present limited opportunities for patent protection, based on well-known legal precedents. As result, our patent protection strategy is to protect our non-gene specific technology and our specific biomarkers. In this regard, as of December 31, 2021, we have four pending utility patent applications and one provisional patent application. The pending utility patent applications include a U.S. patent application related to a genome annotation software platform for annotating genomic intervals that are clinically relevant for analysis, a U.S. patent application related to a genetic carrier screening process, and U.S. and European patent applications related to therapeutic treatment for subjects having certain polymorphic markers associated with specific human leukocyte antigen alleles. If patents are issued from the currently pending applications, the earliest patents will begin expiring in 2040, subject to potential extensions of the patent term that will be calculated based on the length of the patent examination process.
Trade Secrets
We have a trade secrecy program to prevent disclosure of our trade secrets to others, except under stringent conditions of confidentiality when disclosure is critical to our business. We protect trade secrets and know-how by establishing confidentiality agreements and invention assignment agreements with our employees, consultants, scientific advisors, contractors, and collaborators. These agreements provide that all confidential information developed or made known during the course of an individual or entities’ relationship with us must be kept confidential during and after the relationship. These agreements also provide that all inventions resulting from work performed for us or relating to our business and conceived or completed during the period of employment or assignment, as applicable, will be our exclusive property. In addition, we take other appropriate precautions, such as physical and technological security measures, to guard against misappropriation of our proprietary information by third parties.
Although we take steps to protect our proprietary information and trade secrets, including through contractual means with our employees and consultants, third parties may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or disclose our technology. Accordingly, we may not be able to meaningfully protect our trade secrets. For more information regarding the risks related to our intellectual property, see the section entitled “Risk Factors—Risks Related to Our Intellectual Property and Trade Secrets.”
Trademarks
We own various trademarks, applications and unregistered trademarks in the U.S and other commercially important markets, including our company name, product and service names and other trade or service marks. Our trademark portfolio is designed to protect the brands for our Class A common stockproducts and services, both current and in the pipeline.
Regulation
Reimbursement
Patients who have diagnostic tests ordered or are prescribed treatments by providers performing the prescribed services, generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Sales of our products and services will therefore depend substantially on the extent to which the costs of our products and services will be paid by third-party payors, including health maintenance, managed care and similar healthcare
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management organizations, or reimbursed by government health administration authorities, such as Medicare and Medicaid and private health insurers.
In the United States, our ability to commercialize and the commercial success of our product and service offerings will depend in part on the extent to which governmental payor programs at the federal and state levels, including Medicare and Medicaid, private health insurers and other third-party payors provide coverage for and establish adequate reimbursement levels for these offerings. Government authorities, private health insurers and other organizations generally decide which devices they will pay for and establish reimbursement levels for healthcare. Medicare is a federally funded program for the elderly and disabled managed by Centers for Medicare & Medicaid Services, or CMS, through local contractors that administer coverage and reimbursement for certain healthcare items and services. Medicaid is an insurance program for certain categories of patients whose income and assets fall below state defined levels, and is funded jointly by federal and state governments and managed by each state. Similarly, the federal government manages other healthcare programs, including the Veterans Health Administration, the Indian Health Service, and Tricare, the healthcare program for military personnel, retirees, and related beneficiaries. Many states have also created pharmacy assistance programs for individuals who do not qualify for federal programs. In the U.S., private health insurers and other third-party payors often provide reimbursement for products and services based in part on the coverage and payment rates set by the Medicare or Medicaid programs.
Federal programs in the U.S. also sometimes impose price controls through mandatory ceiling prices on purchases by federal agencies and federally funded hospitals and clinics and mandatory rebates on retail pharmacy prescriptions paid by Medicaid and Tricare. These restrictions and limitations influence the purchase of healthcare services and products. Legislative proposals to reform healthcare or reduce costs under government programs may result in lower reimbursement for our products and services or exclusion of our products and services from coverage. In addition, government programs like Medicaid include what are in effect substantial penalties for increasing commercial prices of certain products over the rate of inflation which can affect realization and return on investment.
Increasing efforts by governmental and third-party payors to cap or reduce healthcare costs may cause such organizations to limit both coverage and level of reimbursement for newly approved healthcare products. At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological program pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
As a result of the above trends, we may need to conduct expensive studies in order to demonstrate the medical necessity and cost effectiveness of our products and services, in addition to the costs required to obtain FDA approvals. Our products and services may not be considered medically necessary or cost effective, or the discount percentages required to secure coverage may not yield an adequate margin over cost.
Many hospitals implement a controlled and defined process for covering and approving diagnostic tests and medical devices. Any marketing efforts that are determined to have violated such policies could result in the denial or removal of our products from that hospital’s list of approved products.
Moreover, a payor’s decision to provide coverage for a diagnostic product does not imply that an adequate reimbursement rate will be approved. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in device development. Legislative proposals to reform healthcare or reduce costs under government insurance programs may result in lower reimbursement for our products and services or exclusion of our products and services from coverage. The cost containment measures that healthcare payor and providers are instituting and any healthcare reform could significantly reduce our revenue from the sale of any approved products and services. We cannot provide any assurances that we will be able to obtain and maintain third-party coverage or adequate reimbursement for our products and services in whole or in part.
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In addition, amendments to the False Claims Act impose severe penalties for the knowing and improper retention of overpayments collected from governmental payors. Within 60 days of identifying and quantifying an overpayment, a provider is required to notify CMS or the Medicare contractor of the overpayment and the reason for it and return the overpayment. These amendments could subject our procedures for identifying and processing payments to greater scrutiny. Overpayments may occur from time to time in the healthcare industry without any fraudulent intent. For example, overpayments may result from mistakes in reimbursement claim forms or from improper processing by governmental payor. We maintain protocols intended to identify any overpayments. From time to time, we may identify overpayments and be required to refund those amounts to governmental payors.
Clinical Laboratory Improvement Act
Our clinical reference laboratories in Connecticut are required to hold certain federal certificates to conduct our business. Under the Clinical Laboratory Improvement Act of 1988, or CLIA, we are required to hold a certificate applicable to the type of laboratory examinations we perform and to comply with standards covering personnel, facilities administration, inspections, quality control, quality assurance and proficiency testing.
As of December 31, 2021, we have a current certificate under CLIA to perform testing at our laboratory locations in Stamford and Branford, Connecticut. To renew this CLIA certificate, we are subject to possible redemption in accordancesurvey and inspection every two years to assess compliance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Class A Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our common stock features certain redemption rights that are considered to be outsideprogram standards. Moreover, CLIA inspectors may make random inspections of our controlclinical reference laboratories. The regulatory and subjectcompliance standards applicable to occurrence of uncertain future events. Accordingly, Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of our balance sheet.
Net Income (Loss) Per Common Share
We apply the two-class method in calculating earnings per share. Net income per common share, basictesting we perform may change over time, and diluted for Class A redeemable common stock is calculated by dividing the interest income earned on the Trust Account, net of applicable franchise and income taxes, by the weighted average number of Class A redeemable common stock outstanding for the period. Net loss per common share, basic and diluted for Class B non-redeemable common stock is calculated by dividing the net income, less income attributable to Class A redeemable common stock, by the weighted average number of Class B non-redeemable common stock outstanding for the period presented.
Recent Accounting Standards
Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, wouldsuch changes could have a material effect on our financial statements.business.
Off-Balance Sheet Financing ArrangementsIf our clinical reference laboratory is out of compliance with CLIA requirements, we may be subject to sanctions such as suspension, limitation or revocation of our CLIA certificate, as well as directed plan of correction, state on-site monitoring, civil money penalties, civil injunctive suit or criminal penalties. We must maintain CLIA compliance and certification to be eligible to bill for diagnostic services provided to Medicare and Medicaid beneficiaries. If we were to be found out of compliance with CLIA requirements and subjected to sanction, our business could be harmed.
State Laboratory Testing
We have no obligations, assetsare is required to maintain a license to conduct testing in Connecticut. Connecticut laws establish standards for day-to-day operations of our laboratories in Stamford and Branford, Connecticut. If our clinical reference laboratories are out of compliance with Connecticut standards, the Connecticut Department of Health Services, or liabilities,CDHS, may suspend, restrict or revoke our license to operate our clinical reference laboratories, assess substantial civil money penalties, or impose specific corrective action plans. Any such actions could materially affect our business. As of December 31, 2021, we maintain a current license in good standing with CDHS. However, we cannot provide assurance that CDHS will at all times in the future find us to be in compliance with all such laws.
Several states require the licensure of out-of-state laboratories that accept specimens from those states. For example, New York requires a laboratory to hold a permit which wouldis issued after an on-site inspection and approval of testing methodology and has various requirements over and above CLIA and the College of American Pathologists, or CAP, Laboratory Accreditation Program, including those for personnel qualifications, proficiency testing, physical facility, equipment, and quality control standards. Our laboratory holds the required licenses for California, New York, Maryland, Pennsylvania, and Rhode Island.
Each of our clinical reference laboratories in Connecticut is required to be considered off-balance sheet arrangements as of March 31, 2021. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We will qualifylicensed on a test-specific basis by New York State as an “emerging growth company”out of state laboratory and underour products, as laboratory-developed tests, or LDTs, must be approved by the JOBS Act will be allowed to comply with newNew York State Department of Health, or revised accounting pronouncements basedNYDOH, before they are performed on the effective datesamples from New York. Each Sema4 laboratory is licensed by New York, and we are currently approved for private (not publicly traded) companies.testing samples from New York. We are electingsubject to periodic inspection by the NYDOH and we are required to demonstrate ongoing compliance with NYDOH regulations and standards.
Other states may adopt similar licensure requirements in the future, which may require us to modify, delay the adoption ofor stop our operations in such jurisdictions. Complying with licensure requirements in new or revised accounting standards,jurisdictions may be expensive, time-consuming, and as a result,subject us to significant and unanticipated delays. If we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.identify any other state
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Additionally,with such requirements, or if we are contacted by any other state advising us of such requirements, we intend to follow instructions from the state regulators as to how we should comply with such requirements.
Food and Drug Administration
Laboratory Developed Tests
We provide our tests as LDTs. CMS and certain state agencies regulate the performance of LDTs (as authorized by CLIA and state law, respectively). Historically, the FDA, has exercised enforcement discretion with respect to most LDTs and has not required laboratories that furnish LDTs to comply with the agency's requirements for medical devices (e.g., establishment registration, device listing, quality systems regulations, premarket clearance or premarket approval, and post-market controls). Nevertheless, the FDA may decide to regulate certain LDTs on a case-by-case basis at any time.
Legislative proposals addressing the FDA's oversight of LDTs have been introduced in previous Congresses, and we expect that new legislative proposals will be introduced from time-to-time. The likelihood that Congress will pass such legislation and the extent to which such legislation may affect the FDA's plans to regulate certain LDTs as medical devices is difficult to predict at this time.
If the FDA ultimately regulates certain LDTs as medical devices, whether via final guidance, final regulation, or as instructed by Congress, our tests may be subject to certain additional regulatory requirements. Complying with the FDA's requirements for medical devices can be expensive, time-consuming, and subject us to significant or unanticipated delays. Insofar as we may be required to obtain premarket clearance or approval to perform or continue performing an LDT, we cannot assure you that we will be able to obtain such authorization. Even if we obtain regulatory clearance or approval where required, such authorization may not be for the intended uses that we believe are commercially attractive or are critical to the commercial success of our tests. As a result, the application of the FDA's medical device requirements to our tests could materially and adversely affect our business, financial condition, and results of operations.
Failure to comply with applicable FDA regulatory requirements may trigger a range of enforcement actions by the FDA including warning letters, civil monetary penalties, injunctions, criminal prosecution, recall or seizure, operating restrictions, partial suspension or total shutdown of operations, and denial of or challenges to applications for clearance or approval, as well as significant adverse publicity.
Pre-Market Approval
We may obtain FDA premarket approval, or PMA, for some of our tests including its matched whole exome sequencing, or WES, and whole transcriptome sequencing, or WTS, tests. Devices subject to FDA regulation must undergo premarket review prior to commercialization unless the device is exempt from such review, and we expect that we will be required to perform non-inferiority studies showing comparable results between the Sema4 Signal WES/WTS LDT and third party, FDA-approved tests with regard to certain therapeutic drugs prescribed to ovarian cancer patients, colorectal cancer patients, and non-small cell lung cancer patients. We are currently evaluating an updated pre-submission letter to the FDA with regard to the studies necessary for ovarian cancer and is working to secure access to the subjects necessary to perform this study. With regard to the studies necessary for colorectal cancer patients and non-small cell lung cancer patients, we submitted our pre-submission package and held a pre-submission meeting with the FDA in 2020, and are working to secure access to the subjects necessary to perform this study. Further, the regulations governing the approvals place substantial restrictions on how the tests will be marketed and sold, specifically, by prescription only. In addition, as a condition of Sema4’s FDA approval, we may be required to conduct post-approval studies.
Additionally, manufacturers of medical devices must comply with various regulatory requirements under the Food, Drug, and Cosmetic Act, or FDCA, and regulations thereunder, including, but not limited to, quality system regulations, unless they are exempt, facility registration, product listing, labeling requirements, and certain post-market surveillance requirements. Entities that fail to comply with FDA requirements can be liable for criminal or civil penalties, such as recalls, detentions, orders to cease manufacturing, and restrictions on labeling and promotion, among other potential sanctions.
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We may develop new diagnostic products and services that are regulated by the FDA as medical devices. The regulatory review and approval process for medical devices can be costly, timely, and uncertain. This process may involve, among other things, successfully completing additional clinical trials and submitting a premarket clearance notice or filing a premarket approval application with the FDA. If premarket review is required by the FDA, there can be no assurance that our tests will be cleared or approved on a timely basis, if at all. In addition, there can be no assurance that the labeling claims cleared or approved by the FDA will be consistent with our current claims or adequate to support continued adoption of and reimbursement for our products. Ongoing compliance with FDA regulations could increase the cost of conducting our business, subject us to FDA inspections and other regulatory actions, and potentially subject us to penalties in the processevent we fail to comply with such requirements.
HIPAA and HITECH
Under the administrative simplification provisions of evaluating the benefitsHealth Insurance Portability and Accountability Act of relying1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, the U.S. Department of Health and Human Services issued regulations that establish uniform standards governing the conduct of certain electronic healthcare transactions and protecting the privacy and security of protected health information used or disclosed by most healthcare providers and other covered entities and their business associates, including the business associates' subcontractors. We perform activities that may implicate HIPAA, such as providing clinical laboratory testing services and entering into specific kinds of relationships with covered entities and business associates of covered entities. As a covered entity and as a business associate of other covered entities (with whom we have entered into business associate agreements), we are required to comply with the four principal regulations with which have been issued in final form under HIPAA and HITECH: privacy regulations, security regulations, the breach notification rule, and standards for electronic transactions, which establish standards for common healthcare transactions.
The HITRUST CSF was developed to address the multitude of security, privacy, and regulatory challenges facing organizations. By including federal and state regulations, standards, frameworks, and incorporating a risk-based approach, the HITRUST CSF helps organizations address these challenges through a comprehensive and flexible framework of prescriptive and scalable security and privacy controls. The HITRUST CSF Includes, harmonizes, and cross-references existing, globally recognized standards, regulations, and business requirements, including ISO, EU GDPR, NIST, and PCI. On December 10, 2021, we met the HITRUST Assurance Program requirements for the CSF v9.4 Risk-based, 2-year (r2) certification criteria for our Centrellis Platform, for hosting and curating Patient data.
The privacy regulations cover the use and disclosure of protected health information by covered entities as well as business associates, which are defined to include subcontractors that create, receive, maintain, or transmit protected health information on behalf of a business associate. They also set forth certain rights that an individual has with respect to his or her protected health information maintained by a covered entity, including the right to access or amend certain records containing protected health information, or to request restrictions on the use or disclosure of protected health information. The security regulations establish requirements for safeguarding the confidentiality, integrity, and availability of protected health information that is electronically transmitted or electronically stored. HITECH, among other reduced reporting requirements provided bythings, established certain health information security breach notification requirements. A covered entity must notify any individual whose protected health information is breached according to the JOBS Act. Subject to certain conditionsspecifications set forth in the JOBSbreach notification rule. The HIPAA privacy and security regulations establish a uniform federal "floor" and do not supersede state laws that are more stringent or provide individuals with greater rights with respect to the privacy or security of, and access to, their records containing protected health information or insofar as such state laws apply to personal information that is broader in scope than protected health information as defined under HIPAA. Massachusetts, for example, has a state law that protects the privacy and security of personal information of Massachusetts residents.
There are significant civil and criminal fines and other penalties that may be imposed for violating HIPAA. A covered entity or business associate is also liable for civil money penalties for a violation that is based on an act or omission of any of its agents, including a downstream business associate, as determined according to the federal common law of agency. Additionally, to the extent that we submit electronic healthcare claims and payment
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transactions that do not comply with the electronic data transmission standards established under HIPAA and HITECH, payments to us may be delayed or denied.
Federal and State Fraud and Abuse Laws
In the U.S., there are various fraud and abuse laws with which we must comply, and we are potentially subject to regulation by various federal, state and local authorities, including CMS, other divisions of the U.S. Department of Health and Human Services including the Office of Inspector General, the U.S. Department of Justice, and individual U.S. Attorney offices within the Department of Justice, and state and local governments.
In the U.S., the federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, overtly, covertly, in cash or in kind to induce or in return for the furnishing, arranging for the furnishing of, purchasing, leasing, ordering or arranging for or recommending purchasing, leasing or ordering of any good, facility, service or item for which payment may be made in whole or in part by a federal healthcare program. Courts have stated that a financial arrangement may violate the Anti-Kickback Statute if any one purpose of the arrangement is to encourage patient referrals or other federal healthcare program business, regardless of whether there are other legitimate purposes for the arrangement. The definition of "remuneration" has been broadly interpreted to include anything of value, including gifts, discounts, credit arrangements, payments of cash, consulting fees, waivers of co-payments, ownership interests, and providing anything at less than its fair market value.
Although the Anti-Kickback Statute contains several exceptions, it is broad and may technically prohibit many innocuous or beneficial arrangements within the healthcare industry. Further, the U.S. Department of Health and Human Services issued a series of regulatory "safe harbors." These safe harbor regulations set forth certain provisions, which, if met, will assure healthcare providers and other parties that they will not be prosecuted under the federal Anti-Kickback Statute. Although full compliance with the statutory exceptions or regulatory safe harbors ensures against prosecution under the federal Anti-Kickback Statute, the failure of a transaction or arrangement to fit within a specific statutory exception or regulatory safe harbor does not necessarily mean that the transaction or arrangement is illegal or that prosecution under the federal Anti-Kickback Statute will be pursued. Penalties for federal anti-kickback violations are severe, and include imprisonment, criminal fines, civil money penalties, and exclusion from participation in federal healthcare programs. Many states also have anti-kickback statutes, some of which may apply to items or services reimbursed by any third-party payor, including commercial insurers.
There are also federal laws related to healthcare fraud and false statements, among others, relating to healthcare matters. The healthcare fraud statute prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private payors. A violation of this statute is a felony and may result in fines, imprisonment, or exclusion from governmental payor programs such as the Medicare and Medicaid programs. The false statements statute prohibits knowingly and willfully falsifying, concealing, or covering up a material fact, or making any materially false, fictitious, or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items, or services. A violation of this statute is a felony and may result in fines, imprisonment, or exclusion from governmental payor programs.
Another development affecting the healthcare industry is the increased enforcement of the federal False Claims Act and, in particular, actions brought pursuant to the False Claims Act's "whistleblower" or "qui tam" provisions. The False Claims Act imposes liability on any person or entity that, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment by a federal governmental payor program. The qui tam provisions of the False Claims Act allow a private individual to bring actions on behalf of the federal government alleging that the defendant has defrauded the federal government by submitting a false claim to the federal government and permit such individuals to share in any amounts paid by the entity to the government in fines or settlement. When an entity is determined to have violated the False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties ranging from $5,500 to $11,000 for each false claim.
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In addition, various states have enacted false claim laws analogous to the federal False Claims Act, although many of these state laws apply where a claim is submitted to any third-party payor and not merely a governmental payor program.
Additionally, the civil monetary penalties statute imposes penalties against any person or entity that, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or for a claim that is false or fraudulent. This law also prohibits the offering or transfer of remuneration to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary's selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state healthcare program, unless an exception applies.
On October 25, 2018, the Substance Use-Disorder Prevention that Promoted Opioid Recovery and Treatment for Patients and Communities Act of 2018, or the SUPPORT Act, was enacted. The SUPPORT Act included the Eliminating Kickbacks in Recovery Act of 2018, or EKRA, which establishes an all-payor anti-kickback prohibition that extends to arrangements with recovery homes, clinical laboratories and clinical treatment facilities. EKRA includes a number of statutory exceptions, and directs agencies to develop further exceptions. Current exceptions in some cases reference and in others differ from the Anti-Kickback Statute safe harbors. Significantly, the prohibitions apply with respect to the soliciting or receipt of remuneration for any referrals to recovery homes, clinical treatment facilities, or clinical laboratories, whether or not related to treating substance use disorders. Further, the prohibitions cover the payment or offer of remuneration to induce a referral to, or in exchange for, an individual using the services of, such providers. This law creates additional risk that relationships with referral sources could be problematic.
Physician Referral Prohibitions
Under a federal law directed at "self-referral," commonly known as the "Stark Law," there are prohibitions, with certain exceptions, on referrals for certain designated health services, including laboratory services, that are covered by the Medicare program by physicians who personally, or through an “emerging growth company,” we chooseimmediate family member, have a financial relationship with the entity to rely onwhich the referrals for designated health services are made. The prohibition also extends to payment for any testing referred in violation of the Stark Law. A person who engages in a scheme to circumvent the Stark Law's referral prohibition may be fined up to $100,000 for each such exemptions wearrangement or scheme. In addition, any person who presents or causes to be presented a claim to the Medicare program in violation of the Stark Law is subject to civil monetary penalties of up to $15,000 per service, an assessment of up to three times the amount claimed and possible exclusion from participation in federal healthcare programs. In addition, any person who presents or causes to be presented a claim to the Medicare program in violation of the Stark Law is subject to civil monetary penalties of up to $15,000 per service, an assessment of up to three times the amount claimed, and possible exclusion from participation in federal or state health care programs. Bills submitted in violation of the Stark Law may not be requiredpaid by Medicare, and any person collecting any amounts with respect to any such prohibited bill is obligated to refund such amounts. Many states have comparable laws that are not limited to Medicare referrals. The Stark Law also prohibits state receipt of Federal Medicaid matching funds for prohibited referrals, but this provision of the Stark Law has not been implemented by regulations. In addition, some courts have held that the submission of claims to Medicaid that would be prohibited as self-referrals under the Stark Law for Medicare could implicate the False Claims Act.
Corporate Practice of Medicine
Numerous states have enacted laws prohibiting business corporations, such as Sema4, from practicing medicine and employing or engaging physicians to practice medicine, generally referred to as the prohibition against the corporate practice of medicine. These laws are designed to prevent interference in the medical decision-making process by anyone who is not a licensed physician. For example, California's Medical Board has indicated that determining what diagnostic tests are appropriate for a particular condition and taking responsibility for the ultimate overall care of the patient, including providing treatment options available to the patient, would constitute the unlicensed practice of medicine if performed by an unlicensed person. Violation of these corporate practice of medicine laws may result in civil or criminal fines, as well as sanctions imposed against us and/or the professional
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through licensure proceedings. Typically, such laws are only applicable to entities that have a physical presence in the state.
Genetic Privacy and Testing Laws
We are subject to myriad laws designed to establish safeguards regarding the conduct of genomic testing and analysis and to protect against the misuse of genetic information and human biological specimens, collectively, “samples”, from which genetic information can be derived. These laws vary in their scope and in the nature of their requirements and restrictions. For example, certain genetic privacy laws prohibit the retention of samples after performing a genomic analysis in addition to prohibiting the use or disclosure of genetic information for certain purposes, such as research, without appropriate informed consent from the individual or without sufficient anonymization. The applicability of such informed consent requirements may also depend on the identifiability of the genetic information or sample and the purposes of which it is used. Other laws may impose additional requirements, including requirements regarding institutional review board review and approval for certain research uses of genetic information or samples requirements to implement certain security controls in connection with the transfer of genetic information. We must comply with such genetic privacy and testing laws in our collection, use, disclosure, and retention of genetic information and samples.
Other Health and Medical Regulations
The federal physician payment transparency requirements, or Physician Payments Sunshine Act, and its implementing regulations, which requires applicable manufacturers of covered drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the State Children’s Health Insurance Program, with certain exceptions, to annually report to HHS information related to certain payments or other transfers of value made or distributed to physicians, defined to include doctors, dentists, optometrists, podiatrists and chiropractors, and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. The SUPPORT Act, under a provision entitled “Fighting the Opioid Epidemic with Sunshine,” extends the Physician Payments Sunshine Act to payments and transfers of value to physician assistants, nurse practitioners and other mid-level healthcare providers, with reporting requirements going into effect in 2022 for payments and transfers of value made to these practitioners in 2021.
In addition to its comprehensive regulation of health and safety in the workplace in general, the Occupational Safety and Health Administration has established extensive requirements aimed specifically at laboratories and other healthcare-related facilities. In addition, because our operations require employees to use certain hazardous chemicals, we also must comply with regulations on hazard communication and hazardous chemicals in laboratories. These regulations require us, among other things, (i) provide an independent registered public accounting firm’s attestation report on our systemto develop written programs and plans, which must address methods for preventing and mitigating employee exposure, the use of internal controls over financial reporting pursuantpersonal protective equipment, and training.
Our commercialization activities subject us to Section 404, (ii) provide allregulations of the compensationDepartment of Transportation, the U.S. Postal Service, and the Centers for Disease Control and Prevention that apply to the surface and air transportation of clinical laboratory specimens.
We are also subject to applicable state billing laws. Some states require that payment be made only to the person or entity who performed or supervised the service, while other states have passed anti-mark up and disclosure laws, an alternative but less enforceable approach to direct billing. Under these laws the non-performing person or entity is allowed to bill the client, but is prohibited from marking up the service, and required to disclose each charge to the patient, or patient’s insurer. Additionally, some states have strictly passed disclosure laws that require the non-performing person or entity to disclose to patients or the patient’s insurer the actual charges for all laboratory services.
Privacy and Data Protection Laws
There are a growing number of jurisdictions all over the world that have privacy and data protection laws. These laws are typically triggered by a company’s establishment or physical location in the jurisdiction, data processing activities that take place in the jurisdiction, and/or the processing of personal information about individuals located
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in that jurisdiction. Certain international privacy and data protection laws, such as those in the European Union, can be more restrictive and prescriptive than those in the U.S., while other jurisdictions can have laws less restrictive or prescriptive than those in the U.S. Enforcement of these laws vary from jurisdiction to jurisdiction, with a variety of civil or criminal penalties, or private rights of action.
The European Union’s General Data Protection Regulation, or GDPR, took effect on May 25, 2018. The GDPR extraterritorially applies to a business outside the European Union that offers goods or services to, or monitors the behavior of individuals who are located in the European Union. The GDPR imposes strict requirements on controllers and processors of personal data, including enhanced protections for “special categories” of personal data, which includes sensitive information such as health and genetic information of data subjects in the European Union. The GDPR also grants individuals various rights in relation to their personal data including the rights of access, rectification, objection to certain processing and deletion. The GDPR provides an individual with an express right to seek legal remedies if the individual believes his or her rights have been violated. Failure to comply with the requirements of the GDPR or the related national data protection laws of the member states of the European Union, which may deviate from or be requiredmore restrictive than the GDPR, may result in significant administrative fines issued by European Union regulators.
As of non-emerging growth publicDecember 31, 2020, The United Kingdom of Great Britain and Northern Ireland, or UK, are no longer subject to EU law. Therefore, the GDPR will be brought into UK law as the ‘UK GDPR’ via a statutory instrument which will make technical amendments to the GDPR so that it works in a UK-only context. In Europe, there are also national laws that provide additional controls around the processing of health data.
The Payment Card Industry Data Security Standard, or PCI DSS, was issued by the Payment Card Industry Security Standards Council and establishes industry standards for the processing of payment card information. While the PCI DSS requirements do not have the force of law, the penalties for noncompliance could include exclusion from payment card systems. To the extent that we collect payment card information when receiving payments of insurance premiums or payments for our products or services, we comply with PCI DSS as applicable to our payment environment and PCI DSS merchant level, which is determined by our volume of payment card transactions per year.
FTC Act
As an entity regulated by the Federal Trade Commission, or FTC, we are subject to the FTC’s enforcement power under Section 5 of the Federal Trade Commission Act, or FTC Act. The FTC has policed privacy and data security through its broad power under Section 5 of the FTC Act. Under Section 5, “unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful.” Deceptive trade practices are defined by the FTC as material representations, omissions or practices that are likely to mislead a consumer acting reasonably in the circumstances to the consumer’s detriment. The FTC defines an “unfair” trade practice as one that “causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and is not outweighed by countervailing benefits to consumers or competition.”
The FTC has refrained from providing a checklist of uniformly acceptable data security practices or focusing on one single practice as actionable. Instead, the FTC has taken a holistic approach and relied on industry standards and other norms to identify a particular set of practices that, taken together, constitute adequate security practices for companies undercollecting personal information. In evaluating whether a data security practice is unfair, the Dodd-Frank Wall Street ReformFTC focuses largely on “substantial injury to consumers.” The harm need not be monetary or physical, though such injuries are commonly considered “substantial.” Further, the harm can consist of a risk rather than an actual loss.
CAN-SPAM Act
The Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, or CAN-SPAM Act, establishes rules for commercial electronic mail messages, gives recipients the right to opt out of certain messages, and establishes penalties for violations. We comply with the CAN-SPAM Act in connection with our transmittal of commercial electronic mail messages, or Commercial Email Messages. Commercial Email Messages do not include emails that are informational or are transactional or relationship messages.
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TCPA
The Telephone Consumer Protection Act (iii)of 1991, or TCPA, restricts the making of telemarketing calls and the use of automatic telephone dialing systems, artificial or prerecorded voice messages, SMS text messages, and facsimile transmissions. It also specifies several technical requirements for fax machines, autodialers, and voice messaging systems, principally with provisions requiring identification and contact information of the entity using the device to be contained in the message. We comply with TCPA in connection with our transmittal of automated, artificial, or prerecorded phone calls, SMS text messages, facsimile transmissions, and push notifications.
California Consumer Privacy Act
The California Consumer Privacy Act, or CCPA, is a comprehensive consumer privacy law that took effect on January 1, 2020, and regulates how certain for-profit businesses that do business in California collect, use, and disclose the personal information of consumers who reside in California. Among other things, the CCPA confers to California consumers the right to receive notice of the categories of personal information to be collected by a business, how the business will use and share the personal information, and the third parties who will receive the personal information; the rights to access, delete, or transfer personal information; and the right to receive equal service and pricing from a business after exercising a consumer right granted by the CCPA. In addition, the CCPA allows California consumers the right to opt out of the “sale” of their personal information, which the CCPA defines broadly as any requirementdisclosure of personal information to a third party in exchange for monetary or other valuable consideration. The CCPA also requires a business to implement reasonable security procedures to safeguard personal information against unauthorized access, use, or disclosure.
The CCPA does not apply to personal information that is Protected Health Information under HIPAA. The CCPA also does not apply to a HIPAA Covered Entity to the extent that the Covered Entity maintains patient information in the same manner as Protected Health Information. We are subject to the CCPA with respect to personal information we collect from California consumers that is neither PHI under HIPAA nor patient information that we maintain in the same manner as Protected Health Information.
The California Attorney General has authority to enforce the CCPA and its implementing regulations against covered businesses beginning on July 1, 2020. The CCPA provides for civil penalties for violations, as well as private right of action for data breaches that result from a business’ failure to implement reasonable security procedures.
Competition
Our competitors include companies that offer molecular genetic testing and other clinical diagnostic, life science research, drug discovery services, data services and healthcare analytics, and consumer genetics products. Principal competitors include companies such as Myriad Genetics, Inc., Ambry Genetics Corporation, Color Genomics, Inc., Invitae Corporation, Natera, Inc., Tempus Labs, Inc., Quest Diagnostics, Inc., Laboratory Corporation of America Holdings (or LabCorp), Exact Sciences Corp., 10x Genomics, Inc., Guardant Health, Inc., and Adaptive Biotechnologies, Twist Biosciences Corp., and Schrödinger, Inc., as well as other commercial and academic diagnostic and analytic service providers. In addition to the companies that currently offer traditional genetic testing services and research centers, other established and emerging healthcare, information technology and service companies may commercialize competitive products including informatics, analysis, integrated genetic tools and services for health and wellness.
We believe the principal competitive factors in our market are:
•Patient-centric approach;
•Breadth, depth, and quality of data assets;
•Price and quality of tests;
•Turnaround time of testing results;
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•Coverage and reimbursement arrangements with third-party payors;
•Depth and clinical applicability of interpretive insights;
•Degree of utility of patient and provider facing applications;
•Breadth of interpretive insights beyond just one episode of care;
•Convenience of testing;
•Brand recognition of test provider;
•Additional value-added services and informatics tools;
•Accessibility of results;
•Client service;
•Quality of website content; and
•Reliability
We believe that we compare favorably with our competitors on the basis of these factors. However, many of our competitors and potential competitors have longer operating histories, larger customer bases, greater brand recognition and market penetration, substantially greater financial, technological and research and development resources and selling and marketing capabilities, more experience dealing with third-party payors. As a result, they may be adoptedable to respond more quickly to changes in customer requirements, devote greater resources to the development, promotion and sale of their tests than Sema4 does, or sell their tests at prices designed to win significant levels of market share. We may not be able to compete effectively against these organizations.
Environmental Matters
Sema4’s operations require the use of hazardous materials (including biological materials) that subject it to a variety of federal, state, and local environmental and safety laws and regulations. Some of these regulations provide for strict liability, holding a party potentially liable without regard to fault or negligence. We could be held liable for damages and fines as a result of our, or our partners’, business operations should contamination of the environment or individual exposure to hazardous substances occur. We cannot predict how changes in laws or new regulations will affect our business operations or the cost of compliance.
Raw Materials and Suppliers
We rely on a limited number of suppliers, or, in some cases, sole suppliers, including Agilent Technologies, Inc., Illumina, Inc., Life Technologies Corporation, Agena Biosciences, Inc., MRC-Holland, Asuragen Inc., PerkinElmer Health Sciences, Inc., Fisher Scientific, Integra Biosciences Corporation, Thomas Scientific, Qiagen Inc., USA Scientific, Inc., Promega Corporation, Integrated DNA Technologies Incorporated, and Kapa Biosystems Inc., for certain laboratory reagents, as well as sequencers and other equipment and materials which we use in our laboratory operations. Our laboratory operations could be interrupted if we encounter delays or difficulties in securing these reagents, sequencers or other equipment or materials, and if we cannot obtain an acceptable substitute. Any such interruption could significantly affect our business, financial condition, results of operations and reputation. We believe that there are only a few other manufacturers that are currently capable of supplying and servicing the equipment necessary for our laboratory operations, including sequencers and various associated reagents. The use of equipment or materials provided by these replacement suppliers would require us to alter our laboratory operations. Transitioning to a new supplier would be time consuming and expensive, may result in interruptions in our laboratory operations, could affect the PCAOB regarding mandatory audit firm rotationperformance specifications of its laboratory operations or could require that we revalidate our tests. We cannot assure you that we would be able to secure alternative equipment, reagents, and other materials, or bring such equipment, reagents, and materials online and revalidate them without experiencing interruptions in our workflow. If we encounter delays or difficulties in securing,
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reconfiguring, or revalidating the equipment and reagents we require for our tests, our business and reputation could be adversely affected.
Customers
We provide our health information products and services to a broad range of customers, including health plans (including managed care organizations and other health insurance providers); clinicians; hospitals; employers; patients; federally qualified health centers; and Biopharma companies. In addition, during 2020 and 2021, the customers for our COVID-19 tests included state governments.
Depending on the billing arrangement and applicable law, the clinician or healthcare entity that orders our products or services may not be responsible for paying for the products or services ordered for their patients. In certain circumstances, the patient may be responsible for payment, and in others we seek payment from third party payers, such as a commercial health insurance company, Medicare or a supplementMedicaid program, pursuant to contracts established between us and such third parties.
During 2021, reimbursement from health plans represented 79% and 76% of our diagnostic test revenue and total revenue, respectively. In 2021, two health plans each represented 10% or more of our consolidated total revenue, and no other health plans or other customers represented 10% or more of our consolidated total revenue.
Human Capital
Sema4 is mission driven. Our employees are passionate about changing healthcare and impacting lives. We attract entrepreneurs who are comfortable with ambiguity and thrive on innovation and thoughtful discourse. We empower our employees to iterate and rapidly execute on ideas.
It is our People Team’s mission to connect people to purpose. We achieve this through enablement of excellence across the independent registeredemployment journey, through stewardship of an engaged and inclusive culture, by growing individual, team and organizational capability, in delivering simplification and innovation, and by sharing data-driven people insights that transform our organization. All of this is in service of driving our business forward and optimizing patient health outcomes.
We are delivering a competitive package of compensation and benefits that aims to attract and retain strong talent, in a very competitive talent marketplace. As of December 31, 2021, we had approximately 1,200 employees, of which 54% are women and 46% are men. Our headcount grew by approximately 33% in 2021, and we hired approximately 500 employees in that timeframe, as a part of scaling our operations in connection with our transition to a public accounting firm’scompany and meeting our strategic priorities.
Our Diversity and Inclusion Council seeks to improve diversity, inclusion, equality, and global understanding by promoting dialogue, encouraging respectful understanding, providing information, participating in policy development, overseeing diversity education and training, and helping to foster respect for all employees. In 2022, we will be hosting our inaugural BIPOC Initiative Genomics Symposium, inviting select Ph.D. students and post doctorates for a two-day research symposium to strengthen our diverse hiring practices. Each attendee will present their original research, and will learn about science and career opportunities at Sema4.
We believe that our corporate culture fosters innovation, creativity, and teamwork. In this past year, we launched several programs and processes, which intend to help build a driven culture of alignment, development, compliance, and respect. We are in our second year of formal performance management processes, which are used to drive organizational alignment and includes tracking top-down business priorities and people development goals. The launch of two promotion cycles focus and enable employee career growth and mobility. We also implemented formal people manager learning, in order to build stronger people management skills for our leaders. We have optimized processes and transformed our people management solution in order to have greater systems capability, access to robust reporting, and to strengthen our analytical horsepower.
We have implemented a comprehensive compliance infrastructure, which advises Sema4 individuals and business affiliates on how to prevent, detect, report, providing additional information about the audit and the financial statements (auditor discussionresolve matters of fraud, waste, threats, and analysis),abuse related to
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institutional policies and (iv) disclose certain executive compensation related itemsfederal, state, and local laws and regulations. We have implemented various committees, councils and boards such as the correlation between executive compensationDiversity & Inclusion Council, Data Governance Board, and performanceIRB Review Board. These groups provide guidance for our employees, to empower them to perform according to our legal and comparisonsethical standards. We observe legal, regulatory, and industry trends and comprehensively adapt internal policies and practices as needed. We educate our Board members, executives, and other key employees about conflicts of the CEO’s compensationinterest and advise how to median employee compensation. These exemptions will apply for a periodprevent and detect potential or actual conflicts of five years following the completion of the Initial Public Offeringinterest to safeguard from inappropriate external influence or until we are no longer an “emerging growth company,” whichever earlier.impropriety.
We look to further strengthen our people infrastructure in 2022 through enhanced engagement surveys, values and behaviors programming, and formal talent reviews, with development planning.
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SEMA4’S BUSINESSMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Unless otherwise indicatedThe following discussion and analysis should be read in conjunction with the financial statements and related notes of the Company, included elsewhere in this proxy statement. This discussion contains forward-looking statements reflecting our current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” appearing elsewhere in this proxy statement.
Overview
We are a patient-centered, health intelligence company with a mission to use artificial intelligence, or AI, and machine learning to enable personalized medicine for all. By leveraging leading data scientists and technology, our platform powers remarkable and unique insights that transform the practice of medicine including how disease is diagnosed, treated, and prevented.
We were established out of Icahn School of Medicine at Mount Sinai or ISMMS, and commenced operations in June 2017 as a commercial entity that could effectively engage diverse patient populations and health care institutions at scale. We have since established and deployed our comprehensive and integrated genomic and clinical data platform and established a mature diagnostic testing business. We now maintain a database that includes more than 12 million de-identified individual clinical records, many with genomic profiles. We also manage a data asset over 47 petabytes in size, that has been expanding at more than 1 petabyte per month with an accelerating growth rate.
Currently, we derive the majority of our revenue from our diagnostic test solutions. Our diagnostic business generates revenue and engages with healthcare professionals working with patients primarily through our Women’s Health and Oncology solutions.
Our Women’s Health solutions sequence and analyze an industry-leading number of genes and use interpretive information tools to translate raw sequencing and clinical data efficiently and accurately into digestible clinical reports that guide decision-making by patients and physicians. Our Oncology diagnostic solutions feature both somatic tumor profiling and hereditary cancer screenings, along with a foundational whole exome and whole transcriptome sequencing approach. Our Sema4 Signal Hereditary Cancer solution determines if a patient carries an inherited genetic change that increases the risk of cancer or informs on cancer treatment. We believe our Signal Whole Exome and Transcriptome solution is one of the most comprehensive molecular profiling solutions from a commercial entity to receive New York State approval. Beginning in May of 2020, we also expanded our diagnostic testing services to include testing for the presence of COVID-19, which we intend to discontinue by March 31, 2022.
We have also expanded beyond diagnostic testing to enter into service agreements with third parties to provide diagnostic testing, research, and related data aggregation reporting services. We have established and continue to seek strategic relationships with pharmaceutical and biotech, or Biopharma, companies to enable innovation across the entire drug lifecycle, from next-generation drug discovery and development, to post-market efficacy surveillance, to informing on bioavailability, toxicity, tolerability, and other features critical to drug development.

Factors Affecting Our Performance
We believe several important factors have impacted, and will continue to impact, our performance and results of operations. While each of these areas presents significant opportunities for us, they also pose significant risks and challenges that we must address. See the section titled “Risk Factors” for more information.
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Number of resulted tests
We historically reported both accessioned and resulted tests as important factors impacting our performance. A test is resulted once the appropriate workflow is completed and details are provided to the ordered patients or healthcare professional for reviews, which corresponds to the timing of our revenue recognition. We believe the number of resulted tests in any period is more important and useful to our investors because it directly correlates with long-term patient relationships and the size of our genomic database. Therefore, we do not plan to report the number of accessioned tests.
Success obtaining and maintaining reimbursement
Our ability to increase the number of billable tests and our revenue therefrom will depend on our success in achieving reimbursement for our tests from third-party payors. Reimbursement by a payor may depend on several factors, including a payor’s determination that a test is appropriate, medically necessary, cost-effective, and has received prior authorization. Since each payor makes its own decision as to whether to establish a policy or enter into a contract to provide coverage for our tests, as well as the amount it will reimburse us for a test, seeking these approvals is a time-consuming and costly process.
In cases where we or our partners have established reimbursement rates with third-party payors, we face additional challenges in complying with their procedural requirements for reimbursement. These requirements often vary from payor to payor and are reassessed by third-party payors regularly. As a result, in the past we have needed additional time and resources to comply with the requirements.
We expect to continue to focus our resources on increasing the adoption of, and expanding coverage and reimbursement for, our current and any future tests we may develop or acquire. If we fail to expand and maintain broad adoption of, and coverage and reimbursement for, our tests, our ability to generate revenue and our future business prospects may be adversely affected.
Ability to lower the costs associated with performing our tests
Reducing the costs associated with performing our diagnostic tests is both our focus and a strategic objective. We source, and will continue to source, components of our diagnostic testing workflows from third parties. We also rely upon third-party service providers for data storage and workflow management.
Increasing adoption of our services by existing and new customers
Our performance depends on our ability to retain and broaden the adoption of our services with existing customers as well as our ability to attract new customers. Our success in retaining and gaining new customers is dependent on the market’s confidence in our services and the willingness of customers to continue to seek more comprehensive and integrated genomic and clinical data insights.
Investment in platform innovation to support commercial growth
We are seeking to leverage and deploy our Centrellis and Traversa platforms to develop a pipeline of future disease-specific research and diagnostic and therapeutic products and services. We have limited experience in the development or commercialization of clinical or research products in connection with our database and our Centrellis platform.
We operate in a rapidly evolving and highly competitive industry. Our business faces changing technologies, shifting provider and patient needs, and frequent introductions of rival products and services. To compete successfully, we must accurately anticipate technology developments and deliver innovative, relevant, and useful products, services, and technologies on time. As our business evolves, the competitive pressure to innovate will encompass a wider range of products and services. We must continue to invest significant resources in research and development, including investments through acquisitions and partnerships. These investments are critical to the enhancement of our current diagnostics and health information and data science technologies from which existing and new service offerings are derived.
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We expect to incur significant expenses to advance these development efforts, but they may not be successful. New potential services may fail at any stage of development and, if we determine that any of our current or future services are unlikely to succeed, we may abandon them without any return on our investment. If we are unsuccessful in developing additional services, our growth potential may be impaired.

Key Performance Indicators
We use the following key financial and operating metrics to evaluate our business and operations, measure our performance, identify trends affecting our business, project our future performance, and make strategic decisions. These key financial and operating metrics should be read in conjunction with the following discussion of our results of operations and financial condition together with our consolidated financial statements and the related notes and other financial information included elsewhere in this proxy statement.
The principal focus of our commercial operations is to offer our diagnostic tests through both our direct sales force and laboratory distribution partners. Test volume correlates with genomic database size and long-term patient relationships. Thus, test volumes drive database diversity and enable potential identification of variants of unknown significance and population-specific insights. The number of tests resulted is a key indicator that we use to assess the operational efficiency of our business. Once the appropriate workflow is completed, the test is resulted and details are provided to ordered patients or healthcare professionals for reviews.
During the year ended December 31, 2021, we resulted 709,942 tests in our laboratories, 418,053 tests of which were for COVID-19, compared to the period ended December 31, 2020, in which we resulted approximately 540,407 tests in our laboratories, 332,764 of which were for COVID-19. This 31% increase in resulted volume from 2020 to 2021 largely resulted from newly entered service agreements for COVID-19 testing as well as an increase in non-COVID-19 institutional testing. During the year ended December 31, 2019, we resulted approximately 155,497 tests in our laboratories, none of which were for COVID-19. The 248% increase in resulted volume from 2019 to 2020 largely resulted from newly entered service agreements for COVID-19 testing, offset by a slowdown in the base diagnostic business during the beginning of the COVID-19 pandemic given that many of our customers, including hospitals and clinics, had suspended non-emergency appointments and services.
As discussed above, we no longer report the number of accessioned tests as a key performance indicator because the number of resulted tests more directly correlates with long-term patient relationships and the size of our genomic database.

COVID-19 Impact
The ongoing COVID-19 pandemic has had, and continues to have, an extensive impact on the global health and economic environments since the initial outbreak in March 2020.
Beginning in April 2020, our diagnostic test volumes decreased significantly as compared to the prior year as a result of the COVID-19 pandemic and the related limitations and priorities across the healthcare system. In response, beginning in May 2020, we entered into several service agreements with state governments and healthcare institutions to provide testing for the presence of COVID-19 infection. COVID-19 test volumes grew significantly from the introduction of the service offering through the remainder of 2020 and further increased in 2021. To support the rapid expansion of COVID-19 test volumes, we increased our workforce through both temporary contractors and employees. In addition, while most of our revenues from genetic testing rely upon reimbursements from third party payors, healthcare institutions, and individuals, the majority of our COVID-19 test revenues rely upon reimbursements from state governments and healthcare institutions. In addition, COVID-19 testing yields lower revenues per tests and incurs lower costs to perform each test. We have also experienced a slowdown in receivable collections since the onset of the pandemic, but do not expect those collection trends to continue.
As part of our response to the ongoing COVID-19 pandemic, we have implemented various strategies to mitigate operating risks, reduce costs and improve cash collections. We have made significant advance purchases of test-related inventory in order to reduce the risk of potential business interruptions related to supply chain disruption. We also contracted with third-party vendors to collect and test COVID-19 samples to reduce operating risks related to employee health. Temporary COVID-19 austerity measures included cancellation of the 2020 annual merit
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compensation increase, temporary salary reductions from May through July 2020 and deferral of the 401(k) employer match from May through December 2020. The employer match was reinstated in January 2021, and the deferred portion was funded on March 9, 2021. To support our sales employees with commission-based compensation structure, we implemented temporary minimum commissions during the second quarter of 2020. No such minimums were in place in any quarter after the second quarter nor are any such minimums expected to be implemented again in the near term. No employee layoffs were implemented as part of these austerity measures.
As conditions improve, we are focused on overhauling our revenue cycle, and as part of transformational activities hired a Chief Revenue Officer and established a revenue cycle Center of Excellence. As part of our efforts to improve our collection efficiency and overall financial health, we are also undergoing various process transformations within the Order-to-Cash and Procure-to-Pay cycles.
While test volumes have since improved, we continue to experience changes in the mix of tests due to the impact of the COVID-19 and its variants. We anticipate that demand for COVID-19 tests will decrease as vaccines continue to be developed and deployed to the general population. For this reason, we announced in December 2021 that we had decided to discontinue COVID-19 testing services by March 31, 2022 and began notifying our COVID-19 testing solutions customers of this decision. We intend to dedicate all of our efforts and resources to our core mission to transform healthcare by using artificial intelligence to enable the delivery of precision medicine as the standard of care, and do not expect declines for our other revenue streams during 2022. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19 or its variants, the actions taken to contain it or treat it and the economic impact on local, regional, national and international markets and supply chains. Therefore, the COVID-19 pandemic could continue to have a material impact on our results of operations, cash flows and financial condition for the foreseeable future.
In March 2020, the Coronavirus Aid, Relief and Economic Security Act, or the context otherwise requires, “Sema4,” “we,” “us”CARES Act, was signed into law which was a stimulus bill that, among other things, provided assistance to qualifying businesses and “our”individuals and included funding for the healthcare system. We received $5.4 million in 2020 as part of the stimulus, comprised of $2.6 million received under the Provider Relief Fund, or PRF, distribution and $2.8 million received under the Employee Retention Credit, or ERC, distribution. During 2021, we received an additional $5.6 million under the PRF distribution.
PRF distributions to healthcare providers are not loans and will not be required to be repaid; however, as a condition to receiving these payments, providers must agree to certain terms and conditions and submit sufficient documentation demonstrating that the funds are being used for healthcare-related expenses or lost revenue attributable to the COVID-19 pandemic. We have concluded it is probable that all terms and conditions associated with the PRF distribution have been met. As a result, we recorded the PRF distributions in other income (expense), net in the statements of operations and comprehensive loss during the periods in which we received the distributions.
ERC distributions are refundable tax credits for 50% of qualified wages paid to employees during the pandemic. A company is eligible for the ERC if it has not received a Paycheck Protection Program loan under the Cares Act and (1) its operations have been fully or partially suspended because of COVID-19 or (2) its gross receipts in a calendar quarter in 2020 declined by more than 50% from the same period in 2019. At the time of applying for the ERC, we concluded that it was reasonably possible the eligibility requirements would be met; however, due to a change in circumstances, we are re-evaluating our position. As such, we deferred the recognition of the ERC distribution and recorded the proceeds in other liabilities on the consolidated balance sheets as of December 31, 2021 and 2020.
At this section generally refer to (i) Mount Sinai Genomics,time, we are not certain of the availability, extent or impact of any future relief provided under the CARES Act or other stimulus initiatives.
Recent Developments
In January 2022, we and our wholly-owned subsidiaries, Orion Merger Sub I, Inc., or Merger Sub I, and Orion Merger Sub II, LLC, or Merger Sub II, entered into an Agreement and Plan of Merger and Reorganization, or the
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Merger Agreement, with GeneDx, Inc., a DelawareNew Jersey corporation, or GeneDx, and its subsidiaries priora wholly-owned subsidiary of OPKO Health, Inc., or OPKO, GeneDx Holding 2, Inc., or Holdco, and OPKO to acquire 100% of GeneDx. Subject to the terms and conditions of the Merger Agreement, we will pay consideration to OPKO for the Acquisition of (i) $150 million in cash at the closing of the Acquisition, subject to certain adjustments as provided in the Merger Agreement, (ii) 80 million shares of our Class A common stock to be issued at the closing of the Acquisition and (iii) up to $150 million payable following the closing of the Acquisition, if certain revenue-based milestones are achieved for each of the fiscal years ending December 31, 2022 and December 31, 2023. These milestone payments, if and to the extent earned under the terms of the Merger Agreement, will be satisfied through the payment and/or issuance of a combination of cash and shares of our Class A common stock (valued at $4.86 per share), with such mix to be determined in our sole discretion.
The completion of the Acquisition is subject to a number of closing conditions (which, as of the date of this proxy statement, have not been met), including certain regulatory and other third party approvals, the consummation of a pre-closing restructuring and certain approvals of our stockholders related to the Business Combination, whichAcquisition). The Acquisition is expected to close in the first half of 2022. If this pending Acquisition is consummated, consistent with our business model, we expect to leverage the combined health information database of Sema4 and GeneDx to partner with additional health systems and biopharma companies to transform patient care and therapeutic development and enable precision medicine for all.
Concurrently with the execution of the Merger Agreement, we entered into the Subscription Agreements with the PIPE Investors. The PIPE Investment will be consummated substantially concurrently with the businessclosing of the post-combination companyAcquisition.

Components of Results of Operations
Revenue
We derive the majority of our revenue from diagnostic testing services, which primarily relate to Women’s Health, Oncology and COVID-19. We also recognize revenue from collaboration service agreements with Biopharma companies and other third parties pursuant to which we provide diagnostic testing and related data aggregation reporting services. As discussed above, in December 2021, we announced that we decided to discontinue COVID-19 testing services by March 31, 2022 and begun notifying its subsidiaries following the consummationCOVID-19 testing solutions customers of this decision.
We recognize revenue when control of the Business Combination,promised goods or services is transferred to the customer in an amount that reflects the consideration which we expect to be entitled to in exchange for those goods or services.
Diagnostic Test Revenue
We primarily generate revenue from performing diagnostic testing services for three groups of customers: healthcare professionals working with patients with third-party insurance coverage or without third-party insurance coverage or those who elect to self-pay; and (ii)institutional clients, such as hospitals, clinics, state governments and reference laboratories. Customers are billed upon delivery of test results. The amount of revenue recognized for diagnostic testing services depends on a number of factors, such as contracted rates with our customers and third-party insurance providers, insurance reimbursement policies, payor mix, historical collection experience, price concessions and other business and economic conditions and trends. To date, the post-combinationmajority of our diagnostic test revenue has been earned from orders received for patients with third-party insurance coverage.
Our ability to increase our diagnostic test revenue will depend on our ability to increase our market penetration, obtain contracted reimbursement coverage from third-party payers, enter into contracts with institutions, and increase our reimbursement rate for tests performed.
Other Revenue
We generate revenue from providing diagnostic testing and related data aggregation reporting services under both short-term and long-term project-based collaboration service agreements with third parties. The terms of these
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contracts generally include non-refundable upfront payments, which we record as contract liabilities, and variable payments based upon the achievement of certain milestones during the contract term.
With respect to existing collaboration service agreements, our revenue may fluctuate period to period due to the pattern in which we may deliver our services, our ability to achieve milestones, the timing of costs incurred, changes in estimates of total anticipated costs that we expect to incur during the contract period, and other events that may not be within our control. Our ability to increase our revenue will depend on our ability to enter into contracts with third-party partners.
Cost of Services
The cost of services reflect the aggregate costs incurred in performing services. These costs include expenses for reagents and laboratory supplies, personnel-related expenses (comprising salaries and benefits) and stock-based compensation for employees directly involved in revenue generating activities, shipping and handling fees, costs of third-party reference lab testing and phlebotomy services and allocated genetic counseling, facility and IT costs associated with delivery services. Allocated costs include depreciation of laboratory equipment, facility occupancy, and information technology costs. The cost of services are recorded as the services are performed.
We expect the cost of services to generally increase in line with the anticipated growth in diagnostic testing volume and services we provide under our collaboration service agreements. However, we expect the cost per test to decrease over the long term due to the efficiencies we may gain from improved utilization of our laboratory capacity, automation, and other value engineering initiatives. These expected reductions may be offset by new tests which often have a higher cost per test during the introductory phases before we can gain efficiencies. The cost per test may fluctuate from period to period.
Research and Development Expenses
Research and development expenses represent costs incurred to develop our technology and future test offerings. These costs are principally associated with our efforts to develop the software we use to analyze data and process customer orders. These costs primarily consist of personnel-related expenses (comprising salaries and benefits), stock-based compensation for employees performing research and development, innovation and product development activities, costs of reagents and laboratory supplies, costs of consultants and third-party services, equipment and related depreciation expenses, non-capitalizable software development costs, research funding to our research partners as part of research and development agreements and allocated facility and information technology costs associated with genomics medical research. Research and development costs are generally expensed as incurred and certain non-refundable advanced payments provided to our research partners are expensed as the related activities are performed.
We generally expect our research and development expenses to continue to increase as we innovate and expand the application of our platforms. However, we expect research and development expenses to decrease as a percentage of revenue in the long term, although the percentage may fluctuate from period to period due to the timing and extent of our development and commercialization efforts and fluctuations in our compensation-related charges.
Selling and Marketing Expenses
Selling and marketing expenses primarily consist of personnel-related expenses (comprising salaries, and benefits) and stock-based compensation for employees performing commercial sales, account management, marketing, and allocation of genetic counseling services related to medical education. Selling and marketing costs are expensed as incurred.
We generally expect our selling and marketing expenses will continue to increase in absolute dollars as we expand our commercial sales and marketing and counseling teams and increase marketing activities. However, we expect selling and marketing expenses to decrease as a percentage of revenue in the long term, subject to fluctuations from period to period due to the timing and magnitude of these expenses.
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General and Administrative Expenses
General and administrative expenses primarily consist of personnel-related expenses (comprising salaries and benefits) and stock-based compensation for employees in executive leadership, legal, finance and accounting, human resources, information technology, strategy and other administrative functions. In addition, these expenses include office occupancy and information technology costs. General and administrative costs are expensed as incurred.
We generally expect our general and administrative expenses to continue to increase in absolute dollars as we increase headcount and incur costs associated with operating as a public company, including expenses related to legal, accounting, and its subsidiaries following the consummationregulatory matters; maintaining compliance with requirements of the Business Combination.Nasdaq and of the SEC; director and officer insurance premiums and investor relations. We expect these expenses to decrease as a percentage of revenue in the long term as revenue increases, although the percentage may fluctuate from period to period due to fluctuations in our compensation-related charges.
Sema4 Company OverviewRelated Party Expenses
Related party expenses primarily consist of amounts incurred in connection with transactions occurred with ISMMS for expenses under our transition services agreement, or TSA, with ISMMS which expired at the end of the first quarter of 2021, and other service agreements. Additional information can be found in our consolidated financial statements in Note 7, “Related Party Transactions” included elsewhere in this proxy statement.
We generally expect related party expenses to decrease as we establish our own internal and external resources to fulfill the administrative and other services we have historically procured from ISMMS.
Interest Income
Interest income primarily consists of interest earned on money market funds.
Interest Expense
Interest expense consists of interest costs related to our capital leases and our long-term debt arrangements, including unused line fee and the amortization of deferred transaction costs related to the loan and security agreement entered into with Silicon Valley Bank to provide a $125 million revolving credit facility described elsewhere in this proxy statement.
Other Income, Net
Other income, net primarily consists of funding received under the CARES Act. We recognized $2.6 million of the $5.4 million of funding received under the CARES Act as other income, net on the statements of operations and comprehensive loss during the year ended December 31, 2020. We recognized $5.6 million of additional funding received under the CARES Act during the year ended December 31, 2021 and the amount is included in other income, net for the year ended December 31, 2021. In addition, the loss incurred due to early payment penalties recognized upon extinguishment of debt of $0.3 million is included in other income, net.
Who We Are
Sema4 isWe are a patient-centered, health intelligence company with a mission to use artificial intelligence, or AI, and machine learning to enable personalized medicine for all. Our integrated information platform leverages longitudinal patient data, AI-driven predictive modeling, and genomics in combination with other molecular and high-dimensional data in our efforts both to deliver better outcomes for patients and to transform the practice of medicine, including how disease is diagnosed, treated, and prevented.
Sema4 hasWe have established one of the largest, most comprehensive, and fastest growing integrated health information platforms, collecting and leveraging genomic and clinical data in partnership with patients, healthcare providers and an extensive ecosystem of life science industry contributors. Sema4 isWe are now generating and processing over 3047 petabytes of data per month, growing by almostmore than 1 petabyte per month, and maintainsmaintaining a database that includes more than 11.5approximately 12 million de-identified clinical records, manyincluding more than 500,000 with genomic profiles, integrated in a way that enables physicians to proactively diagnose and manage disease. This expanding database is a virtuous cycle of data: new data enables us to further develop, train, and refine predictive models and drive differentiated insights, which models and insights we deploy through our next generation diagnostic and research solutions and portals to support clinicians and researchers and engage patients, all of which interactions generate more data to continue the cycle.
Today, by providing differentiated insights through diagnostic testing solutions to physicians and patients across the United States, or U.S., in areas such as reproductive health, or Women’s Health, population health, and oncology, or Oncology, Sema4 iswe are reimbursed by payors, providers, and patients for providing these services. In collaboration with pharmaceutical and biotech, or Biopharma, companies, Sema4 receiveswe receive payments for a broad range of services relating to the aggregated data on our information platform, such as consenting and recontacting patients, the development and implementation of a wide range of predictive models, including drug discovery programs, conducting real-world evidence studies, and aiding in the identification and recruitment of patients into clinical trials. Over the next several years, Sema4 expectswe expect to focus on expanding the revenue from our health system and Biopharma partners, while also working to continue to grow the volumes and revenues from our diagnostics test solutions.
While there are many companies seeking to harness the potential of “big data” to address the challenges within the healthcare ecosystem, we believe that few have the scale of Sema4our company combined with itsour revenue-generating diagnostics testing business and origins as a company conceived and nurtured within a world-class health system. These characteristics have enabled Sema4us to build a significant and highly differentiated technological and informational asset positioned to drive precision medicine solutions into the standard of care in an unparalleled way.
Our World Class Team and Unique Origins
Sema4 was founded by Eric Schadt, Ph.D. as part of Icahn School of Medicine at Mount Sinai’s Department of Genetics and Genomic Sciences and the Icahn Institute for Genomics and Multiscale Biology. Dr. Schadt is a world-renowned expert on constructing predictive models of disease that link molecular data to physiology to enable clinical medicine. He has published more than 450 peer-reviewed papers in leading scientific journals, with a public citation or h-index of 128,137, and contributed to discoveries relating to the genetic basis of common human diseases such as cancer, diabetes, obesity, and Alzheimer’s disease. As of MarchDecember 31, 2021, Sema4 has almost 1000we have approximately 1200 employees, including over 160 Ph.D.-level data scientists whose collective work has been recognized in areas such as data science, network modeling, multiscale biotechnology and genomics.
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Sema4 was established out of the Mount Sinai Health System (which we refer to together with itsour related entities as Mount Sinai) and commenced operations in June 2017 as a commercial entity that could effectively engage diverse patient populations and health care institutions at scale, founded on the idea that more information, deeper AI-driven learning, and increased engagement of patients and their providers will improve diagnosis, treatment, and prevention of disease. Sema4 hasWe have since established and deployed itsour comprehensive and integrated
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genomics and information platforms, and intendsintend to continue to expand itsour scale and reach through organic and inorganic growth.
Our Purpose-Built, Flexible Platforms Address Immediate and Untapped Market Opportunities
With the rapid decline in next generation sequencing costs and the increased accessibility of large scale, commoditized computer hardware and storage information products through the cloud, Sema4 expectswe expect that our core information platform, Centrellis®, supported and fueled by our genomic analysis platform, Traversa™, will be well-positioned to drive improved clinical outcomes competitively in the healthcare market.
Sema4’sOur information platform was built to be highly adaptable to different data types and different diseases and health conditions, with the aim to deliver precision medicine and improved health outcomes across a patient’s entire life cycle. Accordingly, we expect our platforms to capitalize on a wide range of growth opportunities, and we intend to apply capital over time to make targeted acquisitions to accelerate our ability to reach a wider range of patients, integrate more deeply into clinical workflows, and address the significant, unaddressed white space for health intelligence in the healthcare ecosystem. These include a broad range of therapeutic segments, beyond Sema4’sour existing focus of our diagnostics solutions for Women’s Health, and Oncology, where we believe there is an immediate need for precision medicine solutions such as in autoimmune disorders, which are expected to represent an approximately $149.4where medical care represented over $100 billion global market by 2025,of spend in the U.S. in 2011, rare diseases, which are expectedis estimated to represent an approximately $317cost the U.S. healthcare system over $400 billion global market in 2026,annually, and cardiovascular disease, which are expected to represent anwhere direct medical spend represents approximately $106.1$200 billion global market in 2023.annually.
By combining our data-driven approach and our deep understanding of health system workflows, we have developed a holistic health information platform, Centrellis, to transform the disease diagnosis and treatment paradigm for the entire healthcare ecosystem: patients, physicians, health systems, payers, and Biopharma companies. The Centrellis platform is comprised of a data management backend that supports a wide array of databases, data warehouses, and knowledge bases, a data analytics layer to mine the data and construct predictive models that provide differentiated insights, and a series of application programmable interfaces to enable tool and software applications to access the data and models. Centrellis serves as the underlying foundation of our precision medicine solution and comprises a sophisticated data management and analytics engine. In the data management layer, our platform processes and stores data in a highly structured and accessible way, which is then analyzed by an advanced insights engine in the analytics layer that deploys state-of-the-art AI, probabilistic causal reasoning and machine learning approaches, and complementary analytics capabilities to deliver increasingly accurate insights to patients, providers, and researchers across a broad range of applications. Centrellis is designed to transform treatment decisions across multiple therapeutic areas by engaging large-scale, high-dimensional data and querying the predictive models of disease and wellness using patient-specific data to derive highly personalized, clinically actionable insights. Centrellis supports various applications, such as delivery of personalized and actionable treatment insights into clinical reports, clinical trial matching, real-world evidence trials and clinical decision support, through an advanced programmable interface, or API, layer.
We have also developed a comprehensive genomic platform, Traversa™, to serve as the backbone of our screening and diagnostic products and with the capacity to deliver molecular data that can be re-accessed, analyzed and delivered throughout a patient’s lifetime. Traversa is designed to simultaneously assay at clinical-grade coverage all known medically relevant regions of the genome, as well as survey the entirety of the human genome, to surface signals that might be medically relevant to a patient in the future. Traversa is integrated with the Centrellis information platform and is designed to adapt at the rate of learning and to match the significant pace of information and knowledge growth, especially in the genomics arena, to allow Sema4us to provide actionable, accurate, and cutting-edge insights from complex and comprehensive data assets. We also expect this platform to enable Sema4us to scale itsour operations and to improve itsour margins in generating secondary insights for patients and providers.
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We Are Building Richer Longitudinal Data Through Deeper Patient and Provider Engagement
Sema4 engagesWe engage with patients, physicians, and health systems as partners and based on principles of transparency, choice, and consent. Driven by our direct engagement with patients and strategic relationships with multiple health systems, the database we have built contains extensive electronic medical record, or EMR, data, surpassing 11.5totaling
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approximately 12 million de-identified clinical records, many with genomic profiles, and has been designed to enable Centrellis to draw from our extensive data assets in a way that enables physicians to proactively diagnose and manage disease. We expect our current and targeted strategic relationships will provide us with access to additional active patient cohorts and datasets to fuel this growth and perpetuate our iterative, data-driven business model, including by rapidly scaling our diagnostic test solutions franchise with physicians and patients through direct engagement with multiple health system partners.
In addition to providing a majority of our current revenue and generating hundreds of thousands of genomic profiles, our established diagnostic test solutions also allow us to engage patients directly as partners, both as part of their clinical care and also acting on their behalf, with appropriate informed consent, to acquire, organize and manage any health data generated on them through the course of their care, all of which contributes to the further development of our genomics and information platforms. Further, we have demonstrated patients’ willingness to partner with us. For example, over 80% of diagnostics solutions patients and users who engaged with our patient portal have given us their informed consent to retrieve, organize, and manage their health records and data, and to facilitate their access to and sharing of thosethat data, as well as additional data that patients share and create through their use of our expanding suite of digital experience products.
Our Established Diagnostic Solutions Are Scaling Rapidly
Sema4We currently operatesoperate a mature diagnostic business that generates revenue and engages with patients through our varied and sophisticated diagnostics and screening offerings. Our population health offerings are designed to run through our Traversa platform and give us the ability to inform on thousands of diseases and conditions, from rare disorders, to drug safety, to risk profiles across a broad range of common human diseases of significant public health concern. We have developed an array of diagnostic and screening solutions to inform across a patient’s life course, ranging from reproductive health and newborn screening to drug safety and oncology. Our Women’s Health solutions sequence and analyze an industry-leading number of genes, and use Centrellis’ interpretive information tools to translate raw sequencing and clinical data efficiently and accurately into digestible clinical reports that guide decision making by patients and physicians. Our Oncology diagnostic solutions feature both somatic tumor profiling and hereditary cancer screenings, along with a foundational whole exome and whole transcriptome sequencing approach.
Centrellis enables the complex interpretations of these data to identify key driver genes, activated and suppressed pathways, molecular subtypes, therapeutic interventions and matching to clinical trials. We believe our array of diverse diagnostic solutions, built on our differentiated grounding in scientific excellence and coupled with an end-to-end full-service model, have led to our rapidly growing customer bases in Women’s Health and Oncology and increasing traction with health systems, as well as deep, trusting engagement with patients.
We Are Embedding Our Solutions Through Innovative, Deep Relationships
Our origins in and subsequent work with Mount Sinai have provided us with an extensive understanding of health systems, patient, and physician workflows as well as the complex interconnectivities that define patient-physician relationships. We have used this knowledge to develop our integrated health system collaboration model, where we have the capabilities necessary to integrate across health system workflows as a holistic health intelligence partner in order to deploy our comprehensive genomics and information platforms, our data curation and harmonization capabilities, and our patient and provider engagement software applications. Our solutions support our health system partners across their operations, helping them integrate a new standard of care and creating a deep relationship with Sema4us that helps both partners realize the potential of the relationship. In addition to creating diagnostic revenue and a clinical relationship with our health system partners and their patients, this engagement provides us with access to insights informed by analyzed and processed EMRs from the health system, as well as the expansive molecular information we generate from our genomics platform as the health system’s precision medicine
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partner. Learning from our long-standing relationship with Mount Sinai, we have refined a health system engagement model that is both operational and economic and designed to maximize both Sema4our and our health system partner’s value from the relationship.
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We are currently activating and expanding our relationships with several leading health systems that will expand our access to data and that we expect will position our platforms for rapid growth and broad commercial opportunities, and have recently signed contracts with three new health systems in support of this strategy. These systems include: AdventHealth, Avera Health, and Northshore University HealthSystem.
Our AdventHealth partnership builds upon the current AdventHealth Genomics and Personalized Health Program to offer genomic solutions to patients across a number of services and specialties. Together, we will conduct data structuring and curation of the combined genomic and clinical data to enable clinicians and scientists to advance research and discovery to improve patient care. We are initially focused on accelerating research in the central Florida division, which includes 18 hospitals and emergency departments, and accounts for more than two million patient visits annually. Nationally, AdventHealth has 51 hospitals and over 100 care sites across 9 states.
Our Avera Health partnership initially focuses on advancing oncology care, enabling Avera Health’s providers and patients to benefit from data-driven insights that inform targeted cancer treatments. Avera Health’s providers will be able to leverage Centrellis, to curate, structure and integrate clinical and genomic data to support both cancer research and clinical care at Avera Health. We will deliver predictive disease network models and clinically actionable insights, empowering Avera Health’s providers to further improve the prevention, detection, and treatment of cancer for their patients. We are also offering digital tools, which give Avera Health’s providers the ability to readily search for cohorts of patients based on clinical criteria, view a patient’s treatment history that is contained in the curated data as an interactive timeline, and more systematically match patients to clinical trials.
At NorthShore University HealthSystem, we are enabling a data-driven genomics program to help clinicians and patients detect, and treat diseases at an early stage, when they are most treatable. As part of the program, NorthShore University HealthSystem’s clinicians and patients will have access to our information-rich genomic solutions for hereditary cancer, population health, pharmacogenomics, and rare expanded carrier screening. Importantly, by combining clinical information with genomic analysis, physicians will be better positioned to administer more personalized, holistic care plans by both drawing insights on how genetic variants will impact patients’ chances of developing disease and determining the most appropriate treatment options. In addition to guiding clinicians, the program is expected to make it easier for NorthShore University HealthSystem patients to understand the implications of genomic findings.
Centered on Centrellis and Traversa, we have also established and continue to seek strategic relationships with Biopharma companies to enable innovation across the entire drug lifecycle, from next generation drug discovery and development, to post-market efficacy surveillance, to informing on bioavailability, toxicity, tolerability, and other features critical to drug development. We have demonstrated the ability to integrate across all aspects of the next generation therapeutic and drug development process, including: biomarker identification as part of early stage drug discovery; identification, validation and prioritization of drug targets; clinical trial patient recruitment; real-world evidence studies; and identifying new markets and indications for existing assets. We believe our solutions allow our Biopharma partners to harness the potential of big data to enable the development of next generation precision medicine therapeutics.
The Current Opportunity for a Comprehensive Health Information and Precision Medicine Solution
“Big data” and analytics have been increasingly viewed as critical components of healthcare delivery in order to achieve the best patient outcomes at increasing efficiencies, including participation in clinical trials and research to deliver more accurate insights that augment clinical decision making. There has been an exponential increase in the availability of health-related data in recent years, driven by increasing digitization of medical records and the adoption of fast-moving technologies such as imaging and next generation sequencing capable of generating massive amounts of data on individual patients. However, we believe today’s practice of medicine persists in classifying patients in more binary terms—healthy or sick, high risk or low risk—based on clinical assessments that are informative but ultimately overly simplistic, based on low-dimensional biomarkers, with many diagnoses still applying thresholds that are predefined using standardized epidemiological tables.
Sema4 is here to change that. Sema4’s goal is to enable the transformation of traditional practices in medicine, and we recognize that a different approach is required in order to fully harness the potential of big data. Accordingly, we seek to achieve this through a single, health intelligence solution that systematizes, harmonizes and curates data; standardizes genomic data across diseases and conditions; and integrates and applies probabilistic, causal reasoning to the healthcare data available today to improve patient clinical outcomes, to enable better physician diagnostics and decision making, and to optimize the life cycle of next generation therapeutics.
Centrellis: Our Health Information Platform Solution
By combining our data-driven approach and our deep understanding of health system workflows, we have developed a holistic health information platform, Centrellis, to transform the disease diagnosis and treatment paradigm for the entire healthcare ecosystem: patients, physicians, health systems, payers, and Biopharma companies. Centrellis is the culmination of our critical competencies and goals as a company:
•technologies aimed at patient and provider engagement,
•the generation, aggregation and standardization of multi-dimensional data, and
•the modeling and generation of differentiated, domain-specific insights
Driven by the virtuous cycle and interconnection of our clinical diagnostics products, rich data assets, database engineering and data science applications, we continue to evolve and deploy our platform to facilitate a better
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understanding of disease and wellness and improve the standard of care through information driven knowledge and understanding.
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Provider Engagement Technologies: Sema4’sOur Next Generation Tools
We have built comprehensive solutions in Centrellis that enable clinicians, researchers, and patients to engage with the relevant structured health data and to leverage our predictive models of disease and wellness and produce clinically actionable insights.
For clinicians and researchers, we have designed Centrellis’s adaptive learning capabilities and tools to enable health systems and clinicians to manage their patient care, research, and health data in one place and to adapt to rapidly changing scientific and clinical norms through an advanced programmable interface, or API, layer, including:
•Integration and on-boarding for health systems and practices that connects data from EMRs and disparate and varied databases,
•Searching and analyzing cohorts of patients, allowing an assessment of their patient populations and quality of care in real-time,
•Enabling clinical decision support and personalized and actionable treatment insights into clinical reports,
•Identifying patients who are candidates for certain clinical genomic analyses,
•Managing the clinical analysis ordered for their patients, from ordering, tracking, resulting, and reanalyzing based on new findings,
•Supporting clinical care and research by matching patients to available clinical trials based on highly personalized inclusion and exclusion metrics, and
•Informing on administrative decisions including as they relate to patient growth, total cost of care, and risk identification and mitigation.
Patient Engagement Technologies: Building Trust and Providing Value Through Clinical Partnership
We are dedicated to giving patients control of their own health data, and in support of this goal, we have designed patient access to Centrellis through our patient portal. Patients have demonstrated their trust by engaging with Sema4us and providing consent for us to collect and store their EMR data. After creating an account, patients are able to manage and track the clinical analysis that Sema4 iswe are performing for them, including by being able to track, receive, and understand the initial insights into their clinical tests and data (including expanded carrier screening, or ECS, tests, and hereditary cancer tests), and to access Sema4’sour supporting clinical services, such as genetic counseling. Our patient portal also provides patients with the opportunity to partner with Sema4us to collect, manage, and regularly update their health data from their disparate healthcare providers, and help participants engage with their data through user-friendly applications, such as their genomic ancestry, personalized residual risk calculations, and other clinical and educational insights and information through important health events, like their pregnancy journey. For patients who have indicated their willingness to participate in research studies, our platform also provides integrated digital informed consenting and research program participation, through transparent, institutional review board approved processes, including targeted clinical trials offerings that provide relevant alternatives and access to the latest scientific trials.
Activating Data Through Generation, Curation and Engineering
In orderWe designed Centrellis to create an accessible and usable database that can support interpretation consistently across patient populations represented within the broad healthcare ecosystem, we designedecosystem. Centrellis to aggregateaggregates large-scale and diverse data, abstract and structure informative unstructured data, and finally integrate the data into an accessible, web-scalable data warehouse that employs a common data model across a broad series of databases. Unstructured data derived from EMR and associated data are run through multiple pipelines leveraging machine learning-enabled
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natural language processing, augmented as needed by human annotators, to extract information and knowledge from thosethat data and then structure and implement extensive quality assurance processes for the resulting annotations. Our multiscale, integrative strategy allows us to connect the processed EMR data with complex biological data from
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many sources, such as the genome, proteome, transcriptome, epigenome, and microbiome. Our standardization of the genomic and EMR data also allows us to pursue strategic relationships in the Biopharma industry, connecting Biopharma companies with clinicians and researchers to create computational models of disease, discover and validate targets and biomarkers, help design clinical trials and recruit patients, and support the collection of real-world data and evidence.
Sema4We not only collectscollect data from external sources, but also generatesgenerate clinical-grade genomic datasets in our clinical and research processes, which further fuels the richness of the data from which Centrellis draws. Our genomic infrastructure enables us to convert bio-samples into datasets that span a range of genomic modalities, from DNA and RNA sequencing to epigenomic profiling, as well as different next generation sequencing technologies, including long-read, single molecule sequencing, low pass whole genome sequencing, and additional transformative technologies. Together with our diagnostic solutions, we use this multi-technology approach to ensure we generate data to comprehensively cover clinically actionable insights from and common variation in the genome, enabling the diagnosis of rare conditions and diseases or risk of passing on mutations to offspring that may cause severe disease, predicting risks of developing diseases such as cancer, predicting tolerability of various therapeutics, and creating broad genomic health profiles through the use of polygenic risk scores.
Our Advanced Domain-Specific AI Informatics for Insight Generation
Finally, we believe our informatics and analysis capabilities form a meaningful connection between the web of databases that we have created in our data warehouse and the utility of Centrellis to our users. Based on our informatics engine, Centrellis generates deep interpretive insights derived from large-scale, multi-omic data, taking advantage of our deeper data generation capabilities, and provides actionable treatment recommendations and innovative research findings. These insights are provided to patients, clinicians, researchers, and partners through the tools described above.
We are also continuing to develop these models and insights. Our researchers have developed a methodology to integrate diverse multi-omics data, including genomic, transcriptomic, and proteomic data, into causal probabilistic networks that help us to understand disease processes and identify key biomarkers through advanced network analysis. Our scientists have pioneered the use of DNA variation information to statistically infer causal relationships among any number of traits that have common genetic variance components. These approaches allow our teams to infer directed causal relationships among a pair of traits with shared genetic variance components, which then can be more systematically applied to traits to infer probabilistic causal network structures that can be mined for a broad range of discoveries. We also designed Centrellis with a high degree of flexibility to allow the platform to adjust to the rapidly changing and advancing health information landscape, highlighted by our Traversa genomic analysis platform, which we believe will lead to improved cost profiles over time as assays transition to whole genome sequencing at increasing resolutions.
As we collect and analyze additional datasets, our platform enables the virtuous cycle of data, and we are able to further refine our products and hone our capabilities to provide enhanced analysis of these data. More data and more insights generate further data and insights to support our models. We have constructed automated pipelines to continuously search the literature and research repositories to expand and distill our knowledge graphs, which are in turn queried to provide the interpretations and insights delivered to users of our systems. To support our interpretations and insights, we utilize internal experts as needed to help resolve conflicting findings to improve upon the actionable insights we deliver to physicians and patients.
Traversa: Our Genomics Platform for Optimizing Screening and Diagnostic Genomics Products and Population Health Initiatives
Traversa is our comprehensive genomics platform that has been designed to serve as the backbone of our genomic analysis products, and Sema4 iswe are in the process of transitioning all of our genomic analyses to this platform. For products on the Traversa platform, Sema4 generateswe generate data on all known medically relevant regions of the genome at
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clinical-grade coverage, as well as low-pass whole genome data to span all common variation in the genome. We also ask for the patient’s consent to biobank the corresponding samples for future clinical testing. While we report on the specific genes analyzed at the request of the clinician and patient, these baseline data and bio-banked samples
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allow us to respond to requests for additional analysis quickly by generating “in silico” interpretations on genomic data already existing on a patient and to surface signals that might be medically relevant across a patient’s life course.
When deployed at across an entire health system, as we intend with our health system partners, Traversa will enable data driven collaborations and initiatives with health systems by establishing comprehensive clinical and genomic data profiles with patient consent. Particularly where integrated with EMR data, Traversa provides health systems with a unique opportunity to deploy population health management programs because of the robust data from which those programs will draw and because of the efficiencies it will create across the health ecosystem by eliminating the repetition of the most time-consuming and costly aspects of genomic analysis, including sample collection and preparation and the generation of sequence data. Using Traversa, clinicians and health systems will have the freedom to advance patient care by allowing clinicians to establish clinical utility and drive adoption of new analysis products, which we believe will consequently expedite improved reimbursements against lower total production costs for those offerings.
We Collect and Manage Rich, Longitudinal Data Built from Diverse Sources
The health information database that Sema4 haswe have created draws from many complementary sources, which we manage in accordance with patient consent and preferences, our regulatory obligations, and our transparent privacy policy and practices. These data are housed in a complex, cloud-based data lake that allows us to manage the various rights and obligations for each dataset at a granular level, including patient-specific requests with regard to their data.
This database includes data generated in the performance of our clinical services to patients and clinicians, including Women’s Health and Oncology testing, as well as additional data that patients provide to us through their engagement with our patient portal and research programs. In addition, we participate in health information exchanges and public database programs, including through the National Institutes of Health. We also generate and collect data by collaborating with our research partners and provide sequencing and analysis services in connection with research programs. We further leverage the data rights provided by patients and secured through our strategic relationships, such as our oncology information partnership with VieCure that by the end of 20212022 is expected to provide us with access to multiple cancer centers and data from all of their active cancer patients, with the number of newly diagnosed active cancer patients growing substantially each year. Additionally, Sema4 supportswe support health systems and other clinical service providers by applying our Centrellis tools to their clinical workflows and medical record databases, and Sema4 receiveswe receive certain rights to work with anonymized datasets and to partner with the health systems in their ongoing clinical and research programs. We have provided such services extensively for Mount Sinai and are in the process of expanding this program with additional health systems, including NorthShore University Healthsystem, as discussed below.Advent Health, Avera and NorthShore. For more information regarding our data arrangements with Mount Sinai, see “Certain Relationships and Related Party Transactions —Sema4’s Related Party TransactionsTransactions—Sema4”.
Our Established Diagnostics Solutions
Sema4’sOur existing diagnostics solutions business centers around Women’s Health and Oncology and our industry-leading diagnostic solutions are powered by Centrellis and delivered through a full-service model that efficiently integrates into provider workflows. Currently, we derive the majority of our revenue from these established diagnostic test solutions.
Our Elements Women’s Health Solutions
Our deep foundation in Women’s Health began before Sema4’s formation within Mount Sinai, where our lab—then called the “Mount Sinai Genetics Testing Lab”—pursued the goal of providing compassionate patient care to a highly diverse population while advancing science through education, research, and outreach. We pioneered accurate and precise pre-conception genetic screening, and we have continued to build upon that work, expanding itsour focus into a multi-generational and pan-ethnic view of the health of individual women and their families. We continueSema4
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Elements™, our portfolio of data-science driven products and services to support reproductive and generational health, highlights our continued focused effort to accelerate the expansion of genomic diagnostic solutions, secondary insights, platform solutions and enriching health system value to drive continued growth in our Women’s Health business, including by leveraging our state-of-the-art genomic infrastructure and Centrellis platform.
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Carrier Screening: Deriving population-health insights from genomic data to differentiate our industry-leading tests
Sema4’sOur Expanded Carrier Screen, or ECS, test is one of the most comprehensive and accurate carrier screening tests available in the market, covering up to 502 genes. We provide a comprehensive solution to physician practices to enable them not only to deliver sophisticated differential insights and care management guidance in support of the clinician’s care plan for the patient, but to also do so with minimal impact on the practice’s operation, helping to ensure physician offices are not overwhelmed by the amount of information and follow up that can be necessitated by carrier screening.
Sema4’sOur ECS solution uses proprietary technology to identify a patient’s molecular ancestry on a genome-wide level for personalized residual risk assessments by analyzing patient-specific genealogical information that is critical to better understand a patient’s chance for passing on inherited disease. This technology has been designed to increase the accuracy of the residual risks reported to patients, in comparison to competing products that determine residual risk based on using self-reported ancestry information that does not reflect the population groups represented in the patient’s genome. Our solution also provides patients with personalized residual risk education, along with the option to view their molecular ancestry report in the Sema4 patient portal.
Sema4’sOur Non-invasive Prenatal SelectTesting Solutions
Sema4Our Noninvasive Prenatal SelectTesting is a comprehensive noninvasive prenatal test, or NIPT, that screens for autosomal and sex chromosome aneuploidies. Our advanced sequencing technology has been designed to provide reliable results down to approximately 2% fetal fraction, the amount of fetal cell-free DNA in the maternal blood sample, and has been designed to have a low failure rate, which helps reduce the need for redraws, limits unnecessary invasive procedures, and improves time to results.
Expansive development in prenatal screening allows Sema4our team to advance scientific efforts to deliver Genome Wide Screening and includes the ability to detect additional whole chromosome aneuploidies and copy number variations, or CNVs. We believe an updated bioinformatics pipeline will help to further reduce false positives. We expect to release new versions of our code in 2021,2022, which we believe will help improve the positive predictive value for CNV calling through fetal fraction enrichment and CNV normalization through nucleosome positioning and fragment characteristicscharacteristics.
We are developing these future test versions to enable the detection of single gene disorders, such as cystic fibrosis and sickle cell disease. This testing may be used for at risk couples to screen a pregnancy for genomic analysis of a specific disorder or as a general screening tool with a panel of diseases. We believe these code enhancements will also facilitate validation of polyploidy, fetal zygosity and molar pregnancy detection, all of which are important aspects of screening pregnancies for chromosomal abnormalities and are not widely available through non-invasive testing.
Our Natalis Newborn Screening Solutions
Sema4’sOur Natalis test is an extension of the Sema4our screening portfolio allowing for detection of heritable conditions from pre-conception, pregnancy and childhood. Newborn Screening, or NBS, detects heritable conditions that are amenable to medical management in newborns and young children. Natalis screens for 193 conditions where knowledge of the condition by the pediatrician may result in prescribing treatment with medications, dietary modifications, or other therapies to improve the baby’s health. All positives are confirmed using biochemical and molecular analysis. Natalis screens for up to five times as many conditions as the newborn screening programs run by certain state governments.
The Sema4
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Our Signal Precision Oncology Solutions
We believe that our Centrellis platform, combined with our comprehensive whole exome and whole transcriptome tumor profiling and hereditary cancer and pharmacogenomics genomic testing solutions, will make a meaningful difference in transforming cancer care. Sema4 hasWe have developed the “Sema4 Signal®” portfolio of solutions to be leveraged individually or as part of a holistic solution for precision oncology care. The Sema4 Signal portfolio features the integration of our germline and somatic tests with our informatics and informaticsdata science tools, along withenabled by customized services to meet patient and provider needs and
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to help drive bettermore personalized care. The Sema4 Signal products include our oncology genomic test solutions, our molecular and clinical data curation and annotation capabilities to inform on the genomic information in the context of the patient’s previous and current medical records, and various software applications to enable engagement of these data and complex results to facilitate clinical decisions, or research discoveries.discoveries and drug development.
The Sema4 Signal Hereditary Cancer Solution
Our Sema4 Signal Hereditary Cancer solution determines if a patient carries an inherited genetic change that increases the risk of cancer or informs on cancer treatment. It is used to inform personalized medical management decisions to aid early detection and prevention of cancer, as well as to determine the most appropriate treatment approaches if cancer occurs, and strategies to reduce risk of additional cancers.
We offer one of the most comprehensive setsets of panels on the U.S. market, and deliver this solution supported by the Traversa platform to enable us to adapt our panels as new discoveries on clinically actionable variants are made, enabling our genomic testing solutions toso we can adapt at the rate of learning. Our solution includes tools to enable testing at the point of care or outside the office, including a digital family screening questionnaire to identify individuals who would benefit from testing, digital ordering via an EMR portal, video-based education, saliva procurement in the patient’s home, proactive billing investigation, pre- andpre-and post-test genetic counselling and family outreach to enable cascade testing.
Our Hereditary Cancer Solution is a unique product in our portfolio in that it is sold in connection with our Oncology, and Women's Health and population health solutions. For affected cancer patients, integrating hereditary cancer with our Sema4 Signal Whole Exome and Transcriptome and our informatics offerings, creates a holistic approach that can help informwhich incorporating real world evidence, integrates available data needed to better personalized clinical care decisions. For unaffected patients, our Sema4 Signal Hereditary Cancer solution is incorporated into both our Women’s Health and Population Health products and services.services to support early identification and treatment of cancer risk.
Our Signal Whole Exome and Transcriptome Solution
We believe our Sema4 Signal Whole Exome and Transcriptome solution is one of the most comprehensive molecular profiling solutions from a commercial entity to receive New York State approval. Our profiling platform integrates tumor-normal matched whole exome sequencing, or WES,“WES”, with whole transcriptome sequencing, or WTS, to deliver clinically actionable information about somatic and germline alterations in solid tumors and hematologic malignancies. This solution provides for access to a holistic view of a patient’s genome and insights into novel fusions, splice variants, and molecular pathways. It also provides for germline findings for cancer and non-cancer genes, as per American College of Medical Genetics guidelines, with relevance to comorbidities, such as familial hypercholesterolemia, and certain drug interactions.
Sema4 deliversWe deliver the WES/WTS solution using a number of proprietary tools housed in Centrellis, including our oncologycancer knowledge-base, which contains comprehensive structured data and learnings on clinically relevant variants, including curated maps that link relevant clinical trials to variants that serve as eligibility biomarkers for the trials, as annotated by Ph.D. oncology experts. Sema4’sOur variant interpretation station for oncology automates clinical reporting by managing the variant curation process and recommending suitable therapies. This AI-driven genomic platform is updated regularly with recent medical literature and prioritizes clinically-significant variants, enabling providers to quickly review and leverage actionable insights.
Regulatory Strategy and Managed Care
We have developed and are advancing our strategy to drive increased reimbursement and higher average selling prices, or ASPs, for our Sema4 Signal Oncology solutions. As part of this strategy, we are expanding our presence in select markets covered by the Molecular Diagnostic Services Program, or MolDx Program, by Palmetto GBA. We plan to submit our WES/WTS and other tumor profiling solutions and take advantage of the established coverage and reimbursement for Comprehensive Genomic Profiling.
We also intend to move all Oncology solutions onto the Traversa platform, which we expect will substantially reduce our production costs and streamline our analysis operations, and we are preparing to submit our WES/WTS for approval by the FDA by engaging in the studies needed to demonstrate clinical utility, which will, if approved, enable us to enhance our coverage and reimbursement with our commercial payors.
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Sema4 Signal Informatics Solutions
To complement the genomics diagnostic solutions, the Sema4 Signal products leverage Centrellis’s provider engagement technologies, described above, including to automatically abstract, annotate, and combine oncology specific datasets, including clinical medical record data, imaging, and genomics. This clinical-genomic data set is provided back to health systems and providers and is powered by our digital applications to drive better personalized care for patients, including clinical trial recruitment, improved system-wide quality of care and increased financial and research activity.
Regulatory and Payer Relations Strategy
We have developed and are advancing our strategy to drive increased reimbursement and higher average selling prices, or ASPs, for our Sema4 Signal Oncology solutions. As part of this strategy, we will take advantage of a Medicare Administrative Contractor (MAC), National Government Services (NGS), update to a Local Coverage Decision (LCD) titled Genomic Sequence Analysis Panels in the Treatment of Solid Organ Neoplasms under which qualifying CGP tests are covered for patients insured by Medicare, who are living with advanced cancer and meet other clinical criteria.
In addition, we are expanding our presence in select markets where Palmetto GBA is the MAC and the MolDx program they administer provides opportunities to apply for coverage under existing or future LCDs. Specifically, we have, or intend to, submit Technical Assessments for coverage and reimbursement of WES/WTS and other tumor profiling solutions based on existing MolDx LCDs.
Beyond the testing, we are exploring the regulatory and market access landscape as it relates to the governance and reimbursement of real-world evidence and AI driven clinical decision-making tools. As we demonstrate the clinical utility of information driven solutions, these emerging areas will become relevant.
Our Covid-19COVID-19 Testing Initiative
In response to the outbreak of the worldwide COVID-19 pandemic, in the first quarter of 2020, Sema4we rapidly leveraged itsour existing technologies and infrastructure capabilities, supplemented by a requisite set of technologies and services, to offer a comprehensive COVID-19 diagnostic testing service for our customers.
Within a highly concentrated and coordinated research, development and commercialization planning effort over a ten-week period, However, on December 15, 2021, we developed a testing solution designedannounced that we decided to assist the State of Connecticut and commercial customers looking to safely return their employees to the workplace. In particular, we developed a set of technologies and services that led to Sema4 implementing viral genomic sequencing and testing capabilities in our Branford lab, including securing a reliable supply chain for chemical reagents and testing kits. To complement thediscontinue COVID-19 testing services Sema4 built out an integrated, end-to-end software environment by adaptingMarch 31, 2022 and began notifying our Centrellis platformCOVID-19 testing solutions customers of this decision. Nationwide and regional lab capacity for COVID-19 testing has increased since we entered the market for COVID-19 testing in the first half of 2020. Management believes it is the appropriate time to the needsdiscontinue this line of COVID-19 patients, then expanded our existing customer services and support frameworkdedicate all of our efforts and resources to accommodateour core mission to transform healthcare by using artificial intelligence to enable the unique turn-around time and workflow needsdelivery of COVID-19 testing. Since April 2020, Sema4 has completed hundredsprecision medicine as the standard of thousands of COVID-19 tests across a wide range of patients in both public and commercial settings.care.
Our Solution for Health Systems and Providers
Our origins within a large academic medical center helped us establish our integrated health system collaboration model, where we seek to integrate our platform across numerous health system workflows to enable precision medicine solutions using Centrellis, from Women’s Health, to Oncology, to patient wellness. Our provider and health system engagement offerings include patient and provider portals, facilitating scheduling of patient appointments, patient consenting, pre-test and post-test genetic counseling, results delivery and patient record management, among other tools and applications that are designed to allow physicians to better engage contextualized information around their patients to improve decision making.
Our Health System Engagement Model
We believe we have developed a compelling value proposition for our initial health system partners, with distinguishing features including our focus on serving local community populations, our track-record of delivering digital or technology-enabled standards of care, and our investment in precision medicine and adoption of genomic diagnostic solutions, with our desire to have predictive insights permeate all service lines and the general patient
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experience in their system. In addition to our deep relationship with Mount Sinai, we have contracted to deploy Centrellis in additional health systems, which we expect will expand our impact and reach.
Sema4 hasWe have refined a health system engagement model designed to maximize both Sema4our and our partner health system’s value from the relationship. We balance clinical-grade and research-based projects in order to deliver value in an economically sustainable manner and establish health and economic performance metrics that form the basis of quarterly steering committee reviews with the program’s executive sponsors. Our model focuses on:
•Embedding our genomic analyses as a standard of care for Women’s Health, Oncology and/or specific diseases, which includes Sema4’sour full-service model including patient and provider education, patient engagement, genetic counseling and integration with the health systems’ clinical workflow and EMR,
•Enhancing existing health system data sets by leveraging Sema4’sour data curation capabilities for both structured and unstructured data to identify clinical utility that can be used by health system providers, researchers and administration,
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•Developing software applications to facilitate deeper engagement of the enhanced health system data we produce, such as reconstructing and visualizing patient health journeys, identifying patient cohorts based on any number of filter criteria, and characterizing outcomes of patients in response to different treatments prescribed,
•Establishing population health programs where health system patients are invited to broad population genetic screening, and
•Developing mutually beneficial research collaboration programs that leverage the strengths of Sema4our and itsour health system partners.
Sema4 seeks to develop its products and services by focusing on partnering more intimately with a select number of health system partners with whom we can deeply integrate and deploy holistic solutions that drive improvements in both economics and outcomes for patient populations. We then intend to take our learnings and developments to deploy more widely, fundamentally re-imagining the care model with similarly committed partners.
Our Solutions Create Mutually Beneficially Value for Sema4Us and itsOur Health System Partners
Sema4 pursuesWe pursue strategic relationships with health systems that evaluate financial returns on a holistic basis. We evaluate success on a long-term basis and recognize that the primary aim of every health system is to provide superior patient care with improved health economics. As such, Sema4 intendswe continue to use the proceeds from the Business Combination, the PIPE Investmentour July 2021 business combination and related transactionsprivate placement financing (which we refer to as the “Prior PIPE Investment”) to accelerate growth in our health system relationships by further investing in research-oriented projects, as well as data curation, platform integrations, and building standards of care to operationalize our testing programs. Starting with Mount Sinai and extending throughout our network, Sema4 intendswe intend to cross-validate and scale our technologies across health systems, as we seek to enable patients by leveraging data and tools across systems and patient populations in a network model so each partner can benefit from what is being learned across the healthcare ecosystem. One such health system where Sema4 has established a strategic relationship is NorthShore University Healthsystem, where we are integrating our data-driven precision medicine solutions, built on the Centrellis and Traversa platforms, into the standard of care to deliver personalized insights and improve clinical outcomes to eligible participants included in the 1.2 million patients served by NorthShore. Sema4 has also established a strategic relationship with AdventHealth, where we will focus on accelerating research through data structuring and curation of combined genomic and clinical data in AdventHealth’s Orlando-area network, which includes more than 20 hospitals and emergency departments, and accounts for more than 2 million patient visits annually.
Sema4We Act as a Broker and Catalyst for Commercial Engagement Between Health System and Biopharma Companies
While health systems and Biopharma companies have an established ability to collaborate effectively and will continue to partner directly, we believe that Sema4’sour network in both segments of the healthcare ecosystem and ability to add value to these relationships through data engineering makes itus well-positioned as a valued collaborator for both types of organizations. Biopharma collaborations are often not the focus for health systems, as they have high start-up costs to develop relationships that extend to patient care. Sema4We can support itsour health system partners by working more collaboratively with the health systemsthem to understand their capabilities and how those capabilities are complemented by Sema4’sour enhancement of a health systems’ data assets and clinical-genomic data generation capabilities, and by facilitating solutions that can be provided jointly to Biopharma companies. For example, Sema4 has built tools that comply with applicable security requirements and regulations and that leverage Centrellis datasets to help Biopharma companies understand clinical trial eligible patient population characteristics and help launch trial sites or design trial protocols more precisely. In turn, health systems can enroll more of their patients into clinical trials and research, bringing their patient population innovative treatments.
Sema4’sOur Biopharma Solutions Engage and Enable Our Partners
We have established and continue to seek strategic relationships with Biopharma companies to enable drug discovery, development, and commercialization. We have demonstrated the ability to integrate across the pharmaceutical life cycle as a result of the unique data and patient and provider engagements developed in our
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health system relationships and information-driven diagnostics solutions, combined with our powerful analytics capabilities and software solutions.
The Biopharma industry has become increasingly competitive as it moves toward the more precise targeting of patients in crowded disease segments, and we believe this trend positions Sema4us as a key partner for Biopharma companies to build a competitive advantage by unlocking the power of big data and enabling next generation precision medicine.
We Strive for Interconnected Strategic Relationships
We serve our Biopharma customers through a unique combination of clinical testing services, clinical and research study design and execution, and advanced data and analytics capabilities.
Sema4’sOur competitive advantage in this space comes from leveraging comprehensive data generated via testing, integrating these deep molecular profiles with clinical patient information, and representing this comprehensive patient data in the Centrellis platform. This enables us to create direct and real time integration of clinical and genetic data with providers connected to drug discovery research, real world evidence studies, and other therapy development opportunities. We are also able to utilize Sema4’sour solutions and unique data assets to enroll patients into clinical trials and to connect Biopharma partners to patient populations matching eligibility criteria for their trials, to facilitate patients receiving novel therapies still under development, and to perform broad genomic and transcriptomic sequencing on health system partner sample banks in collaboration with Biopharma partners.
In our engagement with Biopharma customers, we are focused on a range of disease conditions, including oncology, autoimmune and inflammatory disorders, and rare diseases. Our disease-agnostic approach provides us with the flexibility to support our Biopharma partners across varied therapeutic areas. We continue to work with our Biopharma partners to identify their specific needs and broaden the scope of our disease coverage accordingly.
We believe that, because of our core capabilities and differentiated approach, we are well-positioned to support next-generation drug discovery, development, and commercialization. We further believe our ability to generate deep, clinical-grade multi-omic datasets renders us a valuable genomic testing solution provider for precision medicine Biopharma products. Through direct engagement of providers and patients, we assist Biopharma partners in a patient-centric approach to research and clinical development. By obtaining and curating high-dimensional data in our Centrellis platform, we can deliver novel insights that help to de-risk the development of next generation therapeutics, provide for pharmacologic proof of concept via the integration of genomic and clinical data support, reduce development costs, enhance the patient experience, and increase speed to market. We believe the integration of our solutions forms a holistic and highly differentiated value proposition to Biopharma customers and makes Sema4 a key partner to support our customers across the Biopharma value chain.
Sema4’s Solutions for BioPharma Customers
We engage with our Biopharma customers to develop and deliver unique goods and services for the particular issues that each customer faces. We believe that our Biopharma partners can realize significant value when collaborating with our team to utilize a more integrated, end-to-end solution that leverages our core set of capabilities, including longitudinal patient data, AI-driven predictive modeling, and genomics. We have demonstrated the ability to develop these deep, integrated strategic relationships with Biopharma companies. For example, Sema4’sour five-year collaborative study with Sanofi S.A., or Sanofi, is centered on discovery of new insights into the biological mechanisms and other factors implicated in asthma to help drive Sanofi’s next generation of asthma targets as well as to enhance Sanofi’s understanding of the relevant populations for both its current and in-development therapies and the therapies marketed by others. This asthma study is currently recruiting nearly 1,200 patients, and involves comprehensive clinical characterization of patients and controls, longitudinal monitoring of patient conditions through various applications and devices, collection of biological samples for molecular profiling and generation and integration of DNA and RNA sequencing data with clinical and device acquired data. The study is also leveraging the integrated, longitudinal data to construct models of asthma to stratify patients into subtypes, and seeking to better understand treatments relevant to different subtypes or where there is unmet need for further drug discovery efforts. Along with Sanofi, we will collect traditional clinical data, genomics, immunological,
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environmental, and sensor data from mobile devices to enable sophisticated analyses and to include advanced causal network modeling.
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In general, our Biopharma strategy focuses on three main offering areas:
•Genomic Testing and Analysis Solutions: We serve as a comprehensive clinical testing lab, offering a broad menu of molecular, cytogenic and biochemical testing services for our Biopharma partners. Our technology development group enables us to apply innovative profiling technologies such as long-read, single-cell and spatial molecular profiling approaches to help address our Biopharma partners’ challenges. The data generated by these capabilities, when combined with our analytics services, can produce insights that inform on disease biology, improve and accelerate the drug development process, and help ensure that patients can be made aware of relevant treatment options.
•Data and Analytics Solutions: Centrellis enables us to provide our Biopharma partners with unique, data-driven insights that can help to accelerate the development of precision medicines, utilizing HIPAA-compliant, de-identified datasets. Using advanced analytics and causal network modeling, we work with partners to organize high-dimensional data in ways that facilitate the identification of statistically-inferred causal relationships that enable the identification, validation and prioritization of biomarkers and targets; identify molecular subtypes of disease; and predict patient disease progression, prognosis, drug response, adverse events, and other clinical outcomes. We believe that one of our particular strengths is our data science team, which is comprised of experts published in leading scientific journals, particularly in the area of probabilistic causal reasoning from multi-layered data. Additionally, we support our customer’s real-world evidence needs by using our platform to characterize patient and diagnostic journeys.journals. We work with collaborators, researchers, and key opinion leaders to build new models of disease and develop analytics solutions that enhance our understanding of disease and deliver insights to Biopharma partners that can further optimize their operations.
•Clinical Trial Enablement Solutions: We believe that Centrellis, combined with our active, direct engagement of patients and providers in our Women’s Health and, by extension, rare disorders, Oncology, and population health solutions, positions us well to assist Biopharma partners in their clinical development activities. We have developed a number of software as a service, or SaaS, products to enable Biopharma clinical development, including a clinical trial patient matching product and a clinical trial design product that work with our longitudinal clinic-genomic dataset. Given our patient consent structure, we have the ability to re-contact patients who may benefit from a Biopharma sponsor’s trial. We have developed novel, technology-enabled workflows and solutions that allow us to search for and identify relevant patients in a manner that fully maintains patient confidentiality, and work with providers to assess and enroll these patients in clinical trials. The breadth of search and precision of this method of patient recruitment can substantially improve trial timelines versus traditional recruitment methods. We also assist prominent Biopharma partners seeking to use high-quality genomic analysis to assess patient eligibility for clinical trials. For example, we announced a collaboration with Janssen Pharmaceutical Company of Johnson & Johnson, or Janssen, in the area of genomic testing and advanced data analytics to more efficiently and accurately identify patients who could be candidates for oncology clinical trials in September of 2020. In December 2020, we also announced a strategic agreement with Merus N.V. to utilize our advanced genomic testing to identify patients with tumors harboring specific, rare mutations. We believe our clinical testing services and data solutions make us a key partner for supporting efficient clinical trials.
Our Growth Strategies for our Biopharma Business
We have successfully collaborated with Biopharma partners in engagements that utilize our data access and our data curation, analytics, and sequencing capabilities across research, clinical development, and commercial applications, including but not limited to the aforementioned Sanofi, Janssen and Merus relationships. Although revenues from our Sanofi, Janssen and Merus relationships did not have a material impact on our consolidated results of operations during the years ended December 31, 2019 and 2020 or the three months ended March 31, 2021, these relationships demonstrate our ability to develop these strategic relationships with Biopharma partners.
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Our strategy for increasing our share in the Biopharma market is closely aligned and coordinated with our corporate strategic objectives. The core features of our Biopharma growth strategy are:
Grow the multi-dimensional datasets that feed the Centrellis Platform: As we increase the amount of patient data flowing into Centrellis, we can offer more and deeper insights to our Biopharma partners to assist them in next-generation drug discovery, development, and commercialization.
Continue to engage diverse patients and providers to increase patient access to clinical trials and improve trial recruitment: Our patient-centric approach includes finding relevant clinical trials for certain patients, and because we have growing relationships with established health systems, we have access to highly diverse patient populations. We act as a technology-enabled broker between health systems and Biopharma companies by working more collaboratively with the health systems to understand their capabilities, and how those capabilities are complemented by Sema4’s capabilities and Sema4’s enhancement of a health systems’ data assets and clinical-genomic data generation capabilities. We then facilitate the matching of the solutions that can be provided jointly to Biopharma companies, including to improve the speed and precision by which patients are identified and recruited into trials that may benefit them. As we grow the number of points of contact we have with health systems and patients, we intend to continue to scale this solution, ensuring that a broad and diverse patient population can access trials, and concomitantly that Biopharma clinical trials can recruit patients more quickly.
Focus on continual product development and improvement across our testing offerings and data solutions: Given the competitive markets that we operate in, we must be responsive to scientific and technological advancements as well as customer needs in order to grow and maintain market share. We intend to continue to build upon our competitive advantages in data, analytics and patient and provider engagement to develop market leading products.
Form deep, integrated relationships with Biopharma partners that leverage the full breadth of our offerings: We believe that one of our strongest value propositions to Biopharma partners is our ability to effectively integrate our multiple solutions into a coherent and holistic solution that we believe few of our competitors can offer. Biopharma companies are increasingly working in a more coordinated fashion across their research, development, and commercial departments, and we believe that we are in a strong position to build computational models that can inform decision-making in a more coordinated manner across these previously segregated parts of Biopharma companies. We intend to continue to pursue broad, collaborative, multi-faceted engagements with Biopharma partners that allow us to deliver the maximum value possible. We believe these engagements have the potential to provide recurring revenue streams via multi-year contracts.
Pursue novel business models that allow us to diversify our revenue streams: Given the unique insights we can deliver to Biopharma customers, we believe there is a significant opportunity for us to grow our revenue through new strategic relationships with Biopharma partners. We are currently assessing multiple business models in this area, including those that involve revenue from drug development milestones and royalties. These potential business models include drug discovery-focused joint ventures with Biopharma customers as well as other relevant Biopharma industry participants.
Research and Development
Sema4 hasWe have invested a substantial amount of time and expense into research and development for itsour technology and test offerings, which requires the continuous improvement of software capabilities to analyze data and process customer orders. Sema4’sOur research and development efforts focus on several key areas, including multiscale biotechnology, assay development across sequencing technologies, data science and engineering, and the development of network-based models. Sema4 expects itsWe expect our research and development activities to increase as it innovateswe innovate and expandsexpand the application of itsour current and future platforms including Traversa and Centrellis.
Sema4’sOur internationally recognized research team includes leaders in data science, network modeling, multiscale biotechnology and genomics. As noted above, our CEO, Eric Schadt, is a world-renowned expert on constructing predictive models of disease that link molecular biology to physiology to enable clinical medicine. He has published more than 450 peer-reviewed papers in leading scientific journals, with a public citation or “h-” index
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of 128,137, and has contributed to discoveries relating to the genetic basis of common human diseases such as cancer, diabetes, obesity, and Alzheimer’s disease. Under the leadership of itsour CEO, Sema4’sour research team comprises more than 160 Ph.D.-level scientists, complemented by additional physician scientists and certified technicians as of MarchDecember 31, 2021. Ongoing collaborations with scientists and clinicians inat the Mount Sinai and other healthcare systems allows Sema4’sour research to remain patient-centered and clinically relevant.
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Intellectual Property
Sema4 hasWe have intellectual property rights pertaining to all elements of our platforms and solutions. Our success and ability to compete depend in part on securing and preserving enforceable patent, trade secret, trademark and other intellectual property rights; operating without having competitors infringe, misappropriate or otherwise circumvent these rights; operating without infringing the proprietary rights of others; and obtaining and maintaining licenses for technology development or product commercialization.
Patents
The fields of genomic and health information analysis present limited opportunities for patent protection, based on well-known legal precedents. As result, Sema4’sour patent protection strategy is to protect itsour non-gene specific technology and itsour specific biomarkers. In this regard, as of MarchDecember 31, 2021, we have threefour pending utility patent applications.applications and one provisional patent application. The pending utility patent applications include a U.S. patent application related to a genome annotation software platform for annotating genomic intervals that are clinically relevant for analysis, a U.S. patent application related to a genetic carrier screening process, and an international Patent Cooperation Treaty applicationU.S. and European patent applications related to therapeutic treatment for subjects having certain polymorphic markers associated with specific human leukocyte antigen alleles. If patents are issued from the currently pending applications, the earliest patents will begin expiring in 2040, subject to potential extensions of the patent term that will be calculated based on the length of the patent examination process.
Trade Secrets
We have a trade secrecy program to prevent disclosure of our trade secrets to others, except under stringent conditions of confidentiality when disclosure is critical to our business. We protect trade secrets and know-how by establishing confidentiality agreements and invention assignment agreements with our employees, consultants, scientific advisors, contractors, and collaborators. These agreements provide that all confidential information developed or made known during the course of an individual or entities’ relationship with us must be kept confidential during and after the relationship. These agreements also provide that all inventions resulting from work performed for us or relating to our business and conceived or completed during the period of employment or assignment, as applicable, will be our exclusive property. In addition, we take other appropriate precautions, such as physical and technological security measures, to guard against misappropriation of our proprietary information by third parties.
Although we take steps to protect our proprietary information and trade secrets, including through contractual means with our employees and consultants, third parties may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or disclose our technology. Accordingly, we may not be able to meaningfully protect our trade secrets. For more information regarding the risks related to our intellectual property, see the section entitled “Risk Factors — Factors—Risks Related to Our Intellectual Property and Trade Secrets.”
Trademarks
We own various trademarks, applications and unregistered trademarks in the United StatesU.S and other commercially important markets, including our company name, product and service names and other trade or service marks. Our trademark portfolio is designed to protect the brands for our products and services, both current and in the pipeline.
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Regulation
Reimbursement
Patients who have diagnostic tests ordered or are prescribed treatments by providers performing the prescribed services, generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Sales of our products and services will therefore depend substantially on the extent to which the costs of our products and services will be paid by third-party payors, including health maintenance, managed care and similar healthcare
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management organizations, or reimbursed by government health administration authorities, such as Medicare and Medicaid and private health insurers.
In the United States, our ability to commercialize and the commercial success of our product and service offerings will depend in part on the extent to which governmental payor programs at the federal and state levels, including Medicare and Medicaid, private health insurers and other third-party payors provide coverage for and establish adequate reimbursement levels for these offerings. Government authorities, private health insurers and other organizations generally decide which devices they will pay for and establish reimbursement levels for healthcare. Medicare is a federally funded program for the elderly and disabled managed by Centers for Medicare & Medicaid Services, or CMS, through local contractors that administer coverage and reimbursement for certain healthcare items and services. Medicaid is an insurance program for certain categories of patients whose income and assets fall below state defined levels, and is funded jointly by federal and state governments and managed by each state. Similarly, the federal government manages other healthcare programs, including the Veterans Health Administration, the Indian Health Service, and Tricare, the healthcare program for military personnel, retirees, and related beneficiaries. Many states have also created pharmacy assistance programs for individuals who do not qualify for federal programs. In the United States,U.S., private health insurers and other third-party payors often provide reimbursement for products and services based in part on the coverage and payment rates set by the Medicare or Medicaid programs.
Federal programs in the United StatesU.S. also sometimes impose price controls through mandatory ceiling prices on purchases by federal agencies and federally funded hospitals and clinics and mandatory rebates on retail pharmacy prescriptions paid by Medicaid and Tricare. These restrictions and limitations influence the purchase of healthcare services and products. Legislative proposals to reform healthcare or reduce costs under government programs may result in lower reimbursement for our products and services or exclusion of our products and services from coverage. In addition, government programs like Medicaid include what are in effect substantial penalties for increasing commercial prices of certain products over the rate of inflation which can affect realization and return on investment.
Increasing efforts by governmental and third-party payors to cap or reduce healthcare costs may cause such organizations to limit both coverage and level of reimbursement for newly approved healthcare products. At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological program pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
As a result of the above trends, Sema4we may need to conduct expensive studies in order to demonstrate the medical necessity and cost effectiveness of our products and services, in addition to the costs required to obtain FDA approvals. Sema4’sOur products and services may not be considered medically necessary or cost effective, or the discount percentages required to secure coverage may not yield an adequate margin over cost.
Many hospitals implement a controlled and defined process for covering and approving diagnostic tests and medical devices. Any marketing efforts that are determined to have violated such policies could result in the denial or removal of our products from that hospital’s list of approved products.
Moreover, a payor’s decision to provide coverage for a diagnostic product does not imply that an adequate reimbursement rate will be approved. Adequate third-party reimbursement may not be available to enable Sema4us to maintain price levels sufficient to realize an appropriate return on our investment in device development. Legislative proposals to reform healthcare or reduce costs under government insurance programs may result in lower
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reimbursement for our products and services or exclusion of our products and services from coverage. The cost containment measures that healthcare payor and providers are instituting and any healthcare reform could significantly reduce Sema4’sour revenue from the sale of any approved products and services. Sema4’sWe cannot provide any assurances that we will be able to obtain and maintain third-party coverage or adequate reimbursement for our products and services in whole or in part.
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In addition, amendments to the False Claims Act impose severe penalties for the knowing and improper retention of overpayments collected from governmental payors. Within 60 days of identifying and quantifying an overpayment, a provider is required to notify CMS or the Medicare contractor of the overpayment and the reason for it and return the overpayment. These amendments could subject Sema4’sour procedures for identifying and processing payments to greater scrutiny. Overpayments may occur from time to time in the healthcare industry without any fraudulent intent. For example, overpayments may result from mistakes in reimbursement claim forms or from improper processing by governmental payor. Sema4 maintainsWe maintain protocols intended to identify any overpayments. From time to time, Sema4we may identify overpayments and be required to refund those amounts to governmental payors.
Clinical Laboratory Improvement Act
Sema4’sOur clinical reference laboratories in Connecticut are required to hold certain federal certificates to conduct itsour business. Under the Clinical Laboratory Improvement Act of 1988, or CLIA, Sema4 iswe are required to hold a certificate applicable to the type of laboratory examinations it performswe perform and to comply with standards covering personnel, facilities administration, inspections, quality control, quality assurance and proficiency testing.
As of March 1,December 31, 2021, Sema4 haswe have a current certificate under CLIA to perform testing at our laboratory locations in Stamford and Branford, Connecticut. To renew this CLIA certificate, Sema4 iswe are subject to survey and inspection every two years to assess compliance with program standards. Moreover, CLIA inspectors may make random inspections of Sema4’sour clinical reference laboratories. The regulatory and compliance standards applicable to the testing Sema4 performswe perform may change over time, and any such changes could have a material effect on itsour business.
If Sema4’sour clinical reference laboratory is out of compliance with CLIA requirements, itwe may be subject to sanctions such as suspension, limitation or revocation of itsour CLIA certificate, as well as directed plan of correction, state on-site monitoring, civil money penalties, civil injunctive suit or criminal penalties. Sema4We must maintain CLIA compliance and certification to be eligible to bill for diagnostic services provided to Medicare and Medicaid beneficiaries. If Sema4we were to be found out of compliance with CLIA requirements and subjected to sanction, itsour business could be harmed.
State Laboratory Testing
Sema4We are is required to maintain a license to conduct testing in Connecticut. Connecticut laws establish standards for day-to-day operations of our laboratories in Stamford and Branford, Connecticut. If Sema4’sour clinical reference laboratories are out of compliance with Connecticut standards, the Connecticut Department of Health Services, or CDHS, may suspend, restrict or revoke our license to operate our clinical reference laboratories, assess substantial civil money penalties, or impose specific corrective action plans. Any such actions could materially affect Sema4’sour business. As of March 1,December 31, 2021, Sema4 maintainswe maintain a current license in good standing with CDHS. However, we cannot provide assurance that CDHS will at all times in the future find us to complybe in compliance with all such laws.
Several states require the licensure of out-of-state laboratories that accept specimens from those states. For example, New York requires a laboratory to hold a permit which is issued after an on-site inspection and approval of testing methodology and has various requirements over and above CLIA and the College of American Pathologists, or CAP, Laboratory Accreditation Program, including those for personnel qualifications, proficiency testing, physical facility, equipment, and quality control standards. Sema4’sOur laboratory holds the required licenses for California, New York, Maryland, Pennsylvania, and Rhode Island.
Each of Sema4’sour clinical reference laboratories in Connecticut is required to be licensed on a test-specific basis by New York State as an out of state laboratory and our products, as laboratory-developed tests, or LDTs, must be approved by the New York State Department of Health, or NYDOH, before they are performed on samples from
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New York. Each Sema4 laboratory is licensed by New York, and Sema4 iswe are currently approved for testing samples from New York. Sema4 isWe are subject to periodic inspection by the NYDOH and it iswe are required to demonstrate ongoing compliance with NYDOH regulations and standards.
Other states may adopt similar licensure requirements in the future, which may require Sema4us to modify, delay or stop itsour operations in such jurisdictions. Complying with licensure requirements in new jurisdictions may be expensive, time-consuming, and subject Sema4us to significant and unanticipated delays. If Sema4 identifieswe identify any other state
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with such requirements, or if Sema4 iswe are contacted by any other state advising itus of such requirements, Sema4 intendswe intend to follow instructions from the state regulators as to how we should comply with such requirements.
Food and Drug Administration
Laboratory Developed Tests
Sema4 provides itsWe provide our tests as LDTs. CMS and certain state agencies regulate the performance of LDTs (as authorized by CLIA and state law, respectively). Historically, the FDA, has exercised enforcement discretion with respect to most LDTs and has not required laboratories that furnish LDTs to comply with the agency's requirements for medical devices (e.g., establishment registration, device listing, quality systems regulations, premarket clearance or premarket approval, and post-market controls). Nevertheless, the FDA may decide to regulate certain LDTs on a case-by-case basis at any time.
Legislative proposals addressing the FDA's oversight of LDTs have been introduced in previous Congresses, and Sema4 expectswe expect that new legislative proposals will be introduced from time-to-time. The likelihood that Congress will pass such legislation and the extent to which such legislation may affect the FDA's plans to regulate certain LDTs as medical devices is difficult to predict at this time.
If the FDA ultimately regulates certain LDTs as medical devices, whether via final guidance, final regulation, or as instructed by Congress, Sema4’sour tests may be subject to certain additional regulatory requirements. Complying with the FDA's requirements for medical devices can be expensive, time-consuming, and subject Sema4us to significant or unanticipated delays. Insofar as Sema4we may be required to obtain premarket clearance or approval to perform or continue performing an LDT, Sema4we cannot assure you that itwe will be able to obtain such authorization. Even if Sema4 obtainswe obtain regulatory clearance or approval where required, such authorization may not be for the intended uses that it believeswe believe are commercially attractive or are critical to the commercial success of our tests. As a result, the application of the FDA's medical device requirements to Sema4’sour tests could materially and adversely affect itsour business, financial condition, and results of operations.
Failure to comply with applicable FDA regulatory requirements may trigger a range of enforcement actions by the FDA including warning letters, civil monetary penalties, injunctions, criminal prosecution, recall or seizure, operating restrictions, partial suspension or total shutdown of operations, and denial of or challenges to applications for clearance or approval, as well as significant adverse publicity.
Pre-Market Approval
Sema4We may obtain FDA premarket approval, or PMA, for some of itsour tests including its matched whole exome sequencing, or WES, and whole transcriptome sequencing, or WTS, tests. Devices subject to FDA regulation must undergo premarket review prior to commercialization unless the device is exempt from such review, and Sema4 expectswe expect that itwe will be required to perform non-inferiority studies showing comparable results between the Sema4 Signal WES/WTS LDT and third party, FDA-approved tests with regard to certain therapeutic drugs prescribed to ovarian cancer patients, colorectal cancer patients, and non-small cell lung cancer patients. Sema4 isWe are currently evaluating an updated pre-submission letter to the FDA with regard to the studies necessary for ovarian cancer and is working to secure access to the subjects necessary to perform this study. With regard to the studies necessary for colorectal cancer patients and non-small cell lung cancer patients, Sema4we submitted itsour pre-submission package and held a pre-submission meeting with the FDA in 2020, and isare working to secure access to the subjects necessary to perform this study. Further, the regulations governing the approvals place substantial restrictions on how the tests will be marketed and sold, specifically, by prescription only. In addition, as a condition of Sema4’s FDA approval, itwe may be required to conduct post-approval studies.
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Additionally, manufacturers of medical devices must comply with various regulatory requirements under the Food, Drug, and Cosmetic Act, or FDCA, and regulations thereunder, including, but not limited to, quality system regulations, unless they are exempt, facility registration, product listing, labeling requirements, and certain post-market surveillance requirements. Entities that fail to comply with FDA requirements can be liable for criminal or civil penalties, such as recalls, detentions, orders to cease manufacturing, and restrictions on labeling and promotion, among other potential sanctions.
Sema4
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We may develop new diagnostic products and services that are regulated by the FDA as medical devices. The regulatory review and approval process for medical devices can be costly, timely, and uncertain. This process may involve, among other things, successfully completing additional clinical trials and submitting a premarket clearance notice or filing a premarket approval application with the FDA. If premarket review is required by the FDA, there can be no assurance that Sema4’sour tests will be cleared or approved on a timely basis, if at all. In addition, there can be no assurance that the labeling claims cleared or approved by the FDA will be consistent with Sema4’sour current claims or adequate to support continued adoption of and reimbursement for itsour products. Ongoing compliance with FDA regulations could increase the cost of conducting itsour business, subject us to FDA inspections and other regulatory actions, and potentially subject itus to penalties in the event we fail to comply with such requirements.
HIPAA and HITECH
Under the administrative simplification provisions of the Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, the U.S. Department of Health and Human Services issued regulations that establish uniform standards governing the conduct of certain electronic healthcare transactions and protecting the privacy and security of protected health information used or disclosed by most healthcare providers and other covered entities and their business associates, including the business associates' subcontractors. Sema4 performsWe perform activities that may implicate HIPAA, such as providing clinical laboratory testing services and entering into specific kinds of relationships with covered entities and business associates of covered entities. As a covered entity and as a business associate of other covered entities (with whom we have entered into business associate agreements), Sema4 iswe are required to comply with the four principal regulations with which have been issued in final form under HIPAA and HITECH: privacy regulations, security regulations, the breach notification rule, and standards for electronic transactions, which establish standards for common healthcare transactions.
The HITRUST CSF was developed to address the multitude of security, privacy, and regulatory challenges facing organizations. By including federal and state regulations, standards, frameworks, and incorporating a risk-based approach, the HITRUST CSF helps organizations address these challenges through a comprehensive and flexible framework of prescriptive and scalable security and privacy controls. The HITRUST CSF Includes, harmonizes, and cross-references existing, globally recognized standards, regulations, and business requirements, including ISO, EU GDPR, NIST, and PCI. On December 10, 2021, we met the HITRUST Assurance Program requirements for the CSF v9.4 Risk-based, 2-year (r2) certification criteria for our Centrellis Platform, for hosting and curating Patient data.
The privacy regulations cover the use and disclosure of protected health information by covered entities as well as business associates, which are defined to include subcontractors that create, receive, maintain, or transmit protected health information on behalf of a business associate. They also set forth certain rights that an individual has with respect to his or her protected health information maintained by a covered entity, including the right to access or amend certain records containing protected health information, or to request restrictions on the use or disclosure of protected health information. The security regulations establish requirements for safeguarding the confidentiality, integrity, and availability of protected health information that is electronically transmitted or electronically stored. HITECH, among other things, established certain health information security breach notification requirements. A covered entity must notify any individual whose protected health information is breached according to the specifications set forth in the breach notification rule. The HIPAA privacy and security regulations establish a uniform federal "floor" and do not supersede state laws that are more stringent or provide individuals with greater rights with respect to the privacy or security of, and access to, their records containing protected health information or insofar as such state laws apply to personal information that is broader in scope than protected health information as defined under HIPAA. Massachusetts, for example, has a state law that protects the privacy and security of personal information of Massachusetts residents.
There are significant civil and criminal fines and other penalties that may be imposed for violating HIPAA. A covered entity or business associate is also liable for civil money penalties for a violation that is based on an act or omission of any of its agents, including a downstream business associate, as determined according to the federal common law of agency. Additionally, to the extent that we submit electronic healthcare claims and payment
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transactions that do not comply with the electronic data transmission standards established under HIPAA and HITECH, payments to us may be delayed or denied.
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Federal and State Fraud and Abuse Laws
In the United States,U.S., there are various fraud and abuse laws with which we must comply, and Sema4 iswe are potentially subject to regulation by various federal, state and local authorities, including CMS, other divisions of the U.S. Department of Health and Human Services including the Office of Inspector General, the U.S. Department of Justice, and individual U.S. Attorney offices within the Department of Justice, and state and local governments.
In the United States,U.S., the federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, overtly, covertly, in cash or in kind to induce or in return for the furnishing, arranging for the furnishing of, purchasing, leasing, ordering or arranging for or recommending purchasing, leasing or ordering of any good, facility, service or item for which payment may be made in whole or in part by a federal healthcare program. Courts have stated that a financial arrangement may violate the Anti-Kickback Statute if any one purpose of the arrangement is to encourage patient referrals or other federal healthcare program business, regardless of whether there are other legitimate purposes for the arrangement. The definition of "remuneration" has been broadly interpreted to include anything of value, including gifts, discounts, credit arrangements, payments of cash, consulting fees, waivers of co-payments, ownership interests, and providing anything at less than its fair market value.
Although the Anti-Kickback Statute contains several exceptions, it is broad and may technically prohibit many innocuous or beneficial arrangements within the healthcare industry. Further, the U.S. Department of Health and Human Services issued a series of regulatory "safe harbors." These safe harbor regulations set forth certain provisions, which, if met, will assure healthcare providers and other parties that they will not be prosecuted under the federal Anti-Kickback Statute. Although full compliance with the statutory exceptions or regulatory safe harbors ensures against prosecution under the federal Anti-Kickback Statute, the failure of a transaction or arrangement to fit within a specific statutory exception or regulatory safe harbor does not necessarily mean that the transaction or arrangement is illegal or that prosecution under the federal Anti-Kickback Statute will be pursued. Penalties for federal anti-kickback violations are severe, and include imprisonment, criminal fines, civil money penalties, and exclusion from participation in federal healthcare programs. Many states also have anti-kickback statutes, some of which may apply to items or services reimbursed by any third-party payor, including commercial insurers.
There are also federal laws related to healthcare fraud and false statements, among others, relating to healthcare matters. The healthcare fraud statute prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private payors. A violation of this statute is a felony and may result in fines, imprisonment, or exclusion from governmental payor programs such as the Medicare and Medicaid programs. The false statements statute prohibits knowingly and willfully falsifying, concealing, or covering up a material fact, or making any materially false, fictitious, or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items, or services. A violation of this statute is a felony and may result in fines, imprisonment, or exclusion from governmental payor programs.
Another development affecting the healthcare industry is the increased enforcement of the federal False Claims Act and, in particular, actions brought pursuant to the False Claims Act's "whistleblower" or "qui tam" provisions. The False Claims Act imposes liability on any person or entity that, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment by a federal governmental payor program. The qui tam provisions of the False Claims Act allow a private individual to bring actions on behalf of the federal government alleging that the defendant has defrauded the federal government by submitting a false claim to the federal government and permit such individuals to share in any amounts paid by the entity to the government in fines or settlement. When an entity is determined to have violated the False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties ranging from $5,500 to $11,000 for each false claim.
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In addition, various states have enacted false claim laws analogous to the federal False Claims Act, although many of these state laws apply where a claim is submitted to any third-party payor and not merely a governmental payor program.
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Additionally, the civil monetary penalties statute imposes penalties against any person or entity that, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or for a claim that is false or fraudulent. This law also prohibits the offering or transfer of remuneration to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary's selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state healthcare program, unless an exception applies.
On October 25, 2018, the Substance Use-Disorder Prevention that Promoted Opioid Recovery and Treatment for Patients and Communities Act of 2018, or the SUPPORT Act, was enacted. The SUPPORT Act included the Eliminating Kickbacks in Recovery Act of 2018, or EKRA, which establishes an all-payor anti-kickback prohibition that extends to arrangements with recovery homes, clinical laboratories and clinical treatment facilities. EKRA includes a number of statutory exceptions, and directs agencies to develop further exceptions. Current exceptions in some cases reference and in others differ from the Anti-Kickback Statute safe harbors. Significantly, the prohibitions apply with respect to the soliciting or receipt of remuneration for any referrals to recovery homes, clinical treatment facilities, or clinical laboratories, whether or not related to treating substance use disorders. Further, the prohibitions cover the payment or offer of remuneration to induce a referral to, or in exchange for, an individual using the services of, such providers. This law creates additional risk that relationships with referral sources could be problematic.
Physician Referral Prohibitions
Under a federal law directed at "self-referral," commonly known as the "Stark Law," there are prohibitions, with certain exceptions, on referrals for certain designated health services, including laboratory services, that are covered by the Medicare program by physicians who personally, or through an immediate family member, have a financial relationship with the entity to which the referrals for designated health services are made. The prohibition also extends to payment for any testing referred in violation of the Stark Law. A person who engages in a scheme to circumvent the Stark Law's referral prohibition may be fined up to $100,000 for each such arrangement or scheme. In addition, any person who presents or causes to be presented a claim to the Medicare program in violation of the Stark Law is subject to civil monetary penalties of up to $15,000 per service, an assessment of up to three times the amount claimed and possible exclusion from participation in federal healthcare programs. In addition, any person who presents or causes to be presented a claim to the Medicare program in violation of the Stark Law is subject to civil monetary penalties of up to $15,000 per service, an assessment of up to three times the amount claimed, and possible exclusion from participation in federal or state health care programs. Bills submitted in violation of the Stark Law may not be paid by Medicare, and any person collecting any amounts with respect to any such prohibited bill is obligated to refund such amounts. Many states have comparable laws that are not limited to Medicare referrals. The Stark Law also prohibits state receipt of Federal Medicaid matching funds for prohibited referrals, but this provision of the Stark Law has not been implemented by regulations. In addition, some courts have held that the submission of claims to Medicaid that would be prohibited as self-referrals under the Stark Law for Medicare could implicate the False Claims Act.
Corporate Practice of Medicine
Numerous states have enacted laws prohibiting business corporations, such as Sema4, from practicing medicine and employing or engaging physicians to practice medicine, generally referred to as the prohibition against the corporate practice of medicine. These laws are designed to prevent interference in the medical decision-making process by anyone who is not a licensed physician. For example, California's Medical Board has indicated that determining what diagnostic tests are appropriate for a particular condition and taking responsibility for the ultimate overall care of the patient, including providing treatment options available to the patient, would constitute the unlicensed practice of medicine if performed by an unlicensed person. Violation of these corporate practice of medicine laws may result in civil or criminal fines, as well as sanctions imposed against us and/or the professional
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through licensure proceedings. Typically, such laws are only applicable to entities that have a physical presence in the state.
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Genetic Privacy and Testing Laws
Sema4 isWe are subject to myriad laws designed to establish safeguards regarding the conduct of genomic testing and analysis and to protect against the misuse of genetic information and human biological specimens, collectively, “samples”, from which genetic information can be derived. These laws vary in their scope and in the nature of their requirements and restrictions. For example, certain genetic privacy laws prohibit the retention of samples after performing a genomic analysis in addition to prohibiting the use or disclosure of genetic information for certain purposes, such as research, without appropriate informed consent from the individual or without sufficient anonymization. The applicability of such informed consent requirements may also depend on the identifiability of the genetic information or sample and the purposes of which it is used. Other laws may impose additional requirements, including requirements regarding institutional review board review and approval for certain research uses of genetic information or samples requirements to implement certain security controls in connection with the transfer of genetic information. Sema4We must comply with such genetic privacy and testing laws in itsour collection, use, disclosure, and retention of genetic information and samples.
Other Health and Medical Regulations
The federal physician payment transparency requirements, or Physician Payments Sunshine Act, and its implementing regulations, which requires applicable manufacturers of covered drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the State Children’s Health Insurance Program, with certain exceptions, to annually report to HHS information related to certain payments or other transfers of value made or distributed to physicians, defined to include doctors, dentists, optometrists, podiatrists and chiropractors, and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. The SUPPORT Act, under a provision entitled “Fighting the Opioid Epidemic with Sunshine,” extends the Physician Payments Sunshine Act to payments and transfers of value to physician assistants, nurse practitioners and other mid-level healthcare providers, with reporting requirements going into effect in 2022 for payments and transfers of value made to these practitioners in 2021.
In addition to its comprehensive regulation of health and safety in the workplace in general, the Occupational Safety and Health Administration has established extensive requirements aimed specifically at laboratories and other healthcare-related facilities. In addition, because Sema4’sour operations require employees to use certain hazardous chemicals, we also must comply with regulations on hazard communication and hazardous chemicals in laboratories. These regulations require Sema4,us, among other things, to develop written programs and plans, which must address methods for preventing and mitigating employee exposure, the use of personal protective equipment, and training.
Sema4’sOur commercialization activities subject us to regulations of the Department of Transportation, the U.S. Postal Service, and the Centers for Disease Control and Prevention that apply to the surface and air transportation of clinical laboratory specimens.
Sema4 isWe are also subject to applicable state billing laws. Some states require that payment be made only to the person or entity who performed or supervised the service, while other states have passed anti-mark up and disclosure laws, an alternative but less enforceable approach to direct billing. Under these laws the non-performing person or entity is allowed to bill the client, but is prohibited from marking up the service, and required to disclose each charge to the patient, or patient’s insurer. Additionally, some states have strictly passed disclosure laws that require the non-performing person or entity to disclose to patients or the patient’s insurer the actual charges for all laboratory services.
Privacy and Data Protection Laws
There are a growing number of jurisdictions all over the world that have privacy and data protection laws. These laws are typically triggered by a company’s establishment or physical location in the jurisdiction, data processing activities that take place in the jurisdiction, and/or the processing of personal information about individuals located
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in that jurisdiction. Certain international privacy and data protection laws, such as those in the European Union, can be more restrictive and prescriptive than those in the U.S., while other jurisdictions can have laws less restrictive or
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prescriptive than those in the U.S. Enforcement of these laws vary from jurisdiction to jurisdiction, with a variety of civil or criminal penalties, or private rights of action.
The European Union’s General Data Protection Regulation, or GDPR, took effect on May 25, 2018. The GDPR extraterritorially applies to a business outside the European Union that offers goods or services to, or monitors the behavior of individuals who are located in the European Union. The GDPR imposes strict requirements on controllers and processors of personal data, including enhanced protections for “special categories” of personal data, which includes sensitive information such as health and genetic information of data subjects in the European Union. The GDPR also grants individuals various rights in relation to their personal data including the rights of access, rectification, objection to certain processing and deletion. The GDPR provides an individual with an express right to seek legal remedies if the individual believes his or her rights have been violated. Failure to comply with the requirements of the GDPR or the related national data protection laws of the member states of the European Union, which may deviate from or be more restrictive than the GDPR, may result in significant administrative fines issued by European Union regulators.
As of December 31, 2020, The United Kingdom of Great Britain and Northern Ireland, or UK, are no longer subject to EU law. Therefore, the GDPR will be brought into UK law as the ‘UK GDPR’ via a statutory instrument which will make technical amendments to the GDPR so that it works in a UK-only context. In Europe, there are also national laws that provide additional controls around the processing of health data.
The Payment Card Industry Data Security Standard, or PCI DSS, was issued by the Payment Card Industry Security Standards Council and establishes industry standards for the processing of payment card information. While the PCI DSS requirements do not have the force of law, the penalties for noncompliance could include exclusion from payment card systems. To the extent that Sema4 collectswe collect payment card information when receiving payments of insurance premiums or payments for Sema4’sour products or services, Sema4 complieswe comply with PCI DSS as applicable to Sema4’sour payment environment and PCI DSS merchant level, which is determined by Sema4’sour volume of payment card transactions per year.
FTC Act
As an entity regulated by the Federal Trade Commission, or FTC, Sema4 iswe are subject to the FTC’s enforcement power under Section 5 of the Federal Trade Commission Act, or FTC Act. The FTC has policed privacy and data security through its broad power under Section 5 of the FTC Act. Under Section 5, “unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful.” Deceptive trade practices are defined by the FTC as material representations, omissions or practices that are likely to mislead a consumer acting reasonably in the circumstances to the consumer’s detriment. The FTC defines an “unfair” trade practice as one that “causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and is not outweighed by countervailing benefits to consumers or competition.”
The FTC has refrained from providing a checklist of uniformly acceptable data security practices or focusing on one single practice as actionable. Instead, the FTC has taken a holistic approach and relied on industry standards and other norms to identify a particular set of practices that, taken together, constitute adequate security practices for companies collecting personal information. In evaluating whether a data security practice is unfair, the FTC focuses largely on “substantial injury to consumers.” The harm need not be monetary or physical, though such injuries are commonly considered “substantial.” Further, the harm can consist of a risk rather than an actual loss.
CAN-SPAM Act
The Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, or CAN-SPAM Act, establishes rules for commercial electronic mail messages, gives recipients the right to opt out of certain messages, and establishes penalties for violations. Sema4 compliesWe comply with the CAN-SPAM Act in connection with itsour transmittal of commercial electronic mail messages, or Commercial Email Messages. Commercial Email Messages do not include emails that are informational or are transactional or relationship messages.
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TCPA
The Telephone Consumer Protection Act of 1991, or TCPA, restricts the making of telemarketing calls and the use of automatic telephone dialing systems, artificial or prerecorded voice messages, SMS text messages, and facsimile transmissions. It also specifies several technical requirements for fax machines, autodialers, and voice messaging systems, principally with provisions requiring identification and contact information of the entity using the device to be contained in the message. Sema4 compliesWe comply with TCPA in connection with itsour transmittal of automated, artificial, or prerecorded phone calls, SMS text messages, facsimile transmissions, and push notifications.
California Consumer Privacy Act
The California Consumer Privacy Act, or CCPA, is a comprehensive consumer privacy law that took effect on January 1, 2020, and regulates how certain for-profit businesses that do business in California collect, use, and disclose the personal information of consumers who reside in California. Among other things, the CCPA confers to California consumers the right to receive notice of the categories of personal information to be collected by a business, how the business will use and share the personal information, and the third parties who will receive the personal information; the rights to access, delete, or transfer personal information; and the right to receive equal service and pricing from a business after exercising a consumer right granted by the CCPA. In addition, the CCPA allows California consumers the right to opt out of the “sale” of their personal information, which the CCPA defines broadly as any disclosure of personal information to a third party in exchange for monetary or other valuable consideration. The CCPA also requires a business to implement reasonable security procedures to safeguard personal information against unauthorized access, use, or disclosure.
The CCPA does not apply to personal information that is Protected Health Information under HIPAA. The CCPA also does not apply to a HIPAA Covered Entity to the extent that the Covered Entity maintains patient information in the same manner as Protected Health Information. Sema4 isWe are subject to the CCPA with respect to personal information it collectswe collect from California consumers that is neither PHI under HIPAA nor patient information that Sema4 maintainswe maintain in the same manner as Protected Health Information.
The California Attorney General has authority to enforce the CCPA and its implementing regulations against covered businesses beginning on July 1, 2020. The CCPA provides for civil penalties for violations, as well as private right of action for data breaches that result from a business’ failure to implement reasonable security procedures.
Competition
Sema4’sOur competitors include companies that offer molecular genetic testing and other clinical diagnostic, life science research, drug discovery services, data services and healthcare analytics, and consumer genetics products. Principal competitors include companies such as Myriad Genetics, Inc., Ambry Genetics Corporation, Color Genomics, Inc., Invitae Corporation, Natera, Inc., Tempus Labs, Inc., Quest Diagnostics, Inc., Laboratory Corporation of America Holdings (or LabCorp), Exact Sciences Corp., 10x Genomics, Inc., Guardant Health, Inc., and Adaptive Biotechnologies, Twist Biosciences Corp., and Schrödinger, Inc., as well as other commercial and academic diagnostic and analytic service providers. In addition to the companies that currently offer traditional genetic testing services and research centers, other established and emerging healthcare, information technology and service companies may commercialize competitive products including informatics, analysis, integrated genetic tools and services for health and wellness.
We believe the principal competitive factors in Sema4’sour market are:
•Patient-centric approach;
•Breadth, depth, and quality of data assets;
•Price and quality of tests;
•Turnaround time of testing results;
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•Coverage and reimbursement arrangements with third-party payors;
•Depth and clinical applicability of interpretive insights;
•Degree of utility of patient and provider facing applications;
•Breadth of interpretive insights beyond just one episode of care;
•Convenience of testing;
•Brand recognition of test provider;
•Additional value-added services and informatics tools;
•Accessibility of results;
•Client service;
•Quality of website content; and
•Reliability
We believe that Sema4 compareswe compare favorably with itsour competitors on the basis of these factors. However, many of Sema4’sour competitors and potential competitors have longer operating histories, larger customer bases, greater brand recognition and market penetration, substantially greater financial, technological and research and development resources and selling and marketing capabilities, more experience dealing with third-party payors. As a result, they may be able to respond more quickly to changes in customer requirements, devote greater resources to the development, promotion and sale of their tests than Sema4 does, or sell their tests at prices designed to win significant levels of market share. Sema4We may not be able to compete effectively against these organizations.
Legal Proceedings
Sema4 is currently not a party to any material legal proceedings. From time to time, Sema4 may be involved in various disputes and litigation that is either judged to be not material or that arises in the ordinary course of business.
Environmental Matters
Sema4’s operations require the use of hazardous materials (including biological materials) that subject it to a variety of federal, state, and local environmental and safety laws and regulations. Some of these regulations provide for strict liability, holding a party potentially liable without regard to fault or negligence. Sema4We could be held liable for damages and fines as a result of its,our, or its partner’s,our partners’, business operations should contamination of the environment or individual exposure to hazardous substances occur. Sema4We cannot predict how changes in laws or new regulations will affect itour business operations or the cost of compliance.
Raw Materials and Suppliers
Sema4 reliesWe rely on a limited number of suppliers, or, in some cases, sole suppliers, including Agilent Technologies, Inc., Illumina, Inc., Life Technologies Corporation, Agena Biosciences, Inc., MRC-Holland, Asuragen Inc., PerkinElmer Health Sciences, Inc., Fisher Scientific, Integra Biosciences Corporation, Thomas Scientific, Qiagen Inc., USA Scientific, Inc., Promega Corporation, Integrated DNA Technologies Incorporated, and Kapa Biosystems Inc., for certain laboratory reagents, as well as sequencers and other equipment and materials which we use in our laboratory operations. Sema4’sOur laboratory operations could be interrupted if it encounterswe encounter delays or difficulties in securing these reagents, sequencers or other equipment or materials, and if we cannot obtain an acceptable substitute. Any such interruption could significantly affect itsour business, financial condition, results of operations and reputation. Sema4 believesWe believe that there are only a few other manufacturers that are currently capable of supplying and servicing the equipment necessary for our laboratory operations, including sequencers and various associated reagents. The use of equipment or materials provided by these replacement suppliers would require Sema4us to alter itsour laboratory operations. Transitioning to a new supplier would be time consuming and expensive,
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may result in interruptions in our laboratory operations, could affect the performance specifications of its laboratory operations or could require that Sema4we revalidate our tests. We cannot assure you that Sema4we would be able to secure alternative equipment, reagents, and other materials, or bring such equipment, reagents, and materials online and revalidate them without experiencing interruptions in itsour workflow. If Sema4 encounterswe encounter delays or difficulties in securing,
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reconfiguring, or revalidating the equipment and reagents Sema4we require for itsour tests, our business and reputation could be adversely affected.
Customers
We provide our health information products and services to a broad range of customers, including health plans (including managed care organizations and other health insurance providers); clinicians; hospitals; employers; consumers;patients; federally qualified health centers; and Biopharma companies. In addition, during 2020 and 2021, the customers for our COVID-19 tests included state governments.
Depending on the billing arrangement and applicable law, the clinician or healthcare entity that orders our products or services may not be responsible for paying for the products or services ordered for their patients. In certain circumstances, the patient may be responsible for payment, and in others Sema4 seekswe seek payment from third party payers, such as a commercial health insurance company, Medicare or a Medicaid program, pursuant to contracts established between Sema4us and such third parties.
During 2020,2021, reimbursement from health plans represented 78%79% and 76% of Sema4's consolidated revenue.our diagnostic test revenue and total revenue, respectively. In 2020,2021, two customershealth plans each represented 10% or more of Sema4’sour consolidated total revenue, and no other customerhealth plans or other customers represented 10% or more of Sema4’sour consolidated total revenue.
Our Culture and Employees
As of March 31, 2021, Sema4 had 985 full time employees. To date, Sema4 has not experienced any work stoppages as a result of labor disputes, and Sema4 considers our relationship with its employees to be good. Sema4’s key human capital objectives in managing its business include attracting, developing and retaining top talent while integrating diversity, equity and inclusion principles and practices into our core values. Sema4 wants to attract a pool of diverse and exceptional candidates and support their career growth once they become employees. We also believe that Sema4’s ability to retain its workforce is dependent on its ability to foster an environment that is sustainably safe, respectful, fair and inclusive of everyone and promotes diversity, equity and inclusion inside and outside of its business.Human Capital
Sema4 is mission driven. Sema4’sOur employees are passionate about changing healthcare as sema4 knows it and impacting lives. Sema4 hiresWe attract entrepreneurs who are comfortable with ambiguity and thrive on innovation and thoughtful discourse. Sema4 empowers itsWe empower our employees to iterate and rapidly execute on ideas. When
It is our People Team’s mission to connect people to purpose. We achieve this through enablement of excellence across the creative moment strikes, sema4 embraces efficient executionemployment journey, through stewardship of an engaged and adheresinclusive culture, by growing individual, team and organizational capability, in delivering simplification and innovation, and by sharing data-driven people insights that transform our organization. All of this is in service of driving our business forward and optimizing patient health outcomes.
We are delivering a competitive package of compensation and benefits that aims to attract and retain strong talent, in a very competitive talent marketplace. As of December 31, 2021, we had approximately 1,200 employees, of which 54% are women and 46% are men. Our headcount grew by approximately 33% in 2021, and we hired approximately 500 employees in that timeframe, as a part of scaling our operations in connection with our transition to a public company and meeting our strategic priorities.
Our Diversity and Inclusion Council seeks to improve diversity, inclusion, equality, and global understanding by promoting dialogue, encouraging respectful understanding, providing information, participating in policy development, overseeing diversity education and training, and helping to foster respect for all employees. In 2022, we will be hosting our inaugural BIPOC Initiative Genomics Symposium, inviting select Ph.D. students and post doctorates for a two-day research symposium to strengthen our diverse hiring practices. Each attendee will present their original research, and will learn about science and career opportunities at Sema4.
We believe that our corporate culture fosters innovation, creativity, and teamwork. In this past year, we launched several programs and processes, which intend to help build a driven culture of alignment, development, compliance, and respect. We are in our second year of formal performance management processes, which are used to drive organizational alignment and includes tracking top-down business priorities and people development goals. The launch of two promotion cycles focus and enable employee career growth and mobility. We also implemented formal people manager learning, in order to build stronger people management skills for our leaders. We have optimized processes and transformed our people management solution in order to have greater systems capability, access to robust securityreporting, and to strengthen our analytical horsepower.
We have implemented a comprehensive compliance programs.
•Sema4’s culture hasinfrastructure, which advises Sema4 individuals and will evolve but, at its core, it strives to:
•Consider employees as its most prized asset,
•Move at the speedbusiness affiliates on how to prevent, detect, report, and resolve matters of technologyfraud, waste, threats, and the market,
•Be compassionate,
•Think around corners,
•Foster repeatable innovation, and
•Focus on our mission.
Facilities
Sema4’s corporate headquarters and main laboratory facility are both located in Stamford, Connecticut. Sema4’s headquarters comprises approximately 88,000 square feet of commercial office space and is subjectabuse related to a
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lease that is scheduledinstitutional policies and federal, state, and local laws and regulations. We have implemented various committees, councils and boards such as the Diversity & Inclusion Council, Data Governance Board, and IRB Review Board. These groups provide guidance for our employees, to expire on January 31, 2034. Sema4’s main separate laboratory facility is approximately 66,000 square feetempower them to perform according to our legal and ethical standards. We observe legal, regulatory, and industry trends and comprehensively adapt internal policies and practices as needed. We educate our Board members, executives, and other key employees about conflicts of combined laboratoryinterest and office spaceadvise how to prevent and is subjectdetect potential or actual conflicts of interest to a lease that is scheduledsafeguard from inappropriate external influence or impropriety.
We look to expire on October 31, 2046.
Additionally, Sema4 has two laboratory spacesfurther strengthen our people infrastructure in Branford, Connecticut. The larger laboratory facility comprises approximately 37,400 square feet of laboratory space that houses Sema4’s biorepository in a temperature2022 through enhanced engagement surveys, values and humidity-controlled lab spacebehaviors programming, and is subject to a lease that is scheduled to expire on January 31, 2030. The smaller satellite laboratory and warehousing facility of 19,000 square feet is subject to a year-to-year lease.
Sema4 also has productformal talent reviews, with development team that is located in New York, New York, where its leases and occupy approximately 9,000 square feet of space across three parcels. The leases for two of these parcels are scheduled to expire on August 30, 2022, and the lease for the remaining parcel is month-to-month until terminated.planning.
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SEMA4’sSEMA4’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with ourthe financial statements and related notes of the Company, included elsewhere in this proxy statement. This discussion contains forward-looking statements reflecting our current expectations, estimates and otherassumptions concerning events and financial informationtrends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” appearing elsewhere in this proxy statement. Some of the information contained in this discussion and analysis or set forth elsewhere in this proxy statement, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this proxy statement, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Unless otherwise indicated or the context otherwise requires, references in this Sema4’s Management’s Discussion and Analysis of Financial Condition and Results of Operations section to “Sema4,” “we,” “us,” “our” and other similar terms refer to Sema4 prior to the Business Combination and to the post-combination company and its consolidated subsidiaries after giving effect to the Business Combination.
Overview
Sema4 isWe are a patient-centered, health intelligence company with a mission to use artificial intelligence, or AI, and machine learning to enable personalized medicine for all. By leveraging leading data scientists and technology, our platform powers remarkable and unique insights that transform the practice of medicine including how disease is diagnosed, treated, and prevented.
Sema4 wasWe were established out of the Icahn School of Medicine at Mount Sinai or ISMMS, and commenced operations in June 2017 as a commercial entity that could effectively engage diverse patient populations and health care institutions at scale. Sema4 hasWe have since established and deployed itsour comprehensive and integrated genomic and clinical data platform and established a mature diagnostic testing business. We now maintain a database that includes more than 12 million de-identified individual clinical records, many with genomic profiles. We also manage a data asset over 47 petabytes in size, that has been expanding at more than 1 petabyte per month with an accelerating growth rate.
Currently, we derive the majority of our revenue from our diagnostic test solutions. Our diagnostic business generates revenue and engages with healthcare professionals working with patients primarily through our Women’s Health and Oncology solutions.
Our Women’s Health solutions sequence and analyze an industry-leading number of genes and use interpretive information tools to translate raw sequencing and clinical data efficiently and accurately into digestible clinical reports that guide decision makingdecision-making by patients and physicians. Our Oncology diagnostic solutions feature both somatic tumor profiling and hereditary cancer screenings, along with a foundational whole exome and whole transcriptome sequencing approach. Our Sema4 Signal Hereditary Cancer solution determines if a patient carries an inherited genetic change that increases the risk of cancer or informs on cancer treatment. We believe our Signal Whole Exome and Transcriptome solution is one of the most comprehensive molecular profiling solutions from a commercial entity to receive New York State approval. Beginning in May of 2020, we were also able to expandexpanded our diagnostic testing services to include testing for the presence of COVID-19, infection.which we intend to discontinue by March 31, 2022.
We have also expanded beyond diagnostic testing to enter into collaboration service agreements with third parties to provide diagnostic testing, research, and related data aggregation reporting services. We have established and continue to seek strategic relationships with pharmaceutical and biotech, or Biopharma, companies to enable innovation across the entire drug lifecycle, from next generationnext-generation drug discovery and development, to post-market efficacy surveillance, to informing on bioavailability, toxicity, tolerability, and other features critical to drug development.

Factors Affecting Our Performance
We believe there are several important factors that have impacted, and that we expect will continue to impact, our performance and results of operations. While each of these areas presents significant opportunities for us, they also pose significant risks and challenges that we must address. See the section titled “Risk“Risk Factors” for more information.
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Number of accessionedresulted tests
We historically reported both accessioned and resulted tests as important factors impacting our performance. A test is resulted once the appropriate workflow is completed and details are provided to the ordered patients or healthcare professional for reviews, which corresponds to the timing of our revenue recognition. We believe the number of accessionedresulted tests in any period is anmore important indicator of the growth inand useful to our diagnostic testing services andinvestors because it directly correlates with long-term patient relationships and the size of our genomic database. A test isTherefore, we do not plan to report the number of accessioned when we receive the test at our laboratory, the relevant information about the test is entered into our computer system and the test sample is routed to the appropriate workflow.tests.
Success obtaining and maintaining reimbursement
Our ability to increase the number of billable tests and our revenue therefrom will depend on our success in achieving reimbursement for our tests from third partythird-party payors. Reimbursement by a payor may depend on a number ofseveral factors, including a payor’s determination that a test is appropriate, medically necessary, cost-effective, and has received prior authorization. Since each payor makes its own decision as to whether to establish a policy or enter into a contract to provide coverage for our tests, as well as the amount it will reimburse us for a test, seeking these approvals is a time-consuming and costly process.
In cases where we or our partners have established reimbursement rates with third partythird-party payors, we face additional challenges in complying with their procedural requirements for reimbursement. These requirements often vary from payor to payor and are reassessed by third partythird-party payors onregularly. As a regular basis, and we haveresult, in the past we have needed additional time and resources to comply with them.the requirements.
We expect to continue to focus our resources on increasing the adoption of, and expanding coverage and reimbursement for, our current tests and any future tests we may develop or acquire. If we fail to expand and maintain broad adoption of, and coverage and reimbursement for, our tests, our ability to generate revenue could be harmed and our future business prospects and its business could suffer.may be adversely affected.
Ability to lower the costs associated with performing our tests
Reducing the costs associated with performing our diagnostic tests is both aour focus and a strategic objective of ours.objective. We source, and will continue to source, components of our diagnostic testing workflows from third parties. We also rely upon third partythird-party service providers for data storage and workflow management.
Increasing adoption of our services by existing and new customers
Our performance depends on our ability to retain and broaden the adoption of our services with existing customers as well as our ability to attract new customers. Our success in retaining and gaining new customers is dependent on the market’s confidence in our services and the willingness of customers to continue to seek more comprehensive and integrated genomic and clinical data insights.
Investment in platform innovation to support commercial growth
We are seeking to leverage and deploy our Centrellis and Traversa platforms to develop a pipeline of future disease-specific research and diagnostic and therapeutic products and services. We have limited experience within the development or commercialization of clinical or research products in connection with our database and our Centrellis platform.
We operate in a rapidly evolving and highly competitive industry. Our business faces changing technologies, shifting provider and patient needs, and frequent introductions of rival products and services. To compete successfully, we must accurately anticipate technology developments and deliver innovative, relevant, and useful products, services, and technologies in a timely manner.on time. As our business evolves, the competitive pressure to innovate will encompass a wider range of products and services. We must continue to invest significant resources in research and development, including investments through acquisitions and partnerships. These investments are critical to the enhancement of our current diagnostics and health information and data science technologies from which existing and new service offerings are derived.
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We expect to incur significant expenses to advance these development efforts, but they may not be successful. New potential services may fail at any stage of development and, if we determine that any of our current or future
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services are unlikely to succeed, we may abandon them without any return on our investment. If we are unsuccessful in developing additional services, our growth potential for growth may be impaired.

Key Performance Indicators
We use the following key financial and operating metrics to evaluate our business and operations, measure our performance, identify trends affecting our business, project our future performance, and make strategic decisions. These key financial and operating metrics should be read in conjunction with the following discussion of our results of operations and financial condition together with our consolidated financial statements and the related notes and other financial information included elsewhere in this proxy statement.
The principal focus of our commercial operations is to offer our diagnostic tests through both our direct sales force and laboratory distribution partners. Test volume correlates with genomic database size and long-term patient relationships. Thus, test volumes drive database diversity and enable potential identification of variants of unknown significance and population-specific insights. The number of tests resulted is a key indicator that we use to assess the operational efficiency of our business. Once the appropriate workflow is completed, the test is resulted and details are provided to ordered patients or healthcare professionals for reviews.
During the year ended December 31, 2021, we resulted 709,942 tests in our laboratories, 418,053 tests of which were for COVID-19, compared to the period ended December 31, 2020, in which we resulted approximately 540,407 tests in our laboratories, 332,764 of which were for COVID-19. This 31% increase in resulted volume from 2020 to 2021 largely resulted from newly entered service agreements for COVID-19 testing as well as an increase in non-COVID-19 institutional testing. During the year ended December 31, 2019, we resulted approximately 155,497 tests in our laboratories, none of which were for COVID-19. The 248% increase in resulted volume from 2019 to 2020 largely resulted from newly entered service agreements for COVID-19 testing, offset by a slowdown in the base diagnostic business during the beginning of the COVID-19 pandemic given that many of our customers, including hospitals and clinics, had suspended non-emergency appointments and services.
As discussed above, we no longer report the number of accessioned tests as a key performance indicator because the number of resulted tests more directly correlates with long-term patient relationships and the size of our genomic database.

COVID-19 Impact
In March 2020, the World Health Organization declared the recent novel coronavirus, orThe ongoing COVID-19 outbreak a pandemic. COVID-19pandemic has had, and continues to have, an extensive impact on the global health and economic environments. Many jurisdictions, including thoseenvironments since the initial outbreak in which Sema4 has locations, have implemented measures to combat the outbreak, such as travel restrictions and shelter in place orders. In addition, the healthcare sector generally experienced a decline in discretionary care services at the onset of the pandemic.March 2020.
Beginning in April 2020, our diagnostic test volumes decreased significantly as compared to the prior year as a result of the COVID-19 pandemic and the related limitations and priorities across the healthcare system. In response, beginning in May 2020, we entered into several service agreements with state governments and healthcare institutions to provide testing for the presence of COVID-19 infection. COVID-19 test volumes grew significantly from the introduction of the service offering through the remainder of the year.2020 and further increased in 2021. To support the rapid expansion of COVID-19 test volumes, we have increased our workforce through both temporary contractors and employees. In addition, while most of our revenues from genetic testing rely upon reimbursements from third party payors, healthcare institutions, and individuals, the majority of our COVID-19 test revenues rely upon reimbursements from state governments and healthcare institutions. In addition, COVID-19 testing yields lower revenues per tests and incurs lower costs to perform each test. We have also experienced a slowdown in receivable collections since the onset of the pandemic, but do not expect those collection trends to continue.
As part of our response to the ongoing COVID-19 pandemic, we have implemented various strategies to mitigate operating risks, reduce costs and improve cash collections. We have made significant advance purchases of test-related inventory in order to reduce the risk of potential business interruptions related to supply chain disruption. We also contracted with third-party vendors to collect and test COVID-19 samples to reduce operating risks related to employee health. Temporary COVID-19 austerity measures included cancellation of the 2020 annual merit
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compensation increase, temporary salary reductions from May through July 2020 and deferral of the 401(k) employer match from May through December 2020. The employer match was reinstated in January 2021, and the deferred portion was funded on March 9, 2021. To support our sales employees with commission-based compensation structure, we implemented temporary minimum commissions during the second quarter of 2020. No such minimums were in place in any quarter after the second quarter nor are any such minimums expected to be implemented again in the near term. No employee layoffs were implemented as part of these austerity measures.
As conditions begin to improve, we are focused on overhauling our revenue cycle, and as part of transformational activities have hired a Chief Revenue Officer and established a revenue cycle Center of Excellence. As part of our efforts to improve our collection efficiency and overall financial health, we are also undergoing various process transformations within the Order-to-Cash and Procure-to-Pay cycles.
While test volumes have since improved, we continue to experience changes in the mix of tests due to the impact of COVID-19.the COVID-19 and its variants. We anticipate that demand for COVID-19 tests will eventually decrease as vaccines continue to be developed and deployed to the general population. However, no additional decline is expectedFor this reason, we announced in December 2021 that we had decided to discontinue COVID-19 testing services by March 31, 2022 and began notifying our COVID-19 testing solutions customers of this decision. We intend to dedicate all of our efforts and resources to our core mission to transform healthcare by using artificial intelligence to enable the delivery of precision medicine as the standard of care, and do not expect declines for our other revenue streams for the remainder of 2021.during 2022. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19 or its variants, the actions taken to contain it or treat it and the economic impact on local, regional, national and international markets and supply chains. Therefore, the COVID-19 pandemic could continue to have a material impact on our results of operations, cash flows and financial condition for the foreseeable future.
In March 2020, the Coronavirus Aid, Relief and Economic Security Act, or the CARES Act, was signed into law which was a stimulus bill that, among other things, provided assistance to qualifying businesses and individuals and included funding for the healthcare system. We received $5.4 million in 2020 as part of the stimulus, comprised of $2.6 million received under the Provider Relief Fund, or PRF, distribution and $2.8 million received under the
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Employee Retention Credit, or ERC, distribution. During 2021, we received an additional $5.6 million under the PRF distribution.
PRF distributions to healthcare providers are not loans and will not be required to be repaid; however, as a condition to receiving these payments, providers must agree to certain terms and conditions and submit sufficient documentation demonstrating that the funds are being used for healthcare-related expenses or lost revenue attributable to the COVID-19 pandemic. We have concluded it is probable that all terms and conditions associated with the PRF distribution have been met. As a result, we recorded the PRF distributions in other income (expense), net in the statements of operations and comprehensive loss during the periods in which we received the distributions.
ERC distributions are refundable tax credits for 50% of qualified wages paid to employees during the pandemic. A company is eligible for the ERC if it has not received a Paycheck Protection Program loan under the Cares Act and (1) its operations have been fully or partially suspended because of COVID-19 or (2) its gross receipts in a calendar quarter in 2020 declined by more than 50% from the same period in 2019. At the time of applying for the ERC, we concluded that it was reasonably possible the eligibility requirements would bebe met; however, due to a change in circumstances, we are re-evaluating our position. As such, we deferred the recognition of the ERC distribution and recorded the proceeds in other liabilities on the consolidated balance sheets.sheets as of December 31, 2021 and 2020.
At this time, we are not certain of the availability, extent or impact of any future relief provided under the CARES Act or other stimulus initiatives.
Recent Developments
In January 2022, we and our wholly-owned subsidiaries, Orion Merger Sub I, Inc., or Merger Sub I, and Orion Merger Sub II, LLC, or Merger Sub II, entered into an Agreement and Plan of Merger and Reorganization, or the
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Merger Agreement, with GeneDx, Inc., a New Jersey corporation, or GeneDx, and a wholly-owned subsidiary of OPKO Health, Inc., or OPKO, GeneDx Holding 2, Inc., or Holdco, and OPKO to acquire 100% of GeneDx. Subject to the terms and conditions of the Merger Agreement, we will pay consideration to OPKO for the Acquisition of (i) $150 million in cash at the closing of the Acquisition, subject to certain adjustments as provided in the Merger Agreement, (ii) 80 million shares of our Class A common stock to be issued at the closing of the Acquisition and (iii) up to $150 million payable following the closing of the Acquisition, if certain revenue-based milestones are achieved for each of the fiscal years ending December 31, 2022 and December 31, 2023. These milestone payments, if and to the extent earned under the terms of the Merger Agreement, will be satisfied through the payment and/or issuance of a combination of cash and shares of our Class A common stock (valued at $4.86 per share), with such mix to be determined in our sole discretion.
The completion of the Acquisition is subject to a number of closing conditions (which, as of the date of this proxy statement, have not been met), including certain regulatory and other third party approvals, the consummation of a pre-closing restructuring and certain approvals of our stockholders related to the Acquisition). The Acquisition is expected to close in the first half of 2022. If this pending Acquisition is consummated, consistent with our business model, we expect to leverage the combined health information database of Sema4 and GeneDx to partner with additional health systems and biopharma companies to transform patient care and therapeutic development and enable precision medicine for all.
Concurrently with the execution of the Merger Agreement, we entered into the Subscription Agreements with the PIPE Investors. The PIPE Investment will be consummated substantially concurrently with the closing of the Acquisition.

Components of Results of Operations
Revenue
We derive the majority of our revenue from diagnostic testing services, which primarily relate to Women’s Health, Oncology and COVID-19. We also recognize revenue from collaboration service agreements with Biopharma companies and other third parties pursuant to which we provide diagnostic testing and related data aggregation reporting services. As discussed above, in December 2021, we announced that we decided to discontinue COVID-19 testing services by March 31, 2022 and begun notifying its COVID-19 testing solutions customers of this decision.
Effective January 1, 2019, we adopted the new revenue guidance, Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606”), using the modified retrospective approach. Upon the adoption of ASC 606, weWe recognize revenue when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration which we expect to be entitled to in exchange for those goods or services.
We recognized revenue pursuant to ASC Topic 605 (“ASC 605”), Revenue Recognition, for the year ended December 31, 2018 prior to the adoption of ASC 606. Under ASC 605, revenue was recognized when persuasive evidence of a final agreement existed; delivery had occurred or services were rendered; the price of the product or service was fixed or determinable; and collectability from the customer was reasonably assured.
The adoption of ASC 606 did not materially impact our revenue recognition.
Diagnostic Test Revenue
We primarily generate revenue from performing diagnostic testing services for three groups of customers: healthcare professionals working with patients with third-party insurance coverage; patientscoverage or without third-party insurance coverage or those who elect to self-pay; and institutional clients, such as hospitals, clinics, state governments and reference laboratories. Customers are billed upon delivery of test results. The amount of revenue recognized for diagnostic testing services depends on a number of factors, such as contracted rates with our customers and third-party insurance providers, insurance reimbursement policies, payor mix, historical collection experience, price concessions and other business and economic conditions and trends. To date, the majority of our diagnostic test revenue has been earned from orders received for patients with third-party insurance coverage.
In accordance with ASC 606, revenue is recognized at the point in time in which test results are delivered to customers in an amount that reflects what we expect to collect in exchange for our services.
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In accordance with ASC 605, revenue is recognized in the period in which test results are delivered to customers if the price is fixed or determinable and collectability from the customer is reasonably assured. For most uninsured customers, we were not able to demonstrate a predictable pattern of collectability and, therefore, we recognized revenue when payment was received.
Due to potential future changes in insurance coverage policies, contractual rates, and other trends in the reimbursement of our tests, our collections may fluctuate significantly over time.
Our ability to increase our diagnostic test revenue will depend on our ability to increase our market penetration, obtain contracted reimbursement coverage from third-party payers, enter into contracts with institutions, and increase our reimbursement rate for tests performed.
Other Revenue
We generate revenue from providing diagnostic testing and related data aggregation reporting services under both short-term and long-term project-based collaboration service agreements with third parties. The terms of these
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contracts generally include non-refundable upfront payments, which we record as contract liabilities, and variable payments based upon the achievement of certain milestones during the contract term.
In accordance with ASC 606, we recognize revenue for collaboration service agreements over time based on costs incurred during the contract period. In accordance with ASC 605, we recognized revenues when the contractual obligations were met based on the terms of the respective agreements.
With respect to existing collaboration service agreements, our revenue may fluctuate period to period due to the pattern in which we may deliver our services, our ability to achieve milestones, the timing of costs incurred, changes in estimates of total anticipated costs that we expect to incur during the contract period, and other events that may not be within our control. Our ability to increase our revenue will depend on our ability to enter into contracts with third-party partners.
Cost of Services
CostThe cost of services reflectsreflect the aggregate costs incurred in performing diagnostic testing and collaboration services. These costs include expenses for reagents and laboratory supplies, personnel-related expenses (comprising salaries and benefits), and stock-based compensation for employees directly involved in revenue generating activities, shipping and handling fees, costs of third-party reference lab testing and third-party providers ofphlebotomy services and allocated genetic counseling, facility and phlebotomy services, amortization of software development costs and equipment and allocated facilityIT costs associated with testing.delivery services. Allocated facility costs include depreciation of laboratory equipment, facility occupancy, and information technology costs. CostThe cost of services are recorded as the services are performed.
We expect the cost of services to generally increase in line with the anticipated growth in diagnostic testing volume and services we provide under our collaboration service agreements. However, we expect the cost per test to decrease over the long term due to the efficiencies we may gain from improved utilization of our laboratory capacity, automation, and other value engineering initiatives. These expected reductions may be offset by new tests which often have a higher cost per test during the introductory phases before we are able tocan gain efficiencies. The cost per test may fluctuate from quarterperiod to quarter.period.
Research and Development Expenses
Research and development expenses represent costs incurred to develop our technology and future test offerings. These costs are principally associated with our efforts to develop the software we use to analyze data and process customer orders. These costs primarily consist of personnel-related expenses (comprising salaries and benefits), stock-based compensation for employees performing research and development, innovation and product development activities, costs of reagents and laboratory supplies, costs of consultants and third-party services, equipment and related depreciation expenses, non-capitalizable software development costs, research funding to our research partners as part of research and development agreements and allocated facility and information technology costs associated with genomics medical research. Research and development costs are generally expensed as incurred.
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incurred and certain non-refundable advanced payments provided to our research partners are expensed as the related activities are performed.
We generally expect our research and development expenses to continue to increase in absolute dollars as we innovate and expand the application of our platforms. However, we expect research and development expenses to decrease as a percentage of revenue in the long term, although the percentage may fluctuate from period to period due to the timing and extent of our development and commercialization efforts and fluctuations in our compensation-related charges.
Selling and Marketing Expenses
Selling and marketing expenses primarily consist of personnel-related expenses (comprising salaries, and benefits) and stock-based compensation for employees performing commercial sales, account management, marketing, and allocation of genetic counseling services related to medical education. Selling and marketing costs are expensed as incurred.
We generally expect our selling and marketing expenses will continue to increase in absolute dollars as we expand our commercial sales and marketing and counseling teams and increase marketing activities. However, we expect selling and marketing expenses to decrease as a percentage of revenue in the long term, subject to fluctuations from period to period due to the timing and magnitude of these expenses.
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General and Administrative Expenses
General and administrative expenses primarily consist of personnel-related expenses (comprising salaries and benefits) and stock-based compensation for employees in executive leadership, legal, finance and accounting, human resources, information technology, strategy and other administrative functions. In addition, these expenses include office occupancy and information technology costs. General and administrative costs are expensed as incurred.
We generally expect our general and administrative expenses to continue to increase in absolute dollars as we increase headcount and incur costs associated with operating as a public company, including expenses related to legal, accounting, and regulatory matters; maintaining compliance with requirements of the Nasdaq and of the SEC; director and officer insurance premiums and investor relations. We expect these expenses to decrease as a percentage of revenue in the long term as revenue increases, although the percentage may fluctuate from period to period due to fluctuations in our compensation-related charges.
Related Party Expenses
Related party expenses primarily consist of amounts due toincurred in connection with transactions occurred with ISMMS for expenses incurred pursuant tounder our transition serviceservices agreement, or TSA, with ISMMS which expired at the end of the first quarter of 2021, and other service agreements and arrangements.agreements. Additional information can be found in Sema4’s auditedour consolidated financial statements in Note 6, “Related7, “Related Party Transactions” and Sema4’s unaudited condensed financial statementsincluded elsewhere in Note 6, “Related Party Transactions.”this proxy statement.
We generally expect related party expenses to decrease as we establish our own internal and external resources to fulfilfulfill the administrative and other services we have historically procured from ISMMS.
Interest Income
Interest income primarily consists of interest earned on money market funds.
Interest Expense
Interest expense consists of interest costs related to our capital leases and our long-term debt arrangements.
Gain on Extinguishmentarrangements, including unused line fee and the amortization of Debt
We recognized a gain on debt extinguishment for the year ended December 31, 2018deferred transaction costs related to principalthe loan forgiveness under one of our loan agreements. Additional information can be foundand security agreement entered into with Silicon Valley Bank to provide a $125 million revolving credit facility described elsewhere in Sema4’s audited financial statements in Note 7, “Long-term debt.”
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this proxy statement.
Other Income, Net
Other income, net primarily consists of certain funding received under the CARES Act, sales and use taxes and gains and losses on equipment disposals.Act. We recognized $2.6 million of the $5.4 million of funding received under the CARES Act as other income, net on the statements of operations and comprehensive loss during the year ended December 31, 2020 and2020. We recognized $5.6 million of additional funding received under the CARES Act during the three monthsyear ended MarchDecember 31, 2021.
Key Performance Indicators
The principal focus of our commercial operations is to offer our diagnostic tests through both our direct sales force and laboratory distribution partners. Test volume correlates with genomic database size and long-term patient relationships - thus driving database diversity and enabling potential identification of variants of unknown significance and population-specific insights. The number of tests that we accession is a key indicator that we use to assess the operational efficiency of our business. A test is accessioned when we receive the test at our laboratory, the relevant information about the test is entered into our computer system2021 and the test sampleamount is routed intoincluded in other income, net for the appropriate workflow.year ended December 31, 2021. In addition, the loss incurred due to early payment penalties recognized upon extinguishment of debt of $0.3 million is included in other income, net.
DuringResults of Operations
A discussion regarding our financial condition and results of consolidated operations for the year ended December 31, 2021 compared to the year ended December 31, 2020 we accessioned approximately 520,660 tests in our laboratories, 311,987 tests of which wereand for COVID-19,the year ended December 31, 2020 compared to the year ended December 31, 2019 is presented below.
Certain expenses were previously misclassified as cost of services and they are now reported as selling and marketing. The adjustment is reflected in which we accessioned approximately 225,863 tests in our laboratories, andthe amounts reported below for years ended December 31, 2018,2021, 2020 and 2019. Refer to Note 2, “Summary of Significant Accounting Policies” to our consolidated financial statements for further information included elsewhere in which we accessioned approximately 154,151 tests in our laboratories. The 47% increase in volume from 2018 to 2019 represents continuous expansion to a national footprint and expanded test offerings, and the 131% increase from 2019 to 2020 largely resulted from newly entered service agreements for COVID-19 testing, offset by a slowdown in the base diagnostic business during the beginning of the pandemic given that many of our customers, including hospitals and clinics, had suspended non-emergency appointments and services.this proxy statement.
During the three months ended March 31, 2021, we accessioned approximately 239,140 tests in our laboratories, 175,944 tests of which were for COVID-19, compared to March 31, 2020, in which we accessioned approximately 54,808 tests in our laboratories, none of which were for COVID-19. This 336% increase in volume from 2020 to 2021 largely resulted from newly entered service agreements for COVID-19 testing as well as an increase in non-COVID-19 institutional testing.

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Comparison of the Years Ended December 31, 2020, 20192021 and 20182020
The following table sets forth our results of operations for the periods presented:
Year Ended December 31,Year Ended December 31,


202020192018

20212020
(Restated)


(in thousands)

(in thousands)
RevenueRevenue

Revenue
Diagnostic test revenueDiagnostic test revenue$175,351 $191,667 $132,970 Diagnostic test revenue$205,100 $175,351 
Other revenueOther revenue3,971 4,507 371 Other revenue7,095 3,971 
Total revenueTotal revenue179,322 196,174 133,341 Total revenue212,195 179,322 
Cost of servicesCost of services184,648 119,623 92,093 Cost of services228,797 175,296 
Gross (loss) profitGross (loss) profit(5,326)76,551 41,248 Gross (loss) profit(16,602)4,026 
Research and developmentResearch and development72,700 34,910 21,383 Research and development105,162 72,700 
Selling and marketingSelling and marketing53,831 33,118 19,947 Selling and marketing112,738 63,183 
General and administrativeGeneral and administrative100,742 29,484 19,449 General and administrative205,988 100,742 
Related party expensesRelated party expenses9,395 9,452 9,132 Related party expenses5,659 9,395 
Loss from operationsLoss from operations(241,994)(30,413)(28,663)Loss from operations(446,149)(241,994)
Other income (expense):Other income (expense):

Other income (expense):

Change in fair market value of warrant and earn-out contingent liabilities Change in fair market value of warrant and earn-out contingent liabilities198,401 — 
Interest incomeInterest income506 988 — Interest income79 506 
Interest expenseInterest expense(2,474)(783)(248)Interest expense(2,835)(2,474)
Gain on extinguishment of debt— — 4,500 
Other income, netOther income, net2,622 504 539 Other income, net5,114 2,622 
Total other income, net654 709 4,791 
Total other income (expense), netTotal other income (expense), net200,759 654 
Loss before income taxesLoss before income taxes(241,340)(29,704)(23,872)Loss before income taxes(245,390)(241,340)
Income tax provisionIncome tax provision— — — Income tax provision— — 
Net loss and comprehensive lossNet loss and comprehensive loss(241,340)(29,704)(23,872)Net loss and comprehensive loss(245,390)(241,340)
Redeemable convertible preferred stock dividendsRedeemable convertible preferred stock dividends— 3,039 2,951 Redeemable convertible preferred stock dividends— — 
Net loss attributable to common stockholdersNet loss attributable to common stockholders$(241,340)$(32,743)$(26,823)Net loss attributable to common stockholders$(245,390)$(241,340)
Revenue
ChangeChange
Year Ended December 31,2019 to 20202018 to 2019Year Ended December 31,2020 to 2021
202020192018$%$%20212020$%
(dollars in thousands)(dollars in thousands)
Diagnostic test revenueDiagnostic test revenue$175,351 $191,667 $132,970 $(16,316)(9)%$58,697 44 %Diagnostic test revenue$205,100 $175,351 $29,749 17 %
Other revenueOther revenue3,971 4,507 371 (536)(12)%4,136 1115 %Other revenue7,095 3,971 3,124 79 %
Total revenueTotal revenue$179,322 $196,174 $133,341 $(16,852)(9)%$62,833 47 %Total revenue$212,195 $179,322 $32,873 18 %
Total revenue decreasedincreased by $16.9$32.9 million, or 9%18%, from $196.2to $212.2 million for the year ended December 31, 2019 to2021, from $179.3 million for the year ended December 31, 2020.
Diagnostic test revenue increased by $29.7 million, or 17%, to $205.1 million for the year ended December 31, 2021, from $175.4 million for the year ended December 31, 2020. The increase was primarily attributable to a 135% increase in oncology test volumes, a 38% increase in women’s health test volumes and an overall increase in volumes of 31%, partially offset by the change in the mix of tests performed and reduced reimbursement rates. COVID-19 testing was introduced in May of 2020, which had a lower impact on total test
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volume during the year ended December 31, 2020, compared to the year ended December 31, 2021 (with COVID-19 test volumes growing 26% year over year) .
Other revenue increased by $3.1 million, or 79%, to $7.1 million for the year ended December 31, 2021, from $4.0 million for the year ended December 31, 2020. The increase was primarily attributable to growth in collaboration service activities due to the execution of third-party contracts which generated $3.7 million more in revenues in 2021 compared to 2020. This was partially offset by reduced revenues recognized related to an existing third-party contract by $0.8 million.
Cost of Services (2020 amount restated)
Change
Year Ended December 31,2020 to 2021
20212020$%
(dollars in thousands)
Cost of services$228,797 $175,296 $53,501 31 %
Cost of services increased by $53.5 million, or 31%, to $228.8 million for the year ended December 31, 2021, from $175.3 million for the year ended December 31, 2020. The increase was primarily driven by the following cost components: a $9.7 million increase in stock-based compensation expense primarily driven by the increase in fair value of the liability-classified awards until July 22, 2021, the closing date of our business combination and an increase in the number of stock-based compensation awards granted; a $7.9 million increase in personnel-related expenses driven by an increase in average headcount; a $8.2 million increase in consulting and outside service costs driven by temporary hires contracted to perform COVID-19 testing activities; a $5.0 million increase in logistical expenses and other lab services as a result of an increase in operations; a $9.6 million increase in reagents and laboratory supplies expense due primarily to the 32% increase in volumes; a $2.4 million increase in software expenses due to increased cloud storage and expanded computing capacity requirements from New York City to Stamford, Connecticut for testing data; a $2.1 million increase in the inventory obsolescence reserve for expiring COVID-19 and certain carrier screening testing kits; a $2.2 million increase in occupancy expenses; a $5.1 million increase in depreciation expenses in connection with our laboratory move at the end of 2020, with production activities commencing at the Stamford facility in the first quarter of 2021 and a $1.3 million increase in equipment maintenance and general office expenses.
Research and Development
Change
Year Ended December 31,2020 to 2021
20212020$%
(dollars in thousands)
Research and development$105,162 $72,700 $32,462 45 %
Research and development expenses increased by $32.5 million, or 45%, to $105.2 million for the year ended December 31, 2021, from $72.7 million for the year ended December 31, 2020. The increase was primarily attributable to the following cost components: a $20.5 million increase in stock-based compensation expense driven by the increase in fair value of the liability-classified awards until the closing date of the business combination and an increase in the number of stock-based compensation awards granted; a $0.9 million increase in software expenses due to increased cloud storage; a $0.3 million increase in personnel-related expenses driven by an increase in average headcount a $4.8 million increase in depreciation expenses; a $3.6 million increase in expenses for reagents, laboratory supplies and laboratory software for research and development; and a $2.2 million increase in consulting fees.
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Selling and Marketing (2020 amount restated)
Change
Year Ended December 31,2020 to 2021
20212020$%
(dollars in thousands)
Selling and marketing$112,738 $63,183 $49,555 78 %
Selling and marketing expenses increased by $49.6 million, or 78%, to $112.7 million for the year ended December 31, 2021, from $63.2 million for the year ended December 31, 2020. The increase was primarily attributable to the following cost components: an $17.3 million increase in stock-based compensation expense driven by the increase in fair value of the liability-classified awards until the closing date of the business combination and an increase in the number of stock-based compensation awards granted; a $19.6 million increase in personnel-related expenses driven by increased headcount; a $4.1 million increase in consulting service expenses mainly to support revenue cycle transformation initiatives; a $3.2 million increase in information technology-related expenses; a $1.8 million increase in other administrative and office expenses; a $2.0 million increase in travel and business expenses due to the lifting of COVID-19 travel restrictions and a $1.5 million increase in counseling services.
General and Administrative
Change
Year Ended December 31,2020 to 2021
20212020$%
(dollars in thousands)
General and administrative$205,988 $100,742 $105,246 104 %
General and administrative expenses increased by $105.3 million, or 104%, to $206.0 million for the year ended December 31, 2021, from $100.7 million for the year ended December 31, 2020. The increase was primarily attributable to the following cost components: an $51.7 million increase in stock-based compensation expense driven by the increase in fair value of the liability-classified awards until the closing date of the business combination and an increase in the number of stock-based compensation awards granted; a $21.1 million increase in professional services incurred mainly in connection with the business combination transaction; a $20.0 million increase in personnel-related expenses driven by an increase in average headcount including executive headcount; a $5.0 million increase in software expenses due to increased cloud storage requirements; a $7.0 million increase in insurance expenses driven by the commencement of director’s insurance policy; and a $0.8 million increase in capital taxes as a result of the business combination transaction. These increases were partially offset by a $0.4 million decrease in occupancy and depreciation expenses in connection with our laboratory move from New York City to Stamford, Connecticut.
Related Party Expenses
Change
Year Ended December 31,2020 to 2021
20212020$%
(dollars in thousands)
Related party expenses$5,659 $9,395 $(3,736)(40)%
Related party expenses decreased by $3.7 million, or 40%, to $5.7 million for the year ended December 31, 2021, from $9.4 million for the year ended December 31, 2020. The decrease was primarily attributable to the following cost components: a $3.2 million decrease in rent and facility expenses driven by a reduction of office and lab space leased from ISMMS pursuant to the TSA which ended in the first quarter of 2021; and a $0.5 million decrease in fees associated with information technology support pursuant to the TSA with ISMMS.
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Interest Income
Change
Year Ended December 31,2020 to 2021
20212020$%
(dollars in thousands)
Interest income$79 $506 $(427)(84)%
Interest income decreased by $0.4 million, or 84%, to $0.1 million for the year ended December 31, 2021, from $0.5 million for the year ended December 31, 2020. The decrease was due to declines in interest rates on money market fund accounts.
Interest Expense
Change
Year Ended December 31,2020 to 2021
20212020$%
(dollars in thousands)
Interest expense$2,835 $2,474 $361 15 %
Interest expense increased by $0.4 million, or 15%, to $2.8 million for the year ended December 31, 2021, from $2.5 million for the year ended December 31, 2020. The increase was driven by new capital lease obligations for our Stamford laboratory facility which commenced operations in 2021 as well as the unused line fee and the amortization of deferred transaction costs related to the loan and security agreement entered into with Silicon Valley Bank at the end of 2021.
Other Income, Net
Change
Year Ended December 31,2020 to 2021
20212020$%
(dollars in thousands)
Other income, net$5,114 $2,622 $2,492 95 %
Other income, net increased by $2.5 million or 95% to $5.1 million for the year ended December 31, 2021, from $2.6 million for the year ended December 31, 2020. The increase in other income, net was primarily attributable to the $5.6 million in funding that we received and recognized as other income under the CARES Act in the first quarter of 2021, partially offset by $0.3 million in penalties related to an early repayment of debt. This is compared to $2.6 million in funding received in 2020.

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Comparison of the Years Ended December 31, 2020 and 2019
The following table sets forth our results of operations for the periods presented:
Year Ended December 31,

2020 (Restated)2019
(Restated)

(in thousands)
Revenue

Diagnostic test revenue$175,351 $191,667 
Other revenue3,971 4,507 
Total revenue179,322 196,174 
Cost of services175,296 113,389 
Gross profit4,026 82,785 
Research and development72,700 34,910 
Selling and marketing63,183 39,352 
General and administrative100,742 29,484 
Related party expenses9,395 9,452 
Loss from operations(241,994)(30,413)
Other income (expense):

Interest income506 988 
Interest expense(2,474)(783)
Other income, net2,622 504 
Total other income, net654 709 
Loss before income taxes(241,340)(29,704)
Income tax provision— — 
Net loss and comprehensive loss(241,340)(29,704)
Redeemable convertible preferred stock dividends— 3,039 
Net loss attributable to common stockholders$(241,340)$(32,743)
Revenue
Change
2019 to 2020
20202019$%
Diagnostic test revenue$175,351 $191,667 $(16,316)(9)%
Other revenue3,971 4,507 (536)(12)%
Total revenue$179,322 $196,174 $(16,852)(9)%
Total revenue decreased by $16.9 million, or 9%, to $179.3 million for the year ended December 31, 2020, from $196.2 million for the year ended December 31, 2019.
Diagnostic test revenue decreased by $16.3 million, or 9%, to $175.4 million for the year ended December 31, 2020, from $191.7 million for the year ended December 31, 2019 to $175.4 million for the year ended December 31, 2020.2019. The decrease was primarily attributable to a change in the mix of tests performed coupled with reduced reimbursement rates. Sema4The Company experienced an increase in volumes of 131%248%, primarily driven by the introduction of COVID-19 testing in May 2020. Despite these increased volumes, diagnostic test revenue decreased due to lower pricing on COVID-19 testing relative to other diagnostic tests and an overall decrease in average pricing on Women’s Health and Oncology testing.
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Other revenue decreased by $0.5 million, or 12%, to $4.0 million for the year ended December 31, 2020, from $4.5 million for the year ended December 31, 2019 to $4.0 million for the year ended December 31, 2020.2019. The decrease was primarily attributable to the completion of one significant third-party contract in 2019 and the completion of one significant contract with ISMMS in early 2020. This decrease was partially offset by growth in collaboration service activities due to the execution of two new third-party contracts in 2020. Other revenues are expected to continue to be driven predominately by services performed pursuant to contracts with third parties.
Total revenueCost of Services (2020 and 2019 amounts restated)
Change
2019 to 2020
20202019$%
Cost of services$175,296 $113,389 $61,907 55 %
Cost of services increased by $62.9$61.9 million, or 47%55%, from $133.3to $175.3 million for the year ended December 31, 2018 to $196.2 million for the year ended December 31, 2019.
Diagnostic test revenue increased by $58.7 million, or 44%,2020, from $133.0 million for the year ended December 31, 2018 to $191.7 million for the year ended December 31, 2019. The increase was primarily attributable to an increase in diagnostic testing volumes of 47%, partially offset by lower reimbursement rates for some diagnostic tests.
Other revenue increased by $4.1 million, or 1,115%, from $0.4 million for the year ended December 31, 2018 to $4.5$113.4 million for the year ended December 31, 2019. The increase was primarily attributable to the execution of three new contracts with various third parties in 2019 as well as significant growth in collaboration service activities pursuant to contracts entered into with a third party in March 2019 and with ISMMS in November 2018.
Cost of Services
Change
Year Ended December 31,2019 to 20202018 to 2019
202020192018$%$%
(dollars in thousands)
Cost of services$184,648 $119,623 $92,093 $65,025 54 %$27,530 30 %
Cost of services increased by $65.0 million, or 54%, from $119.6 million for the year ended December 31, 2019 to $184.6 million for the year ended December 31, 2020. The increase was primarily attributable to the following cost components: a $17.0$17.5 million increase in reagents and laboratory supplies expense due primarily to the 131%248% increase in accessionedresulted volumes coupled with the lower per test cost of performing COVID-19 tests relative to our other tests; a $13.2$12.2 million increase in stock-based compensation expenses primarily driven by the increase in fair value of the liability-classified awards; an $11.8$11.1 million increase in personnel-related expenses driven by an increase in average headcount, partially offset by COVID-19 austerity measures; a $6.4 million increase in third party reference laboratory expenses due to an increase in tests performed by such third parties; a $4.4$4.6 million increase in expenses for other services such as genetic counseling, shipping and phlebotomy services; a $4.3$4.4 million increase in depreciation and amortization expenses driven by laboratory sequencing equipment acquired in 2020 and an increase in capitalized software as compared to the prior year; a $3.7$3.6 million increase in outside labor costs driven by temporary hires contracted in 2020 to perform COVID-19 testing activities as well as an increase in consultants supporting collaboration services; a $1.6$0.2 million increase in software expenses due to increased cloud storage and expanded computing capacity requirements for testing data; and a $1.3 million increase in equipment-related expenses, including maintenance expenses on existing equipment and purchases of minor equipment in 2020.2020; and a $0.5 million increase in occupancy costs.
Cost of servicesResearch and Development
2019 to 2020
20202019$%
Research and development$72,700 $34,910 $37,790 108 %
Research and development expense increased by $27.5$37.8 million, or 30%108%, from $92.1to $72.7 million for the year ended December 31, 2018 to $119.62020, from $34.9 million for the year ended December 31, 2019. The increase was primarily attributable to the following cost components: a $16.4 million increase in reagents and laboratory supplies expense and a $2.8 million increase in other laboratory services such as genetic counseling, logistics, and phlebotomy services driven by the 47% increase in volume; a $7.5 million increase in personnel-related expenses due to an increase in average headcount; and a $4.3 million increase in software expenses due to increased cloud storage and expanded computing capacity requirements for testing data. These increases were partially offset by a $2.7 million decrease in third party reference laboratory expenses driven by a smaller percentage of tests performed by reference labs as a result of expanded in-house capabilities to perform sequencing activities.
252

Research and Development
Change
Year Ended December 31,2019 to 20202018 to 2019
202020192018$%$%
(dollars in thousands)
Research and development$72,700 $34,910 $21,383 $37,790 108 %$13,527 63 %
Research and development expense increased by $37.8 million, or 108%, from $34.9 million for the year ended December 31, 2019 to $72.7 million for the year ended December 31, 2020. The increase was primarily attributable to the following cost components: a $25.4 million increase in stock-based compensation expenses primarily due to an increase in fair value of the liability-classified awards and an increase in the number of outstanding awards;stock-based compensation awards granted; a $9.3 million increase in personnel-related expenses driven by increased average headcount and retention bonuses offered to employees impacted by the relocation of our New York laboratory in December of 2020, partially offset by COVID-19 austerity measures; a $1.7 million increase in expenses for reagents, laboratory supplies and laboratory software for research and development use; and a $1.1 million increase in consulting and outside services, primarily due to an increase in the number of, and required investment in, research and development studies.
Research
197

Selling and developmentMarketing (2020 and 2019 amounts restated)
Change
2019 to 2020
20202019$%
Selling and marketing$63,183 $39,352 $23,831 61 %
Selling and marketing expense increased by $13.5$23.8 million, or 63%61%, from $21.4to $63.2 million for the year ended December 31, 2018 to $34.92020, from $39.4 million for the year ended December 31, 2019. The increase was primarily attributable to a $9.7 million increase in personnel-related expenses driven by increased average headcount and a $3.2 million increase in expenses for reagents, laboratory supplies and laboratory software for research and development use due to an increase in the number of, and required investment in, research and development studies.
Selling and Marketing
Change
Year Ended December 31,2019 to 20202018 to 2019
202020192018$%$%
(dollars in thousands)
Selling and marketing$53,831 $33,118 $19,947 $20,713 63 %$13,171 66 %
Selling and marketing expense increased by $20.7 million, or 63%, from $33.1 million for the year ended December 31, 2019 to $53.8 million for the year ended December 31, 2020. The increase was primarily attributable to the following cost components: a $10.6$11.4 million increase in personnel-related expenses driven by an increase in average headcount, partially offset by COVID-19 austerity measures; a $10.1$11.1 million increase in stock-based compensation expenses primarily due to an increase in the fair value of the liability-classified awards and an increase in the number of outstanding awards; andawards due to increase in the number of stock-based compensation awards granted; a $1.5 million increase in commissions due to an increase in sales employee headcount and the implementation of temporary minimum commissions offered to sales employees in response to the COVID-19 pandemic.pandemic; a $1.0 million increase in other lab service; and a $0.6 million increase in software expenses due to increased cloud storage requirements. These increases were partially offset by a $1.8 million decrease in travel and business expenses due to reduced business travel during the COVID-19 pandemic.
SellingGeneral and marketingAdministrative
Change
2019 to 2020
20202019$%
General and administrative$100,742 $29,484 $71,258 242 %
General and administrative expense increased by $13.2$71.3 million, or 66%242%, from $19.9to $100.7 million for the year ended December 31, 2018 to $33.1 million for the year ended December 31, 2019. The increase was primarily attributable to the following cost components: an $8.6 million increase in personnel-related expenses, excluding commissions and a $1.7 million increase in travel and business expenses driven by increases in average headcount; a $1.5 million increase in commissions driven by the 47% increase in volume and achievement of sales targets; and a $0.8 million increase in consultant costs for strategy and go-to-market consulting services.
253

General and Administrative
Change
Year Ended December 31,2019 to 20202018 to 2019
202020192018$%$%
(dollars in thousands)
General and administrative$100,742 $29,484 $19,449 $71,258 242 %$10,035 52 %
General and administrative expense increased by $71.2 million, or 242%,2020, from $29.5 million for the year ended December 31, 2019 to $100.7 million for the year ended December 31, 2020.2019. The increase was primarily attributable to the following cost components: a $66.0 million increase in stock-based compensation expenses due to an increase in the fair value of the liability-classified awards and an increase in the number of outstanding awards;awards due to increase in the number of stock-based compensation awards granted; a $1.4 million increase in occupancy expenses due to the execution of additional third party leases; and a $1.3 million increase in personnel-related expenses due to an increase in general and administrative headcount, partially offset by COVID-19 austerity measures.
General and administrative expense increased by $10.1 million, or 52%, from $19.4 million for the year ended December 31, 2018 to $29.5 million for the year ended December 31, 2019. The increase was primarily attributable to the following cost components: a $4.4 million increase in personnel-related expenses driven by an increase in average headcount; a $2.3 million increase in information technology expenses driven by an increase in software costs due to system migration projects, security audits and other information technology activities commencing in 2019; a $2.0 million increase in consulting and outside service expenses driven by information technology transformation projects commencing in 2019; and increases in miscellaneous other general and administrative expenses.
Related Party Expenses
Change
Year Ended December 31,2019 to 20202018 to 2019
202020192018$%$%
(dollars in thousands)
Related party expenses$9,395 $9,452 $9,132 $(57)(0.6)%$320 4 %
Change
2019 to 2020
20202019$%
Related party expenses$9,395 $9,452 $(57)(1)%
Related party expenses decreased by $0.1 million, or 0.6%, to $9.4 million for the year ended December 31, 2020, from $9.5 million for the year ended December 31, 2019 to $9.4 million for the year ended December 31, 2020.2019. The decrease was primarily attributable to a $1.7 million decrease in service fees associated with a reduction of leased ISMMS employees, a $1.0 million decrease in fees associated with information technology support pursuant to the transition services agreementTSA with ISMMS and decreases in other various services provided by ISMMS pursuant to the TSA and service agreements. These decreases were partially offset by a $2.0 million increase in rent and facility expenses driven by additional office and lab space leased from ISMMS pursuant to the transition services agreement and a $0.5 million increase in consultant costs driven by an increase in research and development efforts performed by ISMMS under consulting agreements.
Related party expenses increased by $0.4 million, or 4%, from $9.1 million for the year ended December 31, 2018 to $9.5 million for the year ended December 31, 2019. The increase was primarily attributable to a $0.7 million increase in fees incurred for information technology support provided by ISMMS for certain transformational projects that occurred in 2019 pursuant to the TSA. These increases were partially offset by a $0.5 million decrease in service fees associated with a reduction of leased ISMMS employees.
254198

Interest Income
Change
Year Ended December 31,2019 to 20202018 to 2019
202020192018$%$%
(dollars in thousands)
Interest income$506 $988 $— $(482)(49)%$988 100 %
Change
2019 to 2020
20202019$%
Interest income$506 $988 $(482)(49)%
Interest income decreased by $0.5 million, or 49%, to $0.5 million for the year ended December 31, 2020, from $1.0 million for the year ended December 31, 2019 to $0.5 million for the year ended December 31, 2020.2019. The decrease was due to declines in interest rates on money market deposit accounts and reductions in the average cash balances held throughout the year in these interest-bearing accounts.
Interest income increased by $1.0 million, or 100%, from $0 for the year ended December 31, 2018 to $1.0 million for the year ended December 31, 2019. The increase in interest income was due to interest earned on cash deposited in new money market deposit accounts in 2019.
Interest Expense
Change
Year Ended December 31,2019 to 20202018 to 2019
202020192018$%$%
(dollars in thousands)
Interest expense$2,474 $783 $248 $1,691 216 %$535 216 %
Change
2019 to 2020
20202019$%
Interest expense$2,474 $783 $1,691 216 %
Interest expense increased by $1.7 million, or 216%, to $2.5 million for the year ended December 31, 2020, from $0.8 million for the year ended December 31, 2019 to $2.5 million for the year ended December 31, 2020.2019. The increase was driven by an increase in capital lease obligations, an increase in our interest-bearing loan balance with the Connecticut Department of Economic and Community Development, or the DECD, and a new interest-bearing bank loan executed in 2020.
Interest expense increased by $0.6 million, or 216%, from $0.2 million for the year ended December 31, 2018 to $0.8 million for the year ended December 31, 2019. The increase was driven by an increase in capital lease obligations.
Gain on Extinguishment of Debt
Change
Year Ended December 31,2019 to 20202018 to 2019
202020192018$%$%
(dollars in thousands)
Gain on extinguishment of debt$— $— $4,500 $— — %$4,500 100 %
No gains or losses on extinguishment of debt were recognized for the years ended December 31, 2020 and 2019. Gain on extinguishment of debt was $4.5 million for the year ended December 31, 2018. The gain on extinguishment of debt in 2018 was attributable to principal loan forgiveness in response to achievement of milestones specified in the amended loan agreement with the DECD.
255

Other Income, Net
Change
Year Ended December 31,2019 to 20202018 to 2019
202020192018$%$%
(dollars in thousands)
Other income, net$2,622 $504 $539 $2,118 420 %$(35)(6)%
Change
2019 to 2020
20202019$%
Other income, net$2,622 $504 $2,118 420 %
Other income, net increased by $2.1 million or 420%, to $2.6 million for the year ended December 31, 2020, from $0.5 million for the year ended December 31, 2019 to $2.6 million for the year ended December 31, 2020.2019. The increase in other income, net was primarily attributable to $2.6 million in funding that we received under the CARES Act.
Other income, net is $0.5 million for the years ended December 31, 2018 and 2019 and there were no material offsetting charges within income and expense year over year.
Comparison of the Three Months Ended March 31, 2021 and 2020
The following table sets forth our results of operations for the periods presented:
Three Months Ended March 31,

20212020

(in thousands)
Revenue

Diagnostic test revenue$62,760 $46,070 
Other revenue1,591 585 
Total revenue64,351 46,655 
Cost of services71,812 39,239 
Gross (loss) profit(7,461)7,416 
Research and development53,131 13,096 
Selling and marketing31,569 11,733 
General and administrative101,917 7,164 
Related party expenses1,797 2,195 
Loss from operations(195,875)(26,772)
Other income (expense):

Interest income21 334 
Interest expense(723)(574)
Other income, net5,584 22 
Total other income (expense), net4,882 (218)
Loss before income taxes(190,993)(26,990)
Income tax provision— — 
Net loss and comprehensive loss$(190,993)$(26,990)
256

Revenue
Change
Three Months Ended March 31,2020 to 2021
20212020$%
(dollars in thousands)
Diagnostic test revenue$62,760 $46,070 $16,690 36 %
Other revenue1,591 585 1,006 172 %
Total revenue$64,351 $46,655 $17,696 38 %
Total revenue increased by $17.7 million, or 38%, from $46.7 million for the three months ended March 31, 2020 to $64.4 million for the three months ended March 31, 2021.
Diagnostic test revenue increased by $16.7 million, or 36%, from $46.1 million for the three months ended March 31, 2020 to $62.8 million for the three months ended March 31, 2021. The increase was primarily attributable to an increase in volumes of 336%, partially offset by the change in the mix of tests performed and reduced reimbursement rates. The increase in volume was primarily driven by the introduction of COVID-19 testing in May of 2020. The lower pricing on COVID-19 testing relative to other diagnostic tests and an overall decrease in average pricing on Women’s Health and Oncology testing contributed to lower revenues generated per test for the three months ended March 31, 2021 relative to the three months ended March 31, 2020.
Other revenue increased by $1.0 million, or 172%, from $0.6 million for the three months ended March 31, 2020 to $1.6 million for the three months ended March 31, 2021. The increase was primarily attributable to growth in collaboration service activities due to the execution of two new third-party contracts, partially offset by reduced revenues recognized related to an existing third-party contract. Other revenues are expected to continue to be driven predominately by services performed pursuant to contracts with third parties.
Cost of Services
Change
Three Months Ended March 31,2020 to 2021
20212020$%
(dollars in thousands)
Cost of services$71,812 $39,239 $32,573 83 %
Cost of services increased by $32.6 million, or 83%, from $39.2 million for the three months ended March 31, 2020 to $71.8 million for the three months ended March 31, 2021. The increase was primarily attributable to the following cost components: a $19.7 million increase in stock-based compensation expense primarily driven by the increase in fair value of the liability-classified awards; a $3.9 million increase in personnel-related expenses driven by an increase in average headcount; a $2.4 million increase in outside labor costs driven by temporary hires contracted to perform COVID-19 testing activities; a $1.3 million increase in expenses for other services such as genetic counseling, shipping and phlebotomy services; a $1.3 million increase in reagents and laboratory supplies expense due primarily to the 336% increase in accessioned volumes coupled with the lower per test cost of performing carrier screening and COVID-19 tests relative to our other tests; a $1.3 million increase in depreciation expenses driven by an increase in leasehold improvements; a $1.1 million increase in software expenses due to increased cloud storage and expanded computing capacity requirements from New York City to Stamford, Connecticut for testing data; and a $0.7 million increase in occupancy expenses in connection with our laboratory move as production activities began at the Stamford facility in the first quarter of 2021.
257

Research and Development
Change
Three Months Ended March 31,2020 to 2021
20212020$%
(dollars in thousands)
Research and Development$53,131 $13,096 $40,035 306 %
Research and development expense increased by $40.0 million, or 306%, from $13.1 million for the three months ended March 31, 2020 to $53.1 million for the three months ended March 31, 2021. The increase was primarily attributable to the following cost components: a $38.0 million increase in stock-based compensation expense driven by the increase in fair value of the liability-classified awards; and a $2.0 million increase in expenses for reagents, laboratory supplies and laboratory software for research and development use driven by an increase in the number of, and required investment in, research and development studies.
Selling and Marketing
Change
Three Months Ended March 31,2020 to 2021
20212020$%
(dollars in thousands)
Selling and marketing$31,569 $11,733 $19,836 169 %
Selling and marketing expense increased by $19.9 million, or 169%, from $11.7 million for the three months ended March 31, 2020 to $31.6 million for the three months ended March 31, 2021. The increase was primarily attributable to the following cost components: a $17.3 million increase in stock-based compensation expense driven by the increase in fair value of the liability-classified awards; a $2.1 million increase in personnel-related expenses driven by increased headcount; a $0.5 million increase in information technology related expenses; and a $0.4 million increase in consulting and outside service expenses to support revenue cycle transformation initiatives. These increases were partially offset by a $0.6 million decrease in travel and entertainment expenses driven by reduced business travel during the COVID-19 pandemic.
General and Administrative
Change
Three Months Ended March 31,2020 to 2021
20212020$%
(dollars in thousands)
General and administrative$101,917 $7,164 $94,753 1,323 %
General and administrative expense increased by $94.7 million, or 1,323%, from $7.2 million for the three months ended March 31, 2020 to $101.9 million for the three months ended March 31, 2021. The increase was primarily attributable to the following cost components: an $89.3 million increase in stock-based compensation expense driven by the increase in fair value of the liability-classified awards and an increase in the number of outstanding awards; a $2.5 million increase in expenses for professional services associated with expected public company requirements; a $2.0 million increase in personnel-related expenses driven by an increase in average headcount including executive headcount; a $0.6 million increase in insurance expenses driven by transitioning to standalone insurance policies separate from ISMMS; and a $0.3 million increase in software expenses due to increased cloud storage capacity requirements. These increases were partially offset by a $0.6 million decrease in occupancy expenses in connection with our laboratory move from New York City to Stamford, Connecticut.
258

Related Party Expenses
Change
Three Months Ended March 31,2020 to 2021
20212020$%
(dollars in thousands)
Related party expenses$1,797 $2,195 $(398)(18.1)%
Related party expenses decreased by $0.4 million, or 18.1%, from $2.2 million for the three months ended March 31, 2020 to $1.8 million for the three months ended March 31, 2021. The decrease was primarily attributable to the following cost components: a $0.2 million decrease in fees associated with information technology support pursuant to the transition services agreement with ISMMS; and a $0.2 million decrease in rent and facility expenses driven by a reduction of office and lab space leased from ISMMS pursuant to the transition services agreement.
Interest Income
Change
Three Months Ended March 31,2020 to 2021
20212020$%
(dollars in thousands)
Interest income$21 $334 $(313)(94)%
Interest income decreased by $0.3 million, or 94%, from $0.3 million for the three months ended March 31, 2020 to a nominal amount for the three months ended March 31, 2021. The decrease was due to declines in interest rates on money market deposit accounts and reductions in the average cash balances held in these interest-bearing accounts.
Interest Expense
Change
Three Months Ended March 31,2020 to 2021
20212020$%
(dollars in thousands)
Interest expense$723 $574 $149 26 %
Interest expense increased by $0.1 million, or 26%, from $0.6 million for the three months ended March 31, 2020 to $0.7 million for the three months ended March 31, 2021. The increase was driven by new loans executed in the second half of 2020.
Other Income, Net
Change
Three Months Ended March 31,2020 to 2021
20212020$%
(dollars in thousands)
Other income, net$5,584 $22 $5,562 
NM (1)
__________________
(1) Not Meaningful (“NM”)
Other income, net increased by $5.6 million from a nominal amount for the three months ended March 31, 2020 to $5.6 million for the three months ended March 31, 2021. The increase in other income, net was primarily attributable to $5.6 million in funding that we received and recognized under the CARES Act.
259

Reconciliation of Non-GAAP Financial Measures
In addition to our results determined in accordance with GAAP, we believe the following non-GAAP measures are useful in evaluating our operating performance. We use the following non-GAAP financial information to evaluate our ongoing operations, as a component in determining employee bonus compensation, and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. However, non-GAAP financial information is presented for supplemental informational purposes only has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial
199

measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.
Non-GAAP financial measures have limitations as analytical tools and you should not consider them in isolation, or as substitutes for analysis of our results as reported under GAAP. We may in the future incur expenses similar to the adjustments in the presentation of Non-GAAP financial measures. Other limitations include that Non-GAAP financial measures do not reflect:
•all expenditures or future requirements for capital expenditures or contractual commitments;
•changes in our working capital needs;
•provision for income taxes, which may be a necessary element of our costs and ability to operate;
•the costs of replacing the assets being depreciated, which will often have to be replaced in the future;
•the non-cash component of employee compensation expense; and
•the impact of earnings or charges resulting from matters we consider not to be reflective, on a recurring basis, of our ongoing operations
Adjusted Gross Profit and Adjusted Gross Margin
Adjusted Gross Profit is a non-GAAP financial measure that we define as revenue less cost of services, excluding depreciation and amortization, stock-based compensation expense, related party expenses, labor costs due to a laboratoryour move, and COVID-19 costs. We define Adjusted Gross Margin as our Adjusted Gross Profit divided by our revenue. We believe these non-GAAP financial measures are useful in evaluating our operating performance compared to that of other companies in our industry, as these metrics generally eliminate the effects of certain items that may vary from company to company for reasons unrelated to overall operating performance.
260

The following is a reconciliation of revenue to our Adjusted Gross Profit and Adjusted Gross Margin for the years ended December 31, 2021, 2020 and 2019 and 2018:(in thousands):
Year Ended December 31,
202020192018Year Ended December 31,
(in thousands)20212020
(Restated)		2019
(Restated)
RevenueRevenue$179,322 $196,174 $133,341 Revenue$212,195 $179,322 $196,174 
Cost of servicesCost of services184,648 119,623 92,093 Cost of services228,797 175,296 113,389 
Gross (Loss) Profit
Gross (Loss) Profit
(5,326)76,551 41,248 
Gross (Loss) Profit
(16,602)4,026 82,785 
(8)%2 %42 %
Add:Add:Add:
Stock-based compensation expenseStock-based compensation expense13,947 710 748 Stock-based compensation expense$22,567 12,942 710 
Related party expenses (1)
2,189 1,859 4,122 
Labor costs due to laboratory move (2)
16,391 — — 
COVID-19 costs (3)
3,179 — — 
Labor costs due to laboratory move (1)
Labor costs due to laboratory move (1)
— 16,391 — 
COVID-19 costs (2)
COVID-19 costs (2)
— 3,179 — 
Adjusted Gross Profit
Adjusted Gross Profit
$30,380 $79,120 $46,118 
Adjusted Gross Profit
$5,965 $36,538 $83,495 
Adjusted Gross Margin
Adjusted Gross Margin
17 %40 %35 %
Adjusted Gross Margin
3 %20 %43 %
__________________
(1)Represents fees paid to ISMMS for certain services that, for GAAP purposes, are included in Cost of Services.
(2)Represents labor costs in respect of laboratory employees' time spent to support our laboratory move from New York City to Stamford, Connecticut in 2020. During the move, our laboratory employees dedicated their time to re-validating and re-establishing instruments and equipment, rebuilding interface, obtaining a CLIA license, and other tasks to make sure the move was done correctly. For GAAP purposes we included these activities in Cost of Services. However, as the laboratory move and effort spent by our employees are one-time activities, we adjusted our Gross Profit to reflect management’s view of our normal operations.
(3)(2)Represents labor costs in respect laboratory employees’ downtime. During the second quarter of 2020, we did not reduce the workforce in our laboratory from COVID-19.due to the COVID-19 pandemic. However, we suffered significantly due to the decrease in volume in Women's Health and other products. Accordingly, we have adjusted our Gross Profit to reflect the management-assessed impact from the decrease in productivity of existing laboratory employees due to the COVID-19 pandemic in the second quarter of 2020.
The following is a reconciliation of revenue to our Adjusted Gross Profit and Adjusted Gross Margin for the three months ended March 31, 2021 and 2020:
200
Three Months Ended March 31,
20212020
(in thousands)
Revenue$64,351 $46,655 
Cost of services71,812 39,239 
Gross (Loss) Profit
(7,461)7,416 
Add:
Stock-based compensation expense19,782 120 
Related party expenses (1)
278 574 
Adjusted Gross Profit
$12,599 $8,110 
Adjusted Gross Margin
20 %17 %
__________________
(1)
Represents fees paid to ISMMS for certain services that, for GAAP purposes, are included in Cost of Services.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure that we define as net loss adjusted for interest (income) expense (income), net, depreciation and amortization, stock-based compensation expenses, transaction costs, other (income) expense, net, provision for (benefit from) income taxes, gain on extinguishmentCOVID-19 costs and change in fair market value of debt, depreciationwarrant and amortization and stock-based compensation expenses, and COVID-19 costs.earn-out contingent liabilities and. We believe Adjusted EBITDA is useful in evaluating our operating performance compared to that of other companies in our industry, as this metric generally eliminates the effects of certain itemsfactors that may vary from company to company for reasons unrelated to overall operating performance.
261

The following is a reconciliation of our net loss to Adjusted EBITDA for the years ended December 31, 2021, 2020, and 2019 and 2018:(in thousands):
Year Ended December 31,
202020192018Year Ended December 31,
(in thousands)202120202019
Net lossNet loss$(241,340)$(29,704)$(23,872)Net loss$(245,390)$(241,340)$(29,704)
Interest (income) expense, net (1)
1,968 (205)248 
Gain on extinguishment of debt (2)
— — (4,500)
Interest expense (income), net (1)
Interest expense (income), net (1)
2,756 1,968 (205)
Depreciation and amortizationDepreciation and amortization11,734 6,407 5,433 Depreciation and amortization21,807 11,734 6,407 
Stock-based compensation expenseStock-based compensation expense120,231 5,482 5,605 Stock-based compensation expense219,421 120,231 5,482 
Transaction costs (2)
Transaction costs (2)
5,496 — — 
Other (income) expense, net (3)
Other (income) expense, net (3)
(2,622)(504)(539)
Other (income) expense, net (3)
(5,291)(2,622)(504)
COVID-19 costs (4)
COVID-19 costs (4)
3,179 — — 
COVID-19 costs (4)
— 3,179 — 
Change in fair market value of warrant and earn-out contingent liabilities (5)
Change in fair market value of warrant and earn-out contingent liabilities (5)
(198,401)— — 
Adjusted EBITDAAdjusted EBITDA$(106,850)$(18,524)$(17,625)Adjusted EBITDA$(199,602)$(106,850)$(18,524)
__________________
(1)Represents the total of Interest Expenseinterest expense related to our capital leases and interest-bearing loans and Interest Incomeinterest income on money market funds.
(2)Represents a gain on debt extinguishmentprofessional service costs incurred in connection with pursuing the business combination transaction that did not meet the requirement for the year ended December 31, 2018 related to principal loan forgiveness under one of our loan agreements.capitalization.
(3)For fiscal year 2020 and 2021, primarily consists of funding received under the CARES Act Provider Relief Fund, and sales and use taxes.Fund.
(4)Represents labor costs in respect laboratory employees’ downtime. During the second quarter of 2020, we did not reduce the workforce in our laboratory from COVID-19.due to the COVID-19 pandemic. However, we suffered significantly due to the decrease in volume in Women's Health and other products. Accordingly, we have adjusted our Gross Profit to reflect the management-assessed impact from the decrease in productivity of existing laboratory employees due to the COVID-19 pandemic in the second quarter of 2020.
The following is a reconciliation of our net loss to Adjusted EBITDA for the three months ended March 31, 2021 and 2020:
Three Months Ended March 31,
20212020
(in thousands)
Net loss$(190,993)$(26,990)
Interest expense, net (1)
702 240 
Depreciation and amortization4,902 2,398 
Stock-based compensation expense164,962 815 
Transaction costs(2)
1,954 — 
Other (income) expense, net (3)
(5,584)(22)
Adjusted EBITDA$(24,057)$(23,559)
__________________
(1)Represents the total of Interest Expense related to our capital leases and interest-bearing loans and Interest Income on money market funds.
(2)Represents professional service costs directly related to the Business Combination.
(3)(5)For the three monthsyear ended MarchDecember 31, 2021, consistsrepresents the change in fair market value of funding receivedthe liabilities associated with our public warrants, private placement warrants and the earn-out shares issuable under the CARES Act Provider Relief Fund.terms of the merger agreement for our business combination.
Going Concern,

Liquidity and Capital Resources
We have incurredOn July 22, 2021, we completed the business combination with CMLS, consummated the Prior PIPE Investment and received net losses and negative cash flowsproceeds of $510 million. Management determined that the cash proceeds received from operations sincethe business combination provides us with sufficient liquidity to meet our inception, including net lossesobligations for at least twelve months from the date of $241.3 million, $29.7 million and $23.9 millionthe filing of our Annual Report on Form 10-K for the yearsyear ended December 31, 2020, 2019 and 2018, respectively, and net losses of $191.0 million and $27.0 million for the three months ended March 31, 2021 and 2020, respectively. As of March 31,2021.
Furthermore, on November 15, 2021, we had an accumulated deficitentered into a loan and security agreement, or the SVB Agreement, with Silicon Valley Bank, or SVB, whereby SVB agreed to provide a $125 million revolving credit facility with a maturity date of $521.0 million. We expect to continue to generate significant operating losses forNovember 15, 2024. No amounts were drawn as of December 31, 2021. Advances under the foreseeable future. Through March 31, 2021, we have funded our operations primarily with proceeds from the issuance of redeemable convertible preferred stock and the issuance of long-term debt. We intend to raise additional capital through the Business Combination. If we are unable to raise additional capital through the Business Combination, or if we require additional capital priorSVB Agreement will bear interest at a floating rate per annum equal to the consummationgreater of (1) 4.00% and (2) the Business Combination, we expect to seek additional funding through private equity financings, debt financings or other capital sources, including collaborations with other companies or other strategic transactions, subject to ourprime rate plus an applicable margin
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covenants underAccordingly, the Merger Agreement related to the conduct of our business prior to the Closing. In particular, we may seek to borrow up to $20 million in additional funds on a short term basis, which we expect would be repaid upon the consummation of the Business Combination; however, we have no binding commitments to access any such financing. Additional capital may not be available on reasonable terms, or at all. The terms of any financing may adversely affect the holdings or the rights of our stockholders.
If we are unable to obtain funding, we will be forced to delay, reduce or eliminate some or all of our research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect our business financial condition, results of operations, or prospects, or we may be unable to continue operations. Although management continues to pursue these plans, there is no assurance that we will be successful in obtaining sufficient funding on acceptable terms to fund continuing operations, if at all.
Based on our recurring losses from operations incurred since inception, expectation of continuing operating losses for the foreseeable future, and the need to raise additional capital to finance future operations, as of June 10, 2021, the issuance date of our unaudited condensed financial statements for the three months ended March 31, 2021 included elsewhere in this proxy statement, we have concluded that there is substantial doubt about our ability to continue as a going concern for a period of one year from the date that these financial statements were issued. Our cash and cash equivalents excluding restricted cash were $58.7 million as of March 31, 2021. As of June 10, 2021, the issuance date of our unaudited condensed financial statements for the three months ended March 31, 2021, we expect that our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements into the third quarter of 2021. Beyond that point, our ability to continue as a going concern is dependent on our ability to raise additional capital to finance our operations.
Theconsolidated financial statements included elsewhere in this proxy statement do not include any adjustments that might result from the outcome of this uncertainty. Accordingly, the financial statements have been prepared on a basis that assumes we will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business. Please seeNevertheless, we may also “Risk Factors – Sema4 may need to raiseseek additional capital to fund its existing operations, develop additional products and services, commercialize new products and servicesfunding in the future through the sale of common or expand its operations.”
We plan to utilizepreferred equity or convertible debt securities, the existing cash and cash equivalents on hand primarily to fund our operations asentry into other credit facilities or another form of third-party funding or by seeking other debt financing. In particular, if the Acquisition is consummated, we continue to grow our business, enter into partnerships, pursue strategic investments and continue research and development initiatives related to Women’s Health and Oncology. We expect to incur additional costs associated with operating as a public company, including expenses relatedissue 50 million shares of our Class A common stock for an aggregate purchase price equal to legal, accounting, and regulatory matters; maintaining compliance with requirements of$200 million pursuant to the Nasdaq and of the SEC; director and officer insurance premiums and investor relations. Cash used to fund operating expenses is affected by the timing of when we pay expenses, as reflected in the change in our outstanding accounts payable and accrued expenses. We also expect to make increased capital expenditures in the near term related to our laboratory operations.PIPE Investment.
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Material Cash Requirements for Known Contractual Obligations and Commitments
The following is a description of commitments for known and reasonably likely cash requirements as of December 31, 20202021 and MarchDecember 31, 2021.2020. We anticipate fulfilling such commitments with our existing cash and cash equivalents, which amounted to $108.1$400.6 million and $58.7$108.1 million as of December 31, 20202021 and MarchDecember 31, 2021,2020, respectively, or through additional capital raised to finance our operations; see "—Going Concern, Liquidity and Capital Resources".operations.
Our future minimum payments under non-cancellable operating lease and capital lease agreements were $73.3$68.3 and $65.6 million, respectively as of December 31, 2020 and $71.5 million as of March 31, 2021. The timing of these future payments, by year, can be found in Sema4’s auditedour consolidated financial statements in Note 8, “Commitments and Contingencies” and Sema4’s unaudited condensed financial statements in Note 8, “Commitments9, “Commitments and Contingencies,” respectively. included elsewhere within this proxy statement.
Our future payments under capital leasescontractual purchase commitments were $70.2$23.1 million as of December 31, 2020 and $69.2 million as of March 31, 2021. The timing of these future payments, by year, can be found in Sema4’s auditedour consolidated financial statements in Note 8, “Commitments and Contingencies” and Sema4’s unaudited condensed financial statements in Note 8, “Commitments9, “Commitments and Contingencies,” respectively. included elsewhere within this proxy statement.
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In 2016, ISMMS received a loan funding commitment from the DECD, or the DECD Loan Agreement, to support the Genetic Sequencing Laboratory Project, which we refer to as the Project. As part of the spin-out of Sema4 from ISMMS, ISMMS assigned both the Project and the DECD Loan Agreement to us. In June of 2018, we amended the DECD Loan Agreement by increasing the total loan commitment amount to $15.5 million. During the years ended December 31, 2020 and 2018, we received $6.0 million and $4.5 million, respectively, in loan funding. During the year ended December 31, 2020, we entered into a Master Loan and Security Agreement, or the Equipment Note, with a bank resulting in the receipt of $6.3 million of proceeds. The loan is fully secured with funds deposited in a bank account opened by Sema4 in the lender-designated bank. Also, during the year ended December 31, 2020, we entered into a Master Lease Agreement with a lender whereby we agreed to sell certain equipment and immediately lease it back, resulting in the receipt of $3.6 million of proceeds. Sema4 issued a letter of credit as security for this loan. More information on the terms of these financing arrangements can be found in Sema4’s audited financial statements in Note 7, “Long-term debt” and Sema4’s unaudited condensed financial statements in Note 7, “Long-term debt.”
The terms of the amended DECD Loan Agreement require us to make interest-only payments through July 2023 and principal and interest payments commencing in August 2023. The final payment of principal and interest is due in July 2028. Interest payments are fixed at an annual interest rate of 2.0%. The outstanding loan balance from the DECD was $11.0 million and $11.0 million at December 31, 2020 and March 31, 2021, respectively. The DECD may grant partial principal loan forgiveness that is contingent upon Sema4 achieving certain milestones. The timing of these future payments, by year, can be found in Sema4’s audited financial statements in Note 7, “Long-Term Debt” and Sema4’s unaudited condensed financial statements in Note 7, “Long-term debt.”
The terms of the Equipment Note require us to make sixty consecutive monthly payments of principal and interest at a fixed monthly amount of $0.1 million beginning in November 2020. Interest payments are fixed at an annual interest rate of 4.75%. The outstanding loan balance was $6.1 million and $5.8 million at December 31, 2020 and March 31, 2021, respectively. The timing of these future payments, by year, can be found in Sema4’s audited financial statements in Note 7, “Long-Term Debt” and Sema4’s unaudited condensed financial statements in Note 7, “Long-term debt,” respectively.
The terms of the Master Lease Agreement require us to make sixty consecutive monthly payments of principal and interest at a fixed monthly amount of $0.1 million beginning in February 2021. Interest payments are fixed at an annual interest rate of 3.54%. The outstanding loan balance was $3.6 million and $3.5 million at December 31, 2020 and March 31, 2021, respectively. The timing of these future payments, by year, can be found Sema4’s audited financial statements in Note 7, “Long-Term Debt” and Sema4’s unaudited condensed financial statements in Note 7, “Long-term debt,” respectively.
Cash Flows
Year Ended
December 31,
Three Months Ended
March, 31
20202019201820212020
(in thousands)
Cash used in operating activities$(93,128)$(18,728)$(24,684)$(42,208)$(22,613)
Cash used in investing activities(31,974)(15,456)(3,803)(4,994)(5,321)
Cash provided by (used in) financing activities129,056 148,012 27,065 (2,278)4,657 
Year Ended
December 31,
202120202019
(in thousands)
Net cash used in operating activities$(190,434)$(93,128)$(18,728)
Net cash used in investing activities(20,786)(31,974)(15,456)
Net cash provided by financing activities493,729 129,056 148,012 
Operating Activities
Net cash used in operating activities during the year ended December 31, 2021 was $190.4 million, which was primarily attributable to a net loss of $245.4 million and a change in fair value of the warrant and earn-out contingent liabilities of $198.4 million, partially offset by non-cash depreciation and amortization of $21.8 million, non-cash stock-based compensation expense of $219.4 million, and a reserve against obsolete inventory of $2.1 million. The net change in our operating assets and liabilities primarily reflected a $5.5 million decrease in accounts receivable due to a decrease in institutional customer receivables which is in line with the respective revenue stream, a $10.6 million increase in inventories driven by a higher volume of purchases to support increasing testing volumes, a $14.3 million increase in prepaid expenses and other current assets mainly driven by new insurance policy premiums paid during the year, a $25.9 million increase in accounts payable and accrued expenses due to additional volume in the fourth quarter related to COVID-19 testing, resulting in increased related accruals and extended payment terms for large vendors, and a $3.2 million increase in other current liabilities mainly driven increased bonus accruals.
Net cash used in operating activities during the year ended December 31, 2020 was $93.1 million, which was primarily attributable to a net loss of $241.3 million, partially offset by non-cash depreciation and amortization of $11.7 million, non-cash stock-based compensation expense of $120.2 million and a net change in our operating assets and liabilities of $13.8 million. The net change in our operating assets and liabilities primarily reflected an increase in accounts receivable of $10.6 million driven by a slowdown in collections due to the COVID-19 pandemic, a $9.0 million increase in inventories in preparation for the move of certain laboratory operations to a
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new location in December 2020, an increase in accounts payable and accrued expenses of $14.8 million due to timing of vendor payments and increased spending during the year related to COVID-19 diagnostic testing and a $16.0 million increase in other current liabilities driven by higher personnel-related accruals due to increased headcount at 2020 year-end as compared to 2019 year-end, as well as an increase in accrued payroll taxes due to the deferral of U.S. payroll taxes as part of the CARES Act.
Net cash used in operating activities during the year ended December 31, 2019 was $18.7 million, which was primarily attributable to a net loss of $29.7 million and a net change in our operating assets and liabilities of $0.7
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$0.7 million, partially offset by non-cash depreciation and amortization of $6.4 million and non-cash stock-based compensation expense of $5.5 million. The net change in our operating assets and liabilities primarily reflected an increase in accounts receivable of $4.6 million driven by increase in testing volumes and billings, an $8.0 million increase in inventories driven by anticipated future growth due to a year-over-year increase in testing volumes for the year ended December 31, 2019 as compared to the year ended December 31, 2018, a $4.4 million increase in other assets due to security deposits on certain office and laboratory locations, an increase in accounts payable and accrued expenses of $12.8 million due to increased operating expenditures in line with the growth of the business and a $4.5 million increase in other current liabilities driven by higher personnel-related accruals due to increased headcount at 2019 year-end as compared to 2018 year-end.
Investing Activities
Net cash used in operatinginvesting activities during the year ended December 31, 20182021 was $24.7$20.8 million, which was primarily attributable to a net loss$9.4 million in purchases of $23.9property and equipment and $11.4 million a $4.5 million non-cash gain on extinguishment of debt and a net change in our operating assets and liabilities of $7.9 million, which were partially offset by non-cash depreciation and amortization of $5.4 million and non-cash stock-based compensation expense of $5.6 million. The net change in our operating assets and liabilities primarily reflected an increase in accounts receivable of $4.7 million driven by an increase in testing volumes and billings, a $4.9 million increase in inventories to support anticipated future growth in diagnostic testing and a $3.9 million increase in other current liabilities driven by higher personnel-related accruals due to increased headcount at 2018 year-end as compared to 2017 year-end.
Net cash used in operating activities during the three months ended March 31, 2021 was $42.2 million, which was primarily attributable to a net loss of $191.0 million and a net change in our operating assets and liabilities of $23.1 million, partially offset by non-cash depreciation and amortization of $4.9 million and non-cash stock-based compensation expense of $165.0 million. The net change in our operating assets and liabilities primarily reflected an $9.8 million increase in inventories driven by a higher volume of purchases to support increasing testing volumes, a $6.5 million increase in prepaid expenses and other current assets mainly driven by professional services costs directly related to the Business Combination, a $3.5 million increase in accounts payable and accrued expenses due to the timingdevelopment of vendor payments, and an $8.7 million decrease in other current liabilities mainly driven by a decline in our bonus accrual following bonus payments in March 2021.
Net cash used in operating activities during the three months ended March 31, 2020 was $22.6 million, which was primarily attributable to a net loss of $27.0 million, partially offset by non-cash depreciation and amortization of $2.4 million, non-cash stock-based compensation expense of $0.8 million and non-cash lease expenses of $1.1 million. The net change in our operating assets and liabilities was nominal for the three months ended March 31, 2020.
Investing Activitiesinternal-use software assets.
Net cash used in investing activities during the year ended December 31, 2020 was $32.0 million, which was attributable to $24.1 million in purchases of property and equipment and $7.9 million of costs related to development of internal-use software assets.
Net cash used in investing activities during the year ended December 31, 2019 was $15.4 million, which was attributable to $11.9 million in purchases of property and equipment and $3.5 million of costs related to development of internal-use software assets.
Financing Activities
Net cash used in investingprovided by financing activities during the year ended December 31, 20182021 was $3.8$493.7 million, which was attributable to $2.2the consummation of our business combination including: $350.0 million from the Prior PIPE Investment proceeds; $442.7 million from an equity infusion from the business combination, net of redemptions; offset by $230.7 million in purchasesthe cash payments to certain Legacy Sema4 stockholders; payment of propertytransaction costs of $51.8 million; and equipment and $1.7$3.8 million of costs related to development of internal-use software assets, partiallystock appreciate rights pay-outs. These amounts were further offset by $0.1an $8.7 million in proceeds from the salerepayment of laboratory equipment.
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Net cash used in investing activities during the three months ended March 31, 2021 was $5.0 million, which was attributable to $2.1 million in purchases of propertylong-term debt and equipment and $2.9$3.7 million of costs related to development of internal-use software assets.
Net cash used in investing activities during the three months ended March 31, 2020 was $5.3 million, which was attributable to $3.9 million in purchases of property and equipment and $1.4 million of costs related to development of internal-use software assets.
Financing Activitiescapital lease principal payments.
Net cash provided by financing activities during the year ended December 31, 2020 was $129.0 million, which was primarily attributable to $117.3 million in net cash proceeds from the issuance of our Series C redeemable convertible preferred stock and $15.9 million in net cash proceeds from the issuance of long-term debt. These increases were partially offset by $4.0 million in principal payments on our capital lease obligations and $0.2 million in principal payments on our long-term debt obligations.
Net cash provided by financing activities during the year ended December 31, 2019 was $148.0 million, which was attributable to $118.8 million in net cash proceeds from the issuance of our Series B redeemable convertible preferred stock and $30.9 million in capital contributions from ISMMS, partially offset by $1.7 million in principal payments on our capital lease obligations.
Net cash provided by financing activities during the year ended December 31, 2018 was $27.0 million, which was attributable to $24.6 million in capital contributions from ISMMS and $4.5 million in net cash proceeds from the issuance of long-term debt, partially offset by $2.1 million in principal payments on our capital lease obligations.
Net cash used in financing activities during the three months ended March 31, 2021 was $2.3 million, which was attributable to $1.3 million in payments for deferred transaction costs related to the Business Combination, $1.0 million in principal payments on our capital lease obligations and $0.4 million in principal payments on our long-term debt obligations, offset by $0.4 million cash received from stock option exercise.
Net cash provided by financing activities during the three months ended March 31, 2020 was $4.7 million, which was attributable to $6.0 million in net cash proceeds from the issuance of long-term debt, partially offset by $1.3 million in principal payments on our capital lease obligations.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risks in the ordinary course of our business. These risks primarily relate to interest rates. Our cash, cash equivalents, and restricted cash consists of bank deposits and money market funds, which totaled $118.9 million and $115.0 million at December 31, 2020 and 2019, respectively, and $69.5 million at March 31, 2021. Such interest-bearing instruments carry a degree of risk; however, because our investments are primarily high-quality credit instruments with short-term in durations with high-quality institutions, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates. A 100 basis point change in interest rates would not have a material effect on the fair market value of our cash, cash equivalents and restricted cash.
Sema4’s loans and financing obligations are recorded at amortized cost and are set at fixed interest rates. As a result, fluctuations in interest rates would not impact our financial statements. However, the fair value of our debt will generally fluctuate with movements of interest rates. Additional information on our long-term debt can be found in Sema4’s audited financial statements in Note 7, “Long-Term Debt” and Sema4’s unaudited condensed financial statements in Note 7, “Long-Term Debt.”
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The fair value of our liability-classified stock options is determined using the Black-Scholes model, which uses the risk-free interest rate as an input. A 100 basis point change in interest rates would not have a material effect on the fair value of our liability classified stock options using the Black-Scholes model.
Critical Accounting Policies and Estimates
We have prepared our consolidated financial statements in accordance with GAAP. Our preparation of these consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities and related disclosures at the date of the financial statements, as well as revenue and expense recorded during the reporting periods. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and or other relevant assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably possible could materially impact the financial statements. While our significant accounting policies are described in more detail in Sema4’s audited financial statements inSee Note 2, “Summary“Summary of Significant Accounting Policies” and Sema4’s unaudited condensedPolicies” to our consolidated financial statements in Note 2, “Summary of Significant Accounting Policies,” included elsewhere in this prospectus,for further discussion on our accounting policies. We have identified below our accounting policies that we believe could
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potentially generate materially different results if we were to change underlying assumptions, estimates and/or judgments. Although actual results may differ from those estimates, we believe the following accounting policies to be critical to the judgmentsestimates are reasonable and estimates used in the preparation of our financial statements.appropriate.
Revenue Recognition
Effective January 1, 2019 we adopted Accounting Standards Codification (“ASC”) Topic 606 (“ASC 606”), Revenue from Contracts with Customers. Under ASC 606,We recognize revenue is recognized when, or as, performance obligations under the terms of a contract are satisfied, which occurs when control of the promised products or services are transferred to a customer. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products or services to a customer. Our contracts require significant judgments in determining the transaction price and satisfying performance obligations under ASC 606.
We recognized revenue pursuant to ASC Topic 605 (“ASC 605”), Revenue recognition, for the year ended December 31, 2018 prior to the adoption of ASC 606. Under ASC 605, revenue was recognized when persuasive evidence of a final agreement existed; delivery had occurred or services were rendered; the price of the product or service was fixed or determinable; and collectability from the customer was reasonably assured. Our contracts require significant judgments in determining whether the price is fixed or determinable and whether collectability is reasonably assured under ASC 605.obligations.
Diagnostic test revenue
Our diagnostic test revenue contracts typically consist of a single performance obligation to deliver diagnostic testing services to the ordering facility or patient and therefore allocation of the contract transaction price is not applicable. Control over diagnostic testing services is transferred at a point in time. Specifically, we determined the customer obtains control of the promised service upon delivery of the test results.
Under ASC 606, we include the unconstrained amount of estimated variable consideration in the transaction price. The transaction price is constrained to only include the amount for which it is probable that a significant reversal of cumulative revenue recognized will not occur when underlying uncertainties or contingencies resolve. At the end of each subsequent reporting period, we re-evaluate the estimated variable consideration included in the transaction price and any related constraint and, if necessary, adjust our estimate of the overall transaction price. The process for estimating the transaction price associated with services provided to customers involves significant judgments and assumptions.
We estimate thea transaction price in arrangements with third-party insurance payors based on historical collection experience, contractual provisions and insurance reimbursement policies, payor mix, and other relevant information for applicable payor portfolios. The estimatesportfolio approach is used as a practical expedient to account for implicit price concessions require significant judgment
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and are based upon management’s assessmentcategories of expected net collections, business and economic conditions, historical trends, trends in federal, state and private employer health care coverage and other collection indicators.
diagnostic test contracts as collective groups rather than on an individual contract basis. Management believes that revenue recognized by utilizing the portfolio approach approximates the revenue that would have been recognized if an individual contract approach was used. For orders received for self-pay patients, we determine thea transaction price associated with services rendered in consideration of implicit price concessions that are granted to such patients.orders. The estimates for implicit price concessions require significant judgment and are based upon management’s assessment of expected net collections, business and economic conditions, historical trends, trends in federal, state and private employer health care coverage and other collection indicators.
For institutional clients, the customer is the institution. Sema4 determines theWe determine a transaction price associated with services rendered in accordance with the contractual rates established with each customer.
We monitor these accrual estimates at each reporting period based on actual cash collections in order to assess whether a revision to the estimate is required. Both the initial estimate and any subsequent revision to the estimate contain uncertainty and require the use of judgment in the estimation of the transaction price and application of the constraint for variable consideration. If actual results in the future vary from Sema4’sour estimates, Sema4we will adjust these estimates, which could affect revenue and earnings in the period such variances become known.
Under ASC 605, A 1% decrease or increase in our collection rate from third-party insurance payors, which we recognizebelieve could be a reasonably likely change, would result in an unfavorable or favorable adjustment to diagnostic test revenue from diagnostic tests performed in the period in which tests are reported to customers if the price is fixed or determinable and collectability from the customer is reasonably assured. The criterion for whether the price was fixed or determinable and whether collectability was reasonably assured were based on management’s judgments. When evaluating collectability, in situations where reimbursement coverage did not exist, we considered whether a sufficient history to reliably estimate a payer’s individual payment patterns existed. For most uninsured customers, we were not able to demonstrate a predictable pattern of collectability and, therefore, recognized revenue when payment was received. For customers who had demonstrated a consistent pattern of payment of tests billed at the appropriate amounts, we recognized revenue at estimated realizable amounts upon delivery of test results.approximately $16.2 million.
Other revenue
We also recognize revenue from service agreements and collaboration service agreements with Biopharma companies and other third parties pursuant to which we provide diagnostic testing and related data aggregation reporting services. The goods and services transferred to our customers pursuant toCertain of these agreements generally comprise a single performance obligation on the basis that such goods and services are not distinct within the context of the contract. This is because the goods and services are highly interdependent and interrelated such that we would not be able to fulfill its underlying promise to its customers by transferring each good or service independently. These contracts generally includeprovide non-refundable upfront payments, which we record as contract liabilities, and variable payments based upon the achievement of certain milestones during the contract term. Milestone payments are a form of variable consideration that are included in the transaction price only when it is probable that doing so will not result in a significant reversal of cumulative revenue recognized when the uncertainty associated with the milestone is subsequently resolved.
Under ASC 606,For certain service or collaboration contracts that require us to transfer control of the service over time, we recognize revenue over time using an input measure based on costs incurred on the basis that this measure best reflects the pattern of transfer of control of the services to the customer. The measure of progress is developed using our best estimate of the performance period and the anticipated costs to be incurred to perform such services. The costs forservices, including any subcontracted services are included in our measure of progress used to recognize revenue.service costs.
Under ASC 605, we recognize revenues when the contractual obligations are met based on the terms of the respective agreements.
Capitalized Internal-Use Software Costs
We capitalize certain costs related to the development of our software applications for internal use. Capitalization begins during the application development stage, once the preliminary project stage has been completed. If a project constitutes an enhancement to existing software, we assess whether the enhancement creates
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additional functionality to the software, thus qualifying the work incurred for capitalization. Costs incurred prior to meeting these criteria together with costs incurred for training and maintenance are expensed as incurred. Once the project is available for general release, capitalization ceases and we estimate the useful life of the asset and begin amortization. We exercise judgment in determining the point at which various projects may be capitalized, in assessing the ongoing value of the capitalized costs and in determining the estimated useful lives over which the costs are amortized. We periodically assess whether triggering events are present to reviewwhich would indicate that the internal-use software for impairment.is impaired. To the extent that we change our estimates related to internal-use software, the amount of internal-use software development costs we capitalize and amortize could change in future periods.
Stock-Based Compensation
We measure stock-based compensation expense for liability-classified stock options granted to employees, consultants and directors based on the estimated fair value of the awards and recognize compensation expense over the requisite service period for each separate vesting portion of the award as if the award was, in-substance, multiple awards. Terms of our stock options include a provision whereby we have a call option to repurchase the award for cash upon termination of employment or termination of the consulting agreement. We have concluded that it is probable we will continue to exercise our call option prior to the award holder being subject to the risks and rewards of equity ownership. As a result, stock options are classified as liabilities in the accompanying balance sheets. Additional information on our stock-based compensation can be found in Sema4’s audited financial statements in Note 9, “Stock-Based Compensation” and Sema4’s unaudited condensed financial statements in Note 9, “Stock-Based Compensation.”
The initial measurement of fair value and subsequent change in fair value are recognized as compensation expense over the requisite service period from grant date to settlement date for all awards that vest with a corresponding adjustment to stock-based compensation liabilities on the balance sheet. Shares of common stock issued upon settlement of an award continue to be classified as a liability and remeasured to fair value each reporting period until the shareholder bears the risks and rewards of equity ownership for a reasonable period of time, which Sema4 concludes is a period of at least six months.Earn-out Contingent Liability
We estimate the fair value of the total earn-out shares based on a Monte Carlo simulation valuation model. The fair value of the earn-out contingent liability is sensitive to expected volatility estimated based on selected guideline public companies and the Company’s common stock price which is sensitive to changes in the forecasts of earnings and/or the relevant operating metrics. The model used requires the use of assumptions regarding variables that are complex, subjective and generally require judgment to determine.
Stock-Based Compensation
Stock-based compensation for all employee and non-employee stock-based awards, including restricted stock units, is measured at fair value on the date of grant and recognized over the service period. The fair value of restricted stock units are calculated based on the fair value of our common stock on the date of grant, while the fair value of stock options are calculated using thea Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires the use of assumptions regarding a number of variables that are complex, subjective and generally require significant judgment to determine. Changes in the assumptions can materially affect the fair value and ultimately how much stock-based compensation expense is recognized. TheseKey assumptions include:
Expected volatility. As we do not have any trading history for our common stock, theinclude expected volatility, wasexpected term, risk-free interest rate and dividend yield. The volatility is estimated based on the average volatility for comparable publicly traded companies over a period equal to the expected term of stock option grants. When selecting these comparable companies, we considered the enterprise value, risk profiles, position within the industry, and whether there was sufficient historical share price information to meet the expected life of the stock-based awards. We computed historical volatility using the daily closing prices for the selected companies’ common stock during the equivalent period of the calculatedThe expected term of the stock-based awards.
Expected term. The expected term representsCompany’s options has been determined utilizing the period that“simplified” method as the awards granted are expected to be outstanding and is determined by the potential timing of a liquidity event since all awards have accelerated vesting features upon a liquidation event and we generally do not expect grantees to exercise vested options prior to a liquidation event.
Risk-free interest rate.qualified as “plain-vanilla” options. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for bonds with maturities consistent with the expected holding periods corresponding with the expected term of the option.
Dividend We estimate zero dividend yield. We as we have not historically paid dividends on common stock and do not anticipate paying dividends in the foreseeable future. Therefore,
Income Taxes
We account for income taxes in accordance with ASC Topic 740, “Income Taxes,” under which deferred income taxes are provided for temporary differences between the expected dividend yield is zero.
Fair value of common stock. Prior to the closing of the Business Combination, the fair valuefinancial reporting and tax basis of our common stock issuable upon exercise of stock options was determinedassets and liabilities. We reduce deferred tax assets, if necessary, by our board of directors, with input from management and independent third-party valuations, as discussed in “Common Stock Valuations” below.
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The estimated forfeiture ratea valuation allowance if it is more likely than not determinable due to a lack of historical and comparable data. Therefore,that we account for forfeitures as they occur.
Common Stock Valuations
The estimated fair value of common stock underlying our stock options was determined at each grant date by our board of directors, with input from management, considering our most recently available third-party valuations of common stock and our board of directors’ assessment of additional objective and subjective factors that it believed were relevant and factors that may have changed from the date of the most recent valuation through the end of the reporting period. All options to purchase shareswill not realize some or all of our common stock are intended to be exercisable atdeferred tax assets. In making such a price per share not less than the per-share fair valuedetermination, we consider all available positive and negative evidence, including future reversals of our common stock underlying those options on the dateexisting taxable temporary differences, projected future taxable income, tax-planning strategies, and results of grant.recent operations.
We determinedrecognize the fair value of our common stock using methodologies, approaches and assumptions consistent withtax benefit from an uncertain tax position only if it is more likely than not that the American Institute of Certified Public Accountants Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Given the absence of a public trading market for our common stock, our common stock valuation methodologies utilize certain assumptions, including probability weighting of events, volatility, time to liquidation, a risk-free interest rate and an assumption for a discount for lack of marketability. Other considerations include:
•the prices, rights, preferences and privileges of our redeemable convertible preferred stock relative to our common stock;
•our operating and financial performance, forecasts and capital resources;
•current business conditions;
•our stage of commercialization;
•the likelihood of achieving a liquidity event for the shares of common stock issuable upon exercise of these stock options, such as an initial public offering, reverse merger SPAC transaction, or sale of Sema4, given prevailing market conditions;
•the market performance of comparable publicly traded technology companies; and
•the U.S. and global economic and capital market conditions.
In valuing our common stock for periods prior to December 31, 2020, we utilized the “backsolve” method to derive our implied enterprise value from arm’s length transactions in our redeemable convertible preferred securities assuming various timelines to liquidity via an initial public offering or sale. We then used an option-pricing model (“OPM”) to estimate the fair value of our common stocktax position will be sustained on examination by taxing authorities, based on the calculated enterprise value under each liquidity scenario. The OPM treats the rightstechnical merits of the holders of redeemable convertible preferred stock and common stock as equivalent to that of call options on any value of the enterprise above certain break points of value based upon the liquidation preferences of the holders of preferred stock, as well as their rights to participation and conversion. Based on the timing and nature of an assumed liquidity event in each scenario, a discount for lack of marketability was applied to each scenario. We then probability weighted the value of each expected outcome to arrive at an estimate of fair value per share of common stock.position.
In valuing our common stock prior to the closing of the Business Combination, including as of December 31, 2020, we estimated the fair value of the enterprise using the probability-weighted expected return method (“PWERM”), which is a highly complex and subjective valuation methodology. Under a PWERM, the fair market value of the common stock is estimated based upon the discounted expected future values for the enterprise assuming various future outcomes. Based on the timing and nature of an assumed liquidity event in each scenario, a discount for lack of marketability was applied to each scenario. We then probability-weighted the value of each expected outcome to arrive at an estimate of fair value per share of common stock.
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For valuations after the closing of the Business Combination, our board of directors determines the fair value of each share of common stock based on the closing price of our common stock on the date of grant or other relevant determination date, as reported on Nasdaq.
JOBS Act Accounting Election
We are an “emerging growth company” within the meaning of the JOBS Act. The JOBS Act allows an emerging growth company to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. We have elected to use this extended transition period and, as a result, our financial statements may not be comparable to companies that comply with public company effective dates. We also intend to rely on other exemptions provided by the JOBS Act,
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including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act.
Following the completion of the Business Combination, weWe will remain an emerging growth company until the earliest of (1) December 31,September 1, 2025, (2) the last day of the fiscal year in which we have total annual gross revenue of at least $1.07 billion, (3) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our Class A common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year or (4) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

Recent Accounting Pronouncements
Additional informationInformation on recent accounting pronouncements can be found in Sema4’s audited consolidated financial statements in Note 2, “Summary“Summary of Significant Accounting Policies” and Sema4’s unaudited condensedPolicies” included elsewhere in this proxy statement.
Internal Controls
Material Weaknesses
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements in Note 2, “Summary of Significant Accounting Policies.”will not be prevented or detected on a timely basis.
Internal Controls 
In connection with the preparation of ourLegacy Sema4's audited financial statements included elsewhere in this proxy statement,for the years ended December 31, 2020, 2019 and 2018, we identified material weaknesses in our internal controlcontrols over financial reporting, which existed as of December 31, 2020. These material weaknesses had not been fully remediated as of December 31, 2021. In addition, during 2021, management identified a misclassification of certain costs included within cost of services for the years ended December 31, 2021, 2020 and 2019. The material weaknesses identified related to the fact that we did not design and maintain accounting policies, procedures and controls to ensure complete, accurate and timely financial reporting in accordance with U.S. GAAP. Specifically, the material weaknesses identified included the following:
•We did not design and maintain accounting policies, processes and controls to analyze, account for and report our revenue arrangements in accordance with ASC 606, Revenue from Contracts with Customers, and ASC 605, Revenue Recognition.
•We did not design and maintain formal accounting policies, procedures and controls to achieve complete, accurate and timely financial accounting, reporting and disclosures, including controls over the preparation and review of account reconciliations, journal entries and classification of certain costs; the accounting for cost capitalization policies in accordance with ASC 330, Inventory, and ASC 350-40, Intangibles – Goodwill and Other – Internal-Use Software; and the application of ASC 840, Leases, ASC 340-40, Contracts with Customers and SEC Regulation S-X Article 5.
•We had not developed and effectively communicated to our employees our accounting policies and procedures, which resulted in inconsistent practices. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.
•Our accounting and operating systems lacked controls over access, and program change management that are needed to ensure access to financial data is adequately restricted to appropriate personnel.
•We do not have sufficient, qualified finance and accounting staff with the appropriate U.S. GAAP technical accounting expertise to identify, evaluate and account for accounting and financial reporting, and effectively design and implement systems and processes that allow for the timely production of accurate financial information in accordance with internal financial reporting timelines, commensurate with our size and the nature and complexity of our operations. As a result, we did not design and maintain formal
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accounting policies, processes and controls related to complex transactions necessary for an effective financial reporting process.
Remediation Plan
Our management is actively engaged and committed to taking the steps necessary to remediate the control deficiencies that constituted the material weaknesses. During 2021, we made the following enhancements to our control environment:
•In May 2021, we hired a permanent Chief Accounting Officer with substantial technical accounting and internal controls experience, whose responsibilities include working with our Chief Financial Officer, existing employees and third-party consultants to improve the design, implementation, execution and supervision of our internal control over financial reporting.controls.
•We added accounting and information technology employees with appropriate experience, certification, education and training to the organization to strengthen our internal accounting team, to provide oversight, structure and reporting lines, and to provide additional review over our disclosures. This includes hiring a Corporate Controller, whose primary responsibilities include working with third-party consultants to improve the design, implementation, execution, and supervision of our internal controls over financial reporting.controls. We expect to continue to evaluateevaluating our needs for additional personnel. We expect to provide enhanced training to existing and new employees in order to enhance the level of communication and understanding of controls with key individualspersonnel that provide key information and perform key roles within our financial accounting and reporting group.
•We engaged outside consultants to assist in the design, implementation, and documentation of internal controls that address the relevant risks, are properly designed, and provide for appropriate evidence of performance of the internal controls; and
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•We engaged outside consultants to assist us in the evaluation of a newour Enterprise Resource Planning (“ERP”ERP”) system in order to mitigate the internal control gaps and limitations that cannot be addressed bywith the current ERP around segregation of duties,configuration, and to enhance the information technology general controls environment.
•Our remediation activities are continuing during 2021.2022. In addition to the above actions, we expect to engage in additional activities, including, but not limited to:
•Hiring more technical accounting resources to enhance our control environment;
•Until we have sufficient technical accounting resources, engagingEngaging external consultants to provide support and to assist us in our evaluation of more complex applications of GAAP, and to assist us with documenting and assessing our accounting policies and procedures;procedures until we have sufficient technical accounting resources;
•Implementing business process-level controls across all significant accounts and information technology general controls across all relevant domains.systems. This will includeincludes providing training suchfor control owners that the preparers and control operators to establish clearwill present expectations as it relates to the control design, execution and monitoring of such controls, including enhancements to the documentation to evidence the execution of the controls; and
•Implementing improvements to our ERP system to enhance the accuracy of our financial records, enable the enforcement of systematic segregation of duties, and to improve our information technology general controls environment.
We continue to enhance corporate oversight over process-level controls and structures to ensure that there is appropriate assignment of authority, responsibility, and accountability to enable remediation of our material weaknesses. We believe that our remediation plan will be sufficient to remediate the identified material weaknesses and strengthen our internal control over financial reporting.controls. As we continue to evaluate, and work to improve our internal control over financial reporting,controls, management may determine that additional measures to address control deficiencies or modifications to the remediation plan are necessary.
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While we have performed certain remediation activities to strengthen our controls to address the identified material weaknesses, control weaknesses are not considered remediated until new internal controls have been operational for a period of time, are tested, and management concludes that these controls are operating effectively. We will continue to monitor the effectiveness of our remediation measures in connection with our future assessments of the effectiveness of internal control over financial reporting and disclosure controls and procedures, and we will make any changes to the design of our plan and take such other actions that we deem appropriate given the circumstances.
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GENEDX’S BUSINESS
In this section, “GeneDx” or “we”, “us” and “our” refer to GeneDx, Inc. unless specifically stated otherwise.
Overview
GeneDx is a patient-centric health information company and leader in delivering clinical genomic answers to an ever-increasing community of patients, families and healthcare providers. With more than 20 years of experience in diagnosing rare disorders and diseases, we have pioneered panels, exome and whole genome sequencing and have developed a proprietary genomic interpretation and information services platform in support of healthcare partners and patients globally. We create, follow, and are informed by cutting-edge science and technology. With one of the most sophisticated datasets of genomic information, we are able to identify new disease-causing genes, advancing the field of medicine through the detection, discovery, and diagnosis of genetic diseases.
Purpose
We operate with the conviction that what is best for our customers (patients, their families and the clinicians, payers and partners who serve them) must be embedded in every aspect of our work. We believe that:
•genomic information has broad utility, and every person should have access to their genome—delivered expertly, ethically and responsibly—to guide health decisions throughout life;
•the transition from hypothesis-based to genome-guided healthcare will improve outcomes for patients and the healthcare system;
•genomics will radically transform therapeutic development, bringing better therapies to patients, faster; and
•patients should control and have the ability to direct the use of their genomic information to benefit both themselves and advance scientific understanding that helps others.
In support of these beliefs, we value:
•Equity: the right of all to have access to information that may improve their health;
•Simplicity: healthcare is complicated. Genetic information is complex. Our job is to make it as simple as possible to access an answer that improves health outcomes. We value the understanding simplicity creates; and
•Transparency: transparency and accountability for ourselves and our partners to safeguard the confidence and trust of patients, customers and partners.
Through this value system, we aim to revolutionize healthcare and change lives by unlocking the answers from within, applying genomics to bring better health to patients around the world.
GeneDx’s Genomic Testing
When patients present with complex issues, a genetic diagnosis may be possible, but a traditional genetic panel test may be too narrow to identify the cause. The human genome is composed of three billion “letters”, or base pairs, of DNA. The exome is the portion of the genome that encodes for proteins, the molecular machines that allow cells to function. Changes in the genome and exome can cause many different diseases.
Some genetic disorders present with very specific symptoms; therefore, tests that read the “letters” of a single gene or a small panel of genes, may be appropriate. However, for many other genetic diseases, patients can present with overlapping symptoms. Finding the correct diagnosis is not always straight-forward and may require multiple tests, costly evaluations, invasive procedures, and long hospital stays. Exome and genome sequencing may find answers that more targeted genetic tests miss and are especially useful when the timing is critical and test results may direct or alter medical management.
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Founded by scientists from the U.S. National Institutes of Health (“NIH”) in 2000, GeneDx has a proven track record of expertise in genetic testing, having launched next generation sequencing panels in 2008, pioneered exome sequencing in 2012 and has now sequenced more than 300,000 exomes to date. We have performed more than one-million genetic tests and have developed the following:
•a curated database of disease-associated genomic variants;
•proprietary bioinformatics and variant interpretation pipelines; and
•rapid exome and whole genome sequencing testing options.
The current status quo of genetic testing generally requires repeated and fragmented testing, which in many cases, is conducted too late. Additionally, targeted genetic tests and panels have been largely commoditized and may leave physicians, healthcare partners and patients searching for deeper answers and enhanced utility. We believe that the scalable exome and whole genome interpretation that we can deliver at speed, no longer requiring a long, complex, expensive, expert-guided search, has the potential to make most other genetic tests obsolete.
Advanced technology with a human touch
With approximately 250 genetic counselors, M.D./Ph.D. scientists, and clinical and molecular genomics specialists, we believe that GeneDx is the industry’s leading genetic testing expert.
Our years of exome sequencing experience provides an enormous phenotyped clinical genomic dataset, including more than 2.1 million structured phenotypes with 60% as parent-child trios. Of particular importance, we have invested resources over time to annotate the phenotypes and sequence the parents, because they improve the diagnostic outcome of each case but also because that data improves the interpretation of future cases. We now have nearly twice as many expertly annotated disease-causing variants as the largest public resource, ClinVar, across more genes, which we have built over the course of a decade of clinical work.
Internally developed with over one-million sequenced specimens, we believe that our database leads to more and more reliable diagnostic test results. Combined with our proprietary, state-of-the-art variant identification software, we believe that our ability to deliver highly accurate test results makes finding definitive diagnoses, even in complex cases, possible. As the number of new patients we test increases, so does our database and as new data increases, so does the potential for greater insights. By comparing new cases against the data from previous cases, we may eventually confirm whether a genetic variant is significant. Once new findings are identified, we aim to proactively reach out to healthcare providers and offer to reanalyze their patients’ previous results. Over time, we expect to fully automate this reanalysis process in a convenient, easy to understand, frictionless method. Implemented with expert oversight, our advanced interpretation methods incorporate automation, bioinformatics, and machine learning, enabling efficient discovery of genetic differences at previously undetectable levels.
GeneDx’s Strategy to Lead
Leveraging these capabilities, we aim to be the global market leader in the development and delivery of reliable, actionable, scalable exome and genome sequencing, and related interpretation and information services. GeneDx’s strategy focuses on the following initiatives:
•expanding the utilization of exome and genome sequencing as the first- or second-tier test over most other germline tests among genetics experts;
•expanding the utilization of industry-leading exome and genome sequencing beyond the experts into the non-expert space globally, creating a new standard of care that enables faster diagnoses, reduces suffering, and helps healthcare systems save money. In the near term, we expect that our principal target markets will be settings with the most vulnerable patients who can benefit the most including, but not limited to, NICU and Pediatric Developmental Disorders; and
•opening new markets and geographies and unlocking the value of our dataset with independently scalable cloud-base interpretation and information service offerings.
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Industry Background and Market Opportunity
Targeted genetic tests and panel testing currently make up the overwhelming majority of medical diagnostics tests ordered today, and GeneDx offers such targeted genetics tests and panel testing. They require that clinicians know what they are looking for and how to find the test that could identify it. The foregoing is hypothesis-based medicine. We firmly believe that affordable, scalable and actionable genomic testing is the future of medicine, in which we sequence once, query often. The barrier to that affordable genome is very high—and not just due to sequencing costs—which are coming down. The less-discussed barrier lies in the ability to process a genome’s wealth of information—quickly, scalably—and deliver a result on which a clinician can easily act to help a patient.
While panel testing can be valuable, it has an inherent limitation as we move toward genetic-based care. Panels can lead to incomprehensive results and an inefficient process. Exome and whole genome testing provide the broadest view into the genome, as such testing can examine all 20,000 genes, whereas panels look at anywhere from two to a few hundred genes. While many of our competitors have grown through a focus on panels, we have focused on exome and whole genome sequencing, developing structured gene-disease knowledge curated by a group of experts to power automated interpretation and reporting.
From a business perspective, the genetic testing industry is highly fragmented: there are dozens of market participants, most of which are tackling the same problem test-by-test with thousands of panels across dozens of clinical areas. It is highly inefficient. But what we are all striving for is the consolidation of the space—who can provide all the answers, and create one test that obviates the need for most others.
In addition to its panel testing business, GeneDx intends to grow primarily by expanding its current market-leading exome position through commercial expansion of its current offerings in the NICU and PP/ID setting, as well as introducing interpretation and information services to clinicians, researchers and biopharmaceutical partners.
Over the long term, GeneDx intends to transform its industry-leading exome into whole genome testing, supported with the launch of a new customer experience platform for non-geneticists, patients and caregivers and evidence generation to establish the clinical and economic benefits of screening.
Customers and Seasonality
GeneDx receives payment for its products and services from business-to-business clients, third-party payers, patients and from other healthcare partners. Substantially all of its revenue for the year ended December 31, 2021 was primarily derived from diagnostic test reports. We expect over time to achieve a mix of diagnostic test revenue, revenue from screening products and information and interpretation services.
Less than five percent of GeneDx’s revenues for the year ended December 31, 2021 were derived from referral sources outside of the United States; however, we expect that, over time, the mix of U.S. vs. rest of world revenue will draw closer to parity.
GeneDx has historically experienced higher revenue in its fourth quarter compared to the first three quarters of the calendar year due in part to seasonal demand for its tests from patients who have met their annual insurance deductibles.
Competition
GeneDx’s competitors include companies that offer molecular genetic testing and consulting services, including specialty and reference laboratories that offer traditional single- and multi-gene tests, as well as biopharmaceutical companies. In addition, there are a large number of new entrants into the market for genetic information, ranging from informatics and analysis pipeline developers, to focused, integrated providers of genetic tools and services for health and wellness, including Illumina, Inc. which is also one of GeneDx’s suppliers. In addition to the companies that currently offer traditional genetic testing services and research centers, other established and emerging healthcare, information technology and service companies may commercialize competitive products including informatics, analysis, integrated genetic tools and services for health and wellness. Principal competitors include
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companies such as Exact Sciences, Invitae, Guardant Health, Myriad, Natera, Neogenomics, Personalis, and Prevention Genetics, as well as other commercial and academic labs.
GeneDx Corporate Office
GeneDx’s corporate office and the location of its 90,000 square-foot laboratory is 207 Perry Parkway, Gaithersburg, Maryland 20877, which is a leased space.
Market Information, Holders and Dividends.
GeneDx is currently an indirect, wholly-owned subsidiary of OPKO Health, Inc., and there is no established public trading market for any of GeneDx’s securities. Following the consummation of the Acquisition, GeneDx will become an indirect, wholly-owned subsidiary of Sema4. GeneDx has never paid cash dividends on its outstanding equity.
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GENEDX’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Factors Affecting Our Performance
We believe several important factors have impacted, and will continue to impact, our performance and results of operations. While each of these areas presents significant opportunities for us, they also pose significant risks and challenges that we must address. See the section titled “Risk Factors” for more information.
Comparison for The Years Ended December 31, 2021 and December 31, 2020
(In thousands)20212020Change% Change
Revenues    
Revenue from services$116,595 $94,712 $21,883 23 %
Other— 308 (308)(100)%
Total revenues116,595 95,020 21,575 23 %
Costs and expenses:    
Cost of revenue84,361 74,367 9,994 13 %
Selling, general and administrative52,439 41,583 10,856 26 %
Research and development12,377 9,110 3,267 36 %
Amortization of intangible assets16,813 16,813 — — %
Total costs and expenses165,990 141,873 24,117 17 %
Operating loss$(49,395)$(46,853)$(2,542)(5)%
Other income (expense)(44)(87)43 49 %
Income tax benefit12,547 12,037 510 4 %
Net loss and comprehensive loss$(36,892)$(34,903)$(1,989)(6)%
Revenue. Revenue from services increased $21.9 million, or 23%, to $116.6 million for the year ended December 31, 2021, from $94.7 million for the year ended December 31, 2020. The increase was primarily attributable to the following components:
•resulted test volumes of 146,982 increased 33% from 110,478 in 2020;
•exome and whole genome sequencing (WGS) revenue increased $22.5 million, resulting from a 45% increase in resulted test volumes partially offset by a decrease of $11.2 million from reduced test reimbursement resulting from a shift in overall payor mix towards third party and government payers;
•non-exome, non-WGS revenue increased $14.0 million from a 30% increase in test resulted volumes, which was partially offset by a decrease of $4.6 million from reduced test reimbursement resulting from increased commoditization and increased denial rates;
•biopharma and data services revenue increased $0.6 million; and
•estimated collection amounts are subject to the complexities and ambiguities of billing, reimbursement regulations and claims processing, as well as considerations unique to Medicare and Medicaid programs, and require us to consider the potential for retroactive adjustments when estimating variable consideration in the recognition of revenue in the period the related services are rendered. For the years ended December 31, 2021 and 2020, we recognized revenue reductions due to changes in estimates of implicit price concessions for performance obligations satisfied in prior periods of $4.2 million and $4.8 million, respectively.
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Other revenue consisted of $0.3 million for the year ended December 31, 2020 from funds distributed to healthcare providers for related expenses or lost revenues that are attributable to the COVID-19 pandemic. No such amounts were received in 2021.
Cost of revenue. Cost of revenue increased $10.0 million, or 13%, to $84.4 million for the year ended December 31, 2021, from $74.4 million for the year ended December 31, 2020. The increase was primarily attributable to the following components: increased reagent, supply and specimen collection costs of $8.4 million; an increase of $5.5 million in personnel-related expenses driven by increased testing volumes; increased depreciation and amortization of $0.9 million; and an increase in shared-based compensation of $0.2 million, partially offset by a discrete benefit of $5.5 million upon receipt of a multi-year sales & use tax refund from the State of Maryland. Our cost per patient encounter (on the basis of laboratory accessions in the period), inclusive of all volumes, improved 9% in 2021 compared to the year ended December 31, 2020.
Selling, general and administrative expenses. Selling, general and administrative expenses increased $10.9 million, or 26%, to $52.4 million for the year ended December 31, 2021, from $41.6 million for the year ended December 31, 2020. Selling, general and administrative expenses increased primarily due to the following components: increased information-technology related and other third party professional fees and license costs of $4.2 million to support the implementation of our expansion of various enterprise systems and other enablement technologies; increased sales and marketing personnel cost of $2.2 million; higher human resource, talent acquisition and onboarding costs of $1.7 to support expansions in our workforce; an increase of $1.2 million in non-cash share-based expense; $0.7 million related to professional fees in connection with the potential separation of GeneDx from OPKO; and $0.4 million increased facility costs, partially offset by $0.5 million lower billing cost.
Research and development expenses. The following table summarizes the components of our research and development expenses:
Research and Development ExpensesFor the years ended December 31,
 20212020
Research and development employee-related expenses$10,042 $6,844 
Other internal research and development expenses2,335 2,266 
Total research and development expenses$12,377 $9,110 
Research and development increased $3.3 million, or 36%, to $12.4 million for the year ended December 31, 2021 from $9.1 million for the year ended December 31, 2020 primarily due to increase personnel-related costs due to increased headcount across laboratory automation and robotics, bioinformatics and data research & development activities, as well as an increase of $0.2 million in share-based compensation expense.
Amortization of intangible assets. Amortization of intangible assets was $16.8 million for both the years ended December 31, 2021 and 2020. Amortization expense reflects the amortization of acquired intangible assets with defined useful lives.
Income tax benefit. Our income tax benefit for the years ended December 31, 2021 and 2020 was $12.5 million and $12.0 million, respectively, and reflects results using our expected effective tax rate. For the year ended December 31, 2020, the tax rate differed from the U.S. federal statutory rate of 21% primarily due to the impact of certain discrete tax events and the difference in state taxes.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2021, we had cash and cash equivalents of approximately $144 thousand.
Net cash used in operations for the year ended December 31, 2021 was $22.9 million primarily attributable to our net loss of $36.9 million and the net change in deferred income taxes of $12.6 million partially offset by non-cash depreciation and amortization expense of $21.9 million. Net cash used in operations for the year ended December 31, 2020 was $11.9 million primarily attributable to our net loss of $34.9 million and the net change in
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deferred income taxes of $12.2 million partially offset by non-cash depreciation and amortization expense of $20.9 million.
Net cash used in investing activities for the years ended December 31, 2021 and December 31, 2020 primarily reflects capital expenditures of $13.0 million and $9.8 million, respectively, predominantly related to the expansion and improvement to our newly outfitted 90,000 square-foot laboratory and to purchases of additional next generation sequencing equipment.
Net cash provided by financing activities for the year ended December 31, 2021 and December 31, 2020 includes equity contributions from BioReference Laboratories, Inc. (“BioReference”), our direct party company, of $35.9 million and $21.3 million, respectively, to fund operations. We have not generated sustained positive cash flow sufficient to offset our operating and other expenses.
In November 2015, BioReference and certain of its subsidiaries, including GeneDx, entered into a credit agreement with JPMorgan Chase Bank, N.A. (“CB”), as lender and administrative agent which was amended and restated on August 30, 2021 (the “A&R Credit Agreement”). The A&R Credit Agreement provides for a $75.0 million secured revolving credit facility and includes a $20.0 million sub-facility for swingline loans and a $20.0 million sub-facility for the issuance of letters of credit. The A&R Credit Agreement matures on August 30, 2024 and is guaranteed by all of BioReference’s domestic subsidiaries. The A&R Credit Agreement is also secured by substantially all assets of BioReference and its domestic subsidiaries, as well as a non-recourse pledge by BioReference’s partent company of its equity interest in BioReference. Availability under the A&R Credit Agreement is based on a borrowing base composed of BioReference’s eligible accounts receivables, which includes GeneDx, as specified therein. As of December 31, 2021, $64.8 million remained available for borrowing under the A&A Credit Agreement.
At BioReference’s option, borrowings under the A&R Credit Agreement (other than swingline loans) bear interest at (i) the CB floating rate (defined as the higher of (a) the prime rate and (b) the LIBOR rate (adjusted for statutory reserve requirements for Eurocurrency liabilities) for an interest period of one month plus 2.50%) plus an applicable margin of 0.75% or (ii) the LIBOR rate (adjusted for statutory reserve requirements for Eurocurrency liabilities) plus an applicable margin of 1.75%. Swingline loans will bear interest at the CB floating rate plus the applicable margin. The A&R Credit Agreement also calls for other customary fees and charges, including an unused commitment fee of 0.375% if the average quarterly availability is 50% or more of the revolving commitment, or 0.25% if the average quarterly availability is less than or equal to 50% of the revolving commitments
We believe that the cash and cash equivalents on hand as of December 31, 2021, cash from operations and the amounts available to be borrowed under the A&R Credit Agreement are sufficient to meet our anticipated cash requirements for operations and debt service beyond the next 12 months. We based this estimate on assumptions that may prove to be wrong or are subject to change, and we may be required to use our available cash resources sooner than we currently expect. If we acquire additional assets or companies, we will need additional funds. Our future cash requirements, and the timing of those requirements, will depend on a number of factors, including the potential for funds to be available upon closing of the acquisition of GeneDx by Sema4 Holdings Corp., which announced in January 2022 that it executed an Agreement and Plan of Merger and Reorganization with GeneDx, and its parent company, the availability of financing, payor claims, and legal proceedings that may arise, including, without limitation class action and derivative litigation to which we are subject, and our ability to obtain insurance coverage for such claims. We have not generated sustained positive cash flow and if we are not able to secure additional funding when needed, we may have to reduce our marketing or sales efforts or cease operations.
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The following table provides information as of December 31, 2021, with respect to the amounts and timing of our known contractual obligation payments due by period.
Contractual obligations
(in thousands)20222023202420252026ThereafterTotal
Open purchase orders14,492 — — — — — 14,492 
Operating Leases(396)1,048 1,659 1,715 1,773 9,116 14,915 
Total14,096 1,048 1,659 1,715 1,773 9,116 29,407 
Quantitative and Qualitative Disclosures about Market Risk
We are subject to general economic and political conditions such as recessions, wage and input cost inflation, governmental COVID-19 shut down mandates as a result of the pandemic and, potential acts of war or terrorism. We are not exposed to material market or interest rate risk in the ordinary course of our business given our limited cash position and no outstanding debt as of the periods presented.
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EXECUTIVE COMPENSATION OF SEMA4
Unless the context otherwise requires, any reference in this section of this proxy statement to “Sema4,” “we,” “us” or “our” refers to Sema4 and its consolidated subsidiaries prior to the consummation of the Business Combination and to the post-combination company and its consolidated subsidiaries following the Business Combination.
Executive Compensation Overview
Objectives of our Executive Compensation Program
The main objectives of our executive compensation program are to create a competitive total rewards package to attract, retain and incent qualified executive officers who will lead us to long-term success and enhance stockholder value based on the balanced attainment of short-term performance objectives and long-term strategic goals. Each element of our compensation program supports these objectives.
Compensation of our Named Executive Officers
The following tables and accompanying narrative disclosure set forth information about the compensation earned by Sema4’sour named executive officers for the year ended December 31, 2020,2021, who were:
•Eric Schadt, Ph.D., Sema4’s founder andour Chief Executive Officer,
•Isaac Ro, our Chief Financial Officer, and
•James Coffin, Ph.D., Sema4’sour former President and Chief Operating Officer, and
•Joel Sendek, Sema4’s former Chief Financial Officer.
The named executive officers’ compensation primarily consists of (1) base salary, (2) annual discretionary cash bonus and (3) equity incentive awards, as well as perquisites described below. Sema4’sawards. Our named executive officers, during their employment with Sema4,us, are also eligible to participate in the same retirement and health and welfare benefit plans as its other full-time employees.
20202021 Summary Compensation Table
The following table presents summary information regarding the total compensation for services rendered in all capacities that was awarded to and earned by Sema4’sour named executive officers during the year ended December 31, 2020.2021.
Name and Principal PositionSalary ($)
Bonus ($)(1)
Option Awards ($)(2)
All Other Compensation ($)(3)
Total ($)
Eric Schadt, Ph.D.
Chief Executive Officer
643,846540,0001,770,47413,7562,968,076
James Coffin, Ph.D.
President and Chief Operating Officer
524,615363,000623,18911,1691,521,974
Joel Sendek (4)
Former Chief Financial Officer...
405,385—1,669,2578,7422,083,383
Name and Principal PositionYearSalary ($)
Bonus ($)(1)
Stock Awards
($)(2)
Option
Awards
($)(2)
All Other Compensation ($)(3)
Total ($)
Eric Schadt, Ph.D. Chief Executive Officer and Director
2021650,000 513,000 10,699,239 3,867,064 41,533 15,770,836 
2020643,846 540,000 — 1,770,474 13,756 2,968,076 
Isaac Ro
Chief Financial Officer
2021353,846 139,333 7,897,167 2,633,103 16,615 11,040,064 
James Coffin, Ph.D.
Former President and Chief Operating Officer(4)
2021530,397 180,370 3,155,535 1,104,874 17,400 4,988,576 
2020524,615 363,000 623,189 — 11,169 1,521,973 
__________________
(1)The amounts reported reflect the annual performance-based cash bonus amounts awarded to Sema4’sour named executive officers for their service in 2020.2021. For additional information regarding the bonus compensation, see “—2020 Bonuses.“Narrative Disclosure to the Summary Compensation Table—2021 Bonuses.”
(2)Amounts represent the aggregate grant date fair value of the restricted stock units and stock options awarded to the named executive officer during 20202021 in accordance with FASB Accounting Standards Codification Topic 718. The assumptions used in calculatingdetermining the grant date fair value of the restricted stock units and stock options reported in the Option Awards column are set forth in Note 910 of the notes to Sema4’sour audited consolidated financial statements included in this proxy statement. Such grant-date fair marketIn determining the total value does not take into account any estimated forfeitures related to service-based vesting conditions.of the equity awards, we have considered all grants issued during the year as earned by the respective executive officers.
(3)The amounts reported in this column represent our matching contributions made on behalf of our named executive officers under our 401(k) plan.plan and other personal benefits including reimbursement for travel costs in the amount of $24,133.
(4)Mr. Sendek served as Sema4’s Chief Financial Officer from September 2019 through January 2021.Dr. Coffin left the Company in February 2022. Amounts reported include payments in respect of his 2021 bonus pursuant to our separation agreement with Dr. Coffin.
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Narrative Disclosure to the Summary Compensation Table
20202021 Bonuses
Under their employment agreements, Dr. Eric Schadt and Dr. James CoffinMr. Ro are entitled to receive annual bonuses based on the achievement of certain corporate and individual performance objectives. Prior to his leaving the Company, Dr. Coffin was also entitled to receive annual bonuses based on the achievement of corporate performance objectives. For the 20202021 bonuses, the target annual bonuses for Dr. Schadt and Dr. CoffinMr. Ro were equal to 100% and 60%50%, respectively, of their respective annual base salaries. In March 2020,February 2022, based on the achievement of corporate and individual performance objectives, Sema4’s board of directorsthe Compensation Committee determined to award bonuses for 20202021 to Dr. Schadt, and to Mr. Ro on a pro rata basis based on his hire date, as set forth in the table above. Further, pursuant to a separation agreement we entered into with Dr. Coffin in January 2022, we agreed to pay Dr. Coffin a 2021 bonus in the amount reflected in the table above.
2021 Equity Awards
Our company offers stock options as well as service-based RSUs to our named executive officers as the long-term incentive component of our compensation program. Stock options allow employees to purchase shares of our Class A common stock at a price per share at least equal to the fair market value of our Class A common stock on the date of grant and may or may not be intended to qualify as “incentive stock options” for U.S. federal income tax purposes. All of our named executive officers received RSU awards in recognition of their service to us and to further incentivize continued performance. Generally, our equity-based awards vest over four years, subject to the employee’s continued employment with us on each vesting date. In connection with the Prior Merger Agreement and following the closing of the business combination, we also granted RSUs in the form of “Earnout RSUs” to our named executive officers that vest subject to certain market-based and service-based vesting conditions. In December 2021, we also issued stock bonuses to our employees who were hired on or before June 30, 2021, including our named executive officers, in connection with the termination of our sabbatical leave program. The stock bonuses were fully vested as of the date of issuance.
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Outstanding Equity Awards at 20202021 Fiscal Year-End
The following table sets forth information concerning outstanding equity awards held by each of Sema4’sour named executive officers as of December 31, 2020.2021.
Option Awards(1)
NameGrant DateNumber of Securities Underlying Unexercised Options Exercisable (#)Number of Securities Underlying Unexercised Options Unexercisable (#)Option Exercise Price ($)Option Expiration Date
Eric Schadt, Ph.D
6/1/2017(2)
39,000—18.946/1/2027
10/17/2019(3)
412,500687,5000.948510/17/2029
2/18/2020(4)
583,3101,283,2940.94852/18/2030
James Coffin, Ph.D
8/31/2017(5)
14,2223,27818.948/31/2027
2/18/2020(4)
205,320451,7060.94852/18/2030
Joel Sendek(6)
2/18/2020(7)
549,9651,209,9260.94852/18/2030
Option Awards(1)

Stock Awards(1)
NameGrant DateNumber of Securities Underlying Unexercised Options Exercisable (#)Number of Securities Underlying Unexercised Options Unexercisable (#)Option Exercise Price ($)Option Expiration DateNumber of Shares or Units of Stock That Have Not Vested (#)
Market Value of Shares or Units of Stock That Have Not Vested ($)(*)
Eric Schadt
6/1/2017(2)
4,829,521 — $0.1529 5/31/2027— — 
10/17/2019(3)
851,357 510,815 $0.7659 10/16/2029— — 
2/18/2020(4)
1,300,203 1,011,285 $0.7659 2/17/2030— — 
10/1/2021(5)
52,541 788,125 $7.62 9/30/2031— — 
10/1/2021(5)
1,182,187 $5,272,552 
12/9/2021(6)
— — — — 223,830 $309,334 
12/9/2021(7)
— — — — 35,054 $48,444 
12/9/2021(8)
— — — — 197,635 $273,133 
12/9/2021(8)
— — — — 83,818 $115,836 
12/9/2021(9)
— — — — 201,720 $278,778 
Isaac Ro
10/1/2021(10)
108,507 470,197 $7.62 9/30/2031— — 
10/1/2021(10)
— — — — 812,500 $3,623,750 
12/9/2021(11)
— — — — 197,848 $273,428 
James Coffin
8/31/2017(12)
2,167,093 — $0.1529 8/30/2027— — 
2/18/2020(4)
457,659 355,961 $0.7659 2/17/2030— — 
10/1/2021(5)
15,011 225,179 $7.62 9/30/2031— — 
10/1/2021(5)
— — — — 337,767 $1,506,442 
12/9/2021(6)
— — — — 189,119 $261,363 
12/9/2021(13)
— — — — 29,056 $40,155 
12/9/2021(14)
— — — — 41,946 $57,968 
__________________
(*)The closing market price of our Class A common stock on December 31, 2021 was $4.46 per share.
(1)All of theThe outstanding equity awards described in this tablestock options were granted under our 2021 Equity Incentive Plan and Legacy Sema4’s 2017 Plan.Equity Incentive Plan, as applicable. The outstanding RSUs were granted under our 2021 Equity Incentive Plan and pursuant to the Prior Merger Agreement, as applicable.
(2)The shares underlying the stock option are fully vested.
(3)The stock option vests at in quarterly installments over a rate of 6.25% of the shares of Sema4’s Class B common stock underlying the stock option each quarter following the June 1, 2019 vesting commencement date. 100% of the shares underlying the stock option will vest upon a change in control transaction.
(4)The stock option vests at a rate of 6.25% of the shares of Sema4’s Class B common stock underlying the stock option each quarter following the August 2, 2019 vesting commencement date.four-year period. 100% of the shares underlying the stock option will vest (a) in the event that the service provider’s option is not assumed or replaced by the buyer in connection with a change of control transaction or (b) upon termination of the service provider’s employment by Sema4us without cause or by the service provider for good reason in connection with a change in control transaction.
(5)(4)The stock option vests atin quarterly installments over a rate of 6.25% of the shares of Sema4’s Class B common stock underlying the stock option each standard calendar quarter following the August 31, 2017 vesting commencement date, beginning on December 30, 2017 and ending on August 30, 2021.four-year period. 100% of the shares underlying the stock option will vest (a) in the event that the service provider’s option is not assumed or replaced by the buyer in connection with a change of control transaction or (b) upon termination of the service provider’s employment by Sema4us without cause or by the service provider for good reason in connection with a change in control transaction.
(6)(5)Mr. Sendek served as Sema4’s Chief Financial Officer from September 2019 through January 2021.
(7)109,993 shares of Sema4’s Class B commonThe stock underlying the stock option vested on the Grant Date; thereafter the stock option vests atoptions and RSU vest in quarterly installments over a rate of 6.25% of the shares of Sema4’s Class B common stock underlying the stock option each quarter following the September 11, 2019 vesting commencement date, beginning on March 11, 2020 and ending on September 11, 2023.four-year period. 100% of the shares underlying the stock optionoptions and RSUs will vest (a) in the event that the service provider’s option is not assumed or replaced by the buyer in connection with a change of control transaction or (b) upon termination of the service provider’s employment by Sema4us without cause or by the service provider for good reason in connection with a change in control transaction.
In addition, it(6)The RSUs were granted pursuant to the Prior Merger Agreement. The vesting of the RSUs is anticipatedconditioned on the satisfaction of both a service requirement and a market-based requirement. The service requirement is deemed satisfied as of the grant date.
(7)The RSUs were granted pursuant to the Prior Merger Agreement. The vesting of the RSUs is conditioned on the satisfaction of both a service requirement and a market-based requirement. The service requirement is deemed satisfied as of the grant date with respect to 12,254 of the RSUs, and will be satisfied with respect to the remainder of the RSUs over four vesting periods, subject to the officer’s continued service to us on each service-based vesting date.
(8)The RSUs were granted pursuant to the Prior Merger Agreement. The vesting of the RSUs is conditioned on the satisfaction of both a service requirement and a market-based requirement. The service requirement is deemed satisfied as of the grant date with respect to 54,532
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of the RSUs, and will be satisfied with respect to the remainder of the RSUs over five semi-annual periods, subject to the officer’s continued service to us on each service-based vesting date.
(9)The RSUs were granted pursuant to the Prior Merger Agreement. The vesting of the RSUs is conditioned on the satisfaction of both a service requirement and a market-based requirement. The service requirement is deemed satisfied as of the grant date with respect to 100,737 of the RSUs, and will be satisfied with respect to the remainder of the RSUs over eight quarterly periods, subject to the officer’s continued service to us on each service-based vesting date.
(10)1/8th of the total shares underlying the stock options and RSUs vested on October 25, 2021, 1/16th of the total shares vested on November 8, 2021, and the RSUs thereafter vests as to 1/16th of the total shares underlying the award in quarterly installments until fully vested on February 8, 2025, subject to the officer's continued service to us on each vesting date. 100% of the shares underlying the stock options and RSUs will vest (a) in the event that Dr. Schadtthe service provider’s option is not assumed or replaced by the buyer in connection with a change of control transaction or (b) upon termination of the service provider’s employment by us without cause or by the service provider for good reason in connection with a change in control transaction.
(11)The RSUs were granted pursuant to the Prior Merger Agreement. The vesting of the RSUs is conditioned on the satisfaction of both a service requirement and a market-based requirement. The service requirement is deemed satisfied as of the grant date with respect to 24,701 of the RSUs, and will be satisfied with respect to the remainder of the RSUs over 14 quarterly periods, subject to the officer’s continued service to us on each service-based vesting date.
(12)The shares underlying the stock option are fully vested.
(13)The RSUs were granted pursuant to the Prior Merger Agreement. The vesting of the RSUs is conditioned on the satisfaction of both a service requirement and a market-based requirement. The service requirement is deemed satisfied as of the grant date with respect to 6,263 of the RSUs, and will be satisfied with respect to the remainder of the RSUs over six quarterly periods, subject to the officer’s continued service to us on each service-based vesting date. Dr. Coffin will each receive a grant of Earnoutleft the Company in February 2022.
(14)The RSUs whenwere granted pursuant to the Earnout RSUs are granted following the closingPrior Merger Agreement. The vesting of the Business Combination.RSUs is conditioned on the satisfaction of both a service requirement and a market-based requirement. The service requirement is deemed satisfied as of the grant date with respect to 29,196 of the RSUs, and will be satisfied with respect to the remainder of the RSUs over four vesting periods, subject to the officer’s continued service to us on each service-based vesting date. Dr. Coffin left the Company in February 2022.
Employment Agreements with Sema4’sOur Current Named Executive Officers
Each of Sema4’sour current named executive officers has entered into an employment agreement with Sema4us that provides for at-will employment and includes each named executive officer’s base salary, a discretionary incentive bonus opportunity and standard employee benefit plan participation. In connection with the Business Combination, we have entered into amended and restatedThe employment agreements with each named executive officer to provide for an annual base salary of $675,000 and a target annual bonus of 100% of annual base salary, in the case of Dr. Schadt, and an annual base salary of $550,000$400,000 and a target annual bonus of 70%50% of annual base salary, in the case of Dr. Coffin.Mr. Ro. The amended and restated employment agreements also provide for the potential payments and benefits upon a termination of employment or in connection with a change in control as described below in “—Potential Payments upon Termination or Change in Control.Control.” In addition, Dr’s Schadt’s amended and restatedMr. Ro’s employment agreement providesagreements provided for Dr. Schadteach to receive a grant of stock optionscertain equity-based incentive awards following the closing of the Business Combination representing the opportunity to purchase a number of shares of Company Class A common stock equal to 1.4% of the total number of shares of Company Class A common stock outstanding as of immediately following
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the closing of the Business Combination, and Dr. Coffin’s amended and restated employment agreement provides for Dr. Coffin to receive a grant of stock options following the closing of the Business Combination representing the opportunity to purchase a number of shares of Company Class A common stock equal to 0.4% of the total number of shares of Company Class A common stock outstanding as of immediately following the closing of the Business Combination. Thesebusiness combination, which awards will bewere granted under the 2021 Equity Incentive Plan (the “2021 EIP”) and will beare subject to service-based vesting conditions. For more information, see“—Outstanding Equity Awards at 2021 Fiscal Year-End.”
In addition, in connection with the amended and restatedpursuant to their employment agreements, each of Dr. Schadt and Dr. CoffinMr. Ro agreed that, during the nine-month period following the Closing,closing of our business combination, he will not: (i) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act, with respect to any shares of Companyour Class A common stock, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any of such shares, in cash or otherwise, or (iii) publicly announce any intention to effect any transaction specified in clause (i) or (ii).
Potential Payments upon Termination or Change in Control
Pursuant to his amended and restated employment agreement, if Dr. Schadt is terminated without “cause” or resigns for “good reason” (as such terms will beare defined in his amended and restated employment agreement) other than in connection with a change in control, he will be entitled to receive 24 months of base salary continuation and continued coverage under our group health benefit plans, subject to his execution of a release of claims. If instead such termination occurs within the period commencing three months prior to and ending 12 months following a change in control, he will be entitled to receive 24 months of base salary continuation, a lump sum payment equal to two times his target annual bonus, 24 months of continued coverage under our group health benefit plans, and accelerated vesting of his outstanding equity-based compensation awards, subject to his execution of a release of claims.
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Pursuant to his amended and restated employment agreement, if Dr. CoffinMr. Ro is terminated without “cause” or resigns for “good reason” (as such terms will beare defined in his amended and restated employment agreement) other than in connection with a change in control, he will be entitled to receive 129 months of base salary continuation and 12 months of continued coverage under our group health benefit plans, subject to his execution of a release of claims. If instead such termination occurs within the 12-month period following a change in control, he will be entitled to receive 12 months of base salary continuation, a lump sum payment equal to one times his target annual bonus, 12 months of continued coverage under our group health benefit plans, and accelerated vesting of his outstanding equity-based compensation awards, subject to his execution of a release of claims.
As described above in “—Outstanding Equity Awards at 20202021 Fiscal Year-End”Year-End”, a portion of the stock options held by Dr. Schadt would vest upon a change in control transaction.
Separation Agreement with Our Board has determinedFormer Named Executive Officer
In connection with Dr. Coffin’s departure from our company in February 2022, we and Dr. Coffin entered into a separation agreement (the “Separation Agreement”), pursuant to which Dr. Coffin received the following severance benefits in exchange for his execution of release of claims:
•a severance payment equal to 12 months of Dr. Coffin’s annual base salary in the amount of $550,000;
•a discretionary 2021 annual bonus payment in the amount of $180,370;
•12 months of reimbursement of COBRA continuation benefits;
•accelerated vesting of 25,425 stock options that were otherwise scheduled to vest on February 2, 2022 in the Business Combination will not constitute a change in control transaction for purposesamount of our named executive officer’s$58,233, which is calculated based on the fair value estimated as of the effective date of his Separation Agreement; and
•an extended period to exercise certain of Dr. Coffin’s vested stock options.options through May 30, 2022.
Equity Compensation Plans and Other Benefit Plans
2017 Stock2021 Equity Incentive Plan
Sema4’s 2017Our 2021 Equity Incentive Plan, or the 2021 EIP, was adopted by Sema4’s board of directorsour Board and approved by our stockholders in July 2021. The following summarizes the material terms of the 2021 EIP. This summary is qualified in its stockholders on April 2017. The 2017 Plan allows forentirety to the grantfull text of stock options, stock appreciation rights, restricted stock, and restricted stock units, or RSUs, as described below. As of March 31,the 2021 Sema4 had 122,000EIP.
Shares reserved. We initially reserved 32,734,983 shares of Class A common stock and 11,710,025 shares of Class B common stock reserved for issuance pursuant to awards granted under the 2021 EIP, which includes shares of our Class A common stock previously reserved but unissued under Legacy Sema4’s 2017 Plan, of which 3,014,526 shares remained available for grant. Sema4 expects to terminate the 2017 Plan upon the effective date of the Equity Incentive Plan whichthat became available for issuance under the 2021 Plan. The number of shares reserved for issuance under the 2021 EIP will increase automatically on January 1 of each of 2022 through 2031 by the number of shares equal to 5% of the aggregate number of outstanding shares of all classes of our Class A common stock as of the immediately preceding December 31, or a lesser number as may be determined by our Board. On January 25, 2022, an additional 12,128,941 shares became available for future issuance under the date immediately prior2021 EIP pursuant to the Closing. Anyplan’s evergreen provision.
In addition, the shares set forth below will again be available for issuance pursuant to awards granted under the 2017 Planour 2021 EIP:
•shares subject to options or SARs granted under our 2021 EIP that remain outstanding as of such date will continuecease to be subject to the termsoption or SAR for any reason other than exercise of Sema4’s 2017 Plan and applicable award agreements untilthe option or SAR;
•shares subject to awards granted under our 2021 EIP that are subsequently forfeited or repurchased by us at the original issue price;
•shares subject to awards granted under our 2021 EIP that otherwise terminate without such awards are exercised or amended or until they terminate or expire by their terms.shares being issued;
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Administration.• Sema4’s 2017 Plan isshares subject to awards granted under our 2021 EIP that are surrendered, cancelled, or exchanged for cash or a different award (or combination thereof);
•shares issuable upon the exercise of options or subject to other awards granted under the 2021 EIP that cease to be subject to such options or other awards, by forfeiture or otherwise, after the effective date of the 2021 EIP;
•shares subject to awards granted under the 2021 EIP that are forfeited or repurchased by us at the original price after the effective date of the 2021 EIP; and
•shares subject to awards under the 2021 EIP that are used to pay the exercise price of an option or withheld to satisfy the tax withholding obligations related to any award.
Administration. Our 2021 EIP will be administered by its boardour compensation committee, or by our Board acting in place of directors or a committee appointed by Sema4’s board of directors.our compensation committee. Subject to the terms and conditions of the 2017 Plan, Sema4’s board of directors has2021 EIP, the administrator will have the authority, to, among other things, to select the persons to whom awards willmay be granted, construe and interpret Sema4’s 2017 Planour 2021 EIP as well as to determine the terms of such awards and prescribe, amend and rescind the rules and regulations relating to the 2017 Plan andplan or any award granted thereunder. The 2021 EIP provides that the administrator may delegate its authority, including the authority to grant awards, to one or more executive officers to the extent permitted by applicable law, provided that awards granted pursuant to the 2017 Plan.non-employee directors may only be determined by our Board.
EligibilityOptions. Pursuant to the 2017 Plan, Sema4 may grant incentive stock options only to its employees (including officers and directors who are also employees). Sema4 may grant non-statutory stock options, stock appreciation rights, restricted stock, and restricted stock units to its employees, directors, and consultants.
Options.The 2017 Plan2021 EIP provides for the grant of both (i) incentive stock options which are intended to qualify for tax treatment as set forth under Section 422 of the Code, and (ii) non-statutorynonqualified stock options to purchase shares of Sema4’sour Class A common stock each at a stated exercise price. Incentive stock options may only be granted to employees, including officers and directors who are also employees. The exercise price of each stock optionoptions granted under the 2021 EIP must be at least equal to the fair market value of Sema4’sour Class A common stock on the date of grant, except that incentivegrant. Incentive stock options granted to anyan individual who ownsholds, directly or by attribution, more than ten percent of the total combined voting power of all classes of Sema4’sour capital stock must have an exercise price of at least equal to 110% of the fair market value of Sema4’sour Class A common stock on the date of grant.
Options may vest based on service or achievement of performance conditions, as determined by the administrator. The administrator may provide for options to be exercised only as they vest or to be immediately exercisable, with any shares issued on exercise being subject to our right of repurchase that lapses as the shares vest. In the event of a participant’s termination of service, an option is generally exercisable, to the extent vested, for a period of three months in the case of termination without cause (except due to a participant’s death or disability), for a period of 12 months in the case of termination due to the participant’s death or disability, or such longer or shorter period as the administrator may provide, and for a period of 24 months in the case of termination due to the participant’s retirement (consistent with our policies regarding retirement). Stock options generally terminate upon a participant’s termination of employment for cause. The maximum term of options granted under Sema4’s 2017 Planour 2021 EIP is ten years from the date of grant, except that the maximum permitted term of incentive stock options granted to an individual who owns stock representingholds, directly or by attribution, more than ten percent of the total combined voting power of all classes of Sema4’sour capital stock is five years from the date of grant.
In the event of a termination of a participant’s termination of service for any reason other than disability or death, an option is generally exercisable, to the extent vested, for a period of not less than 30 days in the case of termination without cause (except due to a participant’s death or disability) and for a period of 12 months in the case of termination due to the participant’s death or disability, or such longer as the administrator may provide. Stock options generally terminate upon a participant’s termination of employment for cause.
Restricted Stock Awards.stock awards (“RSA”). Awards of restricted stock representAn RSA is an offer by Sema4us to grant or sell shares of itsour Class A common stock subject to restrictions, which may lapse based on terms and conditionsthe satisfaction of service or achievement of performance conditions. The price, if any, of an RSA will be determined by Sema4’s board of directors or applicable committee. Holders of restricted stock are entitled to vote and, unlessthe administrator. Unless otherwise determined by the boardadministrator, vesting will cease on the date the participant no longer provides services to us and unvested shares may be forfeited to or repurchased by us.
Stock appreciation rights (“SAR”). A SAR provides for a payment, in cash or shares of directors, are entitledour Class A common stock (up to a specified maximum number of shares, if determined by the administrator), to the participant based upon the difference between the fair market value of our Class A common stock on the date of exercise and a predetermined exercise price, multiplied by the number of shares. The exercise price of a SAR must be at least the fair market value of a share of our Class A common stock on the date of grant. SARs may vest based on service or achievement of performance conditions. No SAR may have a term that is longer than ten years from the date of grant.
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Restricted stock units (“RSU”). An RSU represents the right to receive all dividendsthe value of shares of our Class A common stock at a specified date in the future and distributions with respectmay be subject to vesting based on service or achievement of performance conditions. RSUs may be settled in cash, shares of our Class A common stock or a combination of both as soon as practicable following vesting or on a later date subject to the terms of the 2021 EIP. No RSU may have a term that is longer than ten years from the date of grant.
Performance awards. Performance awards granted pursuant to the 2021 EIP may be in the form of a cash bonus, or an award of performance shares or performance units denominated in shares of our Class A common stock that may be settled in cash, property or by issuance of those shares, subject to the satisfaction or achievement of specified performance conditions.
Stock bonus awards. A stock bonus award provides for payment in the form of cash, shares of our Class A common stock or a combination thereof, based on the fair market value of shares subject to such shares. Anyaward as determined by the administrator. The awards may be granted as consideration for services already rendered, or at the discretion of the administrator, may be subject to vesting restrictions based on continued service or performance conditions.
Dividend equivalents rights. Our Board or the compensation committee thereof may permit participants holding RSUs to receive dividend equivalent payments if and when dividends are paid to stockholders. In the discretion of our board or the compensation committee thereof, such dividend equivalent payments may be paid in cash or shares of our Class A common stock distributionsand may either be paid at the same time as dividend payments are made to stockholders or delayed until shares are issued pursuant to any unvested sharesthe RSU grants and may be subject to the same vesting or performance requirements as the RSUs.
Change of restricted stockcontrol. Our 2021 EIP provides that, in the event of a corporate transaction that constitutes a change of control of our company under the terms of the plan, outstanding awards will be subject to the same restrictions on transferabilityagreement evidencing the change of control, which need not treat all outstanding awards in an identical manner, and may include one or more of the following: (i) the continuation of the outstanding awards; (ii) the assumption of the outstanding awards by the surviving corporation or its parent; (iii) the substitution by the surviving corporation or its parent of new options or equity awards for the outstanding awards; (iv) the full or partial acceleration of exercisability or vesting or lapse of the company’s right to repurchase or other terms of forfeiture and accelerated expiration of the award; or (v) the settlement of the full value of the outstanding awards (whether or not then vested or exercisable) in cash, cash equivalents, or securities of the successor entity with a fair market value equal to the required amount, as determined in accordance with the restricted stock. As2021 EIP, which payments may be deferred until the date or dates the award would have become exercisable or vested. Notwithstanding the foregoing, upon a change of March 31, 2021, nocontrol the vesting of all awards granted to our non-employee directors will accelerate and such awards will become exercisable, to the extent applicable, and vested in full immediately prior to the consummation of the change of control.
Adjustment. In the event of a change in the number of outstanding shares of restricted stock had been issued under the 2017 Plan.
Other Awards. The 2017 Plan also provides for the grant of stock appreciation rights and restricted stock units. As of December 31, 2020, no stock appreciation rights that provide for settlement in shares ofour Class A common stock without consideration by reason of a stock dividend, extraordinary dividend or distribution, spin-off, recapitalization, stock split, reverse stock split, subdivision, combination, consolidation reclassification, spin-off or similar change in our capital structure, proportional adjustments will be made to (i) the number and no restrictedclass of shares reserved for issuance under our 2021 EIP; (ii) the exercise prices, number and class of shares subject to outstanding options or SARs; (iii) the number and class of shares subject to other outstanding awards; and (iv) the maximum number and class of shares that may be issued as incentive stock units had been issued under the 2017 Plan.
Transferability. Unless otherwise determinedoptions, subject to any required action by the board or our stockholders and compliance with applicable laws.
Exchange, repricing and buyout of directors,awards. The administrator may, without prior stockholder approval, (i) reduce the exercise price of outstanding options or SARs without the consent of any participant and (ii) pay cash or issue new awards in exchange for the surrender and cancellation of any, or all, outstanding awards, subject to the consent of any affected participant to the extent required by the terms of the 2021 EIP.
Director compensation limits. No non-employee director may receive awards under our 2021 EIP with a grant date value that when combined with cash compensation received for his or her service as a director, exceed
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$750,000 in a calendar year, increased to $1,000,000 in the calendar year of his or her initial services as a non-employee director.
Clawback; transferability. All awards will be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by our Board or the compensation committee thereof or required by law during the term of service of the participant, to the extent set forth in such policy or applicable agreement. Except in limited circumstances, awards granted under the 2017 Planour 2021 EIP may generally not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent and distribution or qualified domestic relations orders.distribution.
Corporate Transaction.Sub-plans In. Subject to the eventterms of the 2021 EIP, the plan administrator may establish a Corporate Transaction (as definedsub-plan under the 2021 EIP and/or modify the terms of awards granted to participants outside of the United States to comply with any laws or regulations applicable to any such jurisdiction.
Amendment and termination. Our Board or compensation committee may amend our 2021 EIP at any time, subject to stockholder approval as may be required. Our 2021 EIP will terminate ten years from the date our Board adopts the plan, unless it is terminated earlier by our Board. No termination or amendment of the 2021 EIP may materially adversely affect any then-outstanding award without the consent of the affected participant, except as is necessary to comply with applicable laws or as otherwise provided by the terms of the 2021 EIP.
2017 Stock Incentive Plan
Legacy Sema4’s 2017 Equity Incentive Plan (the “2017 EIP”) was adopted by Legacy Sema4’s board of directors and approved by its stockholders in theApril 2017. The 2017 Plan), the 2017 Plan provides that outstanding awards will be terminated unless they are assumed in connection with the corporate transaction. The administrator will have the authority, exercisable either in advance of any actual or anticipated corporate transaction or at the time of an actual corporate transaction and exercisable at the time ofEIP allowed for the grant of an awardstock options, stock appreciation rights, restricted stock, and RSUs. As of December 31, 2021, we had 27,671,750 shares of our Class A common stock reserved for issuance pursuant to outstanding awards granted under the 2017 Plan or any time while an award remains outstanding, to provide forEIP. We terminated the full or partial automatic vesting and exercisability2017 EIP upon the effective date of one or more outstanding unvestedthe 2021 EIP, which was July 21, 2021. Any awards granted under the 2017 EIP that remained outstanding as of such date continue to be subject to the terms of the 2017 EIP and applicable award agreements until such awards are exercised or amended or until they terminate or expire by their terms.
2021 Employee Stock Purchase Plan
The 2021 Employee Stock Purchase Plan (the “ESPP”) was adopted by our Board and approved by our stockholders in July 2021. The following summarizes the release from restrictionsmaterial terms of the ESPP. This summary is qualified in its entirety to the full text of the ESPP. We have not yet established an offering period under the ESPP.
Shares Reserved. We have initially reserved 4,804,011 shares of our Class A common stock equal for issuance and sale under the ESPP. The number of shares reserved for issuance and sale under our ESPP will increase automatically on transfer and repurchaseJanuary 1 of each of 2022 through 2031 by the number of shares equal to 1% of the aggregate number of outstanding shares of all classes of our Class A common stock as of the immediately preceding December 31, or forfeiture rightsa lesser number as may be determined by our compensation committee, or by our Board acting in place of awardsour compensation committee. Subject to stock splits, recapitalizations, or similar events, no more than the number of shares of our Class A common stock equal to ten times the Initial ESPP Share Reserve may be issued over the term of the ESPP. On January 25, 2022, an additional 2,425,788 shares became available for future issuance under the ESPP pursuant to the plan’s evergreen provision.
Administration. Our ESPP will be administered by our compensation committee, or by our Board acting in connection with a corporate transaction, on suchplace of our compensation committee, subject to the terms and conditions asof the administrator may specify. TheESPP. Among other things, the administrator will have the authority to condition any such award vestingdetermine eligibility for participation in the ESPP, designate separate offerings under the plan, and exercisability or release from such limitations uponconstrue, interpret and apply the subsequent termination of service of a participant within a specified period following the effective dateterms of the corporate transaction.plan.
Eligibility. Employees eligible to participate in any offering pursuant to the ESPP generally include any employee that is employed by us or certain of our designated subsidiaries at the beginning of the offering period. However, the administrator may exclude employees who do not meet eligibility requirements that our compensation committee may choose to impose (within the limits permitted by the Code), are customarily employed for 20 hours or less per week, are customarily employed for five months or less in a calendar year or certain highly-compensated employees as determined in accordance with applicable tax laws. In addition, any employee who owns (or is deemed
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to own because of attribution rules) 5% or more of the total combined voting power or value of all classes of our capital stock, or the capital stock of one of our qualifying subsidiaries, or who will own such amount because of participation in the ESPP, will not be eligible to participate in the ESPP. The administrator may impose additional restrictions on eligibility from time to time.
AdjustmentsOffering Periods; Enrollment.. In Under our ESPP, eligible employees will be offered the eventoption to purchase shares of our Class A common stock at a discount over a series of offering periods through accumulated payroll deductions over the period. The length of the offering periods under ESPP will be determined by the plan administrator and may be up to twenty-seven (27) months long. Each offering period may itself consist of one or more purchase periods. When the first offering period commences, our employees who meet the eligibility requirements for participation in that offering period will be eligible to enroll. For subsequent offering periods, new participants will be required to enroll in a timely manner. Once an employee is enrolled, participation will be automatic in subsequence offering periods. Participation in the ESPP ends automatically upon a participant’s termination of employment. A participant may withdraw his or her participation from the ESPP at any time by submitting written notice to the company.
Offerings; Contributions; Limitations. The purchase price for shares purchased under the ESPP during any given purchase period will be 85% of the lesser of the fair market value of our Class A common stock on (i) the first trading day of the applicable offering period or (ii) the last trading day of the purchase period. The ESPP permits participants to purchase shares of our Class A common stock through payroll deductions of a percentage of their eligible compensation, which may not be less than one percent (1%) and may be up to a maximum of fifteen percent (15%) or such lower limit set by the plan administrator. No participant may purchase more than 2,500 shares of our Class A common stock during any one purchase period, and may not subscribe for more than $25,000 in fair market value of shares of our Class A common stock (determined as of the date the offering period commences) in any calendar year in which the offering is in effect. The administrator in its discretion, may set a lower maximum number of shares which may be purchased.
Adjustments upon recapitalization. If the number of outstanding shares of our Class A common stock is changed by stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or othersimilar change in Sema4’sour capital structure without consideration, then the administrator will proportionately adjust the number and class of common stock that is available under the ESPP, the purchase price and number of shares any participant has elected to purchase as well as the maximum number of shares which may be purchased by participants.
Corporate Transaction. If the post-combination company experiences a corporate structure affectingtransaction as determined under the terms of the ESPP, any offering period then in effect will be shortened and terminated on a final purchase date established by the administrator. The final purchase date will occur on or prior to the effective date of change of control transaction, and our ESPP will terminate on the closing of the change of control.
Transferability. Participants may generally not assign, transfer, pledge or otherwise dispose of payroll deductions credited to his or her account, or any rights with regard to an election to purchase shares pursuant to the ESPP other than by will or the laws of descent or distribution.
Amendment; Termination. The board or compensation committee may amend, suspend or terminate the ESPP at any time without stockholder consent, except as to the extent such amendment would increase the number of shares available for issuance under the ESPP, change the class or designation of employees eligible for participation in the plan or otherwise as required by law. If the ESPP is terminated, the administrator may elect to terminate all outstanding offering periods immediately, upon the next purchase date (which may be sooner than originally scheduled) or upon the last day of such offering period. If any offering period is terminated prior to its scheduled completion, all amounts credited to participants which have not been used to purchase shares will be returned to participants as soon as administratively practicable. Unless earlier terminated, the ESPP will terminated upon the earlier to occur of the issuance of all shares of common stock issuedreserved for issuance under the 2017 Plan, Sema4’s board of directors will adjust the number of shares that may be delivered under 2017 Plan and/ESPP, or the number, and price10th anniversary of shares covered by each outstanding award, in order to prevent diminution or enlargement of benefits or potential benefits intended to be made available under the 2017 Plan.effective date.
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401(k) Plan
Sema4 sponsorsWe sponsor a retirement savings plan established inon January 1, 2018 that is intended to qualify for favorable tax treatment under Section 401(a) of the IRC, and contains a cash or deferred feature that is intended to meet the requirements of Section 401(k) of the IRC. Participants may make pre-tax and certain after-tax (Roth) salary deferral contributions to the plan from their eligible earnings up to the statutorily prescribed annual limit under the IRC. Participants who are 50 years of age or older may contribute additional amounts based on the statutory limits for catch-up contributions. Participant contributions are held in trust as required by law. No minimum benefit is provided under the plan. The plan provides for employer safe harbor matching contributions equal to 100% of an employee’s salary deferrals that do not exceed 6% of the employee’s compensation. An employee’s interest in his or her deferrals and safe harbor matching contributions is 100% vested when contributed.
Other Benefits
Sema4’sOur named executive officers, while employed by Sema4,us, are eligible to participate in Sema4’sour employee benefit plans on the same basis as Sema4’sour other employees, including Sema4’sour health and welfare plans. Sema4We generally doesdo not provide Sema4’sour named executive officers with perquisites or other personal benefits. However, Sema4 doeswe do reimburse Sema4’sour named executive officers for their necessary and reasonable business and travel expenses incurred in connection with their services to Sema4.us.
Compensation Committee Interlocks and Insider Participation
The directors who were members of our compensation committee during 2021 were Joshua Ruch, Rachel Sherman and Nat Turner. None of them at any time has been one of our officers or employees. None of our executive officers serves, or in the past has served, as a member of the Board or compensation committee of any entity that has one or more of its executive officers serving on our Board or our compensation committee.
Director Compensation
Non-Employee Director Compensation Policy
We adopted a non-employee director compensation policy that is designed to enable us to attract and retain, on a long-term basis, highly qualified non-employee directors. Our non-employee directors will receive an annual cash retainer of $40,000, payable quarterly, and a grant of stock options and RSUs with an aggregate grant-date value of $200,000, which will vest on the earlier of the first anniversary of the grant date and the next annual meeting of our stockholders. New non-employee directors will receive a grant of stock options RSUs upon joining our Board with an aggregate grant-date value of $400,000, which will vest over the three-year period following the grant date.
Members of our audit committee will receive an additional annual cash retainer of $10,000, and the chairperson of our audit committee will receive an additional cash retainer of $20,000 (in lieu of the annual retainer for membership on the audit committee). Members of our compensation committee will receive an additional annual cash retainer of $7,500, and the chairperson of our compensation committee will receive an additional cash retainer of $15,000 (in lieu of the annual retainer for membership on the compensation committee). Members of our nominating and governance committee will receive an additional annual cash retainer of $5,000, and the chairperson of our nominating and governance committee will receive an additional cash retainer of $10,000 (in lieu of the annual retainer for membership on the compensation committee).
Executive Chairman Compensation
In January 2022, our Board appointed Jason Ryan as Executive Chairman and entered into an executive chairman agreement (the “Executive Chairman Agreement”) with Mr. Ryan. Prior to this appointment, Mr. Ryan served as a non-employee director of our Board. The Executive Chairman Agreement provides for an annual base salary of $540,000. In connection with the appointment, we issued to our Executive Chairman an option to purchase 429,730 shares of our Class A common stock, 247,525 service-based RSUs and 126,980 performance-based stock units, which awards will vest in full on the earlier of (a) December 31, 2022, and (b) a change in control of our company subject to Mr. Ryan’s continued service as our Executive Chairman through such date and, in the case of
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the performance-based RSUs, subject to the achievement of certain performance-based vesting conditions. The Executive Chairman Agreement will terminate on December 31, 2022 unless terminated earlier in accordance with its terms or extended by the mutual agreement of our Board and Mr. Ryan.
2021 Director Compensation Table
The following table sets forth the compensation earned by or paid to our non-employee directors for services provided during the year ended December 31, 2021, other than Keith Meister who joined the Board in January 2022. Dr. Schadt did not receive any compensation for his service as a director during fiscal year 2020,2021, while also serving as Chief Executive Officer. Please see the section entitled “Executive Compensation of Sema4—2020 Summary Compensation Table” for a summary of payments made to Dr. Schadt. Other than as described below, none of Sema4’sour non-employee directors received any fees or reimbursement of any expenses (other than customary expenses in connection with the attendance of meetings of Sema4’s board of directors)our Board) or any equity or non-equity awards in the year ended December 31, 2020.2021. Please see the section entitled “—2021 Summary Compensation Table” for a summary of payments made to Dr. Schadt.
2020 Director Compensation Table
The following table presents the total compensation earned by each of Sema4’s non-employee directors in the year ended December 31, 2020.
Name
Fees Earned or Paid in Cash($)(1)
Option Awards($)(2)
All Other Compensation($)(3)
Total($)
Joshua Ruch————
Kenneth Davis, M.D————
Rachel Sherman, M.D., M.P.H., F.A.C.P88,736278,209—366,945
R. Martin Chavez, Ph.D—1,960,993—1,960,993
Dennis Charney, M.D————
Michael Pellini, M.D————
Andrew ElBardissi————
Viral Patel————
David Windreich————
NameFees Earned or Paid in Cash($)
Option Awards($)(1)(4)
Restricted
Stock and
Other
Securities
($)(1)(4)
All Other Compensation ($)(2)
Total($)
Joshua Ruch47,500 201,911 199,985 — 449,396 
Dennis Charney, M.D.— — — — — 
Eli D. Casdin20,000 101,401 99,992 — 221,393 
Emily Leproust, Ph.D.25,000 101,401 99,992 — 226,393 
Jason Ryan(3)
30,000 201,911 199,985 — 431,896 
Michael Pellini, M.D.20,000 201,911 199,985 — 421,896 
Nat Turner23,750 101,401 99,992 — 225,143 
Rachel Sherman, M.D., M.P.H., F.A.C.P.20,000 101,401 143,797 50,000 315,198 
__________________
(1)The amounts reported in this column represent fees earned for service on Sema4’s board of directors.
(2)The amounts reported in this column represent the aggregate grant date fair value of the awards granted under Sema4’s 2017 Equity Incentive Planthe 2021 EIP and pursuant to Sema4’sthe Prior Merger Agreement, as applicable, to our directors during the year ended December 31, 2020,2021, as computed in accordance with FASB ASC Topic 718. The
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assumptions used in calculatingdetermining the grant date fair value of the awards reported in the Option Awards columnand Restricted Stock and Other Securities columns are set forth in Note 910 to Sema4’s consolidatedour financial statements included elsewhere in this proxy statement. Note that the amounts reported in this column reflect the aggregate accounting cost for these awards granted during the year, and do not necessarily correspond to the actual economic value that may be received by the director from the awards.
(3)(2)The amounts reported in this column represents Sema4’s reimbursement for reasonable businesspayments under director legacy and travel expenses incurredother charitable award programs.
(3)Mr. Ryan served as a non-employee director until January 2022.
(4)The following table sets forth information regarding the aggregate number of shares of our Class A common stock underlying outstanding stock options held by our non-employee directors as of December 31, 2021 and the aggregate number of unvested shares of our Class A common stock underlying outstanding RSU awards held by our non-employee directors as of December 31, 2021:
NameShares Underlying
Unexercised Stock Options		Unvested Shares of
Restricted Stock Units
Joshua Ruch44,572 25,672 
Dennis Charney, M.D.— — 
Eli D. Casdin22,286 12,836 
Emily Leproust, Ph.D.22,286 12,836 
Jason Ryan44,572 25,672 
Michael Pellini, M.D.44,572 25,672 
Nat Turner22,286 12,836 
Rachel Sherman, M.D., M.P.H., F.A.C.P.385,509 
44,533 (1)
__________________
(1)Includes 31,697 Earnout RSUs granted in connection with the director’s servicesPrior Merger Agreement.
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EXECUTIVE COMPENSATION OF GENEDX
As discussed above, GeneDx is currently part of OPKO and not an independent company. Decisions about GeneDx’s executive compensation and benefits to Sema4.date have been made by the Compensation Committee of the OPKO Board of Directors (the “OPKO Compensation Committee”) and OPKO senior management. Accordingly, this section focuses on OPKO’s compensation and benefit programs and decisions for 2021. Katherine Stueland, GeneDx’s Chief Executive Officer, who will be appointed Co-Chief Executive Officer of Sema4 following the Closing, is GeneDx’s sole named executive officer (the “Named Executive Officer”). Following the Closing, Ms. Stueland’s executive compensation will be determined by Sema4’s Board of Directors and in accordance with the Sema4 Stueland Employment Agreement (as defined below), and accordingly Ms. Stueland’s executive compensation and the benefits programs to which she will be entitled will not be the same as those discussed below.
Summary Compensation Table
The following table sets out the compensation for the Named Executive Officer for the year ended December 31, 2021:
Name and Principal PositionYear
Salary ($)(1)
Bonus ($)
Stock Awards ($)(2) (3)
Option Awards ($)(2)
All Other Compensation ($)(4)
Total Compensation ($)
Katherine Stueland, Chief Executive Officer of GeneDx
2021285,577137,5002,500,000963,00011,6003,897,677
__________________
(1)Ms. Stueland became the Chief Executive Officer and President of GeneDx on June 21, 2021. Her annual base salary is $550,000.
(2)Reflects the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. The assumptions used in calculating the amounts are discussed in Note 10 of OPKO’s audited financial statements for the year ended December 31, 2021 included in OPKO’s Annual Report on Form 10-K filed with the SEC on March 1, 2022.
(3)Consists of RSUs granted by OPKO to Ms. Stueland on June 21, 2021. See “—Outstanding Equity Awards at 2021 Fiscal Year-End” below.
(4)Includes contributions made by OPKO under its 401(k) Plan during fiscal year 2021 in the amount of $11,600 for Ms. Stueland.

Narrative to Summary Compensation Table
Stueland GeneDx Employment Agreement
GeneDx entered into an indefinite Employment Agreement with Ms. Stueland on June 7, 2021 (as amended, the “GeneDx Stueland Employment Agreement”), to serve as GeneDx’s Chief Executive Officer and President commencing on June 21, 2021. The GeneDx Stueland Employment Agreement provides for (i) an annual base salary of $550,000, subject to annual review and increase (but not decrease) by GeneDx or OPKO’s, as applicable, board of directors and (ii) eligibility to receive an annual bonus of up to $225,000 based upon satisfaction of performance-based goals and other individual and company metrics agreed upon between Ms. Stueland and GeneDx or OPKO’s, as applicable, board of directors. The GeneDx Stueland Employment Agreement further provides for a $2,500,000 sign on bonus (the “Sign-On Bonus”), payable in cash, of which $1,000,000 was paid on June 21, 2021, and, subject to Ms. Stueland’s continued employment, $750,000 will be payable on each of June 21, 2022 and June 21, 2023, provided that, upon the occurrence of certain events prior to June 21, 2023, including a change of control of GeneDx, Ms. Stueland shall be entitled to receive the Sign-On Bonus in full. Additionally, pursuant to the GeneDx Stueland Employment Agreement, OPKO granted Ms. Stueland restricted stock units on June 21, 2021 with respect to shares of OPKO common stock with a value of $2,500,000 as of the date of the grant (the “OPKO RSUs”), of which 50% vest on June 21, 2022 and the remaining 50% vest on December 21, 2022, provided that the OPKO RSUs shall become immediately vested in full upon the occurrence of certain events, including a change of control of GeneDx. Ms. Stueland also received options to purchase 450,000 shares of OPKO’s common stock (the “Initial Option”) under OPKO’s equity incentive plan, with an exercise price equal to $3.78, the closing stock price of OPKO’s common stock on the day of grant, which Initial Option vests annually in four equal installments over a four year period beginning on June 21, 2021, provided that, upon the occurrence of certain events prior to June 21, 2022, including a change of control of GeneDx, the vesting of the Initial Option shall be immediately accelerated in full. OPKO further agreed to grant Ms. Stueland options to purchase 450,000 shares of OPKO’s
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common stock on June 21, 2022 (the “Additional Option”) under OPKO’s equity incentive plan, with an exercise price equal to closing stock price of OPKO’s common stock on the day of grant, and terms identical to the options described in the preceding sentence, except that the four year vesting period will begin on June 21, 2022, provided that should Ms. Stueland’s employment be terminated without cause or upon resignation by her for good reason within twelve months of a change of control of GeneDx, or within three months prior to such change of control, the vesting of the Additional Option shall be immediately accelerated in full.
In connection with the execution of the Merger Agreement, GeneDx and Ms. Stueland entered into a certain amendment to the GeneDx Stueland Employment Agreement, dated as of January 14, 2022 (the “GeneDx Stueland Employment Agreement Amendment”), pursuant to which Ms. Stueland agreed, among other things, that (i) she shall not be permitted to exercise the Initial Option, (ii) at the Effective Time, the Initial Option shall be automatically cancelled and forfeited without any payment to her, (iii) OPKO is not required to grant her the Additional Option, provided the Closing occurs, and (iv) OPKO has no further obligations under the GeneDx Stueland Employment Agreement from and after the Closing, including no obligation to pay her the balance of the Sign-On Bonus. Pursuant to the GeneDx Stueland Employment Agreement Amendment, OPKO acknowledged and agreed that all outstanding OPKO RSUs will become immediately vested in full immediately prior to the Closing, subject to Ms. Stueland’s continued employment with GeneDx.
Ms. Stueland is also entitled to participate in OPKO’s employee benefit arrangements, on terms and conditions no less favorable than those available to any other similarly situated senior executive and is entitled to expense reimbursement for reasonable out-of-pocket expenses incurred in the course of her duties and in connection with her relocation from Seattle, Washington to Gaithersburg, Maryland.
The GeneDx Stueland Employment Agreement contains restrictive covenants, including confidentiality of information, assignment of certain intellectual property, non-competition, non-solicitation and non-disparagement covenants. The confidentiality covenant and non-disparagement covenants have an indefinite term, and the non-competition and non-solicitation covenants are effective both during the executive’s employment with GeneDx and until the one year anniversary of her termination of employment. In addition, the GeneDx Stueland Employment Agreement further provides for severance benefits, as described below under “—Potential Payments Upon Termination and Change in Control.”
Base Salaries
OPKO has sought to establish and maintain competitive annual base salaries for its executive officers, including the Named Executive Officer, by utilizing available resources. OPKO provided fixed salary compensation to its named executive officers and the Named Executive Officer based on their responsibilities and individual experience, taking into account competitive market compensation paid by other companies for similar positions within the diagnostics and laboratory industries. In general, OPKO historically targeted executive officer compensation and base salary to fall within the median range for equivalent or similar positions of executives at peer group companies.
Discretionary Annual Bonus.
In addition to base salaries, OPKO’s Compensation Committee has had the authority to award discretionary annual bonuses to the Named Executive Officer based on corporate and individual performance. Incentives, as a percent of salary, increase with executive rank so that, as rank increases, a greater portion of total annual cash compensation is based on annual corporate and individual performance. Furthermore, as an executive’s rank increases, a greater percentage of that executive’s cash bonus is based on corporate performance, rather than individual performance. In 2022, Ms. Stueland was awarded a cash bonus of $137,500 for work performed in 2021.
Equity Compensation.
OPKO believes that equity compensation should be a primary component of its executive compensation program because it aligns the interests of its executive officers with the long-term performance of OPKO. Stock options are a critical element of OPKO’s long-term incentive strategy. The primary purpose of stock options is to provide OPKO’s employees with a personal and financial interest in its success through stock ownership, thereby aligning the interests of such persons with those of OPKO’s stockholders. Under OPKO’s employee stock option
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program, options are granted at fair market value at the date of grant, and options granted under the program become exercisable only after a vesting period, which is subject to continued employment. Consequently, employees benefit from stock options only if the market value of OPKO’s common stock increases over time. With respect to these stock options, OPKO recognizes compensation expense based on FASB ASC Topic 718.
The OPKO Compensation Committee typically grants stock options to its employees under the OPKO Health, Inc. 2016 Equity Incentive Plan (the “2016 Equity Incentive Plan”) and previously the 2007 Equity Incentive Plan. As with base salaries and discretionary cash bonuses, there is no set formula or performance criteria, which determines the amount of the equity award for OPKO’s employees, including the Named Executive Officer. Nor does the OPKO Compensation Committee assign any relative weight to any specific factors or criteria it considers when granting stock options. Rather, the OPKO Compensation Committee exercises its judgment and discretion by considering all factors it deems relevant at the time of such grants, including the internally generated peer group survey previously discussed and OPKO’s performance during the most recent fiscal year. For the Named Executive Officer, the decisions by the OPKO Compensation Committee regarding grants of stock options are made based almost entirely upon the recommendation of OPKO’s Chief Executive Officer, and includes his subjective determination based on his assessment of the executive officer’s current position with OPKO, the executive officer’s past and expected future performance and the other factors discussed in the determination of base salaries.
Restrictions on Hedging
OPKO’s officers and personnel are prohibited from pledging OPKO’s common stock, purchasing OPKO’s securities on margin, engaging in short selling OPKO’s common stock, buying or selling puts or calls in connection with OPKO’s securities and engaging in derivative transactions involving OPKO’s securities, without prior written consent from OPKO’s acting compliance officer. In addition, OPKO’s directors and executive officers, as well as certain other employees, generally may purchase or sell OPKO securities only during permitted windows, which generally begin on the first full business day following the issuance of its earnings releases and continuing until two weeks prior to the end of the fiscal quarter.
Outstanding Equity Awards at 2021 Fiscal Year-End
The following table provides information regarding outstanding equity awards made to the Named Executive Officer as of December 31, 2021.
Option AwardsStock Awards
Name
Number of securities underlying unexercised options (#) exercisable
Number of securities underlying unexercised options (#) unexercisable (1)
Equity incentive plan awards: Number of securities underlying unexercised unearned options (#)
Option exercise price ($)Option expiration date
Number of shares or units of stock that have not vested (#)
Market value of shares of units of stock that have not vested ($)(2)
Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#)
Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested shares ($)
Katherine Stueland— 450,000 — 3.78 06/20/2031$— $2,500,000 $— $— 
__________________
(1)Options vest in four equal annual tranches, commencing on June 21, 2022, and expire on June 20, 2031. In connection with the GeneDx Stueland Employment Agreement Amendment Option, Ms. Stueland and OPKO agreed that such options shall be automatically cancelled and forfeited without any payment to her at the Effective Time.
(2)Consists of RSUs granted on June 21, 2021, and 50% of such RSUs vest on June 21, 2022, with the remaining 50% scheduled to vest on December 21, 2022, provided that the OPKO RSUs shall become immediately vested in full upon the occurrence of certain events, including a change of control of GeneDx. In connection with the GeneDx Stueland Employment Agreement Amendment, OPKO acknowledged and agreed that all outstanding OPKO RSUs will become immediately vested in full immediately prior to the Closing.
Other Elements of Compensation
Severance and Change-in-Control Benefits.
The Named Executive Officer is entitled to severance or change of control benefits as described below in “—Potential Payments Upon Termination and Change in Control—Stueland”.
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401(k) Profit Sharing Plan. 
OPKO has adopted a tax-qualified 401(k) Profit Sharing Plan (the “401(k) Plan”) covering all qualified employees. The effective date of the 401(k) Plan was January 2008. Participants may elect a salary reduction of at least 1% as a contribution to the 401(k) Plan, up to the statutorily prescribed annual limit for tax-deferred contributions ($19,500 for employees under age 50 and an additional $6,500 for employees 50 and above in 2020). In 2008, OPKO adopted the Roth contribution for employee elections. The 401(k) Plan permits employer matching of up to 4% of a participant’s salary up to the statutory limits. In 2010, OPKO elected a safe harbor contribution at 4% of annual compensation. All of OPKO’s safe harbor contributions are immediately vested.
Other Compensation.
The Named Executive Officer has standard benefits that are offered to all full-time, exempt employees of OPKO. These standard benefits include health, dental and life insurance, and short and long-term disability.
Potential Payments Upon Termination and Change in Control
Stueland
Pursuant to the terms of the GeneDx Stueland Employment Agreement, if Ms. Stueland’s employment is terminated (i) by GeneDx without “cause” (as defined in the GeneDx Stueland Employment Agreement) and not due to her death or disability or (ii) for “good reason” (as defined in the GeneDx Stueland Employment Agreement) by Ms. Stueland, Ms. Stueland will be entitled to receive the following severance payments in a lump cash payment within thirty (30) days of the date of termination, in addition to certain accrued obligations (including any earned but unpaid prior year annual bonus):
•an amount equal to 12 months’ base salary;
•an amount equal to the target bonus for the year of termination of employment;
•an amount equal to twelve (12) months of the employer portion of GeneDx’s or OPKO’s, as applicable, group health plan premiums that such company would have paid for Ms. Stueland and her dependents if she remained an active participant during such twelve (12) months; and
•any remaining portion of the Sign-On Bonus not yet paid to Ms. Stueland
In addition, upon a “change of control” (as defined in the GeneDx Stueland Employment Agreement), Ms. Stueland’s termination without cause or her resignation for good reason, the OPKO RSUs will immediately vest. Prior to June 21, 2022, upon a change of control, Ms. Stueland’s termination without cause or her resignation for good reason, or after June 21, 2022, upon Ms. Stueland’s termination without cause or her resignation for good reason within three months before, or 12 months after, a change of control, the Initial Option and Additional Option (as applicable) granted pursuant to the GeneDx Stueland Employment Agreement described above will immediately vest.
Ms. Stueland and OPKO agreed in the GeneDx Stueland Employment Agreement to revise certain of the terms of the GeneDx Stueland Employment Agreement, including the affect on Ms. Stueland’s equity awards and OPKO’s obligations to Ms. Stueland, from and after the Closing, as more fully described in “—Narrative to Summary Compensation Table—Stueland GeneDx Employment Agreement” above.
Upon a termination of Ms. Stueland’s employment for cause or due to her death or as a result of her disability, Ms. Stueland will be entitled to certain accrued obligations (including any earned but unpaid prior year annual bonus).
GeneDx’s obligation to provide the severance payments and benefits described above are contingent upon Ms. Stueland’s execution and non-revocation of a release of claims against GeneDx and its parent entities and affiliates.
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Director Compensation
Each of OPKO’s non-employee directors is currently entitled to receive an annual retainer of $30,000, payable in quarterly installments, an option to acquire 50,000 shares of OPKO’s common stock upon initial appointment to the OPKO’s board of directors and an option to acquire 30,000 shares each year thereafter on the date of OPKO’s annual meeting of stockholders. Richard Pfenniger is the Lead Independent Director and chairman of the Audit Committee of OPKO’s Board of Directors. Accordingly, he is entitled to receive (1) an additional annual retainer of $10,000, payable in quarterly installments, and an option to acquire 15,000 shares of OPKO’s common stock each year on the date of the OPKO’s annual meeting of stockholders, (2) an additional annual retainer of $15,000, payable in quarterly installments, and (3) an option to acquire 15,000 shares of OPKO’s common stock each year on the date of OPKO’s annual meeting of stockholders.
The following table sets forth information with respect to compensation earned by Mr. Pfenniger for fiscal year 2021.
Annual Compensation
NameFees Earned or Paid in Cash ($)Stock Award ($)
Option Awards ($)(4)
Non-Equity Incentive Plan Compensation ($)Change in Nonqualified Deferred Compensation Earnings ($)All Other Compensation ($)Total ($)
Richard C. Pfenniger, Jr.49,323 — 139,200 — — — 188,523 
Actions Taken in Connection with the aggregateClosing
Stueland Sema4 Employment Agreement
In connection with the execution of the Merger Agreement, Sema4 and Ms. Stueland entered into a certain Employment Agreement, dated as of January 14, 2022 (the “Sema4 Stueland Employment Agreement”), pursuant to which Sema4 agreed, immediately following the Closing, to employ Ms. Stueland as the Co-Chief Executive Officer of Sema4 for a term of three years, which shall automatically renew for successive one year terms unless earlier terminated (such period from the commencement of employment under the termination thereof, the “Term”). The Sema4 Stueland Employment Agreement contemplates a base salary of $675,000 per year, subject to review by the Sema4’s Board at least annually, and a performance bonus based on the achievement of certain goals for Sema4 and/or Ms. Stueland as mutually agreed by Ms. Stueland and the Board of Directors at the beginning of each calendar year, with a target amount equal to one hundred percent of the base salary. Ms. Stueland will receive a cash bonus equal to the lesser of (i) $1,500,000 and (ii) the amount treated as a “Transaction Expense” for purposes of the Merger Agreement on account of clause (i) of the “Stueland Employment Agreement Obligations,” within the meaning of the Merger Agreement, which will be payable within the first full payroll period following the Closing. As soon as practicable after the Sema4 Stueland Employment Agreement’s effective date, subject to approval of Sema4’s Board, Sema4 will grant Ms. Stueland an option to purchase shares of Class A common stock with a grant-date value equal to $4,500,000, with an exercise price equal to the closing price of the Class A common stock on the date of grant, and a number of sharesrestricted stock units with a grant-date value equal to $4,500,000. Such equity awards described in the preceding sentence will be subject to the terms of the 2021 EIP, and will vest and become exercisable as follows: 25% on the first anniversary of the Closing, 25% on the second anniversary of the Closing and 6.25% on a quarterly basis thereafter through the fourth anniversary of the Closing.
Ms. Stueland will also be entitled to participate in Sema4’s Class Bemployee benefit arrangements provided to the Company’s most senior executive officers and is entitled to expense reimbursement for out-of-pocket expenses in accordance with Company policies and up to four weeks of vacation per year.
The Sema4 Stueland Employment Agreement contains restrictive covenants, including confidentiality of information, assignment of certain intellectual property, non-competition and non-solicitation covenants. The confidentiality covenant has an indefinite term, and the non-competition and non-solicitation covenants are effective both during the Ms. Stueland’s employment with Sema4 and until the one year anniversary of her termination of employment.
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Pursuant to the terms of the Sema4 Stueland Employment Agreement, if Ms. Stueland’s employment is terminated (i) by Sema4 without “cause” (as defined in the Sema4 Stueland Employment Agreement) and not due to her death or disability or (ii) for “good reason” (as defined in the Sema4 Stueland Employment Agreement) by Ms. Stueland, Ms. Stueland will be entitled, subject to certain conditions, to receive the following severance payments, in addition to certain accrued obligations (including any earned but unpaid prior year annual bonus):
•twenty four (24) months’ of continued base salary;
•up to twenty four (24) months of reimbursement of the employer portion of COBRA health insurance coverage; and
•accelerated vesting of the unvested portion of the Sema4 Initial Option with an aggregate grant date value equal to the amount treated as a “Transaction Expense” for purposes of the Merger Agreement on account of clause (ii) of the “Stueland Employment Agreement Obligations” (as defined in the Merger Agreement).
In addition, inside the “Change in Control Period” (as defined in the Sema4 Stueland Employment Agreement), upon Ms. Stueland’s termination without cause or her resignation for good reason, Sema4 will pay Ms. Stueland a lump sum in an amount equal to two hundred percent (200%) of her target performance bonus for the calendar year in which her employment terminated and the vesting of all unvested equity based compensation awards held by Ms. Stueland shall be immediately accelerated and, if applicable, exercisable.
Upon a termination of Ms. Stueland’s employment for cause or due to her death or as a result of her disability, Ms. Stueland will be entitled to certain accrued obligations (including any earned but unpaid prior year annual bonus).
Sema4’s obligation to provide the severance payments and benefits described above are contingent upon Ms. Stueland’s execution and non-revocation of a release of claims against Sema4.
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GOLDEN PARACHUTE COMPENSATION OF GENEDX
The following table sets forth the information required by Item 402(t) of Regulation S-K regarding the compensation for the Named Executive Officer that is based on or otherwise relates to the Acquisition, assuming that the Acquisition was consummated on March 15, 2022 (which is the date assumed solely for the purposes of this golden parachute disclosure), and that the Named Executive Officer’s employment was terminated on the day that resulted in her receipt of the maximum amount of severance benefits under the Sema4 Stueland Employment Agreement as a result of a termination of employment following a change of control event, together with the value of the unvested equity awards that would be accelerated as a result of the Acquisition. The amounts shown in the table do not include the value of payments or benefits that would have been earned, or any amounts associated with equity awards that have vested or would vest pursuant to their terms, on or prior to the assumed effective date of the Acquisition or the value of payments or benefits that are not based on or otherwise related to the Acquisition.
For purposes of calculating the potential payments set forth in the table below, GeneDx has assumed that (a) the Acquisition will become effective on March 15, 2022, (b) unless otherwise noted, that the date of termination of employment of the Named Executive Officer is March 15, 2022; (c) the OPKO common stock subjectprice is $3.85 per share (the average closing price per share of OPKO common stock for the five trading days immediately following the date of announcement of the Acquisition); and (d) no withholding taxes are applicable to outstanding options heldany payments set forth in the table. The amounts shown in the table are estimates only, are based on assumptions and information available to date, and do not reflect any cutback that may be applied to the payments and benefits otherwise payable to the Named Executive Officer to put her in a better after-tax position in the event of the imposition of any excise taxes under Sections 280G and 4999 of the Internal Revenue Code, as contemplated by Sema4’s non-employee directorsGeneDx Stueland Employment Agreement or 2016 Equity Incentive Plan, as applicable. The actual amounts that may be paid upon an individual’s termination of December 31, 2020:employment, if any, can only be determined at the actual time of such termination.
NameNumber of Shares Underlying Options Held as of December 31, 2020Cash ($)Equity ($)Pension/NQDC ($)Perquisites/Benefits ($)Tax reimbursement ($)Other ($)Total Compensation ($)
Joshua RuchKatherine Stueland—
Kenneth Davis, M.D—
Dennis Charney, M.D—
Michael Pellini, M.D—
Rachel Sherman, M.D., M.P.H., F.A.C.P
293,3152,850,000(1)
R. Martin Chavez, Ph.D
832,1992,577,798(2)
Andrew ElBardissi—
Viral Patel
19,800(3)
—
David Windreich—5,447,597.00 
__________________
(1)Cash. The stock option vests atestimated amount shown in this column represents 24 months of base salary continuation payable in the event of a ratequalifying termination of 6.25%Ms. Stueland’s employment and the $1,500,000 cash bonus that Ms. Stueland will receive from Sema4 within the first full payroll period following the Closing. The salary continuation payments are “double-trigger” benefits in that they will be paid to Ms. Stueland only if she experiences a qualifying termination of employment following the Closing. The $1,500,000 cash bonus is a “single-trigger” benefit in that will be paid shortly following the Closing, whether or not Ms. Stueland’s employment is later terminated.
(2)Equity. The estimated amount shown in this column represents (a) $31,500, which the value of the sharesInitial Option that would be expected to be treated as “Transaction Expense” for purposes of Sema4’s Class Bthe Merger Agreement on account of clause (ii) of the “Stueland Employment Agreement Obligations,” within the meaning of the Merger Agreement, and (b) $2,546,298, which is the value of the OPKO RSUs which will become fully vested immediately prior to the Closing, subject to Ms. Stueland’s continued employment with GeneDx, in each case based on an OPKO common stock underlying the stock option each quarterprice of $3.85 per share. The amount described in clause (a) is a “double-trigger” benefit in that Ms. Stueland will receive this acceleration benefit only if she experiences a qualifying termination of employment following the February 18, 2020 vesting commencement date. 100%Closing. The amount described in clause (b) is a “single-trigger” benefit in that Ms. Stueland will receive this acceleration benefit in connection with the Closing, whether or not Ms. Stueland’s employment is later terminated.
(3)Perquisites/Benefits. The estimated amount shown in this column represents the value of the shares underlyingcontinued medical, dental, and vision benefits that Ms. Stueland would receive for a period of 24 months following a qualifying termination of employment. This is a “double-trigger” benefit in that it will be provided to Ms. Stueland only if she experiences a qualifying termination of employment following the stock optionClosing.
Indemnification of Sema4 Directors and Officers
Sema4’s Charter contains provisions limiting the liability of directors, and Sema4’s Bylaws provide that it will vestindemnify each of its directors to the fullest extent permitted under Delaware law. Sema4’s Charter and Bylaws also provide Sema4’s Board with discretion to indemnify officers and employees when determined appropriate by the Board.
Sema4 has entered into indemnification agreements with each of its directors and executive officers and certain other key employees. In connection with the Closing of the Acquisition, Sema4 expects to enter into indemnification agreements with each of the new directors and executive officer, as applicable. The indemnification agreements provide that Sema4 will indemnify each of its directors, executive officers, and such other key employees against any and all expenses incurred by that director, executive officer, or other key employee because of his or her status
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as one of the Sema4’s directors, executive officers, or other key employees, to the fullest extent permitted by Delaware law, Sema4’s Charter and its Bylaws. In addition, the indemnification agreements provide that, to the fullest extent permitted by Delaware law, Sema4 will advance all expenses incurred by its directors, executive officers, and other key employees in connection with a change in control transaction.
(2)52,012 shares of Sema4’s Class B common stock underlying the stock option shall vestlegal proceeding involving his or her status as a director, executive officer, or key employee. For information on the 11th dayindemnification of each August, November, FebruaryGeneDx’s officers and May from May 11, 2020 through May 11, 2024, withdirectors following the first such vesting date to occur on August 11, 2020, such that 52,012 ofAcquisition, see the shares of Sema4’s Class B common stock underlying the stock option shall be vested as of the date of the award. section entitled “The balance of 7 shares of Sema4’s Class B common stock underlying the stock option shall vest on May 11, 2024. 100% of the shares underlying the stock option will vest in connection with a change in control transaction.Acquisition
Non-Employee Director Compensation Policy
In connection with this transaction, the post-combination company intends to adopt a non-employee director compensation policy that will be designed to enable the post-combination company to attract—Covenants and retain, on a long-term basis, highly qualified non-employee directors.Agreements—Insurance; D&O Indemnification.”
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MANAGEMENT AFTER THE BUSINESS COMBINATIONOF SEMA4
UponDIRECTORS AND EXECUTIVE OFFICERS
Management
The following table sets forth the consummationnames, ages as of the business combination, the businessFebruary 22, 2022, and affairs of the post-combination company will be managed by or under the direction of the board of directors of the post-combination company. the directors andcertain other information regarding our executive officers of the post-combination company upon consummation of the business combination will include the following.and directors:
NameAgePosition
Executive OfficersOfficers:
Eric Schadt, Ph.D.5657Chief Executive Officer and Director
Isaac Ro43Chief Financial Officer
Shawn AssadJason Ryan47Chief Accounting OfficerExecutive Chairman and Director
James Coffin, Ph.D.Isaac Ro5744President and Chief OperatingFinancial Officer
Daniel Clark, J.D.4142Secretary and General Counsel
Anthony Prentice4849Chief Product Officer
Kareem Saad4243Chief Business Officer
Karen White5051Chief People Officer
Non-Employee Directors:
Non-Employee Directors
Dennis Charney, M.D.(5)
70Director
Eli D. Casdin
47Director
Emily Leproust, Ph.D.(4)(6)48Director
Jason Ryan
Emily Leproust, Ph.D.(5)
4749Director
Joshua Ruch
Keith A. Meister(1)
7148Director
Michael Pellini, M.D.5556Director
Joshua Ruch(2)(4)
72Director
Rachel Sherman, M.D., M.P.H., F.A.C.P.(3)(6)
64Director
Nat Turner35Director
Rachel Sherman, M.D., M.P.H., F.A.C.P.6336Director
__________________
(1)Chair of the Audit Committee
(2)Chair of the Compensation Committee
(3)Chair of the Nominating and Corporate Governance Committee
(4)Member of the Nominating and Corporate Governance Committee
(5)Member of the Audit Committee
(6)Member of the Compensation Committee
Executive Officers
Eric Schadt, Ph.D., is founder andhas served as our Chief Executive Officer of Sema4 and has served as a member of Sema4’sour Board since July 2021. Dr. Schadt was the founder of Legacy Sema4 and previously served as its Chief Executive Officer and as a member of its board of directors sincefrom June 2017.2017 to July 2021. Dr. Schadt also serves as the Dean for Precision Medicine, and Mount Sinai Professor in Predictive Health and Computational Biology at the Icahn School of Medicine at Mount Sinai. Dr. Schadt was previously Founding Director of the Icahn Institute for Genomics and Multiscale Biology from September 2011 to June 2017, and Professor and Chair of the Department of Genetics and Genomic Sciences from August 2011 to June 2017. Dr. Schadt previously served as the Chief Scientific Officer at Pacific Biosciences of California, a biotechnology company, from May 2009 to July 2012, and as an Executive Director at Merck from July 2001 to May 2009. Dr. Schadt also currently serves on numerous boards of directors and scientific advisory boards for various private companies. Dr. Schadt earned his Ph.D. from the University of California, Los Angeles, his M.A. from the University of California, Davis, and his B.S. from California Polytechnic State University-San Luis Obispo. Dr. Schadt’s expertise in computational biology, genomics, health systems operating experience, and knowledge of Sema4’s business, years of senior management experience at a biotechnology company, and his service as a director of other biopharmaceutical companies provide him with the qualifications and skills to serve as a director on our Board.
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Jason Ryan has served as a member of our Board since July 2021, and as our Executive Chairman since January 2022. Mr. Ryan served as Chief Operating and Financial Officer of Magenta Therapeutics, Inc., a biotechnology company, from January 2019 to November 2020. Prior to joining Magenta Therapeutics, Inc., Mr. Ryan previously served as Chief Financial Officer of Foundation Medicine, Inc., a molecular information company which became a wholly-owned subsidiary of Roche Holdings, Inc., from March 2015 to November 2018. Prior to his position as Chief Financial Officer of Foundation Medicine, Inc., Mr. Ryan served in various other finance roles at Foundation Medicine, including as Senior Vice President of Finance. Prior to joining Foundation Medicine, Inc., Mr. Ryan led the post-combination company.finance and strategic planning functions of various other life science companies including Taligen Therapeutics, Inc., Codon Devices Inc. and Genomics Collaborative, Inc. Mr. Ryan joined the board of directors of Singular Genomics Systems, Inc. in April 2021, and previously served on the board of directors of ArcherDX, Inc. (which was acquired by Invitae Corporation) from April 2020 to October 2020. He began his career at Deloitte & Touche LLP. Mr. Ryan holds an M.B.A. from Babson College and a B.S. in economics from Bates College, and earned a C.P.A. in Massachusetts. Mr. Ryan’s extensive finance experience and his leadership experience in the life sciences and biopharmaceutical industries qualifies him to serve as a director on our Board.
Isaac Ro has served as our Chief Financial Officer since July 2021. Mr. Ro previously served as Legacy Sema4’s Chief Financial Officer sincefrom February 2021 to July 2021. Mr. Ro previously served as the Chief Financial Officer of Thrive Earlier Detection Corp., a company focused on early detection cancer screening, from June 2019 to February 2021, through Thrive’s sale to Exact Sciences Corporation in January 2021. From July 2010 to June 2019, Mr. Ro held roles of increasing responsibility at Goldman Sachs leading the U.S. Medical Technology team, including as Vice President. Prior to Goldman Sachs, Mr. Ro served as a Director at SVB Leerink from June 2004 to July 2010. Mr. Ro holds a B.A. in History, with honors, from Middlebury College.
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Shawn Assad, has served as Sema4’s Chief Accounting Officer since May 2021. Mr. Assad previously served as the New York Office Partner at CFGI, an accounting advisory and consulting services company, from May 2020 until May 2021. Prior to joining CFGI, Mr. Assad served as the Chief Accounting Officer and Global Controller at Vice Media, digital media and broadcasting company, from April 2018 to May 2020. From May 2015 to April 2018, Mr. Assad held roles of increasing responsibility at Endeavor (formerly WME/IMG), a global entertainment, sports and content company, including as the Senior Vice President, Assistant Global Controller and Vice President of Global Technical and SEC Reporting, and from April 2008 to May 2015, Mr. Assad served as the Senior Director at The Seigfried Group LLP, an accounting and financial resources services firm. Mr. Assad holds a graduate degree in Accounting from Northeastern University and a Bachelor of Science in Accounting from Paris School of Business in Paris, France.
James Coffin, Ph.D., has served as Sema4’s President and Chief Operating Officer since August 2017 and previously served as Sema4’s Treasurer from January 2021 to March 2021. Dr. Coffin previously served as Chief Executive Officer, Chairman of the Board and President at Source Medical Solutions, a practice management and EMR solutions provider in the ambulatory surgical space, from December 2014 to June 2017. Prior to joining Source Medical Solutions, Dr. Coffin was Worldwide Vice President and General Manager at Dell, leading the Global Healthcare and Life Science business from January 2007 to April 2013. Prior to Dell, Dr. Coffin served as Worldwide Vice President of IBM’s Healthcare and Life Sciences and its Life Sciences Solutions divisions between August 1999 and January 2007. Dr. Coffin earned his Ph.D. in Chemistry from the University of Arkansas and his B.S. in Chemistry from Louisiana Tech University. Dr. Coffin also completed a fellowship in Chemistry at the University of Cambridge.
Daniel Clark, J.D., has served as our General Counsel since July 2021. Mr. Clark previously served as Legacy Sema4’s General Counsel sincefrom March 2016 to July 2021 and Secretary sincefrom March 2020.2016 to July 2021. From 2015 to May 2017, Mr. Clark served as the Senior Contracts Manager – Genetics & Genomics at Mount Sinai Innovation Partners. Prior to joining Mount Sinai Innovation Partners, Mr. Clark practiced with two leading law firms in New York, clerked for Judge Frederic Block in the Eastern District of New York, and helped found a boutique startup law firm. Mr. Clark received his J.D. from the University of Michigan School of Law, cum laude, and his B.A. in Economics and Philosophy from Pomona College, cum laude. Mr. Clark also traveled as a Thomas J. Watson Fellow.
Anthony Prentice has served as our Chief Product Officer since July 2021. Mr. Prentice previously served as Legacy Sema4’s Chief Product Officer sincefrom September 2016.2016 to July 2021. Prior to joining Sema4, Mr. Prentice served in various roles of increasing responsibility at American Express from May 2005 to September 2016, including as the Vice President of Mobile Payments from August 2011 to September 2016 and as the Vice President of Gold Card Product Management from April 2010 to October 2011. Prior to joining American Express, Mr. Prentice served as the Director of Category Management at Starbucks Corp from 2002 to 2005, and as an Engagement Manager at McKinsey & Company from 1998 to 2002. Mr. Prentice earned an M.B.A. from Columbia University and his B.S. in Mechanical Engineering from Cornell University.
Kareem Saad has served as our Chief Business Officer since July 2021. Mr. Saad previously served as Legacy Sema4’s Chief Business Officer sincefrom January 2021 to July 2021. Mr. Saad also previously served as the Chief Strategy Officer at Sema4 from October 2017 to January 2020. Prior to rejoining Sema4, Mr. Saad served as the President and Chief Operating Officer of Apervita, Inc., a healthcare technology company, from February 2020 to January 2021. Mr. Saad previously served as the Chief Commercial Officer and EVP of Strategy and Business Development of SourceMed, a healthcare technology company, between January 2015 and June 2017. Prior to joining SourceMed, Mr. Saad served as a National Sales Director and Manager in Dell’s Healthcare and Life Sciences division between June 2009 and July 2013, and as a Business Segment Executive in IBM’s Healthcare Life Sciences group from November 2001 to February 2006. Mr. Saad received an M.B.A. with a concentration in Economics and Finance from the University of Chicago and a B.S. in Biochemistry and Molecular Biology with a minor in Computer Science from the University of British Columbia.
Karen White has served as our Chief People Officer since July 2021. Ms. White previously served as Legacy Sema4’s Chief People Officer sincefrom September 2020.2020 to July 2021. Prior to joining Sema4, Ms. White was Vice
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President of Human Resources for Commercial Solutions at Syneos Health, Inc., a biopharmaceutical outsource services organization, from June 2016 to September 2020. Prior to the merger of inVentiv Health, Inc. and INC Research Holdings, Inc. in August 2017, and later rebranding to Syneos Health in January 2018, Ms. White served as Managing Director of Human Capital at inVentiv Health from June 2016 to August 2017. Prior to that, Ms. White served as Director of Talent Development at Memorial Sloan Kettering
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Cancer Center where she was employed from October 2011 to June 2016. Before October 2011, Ms. White held various positions at large global organizations such as Goldman Sachs Group Inc., International Business Machines Corp., and PricewaterhouseCoopers. Ms. White earned her M.B.A. from The George Washington University and her B.A. from Hobart and William Smith Colleges.
Non-Employee Directors
Following the Closing, the post-combination company’s board of directors will consist of up to 9 directors, which will be divided into three classes (Class I, II and III) with Class I consisting of three directors, Class II consisting of four directors and Class III consisting of two directors. Pursuant to the Business Combination Agreement, the board of directors of the post-combination company will consist of (i) 6 individuals designated by Sema4 prior to the mailing of this proxy statement to CMLS shareholders (5 of whom are existing members of Sema4’s board of directors) and (ii) three directors designated by CMLS (who are Emily Leproust and Nat Turner, each an existing member of CMLS’s board of directors, and Eli Casdin, an existing member of CMLS’s board of directors and its Chief Executive Officer).
Dennis Charney, M.D.,has served as a member of our Board since July 2021, and previously served as a member of Legacy Sema4’s board of directors sincefrom June 2017.2017 to July 2021. Dr. Charney has served as the Anne and Joel Ehrenkranz Dean of the Icahn School of Medicine at Mount Sinai since JanuaryMarch 2007, and as President for Academic Affairs for the Mount Sinai Health System since September 2013. From March 20062005 to March 2007, Dr. Charney served as Dean for Academic and Scientific Affairs of the Icahn School of Medicine at Mount Sinai and Senior Vice President for Health Services of The Mount Sinai Medical Center. From 2007-2013, Dr. Charney served as the Dean of the School and Executive Vice President for Academic Affairs of the Medical Center. Dr. Charney first joined the Icahn School of Medicine at Mount Sinai in 2004 as Dean of Research. Prior to joining the Icahn School of Medicine at Mount Sinai, Dr. Charney led the Mood and Anxiety Disorder Research Program and the Experimental Therapeutics and Pathophysiology Branch at the National Institute of Mental Health, and he served as Professor of Psychiatry with tenure at Yale University from January 1990 to January 2000. Dr. Charney received his M.D. from Penn State College of Medicine and his B.A. from Rutgers University. Dr. Charney completed a residency in clinical psychiatry at Yale University School of Medicine and a fellowship in biological psychiatry at Connecticut Mental Health Center. Dr. Charney’s extensive medical and clinical experience in the biotechnology industry qualifies him to serve as a director on the board of directors of the post-combination company.our Board.
Eli D. Casdin will serve on the board of directors of the combined company following completion of the business combination. Mr. Casdin has served as a member of the board of directorsour Board since July 2020, and previously served as the Chief Executive Officer of CMLS sincefrom July 2020.2020 to July 2021. Mr. Casdin founded Casdin Capital, LLC, an investment firm focused on the life sciences and healthcare industry, in November 2011 and currently serves as its Chief Investment Officer. Mr. Casdin hasalso serves on the boards of directors of SomaLogic, Inc., a protein biomarker discovery and clinical diagnostics company (formerly, CM Life Sciences II Inc., a special purpose acquisition company (“CMLS II”)), since September 2021 (having previously served as the Chief Executive Officer of CMLS II from February 2021 to September 2021), and EQRx, Inc., a pharmaceutical company (formerly, CM Life Sciences III Inc., a special purpose acquisition company (“CMLS III”)), since December 2021 (having previously served as the Chief Executive Officer of CMLS III from February 2021 to December 2021). In addition, Mr. Casdin serves on the boards of directors of Century Therapeutics, Inc., a biotechnology company, since February 2021, Absci Corp, a drug and target discovery company, since December 2020, and Tenaya Therapeutics, Inc., a biotechnology company, since August 2019, and previously served on the board of directors of Exact Sciences Corp., a molecular diagnostics company focused on early cancer detection, treatment and monitoring, sincefrom October 2017.2017 to September 2020. Mr. Casdin holds an M.B.A. from Columbia Business School and a B.S. degree from Columbia University School of General Studies. Mr. Casdin’s qualifications to serve on the board of directors of the post-combination companyour Board include his extensive leadership experience as an executive officer of an investment firm, his extensive public and private company directorship experience in the life sciences and healthcare sectors, and his expertise in finance, capital markets, and the biotechnology industry.
Emily Leproust, Ph.D., will serve on the boardhas served as a member of directors of the combined company following completion of the business combination.our Board since September 2020. Dr. Leproust has been President and Chief Executive Officer of Twist Bioscience Corp., a biotechnology company, since co-founding Twist in 2013. Since October 2018, she has also served as Chair of the board of directors for Twist. Prior to co-founding Twist, Dr. Leproust served in various positions at Agilent Technologies, Inc., an analytical instrumentation development and manufacturing company, most recently as its Director, Applications and Chemistry R&D from February 2009 to April 2013. Dr. Leproust holds a Ph.D. in Organic Chemistry from the University of Houston and a M.Sc. in Industrial Chemistry from the Lyon School of Industrial Chemistry. Dr. Leproust’s qualifications to serve on the board of directors of the post-combination companyour Board include her extensive professional and educational experience in the life sciences industry.
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Jason Ryan
Keith Meisterwill serve has served as a member of our Board since January 2022, and previously served as the Chairman of the Board of CMLS from July 2020 to July 2021. He founded Corvex Management LP, a New York based investment manager, in December 2010 and since its inception has served as its Managing Partner and Chief Investment Officer. From 2003 to 2010, Mr. Meister served as Chief Executive Officer and then Principal Executive Officer and Vice Chairman of the board of Icahn Enterprises L.P., the primary investment vehicle for Carl Icahn. In addition, Mr. Meister previously served as Chairman of CMLS II from December 2020 to September 2021 and CMLS III from January 2021 to December 2021. Mr. Meister also serves on the Board of Directors of MGM Resorts International, a global hospitality and entertainment company, and its affiliate Roar Digital. Mr. Meister has previously served on the board of directors of the combined company following completionnumerous other public companies in his career, including Yum! Brands Inc., The Williams Companies, Inc., ADT, Inc., Ralcorp Holdings, Inc. and Motorola, Inc. (now Motorola Solutions, Inc.). He is Chairman of the business combination.board of the Harlem Children’s Zone and also serves on the board of trustees of the American Museum of Natural History. Mr. RyanMeister holds a B.A. degree in government from Harvard College where he graduated cum laude. His qualifications to serve on our board of directors include his extensive leadership experience as managing partner and executive officer of an investment firm and a diversified holding company, his extensive public company directorship experience in a variety of industries, and his expertise in finance, capital markets, strategic development, and risk management.
Michael Pellini, M.D., has served as Chief Operatinga member of our Board since July 2021, and Financial Officer of Magenta Therapeutics, Inc., a biotechnology company, from January 2019 to October 2020. Prior to joining Magenta Therapeutics, Inc., Mr. Ryan
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previously served as Chief Financial Officera member of Legacy Sema4’s board of directors from August 2019 to July 2020. Since December 2017, Dr. Pellini has served as a Managing Partner of Section 32, LLC, a technology and life sciences-based venture capital fund. Dr. Pellini held roles of increasing responsibility at Foundation Medicine, Inc., a molecular information company, which becamewas acquired by F. Hoffmann-La Roche Ltd. in 2018, from May 2011 until its acquisition, including as Chairman of the board of directors, Chief Executive Officer and President. From April 2008 to April 2011, Dr. Pellini held the position of President and Chief Operating Officer at Clarient, Inc., a wholly-owned subsidiarymedical diagnostic services company, which was acquired by General Electric Healthcare Company in 2010, and also served on Clarient’s board of Roche Holdings,directors from May 2007 to April 2009. Dr. Pellini also previously served as Vice President, Life Sciences at Safeguard Scientifics, Inc., a private equity and venture capital firm from March 20152007 to November 2018. Prior to his positionApril 2008. Dr. Pellini currently serves as Chief Financial Officera member of Foundation Medicine, Inc., Mr. Ryan served in various other finance roles at Foundation Medicine, including as Senior Vice President of Finance. Prior to joining Foundation Medicine, Inc., Mr. Ryan led the finance and strategic planning functions of various other life science companies including Taligen Therapeutics, Inc., Codon Devices Inc. and Genomics Collaborative, Inc. Mr. Ryan joined the board of directors of Adaptive Biotechnologies Corporation, the GO2 Foundation, the Personalized Medicine Coalition, Singular Genomics Systems, Inc. in April 2021,, the Mission Hospital Foundation and previously served onseveral private companies. Dr. Pellini earned an M.D. from Jefferson Medical College (now the boardSidney Kimmel Medical College of directors of ArcherDX, Inc. (which was acquired by Invitae Corporation) from April 2020 to October 2020. He began his career at Deloitte & Touche. Mr. Ryan holdsThomas Jefferson University), an M.B.A. from Babson CollegeDrexel University, and a B.S.B.A. in economicsEconomics from Bates College, and earned a C.P.A. in Massachusetts. Mr. Ryan’s extensive finance experience and his leadershipBoston College. Dr. Pellini’s broad experience in the technology, health care and life sciences industries as an investor, and biopharmaceutical industries qualifieshis years of senior management experience at public biotechnology companies, provides him with the qualifications and skills to serve as a director on the post-combination company’s board of directors.our Board.
Joshua Ruch has served as a member of our Board since July 2021, and previously served as the Chairman of our Board from July 2021 to January 2022 and as a member of Legacy Sema4’s board of directors sincefrom November 2017.2017 to July 2021. Mr. Ruch is also a managing partner and co-founder of Rho Capital Partners, an investment and venture capital management company focused on innovative technology, and has held such positions since the founding of Rho Capital Partners in 1981. Prior to co-founding Rho Capital Partners and Rho Ventures in 1981, Mr. Ruch worked as an investment banker at Salomon Brothers in New York, a multinational investment bank. In addition to Sema4, Mr. Ruch is also a trustee of the Mount Sinai Health System, Carnegie Hall and the National Humanities Center, and is a member of the Board of Governors of the Technion – Israel Institute of Technology and the Steering Committee of the Jacobs Institute. Joshua received an M.B.A. from the Harvard Business School and a B.S. in electrical engineering from the Technion – Israel Institute of Technology in Haifa, Israel. Mr. Ruch’s broad experience as an investor and serving on the boards of emerging technology companies, including health care and biotechnology companies, qualifies him to serve on the post-combination company’s board of directors.our Board.
Michael Pellini,Rachel Sherman, M.D.,M.P.H., F.A.C.P., has served as a member of Sema4’s board of directorsour Board since August 2019. Since December 2017, Dr. Pellini has served as a Managing Partner of Section 32, LLC, a technologyJuly 2021, and life sciences-based venture capital fund. Dr. Pellini held roles of increasing responsibility at Foundation Medicine, Inc., a molecular information company, which was acquired by F. Hoffmann-La Roche Ltd. in 2018, from May 2011 until its acquisition, including as Chairman of the board of directors, Chief Executive Officer and President. From April 2008 to April 2011, Dr. Pellini held the position of President and Chief Operating Officer at Clarient, Inc., a medical diagnostic services company, which was acquired by General Electric Healthcare Company in 2010, and also served on Clarient’s board of directors from May 2007 to April 2009. Dr. Pellini also previously served as Vice President, Life Sciences at Safeguard Scientifics, Inc., a private equity and venture capital firm from March 2007 to April 2008. Dr. Pellini currently serves as a member of the board of directors of Adaptive Biotechnologies Corporation, the Personalized Medicine Coalition, the Mission Hospital Foundation and several private companies. Dr. Pellini earned an M.D. from Jefferson Medical College (now the Sidney Kimmel Medical College of Thomas Jefferson University), an M.B.A. from Drexel University, and a B.A. in Economics from Boston College. Dr. Pellini’s broad experience in the technology, health care and life sciences industries as an investor, and his years of senior management experience at public biotechnology companies, provides him with the qualifications and skills to serve as a director of the post-combination company.
Nat Turnerwill serve on the board of directors of the combined company following the completion of the business combination. Mr. Turner has been the Co-Founder and Chief Executive Officer of Flatiron Health, Inc., a healthcare technology company focusing on accelerating oncology research and improving patient care since June 2012 and was acquired by Roche Holding AG in April 2018. Previously, Mr. Turner co-founded and served as Chief Executive Officer of Invite Media, Inc., an advertising technology company, from March 2007 until it was acquired by Google Inc. in June 2010, after which he remained at Google until June 2012. Mr. Turner received a B.S., cum laude, in Economics with concentrations in entrepreneurship and marketing from The Wharton School of the University of Pennsylvania. Mr. Turner’s qualifications to serve on the board of directors of the post-combination company include his significant experience in the life sciences industry, both as an executive and as an angel investor.
Rachel Sherman, M.D., M.P.H., F.A.C.P., has served as a member of Legacy Sema4’s board of directors sincefrom March 2020.2020 to July 2021. Dr. Sherman is currently the President of Rachel Sherman Partners LLC, a drug development, regulatory, and policy consulting firm she founded in 2019, and a clinical lecturer at Harvard Pilgrim Health Care Institute. Dr.
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Sherman also currently serves as a member of the Board of Directors for Aptinyx Inc., a biopharmaceutical company. From May 2017 to January 2019, Dr. Sherman served as Principal Deputy Commissioner at the U.S. Food and Drug Administration (FDA)
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(the “FDA”), where she spent nearly 30 years in medical product development and regulation. Dr. Sherman also served in additional roles at the FDA including as deputy commissioner for Medical Products and Tobacco in the Office of the Commissioner and director of the Office of Medical Policy in the Center for Drug Evaluation and Research. Dr. Sherman earned an M.D. from Mount Sinai School of Medicine, an M.P.H from The School of Hygiene and Public Health at Johns Hopkins University and an A.B. in mathematics from Washington University (St. Louis). Dr. Sherman’s medical and regulatory experience across a broad range of subject matters, including biosimilars, expedited drug development, prescription drug promotion, and active post-market surveillance provides her with the qualifications and skills to serve on our Board.
Nat Turner has served as a member of our Board since July 2021. Mr. Turner is currently CEO of Collectors Universe, an authentication and grading company for collectible coins, trading cards, video games, autographs, and memorabilia. Mr. Turner is also Chairman of Flatiron Health, Inc., and Director on the post-combination company’sBoard of Directors for Clover Health Investments Corp. Previously, Mr. Turner was the Co-Founder and Chief Executive Officer of Flatiron Health, Inc., a healthcare technology company focusing on accelerating oncology research and improving patient care, from June 2012 until April 2021, and was acquired by Roche Holding AG in April 2018. Prior to that, Mr. Turner co-founded and served as Chief Executive Officer of Invite Media, Inc., an advertising technology company, from March 2007 until it was acquired by Google Inc. in June 2010, after which he remained at Google until June 2012. Mr. Turner received a B.S., cum laude, in Economics with concentrations in entrepreneurship and marketing from The Wharton School of the University of Pennsylvania. Mr. Turner’s qualifications to serve on our Board include his significant experience in the life sciences industry, both as an executive and as an angel investor.
There are no familial relationships among our executive officers or directors.
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MANAGEMENT AFTER THE ACQUISITION
All of our current officers and directors will continue to serve as such following the Acquisition. It is also anticipated that upon consummation of the acquisition, Ms. Stueland will become the new Co-Chief Executive Officer of the Company. Following the Acquisition, our directors and executive officers will be as follows:
NameAgePosition
Executive Officers
Eric Schadt, Ph.D.57Co-Chief Executive Officer and Director
Katherine Stueland46Co-Chief Executive Officer and Director
Jason Ryan47Executive Chairman and Director
Isaac Ro44Chief Financial Officer
Shawn Assad47Chief Accounting Officer
Daniel Clark, J.D.42Secretary and General Counsel
Anthony Prentice49Chief Product Officer
Kareem Saad43Chief Business Officer
Karen White51Chief People Officer
Non-Employee Directors
Dennis Charney, M.D.70Director
Eli D. Casdin48Director
Emily Leproust, Ph.D.49Director
Keith Meister48Director
Michael Pellini, M.D.56Director
Richard C. Pfenniger, Jr.66Director
Joshua Ruch72Director
Rachel Sherman, M.D., M.P.H., F.A.C.P.64Director
Nat Turner36Director
Executive Officers
For information regarding Mr. Schadt, Mr. Ryan, Mr. Ro, Mr. Assad, Mr. Clark, Mr. Prentice, Mr. Saad and Ms. White please refer to “Management of Sema4” above.
Katherine Stuelandhas been the President and Chief Executive Officer of GeneDx since June 2021, and will serve as Sema4’s Co-Chief Executive Officer following the completion of the Acquisition. Prior to joining GeneDx, Ms. Stueland served as the Chief Commercial Officer at Invitae Corporation, a biotechnology company, from October 2016 to June 2021 and as the Head of Communications and Investor Relations at Invitae Corporation from November 2013 to October 2016, during which time she helped Invitae Corporation transition from a private to a public company. Ms. Stueland previously served as the Principal at Vivo Communications, a technology company, from January 2013 to December 2013, and as the Vice President of Communications and Investor Relations at Dendreon Corporation, a biotechnology company, from September 2009 to June 2012. Ms. Stueland previously served on the board of directors.the Rivkin Center, a non-profit organization dedicated to the treatment and prevention of cancer in women. Ms. Stueland earned a B.S. in English language and literature from Miami University of Ohio. Ms. Stueland’s extensive leadership experience as an executive officer of biotechnology companies and knowledge of GeneDx’s business provide her with the qualifications and skills to serve as a director on our Board.
Non-Employee Directors
For information regarding Mr. Charney, Mr. Casdin, Ms. Leproust, Mr. Meister, Mr. Pellini, Mr. Ruch, Ms. Sherman, and Mr. Turner please refer to “Management of Sema4” above.
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Richard C. Pfenniger, Jr., is a private investor and has previously served as Interim CEO of Vein Clinics of America, Inc., a privately held company that specializes in the treatment of vein disease, from May 2014 to February 2015 and as Interim CEO of IntegraMed America, Inc., a privately held company that manages outpatient fertility medical centers, from January 2013 to June 2013. He served as Chief Executive Officer and President for Continucare Corporation, a provider of primary care physician and practice management services, from 2003 until 2011, and served as Chairman of the Board of Directors of Continucare Corporation from 2002 until 2011. Previously, Mr. Pfenniger served as the Chief Executive Officer and Vice Chairman of Whitman Education Group, Inc. from 1997 through June 2003. Prior to joining Whitman, he served as the Chief Operating Officer of IVAX from 1994 to 1997, and, from 1989 to 1994, he served as the Senior Vice President-Legal Affairs and General Counsel of IVAX Corporation. Prior thereto he was engaged in the private practice of law. Mr. Pfenniger currently serves as a director of OPKO Health, Inc., a medical test and medication company focused on diagnostics and pharmaceuticals, GP Strategies Corporation, a corporate education and training company, and Asensus Surgical, Inc., a medical device company. He also serves as the Vice Chairman of the Board of Trustees and as a member of the Executive Committee of the Phillip and Patricia Frost Museum of Science. Mr. Pfenniger previously served as a director of BioCardia, Inc., clinical-stage regenerative medicine company developing novel therapeutics for cardiovascular diseases, IntegraMed America, Inc., a private specialty healthcare services company offering products and services to patients and providers in the fertility and vein care segments of the health industry, Vein Clinics of America and Wright Investors’ Services Holdings, Inc., an investment management and financial advisory firm. Mr. Pfenniger’s experience as a chief executive officer, chief operating officer and general counsel, and knowledge of the healthcare business provide him with the qualifications and skills to serve as a director on our Board.
Classified Board of Directors
In accordance with the proposed Amended and Restated Certificate of Incorporation that will be in effect upon the Closing, immediately after the Closing, theThe board of directors of the post-combination company will beCompany are divided into three staggered classes of directors. At each annual meeting of stockholders, a class of directors will beare subject to re-election for a three-year term. As a result, only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms. The directors will beare divided among the three classes as follows:
•the Class I directors will be Eli D. Casdin, Joshua Ruch and Michael Pellini and their terms will expire at the first annual meeting of stockholders held after the Closing;in 2022;
•the Class II directors will be Rachel Sherman, Eric Schadt, Nat Turner and Dennis Charney, and their terms will expire at the second annual meeting of stockholders held after the Closing;in 2023; and
•the Class III directors will be Emily Leproust, and Jason Ryan and Keith Meister and their terms will expire at the third annual meeting of stockholders held after the Closing.in 2024.
Each director’s term continues until the election and qualification of his or her successor, or his or her earlier death, resignation or removal. The Amended and Restated Certificate of IncorporationOur Charter and restated bylaws that will be in effect upon the Closing authorize only the board of directors of the post-combination company to fill vacancies on the board of directors of the post-combination company.board. Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. This classification of the board of directors of the post-combination companyCompany may have the effect of delaying or preventing changes in control of the post-combination company. See the section titled Company.
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“Description of Securities— Certain Anti-Takeover Provisions of Delaware Law, the Company’s Certificate of Incorporation and Bylaws.”
CORPORATE GOVERNANCE OF SEMA4
Director Independence
The rules of Nasdaq require that a majority of the post-combination company’sCompany’s board of directors be independent. An “independent director” is defined generally as a person other than an executive officer or employee of CMLS, the post-combination companyCompany or any other individual having a relationship which, in the opinion of the issuer’s board of directors, would interfere with the exercise of independent judgement in carrying out the responsibilities of a director. It is anticipatedOur Board has determined that each individual expected to servecurrently serving on the post-combination company’sour board, of directors upon consummation of the Business Combination, other than [     ], will qualifyDr. Schadt and Mr. Ryan, qualifies as an independent director under Nasdaq listing standards.
Board of Directors
Our Board oversees our business affairs and works with our CEO and other senior management to determine our strategy and mission. In fulfilling its responsibilities, our Board is involved in strategic and operational planning, financial reporting, governance, compliance and risk oversight.
Committees of the Board of Directors
The post-combination company’s board of directors will haveOur Board has the authority to appoint standing and special committees to perform certain management and administration functions. CMLS’s current board of directorsOur Board has established ana standing audit committee, a standing compensation committee, and a standing nominating and corporate governance committee, each of which will have the composition and responsibilities described below following the Closing.committee. The composition and responsibilities of each committee are described below. Members will serve on these committees until their
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resignation or until otherwise determined by the board of directors. Following the Closing, theBoard. The charters for each of these committees will beare available on Sema4’sour website at www.Sema4.com. Information contained on or accessible through Sema4’sour website is not a part of this proxy statement/prospectus,statement, and the inclusion of such website address in this proxy statement/prospectusstatement is an inactive textual reference only.
Audit Committee
Following the Closing, the post-combination company’sOur audit committee will compriseis comprised of [        ],  [       ] and[        ],Messrs. Meister and Charney, and Ms. Leproust, with [     ]Mr. Meister as the chairman of the post-combination company’sCompany’s audit committee. The post-combination company board of directors is expected to determineBoard has determined that the composition of the post-combination company’sour audit committee meets the requirements for independence under the current Nasdaq and SEC rules and regulations, and that each member of the audit committee is financially literate. In addition, CMLS’s current board of directorsthe Board has determined that [              ]Mr. Meister is an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K promulgated under the Securities Act. This designation does not impose on him or her any duties, obligations or liabilities that are greater than are generally imposed on members of the post-combination company’sour audit committee and the post-combination company’s board of directors. The post-combination company’sour Board. Our audit committee is directly responsible for, among other things:
•reviewing and discussing with management and the independent auditors our quarterly and annual financial results and earnings releases, our annual audited and quarterly unaudited financial statements and annual and quarterly reports on Form 10-K and 10-Q and recommend to the Board whether the annual financial statements should be included in our Annual Report on Form 10-K;
•selecting and hiring the independent registered public accounting firm;
•monitoring the qualifications, independence and performance of the post-combination company’sour independent auditors;
•the preparation of the audit committee report to be included in the post-combination company’sproxy statement for our annual proxy statement;meeting;
•the post-combination company’sour compliance with legal and regulatory requirements;
•the post-combination company’soverseeing our accounting and financial reporting processes, including the post-combination company’sour financial statement audits and the integrity of the post-combination company’sour financial statements; and
•reviewing and approving related-person transactions.transactions; and
•overseeing our financial risks, enterprise exposures, cybersecurity risks and other risks as it deems necessary or appropriate.
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Compensation Committee
Following the Closing, the post-combination company’sOur compensation committee will compriseis comprised of [        ], [       ]Dr. Sherman, and [       ],Messrs. Ruch and Casdin, with [      ]Mr. Ruch as the chairman of our compensation committee. The post-combination company board of directors is expected to determineBoard has determined that each member of the post-combination company’sour compensation committee is a non-employee director, as defined by Rule 16b-3 promulgated under the Exchange Act, and meets the requirements for independence under the current Nasdaq listing standards and SEC rules and regulations. The post-combination company’s compensation committee is responsible for, among other things:
•evaluating, recommending, approving and reviewing executive officer compensation arrangements, plans, policies and programs;
•evaluating and recommending non-employee director compensation arrangements for determination by the post-combination company’s board of directors;our Board;
•administering the post-combination company’sour cash-based and equity-based compensation plans; and
•overseeing the post-combination company’sour compliance with regulatory requirements associated with the compensation of directors, officers and employees.
NominatingThe compensation committee may retain compensation advisors and Corporate Governanceother compensation consultants.
Role of Compensation Consultant
The compensation committee has the authority to retain the services and obtain the advice of external advisors, including compensation consultants, legal counsel and other advisors to assist in the evaluation of executive officer compensation. The compensation committee has engaged Radford Data & Analytics of Aon, our independent compensation consultant (“Radford”) to conduct an executive compensation market analysis and review of our short-term cash and long-term equity incentive practices to help ensure they align with market practices. Radford reviewed and advised on all principal aspects of our executive compensation program, including:
•Assisting in developing a peer group of publicly traded companies to be used to help assess the competitiveness of executive compensation;
•Assisting in ensuring a competitive compensation framework;
•Meeting regularly with the compensation committee to review all elements of executive compensation, including the competitiveness of our executive compensation program;
•Assisting in the competitive assessment of the short-term cash and long-term equity incentive plans designs; and
•Assisting in the risk assessment of our compensation program.
Outside of its services to the compensation committee, Radford provides no other services to us. The compensation committee evaluated the independence of Radford and determined that it is independent. The compensation committee also determined that Radford’s work for the Company in 2021 did not raise any conflicts of interest.
Role of Compensation Committee and Executive Officers in Compensation Decisions
Our compensation committee works in close collaboration with the full Board on executive compensation matters. Following the Closing,adoption of our compensation committee charter, our compensation committee has adopted a practice of informing and consulting with the post-combination company’s nominatingfull Board concerning the establishment of performance goals and governance committee will comprise of [       ], [      ] and [      ], with [      ] as the chairmanobjectives for our Chief Executive Officer, evaluating our Chief Executive Officer’s performance in light of the post-combination company’s nominatinggoals and governance committee.objectives that were set, and determining the Chief Executive Officer’s compensation based on that evaluation. Our Chief Executive Officer serves on our Board but recuses himself from any deliberations about his compensation. For fiscal year 2021, our Chief Executive Officer prepared an analysis for the compensation committee recommending each element of compensation to be paid to all other executive officers. The post-combination company board of directors is expected to determine that each
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compensation committee considered his recommendations, along with an analysis from Radford, in approving the compensation of our other executive officers.
Nominating and Corporate Governance Committee
Our nominating and governance committee is comprised of Messrs. Ruch and Casdin, and Dr. Sherman, with Dr. Sherman as the chairwoman of our nominating and governance committee. The Board has determined that each member of the post-combination company’sour nominating and governance committee meets the requirements for independence under the current Nasdaq listing standards. The post-combination company’sOur nominating and governance committee is responsible for, among other things:
•identifying, considering and recommending candidates for membership on the post-combination company’s board of directors;our Board;
•overseeing the process of evaluating the performance of the post-combination company’s board of directors;our Board; and
•advising the post-combination company’s board of directorsour Board on other corporate governance matters.
Stock Ownership Guidelines
With the exception of a 9-month lockup established in the employment agreements entered into in June and July 2021 with Eric Schadt, Isaac Ro, Daniel Clark, James Coffin, Anthony Prentice, Kareem Saad and Karen White in connection with the closing of our 2021 SPAC merger transaction, we have not established any stock ownership requirements for our executives.
Board and Committee Meetings and Attendance
The Board and its committees meet throughout the year on a pre-determined schedule and also hold special meetings and act by written consent from time to time.
Typically, in conjunction with the regularly scheduled meetings of the Board, the independent directors meet in executive sessions outside the presence of management.
During 2021, the Board met six times (including telephonic meetings) and took action by unanimous written consent four times. During 2021, our audit committee met three times and took action by unanimous written consent one time, our compensation committee met three times and took action by unanimous written consent two times, and our nominating and governance committee did not meet. In addition to the official meetings, the Board also had a number of informational meetings throughout the year to update the Board on various strategic initiatives, including in connection with the Acquisition. Each director attended at least 75% of the meetings held by the Board and by each committee on which he or she served while he or she was a director during the year, except for Nat Turner.
We acknowledge the value of having directors with significant experience in other businesses and activities. Effective service requires substantial commitment, but we recognize that the demands of other business activities vary substantially; therefore, we do not consider it necessary to impose specific limits on such activities so long as directors are sufficiently attentive and available to fulfill their duties and so long as directors comply at all times with our conflict of interests policies.
Director Attendance at Annual Meetings
Although we do not have a formal policy regarding attendance by members of the Board at each annual meeting of stockholders, we encourage all of our directors to attend in person, or virtually, depending on the meeting format. In fiscal year 2021, all of the directors serving at the time of last year’s special meeting, which was held as a special meeting in lieu of our annual meeting, attended that meeting.
Code of Business Conduct and Ethics
The post-combination company will adoptWe have adopted a Code of Business Conduct and Ethics that applies to all of itsour employees, officers and directors, including those officers responsible for financial reporting. Following the closing of the Business Combination, theThe Code of Business Conduct and Ethics will beis available on Sema4’sour website at www.Sema4.com. Information contained on or accessible through such website is not a part of this proxy statement/prospectus,statement, and the inclusion of the website address in this proxy statement/prospectusstatement is an inactive textual
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reference only. The post-combination company intendsWe intend to disclose any amendments to the Code of Business Conduct and Ethics, or any waivers of its requirements, on its website to the extent required by the applicable rules and exchange requirements.
Corporate Governance Guidelines
Our Board has adopted Corporate Governance Guidelines that set forth expectations for directors, director independence standards, board committee structure and functions, stock ownership guidelines, and other policies for the governance of the Company. Our Corporate Governance Guidelines are available without charge on the investor relations section of our website at www.Sema4.com. Information contained on or accessible through such website is not a part of this proxy statement, and the inclusion of the website address in this proxy statement is an inactive textual reference only.
Stockholder Communications with the Board of Directors
Should stockholders wish to communicate with the Board or any specified individual directors, such correspondence should be sent to the attention of the Corporate Secretary, at Sema4 Holdings Corp., 333 Ludlow Street, North Tower, 8th Floor, Stamford, Connecticut 06902. The Corporate Secretary will forward the communication to the Board members.
Compensation Committee Interlocks and Insider Participation
No memberThe directors who were members of the post-combination company’sour compensation committee has ever been an officer or employee of either company.during 2021 were Joshua Ruch, Rachel Sherman and Nat Turner. None of the post-combination company’s expectedthem at any time has been one of our officers or employees. None of our executive officers serve,serves, or havein the past has served, during the last year, as a member of the board of directors or compensation committee or other board committee performing equivalent functions of any other entity that has one or more of its executive officers serving as one ofon our directorsBoard or on either company’sour compensation committee.
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DESCRIPTION OF SECURITIESEQUITY COMPENSATION PLAN INFORMATION
The following summarytable summarizes the number of securities underlying outstanding options, stock awards, warrants and rights granted to employees and directors, as well as the material termsnumber of securities remaining available for future issuance, under the post-combination company’s securitiesequity compensation awards as of December 31, 2021.
(a)(b)(c)
Plan category
Number of securities
to be issued upon
exercise of outstanding
options, warrants and
rights(1)
(#)
Weighted-average
exercise price of
outstanding options,
warrants and
rights(2)
($)
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))
(#)
Equity compensation plans approved by security holders15,823,351 $7.69 20,271,849 (3)
Equity compensation plans not approved by security holders30,341,429 (4)$0.49 — 
Total46,164,780 20,271,849 
__________________
(1)Consists of options to purchase shares of our Class A common stock, RSU awards representing the right to acquire shares of our Class A common stock, and performance stock unit awards representing the right to acquire shares of our Class A common stock
(2)The weighted average exercise price is calculated based solely on the outstanding stock options. It does not take into account the shares issuable upon vesting of outstanding RSU awards, which have no exercise price.
(3)Consists of 15,467,838 shares remaining available for issuance under the 2021 EIP, and 4,804,011 shares remaining available for issuance under the ESPP. On January 25, 2022, an additional 12,128,941 shares became available for future issuance under the Sema4 Holdings Corp. 2021 Equity Incentive Plan and an additional 2,425,788 became available for issuance under the Sema4 Holdings Corp. 2021 Employee Stock Purchase Plan, both pursuant to the plan’s evergreen provisions.
(4)Consists of outstanding stock options that were assumed in connection with our business combination and the Earn Out RSUs granted in connection with the business combination. No additional awards may be granted under the 2017 Plan pursuant to which such awards were initially granted.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Sema4
Related Party Transactions
The following the Business Combination is not intendeda description of transactions since January 1, 2020 and currently proposed transactions in which:
a.we have been or is to be a complete summaryparticipant;
b.the amount involved exceeded or will exceed the lesser of $120,000 or 1% of the rightsaverage of our total assets as of year-end for the last two completed fiscal years; and preferences
c.any of such securities. The full textour directors, executive officers or holders of more than 5% of our capital stock, or any immediate family member of, or person sharing the proposed Amended and Restated Certificatehousehold with, any of Incorporation is attached as Annex Bthese individuals, had or will have a direct or indirect material interest.
Related Party Transactions Related to this proxy statement. We urge youthe Acquisition
Acquisition Subscription Agreements
In connection with the Acquisition, the PIPE Investors executed subscription agreements to read our Amended and Restated Certificatepurchase an aggregate of Incorporation in its entirety for a complete description of the rights and preferences of the post-combination company’s securities following the Business Combination.
Authorized and Outstanding Stock
The Amended and Restated Certificate of Incorporation authorizes the issuance of 400,000,00050,000,000 shares of our Class A common stock $0.0001 par valueat $4.00 per share, including 380,000,000for an aggregate purchase price of $200 million in private placements that we expect to close in the first half of 2022. The funds from such private placement will be used in part or whole to fund the Acquisition of GeneDx. The following table sets forth the number of shares of our Class A common stock that we expect to issue to our directors, executive officers and 5% stockholders and their affiliates in this transaction:
Shares of Class A Common Stock
PurchaserNumber of SharesAggregate Gross Consideration ($)
Entities affiliated with Blackstone(1)
2,500,000 10,000,000 
Entities affiliated with Casdin(2)
11,437,500 45,750,000 
Entities affiliated with Corvex(3)
11,437,500 45,750,000 
Mount Sinai(4)
6,250,000 25,000,000 
Entities affiliated with Deerfield(5)
5,000,000 20,000,000 
Entities affiliated with Rho Partners(6)
2,125,000 8,500,000 
Entities affiliated with Section32(7)
1,250,000 5,000,000 
Total40,000,000 160,000,000 
__________________
(1)Consists of 2,434,863 shares of Class A common stock expected to be issued to BTO Sema4 Holdings L.P., 50,402 shares of Class A common stock expected to be issued to Blackstone Tactical Opportunities Fund - FD L.P. and 20,000,00014,735 shares of Class A common stock expected to be issued to Blackstone Family Tactical Opportunities Investment Partnership III ESC L.P.
(2)Consists of 11,437,500 shares of Class A common stock expected to be issued to Casdin Partners Master Fund, L.P.
(3)Consists of 3,557,000 shares of Class A common stock expected to be issued to Corvex Master Fund LP, 7,320,000 shares of Class A common stock expected to be issued to Corvex Select Equity Master Fund LP, and 560,500 shares of Class A common stock expected to be issued to Corvex Dynamic Equity Select Master Fund LP.
(4)Consists of 6,250,000 shares of Class A common stock expected to be issued to Ichan School of Medicine at Mount Sinai.
(5)Consists of 3,125,000 shares of Class A common stock expected to be issued to Deerfield Private Design Fund V, L.P. and 1,875,000 shares of Class A common stock expected to be issued to Deerfield Partners, L.P.
(6)Consists of 1,632,963 shares of Class A common stock expected to be issued to Vaal Investment Partners Q9 LP, 329,665 shares of Class A common stock expected to be issued to Rugu2 LLC, and 162,372 shares of Class A common stock expected to be issued to Kariba LLC. Rho Partners is an affiliate of Joshua Ruch, a member of our Board.
(7)Consists of 1,250,000 shares of Class A common stock expected to be issued to Section 32 Fund 2, L.P. Section32 is an affiliate of Michael Pellini, a member of our Board.
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Support Agreements
In connection with the execution of the Acquisition Merger Agreement, OPKO Health, Inc. (“OPKO”), the parent of GeneDx, and we entered into Support Agreements (the “Support Agreements”) with certain of our stockholders (including CMLS Holdings LLC, Casdin Partners Master Fund, L.P., Corvex Master Fund LP, Corvex Select Equity Master Fund LP, Corvex Dynamic Equity Select Master Fund LP, Icahn School of Medicine at Mount Sinai, and Section 32 Fund 2, L.P., whereby such stockholders agreed to, among other things, (a) vote at any meeting of our stockholders all of their shares of our Class A common stock held of record: (i) to approve the issuance of the stock consideration pursuant to Acquisition Merger Agreement and the issuance of our Class A common stock pursuant to the subscription agreements for the acquisitions; (ii) to approve the appointment of two specified designees to the Board for terms that expire no earlier than the end of the Second Milestone Period (as defined in the Acquisition Merger Agreement); (iii) to approve an amendment to our Charter to increase the authorized shares of our Class A common stock from 380,000,000 to 1,000,000,000; (iv) to approve any other proposal included in a proxy statement that is recommended by the Board as necessary to consummate the transactions in connection with the Acquisition Merger Agreement; (v) to approve any proposal that is recommended by the Board to adjourn the meeting to a later date, if there are not sufficient affirmative votes (in person or by proxy) to obtain the requested approvals on the date on which such meeting is held; and (vi) against any and all other proposals that could reasonably be expected to delay or impair the ability of us to consummate the transactions; (b) provide a proxy to us to vote such shares accordingly (subject to the condition that a proxy statement has been filed with the SEC and provided to our stockholders); (c) be bound by certain other covenants and agreements related to the transactions; and (d) be bound by certain transfer restrictions with respect to all or a percentage of their shares of our Class A common stock, prior to the meeting, in each case, on the terms and subject to the conditions set forth in the Support Agreements.
Sema4 Related Party Transactions
Employment Arrangements with Immediate Family Members of Our Executive Officers and Directors
Emilio Schadt, the son of Eric Schadt, our Chief Executive and a director, has been employed with us since August 2018 as a Data Science Software Engineer, where he is responsible for implementing methods to improve data reliability. During the year ended December 31, 2021, Mr. Schadt had total compensation, including base salary and bonus, of $177,543. Rick Wallsten, the brother of Eric Schadt, our Chief Executive Officer and a director, has been employed by us since November 2017 as a clinical pharmacist, where he is responsible for certain aspects of our pharmacogenomics program. During the year ended December 31, 2021, Mr. Wallsten had total cash compensation, including base salary and bonus, of $209,563. During the year ended December 31, 2020, Mr. Wallsten had total cash compensation, including base salary and bonus, of $157,620. Carol Senn, the sister-in-law of James Coffin, our former Chief Operating Officer, has been employed with us since November 2020 as an Account Manager, where she is responsible for certain aspects of growing the business. During the year ended December 31, 2021, Ms. Senn had total compensation, including base salary, of $155,706. Kelly Peterson, the sister of James Coffin, our former Chief Operating Officer, has been employed with us since February 2019 as a Sales Specialist Oncology, where she is responsible for the aspect of growing the business. During the year ended December 31, 2021, Ms. Peterson had total compensation, including base salary, of $211,152.
The salary and bonus levels, as applicable, of the aforementioned individuals were based on reference to internal pay equity when compared to the compensation paid to employees in similar positions who were not related to our executive officers and directors. They also received equity awards on the same general terms and conditions as applicable to other employees in similar positions who were not related to our executive officers and directors.
Licenses and Subleases
We were a party to several space license agreements and continue to be a party to sublease agreements with the Mount Sinai Health System (which we refer to together with its related entities as “Mount Sinai”) pursuant to which we leased approximately 124,000 square feet of office and laboratory space in Stamford, Connecticut for its headquarters and laboratory operations, and approximately 26,000 square feet of office and laboratory space in New York, New York for additional office space and laboratory operations. Rent expense for all facilities subleased by
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Icahn School of Medicine at Mount Sinai (“ISMMS”) to us was $4.2 million for the year ended December 31, 2021 and $5.9 million for the year ended December 31, 2020. Future minimum lease payments are expected to total $4.2 million related to all facilities subleased by ISMMS to Sema4 for the year ending December 31, 2022.
Transition Services and Employee Compensation
ISMMS provided transition services, under a transition services agreement and other contractual arrangements with us for services related to finance (accounts payable & purchasing, general accounting, financial systems, and payroll), real estate management, insurance coverage, compliance, equipment subleases, and IT. The transition services agreement expired on March 28, 2021. We made direct payments to ISMMS of approximately $1.6 million pursuant to such transition services agreement in 2021.
We provide partial reimbursement to Mount Sinai for limited compensation, services, and related expenses for certain individuals employed by Mount Sinai and certain individuals employed at both Mount Sinai and our company. For the years ended December 31, 2021 and 2020, the total amount of reimbursement for employee compensation and expenses paid by us to Mount Sinai was equal to approximately $1.2 million and $1.3 million, respectively.
Commercial Relationships
We provide products and services to Mount Sinai at fair market value, including for certain oncology testing, research services and clinical data services. Mount Sinai pays for certain of these services in cash, and for other of these services in kind through performing components of collaborative research projects and/or the provision of intellectual property and data rights.
In particular, these arrangements include a data structuring and curation services agreement, dated August 1, 2019, with ISMMS and certain other Mount Sinai entities, pursuant to which we provide certain data structuring and clinical support services to Mount Sinai, including the delivery to Mount Sinai of a curated dataset and interface allowing Mount Sinai users to query the curated dataset as mutually agreed by the parties. As compensation for these services, Mount Sinai provides us certain rights to use de-identified curated data. The data structuring and curation services agreement has a five-year term and, provided we are not in default under the terms of the agreement, the agreement may be renewed at our option for up to two one-year extension periods. Following the extension periods, the agreement may be further renewed by the mutual agreement of the parties. The agreement may be terminated earlier by Mount Sinai upon certain fundamental breaches by us, by us upon a breach by Mount Sinai of its material obligations, and by either party if certain insolvency or bankruptcy events occur with respect to the other party.
We also receive products and services from Mount Sinai at fair market value, including for certain research and clinical services, development services and lab services, and licenses certain intellectual property from Mount Sinai. Pursuant to these arrangements, we made direct payments to Mount Sinai of approximately $1.4 million and $3.4 million for the years ended December 31, 2021 and 2020, respectively.
Indemnification Agreements
Our Charter contains provisions limiting the liability of directors, and our Bylaws provide that we will indemnify each of our directors to the fullest extent permitted under Delaware law. Our Charter and our Bylaws also provide the Board with discretion to indemnify officers and employees when determined appropriate by our Board.
We have entered into indemnification agreements with each of our directors and executive officers and certain other key employees. The indemnification agreements provide that we will indemnify each of its directors, executive officers, and such other key employees against any and all expenses incurred by that director, executive officer, or other key employee because of his or her status as one of the Company’s directors, executive officers, or other key employees, to the fullest extent permitted by Delaware law, our Charter and our Bylaws. In addition, the indemnification agreements provide that, to the fullest extent permitted by Delaware law, the Company will advance all expenses incurred by its directors, executive officers, and other key employees in connection with a legal proceeding involving his or her status as a director, executive officer, or key employee.
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Legacy Sema4 Related Party Transactions
Series C Preferred Stock Financing
In July 2020, Legacy Sema4 sold an aggregate of 197,821 shares of its Series C preferred stock at a purchase price of $613.6743 per share to accredited investors for an aggregate purchase price of approximately $121.4 million. On July 22, 2021, each share of Legacy Sema4’s Series C preferred stock was cancelled and received a portion of the merger consideration in connection with the completion of the business combination, as provided in the Prior Merger Agreement.
The following table summarizes purchases of shares of Legacy Sema4’s Series C preferred stock by its executive officers, directors, and holders of more than 5% of its capital stock.
Shares of Series C Preferred Stock
PurchaserNumber of
Shares		Aggregate Gross Consideration ($)
Entities affiliated with Blackstone(1)
38,130 $23,399,401 
__________________
(1)Consists of 37,138 shares of Series C preferred stock held by BTO Sema4 Holdings L.P., 768 shares of Series C preferred stock held by Blackstone Tactical Opportunities Fund - FD L.P. and 224 shares of Series C preferred stock held by Blackstone Family Tactical Opportunities Investment Partnership III ESC L.P.
Second Amended and Restated Stockholders Agreement
On July 27, 2020, Legacy Sema4 entered into a second amended and restated stockholders’ agreement, as amended (the “A&R Stockholders’ Agreement”), with certain holders of Legacy Sema4’s capital stock. The A&R Stockholders’ Agreement provided for certain customary rights with respect to the management of Legacy Sema4, rights of first offer and pre-emptive rights, transfer restrictions, tag-along rights and drag-along rights, which rights and restrictions terminated on July 22, 2021, upon the consummation of the business combination. In addition, the A&R Stockholders’ Agreement provided for certain customary registration rights.
Related Party Transactions Entered into in Connection with the Business Combination
Business Combination Subscription Agreements
In connection with our business combination, the Merger PIPE Investors purchased an aggregate of 35,000,000 shares of our Class A common stock at $10.00 per share, for an aggregate purchase price of $350 million in private placements that closed immediately prior to the Merger Closing. The funds from such private placement were used as part of the consideration to Legacy Sema4’s equity holders in connection with the business combination. The following table sets forth the number of shares of our Class A common stock that we issued to our directors, executive officers and 5% stockholders and their affiliates in this transaction:
Shares of Class A Common Stock
PurchaserNumber of
Shares		Aggregate Gross Consideration ($)
Entities affiliated with Casdin(1)
5,000,000 50,000,000 
Entities affiliated with Corvex(2)
4,000,000 40,000,000 
Entities affiliated with Deerfield(3)
2,750,000 27,500,000 
Total16,250,000 162,500,000 
__________________
(1)Consists of 5,000,000 shares of Class A common stock held by affiliates of Casdin Partners Master Fund L.P.
(2)Consists of 4,000,000 shares of Class A common stock held by affiliates of Corvex Management LP.
(3)Consists of 2,750,000 shares of Class A common stock held by affiliates of Deerfield Management Company, L.P.
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Amended and Restated Registration Rights Agreement
In connection with the consummation of our business combination, we, CMLS Holdings LLC (the “Former Sponsor”) and certain other parties thereto (collectively, the “rights holders”) entered into an amended and restated registration rights agreement (the “Amended and Restated Registration Rights Agreement”). Pursuant to the terms of the Amended and Restated Registration Rights Agreement, we were required to prepare and file with the SEC, no later than 30 days after the closing date for the Merger, a shelf registration statement for an offering to be made on a continuous basis from time to time with respect to the resale of the registrable shares under the Amended and Restated Registration Rights Agreement. We were further required to use commercially reasonable efforts to cause such shelf registration statement to be declared effective as soon as possible after filing, but in no event later than the earlier of 60 days following the filing date thereof and five business days after the SEC notifies us that it will not review such registration statement, subject to extension in the event that the registration is subject comments from the SEC.
In addition, pursuant to the terms of the Amended and Restated Registration Rights Agreement and subject to certain requirements and customary conditions, including with regard to the number of demand rights that may be exercised, the rights holders may demand at any time or from time to time, that we file a registration statement on Form S-1 or Form S-3 to register certain shares of our Class A common stock held by such rights holders. The Amended and Restated Registration Rights Agreement also provides the rights holders with “piggy-back” registration rights, subject to certain requirements and customary conditions. We will bear the expenses incurred in connection with the filing of any such registration statement.
ISMMS Lock-Up Agreement
In connection with the execution of the Prior Merger Agreement, we and Icahn School of Medicine at Mount Sinai entered into the ISMMS Lock-Up Agreement whereby ISMMS agreed to certain transfer restrictions in respect of the shares of our Class A common stock issued to ISMMS pursuant to the Prior Merger Agreement. These transfer restrictions expired on January 18, 2022.
Shareholder Lock-up Agreements
In connection with the execution of the Prior Merger Agreement, each stockholder of Legacy Sema4 prior to the closing of the business combination holding more than 1% of the outstanding common stock of Legacy Sema4 as of the date thereof, entered into a Stockholder Lock-up Agreement whereby such shareholder agreed to certain transfer restrictions in respect of the shares of our Class A common stock issued to such shareholder pursuant to the Prior Merger Agreement. These transfer restrictions expired on January 18, 2022.
CMLS Related Party Transactions Entered into Prior to the Business Combination
Founder Shares
On July 16, 2020, the Former Sponsor purchased an aggregate of 10,062,500 shares of Class B common stock of CMLS (the “Class B common stock”), for a total purchase price of $25,000, or approximately $0.002 per share. In August 2020, the Former Sponsor transferred 25,000 of Class B common stock to each of Dr. Leproust and Mr. Turner. On September 1, 2020, CMLS effected a 1:1.1 stock split of its Class B common stock, resulting in the Former Sponsor holding an aggregate of 10,993,750 shares of Class B common stock. The outstanding shares of ourClass B common stock are, and the shares ofautomatically converted into Class A common stock issuableon July 22, 2021 in connection with the Business Combinationconsummation of the business combination (such shares, the “Founder Shares”).
Private Placement Warrants
On September 1, 2020, simultaneously with the closing of CMLS’s initial public offering (the “Initial Public Offering”), the Former Sponsor and certain of CMLS’s independent directors purchased an aggregate of 7,236,667 private placement warrants (the “Private Placement Warrants”), at a price of $1.50 per Private Placement Warrant, for an aggregate purchase price of $10,855,000. The Former Sponsor purchased 6,903,335 Private Placement Warrants, and Dr. Leproust (and/or one or more entities controlled by her) purchased 166,666 Private Placement
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Warrants. Each Private Placement Warrant is exercisable to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment.
Promissory Note–Related Party
On July 16, 2020, the Former Sponsor issued an unsecured promissory note to CMLS (the “Promissory Note”), pursuant to which CMLS could borrow up to an aggregate principal amount of $300,000. The Promissory Note was non-interest bearing and payable on the Merger Agreementearlier of (i) December 31, 2020 or (ii) the consummation of the Initial Public Offering. The outstanding balance under the Promissory Note of $165,081 was repaid at the closing of the Initial Public Offering on September 4, 2020.
Insider Letter
On September 1, 2020, in connection with the Initial Public Offering, CMLS, the Former Sponsor and certain insiders of CMLS entered into a letter agreement (the “Insider Letter”) providing for, among other things, a lock-up in relation to the Founder Shares until the earlier of (a) one year after the completion of the business combination and (b) subsequent to the business combination, if the closing price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations, and the PIPE Investment will be, duly authorized, validly issued, fully paid and non-assessable. Aslike) for any 20 trading days within any 30-day trading day period commencing at least 150 days after the business combination or (y) the date following the completion of the record datebusiness combination on which we complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of our stockholders having the right to exchange their shares of Class A common stock for cash securities or other property. The Former Sponsor and each insider also agreed not to transfer any Private Placement Warrants (or any share of Class A common stock issued or issuable upon the exercise of the Private Placement Warrants), until 30 days after the completion of the business combination.
Forward Purchase Agreement
On September 1, 2020, in connection with the Initial Public Offering, CMLS entered into separate forward purchase agreements with Casdin Capital, LLC (“Casdin”) and Corvex Management LP (“Corvex”), in their capacities as investment advisors on behalf of one or more investment funds, clients or accounts managed by each of Casdin and Corvex, respectively (collectively, their “Clients”), pursuant to which, subject to the conditions provided therein, they caused the Clients to purchase from us up to an aggregate amount of 15,000,000 shares of Class A common stock the private placement that closed concurrently with the closing of the business combination.
Review, Approval or Ratification of Transactions with Related Parties
On July 22, 2021, we adopted a written related party transaction policy in connection with the completion of the business combination. The policy provides that officers, directors, holders of more than 5% of any class of our voting securities, and any member of the immediate family of and any entity affiliated with any of the foregoing persons, will not be permitted to enter into a related-party transaction with us without the prior consent of our audit committee, or other independent members of our Board in the event it is inappropriate for the Special Meeting, there were 55,343,750audit committee to review such transaction due to a conflict of interest. Any request for us to enter into a transaction with an executive officer, director, principal stockholder, or any of their immediate family members or affiliates, in which the amount involved exceeds $120,000, must first be presented to our audit committee for review, consideration, and approval. In approving or rejecting the proposed transactions, our audit committee will take into account all of the relevant facts and circumstances available.
Director Independence
The rules of Nasdaq require that a majority of our Board be independent. An “independent director” is defined generally as a person other than an executive officer or employee of the issuer or any other individual having a relationship which, in the opinion of the issuer’s board of directors, would interfere with the exercise of independent judgement in carrying out the responsibilities of a director. Each individual serving on our Board, other than Eric Schadt and Jason Ryan, qualifies as an independent director under Nasdaq listing standards. Each director who serves on our audit committee, compensation committee and nominating and corporate governance committee are
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independent under Nasdaq listing standards. See the section entitled “Corporate Governance of Sema4” elsewhere in this proxy statement for more information.
GeneDx
GeneDx had no related party transactions for the years ended December 31, 2021 and 2020.
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REPORT OF THE AUDIT COMMITTEE
The information contained in the following report of our audit committee is not considered to be "soliciting material," "filed" or incorporated by reference in any past or future filing by us under the Exchange Act or the Securities Act unless and only to the extent that we specifically incorporate it by reference.
Our audit committee has reviewed and discussed with our management and Ernst & Young LLP our audited consolidated financial statements for the year ended December 31, 2021. Our audit committee has also discussed with Ernst & Young LLP the matters required to be discussed by Auditing Standard No. 1301 adopted by the Public Company Accounting Oversight Board (United States) regarding “Communications with Audit Committees.”
Our audit committee has received and reviewed the written disclosures and the letter from Ernst & Young LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with our audit committee concerning independence, and has discussed with Ernst & Young LLP its independence from us.
Based on the review and discussions referred to above, our audit committee recommended to our board of directors that the audited consolidated financial statements be included in our annual report on Form 10-K for the year ended December 31, 2021 for filing with the U.S. Securities and Exchange Commission.
Submitted by the Audit Committee
Keith Meister, Chair
Dennis Charney
Emily Leproust
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BENEFICIAL OWNERSHIP OF SECURITIES
Beneficial Ownership of Certain Stockholders, Directors and Executive Officers
The following table sets forth certain information with respect to the beneficial ownership of our Class A common stock as of February 22, 2022, by:
•each stockholder known by us to be the beneficial owner of more than 5% of our Class A common stock;
•each of our named executive officers;
•each of our directors and director nominees; and
•all of our current directors and executive officers as a group.
Percentage ownership of our Class A common stock is based on 244,727,239 shares of our Class A common stock outstanding heldon February 22, 2022. Beneficial ownership is determined according to the rules of record by approximately 5 holdersthe SEC, which generally provide that a person has beneficial ownership of commona security if he, she or it possesses sole or shared voting or investment power over that security or has the right to acquire a security, such as through the exercise of warrants or stock no sharesoptions or the vesting of preferredrestricted stock units, within 60 days of the date above. Shares subject to warrants or options that are currently exercisable or exercisable within 60 days of the date above or subject to restricted stock units that vest within 60 days of such date are considered outstanding and 21,995,000beneficially owned by the person holding such warrants, options or restricted stock units for the purpose of computing the percentage ownership of that person but are not treated as outstanding heldfor the purpose of record by approximately 4 holderscomputing the percentage ownership of warrants. Such numbers do not include DTC participants orany other person.
Except as described in the footnotes below and subject to applicable community property laws and similar laws, we believe that each person listed above has sole voting and investment power with respect to such shares. Unless
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otherwise noted, the address of each beneficial owners holding shares through nominee names.owner is c/o Sema4 Holdings Corp., 333 Ludlow Street, North Tower, 8th Floor, Stamford, Connecticut 06902.
Name of Beneficial OwnersNumber of Shares of Class
A Common Stock Beneficially Owned
Percentage of Outstanding
Class A
Common StockBENEFICIAL OWNERSHIP OF SECURITIES
Beneficial Ownership of Certain Stockholders, Directors and Executive Officers
The Amended and Restated Certificate of Incorporation provides that the common stock will have identical rights, powers, preferences and privileges to current common stock.
Voting Power
Except as otherwise required by law or as otherwise provided in any certificate of designation for any series of preferred stock, under the current certificate of incorporation and the Amended and Restated Certificate of Incorporation, the holders of common stock possess or will possess, as applicable, all voting power for the election of our directors and all other matters requiring stockholder action and are entitled or will be entitled, as applicable, to one vote per share on matters to be voted on by stockholders. The holders of common stock shall at all times vote together as one class on all matters submitted to a vote of the holders of common stock under both the current certificate of incorporation and the Amended and Restated Certificate of Incorporation.
Dividends
Subject to the rights, if any of the holders of any outstanding shares of preferred stock, under both the current certificate of incorporation and the Amended and Restated Certificate of Incorporation, holders of common stock will be entitled to receive such dividends and other distributions, if any, as may be declared from time to time by our Board in its discretion out of funds legally available therefor and shall share equally on a per share basis in such dividends and distributions.
Liquidation, Dissolution and Winding Up
In the event of the voluntary or involuntary liquidation, dissolution or winding-up of the post-combination company under both the current certificate of incorporation and the Amended and Restated Certificate of Incorporation, the holders of common stock will be entitled to receive all the remaining assets of the post-combination company available for distribution to stockholders, ratably in proportion to the number of shares of common stock held by them, after the rights of the holders of the preferred stock have been satisfied.
Preemptive or Other Rights
Under the current certificate of incorporation, our stockholders have no preemptive or other subscription rights and there are no sinking fund or redemption provisions applicable to our common stock.
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Election of Directors
Our Board is currently divided into three classes, Class I, Class II and Class III, with only one class of directors being elected in each year and each class (except for those directors appointed prior to our first annual meeting of stockholders) serving a three-year term. The term of office of the Class I directors will expire at our first annual meeting of stockholders. The term of office of the Class II directors will expire at the second annual meeting of stockholders. The term of office of the Class III directors will expire at the third annual meeting of stockholders. However, if the Business Combination Proposal, the Nasdaq Stock Issuance Proposal, the Charter Approval Proposal and the Incentive Plan Proposal are approved at the Special Meeting, this structure will change.
Under the terms of the Amended and Restated Certificate of Incorporation, upon the effectiveness thereof, the term of the Class I Directors in place at such time will expire at the first annual meeting of the stockholders of the post-combination company following the effectiveness of the Amended and Restated Certificate of Incorporation; the term of the Class II Directors in place at such time will expire at the second annual meeting of the stockholders of the post-combination company following the effectiveness of the Amended and Restated Certificate of Incorporation; and the term of the Class III Directors in place at such time will expire at the third annual meeting of the stockholders of the post-combination company following the effectiveness of the Amended and Restated Certificate of Incorporation.
Preferred Stock
Our Amended and Restated Certificate of Incorporation provides that shares of preferred stock may be issued from time to time in one or more series. Our Board is authorized to fix the voting rights, if any, designations, powers, preferences and relative, participating, optional, special and other rights, if any, and any qualifications, limitations and restrictions thereof, applicable to the shares of each series. Our Board is able, without stockholder approval, to issue preferred stock with voting and other rights that could adversely affect the voting power and other rights of the holders of the common stock and could have anti-takeover effects. The ability of our Board to issue preferred stock without stockholder approval could have the effect of delaying, deferring or preventing a change of control of us or the removal of existing management. We have no preferred stock outstanding at the date hereof. Although we do not currently intend to issue any shares of preferred stock, we cannot assure you that we will not do so in the future.
Capital Stock Prior to the Business Combination
We are providing stockholders with the opportunity to redeem all or a portion of their public shares of common stock upon the consummation of the Business Combination at a per-share price, payable in cash, equal to the aggregate amount on deposit in the Trust Account as of two business days prior to the Closing, including interest not previously released to the Company to pay its franchise and income taxes, divided by the number of then outstanding public shares, subject to the limitations described herein. Our Initial Stockholders, directors and officers have agreed to waive their redemption rights with respect to their shares of common stock in connection with the consummation of the Business Combination. Our Initial Stockholders have also agreed to waive their right to a conversion price adjustment with respect to any shares of our common stock they may hold in connection with the consummation of the Business Combination.
We will consummate the Business Combination only if a majority of our outstanding shares of common stock entitled to vote and actually cast thereon at the Special Meeting are voted in favor of the Business Combination Proposal at the Special Meeting. However, the participation of our Sponsor, officers and directors, or their affiliates in privately negotiated transactions (as described in this proxy statement), if any, could result in the approval of the Business Combination even if a majority of the stockholders vote, or indicate their intention to vote, against the Business Combination.
Our Initial Stockholders have agreed to vote their shares of common stock in favor of the Business Combination. As of the date of filing this proxy statement, our Initial Stockholders, directors and officers do not currently hold any public shares. Public stockholders may elect to redeem their public shares whether they vote for or against the Business Combination.
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Pursuant to our current certificate of incorporation, if we are unable to consummate a business combination by the applicable deadline, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to us to pay our franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. Our Initial Stockholders, officers and directors have agreed to waive their redemption rightstable sets forth certain information with respect to the Founder Shares: (a) in connection with the consummation of a business combination; (b) if we fail to consummate our initial business combination by the applicable deadline; (c) in connection with a tender offer; and (d) otherwise upon our liquidation or in the event our Board resolves to liquidate the Trust Account and ceases to pursue the consummation of a business combination prior to the applicable deadline. Our Initial Stockholders have also agreed to waive their right to a conversion price adjustment with respect to any shares of our common stock they may hold in connection with the consummation of the Business Combination. However, if our Initial Stockholders or any of our officers, directors or affiliates acquire public shares, they will be entitled to redemption rights with respect to such public shares if we fail to consummate our initial business combination within the required time period.
In the event of a liquidation, dissolution or winding up of the Company after our initial business combination, holders of our common stock are entitled to share ratably in proportion to the number of shares of common stock in all assets remaining available for distribution to them after payment of the debts and other liabilities and after provision is made for each class of stock, if any, having preference over the common stock.
Our stockholders have no preemptive or other subscription rights. There are no sinking fund provisions applicable to our common stock, except that upon the consummation of our initial business combination, subject to the limitations described herein, we will provide our stockholders with the opportunity to redeem their shares of our common stock for cash equal to their pro rata share of the aggregate amount on deposit in the Trust Account as of two business days prior to the Closing, including any amounts representing interest earned on the Trust Account, less any interest released to us released to pay its franchise and income taxes.
Founder Shares
The Founder Shares are designated as Class B common stock and, are identical to the shares of common stock, and holders of Founder Shares have the same stockholder rights as public stockholders, except that: (i) the Founder Shares are subject to certain transfer restrictions, as described in more detail below; and (ii) our Initial Stockholders, directors and officers have entered into a letter agreement with us, pursuant to which they have agreed (a) to waive their redemption rights with respect to their shares of common stock in connection with the completion of our business combination and (b) to waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if we fail to complete our business combination by the applicable deadline, although they will be entitled to liquidating distributions from the Trust Account with respect to any public shares they hold if we fail to complete our business combination within such time period; (iii) our Initial Stockholders have to waive their right to a conversion price adjustment with respect to any shares of our common stock they may hold in connection with the consummation of the Business Combination; and (iv) are subject to registration rights. Our Initial Stockholders, officers and directors have agreed to vote their shares of common stock in favor of our Business Combination. With certain limited exceptions, the Founder Shares are not transferable, assignable or salable (except to our officers and directors and other persons or entities affiliated with our Sponsor, each of whom will be subject to the same transfer restrictions) until 180 days after the completion of our initial business combination.
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Warrants
Public Warrants
Each whole public warrant entitles the registered holder to purchase one sharebeneficial ownership of our Class A common stock at a priceas of $11.50 per whole share, subject to adjustment as discussed below, at any time commencing on the later of 12 months from the closing of the IPO or 30 days after the completion of our initial business combination. Pursuant to the warrant agreement, a warrant holder may exercise its public warrants only for a whole number of shares of common stock. This means that only a whole public warrant may be exercised at any given time by a warrant holder. No fractional public warrants will be issued upon separation of the units and only whole public warrants will trade. The public warrants will expire five years after the completion of our initial business combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
We are not obligated to deliver any shares of common stock pursuant to the exercise of a public warrant and will have no obligation to settle such public warrant exercise unless a registration statement under the Securities Act with respect to the shares of common stock underlying the public warrants is then effective and a prospectus relating thereto is current, subject to our satisfying our obligations described below with respect to registration. No public warrant will be exercisable for cash or on a cashless basis, and we will not be obligated to issue any shares to holders seeking to exercise their public warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption is available. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to a public warrant, the holder of such public warrant will not be entitled to exercise such public warrant and such public warrant may have no value and expire worthless. In the event that a registration statement is not effective for the exercised public warrants, the purchaser of a unit containing such public warrant will have paid the full purchase price for the unit solely for the share of common stock underlying such unit.
We have agreed that as soon as practicable, but in no event later than 15 business days, after the closing of our initial business combination, we will use our best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the shares of common stock issuable upon exercise of the public warrants. We will use our best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the public warrants in accordance with the provisions of the warrant agreement. Notwithstanding the above, if our common stock is at the time of any exercise of a public warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of public warrants who exercise their public warrants to do so a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act (or any successor rule) and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, but will use our best efforts to register the shares under applicable blue sky laws to the extent an exemption is not available.
Redemption of Warrants When the Price per Share of Class A Common Stock Equals or Exceeds $18.00 — Once the warrants become exercisable, the Company may redeem the outstanding Public Warrants:February 22, 2022, by:
•in whole and not in part;
•at a priceeach stockholder known by us to be the beneficial owner of $0.01 per public warrant;
•upon not lessmore than 30 days’ prior written notice5% of redemption to each warrant holder; and
•if, and only if, the closing price of the Class A common stock equals or exceeds $18.00 per share (as adjusted) for any 20 trading days within a 30-trading day period ending three trading days before sending the notice of redemption to warrant holders (the “Reference Value”)
If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
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Redemption of Warrants When the Price per Share of Class A Common Stock Equals or Exceeds $10.00 — Once the warrants become exercisable, the Company may redeem the outstanding warrants:
•in whole and not in part;
•at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares based on the redemption date and the fair market value of theour Class A common stock;
•if,each of our named executive officers;
•each of our directors and only if, the closing pricedirector nominees; and
•all of theour current directors and executive officers as a group.
Percentage ownership of our Class A common stock equals or exceeds $10.00 per share (as adjusted) for any 20 trading days within the 30-trading day period ending three trading days before the Company sends the notice of redemption to the warrant holders; and
•if the closing price of the Class A common stock for any 20 trading days within a 30-trading day period ending three trading days before the Company sends notice of redemption to the warrant holders is less than $18.00 per share (as adjusted), the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding Public Warrants, as described above.
In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors, and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or its affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of a Business Combination on the date of the completion of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s Class A common stock during the 20 trading day period starting on the trading day after the day on which the Company completes a Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, the $18.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price, and the $10.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that (1) the Private Placement Warrants and the Class A common stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or saleable until 30 days after the completion of a Business Combination, subject to certain limited exceptions, (2) the Private Placement Warrants will be exercisable on a cashless basis, (3) the Private Placement Warrants will be non-redeemable (except as described above in “Redemption of Warrants When the Price per Share of Class A common stock Equals or Exceeds $10.00”) so long as they are held by the initial purchasers or their permitted transferees, and (4) the holders of the Private Placement Warrants and the Class A common stock issuable upon the exercise of the Private Placement Warrants will have certain registration rights. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
We have established the last of the redemption criterion discussed above to prevent a redemption call unless there is at the time of the call a significant premium to the warrant exercise price. If the foregoing conditions are satisfied and we issue a notice of redemption of the public warrants, each warrant holder will be entitled to exercise his, her or its public warrant prior to the scheduled redemption date. However, the price of the common stock may fall below the $18.00 redemption trigger price as well as the $11.50 warrant exercise price after the redemption notice is issued.
Redemption procedures and cashless exercise. If we call the public warrants for redemption as described above, our management will have the option to require any holder that wishes to exercise his, her or its public warrant to do so on a “cashless basis.” In determining whether to require all holders to exercise their public warrants on a “cashless
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basis,” our management will consider, among other factors, our cash position, the number of public warrants that are outstanding and the dilutive effect on our stockholders of issuing the maximum number of shares of common stock issuable upon the exercise of our public warrants. If our management takes advantage of this option, all holders of public warrants would pay the exercise price by surrendering their public warrants for that number of shares of common stock equal to the quotient obtained by dividing (i) the product of the number of shares of common stock underlying the public warrants, multiplied by the difference between the exercise price of the public warrants and the “fair market value” (defined below) by (ii) the fair market value. The “fair market value” shall mean the average reported last sale price of the common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of public warrants. If our management takes advantage of this option, the notice of redemption will contain the information necessary to calculate the number of shares of common stock to be received upon exercise of the public warrants, including the “fair market value” in such case. Requiring a cashless exercise in this manner will reduce the number of shares to be issued and thereby lessen the dilutive effect of a warrant redemption. We believe this feature is an attractive option to us if we do not need the cash from the exercise of the public warrants after our initial business combination. If we call our public warrants for redemption and our management does not take advantage of this option, our Sponsor and its permitted transferees would still be entitled to exercise their private placement warrants for cash or on a cashless basis using the same formula described above that other warrant holders would have been required to use had all warrant holders been required to exercise their public warrants on a cashless basis, as described in more detail below. The Forfeiture Agreement provides that, immediately prior to the Closing, and conditioned and effective upon the Closing, up to a maximum of 33% of private placement warrants held by the Sponsor immediately prior to the Closing, may be automatically cancelled, for no consideration, and shall no longer be outstanding. For additional information on the potential forfeiture of private placement warrants by the Sponsor, see the section entitled “The Business Combination Proposal — Related Agreements — Forfeiture Agreement”.
A holder of a public warrant may notify us in writing in the event it elects to be subject to a requirement that such holder will not have the right to exercise such public warrant, to the extent that after giving effect to such exercise, such person (together with such person’s affiliates), to the warrant agent’s actual knowledge, would beneficially own in excess of 9.8% (or such other amount as a holder may specify) of the shares of common stock outstanding immediately after giving effect to such exercise.
Anti-dilution Adjustments. If the number of outstanding shares of common stock is increased by a stock dividend payable in shares of common stock, or by a split-up of shares of common stock or other similar event, then, on the effective date of such stock dividend, split-up or similar event, the number of shares of common stock issuable on exercise of each public warrant will be increased in proportion to such increase in the outstanding shares of common stock. A rights offering to holders of common stock entitling holders to purchase shares of common stock at a price less than the fair market value will be deemed a stock dividend of a number of shares of common stock equal to the product of (i) the number of shares of common stock actually sold in such rights offering (or issuable under any other equity securities sold in such rights offering that are convertible into or exercisable for common stock) multiplied by (ii) one minus the quotient of (a) the price per share of common stock paid in such rights offering divided by (b) the fair market value. For these purposes (1) if the rights offering is for securities convertible into or exercisable for common stock, in determining the price payable for common stock, there will be taken into account any consideration received for such rights, as well as any additional amount payable upon exercise or conversion and (2) fair market value means the volume weighted average price of common stock as reported during the 10 trading day period ending on the trading day prior to the first date on which the shares of common stock trade on the applicable exchange or in the applicable market, regular way, without the right to receive such rights.
In addition, if we, at any time while the public warrants are outstanding and unexpired, pay a dividend or make a distribution in cash, securities or other assets to the holders of common stock on account of such shares of common stock (or other shares of our capital stock into which the public warrants are convertible), other than (i) as described above; (ii) certain ordinary cash dividends; (iii) to satisfy the redemption rights of the holders of common stock in connection with a proposed initial business combination; (iv) to satisfy the redemption rights of the holders of common stock in connection with a stockholder vote to amend the Company’s current certificate of incorporation to modify the substance or timing of the Company’s obligation to redeem 100% of our public shares if we do not
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complete a business combination within 24 months from the closing of the IPO, or (v) in connection with the redemption of our public shares upon our failure to complete our initial business combination, then the warrant exercise price will be decreased, effective immediately after the effective date of such event, by the amount of cash and/or the fair market value of any securities or other assets paid on each share of common stock in respect of such event.
If the number of outstanding shares of our common stock is decreased by a consolidation, combination, reverse stock split or reclassification of shares of common stock or other similar event, then, on the effective date of such consolidation, combination, reverse stock split, reclassification or similar event, the number of shares of common stock issuable on exercise of each public warrant will be decreased in proportion to such decrease in outstanding shares of common stock.
Whenever the number of shares of common stock purchasable upon the exercise of the public warrants is adjusted, as described above, the warrant exercise price will be adjusted by multiplying the warrant exercise price immediately prior to such adjustment by a fraction (x) the numerator of which will be the number of shares of common stock purchasable upon the exercise of the public warrants immediately prior to such adjustment, and (y) the denominator of which will be the number of shares of common stock so purchasable immediately thereafter.
In case of any reclassification or reorganization of the outstanding shares of common stock (other than those described above or that solely affects the par value of such shares of common stock), or in the case of any merger or consolidation of us with or into another corporation (other than a consolidation or merger in which we are the continuing corporation and that does not result in any reclassification or reorganization of our outstanding shares of common stock), or in the case of any sale or conveyance to another corporation or entity of the assets or other property of us as an entirety or substantially as an entirety in connection with which we are dissolved, the holders of the public warrants will thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in the public warrants and in lieu of the shares of our common stock immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the holder of the public warrants would have received if such holder had exercised their public warrants immediately prior to such event. However, if such holders were entitled to exercise a right of election as to the kind or amount of securities, cash or other assets receivable upon such consolidation or merger, then the kind and amount of securities, cash or other assets for which each public warrant will become exercisable will be deemed to be the weighted average of the kind and amount received per share by such holders in such consolidation or merger that affirmatively make such election, and if a tender, exchange or redemption offer has been made to and accepted by such holders (other than a tender, exchange or redemption offer made by the Company in connection with redemption rights held by stockholders of the Company as provided for in the Company’s current certificate of incorporation or as a result of the repurchase of shares of common stock by the company if a proposed initial business combination is presented to the stockholders of the company for approval) under circumstances in which, upon completion of such tender or exchange offer, the maker thereof, together with members of any group (within the meaning of Rule 13d-5(b)(1) under the Exchange Act (or any successor rule)) of which such maker is a part, and together with any affiliate or associate of such maker (within the meaning of Rule 12b-2 under the Exchange Act (or any successor rule)) and any members of any such group of which any such affiliate or associate is a part, own beneficially (within the meaning of Rule 13d-3 under the Exchange Act (or any successor rule)) more than 50% of the outstanding shares of common stock, the holder of a public warrant will be entitled to receive the highest amount of cash, securities or other property to which such holder would actually have been entitled as a stockholder if such warrant holder had exercised the public warrant prior to the expiration of such tender or exchange offer, accepted such offer and all of the common stock held by such holder had been purchased pursuant to such tender or exchange offer, subject to adjustments (from and after the consummation of such tender or exchange offer) as nearly equivalent as possible to the adjustments provided for in the warrant agreement. Additionally, if less than 70% of the consideration receivable by the holders of common stock in such a transaction is payable in the form of common stock in the successor entity that is listed for trading on a national securities exchange or is quoted in an established over-the-counter market, or is to be so listed for trading or quoted immediately following such event, and if the registered holder of the public warrant properly exercises the public warrant within 30 days following public disclosure of such transaction, the warrant exercise price will be
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reduced as specified in the warrant agreement based on the per share consideration minus Black-Scholes Warrant Value (as defined in the warrant agreement) of the public warrant.
The public warrants have been issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. You should review a copy of the warrant agreement, which is filed as an exhibit to the registration statement pertaining to our IPO, for a complete description of the terms and conditions applicable to the public warrants. The warrant agreement provides that the terms of the public warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 50% of the then outstanding public warrants to make any change that adversely affects the interests of the registered holders of public warrants.
The public warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price (or on a cashless basis, if applicable), by certified or official bank check payable to us, for the number of public warrants being exercised. The warrant holders do not have the rights or privileges of holders of common stock and any voting rights until they exercise their public warrants and receive shares of common stock. After the issuance of shares of common stock upon exercise of the public warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by stockholders.
Warrants may be exercised only for a whole number of shares of common stock. No fractional shares will be issued upon exercise of the public warrants. If, upon exercise of the public warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round down to the nearest whole number the number of shares of common stock to be issued to the warrant holder. As a result, warrant holders not purchasing public warrants in multiples of three warrants will not obtain value from the fractional interest that will not be issued.
Private Placement Warrants
Our Sponsor and Mr. Islam and Dr. Leproust purchased an aggregate of 7,236,667 private placement warrants at a price of $1.50 per warrant for an aggregate purchase price of  $10,855,000 in a private placement. The private placement warrants (including the common stock issuable upon exercise of the private placement warrants) will not be transferable, assignable or salable until 30 days after the completion of our initial business combination. Otherwise, the private placement warrants have terms and provisions that are identical to those of the warrants sold as part of the units in our IPO, including as to exercisability and exercise period.
The Forfeiture Agreement provides that, immediately prior to the Closing, and conditioned and effective upon the Closing, up to a maximum of 33% of private placement warrants held by the Sponsor immediately prior to the Closing, may be automatically cancelled, for no consideration, and shall no longer be outstanding. For additional information on the potential forfeiture of private placement warrants by the Sponsor, see the section entitled “The Business Combination Proposal — Related Agreements — Forfeiture Agreement”.
Dividends
We have not paid any cash dividends on our common stock to date and do not intend to pay cash dividends prior to the completion of a business combination. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of a business combination. The payment of any cash dividends subsequent to a business combination will be within the discretion of our Board at such time. In addition, our Board is not currently contemplating and does not anticipate declaring any stock dividends in the foreseeable future. Further, if we incur any indebtedness, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith.
Transfer Agent and Warrant Agent
The Transfer Agent for our common stock and warrant agent for our warrants is Continental Stock Transfer & Trust Company. We have agreed to indemnify Continental Stock Transfer & Trust Company in its roles as transfer agent and warrant agent, its agents and each of its stockholders, directors, officers and employees against all
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liabilities, including judgments, costs and reasonable counsel fees that may arise out of acts performed or omitted for its activities in that capacity, except for any liability due to any gross negligence, willful misconduct or bad faith of the indemnified person or entity.
Certain Anti-Takeover Provisions of Delaware Law, the Company’s Certificate of Incorporation and Bylaws
Provisions of the DGCL and our current certificate of incorporation and bylaws as well as provisions of the Amended and Restated Certificate of Incorporation could make it more difficult to acquire the post-combination company by means of a tender offer, a proxy contest or otherwise, or to remove incumbent officers and directors. These provisions, summarized below, are intended to discourage coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of the post-combination company to first negotiate with the board of directors. We believe that the benefits of these provisions outweigh the disadvantages of discouraging certain takeover or acquisition proposals because, among other things, negotiation of these proposals could result in an improvement of their terms and enhance the ability of our Board to maximize stockholder value. However, these provisions may delay, deter or prevent a merger or acquisition of us that a stockholder might consider is in its best interest, including those attempts that might result in a premium over the prevailing market price of the common stock.
In addition, both our current certificate of incorporation and our Amended and Restated Certificate of Incorporation provide for certain other provisions that may have an anti-takeover effect:
•There is no cumulative voting with respect to the election of directors.
•Our Board is empowered to elect a director to fill a vacancy created by the expansion of the Board or the resignation, death, or removal of a director in certain circumstances.
•Directors may only be removed from the Board for cause.
•Our Board will be classified into three classes of directors. As a result, in most circumstances, a person can gain control of our Board by successfully engaging in a proxy contest at two or more annual meetings.
•A prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders.
•A prohibition on stockholders calling a special meeting and the requirement that a meeting of stockholders may only be called by members of our Board, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors.
•Our authorized but unissued common stock and preferred stock are available for future issuances without stockholder approval and could be utilized for a variety of corporate purposes, including future offerings to raise additional capital, acquisitions and employee benefit plans. Our Board is entitled, without further stockholder approval, to designate one or more series of preferred stock and the associated voting rights, preferences and privileges of such series of preferred stock. The existence of authorized but unissued and unreserved common stock and preferred stock could render more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.
Forum Selection Clause
Our current certificate of incorporation includes and the Amended and Restated Certificate of Incorporation will include a forum selection clause. The Amended and Restated Certificate of Incorporation provides that, subject to limited exceptions, the Court of Chancery of the State of Delaware and federal court within the State of Delaware will be exclusive forums for any
•derivative action or proceeding brought on the Company’s behalf;
•action asserting a claim of breach of a fiduciary duty owed by, or other wrongdoing by, any director, officer, stockholder, employee or agent of the Company to the Company or the Company’s stockholders;
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•action asserting a claim against the Company or any director, officer, stockholder, employee or agent of the Company arising pursuant to any provision of the DGCL, the Company’s Amended and Restated Certificate of Incorporation or Bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware:
•action to interpret, apply, enforce or determine the validity of the Amended and Restated Certificate of Incorporation or the Bylaws; or
•other action asserting a claim against the Company or any director, officer, stockholder, employee or agent of the Company that is governed by the internal affairs doctrine.
This choice of forum provision does not apply to actions brought to enforce a duty or liability created by the Exchange Act or any other claim for which federal courts have exclusive jurisdiction. Furthermore, in accordance with the post-combination’s company restated bylaws, unless the Company consents in writing to the selection of an alternative forum, the federal district courts of the United States will be, to the fullest extent permitted by law, the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. The Company intends for this provision to apply to any complaints asserting a cause of action under the Securities Act despite the fact that Section 22 of the Securities Act creates concurrent jurisdiction for the federal and state courts over all actions brought to enforce any duty or liability created by the Securities Act or the rules and regulations promulgated thereunder. Please see “Risk Factors — The proposed Amended and Restated Certificate of Incorporation designates the Court of Chancery of the State of Delaware and federal court within the State of Delaware as the exclusive forum for certain types of actions and proceedings that the Company’s stockholders may initiate, which could limit a stockholder’s ability to obtain a favorable judicial forum for disputes with the Company or its directors, officers or employees.” for additional information.
Rule 144 and Restrictions on the Use of Rule 144 by Shell Companies or Former Shell Companies
In general, Rule 144 of the Securities Act, which we refer to as “Rule 144”, permits the resale of restricted securities without registration under the Securities Act if certain conditions are met. Rule 144 is not available for the resale of restricted securities initially issued by shell companies (other than business combination related shell companies) or issuers that have been at any time previously a shell company, including us. However, Rule 144 also includes an important exception to this prohibition if the following conditions are met at the time of such resale:
•the issuer of the securities that was formerly a shell company has ceased to be a shell company;
•the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act;
•the issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding 12 months (or such shorter period that the issuer was required to file such reports and materials), other than Form 8-K reports; and
•at least one year has elapsed from the time that the issuer filed current Form 10 type information with the SEC reflecting its status as an entity that is not a shell company.
We anticipate that following the consummation of the Business Combination, we will no longer be a shell company, and as long as the conditions set forth in the exceptions listed above are satisfied, Rule 144 will become available for the resale of our restricted securities.
If the above conditions have been met and Rule 144 is available, a person who has beneficially owned restricted shares of our common stock or warrants for at least one year would be entitled to sell their securities pursuant to Rule 144, provided that such person is not deemed to have been one of our affiliates at the time of, or at any time during the three months preceding, a sale. If such persons are our affiliates at the time of, or at any time during the three months preceding, a sale, such persons would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of:
•1% of the total number of shares of common stock or warrants, as applicable, then outstanding; or
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•the average weekly reported trading volume of the common stock or warrants, as applicable, during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.
Sales by affiliates under Rule 144, when available, will also limited by manner of sale provisions and notice requirements.
As of the date of this proxy statement, we had 55,343,750 shares of common stock outstanding, of which 44,275,000 shares are freely tradable without restriction or further registration under the Securities Act, except for any shares purchased by one of our affiliates. All of the 11,068,750 Founder Shares owned by our Initial Stockholders are restricted securities under Rule 144, in that they were issued in private transactions not involving a public offering. If the Business Combination is approved, the shares of our common stock we issue to the PIPE Investors pursuant to the Subscription Agreements will be restricted securities for purposes of Rule 144.
As of the date of this proxy statement, there are 21,995,000 warrants of the Company outstanding, consisting of 14,758,333 public warrants originally sold as part of the units issued in the Company’s IPO and 7,236,667 private placement warrants that were sold by the Company to our Sponsor in a private sale concurrently with the Company’s IPO (which up to a maximum of 33% of private placement warrants may be automatically cancelled immediately prior to Closing pursuant to the Forfeiture Agreement; for additional information on the potential forfeiture of private placement warrants by the Sponsor, see the section entitled “The Business Combination Proposal — Related Agreements — Forfeiture Agreement”). Each warrant is exercisable for three-quarters of one share of our common stock, in accordance with the terms of the warrant agreement governing the warrants. The public warrants and are freely tradable, except for any warrants purchased by one of our affiliates within the meaning of Rule 144 under the Securities Act. In addition, we will be obligated to file no later than 15 business days after the Closing, a registration statement under the Securities Act covering the 44,275,000244,727,239 shares of our Class A common stock outstanding on February 22, 2022. Beneficial ownership is determined according to the rules of the SEC, which generally provide that may be issued upona person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security or has the right to acquire a security, such as through the exercise of warrants or stock options or the publicvesting of restricted stock units, within 60 days of the date above. Shares subject to warrants and cause such registration statementor options that are currently exercisable or exercisable within 60 days of the date above or subject to become effective and maintain the effectivenessrestricted stock units that vest within 60 days of such registration statement untildate are considered outstanding and beneficially owned by the expiration of the warrants.
We expect Rule 144 to be availableperson holding such warrants, options or restricted stock units for the resalepurpose of computing the above noted restricted securitiespercentage ownership of that person but are not treated as longoutstanding for the purpose of computing the percentage ownership of any other person.
Except as the conditions set forthdescribed in the exceptionsfootnotes below and subject to applicable community property laws and similar laws, we believe that each person listed above are satisfied following the Business Combination.
Registration Rights
CMLS Registration Rights
The holders of the Founder Shares, private placement warrants (and any shares of common stock issuable upon the exercise of the private placement warrants),has sole voting and securities that may be issued upon conversion of working capital loans are entitled to registration rights pursuant to a registration rights agreement signed February 9, 2021, requiring the Company to register such securities for resale. The holders of the majority of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rightsinvestment power with respect to registration statements filed subsequent to the completion of a business combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lock-up period. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Demand Registration Rights
Following the expiration of the Founder Shares Lock-Up Period, the Private Placement Lock-Up Period or any other applicable lock-up period, holders of at least a majority in interest of the then-outstanding number of registrable securities held by the holders or any holder expecting to sell registrable securities yielding aggregate gross proceeds in excess of $50,000,000 may make a written demand for registration of all or part of their registrable securities. The Company will within five days of the Company’s receipt of the demand, notify, in writing all other Holders of registrable securities of such demand. Each holder who will want to participate in the registration will notify the Company, in writing, within five days after the receipt by the holder of the notice from the Company. Upon receipt by the Company of any such written notification from a holder(s) to the Company such holder(s) willshares. Unless
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be entitled to have their registrable securities included in a registration more than 60 days immediately afterotherwise noted, the Company’s receiptaddress of the demand.each beneficial owner is c/o Sema4 Holdings Corp., 333 Ludlow Street, North Tower, 8th Floor, Stamford, Connecticut 06902.
Under no circumstances will the Company be obligated to effect more than an aggregate of three registrations pursuant to a demand by the existing holders and an aggregate of five registrations pursuant to a demand by the new holders with respect to any or all registrable securities.
Notwithstanding the foregoing, (i) the Company shall not be required to give effect to a demand from a holder if the Company has registered registrable securities pursuant to a demand (which has become effective) from such holder in the preceding 120 days, and (ii) the Company’s obligations with respect to any demand will be deemed satisfied so long as the registration statement filed includes all of such holder’s registrable securities and is effective.
Piggyback Registration Rights
If the Company proposes to file a registration statement under the Securities Act with respect to an offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into equity securities, for its own account or for the account of stockholders of the Company, other than a registration statement (a) filed in connection with any employee stock option or other benefit plan, (b) for an exchange offer or offering of securities solely to the Company’s existing stockholders, (c) for an offering solely of debt that is convertible into equity securities of the Company, (d) for a dividend reinvestment plan, (e) for any issuances of securities in connection with a transaction involving a merger, consolidation, sale, exchange, issuance, transfer, reorganization or other extraordinary transaction between the Company or any of its affiliates and any third party, or (f) filed pursuant to subsection 2.1.1 of the registration rights agreement, then, the Company shall give written notice of such proposed filing to all of the holders of registrable securities (excluding the Sponsor with respect to any Registrable Securities (as defined in the Merger Agreement) distributed by the Sponsor to its members following the expiration of the Founder Shares Lock-up Period or the Private Placement Lock-up Period, as applicable) as soon as practicable but not less than 20 days before the anticipated filing date of such Registration Statement. This notice will offer to all of the Holders of Registrable Securities the opportunity to register the sale of such number of Registrable Securities as such Holders may request in writing within five days after receipt of such written notice.
The Company shall, in good faith, cause such Registrable Securities identified in a Holder’s response to be included in such Piggyback Registration and shall use its commercially reasonable efforts to cause the managing underwriter or underwriters of a proposed Underwritten Offering, if any, to permit the Registrable Securities requested by the Holders to be included in a Piggyback Registration on the same terms and conditions as any similar securities of the Company or Company stockholder(s) for whose account the Registration Statement is to be filed included in such Registration and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof. All such Holders proposing to distribute their Registrable Securities through an Underwritten Offering will enter into an underwriting agreement in customary form with the underwriter(s) selected for such Underwritten Offering by the Company.
Shelf Registration Rights
The Company will, as soon as practicable, but in any event within 30 days after the Business Combination, file a Registration Statement under the Securities Act to permit the public resale of all the registrable securities held by the holders from time to time as permitted by Rule 415 under the Securities Act on the terms and conditions specified in registration rights agreement and will use its commercially reasonable efforts to cause such registration statement to be declared effective as soon as practicable after the filing thereof, but in no event later than the earlier of (i) 60 days following the Business Combination and (ii) five business days after the SEC notifies the Company that it will not review the registration statement.
Without limiting the foregoing, as soon as practicable, but in no event later than three business days, following the resolution or clearance of all SEC comments or, if applicable, following notification by the SEC that the registration statement will not be subject to review, the Company will file a request for acceleration of effectiveness of such registration statement to a time and date not later than two business days after the submission of such request.
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The registration statement filed with the SEC will be on Form S-1 or such other form of registration statement as is then available to effect a registration for resale of the registrable securities, provided, that the Company will file, within 30 days of such time as Form S-3 is available for the registration, a post-effective amendment to the registration statement then in effect, or otherwise file a registration statement on Form S-3, registering the registrable securities for resale on Form S-3 (provided that the Company will use commercially reasonable efforts to maintain the effectiveness of the Registration Statement then in effect until such time as a registration statement (or post-effective amendment) on Form S-3 covering such registrable securities has been declared effective by the SEC.
The registration statement will cover all registrable securities, and will contain a prospectus in such form as permits any holder to sell such registrable securities pursuant to Rule 415 under the Securities Act at any time beginning on the effective date for such registration statement and the Company will file with the SEC the final form of such prospectus pursuant to Rule 424 (or successor thereto) under the Securities Act no later than the second Business Day after the Registration Statement becomes effective. The registration statement will provide for the resale pursuant to any method or combination of methods legally available to, and requested by, the holders and will include a customary “plan of distribution”. The Company will use its commercially reasonable efforts to cause the registration statement to remain effective, and to be supplemented and amended to the extent necessary to ensure that the registration statement is available or, if not available, that another registration statement is available at all times, for the public resale of all the registrable securities held by the holders until all such registrable securities have ceased to be registrable securities. As soon as practicable following the effective date of the registration statement, but in any event within three business days of such date, the Company will notify the Holders of the effectiveness of such registration statement.
PIPE Subscription Agreement
Under the terms of the Subscription Agreements, the Company, as soon as practicable, but in no event later than 30 calendar days after the Business Combination, will file with the Commission (at the Company’s sole cost and expense) a Registration Statement registering the resale of the Acquired Shares, and the Company will use its commercially reasonable efforts to cause the Registration Statement to be declared effective as soon as practicable after the filing thereof, but no later than the earlier of (i) the 60th calendar day (or 100th calendar day if the Commission notifies the Company that it will “review” the Registration Statement) following the Business Combination and (ii) the tenth business day after the date the Company is notified by the Commission that the Registration Statement will not be “reviewed” or will not be subject to further review. Under no circumstances shall Subscriber be required to sign any type of lock-up agreement.
If the Commission prevents the Company from including any or all of the shares proposed to be registered under the Registration Statement due to limitations on the use of Rule 415 of the Securities Act for the resale of the Acquired Shares by the applicable stockholders or otherwise, such Registration Statement will register for resale such number of Acquired Shares which is equal to the maximum number of Acquired Shares as is permitted by the Commission. In such event, the number of Acquired Shares to be registered for each selling shareholder named in the Registration Statement will be reduced pro rata among all such selling shareholders. In the event the Company amends the Registration Statement in accordance with the foregoing, the Company will use its commercially reasonable efforts to file with the Commission, as promptly as allowed by the Commission, one or more registration statements to register the resale of those Registrable Securities that were not registered on the initial Registration Statement. The Company will use its commercially reasonable efforts to maintain the continuous effectiveness of the Registration Statement until all such securities cease to be Registrable Securities or such shorter period upon which each undersigned party with Registrable Securities included in such Registration Statement have notified the Company that such Registrable Securities have actually been sold.
The Company will provide all customary and commercially reasonable cooperation necessary to enable the holders to resell Registrable Securities pursuant to the Registration Statement or Rule 144 under the Securities Act (“Rule 144”), as applicable, qualify the Registrable Securities for listing on the primary stock exchange on which its Class A Shares are then listed, update or amend the Registration Statement as necessary to include Registrable Securities and provide customary notice to holders of Registrable Securities.
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Public Warrants
Under the terms of the warrant agreement pursuant to which the public warrants were issued, the Company agreed that as soon as practicable, but in no event later than 15 business days after the closing of the Business Combination, it will use its best efforts to file with the SEC a registration statement for the registration under the Securities Act of the shares of common stock issuable upon exercise of the warrants. The Company will thereafter use its best efforts to cause the same to become effective within 60 business days following the Business Combination and to maintain a current prospectus relating to the common stock issuable upon exercise of the public warrants, until the expiration of the public warrants in accordance with the provisions of the warrant agreement. If any such registration statement has not been declared effective by the 60th Business Day following the Business Combination, holders of the Warrants shall have the right, during the period beginning on the sixty-first Business Day after the closing of the Business Combination and ending upon such registration statement being declared effective by the Commission, and during any other period when the Company failed to have maintained an effective registration statement covering the issuance of the shares of common stock issuable upon exercise of the Warrants, to exercise such Warrants on a “cashless basis,” by exchanging the Warrants (in accordance with Section 3(a)(9) of the Securities Act or another exemption) in accordance with the provisions of the warrant agreement.
If the common stock is at the time of any exercise of a public warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, (i) require holders of public warrants who exercise public warrants to exercise such public warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and (ii) in the event the Company so elects, the Company shall (x) not be required to file or maintain in effect a registration statement for the registration, under the Securities Act, of the shares of common stock issuable upon exercise of the warrants, notwithstanding anything in the warrant agreement to the contrary, and (y) use its commercially reasonable efforts to register or qualify for sale the shares of common stock issuable upon exercise of the public warrant under applicable blue sky laws to the extent an exemption is not available.
Listing of Securities
We intend to apply to list of the post-combination company’s common stock and warrants on Nasdaq under the symbols “SMFR” and “SMFRW,” respectively, upon the Closing.
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Name of Beneficial OwnersNumber of Shares of Class
A Common Stock Beneficially Owned
Percentage of Outstanding
Class A
BENEFICIAL OWNERSHIP OF SECURITIESCERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Sema4
Related Party Transactions
The following is a description of transactions since January 1, 2020 and currently proposed transactions in which:
a.we have been or is to be a participant;
b.the amount involved exceeded or will exceed the lesser of $120,000 or 1% of the average of our total assets as of year-end for the last two completed fiscal years; and
c.any of our directors, executive officers or holders of more than 5% of our capital stock, or any immediate family member of, or person sharing the household with, any of these individuals, had or will have a direct or indirect material interest.
Related Party Transactions Related to the Acquisition
Acquisition Subscription Agreements
In connection with the Acquisition, the PIPE Investors executed subscription agreements to purchase an aggregate of 50,000,000 shares of our Class A common stock at $4.00 per share, for an aggregate purchase price of $200 million in private placements that we expect to close in the first half of 2022. The funds from such private placement will be used in part or whole to fund the Acquisition of GeneDx. The following table sets forth information regarding the beneficial ownership regarding (i) the actual beneficial ownershipnumber of theshares of our Class A common stock of the Company as of March 31, 2021 and (ii) expected beneficial ownership of the common stock of the post-combination company immediately following the Closing, assuming that no public shares are redeemed, and alternatively that 29,474,795 public shares are redeemed, which represents the maximum number of public shares that can be redeemed while satisfying the applicable closing conditions under the Merger Agreement, by:
•each person knownwe expect to be the beneficial owner of more than 5% of the outstanding common stock of CMLS as of March 31, 2021;
•each person who may become beneficial owner of more than 5% of outstanding common stock of the post-combination company immediately following the Business Combination;
•each of CMLS’s currentissue to our directors, executive officers and directors;5% stockholders and their affiliates in this transaction:
Shares of Class A Common Stock
PurchaserNumber of SharesAggregate Gross Consideration ($)
Entities affiliated with Blackstone(1)
2,500,000 10,000,000 
Entities affiliated with Casdin(2)
11,437,500 45,750,000 
Entities affiliated with Corvex(3)
11,437,500 45,750,000 
Mount Sinai(4)
6,250,000 25,000,000 
Entities affiliated with Deerfield(5)
5,000,000 20,000,000 
Entities affiliated with Rho Partners(6)
2,125,000 8,500,000 
Entities affiliated with Section32(7)
1,250,000 5,000,000 
Total40,000,000 160,000,000 
__________________
•(1)allConsists of CMLS’s current executive officers and directors as a group;
•each person who will become an executive officer or a director of the post-combination company upon consummation of the Business Combination; and
•all of the executive officers and directors of the post-combination company as a group after the consummation of the Business Combination.
Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security. Under those rules, beneficial ownership includes securities that the individual or entity has the right to acquire, such as through the exercise of warrants or stock options or the vesting of restricted stock units, within 60 days of the record date. Shares subject to warrants or options that are currently exercisable or exercisable within 60 days of the record date or subject to restricted stock units that vest within 60 days of the record date are considered outstanding and beneficially owned by the person holding such warrants, options or restricted stock units for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
The beneficial ownership of shares of common stock prior to the Business Combination is based on 55,343,750 shares of common stock of the Company (including 44,275,000 public shares and 11,068,750 Founder Shares) issued and outstanding as of March 31, 2021.
The expected beneficial ownership of shares of common stock after the Business Combination assuming none of the public shares are redeemed (the no redemptions scenario) has been determined based upon the following: (i) that no public stockholders exercise their redemption rights, (ii) that none of the investors set forth in the table below has purchased or purchases additional shares of common stock (prior to or after the Business Combination), (iii) that 35,000,000 shares of post-combination company common stock are issued to the PIPE Investors, (iv) that 147,922,735 shares of post-combination company common stock are issued to the former Sema4 equity holders as merger consideration, the former Sema4 equity holders who have elected to receive their pro rata share of Closing Available Cash receive an aggregate of $243.8 million in cash, and 29,120,955 Company Options are issued to the former Sema4 equity award holders, (v) the Sponsor forfeits no Founder Shares pursuant to the terms of the Sponsor Forfeiture Agreement and the remaining Founder Shares convert into 11,068,7502,434,863 shares of Class A common stock in connection with the Business Combination, and (vi) there willexpected to be an aggregate of 238,266,485 shares of the post-combination company’s common stock issued and outstanding at Closing.
The expected beneficial ownership of shares of common stock after the Business Combination assuming the maximum number of public shares have been redeemed (the maximum redemption scenario) has been determined based on the following: (i) that holders of 29,474,795 public shares exercise their redemption rights, which represents the maximum number of public shares that can be redeemed while satisfying the applicable closing
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conditions under the Merger Agreement, (ii) that none of the investors set forth in the table below has purchased or purchases additional shares of common stock (prior to or after the Business Combination), (iii) that 35,000,000 shares of post-combination company common stock are issued to the PIPE Investors, (iv) that 172,304,223 shares of post-combination company common stock are issued to the formerBTO Sema4 equity holders as merger consideration, the former Sema4 equity holders who have elected to receive their pro rata share of Closing Available Cash receive no cash consideration, and 29,120,955 Company Options are issued to the former Sema4 equity award holders, (v) the Sponsor forfeits an aggregate of 2,439,452 Founder Shares pursuant to the Sponsor Forfeiture Agreement and the remaining Founder Shares convert into 8,629,298Holdings L.P., 50,402 shares of Class A common stock in connection with the Business Combination, and (vi) there will be an aggregate of 230,733,726 shares of the post-combination company’s common stock issued and outstanding at Closing.
In addition, the calculations of the expected number of Company securities to be issued in the Business Combination under each of the no redemptions and maximum redemption scenarios has been determined based upon the number of shares of Sema4 Class A common stock, Sema4 Class B common stock and Sema4 preferred stock and the number of Sema4 Options that were issued and outstanding as of March 31, 2021.
The table below does not include any Earn-Out Shares that may be issued after the closing of the Business Combination.
Except as noted by footnote, and subject to community property laws where applicable, based on the information provided to CMLS and Sema4, respectively, the persons and entities named in the table below have sole voting and investment power with respect to all shares shown as beneficially owned by them.
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After Business Combination
Prior to Business CombinationAssuming No RedemptionsAssuming Maximum Redemptions
Name and Address of Beneficial Owners(1)
Number of Shares%Number of Shares%Number of Shares%
CMLS Holdings LLC (2)
10,993,75019.910,993,7504.88,070,2883.6
Eli D. Casdin(2)
10,993,75019.910,993,7504.88,070,2883.6
Keith A. Meister(2)
10,993,75019.910,993,7504.88,070,2883.6
Brian Emes——————
Shaun Rodriguez——————
Sean George——————
Munib Islam25,000*25,000*25,000*
Emily Leproust25,000*25,000*25,000*
Nat Turner25,000*25,000*25,000*
All directors and officers of the Company as a Group prior to the Business Combination (eight persons)11,068,75020.011,068,7504.88,629,2983.6
Directors and officers after the Business Combination:
Eric Schadt(3)
——6,437,4942.76,437,4942.9
Isaac Ro——————
Shawn Assad——————
Daniel Clark(4)
——1,296,449*1,296,449*
James Coffin(5)
——2,252,8601.02,252,8601.0
Anthony Prentice(6)
——2,016,767*2,016,767*
Kareem Saad——————
Karen White(7)
——25,767*25,767*
Dennis Charney——————
Eli D. Casdin(2)
10,993,75019.910,993,7504.88,070,2883.6
Emily Leproust25,000*25,000*25,000*
Michael Pellini——————
Jason Ryan——————
Joshua Ruch——————
Rachel Sherman(8)
——113,519*113,519*
Nat Turner25,000*25,000*25,000*
All directors and officers after the Business Combination as a group (16 persons)11.042,75020.023,186,60610.020,263,1449.0
Five Percent Holders:
Entities affiliated with Blackstone Group Inc.(9)
——
23,949,870(10)
10.3
29,902,446(11)
13.8
Entities affiliated with Deerfield Management Company, L.P.(12)
——
13,849,786(13)
5.9
13,849,786(14)
6.4
Icahn School of Medicine at Mount Sinai(15)
——
83,402,170(16)
35.8
105,441,409(17)
48.6
__________________
*       Less than 1%
(1)Unless otherwise indicated, the business address of each beneficial owner listed in the table below before the Business Combination is c/o Corvex Management LP, Inc., 667 Madison Ave, New York, NY 10065 and the business address of each of the directors and officers after the Business Combination is c/o Sema4 Holdings Corp, 333 Ludlow Street, Stamford, Connecticut 06902.
(2)The Sponsor is the record holder of the shares reported herein. The Board of Managers of the Sponsor is comprised of Mr. Casdin and Mr. Meister who share voting and investment discretion with respect to the common stock held of record by the Sponsor. Messrs. Casdin and Meister disclaim beneficial ownership of these shares except to the extent of their respective pecuniary interests therein.
(3)Consists of 6,437,494 shares of the post-combination company common stock subject to options exercisable within 60 days of March 31, 2021.
(4)Consists of 1,296,449 shares of the post-combination company common stock subject to options exercisable within 60 days of March 31, 2021.
(5)Consists of 2,252,860 shares of the post-combination company common stock subject to options exercisable within 60 days of March 31, 2021.
(6)Consists of 2,016,767 shares of the post-combination company common stock subject to options exercisable within 60 days of March 31, 2021.
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(7)Consists of 25,767 shares of the post-combination company common stock subject to options exercisable within 60 days of March 31, 2021.
(8)Consists of 113,519 shares of the post-combination company common stock subject to options exercisable within 60 days of March 31, 2021.
(9)BTO Holdings Manager L.L.C. is the general partner of BTO Sema4 Holdings L.P. Blackstone Tactical Opportunities Associates L.L.C. is the managing member of BTO Holdings Manager L.L.C. BTOA L.L.C. is the sole member of Blackstone Tactical Opportunities Associates L.L.C. Blackstone Holdings III L.P. is the managing member of BTOA L.L.C. Blackstone Tactical Opportunities Associates III - NQ L.P. is the general partner of Blackstone Tactical Opportunities Fund - FD L.P. BTO DE GP - NQ L.L.C. is the general partnerand 14,735 shares of Blackstone Tactical Opportunities Associates III - NQ L.P. Blackstone Holdings II L.P. is the managing member of BTO DE GP - NQ L.L.C. Blackstone Holdings I/II GP L.L.C. is the general partner of Blackstone Holdings II L.P. BTO Side-by-Side GP L.L.C. is the general partner ofClass A common stock expected to be issued to Blackstone Family Tactical Opportunities Investment Partnership III ESC L.P. Blackstone Holdings III
(2)Consists of 11,437,500 shares of Class A common stock expected to be issued to Casdin Partners Master Fund, L.P.
(3)Consists of 3,557,000 shares of Class A common stock expected to be issued to Corvex Master Fund LP, 7,320,000 shares of Class A common stock expected to be issued to Corvex Select Equity Master Fund LP, and 560,500 shares of Class A common stock expected to be issued to Corvex Dynamic Equity Select Master Fund LP.
(4)Consists of 6,250,000 shares of Class A common stock expected to be issued to Ichan School of Medicine at Mount Sinai.
(5)Consists of 3,125,000 shares of Class A common stock expected to be issued to Deerfield Private Design Fund V, L.P. and 1,875,000 shares of Class A common stock expected to be issued to Deerfield Partners, L.P.
(6)Consists of 1,632,963 shares of Class A common stock expected to be issued to Vaal Investment Partners Q9 LP, 329,665 shares of Class A common stock expected to be issued to Rugu2 LLC, and 162,372 shares of Class A common stock expected to be issued to Kariba LLC. Rho Partners is the solean affiliate of Joshua Ruch, a member of BTO Side-by-Side GP L.L.C. Blackstone Holdings III GPour Board.
(7)Consists of 1,250,000 shares of Class A common stock expected to be issued to Section 32 Fund 2, L.P. Section32 is the general partneran affiliate of Blackstone Holdings III L.P. Blackstone Holdings III GP Management L.L.C. is the general partner of Blackstone Holdings III GP L.P. The Blackstone Group Inc. is the soleMichael Pellini, a member of each of Blackstone Holdings I/II GP L.L.C. and Blackstone Holdings III GP Management L.L.C. The sole holderour Board.
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Support Agreements
In connection with the execution of the Acquisition Merger Agreement, OPKO Health, Inc. (“OPKO”), the parent of GeneDx, and we entered into Support Agreements (the “Support Agreements”) with certain of our stockholders (including CMLS Holdings LLC, Casdin Partners Master Fund, L.P., Corvex Master Fund LP, Corvex Select Equity Master Fund LP, Corvex Dynamic Equity Select Master Fund LP, Icahn School of Medicine at Mount Sinai, and Section 32 Fund 2, L.P., whereby such stockholders agreed to, among other things, (a) vote at any meeting of our stockholders all of their shares of our Class CA common stock held of The Blackstone Group Inc. is Blackstone Group Management L.L.C. Blackstone Group Management L.L.C. is wholly-owned by Blackstone's senior managing directors and controlled by its founder, Stephen A. Schwarzman. Eachrecord: (i) to approve the issuance of the Blackstone entities described in this footnotestock consideration pursuant to Acquisition Merger Agreement and Stephen A. Schwarzman may be deemedthe issuance of our Class A common stock pursuant to beneficially own the shares directly or indirectly controlled by such Blackstone entities or him, but each disclaims beneficial ownershipsubscription agreements for the acquisitions; (ii) to approve the appointment of such shares. The address of Mr. Schwarzman and eachtwo specified designees to the Board for terms that expire no earlier than the end of the Second Milestone Period (as defined in the Acquisition Merger Agreement); (iii) to approve an amendment to our Charter to increase the authorized shares of our Class A common stock from 380,000,000 to 1,000,000,000; (iv) to approve any other proposal included in a proxy statement that is recommended by the Board as necessary to consummate the transactions in connection with the Acquisition Merger Agreement; (v) to approve any proposal that is recommended by the Board to adjourn the meeting to a later date, if there are not sufficient affirmative votes (in person or by proxy) to obtain the requested approvals on the date on which such meeting is held; and (vi) against any and all other proposals that could reasonably be expected to delay or impair the ability of us to consummate the transactions; (b) provide a proxy to us to vote such shares accordingly (subject to the condition that a proxy statement has been filed with the SEC and provided to our stockholders); (c) be bound by certain other covenants and agreements related to the transactions; and (d) be bound by certain transfer restrictions with respect to all or a percentage of their shares of our Class A common stock, prior to the meeting, in each case, on the terms and subject to the conditions set forth in the Support Agreements.
Sema4 Related Party Transactions
Employment Arrangements with Immediate Family Members of Our Executive Officers and Directors
Emilio Schadt, the son of Eric Schadt, our Chief Executive and a director, has been employed with us since August 2018 as a Data Science Software Engineer, where he is responsible for implementing methods to improve data reliability. During the year ended December 31, 2021, Mr. Schadt had total compensation, including base salary and bonus, of $177,543. Rick Wallsten, the brother of Eric Schadt, our Chief Executive Officer and a director, has been employed by us since November 2017 as a clinical pharmacist, where he is responsible for certain aspects of our pharmacogenomics program. During the year ended December 31, 2021, Mr. Wallsten had total cash compensation, including base salary and bonus, of $209,563. During the year ended December 31, 2020, Mr. Wallsten had total cash compensation, including base salary and bonus, of $157,620. Carol Senn, the sister-in-law of James Coffin, our former Chief Operating Officer, has been employed with us since November 2020 as an Account Manager, where she is responsible for certain aspects of growing the business. During the year ended December 31, 2021, Ms. Senn had total compensation, including base salary, of $155,706. Kelly Peterson, the sister of James Coffin, our former Chief Operating Officer, has been employed with us since February 2019 as a Sales Specialist Oncology, where she is responsible for the aspect of growing the business. During the year ended December 31, 2021, Ms. Peterson had total compensation, including base salary, of $211,152.
The salary and bonus levels, as applicable, of the aforementioned individuals were based on reference to internal pay equity when compared to the compensation paid to employees in similar positions who were not related to our executive officers and directors. They also received equity awards on the same general terms and conditions as applicable to other employees in similar positions who were not related to our executive officers and directors.
Licenses and Subleases
We were a party to several space license agreements and continue to be a party to sublease agreements with the Mount Sinai Health System (which we refer to together with its related entities listedas “Mount Sinai”) pursuant to which we leased approximately 124,000 square feet of office and laboratory space in this footnote is c/o The Blackstone Group Inc., 345 Park Avenue,Stamford, Connecticut for its headquarters and laboratory operations, and approximately 26,000 square feet of office and laboratory space in New York, New York 10154.for additional office space and laboratory operations. Rent expense for all facilities subleased by
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(10)
Icahn School of Medicine at Mount Sinai (“ISMMS”) to us was $4.2 million for the year ended December 31, 2021 and $5.9 million for the year ended December 31, 2020. Future minimum lease payments are expected to total $4.2 million related to all facilities subleased by ISMMS to Sema4 for the year ending December 31, 2022.
Transition Services and Employee Compensation
ISMMS provided transition services, under a transition services agreement and other contractual arrangements with us for services related to finance (accounts payable & purchasing, general accounting, financial systems, and payroll), real estate management, insurance coverage, compliance, equipment subleases, and IT. The transition services agreement expired on March 28, 2021. We made direct payments to ISMMS of approximately $1.6 million pursuant to such transition services agreement in 2021.
We provide partial reimbursement to Mount Sinai for limited compensation, services, and related expenses for certain individuals employed by Mount Sinai and certain individuals employed at both Mount Sinai and our company. For the years ended December 31, 2021 and 2020, the total amount of reimbursement for employee compensation and expenses paid by us to Mount Sinai was equal to approximately $1.2 million and $1.3 million, respectively.
Commercial Relationships
We provide products and services to Mount Sinai at fair market value, including for certain oncology testing, research services and clinical data services. Mount Sinai pays for certain of these services in cash, and for other of these services in kind through performing components of collaborative research projects and/or the provision of intellectual property and data rights.
In particular, these arrangements include a data structuring and curation services agreement, dated August 1, 2019, with ISMMS and certain other Mount Sinai entities, pursuant to which we provide certain data structuring and clinical support services to Mount Sinai, including the delivery to Mount Sinai of a curated dataset and interface allowing Mount Sinai users to query the curated dataset as mutually agreed by the parties. As compensation for these services, Mount Sinai provides us certain rights to use de-identified curated data. The data structuring and curation services agreement has a five-year term and, provided we are not in default under the terms of the agreement, the agreement may be renewed at our option for up to two one-year extension periods. Following the extension periods, the agreement may be further renewed by the mutual agreement of the parties. The agreement may be terminated earlier by Mount Sinai upon certain fundamental breaches by us, by us upon a breach by Mount Sinai of its material obligations, and by either party if certain insolvency or bankruptcy events occur with respect to the other party.
We also receive products and services from Mount Sinai at fair market value, including for certain research and clinical services, development services and lab services, and licenses certain intellectual property from Mount Sinai. Pursuant to these arrangements, we made direct payments to Mount Sinai of approximately $1.4 million and $3.4 million for the years ended December 31, 2021 and 2020, respectively.
Indemnification Agreements
Our Charter contains provisions limiting the liability of directors, and our Bylaws provide that we will indemnify each of our directors to the fullest extent permitted under Delaware law. Our Charter and our Bylaws also provide the Board with discretion to indemnify officers and employees when determined appropriate by our Board.
We have entered into indemnification agreements with each of our directors and executive officers and certain other key employees. The indemnification agreements provide that we will indemnify each of its directors, executive officers, and such other key employees against any and all expenses incurred by that director, executive officer, or other key employee because of his or her status as one of the Company’s directors, executive officers, or other key employees, to the fullest extent permitted by Delaware law, our Charter and our Bylaws. In addition, the indemnification agreements provide that, to the fullest extent permitted by Delaware law, the Company will advance all expenses incurred by its directors, executive officers, and other key employees in connection with a legal proceeding involving his or her status as a director, executive officer, or key employee.
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Legacy Sema4 Related Party Transactions
Series C Preferred Stock Financing
In July 2020, Legacy Sema4 sold an aggregate of 197,821 shares of its Series C preferred stock at a purchase price of $613.6743 per share to accredited investors for an aggregate purchase price of approximately $121.4 million. On July 22, 2021, each share of Legacy Sema4’s Series C preferred stock was cancelled and received a portion of the merger consideration in connection with the completion of the business combination, as provided in the Prior Merger Agreement.
The following table summarizes purchases of shares of Legacy Sema4’s Series C preferred stock by its executive officers, directors, and holders of more than 5% of its capital stock.
Shares of Series C Preferred Stock
PurchaserNumber of
Shares		Aggregate Gross Consideration ($)
Entities affiliated with Blackstone(1)
38,130 $23,399,401 
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(1)Consists of 23,326,03837,138 shares of post-combination company commonSeries C preferred stock to be held by BTO Sema4 Holdings L.P., 482,778768 shares of post-combination company commonSeries C preferred stock to be held by Blackstone Tactical Opportunities Fund - FD L.P. and 141,054224 shares of post-combination company commonSeries C preferred stock to be held by Blackstone Family Tactical Opportunities Investment Partnership III ESC L.P.
Second Amended and Restated Stockholders Agreement
(11)On July 27, 2020, Legacy Sema4 entered into a second amended and restated stockholders’ agreement, as amended (the “A&R Stockholders’ Agreement”), with certain holders of Legacy Sema4’s capital stock. The A&R Stockholders’ Agreement provided for certain customary rights with respect to the management of Legacy Sema4, rights of first offer and pre-emptive rights, transfer restrictions, tag-along rights and drag-along rights, which rights and restrictions terminated on July 22, 2021, upon the consummation of the business combination. In addition, the A&R Stockholders’ Agreement provided for certain customary registration rights.
Related Party Transactions Entered into in Connection with the Business Combination
Business Combination Subscription Agreements
In connection with our business combination, the Merger PIPE Investors purchased an aggregate of 35,000,000 shares of our Class A common stock at $10.00 per share, for an aggregate purchase price of $350 million in private placements that closed immediately prior to the Merger Closing. The funds from such private placement were used as part of the consideration to Legacy Sema4’s equity holders in connection with the business combination. The following table sets forth the number of shares of our Class A common stock that we issued to our directors, executive officers and 5% stockholders and their affiliates in this transaction:
Shares of Class A Common Stock
PurchaserNumber of
Shares		Aggregate Gross Consideration ($)
Entities affiliated with Casdin(1)
5,000,000 50,000,000 
Entities affiliated with Corvex(2)
4,000,000 40,000,000 
Entities affiliated with Deerfield(3)
2,750,000 27,500,000 
Total16,250,000 162,500,000 
__________________
(1)Consists of 29,123,5645,000,000 shares of post-combination companyClass A common stock to be held by BTO Sema4 Holdings L.P., 602,770 sharesaffiliates of post-combination company common stock to be held by Blackstone Tactical OpportunitiesCasdin Partners Master Fund - FD L.P. and 176,112 shares of post-combination company common stock to be held by Blackstone Family Tactical Opportunities Investment Partnership III ESC L.P.
(12)(2)Consists of 4,000,000 shares of Class A common stock held by affiliates of Corvex Management LP.
(3)Consists of 2,750,000 shares of Class A common stock held by affiliates of Deerfield Management Company, L.P. (“Deerfield Management”) is
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Amended and Restated Registration Rights Agreement
In connection with the investment managerconsummation of Deerfield Partners, L.P. (“Deerfield Partners”our business combination, we, CMLS Holdings LLC (the “Former Sponsor”) and Deerfield Private Design Fund V, L.P. (“DPDF”certain other parties thereto (collectively, the “rights holders”) entered into an amended and restated registration rights agreement (the “Amended and Restated Registration Rights Agreement”). Deerfield Mgmt, L.P. (“Deerfield Mgmt”) isPursuant to the general partner of Deerfield Partners. Deerfield Mgmt V, L.P. (“Deerfield Mgmt V”) is the general partner of DPDF. James E. Flynn is the sole memberterms of the general partnerAmended and Restated Registration Rights Agreement, we were required to prepare and file with the SEC, no later than 30 days after the closing date for the Merger, a shelf registration statement for an offering to be made on a continuous basis from time to time with respect to the resale of eachthe registrable shares under the Amended and Restated Registration Rights Agreement. We were further required to use commercially reasonable efforts to cause such shelf registration statement to be declared effective as soon as possible after filing, but in no event later than the earlier of Deerfield Management, Deerfield Mgmt60 days following the filing date thereof and Deerfield Mgmt V. Deerfield Management, Deerfield Mgmtfive business days after the SEC notifies us that it will not review such registration statement, subject to extension in the event that the registration is subject comments from the SEC.
In addition, pursuant to the terms of the Amended and Mr. FlynnRestated Registration Rights Agreement and subject to certain requirements and customary conditions, including with regard to the number of demand rights that may be deemedexercised, the rights holders may demand at any time or from time to beneficially own the securitiestime, that we file a registration statement on Form S-1 or Form S-3 to register certain shares of our Class A common stock held by Deerfield Partners. Deerfield Management, Deerfield Mgmt Vsuch rights holders. The Amended and Mr. Flynn may be deemedRestated Registration Rights Agreement also provides the rights holders with “piggy-back” registration rights, subject to beneficially owncertain requirements and customary conditions. We will bear the securities held by DPDF. The address for eachexpenses incurred in connection with the filing of Deerfield Partners, DPDF, Deerfield Management, Deerfield Mgmt, Deerfield Mgmt Vany such registration statement.
ISMMS Lock-Up Agreement
In connection with the execution of the Prior Merger Agreement, we and Mr. Flynn is 345 Park Avenue South, New York, New York 10010.
(13)Consists of 6,924,893 shares of post-combination company common stock to be held by Deerfield Partners and 6,924,893 shares of post-combination company common stock to be held by DPDF.
(14)Consists of 6,924,893 shares of post-combination company common stock to be held by Deerfield Partners and 6,924,893 shares of post-combination company common stock to be held by DPDF.
(15)The shares are held by Icahn School of Medicine at Mount Sinai orentered into the ISMMS a New York Education Corporation. The responsibility and authority for the voting and investment decisions withLock-Up Agreement whereby ISMMS agreed to certain transfer restrictions in respect toof the shares of our Class A common stock issued to ISMMS pursuant to the Prior Merger Agreement. These transfer restrictions expired on January 18, 2022.
Shareholder Lock-up Agreements
In connection with the execution of the Prior Merger Agreement, each stockholder of Legacy Sema4 heldprior to the closing of the business combination holding more than 1% of the outstanding common stock of Legacy Sema4 as of the date thereof, entered into a Stockholder Lock-up Agreement whereby such shareholder agreed to certain transfer restrictions in respect of the shares of our Class A common stock issued to such shareholder pursuant to the Prior Merger Agreement. These transfer restrictions expired on January 18, 2022.
CMLS Related Party Transactions Entered into Prior to the Business Combination
Founder Shares
On July 16, 2020, the Former Sponsor purchased an aggregate of 10,062,500 shares of Class B common stock of CMLS (the “Class B common stock”), for a total purchase price of $25,000, or approximately $0.002 per share. In August 2020, the Former Sponsor transferred 25,000 of Class B common stock to each of Dr. Leproust and Mr. Turner. On September 1, 2020, CMLS effected a 1:1.1 stock split of its Class B common stock, resulting in the Former Sponsor holding an aggregate of 10,993,750 shares of Class B common stock. The shares of Class B common stock automatically converted into Class A common stock on July 22, 2021 in connection with the consummation of the business combination (such shares, the “Founder Shares”).
Private Placement Warrants
On September 1, 2020, simultaneously with the closing of CMLS’s initial public offering (the “Initial Public Offering”), the Former Sponsor and certain of CMLS’s independent directors purchased an aggregate of 7,236,667 private placement warrants (the “Private Placement Warrants”), at a price of $1.50 per Private Placement Warrant, for an aggregate purchase price of $10,855,000. The Former Sponsor purchased 6,903,335 Private Placement Warrants, and Dr. Leproust (and/or one or more entities controlled by ISMMSher) purchased 166,666 Private Placement
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Warrants. Each Private Placement Warrant is vested in those persons who from timeexercisable to time arepurchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment.
Promissory Note–Related Party
On July 16, 2020, the executive officersFormer Sponsor issued an unsecured promissory note to CMLS (the “Promissory Note”), pursuant to which CMLS could borrow up to an aggregate principal amount of ISMMS$300,000. The Promissory Note was non-interest bearing and payable on the earlier of (i) December 31, 2020 or (ii) the consummation of the Initial Public Offering. The outstanding balance under the oversightPromissory Note of $165,081 was repaid at the closing of the Initial Public Offering on September 4, 2020.
Insider Letter
On September 1, 2020, in connection with the Initial Public Offering, CMLS, the Former Sponsor and directioncertain insiders of itsCMLS entered into a letter agreement (the “Insider Letter”) providing for, among other things, a lock-up in relation to the Founder Shares until the earlier of (a) one year after the completion of the business combination and (b) subsequent to the business combination, if the closing price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations, and the like) for any 20 trading days within any 30-day trading day period commencing at least 150 days after the business combination or (y) the date following the completion of the business combination on which we complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of our stockholders having the right to exchange their shares of Class A common stock for cash securities or other property. The Former Sponsor and each insider also agreed not to transfer any Private Placement Warrants (or any share of Class A common stock issued or issuable upon the exercise of the Private Placement Warrants), until 30 days after the completion of the business combination.
Forward Purchase Agreement
On September 1, 2020, in connection with the Initial Public Offering, CMLS entered into separate forward purchase agreements with Casdin Capital, LLC (“Casdin”) and Corvex Management LP (“Corvex”), in their capacities as investment advisors on behalf of one or more investment funds, clients or accounts managed by each of Casdin and Corvex, respectively (collectively, their “Clients”), pursuant to which, subject to the conditions provided therein, they caused the Clients to purchase from us up to an aggregate amount of 15,000,000 shares of Class A common stock the private placement that closed concurrently with the closing of the business combination.
Review, Approval or Ratification of Transactions with Related Parties
On July 22, 2021, we adopted a written related party transaction policy in connection with the completion of the business combination. The policy provides that officers, directors, holders of more than 5% of any class of our voting securities, and any member of the immediate family of and any entity affiliated with any of the foregoing persons, will not be permitted to enter into a related-party transaction with us without the prior consent of our audit committee, or other independent members of our Board in the event it is inappropriate for the audit committee to review such transaction due to a conflict of interest. Any request for us to enter into a transaction with an executive officer, director, principal stockholder, or any of their immediate family members or affiliates, in which the amount involved exceeds $120,000, must first be presented to our audit committee for review, consideration, and approval. In approving or rejecting the proposed transactions, our audit committee will take into account all of the relevant facts and circumstances available.
Director Independence
The rules of Nasdaq require that a majority of our Board be independent. An “independent director” is defined generally as a person other than an executive officer or employee of the issuer or any other individual having a relationship which, in the opinion of the issuer’s board of directors, would interfere with the exercise of independent judgement in carrying out the responsibilities of a director. Each individual serving on our Board, other than Eric Schadt and its sole member, Mount Sinai Health System, Inc., a New York Not-for-Profit Corporation. The address for Icahn School of Medicine at Mount Sinai is One Gustave L. Levy Place, New York, New York 10029.
(16)Consists of 83,402,170 shares of post-combination company common stock to be held by Icahn School of Medicine at Mount Sinai.
(17)Consists of 105,441,409 shares of post-combination company common stock to be held by Icahn School of Medicine at Mount Sinai.Jason Ryan, qualifies as an independent director under Nasdaq listing standards. Each director who serves on our audit committee, compensation committee and nominating and corporate governance committee are
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independent under Nasdaq listing standards. See the section entitled “Corporate Governance of Sema4” elsewhere in this proxy statement for more information.
GeneDx
GeneDx had no related party transactions for the years ended December 31, 2021 and 2020.
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REPORT OF THE AUDIT COMMITTEE
The information contained in the following report of our audit committee is not considered to be "soliciting material," "filed" or incorporated by reference in any past or future filing by us under the Exchange Act or the Securities Act unless and only to the extent that we specifically incorporate it by reference.
Our audit committee has reviewed and discussed with our management and Ernst & Young LLP our audited consolidated financial statements for the year ended December 31, 2021. Our audit committee has also discussed with Ernst & Young LLP the matters required to be discussed by Auditing Standard No. 1301 adopted by the Public Company Accounting Oversight Board (United States) regarding “Communications with Audit Committees.”
Our audit committee has received and reviewed the written disclosures and the letter from Ernst & Young LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with our audit committee concerning independence, and has discussed with Ernst & Young LLP its independence from us.
Based on the review and discussions referred to above, our audit committee recommended to our board of directors that the audited consolidated financial statements be included in our annual report on Form 10-K for the year ended December 31, 2021 for filing with the U.S. Securities and Exchange Commission.
Submitted by the Audit Committee
Keith Meister, Chair
Dennis Charney
Emily Leproust
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Sema4
The Company’s Related Party Transactions
Founder Shares
On July 16, 2020 our Sponsor purchased an aggregate 10,062,500 Founder Shares for a total purchase price of $25,000, or approximately $0.002 per share. In August 2020, our Sponsor transferred 25,000 Founder Shares to each of Mr. Islam, Dr. Leproust and Mr. Turner. On September 1, 2020, we effected a 1:1.1 stock split of our Class B common stock, resulting in our Sponsor holding an aggregate of 10,993,750 Founder Shares and there being an aggregate of 11,068,750 Founder Shares outstanding. The purchase price of the Founder Shares was determined by dividing the amount of cash contributed to the Company by the number of Founder Shares issued. The Founder Shares may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder.
The Initial Stockholders have agreed to (i) waive their redemption rights with respect to their Founder Shares and public shares in connection with the completion of our initial business combination, (ii) waive their redemption rights with respect to their Founder Shares and public shares in connection with a stockholder vote to approve an amendment to our current certificate of incorporation to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination within 18 months from the closing of the initial public offering or to provide for redemption in connection with a business combination and (iii) waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares if we fail to complete our initial business combination within 18 months from the closing of the initial public offering, although they will be entitled to liquidating distributions from the Trust Account with respect to any public shares they hold if we fail to complete our initial business combination within the prescribed time frame.
Private Placement Warrants
Simultaneously with the closing of the Initial Public Offering, the Sponsor and certain of the Company’s independent directors purchased an aggregate of 7,236,667 Private Placement Warrants, at a price of $1.50 per Private Placement Warrant, for an aggregate purchase price of $10,855,000. The Sponsor purchased 6,903,335 Private Placement Warrants, and each of Mr. Islam and Dr. Leproust (and/or one or more entities controlled by them) purchased 166,666 Private Placement Warrants. Each Private Placement Warrant is exercisable to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment. Proceeds from the sale of the Private Placement Warrants were added to the net proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless.
The Forfeiture Agreement provides that, immediately prior to the Closing, and conditioned and effective upon the Closing, up to a maximum of 33% of private placement warrants held by the Sponsor immediately prior to the Closing, may be automatically cancelled, for no consideration, and shall no longer be outstanding. For additional information on the potential forfeiture of private placement warrants by the Sponsor, see the section entitled “The Business Combination Proposal — Related Agreements — Forfeiture Agreement”.
Registration Rights
The holders of the Founder Shares, private placement warrants (and any shares of common stock issuable upon the exercise of the private placement warrants), and securities that may be issued upon conversion of working capital loans are entitled to registration rights pursuant to a registration rights agreement signed February 9, 2021, requiring the Company to register such securities for resale. The holders of the majority of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a business combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until
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termination of the applicable lock-up period. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
The Forfeiture Agreement provides that, immediately prior to the Closing, and conditioned and effective upon the Closing, up to a maximum of 33% of private placement warrants held by the Sponsor immediately prior to the Closing, may be automatically cancelled, for no consideration, and shall no longer be outstanding. For additional information on the potential forfeiture of private placement warrants by the Sponsor, see the section entitled “The Business Combination Proposal — Related Agreements — Forfeiture Agreement”.
Post Business Combination Registration Rights Agreement
In connection with the Business Combination, the Sponsor and certain stockholders will enter into a registration rights agreement (the “Post Business Combination Registration Rights Agreement”) with respect to the Company’s common stock that will be issued and outstanding following the Business Combination. Pursuant to the terms of the Post Business Combination Registration Rights Agreement, the Company will be obligated to file a resale shelf registration statement on behalf of the stockholder parties within 30 calendar days after the Closing. The Post Business Combination Registration Rights Agreement will also provide the parties thereto with demand, “piggy-back” and Form S-3 registration rights, subject to certain minimum requirements and customary conditions. In addition, subject to certain exceptions, each party to the Post Business Combination Registration Rights Agreement will agree for a period of time not to transfer or dispose of the Company’s common stock.
Promissory Note – Related Party
On July 16, 2020, the Sponsor issued an unsecured promissory note to the Company (the “Promissory Note”), pursuant to which the Company could borrow up to an aggregate principal amount of $300,000. The Promissory Note was non-interest bearing and payable on the earlier of (i) December 31, 2020 or (ii) the consummation of the Initial Public Offering. The outstanding balance under the Promissory Note of $165,081 was repaid at the closing of the Initial Public Offering on September 4, 2020.
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes may be repaid upon completion of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of the notes may be converted upon completion of a Business Combination into warrants at a price of $1.50 per warrant. Such warrants would be identical to the Private Placement Warrants. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. As of September 30, 2020, there were no amounts outstanding under the Working Capital Loans.
Underwriting Agreement
The underwriter is entitled to a deferred fee of $0.35 per Unit, or $15,496,250 in the aggregate. The deferred fee will become payable to the underwriter from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Forward Purchase Agreement
The Company entered into separate forward purchase agreements with affiliates of the Sponsor, Casdin Capital, LLC (“Casdin”) and Corvex Management LP (“Corvex”), in their capacities as investment advisors on behalf of one or more investment funds, clients or accounts managed by each of Casdin and Corvex, respectively (collectively, their “Clients”), pursuant to which, subject to the conditions described below, they will cause the Clients to purchase from the Company up to an aggregate amount of 15,000,000 shares of Class A common stock, or the forward purchase shares, for $10.00 per forward purchase share, or an aggregate amount of up to $150,000,000, in a private
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placement that will close concurrently with the closing of a Business Combination. The amount of forward purchase shares sold pursuant to the forward purchase agreements will be determined in the Company’s discretion based on the Company’s need for additional capital to consummate a Business Combination. Under each forward purchase agreement, the Company is required to approach Casdin and Corvex if it proposes to raise additional capital by issuing any equity, or securities convertible into, exchangeable or exercisable for equity securities in connection with a Business Combination. The respective obligations of Casdin and Corvex to purchase forward purchase shares will, among other things, be conditioned on the Company completing a Business Combination with a company engaged in a business that is within the investment objectives of the Clients purchasing forward purchase shares and on the Business Combination (including the target assets or business, and the terms of the Business Combination) being reasonably acceptable to such Clients as determined by Casdin or Corvex, as relevant, as investment advisors on behalf of such Clients. Each of Casdin and Corvex will have the right to transfer a portion of its purchase obligation under the forward purchase agreement to third parties, subject to compliance with applicable securities laws. To the extent that the Company obtains alternative financing to fund the initial Business Combination and the Clients participate in such financing, the aggregate commitment under the forward purchase agreement will be reduced by the amount of such alternative financing.
Subscription Agreement
In connection with the Business Combination, the Company entered into the Subscription Agreements with the PIPE Investors, pursuant to which, among other things, the Company agreed to issue and sell to the PIPE Investors, in private placements to close immediately prior to the Closing, an aggregate of 35,000,000 shares of common stock at $10.00 per share, for an aggregate purchase price of $350,000,000. The obligations to consummate the subscriptions are conditioned upon, among other things, customary closing conditions and the consummation of the transactions contemplated by the Merger Agreement. The PIPE Investment will be consummated substantially concurrently with the Closing. All of the PIPE investors have affirmed to us that the Restatement (as defined below) would not affect the closing of the Transaction. For more information about the Restatement please see the section entitled “Risk Factors — Risks Related to the Company and the Business Combination”.
Related Party Policy
Prior to the consummation of our IPO, we adopted a code of ethics requiring us to avoid, wherever possible, all conflicts of interests, except under guidelines or resolutions approved by our board of directors (or the appropriate committee of our board) or as disclosed in our public filings with the SEC. Under our code of ethics, conflict of interest situations include any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) involving the Company.
In addition, our audit committee, pursuant to a written charter that we adopted prior to the consummation of our IPO, is responsible for reviewing and approving related party transactions to the extent that we enter into such transactions. An affirmative vote of a majority of the members of the audit committee present at a meeting at which a quorum is present is required in order to approve a related party transaction. A majority of the members of the entire audit committee constitutes a quorum. Without a meeting, the unanimous written consent of all of the members of the audit committee is required to approve a related party transaction. We also require each of our directors and executive officers to complete a directors’ and officers’ questionnaire that elicits information about related party transactions.
These procedures are intended to determine whether any such related party transaction impairs the independence of a director or presents a conflict of interest on the part of a director, employee or officer.
Sema4’s Related Party Transactions
The following is a description of transactions since January 1, 2020 and currently proposed transactions in which:
•a.Sema4 haswe have been or is to be a participant;
•b.the amount involved exceeded or exceeds $120,000;will exceed the lesser of $120,000 or 1% of the average of our total assets as of year-end for the last two completed fiscal years; and
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•c.any of Sema4’sour directors, executive officers or holders of more than 5% of itsour capital stock, prior to the Business Combination, or any immediate family member of, or person sharing the household with, any of these individuals, had or will have a direct or indirect material interest.
Related Party Transactions Related to the Acquisition
Acquisition Subscription Agreements
In connection with the Acquisition, the PIPE Investors executed subscription agreements to purchase an aggregate of 50,000,000 shares of our Class A common stock at $4.00 per share, for an aggregate purchase price of $200 million in private placements that we expect to close in the first half of 2022. The funds from such private placement will be used in part or whole to fund the Acquisition of GeneDx. The following table sets forth the number of shares of our Class A common stock that we expect to issue to our directors, executive officers and 5% stockholders and their affiliates in this transaction:
Shares of Class A Common Stock
PurchaserNumber of SharesAggregate Gross Consideration ($)
Entities affiliated with Blackstone(1)
2,500,000 10,000,000 
Entities affiliated with Casdin(2)
11,437,500 45,750,000 
Entities affiliated with Corvex(3)
11,437,500 45,750,000 
Mount Sinai(4)
6,250,000 25,000,000 
Entities affiliated with Deerfield(5)
5,000,000 20,000,000 
Entities affiliated with Rho Partners(6)
2,125,000 8,500,000 
Entities affiliated with Section32(7)
1,250,000 5,000,000 
Total40,000,000 160,000,000 
__________________
(1)Consists of 2,434,863 shares of Class A common stock expected to be issued to BTO Sema4 Holdings L.P., 50,402 shares of Class A common stock expected to be issued to Blackstone Tactical Opportunities Fund - FD L.P. and 14,735 shares of Class A common stock expected to be issued to Blackstone Family Tactical Opportunities Investment Partnership III ESC L.P.
(2)Consists of 11,437,500 shares of Class A common stock expected to be issued to Casdin Partners Master Fund, L.P.
(3)Consists of 3,557,000 shares of Class A common stock expected to be issued to Corvex Master Fund LP, 7,320,000 shares of Class A common stock expected to be issued to Corvex Select Equity Master Fund LP, and 560,500 shares of Class A common stock expected to be issued to Corvex Dynamic Equity Select Master Fund LP.
(4)Consists of 6,250,000 shares of Class A common stock expected to be issued to Ichan School of Medicine at Mount Sinai.
(5)Consists of 3,125,000 shares of Class A common stock expected to be issued to Deerfield Private Design Fund V, L.P. and 1,875,000 shares of Class A common stock expected to be issued to Deerfield Partners, L.P.
(6)Consists of 1,632,963 shares of Class A common stock expected to be issued to Vaal Investment Partners Q9 LP, 329,665 shares of Class A common stock expected to be issued to Rugu2 LLC, and 162,372 shares of Class A common stock expected to be issued to Kariba LLC. Rho Partners is an affiliate of Joshua Ruch, a member of our Board.
(7)Consists of 1,250,000 shares of Class A common stock expected to be issued to Section 32 Fund 2, L.P. Section32 is an affiliate of Michael Pellini, a member of our Board.
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Support Agreements
In connection with the execution of the Acquisition Merger Agreement, OPKO Health, Inc. (“OPKO”), the parent of GeneDx, and we entered into Support Agreements (the “Support Agreements”) with certain of our stockholders (including CMLS Holdings LLC, Casdin Partners Master Fund, L.P., Corvex Master Fund LP, Corvex Select Equity Master Fund LP, Corvex Dynamic Equity Select Master Fund LP, Icahn School of Medicine at Mount Sinai, and Section 32 Fund 2, L.P., whereby such stockholders agreed to, among other things, (a) vote at any meeting of our stockholders all of their shares of our Class A common stock held of record: (i) to approve the issuance of the stock consideration pursuant to Acquisition Merger Agreement and the issuance of our Class A common stock pursuant to the subscription agreements for the acquisitions; (ii) to approve the appointment of two specified designees to the Board for terms that expire no earlier than the end of the Second Milestone Period (as defined in the Acquisition Merger Agreement); (iii) to approve an amendment to our Charter to increase the authorized shares of our Class A common stock from 380,000,000 to 1,000,000,000; (iv) to approve any other proposal included in a proxy statement that is recommended by the Board as necessary to consummate the transactions in connection with the Acquisition Merger Agreement; (v) to approve any proposal that is recommended by the Board to adjourn the meeting to a later date, if there are not sufficient affirmative votes (in person or by proxy) to obtain the requested approvals on the date on which such meeting is held; and (vi) against any and all other proposals that could reasonably be expected to delay or impair the ability of us to consummate the transactions; (b) provide a proxy to us to vote such shares accordingly (subject to the condition that a proxy statement has been filed with the SEC and provided to our stockholders); (c) be bound by certain other covenants and agreements related to the transactions; and (d) be bound by certain transfer restrictions with respect to all or a percentage of their shares of our Class A common stock, prior to the meeting, in each case, on the terms and subject to the conditions set forth in the Support Agreements.
Sema4 Related Party Transactions
Employment Arrangements with Immediate Family Members of Our Executive Officers and Directors
Emilio Schadt, the son of Eric Schadt, our Chief Executive and a director, has been employed with us since August 2018 as a Data Science Software Engineer, where he is responsible for implementing methods to improve data reliability. During the year ended December 31, 2021, Mr. Schadt had total compensation, including base salary and bonus, of $177,543. Rick Wallsten, the brother of Eric Schadt, our Chief Executive Officer and a director, has been employed by us since November 2017 as a clinical pharmacist, where he is responsible for certain aspects of our pharmacogenomics program. During the year ended December 31, 2021, Mr. Wallsten had total cash compensation, including base salary and bonus, of $209,563. During the year ended December 31, 2020, Mr. Wallsten had total cash compensation, including base salary and bonus, of $157,620. Carol Senn, the sister-in-law of James Coffin, our former Chief Operating Officer, has been employed with us since November 2020 as an Account Manager, where she is responsible for certain aspects of growing the business. During the year ended December 31, 2021, Ms. Senn had total compensation, including base salary, of $155,706. Kelly Peterson, the sister of James Coffin, our former Chief Operating Officer, has been employed with us since February 2019 as a Sales Specialist Oncology, where she is responsible for the aspect of growing the business. During the year ended December 31, 2021, Ms. Peterson had total compensation, including base salary, of $211,152.
The salary and bonus levels, as applicable, of the aforementioned individuals were based on reference to internal pay equity when compared to the compensation paid to employees in similar positions who were not related to our executive officers and directors. They also received equity awards on the same general terms and conditions as applicable to other employees in similar positions who were not related to our executive officers and directors.
Licenses and Subleases
We were a party to several space license agreements and continue to be a party to sublease agreements with the Mount Sinai Health System (which we refer to together with its related entities as “Mount Sinai”) pursuant to which we leased approximately 124,000 square feet of office and laboratory space in Stamford, Connecticut for its headquarters and laboratory operations, and approximately 26,000 square feet of office and laboratory space in New York, New York for additional office space and laboratory operations. Rent expense for all facilities subleased by
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Icahn School of Medicine at Mount Sinai (“ISMMS”) to us was $4.2 million for the year ended December 31, 2021 and $5.9 million for the year ended December 31, 2020. Future minimum lease payments are expected to total $4.2 million related to all facilities subleased by ISMMS to Sema4 for the year ending December 31, 2022.
Transition Services and Employee Compensation
ISMMS provided transition services, under a transition services agreement and other contractual arrangements with us for services related to finance (accounts payable & purchasing, general accounting, financial systems, and payroll), real estate management, insurance coverage, compliance, equipment subleases, and IT. The transition services agreement expired on March 28, 2021. We made direct payments to ISMMS of approximately $1.6 million pursuant to such transition services agreement in 2021.
We provide partial reimbursement to Mount Sinai for limited compensation, services, and related expenses for certain individuals employed by Mount Sinai and certain individuals employed at both Mount Sinai and our company. For the years ended December 31, 2021 and 2020, the total amount of reimbursement for employee compensation and expenses paid by us to Mount Sinai was equal to approximately $1.2 million and $1.3 million, respectively.
Commercial Relationships
We provide products and services to Mount Sinai at fair market value, including for certain oncology testing, research services and clinical data services. Mount Sinai pays for certain of these services in cash, and for other of these services in kind through performing components of collaborative research projects and/or the provision of intellectual property and data rights.
In particular, these arrangements include a data structuring and curation services agreement, dated August 1, 2019, with ISMMS and certain other Mount Sinai entities, pursuant to which we provide certain data structuring and clinical support services to Mount Sinai, including the delivery to Mount Sinai of a curated dataset and interface allowing Mount Sinai users to query the curated dataset as mutually agreed by the parties. As compensation for these services, Mount Sinai provides us certain rights to use de-identified curated data. The data structuring and curation services agreement has a five-year term and, provided we are not in default under the terms of the agreement, the agreement may be renewed at our option for up to two one-year extension periods. Following the extension periods, the agreement may be further renewed by the mutual agreement of the parties. The agreement may be terminated earlier by Mount Sinai upon certain fundamental breaches by us, by us upon a breach by Mount Sinai of its material obligations, and by either party if certain insolvency or bankruptcy events occur with respect to the other party.
We also receive products and services from Mount Sinai at fair market value, including for certain research and clinical services, development services and lab services, and licenses certain intellectual property from Mount Sinai. Pursuant to these arrangements, we made direct payments to Mount Sinai of approximately $1.4 million and $3.4 million for the years ended December 31, 2021 and 2020, respectively.
Indemnification Agreements
Our Charter contains provisions limiting the liability of directors, and our Bylaws provide that we will indemnify each of our directors to the fullest extent permitted under Delaware law. Our Charter and our Bylaws also provide the Board with discretion to indemnify officers and employees when determined appropriate by our Board.
We have entered into indemnification agreements with each of our directors and executive officers and certain other key employees. The indemnification agreements provide that we will indemnify each of its directors, executive officers, and such other key employees against any and all expenses incurred by that director, executive officer, or other key employee because of his or her status as one of the Company’s directors, executive officers, or other key employees, to the fullest extent permitted by Delaware law, our Charter and our Bylaws. In addition, the indemnification agreements provide that, to the fullest extent permitted by Delaware law, the Company will advance all expenses incurred by its directors, executive officers, and other key employees in connection with a legal proceeding involving his or her status as a director, executive officer, or key employee.
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Legacy Sema4 Related Party Transactions
Series C Preferred Stock FinancingIndemnification Agreements
In July 2020, Sema4 sold an aggregateOur Charter contains provisions limiting the liability of 197,821 sharesdirectors, and our Bylaws provide that we will indemnify each of our directors to the fullest extent permitted under Delaware law. Our Charter and our Bylaws also provide the Board with discretion to indemnify officers and employees when determined appropriate by our Board.
We have entered into indemnification agreements with each of our directors and executive officers and certain other key employees. The indemnification agreements provide that we will indemnify each of its Series C preferred stock at a purchase pricedirectors, executive officers, and such other key employees against any and all expenses incurred by that director, executive officer, or other key employee because of $613.6743 per share to accredited investors for an aggregate purchase price of approximately $121.4 million. Each share of Sema4’s Series C preferred stock will be cancelled and represent the right to receive a portionhis or her status as one of the merger considerationCompany’s directors, executive officers, or other key employees, to the fullest extent permitted by Delaware law, our Charter and our Bylaws. In addition, the indemnification agreements provide that, to the fullest extent permitted by Delaware law, the Company will advance all expenses incurred by its directors, executive officers, and other key employees in connection with the completion of the Business Combination,a legal proceeding involving his or her status as provided in the Merger Agreement. See “Proposal No.1 – Approval of the Business Combination—The Merger Agreement—Merger Consideration.”
The following table summarizes purchases of shares of Sema4’s Series C preferred stock by its executive officers, directors, and holders of more than 5% of its capital stock.
Shares of Series C Preferred Stock
PurchaserNumber of SharesAggregate Gross Consideration ($)
Entities affiliated with Blackstone(1)
38,130 $23,399,401 
__________________
(1)Consists of 37,138 shares of Series C preferred stock held by BTO Sema4 Holdings L.P., 768 shares of Series C preferred stock held by Blackstone Tactical Opportunities Fund - FD L.P. and 224 shares of Series C preferred stock held by Blackstone Family Tactical Opportunities Investment Partnership III ESC L.P.
Second Amended and Restated Stockholders Agreement
On July 27, 2020, Sema4 entered into a second amended and restated stockholders’ agreement, as amended, or the Stockholders’ Agreement, with certain holders of Sema4’s capital stock. The Stockholders’ Agreement provides for certain customary rights with respect to the management of Sema4, rights of first offer and pre-emptive rights, transfer restrictions, tag-along rights and drag-along rights, which rights and restrictions will terminate upon the consummation of the Business Combination. In addition, the Stockholders’ Agreement provides for certain customary registration rights. In connection with the consummation of the Business Combination, certain stockholders of Sema4 will enter into an amended and restated registration rights agreement with the post-combination company, which will terminate the registration rights under the Stockholders’ Agreement. For a description of the amended and restated registration rights agreement, see the section entitled “Certain Relationships and Related Party Transactions — The Company’s Related Party Transactions — Post Business Combination Registration Rights Agreement”.
Registration Rights Agreement
On March 28, 2016, Sema4 entered into a registration rights agreement, or the ISMMS Registration Rights Agreement, with Icahn School of Medicine at Mount Sinai, or ISMMS. The ISMMS Registration Rights Agreement provides for certain customary registration rights. In connection with the consummation of the Business Combination, ISMMS will enter into an amended and restated registration rights agreement with the post-combination company, which will terminate the registration rights under the ISMMS Registration Rights Agreement. For a description of the amended and restated registration rights agreement, see the section entitled “Certain Relationships and Related Party Transactions — The Company’s Related Party Transactions — Post Business Combination Registration Rights Agreement”.
Employment Arrangements with Immediate Family Members of Sema4’s Executive Officers and Directors
Rick Wallsten, the brother of Eric Schadt, Sema4’s Chief Executive Officer and a director, has been employed by Sema4 since November 2017 as a clinical pharmacist. As a clinical pharmacist for Sema4, Mr. Wallsten is responsible for certain aspects of Sema4’s pharmacogenomics program. During the year ended December 31, 2020, Mr. Wallsten had total cash compensation, including base salary and bonus, of $157,620.executive officer, or key employee.
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Kelly Peterson, the sister of James Coffin, Sema4’s President, Chief Operating Officer and Treasurer, has been employed byLegacy Sema4 since February 2019 as an account manager. As an account manager for Sema4, Ms. Peterson is responsible for managing certain of Sema4’s oncology customer accounts. During the year ended December 31, 2020, Ms. Peterson had total cash compensation, including base salary, commission and other compensation, of $160,223.
Licenses and Subleases
Sema4 was a party to several space license agreements and continues to be a party to sublease agreements with the Mount Sinai Health System (which we refer to together with its related entities as Mount Sinai) pursuant to which Sema4 leased certain office and laboratory space from Mount Sinai at fair market value, including approximately 124,000 square feet of office and laboratory space in Stamford, Connecticut for its headquarters and laboratory operations, and approximately 26,000 square feet of office and laboratory space in New York, New York for additional office space and laboratory operations. Rent expense for these licensed and subleased facilities was $5.9 million for the year ended December 31, 2020 and $1.4 million for the three months ended March 31, 2021. Future minimum lease payments are expected to total $4.8 million related to all facilities subleased by ISMMS to Sema4 for the year ending December 31, 2021. It is expected that the post-combination company will continue to operate out of the office and laboratory space in Stamford, Connecticut for its headquarters and laboratory operations, and certain of the subleased office space in New York, New York, following the completion of the Business Combination.
Transition Services and Employee Compensation
ISMMS provided transition services, under a transition services agreement and other contractual arrangements with Sema4 for services related to finance (accounts payable & purchasing, general accounting, financial systems, and payroll), real estate management, insurance coverage, compliance, equipment subleases, and IT. The transition services agreement expired on March 28, 2021. Sema4 made direct payments to ISMMS of approximately $3.1 million and $0.7 million for the year ended December 31, 2020 and the three months ended March 31, 2021 pursuant to the transition services agreement. It is expected that Sema4 will negotiate and enter into a new transition services agreement prior to the completion of the Business Combination.
Sema4 provides partial reimbursement to Mount Sinai for limited compensation, services, and related expenses for certain individuals employed by Mount Sinai and certain individuals employed at both Mount Sinai and Sema4. For the year ended December 31, 2020 and the three months ended March 31, 2021, the total amount of reimbursement for employee compensation and expenses paid by Sema4 to Mount Sinai was equal to approximately $1.3 million and $0.3 million, respectively.
Commercial Relationships
Sema4 provides products and services to Mount Sinai at fair market value, including for certain oncology testing, research services and clinical data services. Mount Sinai pays for certain of these services in cash, and for other of these services in kind through performing components of collaborative research projects and/or the provision of intellectual property and data rights.
In particular, these arrangements include a data structuring and curation services agreement, dated August 1, 2019, with ISMMS and certain other Mount Sinai entities, pursuant to which Sema4 provides certain data structuring and clinical support services to Mount Sinai, including the delivery to Mount Sinai of a curated dataset and interface allowing Mount Sinai users to query the curated dataset as mutually agreed by the parties. As compensation for these services, Mount Sinai provides Sema4 certain rights to use de-identified curated data. The data structuring and curation services agreement has a five-year term and, provided Sema4 is not in default under the terms of the agreement, the agreement may be renewed at Sema4’s option for up to two one-year extension periods. Following the extension periods, the agreement may be further renewed by the mutual agreement of the parties. The agreement may be terminated earlier by Mount Sinai upon certain fundamental breaches by Sema4, by Sema4 upon a breach by Mount Sinai of its material obligations, and by either party if certain insolvency or bankruptcy events occur with respect to the other party.
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Sema4 also receives products and services from Mount Sinai at fair market value, including for certain research and clinical services, development services and lab services, and licenses certain intellectual property from Mount Sinai. Pursuant to these arrangements, Sema4 made direct payments to Mount Sinai of approximately $3.7 million and $0.3 million for the year ended December 31, 2020 and the three months ended March 31, 2021, respectively.
Post-Business Combination Arrangements
In connection with the Business Combination, certain agreements were entered into or will be entered into pursuant to the Merger Agreement. These agreements include:
•Amended and Restated Registration Rights Agreement (see the section entitled “The Business Combination Proposal — Related Agreements — Amended and Restated Registration Rights Agreement”);Party Transactions
•Forfeiture Agreement (see the section entitled “The Business Combination Proposal — Related Agreements — Forfeiture Agreement”);
•ISMMS Lock-Up Agreement (see the section entitled “The Business Combination Proposal — Related Agreements —ISMMS Lock-Up Agreement”);
•Shareholder-Lockup Agreement (see the section entitled “The Business Combination Proposal — Related Agreements —Shareholder-Lockup Agreement”);
•Sponsor Support Agreement (see the section entitled “The Business Combination Proposal — Related Agreements — Sponsor Support Agreement”); and
•Insider Letter (see the section entitled “The Business Combination Proposal — Related Agreements —Insider Letter”).
Indemnification Agreements
The Amended and Restated Certificate of Incorporation, which will be effective upon the completion of the Business Combination, will containOur Charter contains provisions limiting the liability of directors, and Company’s bylaws, which will be effective upon the completion of the Business Combination, willour Bylaws provide that the post-combination companywe will indemnify each of itsour directors to the fullest extent permitted under Delaware law. The AmendedOur Charter and Restated Certificate of Incorporation and the bylaws willour Bylaws also provide the board of directorsBoard with discretion to indemnify officers and employees when determined appropriate by the post-combination company’s board of directors.our Board.
The post-combination company intends to enterWe have entered into new indemnification agreements with each of itsour directors and executive officers and certain other key employees. The indemnification agreements will provide that the post-combination companywe will indemnify each of its directors, executive officers, and such other key employees against any and all expenses incurred by that director, executive officer, or other key employee because of his or her status as one of the post-combination company’sCompany’s directors, executive officers, or other key employees, to the fullest extent permitted by Delaware law, the Amendedour Charter and Restated Certificate of Incorporation and the post-combination company’s bylaws.our Bylaws. In addition, the indemnification agreements will provide that, to the fullest extent permitted by Delaware law, the post-combination companyCompany will advance all expenses incurred by its directors, executive officers, and other key employees in connection with a legal proceeding involving his or her status as a director, executive officer, or key employee.
Policies and Procedures for
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Legacy Sema4 Related Party Transactions
Series C Preferred Stock Financing
In July 2020, Legacy Sema4 sold an aggregate of 197,821 shares of its Series C preferred stock at a purchase price of $613.6743 per share to accredited investors for an aggregate purchase price of approximately $121.4 million. On July 22, 2021, each share of Legacy Sema4’s Series C preferred stock was cancelled and received a portion of the merger consideration in connection with the completion of the business combination, as provided in the Prior Merger Agreement.
The post-combination company intendsfollowing table summarizes purchases of shares of Legacy Sema4’s Series C preferred stock by its executive officers, directors, and holders of more than 5% of its capital stock.
Shares of Series C Preferred Stock
PurchaserNumber of
Shares		Aggregate Gross Consideration ($)
Entities affiliated with Blackstone(1)
38,130 $23,399,401 
__________________
(1)Consists of 37,138 shares of Series C preferred stock held by BTO Sema4 Holdings L.P., 768 shares of Series C preferred stock held by Blackstone Tactical Opportunities Fund - FD L.P. and 224 shares of Series C preferred stock held by Blackstone Family Tactical Opportunities Investment Partnership III ESC L.P.
Second Amended and Restated Stockholders Agreement
On July 27, 2020, Legacy Sema4 entered into a second amended and restated stockholders’ agreement, as amended (the “A&R Stockholders’ Agreement”), with certain holders of Legacy Sema4’s capital stock. The A&R Stockholders’ Agreement provided for certain customary rights with respect to adoptthe management of Legacy Sema4, rights of first offer and pre-emptive rights, transfer restrictions, tag-along rights and drag-along rights, which rights and restrictions terminated on July 22, 2021, upon the consummation of the business combination. In addition, the A&R Stockholders’ Agreement provided for certain customary registration rights.
Related Party Transactions Entered into in Connection with the Business Combination
Business Combination Subscription Agreements
In connection with our business combination, the Merger PIPE Investors purchased an aggregate of 35,000,000 shares of our Class A common stock at $10.00 per share, for an aggregate purchase price of $350 million in private placements that closed immediately prior to the Merger Closing. The funds from such private placement were used as part of the consideration to Legacy Sema4’s equity holders in connection with the business combination. The following table sets forth the number of shares of our Class A common stock that we issued to our directors, executive officers and 5% stockholders and their affiliates in this transaction:
Shares of Class A Common Stock
PurchaserNumber of
Shares		Aggregate Gross Consideration ($)
Entities affiliated with Casdin(1)
5,000,000 50,000,000 
Entities affiliated with Corvex(2)
4,000,000 40,000,000 
Entities affiliated with Deerfield(3)
2,750,000 27,500,000 
Total16,250,000 162,500,000 
__________________
(1)Consists of 5,000,000 shares of Class A common stock held by affiliates of Casdin Partners Master Fund L.P.
(2)Consists of 4,000,000 shares of Class A common stock held by affiliates of Corvex Management LP.
(3)Consists of 2,750,000 shares of Class A common stock held by affiliates of Deerfield Management Company, L.P.
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Amended and Restated Registration Rights Agreement
In connection with the consummation of our business combination, we, CMLS Holdings LLC (the “Former Sponsor”) and certain other parties thereto (collectively, the “rights holders”) entered into an amended and restated registration rights agreement (the “Amended and Restated Registration Rights Agreement”). Pursuant to the terms of the Amended and Restated Registration Rights Agreement, we were required to prepare and file with the SEC, no later than 30 days after the closing date for the Merger, a newshelf registration statement for an offering to be made on a continuous basis from time to time with respect to the resale of the registrable shares under the Amended and Restated Registration Rights Agreement. We were further required to use commercially reasonable efforts to cause such shelf registration statement to be declared effective as soon as possible after filing, but in no event later than the earlier of 60 days following the filing date thereof and five business days after the SEC notifies us that it will not review such registration statement, subject to extension in the event that the registration is subject comments from the SEC.
In addition, pursuant to the terms of the Amended and Restated Registration Rights Agreement and subject to certain requirements and customary conditions, including with regard to the number of demand rights that may be exercised, the rights holders may demand at any time or from time to time, that we file a registration statement on Form S-1 or Form S-3 to register certain shares of our Class A common stock held by such rights holders. The Amended and Restated Registration Rights Agreement also provides the rights holders with “piggy-back” registration rights, subject to certain requirements and customary conditions. We will bear the expenses incurred in connection with the filing of any such registration statement.
ISMMS Lock-Up Agreement
In connection with the execution of the Prior Merger Agreement, we and Icahn School of Medicine at Mount Sinai entered into the ISMMS Lock-Up Agreement whereby ISMMS agreed to certain transfer restrictions in respect of the shares of our Class A common stock issued to ISMMS pursuant to the Prior Merger Agreement. These transfer restrictions expired on January 18, 2022.
Shareholder Lock-up Agreements
In connection with the execution of the Prior Merger Agreement, each stockholder of Legacy Sema4 prior to the closing of the business combination holding more than 1% of the outstanding common stock of Legacy Sema4 as of the date thereof, entered into a Stockholder Lock-up Agreement whereby such shareholder agreed to certain transfer restrictions in respect of the shares of our Class A common stock issued to such shareholder pursuant to the Prior Merger Agreement. These transfer restrictions expired on January 18, 2022.
CMLS Related Party Transactions Entered into Prior to the Business Combination
Founder Shares
On July 16, 2020, the Former Sponsor purchased an aggregate of 10,062,500 shares of Class B common stock of CMLS (the “Class B common stock”), for a total purchase price of $25,000, or approximately $0.002 per share. In August 2020, the Former Sponsor transferred 25,000 of Class B common stock to each of Dr. Leproust and Mr. Turner. On September 1, 2020, CMLS effected a 1:1.1 stock split of its Class B common stock, resulting in the Former Sponsor holding an aggregate of 10,993,750 shares of Class B common stock. The shares of Class B common stock automatically converted into Class A common stock on July 22, 2021 in connection with the consummation of the business combination (such shares, the “Founder Shares”).
Private Placement Warrants
On September 1, 2020, simultaneously with the closing of CMLS’s initial public offering (the “Initial Public Offering”), the Former Sponsor and certain of CMLS’s independent directors purchased an aggregate of 7,236,667 private placement warrants (the “Private Placement Warrants”), at a price of $1.50 per Private Placement Warrant, for an aggregate purchase price of $10,855,000. The Former Sponsor purchased 6,903,335 Private Placement Warrants, and Dr. Leproust (and/or one or more entities controlled by her) purchased 166,666 Private Placement
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Warrants. Each Private Placement Warrant is exercisable to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment.
Promissory Note–Related Party
On July 16, 2020, the Former Sponsor issued an unsecured promissory note to CMLS (the “Promissory Note”), pursuant to which CMLS could borrow up to an aggregate principal amount of $300,000. The Promissory Note was non-interest bearing and payable on the earlier of (i) December 31, 2020 or (ii) the consummation of the Initial Public Offering. The outstanding balance under the Promissory Note of $165,081 was repaid at the closing of the Initial Public Offering on September 4, 2020.
Insider Letter
On September 1, 2020, in connection with the Initial Public Offering, CMLS, the Former Sponsor and certain insiders of CMLS entered into a letter agreement (the “Insider Letter”) providing for, among other things, a lock-up in relation to the Founder Shares until the earlier of (a) one year after the completion of the business combination and (b) subsequent to the business combination, if the closing price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations, and the like) for any 20 trading days within any 30-day trading day period commencing at least 150 days after the business combination or (y) the date following the completion of the business combination on which we complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of our stockholders having the right to exchange their shares of Class A common stock for cash securities or other property. The Former Sponsor and each insider also agreed not to transfer any Private Placement Warrants (or any share of Class A common stock issued or issuable upon the exercise of the Private Placement Warrants), until 30 days after the completion of the business combination.
Forward Purchase Agreement
On September 1, 2020, in connection with the Initial Public Offering, CMLS entered into separate forward purchase agreements with Casdin Capital, LLC (“Casdin”) and Corvex Management LP (“Corvex”), in their capacities as investment advisors on behalf of one or more investment funds, clients or accounts managed by each of Casdin and Corvex, respectively (collectively, their “Clients”), pursuant to which, subject to the conditions provided therein, they caused the Clients to purchase from us up to an aggregate amount of 15,000,000 shares of Class A common stock the private placement that closed concurrently with the closing of the business combination.
Review, Approval or Ratification of Transactions with Related Parties
On July 22, 2021, we adopted a written related party transaction policy to be effective uponin connection with the completion of the Business Combination.business combination. The policy will provideprovides that officers, directors, holders of more than 5% of any class of the post-combination company’sour voting securities, and any member of the immediate family of and any entity affiliated with any of the foregoing persons, will not be permitted to enter into a related-party transaction with the post-combination companyus without the prior consent of theour audit committee, or other independent members of the post-combination company’s board of directorsour Board in the event it is inappropriate for the audit committee to review such transaction due to a conflict of interest. Any request for the post-combination
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companyus to enter into a transaction with an executive officer, director, principal stockholder, or any of their immediate family members or affiliates, in which the amount involved exceeds $120,000, must first be presented to theour audit committee for review, consideration, and approval. In approving or rejecting the proposed transactions, theour audit committee will take into account all of the relevant facts and circumstances available.
AllDirector Independence
The rules of Nasdaq require that a majority of our Board be independent. An “independent director” is defined generally as a person other than an executive officer or employee of the transactions describedissuer or any other individual having a relationship which, in the opinion of the issuer’s board of directors, would interfere with the exercise of independent judgement in carrying out the responsibilities of a director. Each individual serving on our Board, other than Eric Schadt and Jason Ryan, qualifies as an independent director under Nasdaq listing standards. Each director who serves on our audit committee, compensation committee and nominating and corporate governance committee are
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independent under Nasdaq listing standards. See the section entitled “Corporate Governance of Sema4” elsewhere in this section were entered into prior toproxy statement for more information.
GeneDx
GeneDx had no related party transactions for the adoption of this policy.years ended December 31, 2021 and 2020.
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REPORT OF THE AUDIT COMMITTEE
The information contained in the following report of our audit committee is not considered to be "soliciting material," "filed" or incorporated by reference in any past or future filing by us under the Exchange Act or the Securities Act unless and only to the extent that we specifically incorporate it by reference.
Our audit committee has reviewed and discussed with our management and Ernst & Young LLP our audited consolidated financial statements for the year ended December 31, 2021. Our audit committee has also discussed with Ernst & Young LLP the matters required to be discussed by Auditing Standard No. 1301 adopted by the Public Company Accounting Oversight Board (United States) regarding “Communications with Audit Committees.”
Our audit committee has received and reviewed the written disclosures and the letter from Ernst & Young LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with our audit committee concerning independence, and has discussed with Ernst & Young LLP its independence from us.
Based on the review and discussions referred to above, our audit committee recommended to our board of directors that the audited consolidated financial statements be included in our annual report on Form 10-K for the year ended December 31, 2021 for filing with the U.S. Securities and Exchange Commission.
Submitted by the Audit Committee
Keith Meister, Chair
Dennis Charney
Emily Leproust
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BENEFICIAL OWNERSHIP OF SECURITIES
Beneficial Ownership of Certain Stockholders, Directors and Executive Officers
The following table sets forth certain information with respect to the beneficial ownership of our Class A common stock as of February 22, 2022, by:
•each stockholder known by us to be the beneficial owner of more than 5% of our Class A common stock;
•each of our named executive officers;
•each of our directors and director nominees; and
•all of our current directors and executive officers as a group.
Percentage ownership of our Class A common stock is based on 244,727,239 shares of our Class A common stock outstanding on February 22, 2022. Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security or has the right to acquire a security, such as through the exercise of warrants or stock options or the vesting of restricted stock units, within 60 days of the date above. Shares subject to warrants or options that are currently exercisable or exercisable within 60 days of the date above or subject to restricted stock units that vest within 60 days of such date are considered outstanding and beneficially owned by the person holding such warrants, options or restricted stock units for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
Except as described in the footnotes below and subject to applicable community property laws and similar laws, we believe that each person listed above has sole voting and investment power with respect to such shares. Unless
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otherwise noted, the address of each beneficial owner is c/o Sema4 Holdings Corp., 333 Ludlow Street, North Tower, 8th Floor, Stamford, Connecticut 06902.
Name of Beneficial OwnersNumber of Shares of Class
A Common Stock Beneficially Owned
Percentage of Outstanding
Class A
Common Stock
5% Stockholders:
Entities affiliated with Blackstone Group Inc.(1)
25,866,50210.6
Entities affiliated with Deerfield Management Company, L.P.(2)
13,966,8245.7
Icahn School of Medicine at Mount Sinai(3)
88,355,47336.1
Directors and Named Executive Officers:
Eric Schadt(4)
7,484,1163.1
Isaac Ro(5)
395,294*
James Coffin (6)
2,696,0801.1
Dennis Charney——
Eli D. Casdin(7)
22,730,4199.3
Emily Leproust(8)
191,666*
Keith Meister(9)
22,230,4199.1
Michael Pellini(10)
3,714*
Jason Ryan(11)
3,714*
Joshua Ruch(12)
3,714*
Rachel Sherman(13)
181,609*
Nat Turner(14)
191,666*
Katherine Stueland——
Richard C. Fenniger Jr.——
Directors and executive officers as a group (15 individuals)(15)
39,485,25316.1
__________________
*Less than one percent
(1)Based solely on the information set forth in a Schedule 13D/A filed with the SEC on January 20, 2022 by Blackstone Holding III L.P. Consists of (i) 24,404,324 shares of Class A common stock held by BTO Sema4 Holdings L.P., (ii) 505,095 shares of Class A common stock held by Blackstone Tactical Opportunities Fund - FD L.P., (iii) 147,574 shares of Class A common stock held by Blackstone Family Tactical Opportunities Investment Partnership III ESC L.P., and (iv) (a) 100,000 shares of Class A common stock and (b) warrants to purchase 709,509 shares of Class A common stock which are exercisable within 60 days of February 22, 2022 held by Blackstone Aqua Master Sub-Fund, a sub-fund of Blackstone Global Master Fund ICAV. BTO Holdings Manager L.L.C. is the general partner of BTO Sema4 Holdings L.P. Blackstone Tactical Opportunities Associates L.L.C. is the managing member of BTO Holdings Manager L.L.C. BTOA L.L.C. is the sole member of Blackstone Tactical Opportunities Associates L.L.C. Blackstone Holdings III L.P. is the managing member of BTOA L.L.C. Blackstone Tactical Opportunities Associates III - NQ L.P. is the general partner of Blackstone Tactical Opportunities Fund - FD L.P. BTO DE GP - NQ L.L.C. is the general partner of Blackstone Tactical Opportunities Associates III - NQ L.P. Blackstone Holdings II L.P. is the managing member of BTO DE GP - NQ L.L.C. Blackstone Holdings I/II GP L.L.C. is the general partner of Blackstone Holdings II L.P. Blackstone Alternative Solutions L.L.C. is the investment manager of Blackstone Aqua Master Sub-Fund, a sub-fund of Blackstone Global Master Fund ICAV. Blackstone Holdings I L.P. is the sole member of Blackstone Alternative Solutions L.L.C. Blackstone Holdings I/II GP L.L.C. is the general partner of Blackstone Holdings I L.P. BTO Side-by-Side GP L.L.C. is the general partner of Blackstone Family Tactical Opportunities Investment Partnership III ESC L.P. Blackstone Holdings III L.P. is the sole member of BTO Side-by-Side GP L.L.C. Blackstone Holdings III GP L.P. is the general partner of Blackstone Holdings III L.P. Blackstone Holdings III GP Management L.L.C. is the general partner of Blackstone Holdings III GP L.P. The Blackstone Group Inc. is the sole member of each of Blackstone Holdings I/II GP L.L.C. and Blackstone Holdings III GP Management L.L.C. The sole holder of the Class C common stock of The Blackstone Group Inc. is Blackstone Group Management L.L.C. Blackstone Group Management L.L.C. is wholly-owned by Blackstone's senior managing directors and controlled by its founder, Stephen A. Schwarzman. Each of the Blackstone entities described in this footnote and Stephen A. Schwarzman may be deemed to beneficially own the shares directly or indirectly controlled by such Blackstone entities or him, but each disclaims beneficial ownership of such shares. The address of Mr. Schwarzman and each of the other entities listed in this footnote is c/o The Blackstone Group Inc., 345 Park Avenue, New York, New York 10154.
(2)Based solely on the information set forth in a Schedule 13G/A filed with the SEC on February 11, 2022 by James E. Flynn. Consists of (i) 7,042,580 shares of Class A common stock held by Deerfield Partners and (ii) 6,924,244 shares of Class A common stock held by DPDF. Deerfield Management Company, L.P. (“Deerfield Management”) is the investment manager of Deerfield Partners, L.P. (“Deerfield
257

Partners”) and Deerfield Private Design Fund V, L.P. (“DPDF”). Deerfield Mgmt, L.P. (“Deerfield Mgmt”) is the general partner of Deerfield Partners. Deerfield Mgmt V, L.P. (“Deerfield Mgmt V”) is the general partner of DPDF. James E. Flynn is the sole member of the general partner of each of Deerfield Management, Deerfield Mgmt and Deerfield Mgmt V. Deerfield Management, Deerfield Mgmt and Mr. Flynn may be deemed to beneficially own the securities held by Deerfield Partners. Deerfield Management, Deerfield Mgmt V and Mr. Flynn may be deemed to beneficially own the securities held by DPDF. The address for each of Deerfield Partners, DPDF, Deerfield Management, Deerfield Mgmt, Deerfield Mgmt V and Mr. Flynn is 345 Park Avenue South, New York, New York 10010.
(3)Based solely on the information set forth in a Schedule 13D/A filed with the SEC on January 21, 2022 by Icahn School of Medicine at Mount Sinai (“ISMMS”). Consists of 88,355,473 shares of Class A common stock held by ISMMS. The shares are held by ISMMS, a New York Education Corporation. The responsibility and authority for the voting and investment decisions with respect to the shares held by ISMMS is vested in those persons who from time to time are the executive officers of ISMMS under the oversight and direction of its board of directors and its sole member, Mount Sinai Health System, Inc., a New York Not-for-Profit Corporation. The address for Icahn School of Medicine at Mount Sinai is One Gustave L. Levy Place, New York, New York 10029.
(4)Consists of (i) 168,351 shares of Class A common stock and (ii) 7,315,765 shares of Class A common stock subject to options that are exercisable within 60 days of February 22, 2022.
(5)Consists of (i) 250,618 shares of Class A common stock and (ii) 144,676 shares of Class A common stock subject to options that are exercisable within 60 days of February 22, 2022.
(6)Consists of (i) 30,893 shares of Class A common stock and (ii) 2,665,187 shares of Class A common stock subject to options that are exercisable within 60 days of February 22, 2022. Dr. Coffin left the Company in February 2022.
(7)Based solely on the information set forth in a Schedule 13D/A filed with the SEC on January 19, 2022 by CMLS Holdings LLC. Includes (i) 5,000,000 shares of Class A common stock held indirectly by Casdin Partners Master Fund L.P., and (ii) (x) 10,993,750 shares of Class A common stock and (y) 6,736,669 shares of Class A common stock underlying private placement warrants that are exercisable within 60 days of February 22, 2022 held indirectly by CMLS Holdings LLC (the “Former Sponsor”). The Board of Managers of the Former Sponsor is comprised of Mr. Eli Casdin and Mr. Keith Meister who share voting and investment discretion with respect to the Class A common stock held of record by CMLS Holdings LLC. Mr. Casdin is a member of the Board. C-LSH LLC and M-LSH LLC are the members of CMLS Holdings LLC, and Mr. Casdin and Mr. Meister are the managing members of C-LSH LLC and M-LSH LLC, respectively. As such, each of the foregoing may be deemed to have or share beneficial ownership of the Class A common stock held directly by CMLS Holdings LLC. The business address of the Former Sponsor is c/o Corvex Management, L.P., 667 Madison Avenue, New York, NY 10065.
(8)Consists of (i) 25,000 shares of Class A common stock and (ii) 166,666 shares of Class A common stock underlying private placement warrants that are exercisable within 60 days of February 22, 2022.
(9)Based solely on the information set forth in a Schedule 13D/A filed with the SEC on January 19, 2022 by CMLS Holdings LLC. Includes (i) 4,500,000 shares of Class A common stock held indirectly by Corvex Management, L.P. and (ii) (x) 10,993,750 shares of Class A common stock and (y) 6,736,669 shares of Class A common stock underlying private placement warrants that are exercisable within 60 days of February 22, 2022 held indirectly by the Former Sponsor. The Board of Managers of the Former Sponsor is comprised of Mr. Eli Casdin and Mr. Keith Meister who share voting and investment discretion with respect to the Class A common stock held of record by CMLS Holdings LLC. C-LSH LLC and M-LSH LLC are the members of CMLS Holdings LLC, and Mr. Casdin and Mr. Meister are the managing members of C-LSH LLC and M-LSH LLC, respectively. As such, each of the foregoing may be deemed to have or share beneficial ownership of the Class A common stock held directly by CMLS Holdings LLC. The business address of the Former Sponsor is c/o Corvex Management LP, 667 Madison Avenue, New York, NY 10065.
(10)Consists of 3,714 shares of Class A common stock subject to options that are exercisable within 60 days of February 22, 2022.
(11)Consists of 3,714 shares of Class A common stock subject to options that are exercisable within 60 days of February 22, 2022.
(12)Consists of 3,714 shares of Class A common stock subject to options that are exercisable within 60 days of February 22, 2022.
(13)Consists of 181,609 shares of Class A common stock subject to options that are exercisable within 60 days of February 22, 2022.
(14)Consists of (i) 25,000 shares of Class A common stock held by Nat Turner and (ii) 166,666 shares of Class A common stock underlying private placement warrants held by NTWJ Holdings, LLC (“NTWJ”), that are exercisable within 60 days of February 22, 2022. Mr. Turner is a managing member of NTWJ. The address for NTWJ is 139 Reade Street, New York, New York 10013.
(15)Consists of (i) 21,376,237 shares of Class A common stock held directly and indirectly by all current directors and current executive officers of the Company as a group, (ii) 18,014 shares of Class A common stock issuable pursuant to RSUs held directly by all current directors and executive officers of the Company as a group and that will be vested within 60 days of February 22, 2022, (iii) 11,021,001 shares of Class A common stock subject to options held directly by all current directors and executive officers of the Company as a group and that are exercisable within 60 days of February 22, 2022, and (iv) 7,070,001 shares of Class A common stock underlying private placement warrants held directly and indirectly by all current directors and executive officers of the Company as a group and that are exercisable within 60 days of February 22, 2022.
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DELINQUENT SECTION 16(A) REPORTS
Section 16(a) of the Exchange Act requires our directors, executive officers, and any persons who own more than 10% of our common stock, to file initial reports of ownership and reports of changes in ownership with the SEC. Based solely on our review of the forms filed with the SEC and written representations from the directors and executive officers, we believe that all Section 16(a) filing requirements were timely met in the fiscal year ended December 31, 2021, with the exception of: a Form 4 with respect to the issuance of restricted stock units (“RSUs”) and an associated sale to cover transaction in respect of tax withholding obligations in connection with the vesting and settlement of a portion of the RSUs, which was filed one day late on October 6, 2021 on behalf of Shawn Assad; a Form 4 with respect to a sale to cover transaction in respect of tax withholding obligations in connection with the vesting and settlement of RSUs, which was filed one day late on November 15, 2021 on behalf of Shawn Assad; Forms 4 with respect to the issuance of RSUs and associated sale to cover transactions in respect of tax withholding obligations in connection with the vesting and settlement of a portion of the RSUs, which were filed four days late on November 2, 2021 on behalf of each of Shawn Assad, Daniel Clark, James Coffin, Anthony Prentice, Isaac Ro, Kareem Saad, Eric Schadt, and Karen White; a Form 5 with respect to the exercise of shares underlying the option grant, which was filed eighty-three days late on February 7, 2022 on behalf of Daniel Clark; and a Form 3 that was filed 29 days late on August 30, 2021 for affiliates of Blackstone, which was due within 10 calendar days of July 22, 2021 following the closing of the business combination, by BTO Sema4 Holdings L.P., BTO Holdings Manager L.L.C., Blackstone Tactical Opportunities Associates L.L.C., BTOA L.L.C., Blackstone Family Tactical Opportunities Investment Partnership III ESC L.P., BTO Side-by-Side GP L.L.C., Blackstone Holdings III L.P., Blackstone Holdings III GP L.P., Blackstone Holdings III GP Management L.L.C., Blackstone Tactical Opportunities Fund – FD L.P., Blackstone Tactical Opportunities Associates III – NQ L.P., BTO DE GP – NQ L.L.C., Blackstone Holdings II L.P., Blackstone Aqua Master Sub-Fund, a sub-fund of Blackstone Global Master Fund ICAV, Blackstone Alternative Solutions L.L.C., Blackstone Holdings I L.P., Blackstone Holdings I/II GP L.L.C., Blackstone Inc., Blackstone Group Management L.L.C. and Stephen A. Schwarzman.
MARKET PRICE, TICKER SYMBOL AND DIVIDEND INFORMATION
The Company
Market Price and Ticker Symbol
The Company’s units,Class A common stock and warrants are currently listed on Nasdaq under the symbols “CMLFU”, “CMLF”“SMFR” and “CMLFW”“SMFRW”, respectively.
On February 9, 2021,January 14, 2022, the trading date before the public announcement of the Business Combination,Acquisition, the Company’s units,Class A common stock and warrants closed at $16.96, $15.52$4.04 and $4.70,$0.75, respectively. On June 25, 2021,March 30, 2022, the trading date immediately prior to the date of this proxy statement, the Company’s units,Class A common stock and warrants closed at $14.25, $12.66$3.12 and $4.48,$0.69, respectively.
Holders
As of April 15, 2021,March 25, 2022 there was 1 holderwere 76 holders of record of our units, 1 holder of record of ourClass A common stock and 45 holders of record of our warrants. The number of holders of record does not include a substantially greater number of “street name” holders or beneficial holders whose units,Class A common stock and warrants are held of record by banks, brokers and other financial institutions.
Dividend Policy
We have not paid any cash dividends on our Class A common stock to date and do not intend to pay cash dividends prior to the completion of the Business Combination.Acquisition. The payment of any cash dividends subsequent to the Business CombinationAcquisition will be within the discretion of the post-combination company’sCompany’s board of directors at such time. WeFollowing the Acquisition, we currently expect that the post-combination companyCompany will retain future earnings to finance operations and grow its business, and we do not expect the post-combination companyCompany to declare or pay cash dividends for the foreseeable future.
Sema4
There is no public market for shares of Sema4 capital stock.
311259

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Representatives of our independent registered public accounting firm, Withum,Ernst & Young LLP, will be present at the special meeting of the Company’s stockholders. The representatives will have the opportunity to make a statement if they so desire and they are expected to be available to respond to appropriate questions.
APPRAISAL RIGHTS
Appraisal rights are not available to holders of our shares of Class A common stock in connection with the Business Combination.Acquisition.
HOUSEHOLDING INFORMATION
Unless we have received contrary instructions, we may send a single copy of this proxy statement to any household at which two or more stockholders reside if we believe the stockholders are members of the same family. This process, known as “householding,” reduces the volume of duplicate information received at any one household and helps to reduce our expenses. However, if stockholders prefer to receive multiple sets of our disclosure documents at the same address this year or in future years, the stockholders should follow the instructions described below. Similarly, if an address is shared with another stockholder and together both of the stockholders would like to receive only a single set of our disclosure documents, the stockholders should follow these instructions:
•If the shares are registered in the name of the stockholder, the stockholder should contact us at our offices at CM Life Sciences, Inc.Sema4 Holdings Corp., 667 Madison Avenue, New York, New York 10065333 Ludlow Street, North Tower, 8th Floor, Stamford, Connecticut 06902 or by telephone at (212) 474-6745,(800) 298-6470, to inform us of his or her request; or
•If a bank, broker or other nominee holds the shares, the stockholder should contact the bank, broker or other nominee directly.
TRANSFER AGENT AND REGISTRAR
The transfer agent for our securities is Continental Stock Transfer & Trust Company.
SUBMISSION OF STOCKHOLDER PROPOSALS
Our Board is aware of no other matter that may be brought before the Special Meeting. Under Delaware law, only business that is specified in the notice of Special Meeting to stockholders may be transacted at the Special Meeting.
FUTURE STOCKHOLDER PROPOSALS
We anticipate that the 20212023 annual meeting of stockholders will be held no later than June 2021.2023. For any proposal to be considered for inclusion in the proxy statement and form of proxy for the post-combination company’s 2021Company’s 2023 annual meeting of stockholders, it must be submitted in writing and comply with the requirements of Rule 14a-8 of the Exchange Act. SuchStockholder proposals submitted pursuant to Rule 14a-8 under the Exchange Act and intended to be presented at our 2023 annual meeting of stockholders must be received by the post-combination company at its principal executive offices a reasonable time before the post-combination company begins to print and mail its 2021 annual meeting proxy materialsus not later than December 1, 2022 in order to be considered for inclusion in theour proxy materials for that meeting. Such proposals must be received by the 2021 annual meeting.Company at its principal executive offices at 333 Ludlow Street, North Tower, 8th Floor, Stamford, Connecticut 06902.
In addition to any other applicable requirements, for business and for nominations to be properly brought before an annual meeting by a stockholder, the post-combination companyCompany’s bylaws will provide that the stockholder must give timely notice in proper written form to our secretaryCorporate Secretary at the post-combination company’sCompany’s principal executive offices at 333 Ludlow Street, North Tower, 8th Floor, Stamford, Connecticut 06902, and such business must otherwise be a proper matter for stockholder action. Such notice, to be timely, must be received not less than 9075 days nor more than 120105 days prior to the first anniversary of the preceding year’s annual meeting (which date shall, for purposes of the annual meeting of the post-combination company in the year of the Business Combination, be deemed to have occurred on May 15 of such year).meeting. As a result, any notice given by or on behalf of a shareholderstockholder pursuant to these provisions of the post-combination companyCompany’s bylaws (and not pursuant to SEC Rule 14a-8) must be received by [                ], 2021February 11, 2023 (but not before [                ], 2021)January 12, 2023). However, that in the event that the date of the
312260

event that the date of the annual meeting is advanced by more than thirty (30) days, or delayed by more than seventy (70)sixty (60) days, a stockholder’s notice must be so received not earlier than the one hundred and twentieth (120th)fifth (105th) day prior to such annual meeting and not later than the close of business on the later of (A) the ninetieth (90th) day prior to such annual meeting and (B) the tenth (10th) day following the day on which notice of the date of such annual meeting was mailed or public disclosure of the date of such annual meeting was made, whichever first occurs. Nominations and proposals also must satisfy other requirements set forth in the bylaws. The chairman of our Board may refuse to acknowledge the introduction of any stockholder proposal not made in compliance with the foregoing procedures and requirements set forth in the bylaws.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC as required by the Exchange Act. You can read the Company’s SEC filings, including this proxy statement, over the Internet at the SEC’s website at http://www.sec.gov.
If you would like additional copies of this proxy statement or if you have questions about the transaction or the proposals to be presented at the special meeting,Special Meeting, you should contact the Company at the following address and telephone number:
c/o Corvex Management LP333 Ludlow Street
667 Madison AvenueNorth Tower, 8th Floor
New York, New York 10065Stamford, Connecticut 06902
Telephone: (212) 474-6745(800) 298-6470
Attention: Eli CasdinInvestors@sema4.com
You may also obtain these documents by requesting them in writing or by telephone from the Company’s proxy solicitation agent at the following address and telephone number:
D.F. King & Co., Inc.
48 Wall Street, 22nd Floor
New York, NY 10005
Stockholders Call (toll-free): (800) 967-5074735-3591
Banks and Brokers Call: (212) 269-5550
Email: CMLF@dfking.comSema4@dfking.com
If you are a stockholder of the Company and would like to request documents, please do so no later than five business days before the special meetingSpecial Meeting in order to receive them before the special meeting.Special Meeting. If you request any documents from us, we will mail them to you by first class mail, or another equally prompt means.
All information contained in this proxy statement relating to the Company has been supplied by the Company, and all such information relating to Sema4GeneDx has been supplied by Sema4.GeneDx. Information provided by either the Company or Sema4GeneDx does not constitute any representation, estimate or projection of any other party.
This document is a proxy statement of the Company for the special meeting.Special Meeting. We have not authorized anyone to give any information or make any representation about the transaction, the Company or Sema4GeneDx that is different from, or in addition to, that contained in this proxy statement. Therefore, if anyone does give you information of this sort, you should not rely on it. The information contained in this proxy statement speaks only as of the date of this proxy statement, unless the information specifically indicates that another date applies.
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Mount Sinai Genomics, Inc.SEMA4 HOLDINGS CORP.
Financial Statements
Years Ended December 31, 2020, 2019 and 2018INDEX TO FINANCIAL STATEMENTS
Page
F-2
Financial Statements
F-3
F-5
F-6
F-7
F-8
Three Months Ended March 31, 2021 and 2020
Condensed Financial Statements (unaudited)
F-39
F-41
F-42
F-43
F-449
F-1

Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Mount Sinai Genomics, Inc.Sema4 Holdings Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Mount Sinai Genomics, Inc.Sema4 Holdings Corp. (the Company) as of December 31, 20202021 and 2019,2020, the related consolidated statements of operations and comprehensive loss, redeemable convertible preferred stock and stockholders’ deficitequity (deficit) and cash flows for each of the three years in the period ended December 31, 2020,2021, and the related notes (collectively referred to as the “financial“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 20202021 and 2019,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020,2021, in conformity with U.S. generally accepted accounting principles.
Restatement of 2020 and 2019 Financial Statements
As discussed in Note 2 to the consolidated financial statements, the 2020 and 2019 financial statements have been restated to correct a misstatement.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America.PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
The Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses, and expects to continue to do so, has an accumulated deficit and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.
/s/ ErnstERNST & YoungYOUNG LLP
We have served as the Company’s auditor since 2018.
New York, New York
May 6, 2021March 14, 2022
Auditor Firm Id:No. 42Auditor Name:Ernst & Young LLPAuditor Location:New York, New York, United States
F-2

Mount Sinai Genomics, Inc.Sema4 Holdings Corp.
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
December 31,December 31,
2020201920212020
AssetsAssetsAssets
Current assets:Current assets:Current assets:
Cash and cash equivalentsCash and cash equivalents$108,132 $115,006 Cash and cash equivalents$400,569 $108,132 
Accounts receivable32,044 21,433 
Accounts receivable, netAccounts receivable, net26,509 32,044 
Due from related partiesDue from related parties289 204 Due from related parties54 289 
Inventory24,962 15,983 
Prepaid expenses and other current assets8,681 11,179 
Inventory, netInventory, net33,456 24,962 
Prepaid expensesPrepaid expenses19,154 4,557 
Other current assetsOther current assets3,802 4,124 
Total current assetsTotal current assets174,108 163,805 Total current assets483,544 174,108 
Property and equipment, netProperty and equipment, net63,110 35,263 Property and equipment, net62,719 63,110 
Restricted cashRestricted cash10,828 — Restricted cash900 10,828 
Other assetsOther assets3,596 4,771 Other assets6,930 3,596 
Total assetsTotal assets$251,642 $203,839 Total assets$554,093 $251,642 
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Deficit
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
Current liabilities:Current liabilities:Current liabilities:
Accounts payableAccounts payable$26,737 $17,475 Accounts payable$44,693 $26,737 
Accrued expensesAccrued expenses11,854 6,250 Accrued expenses20,108 11,854 
Due to related partiesDue to related parties1,425 1,782 Due to related parties2,623 1,425 
Current portion of capital lease obligationsCurrent portion of capital lease obligations3,506 2,713 Current portion of capital lease obligations3,419 3,506 
Current contract liabilities1,783 1,559 
Contract liabilitiesContract liabilities473 1,783 
Other current liabilitiesOther current liabilities28,137 10,407 Other current liabilities29,968 28,137 
Total current liabilitiesTotal current liabilities73,442 40,186 Total current liabilities101,284 73,442 
Long-term debt, net of current portionLong-term debt, net of current portion18,971 5,000 Long-term debt, net of current portion11,000 18,971 
Stock-based compensation liabilitiesStock-based compensation liabilities131,989 11,758 Stock-based compensation liabilities— 131,989 
Capital lease obligations, net of current portionCapital lease obligations, net of current portion20,778 17,276 Capital lease obligations, net of current portion18,427 20,778 
Contract liabilities, net of current portion— 783 
Other liabilitiesOther liabilities2,074 432 Other liabilities3,480 2,074 
Warrant liabilityWarrant liability21,555 — 
Earn-out contingent liabilityEarn-out contingent liability10,244 — 
Total liabilitiesTotal liabilities247,254 75,435 Total liabilities165,990 247,254 
Commitments and contingencies (Note 8)
Commitments and contingencies (Note 9)Commitments and contingencies (Note 9)
Redeemable convertible preferred stock:Redeemable convertible preferred stock:Redeemable convertible preferred stock:
Series A-1 redeemable convertible preferred stock, $0.00001 par value: 447,373 shares authorized, issued and outstanding at December 31, 2020 and 2019; aggregate liquidation preference of $55,000 at December 31, 2020 and 201951,811 51,811 
Series A-2 redeemable convertible preferred stock, $0.00001 par value: 522,627 shares authorized at December 31, 2020 and 2019; 401,347 shares authorized, issued and outstanding at December 31, 2020 and 2019; aggregate liquidation preference of $49,342 at December 31, 2020 and 201946,480 46,480 
Series B redeemable convertible preferred stock, $0.00001 par value: 338,663 shares authorized, issued and outstanding at December 31, 2020 and 2019; aggregate liquidation preference of $204,302 at December 31, 2020 and 2019118,824 118,824 
Series C redeemable convertible preferred stock, $0.00001 par value: 197,824 shares authorized at December 31, 2020 and no shares authorized at December 31, 2019; 197,821 shares issued and outstanding at December 31, 2020 and no shares issued and outstanding at December 31, 2019; aggregate liquidation preference of $121,397 at December 31, 2020117,324 –
Redeemable convertible preferred stock334,439 217,115 
Stockholders’ deficit:
Class A common stock, $0.00001 par value: 2,500,000 shares authorized at December 31, 2020 and 2019; 1 share issued and outstanding at December 31, 2020 and 2019––
Series A-1 redeemable convertible preferred stock, $0.00001 par value: 0 and 55,399,943 shares authorized, issued and outstanding at December 31, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $0 and $55,000 at December 31, 2021 and December 31, 2020, respectivelySeries A-1 redeemable convertible preferred stock, $0.00001 par value: 0 and 55,399,943 shares authorized, issued and outstanding at December 31, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $0 and $55,000 at December 31, 2021 and December 31, 2020, respectively— 51,811 
F-3

Class B convertible common stock, $0.00001 par value: 15,000,000 shares authorized at December 31, 2020 and 2019; 105,429 shares issued and outstanding at December 31, 2020 and no shares issued and outstanding at December 31, 2019
Additional paid-in capital––
Accumulated deficit(330,051)(88,711)
Total stockholders’ deficit(330,051)(88,711)
Total liabilities, redeemable convertible preferred stock and stockholders’ deficit$251,642 $203,839 
Series A-2 redeemable convertible preferred stock, $0.00001 par value: 0 and 64,718,940 shares authorized at December 31, 2021 and December 31, 2020, respectively; 0 and 49,700,364 shares authorized, issued and outstanding at December 31, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $0 and $49,342 at December 31, 2021 and December 31, 2020, respectively— 46,480 
Series B redeemable convertible preferred stock, $0.00001 par value: 0 and 41,937,960 shares authorized, issued and outstanding at December 31, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $0 and $204,302 at December 31, 2021and December 31, 2020, respectively— 118,824 
Series C redeemable convertible preferred stock, $0.00001 par value: 0 and 24,497,317 shares authorized at December 31, 2021 and December 31, 2020, respectively; 0 and 24,496,946 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $0 and $121,397 at December 31, 2021 and December 31, 2020, respectively— 117,324 
Redeemable convertible preferred stock— 334,439 
Stockholders’ equity (deficit):
Preferred Stock, $0.0001 par value: 1,000,000 and 0 shares authorized at December 31, 2021 and December 31, 2020, respectively; 0 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively— — 
Class A common stock, $0.0001 par value: 380,000,000 shares authorized, 242,647,604 shares issued and outstanding at December 31, 2021 and $0.00001 par value: 309,584,750 shares authorized, 124 shares issued and outstanding at December 31, 202024 — 
Class B convertible common stock, $0.00001 par value: 0 and 18,575,085 shares authorized at December 31, 2021 and December 31, 2020, respectively; 0 and 130,557 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively— — 
Additional paid-in capital963,520 — 
Accumulated deficit(575,441)(330,051)
Total stockholders’ equity (deficit)388,103 (330,051)
Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)$554,093 $251,642 
The accompanying notes are an integral part of these consolidated financial statements.
F-4

Mount Sinai Genomics, Inc.Sema4 Holdings Corp.
Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except per share and share amounts)
Year Ended December 31,Year Ended December 31,
202020192018202120202019
RevenueRevenueRevenue
(Restated)(1)
(Restated)(1)
Diagnostic test revenue (including related party revenue of $285, $0 and $0 for the years ended December 31, 2020, 2019, and 2018, respectively)$175,351 $191,667 $132,970 
Other revenue (including related party revenue of $3, $1,180 and $254 for the years ended December 31, 2020, 2019 and 2018, respectively)3,971 4,507 371 
Diagnostic test revenue (including related party revenue of $90, $285 and $0 for the years ended December 31, 2021, 2020, and 2019, respectively)Diagnostic test revenue (including related party revenue of $90, $285 and $0 for the years ended December 31, 2021, 2020, and 2019, respectively)$205,100 $175,351 $191,667 
Other revenue (including related party revenue of $232, $3 and $1,180 for the years ended December 31, 2021, 2020, and 2019, respectively)Other revenue (including related party revenue of $232, $3 and $1,180 for the years ended December 31, 2021, 2020, and 2019, respectively)7,095 3,971 4,507 
Total revenueTotal revenue179,322 196,174 133,341 Total revenue212,195 179,322 196,174 
Cost of services (including related party expenses of $2,189, $1,859 and $4,122 for the years ended December 31, 2020, 2019 and 2018, respectively)184,648 119,623 92,093 
Cost of services (including related party expenses of $3,975, $2,189 and $1,859 for the years ended December 31, 2021, 2020, and 2019, respectively)Cost of services (including related party expenses of $3,975, $2,189 and $1,859 for the years ended December 31, 2021, 2020, and 2019, respectively)228,797 175,296 113,389 
Gross (loss) profitGross (loss) profit(5,326)76,551 41,248 Gross (loss) profit(16,602)4,026 82,785 
Research and developmentResearch and development72,700 34,910 21,383 Research and development105,162 72,700 34,910 
Selling and marketingSelling and marketing53,831 33,118 19,947 Selling and marketing112,738 63,183 39,352 
General and administrativeGeneral and administrative100,742 29,484 19,449 General and administrative205,988 100,742 29,484 
Related party expensesRelated party expenses9,395 9,452 9,132 Related party expenses5,659 9,395 9,452 
Loss from operationsLoss from operations(241,994)(30,413)(28,663)Loss from operations(446,149)(241,994)(30,413)
Other income (expense):Other income (expense):Other income (expense):
Change in fair market value of warrant and earn-out contingent liabilitiesChange in fair market value of warrant and earn-out contingent liabilities198,401 — — 
Interest incomeInterest income506 988 — Interest income79 506 988 
Interest expenseInterest expense(2,474)(783)(248)Interest expense(2,835)(2,474)(783)
Gain on extinguishment of debt— — 4,500 
Other income, netOther income, net2,622 504 539 Other income, net5,114 2,622 504 
Total other income, netTotal other income, net654 709 4,791 Total other income, net200,759 654 709 
Loss before income taxesLoss before income taxes(241,340)(29,704)(23,872)Loss before income taxes(245,390)(241,340)(29,704)
Income tax provisionIncome tax provision— — — Income tax provision— — — 
Net loss and comprehensive lossNet loss and comprehensive loss$(241,340)$(29,704)$(23,872)Net loss and comprehensive loss$(245,390)$(241,340)$(29,704)
Redeemable convertible preferred stock dividendsRedeemable convertible preferred stock dividends— 3,039 2,951 Redeemable convertible preferred stock dividends— — 3,039 
Net loss attributable to common stockholdersNet loss attributable to common stockholders$(241,340)$(32,743)$(26,823)Net loss attributable to common stockholders$(245,390)$(241,340)$(32,743)
Weighted average shares outstanding of Class A common stock1 1 1 
Weighted average shares outstanding, Class A common stockWeighted average shares outstanding, Class A common stock108,077,439 5,131 124 
Basic and diluted net loss per share, Class A common stockBasic and diluted net loss per share, Class A common stock$(5,824)$(32,743)$(26,823)Basic and diluted net loss per share, Class A common stock$(2.27)$(47,036)$(264,056)
Weighted average shares outstanding of Class B common stock4,044 — — 
Basic and diluted net loss per share, Class B common stock(58)— — 
___________________
(1)Certain expenses were previously misclassified as cost of services. These expenses are now reported as selling and marketing. This adjustment has no impact on total revenue, loss from operations, net loss and comprehensive loss or net loss per share. Refer to Note 2, “Summary of Significant Accounting Policies” to our consolidated financial statements for further information.
The accompanying notes are an integral part of these consolidated financial statements.
F-5

Mount Sinai Genomics, Inc.Sema4 Holdings Corp.
Consolidated Statement of Redeemable Convertible Preferred Stock and Stockholders’ DeficitEquity (Deficit)
(in thousands, except share amounts)
Redeemable Convertible Preferred StockClass A Common StockClass B Common StockRedeemable Convertible Preferred StockClass A Common StockClass B Common Stock
SharesAmountSharesPer ValueSharesPer ValueAccumulated deficitTotal stockholders’ deficitSharesAmountSharesPer ValueSharesPer ValueAdditional paid-in capitalAccumulated deficitTotal stockholders’ equity (deficit)
Balance at December 31, 2017800,000 $36,768 1 $— — $— $(29,145)$(29,145)
Net loss— — — — — — (23,872)(23,872)
Preferred Series A dividend24,000 2,951 — — — — (2,951)(2,951)
Capital contributions— 24,636 — — — — — — 
Balance at December 31, 2018Balance at December 31, 2018824,000 $64,355 1 $— — $— $(55,968)$(55,968)Balance at December 31, 2018102,039,134 $64,355 124 $— — $— — $(55,968)$(55,968)
Net lossNet loss— — — — — — (29,704)(29,704)Net loss— — — — — — — (29,704)(29,704)
Preferred Series A dividendPreferred Series A dividend24,720 3,039 — — — — (3,039)(3,039)Preferred Series A dividend3,061,173 3,039 — — — — — (3,039)(3,039)
Capital contributionsCapital contributions— 30,897 — — — — — — Capital contributions— 30,897 — — — — — — — 
Issuance of Preferred Series B, net of issuance costsIssuance of Preferred Series B, net of issuance costs338,663 118,824 — — — — — — Issuance of Preferred Series B, net of issuance costs41,937,960 $118,824 — — — — — — — 
Balance at December 31, 2019Balance at December 31, 20191,187,383 $217,115 1 $— — $— $(88,711)$(88,711)Balance at December 31, 2019147,038,267 $217,115 124 $— — $— — $(88,711)$(88,711)
Net lossNet loss— — — — — — (241,340)(241,340)Net loss— — — — — — — (241,340)(241,340)
Common stock class B issued pursuant to stock options— — —— 105,429 — — — 
Issuance of Preferred Series C, net of issuance costs197,821 117,324 — — — — — — 
Preferred Series A dividendPreferred Series A dividend— — — — 130,557 — — — — 
Capital contributionsCapital contributions24,496,946 117,324 — — — — — — — 
Balance at December 31, 2020Balance at December 31, 20201,385,204 $334,439 1 $— 105,429 $— $(330,051)$(330,051)Balance at December 31, 2020171,535,213 $334,439 124 $— 130,557 $— $(330,051)$(330,051)
Net lossNet loss— — — — — — (245,390)(245,390)
Stock option exercises Stock option exercises— — 995,526 — 1,253,179 — 1,783 — 1,783 
Conversion of Preferred Stock Conversion of Preferred Stock(171,535,213)(334,439)148,543,062 15 — — 104,517 — 104,532 
Conversion of Class B Common Stock Conversion of Class B Common Stock— — 1,309,320 — (1,383,736)— (744)— (744)
Net equity infusion from the Business Combination Net equity infusion from the Business Combination— — 90,333,562 9 — — 510,742 — 510,751 
Stock-based compensation modification reclassification Stock-based compensation modification reclassification— — — — — — 304,837 — 304,837 
Stock-based compensation expense Stock-based compensation expense— — — — — — 42,385 — 42,385 
Vested restricted stock units converted to common stockVested restricted stock units converted to common stock— — 1,466,010 — — — — — — 
Balance at December 31, 2021Balance at December 31, 2021— $— 242,647,604 $24 — $— $963,520 $(575,441)$388,103 
The accompanying notes are an integral part of these consolidated financial statements.
F-6

Mount Sinai Genomics, Inc.Sema4 Holdings Corp.
Consolidated Statements of Cash Flows
(in thousands, except share amounts)thousands)
Year Ended December 31,Year Ended December 31,
202020192018202120202019
Operating activitiesOperating activitiesOperating activities
Net lossNet loss$(241,340)$(29,704)$(23,872)Net loss$(245,390)$(241,340)$(29,704)
Adjustments to reconcile net loss to net cash used in operating activities:Adjustments to reconcile net loss to net cash used in operating activities:Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expenseDepreciation and amortization expense11,734 6,407 5,433 Depreciation and amortization expense21,807 11,734 6,407 
Stock-based compensation expenseStock-based compensation expense120,231 5,482 5,605 Stock-based compensation expense219,421 120,231 5,482 
Change in fair value of warrant and contingent liabilitiesChange in fair value of warrant and contingent liabilities(198,401)— — 
Provision for excess and obsolete inventoryProvision for excess and obsolete inventory2,129 — — 
Non-cash lease expenseNon-cash lease expense2,400 (176)437 Non-cash lease expense1,555 2,400 (176)
Gain on extinguishment of debt— — (4,500)
Loss from sale of lab equipment— — 105 
Loss on extinguishment of debtLoss on extinguishment of debt301 — — 
Amortization of debt issuance costsAmortization of debt issuance costs66 — — 
Change in operating assets and liabilities:Change in operating assets and liabilities:Change in operating assets and liabilities:
Accounts receivableAccounts receivable(10,611)(4,567)(4,743)Accounts receivable5,535 (10,611)(4,567)
InventoryInventory(8,979)(7,970)(4,929)Inventory(10,624)(8,979)(7,970)
Prepaid expenses and other current assetsPrepaid expenses and other current assets2,498 (2,526)(1,534)Prepaid expenses and other current assets(14,250)2,498 (2,526)
Due to/from related partiesDue to/from related parties(442)(919)(2,817)Due to/from related parties1,433 (442)(919)
Other assetsOther assets1,175 (4,395)(53)Other assets(1,861)1,175 (4,395)
Accounts payable and accrued expensesAccounts payable and accrued expenses14,805 12,847 2,311 Accounts payable and accrued expenses25,916 14,805 12,847 
Contract liabilitiesContract liabilities(559)2,342 — Contract liabilities(1,310)(559)2,342 
Other current liabilitiesOther current liabilities15,960 4,451 3,873 Other current liabilities3,239 15,960 4,451 
Net cash used in operating activitiesNet cash used in operating activities(93,128)(18,728)(24,684)Net cash used in operating activities(190,434)(93,128)(18,728)
Investing activitiesInvesting activitiesInvesting activities
Purchases of property and equipmentPurchases of property and equipment(24,094)(11,923)(2,183)Purchases of property and equipment(9,400)(24,094)(11,923)
Proceeds from sale of equipment— — 125 
Development of internal-use software assetsDevelopment of internal-use software assets(7,880)(3,533)(1,745)Development of internal-use software assets(11,386)(7,880)(3,533)
Net cash used in investing activitiesNet cash used in investing activities(31,974)(15,456)(3,803)Net cash used in investing activities(20,786)(31,974)(15,456)
Financing activitiesFinancing activitiesFinancing activities
Proceeds from issuance of Series B redeemable convertible preferred stock, net of issuance costsProceeds from issuance of Series B redeemable convertible preferred stock, net of issuance costs— 118,824 — Proceeds from issuance of Series B redeemable convertible preferred stock, net of issuance costs— — 118,824 
Proceeds from issuance of Series C redeemable convertible preferred stock, net of issuance costsProceeds from issuance of Series C redeemable convertible preferred stock, net of issuance costs117,324 — — Proceeds from issuance of Series C redeemable convertible preferred stock, net of issuance costs— 117,324 — 
Proceeds from PIPE issuanceProceeds from PIPE issuance350,000 — — 
Proceeds from equity infusion from the merger, net of redemptionsProceeds from equity infusion from the merger, net of redemptions442,684 — — 
Legacy Sema4 Shareholder payoutLegacy Sema4 Shareholder payout(230,665)— — 
Payment of transaction costsPayment of transaction costs(51,760)— — 
Stock Appreciation Rights payoutStock Appreciation Rights payout(3,795)— — 
Repayment of long-term debtRepayment of long-term debt(8,741)— — 
Exercise of stock optionsExercise of stock options1,271 — — 
Capital contributions from ISMMSCapital contributions from ISMMS— 30,897 24,636 Capital contributions from ISMMS— — 30,897 
Proceeds from long-term debt15,928 — 4,500 
Long-term debt principal payments(186)— — 
Capital lease principal payments(4,010)(1,709)(2,071)
Net cash provided by financing activities129,056 148,012 27,065 
Net increase (decrease) in cash, cash equivalents and restricted cash3,954 113,828 (1,422)
Cash, cash equivalents and restricted cash, at beginning of year115,006 1,178 2,600 
Cash, cash equivalents and restricted cash, at end of year$118,960 $115,006 $1,178 
Supplemental disclosures of cash flow information
Interest expense paid$1,745 $305 $260 
Purchases of property and equipment in accounts payable and accrued expenses$447 $818 $— 
Software development costs in accounts payable and accrued expenses$1,473 $1,040 $334 
Non-cash Series A redeemable convertible preferred stock dividends declared and paid$— $3,039 $2,951 
Forgiveness of principal on long-term debt$— $— $4,500 
Assets acquired under capital leases obligations$7,546 $9,796 $5,670 
F-7

Proceeds from long-term debt— 15,928 — 
Long-term debt principal payments(1,000)(186)— 
Debt issuance costs(537)— — 
Capital lease principal payments(3,728)(4,010)(1,709)
Net cash provided by financing activities493,729 129,056 148,012 
Net increase in cash, cash equivalents and restricted cash282,509 3,954 113,828 
Cash, cash equivalents and restricted cash, at beginning of year118,960 115,006 1,178 
Cash, cash equivalents and restricted cash, at end of year401,469 118,960 115,006 
Supplemental disclosures of cash flow information
Cash paid for interest$2,751 $1,745 $305 
Cash paid for taxes$349 $— $— 
Purchases of property and equipment in accounts payable and accrued expenses$761 $447 $818 
Software development costs in accounts payable and accrued expenses$1,149 $1,473 $1,040 
Non-cash Series A redeemable convertible preferred stock dividends declared and paid$— $— $3,039 
Debt issuance costs incurred but unpaid$1,000 $— $— 
The accompanying notes are an integral part of these consolidated financial statements.
F-7F-8

Mount Sinai Genomics, Inc.Sema4 Holdings Corp.
Notes to Consolidated Financial Statements
1. Organization and Description of Business
Sema4 Holdings Corp., formerly Mount Sinai Genomics Inc., d/b/a Sema4 (the “Company”Delaware corporation (“Legacy Sema4”), as discussed further below, provides genomics-related diagnostic and information services and pursues genomics medical research. The CompanyLegacy Sema4 utilizes an integrated portfolio of laboratory processes, software tools and informatics capabilities to process DNA-containing samples, analyze information about patient-specific genetic variation and generate test reports for clinicians and their patients. The CompanyLegacy Sema4 provides a variety of genetic diagnostic tests and information with a focus on reproductive health, including pediatric, oncology and other conditions. In 2020, the CompanyLegacy Sema4 began to provide diagnostic testing services in response to the recent noveloutbreak of the coronavirus (“COVID-19”) outbreak. The Companypandemic. On December 15, 2021, it was announced that COVID-19 testing services would be discontinued by March 31, 2022. Legacy Sema4 primarily serves healthcare professionals who work with their patients and bills third partythird-party payors across the United States, with a substantial portion of its diagnostic testing volume occurring in the states of New York, California, Florida, Connecticut and New Jersey.
The Company was incorporated inOn July 22, 2021 (the “Closing Date”), CM Life Sciences, Inc. (“CMLS”) completed the Stateacquisition of Delaware as a for-profit corporation on October 16, 2015, with limited operations focused on establishingLegacy Sema4, pursuant to that certain Agreement and Plan of Merger (as amended, the Company as a capitalized, standalone entity. On June 1, 2017, the Company signed a contribution and funding agreement (the “Contribution“Merger Agreement”) and other agreements with Icahn School of Medicine at Mount Sinai (“ISMMS”), whereby ISMMS contributed certain assetsdated February 9, 2021. On the Closing Date, S-IV Sub, Inc. (“Merger Sub”) merged with and liabilities related tointo the Company’s operations, provided certain services toLegacy Sema4, with Legacy Sema4 surviving the Company, and also committed to fund the Company up to $55.0 million in future capital contributions (see Note 6) in exchange for equity in the Company (the “Spin-out”). Following the Spin-out, the Company commenced operations and began providing the services and performing research.
The Company remainedmerger as a wholly-owned subsidiary of ISMMS until August 2, 2019, whenCMLS (the “Merger” and, together with the Company issuedother transactions contemplated by the Merger Agreement, the “Business Combination”). In connection with the consummation of the Business Combination, CMLS changed its Series B redeemable convertible preferred stock (see Note 10). ISMMS providedname to “Sema4 Holdings Corp.” (“Sema4 Holdings”) and Legacy Sema4 changed its remaining committed fundingname to “Sema4 OpCo, Inc.” All equity securities of Legacy Sema4 were converted into the Company, pursuantright to receive the Contribution Agreement,applicable portion of the merger consideration.
The Merger was accounted for as a reverse recapitalization with Legacy Sema4 as the accounting acquirer and CMLS as the acquired company for accounting purposes. The shares and net loss per common share, prior to the Series B redeemable convertible preferredMerger, have been retroactively restated as shares reflecting the exchange ratio established in the Merger (1 share of Legacy Sema4 Class A common stock issuance. ISMMS continuesfor 123.8339 shares of Sema4 Holdings Class A common stock) (the “Conversion Ratio”).
Prior to maintain majority controlthe Merger, shares of CMLS Class A common stock, CMLS’s public warrants, and CMLS’s public units were traded on the Nasdaq Capital Market under the ticker symbols “CMLF”, “CMFLW”, and “CMLFU” respectively. On July 23, 2021, shares of Sema4 Holdings Class A common stock and Sema4 Holdings’ public warrants began trading on the Nasdaq Global Select Market (the “Nasdaq”) under the ticker symbols “SMFR” and “SMFRW,” respectively. See Note 3, “Business Combination,” for additional details.
Unless otherwise stated herein or unless the context otherwise requires, references in these notes to the “Company,” or “Sema4” refer to (i) Legacy Sema4 prior to the consummation of the CompanyBusiness Combination; and (ii) Sema4 Holdings and its subsidiary following the Series B and Series C redeemable convertible preferred stock issuances.consummation of the Business Combination.

2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Assets and liabilities transferred to the Company in the Spin-out were accounted for at ISMMS’s historical book basis as the transaction represented a transfer of net assets between entities under common control. The Company’s historical financial information includes costs of certain services historically provided by ISMMSIcahn School of Medicine at Mount Sinai (“ISMMS”) pursuant to athe Transition Services Agreement (“TSA”("TSA") and service agreements (“Service Agreements”). The Company’s historical results are not necessarily indicative of what its resultsservice.
Restatement – 2020 and 2019 annual statements of operations financial position, cash flows, or costs and expenses would have been had the Company been an independent entity during the historical periods presented or what its results of operations, financial position, cash flows, or costs and expenses will be in the future when it is a publicly traded, stand-alone company.
Liquidity and Going Concerncomprehensive loss
The Company has evaluated whether there are certain conditionsclassifies expenses incurred that directly relate to the delivery of revenue as cost of services in its consolidated statements of operations and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.
Through December 31, 2020, the Company has funded its operations primarily with proceeds from the issuance of its redeemable convertible preferred stock and the issuance of long-term debt. The Company has incurred recurring losses since its inception, including net losses of $241.3 million, $29.7 million and $23.9 million for the years ended December 31, 2020, 2019 and 2018, respectively. As of December 31, 2020, the Company had ancomprehensive loss.
F-8F-9

accumulated deficitAs a result of $330.1 million.expanded accounting resources, the Company identified the misclassification of certain expenses related to the genetic counseling department reported in cost of services that should have been reported in selling and marketing in the prior period financial statements. The Company expectsquantified the amount and determined it necessary to continuerestate its previously reported balances as follows (in thousands):
December 31, 2020December 31, 2019
As reportedMisclass-
ification		RestatedAs reportedMisclass-
ification		Restated
Total revenue179,322 — 179,322 196,174 — 196,174 
Cost of services184,648 (9,352)175,296 119,623 (6,234)113,389 
Gross (loss) profit(5,326)9,352 4,026 76,551 6,234 82,785 
Research and development72,700 — 72,700 34,910 — 34,910 
Selling and marketing53,831 9,352 63,183 33,118 6,234 39,352 
General and administrative100,742 — 100,742 29,484 — 29,484 
Related party expenses9,395 — 9,395 9,452 — 9,452 
Loss from operations(241,994)— (241,994)(30,413)— (30,413)
Total other income, net654 — 654 709 — 709 
Net loss and comprehensive loss(241,340)— (241,340)(29,704)— (29,704)
This misclassification did not have any impact to generate significant operating lossesthe Company's net loss or net loss per share as reported in the statements of operations and comprehensive loss in any interim or annual periods. Included in the misclassification amount is stock-based compensation expense of $1 million for 2020. There was no impact of misclassification for 2019 related to stock-based compensation expense.
Restatement – 2021 and 2020 interim financial statements (unaudited)
Additionally, the foreseeable future. AsCompany has identified quarterly out of May 6,period adjustments generally related to recognition of cost of services in the quarterly periods ended March 31, 2021, the issuance date June 30, 2021 and September 30, 2021. The impact
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of the financial statements formisclassification and quarterly out of period adjustments identified on each of the three months periods in the year ended December 31, 2021 and 2020 are disclosed as follows (in thousands):
2021 interim statements of operations and comprehensive loss (in thousands)
First
Quarter		Second
Quarter
As
 reported		Misclass-ificationAdjustmentRestatedAs
 reported		Misclass-ificationAdjustmentRestated
Total revenue64,351 — (150)64,201 46,865 — 150 47,015 
Cost of services71,812 (3,837)549 68,524 49,631 (2,287)835 48,179 
Gross (loss) profit(7,461)3,837 (699)(4,323)(2,766)2,287 (685)(1,164)
Research and development53,131 — 2 53,133 11,954 — (2)11,952 
Selling and marketing31,569 3,837 (40)35,366 16,247 2,287 40 18,574 
General and administrative101,917 — 121 102,038 12,794 — 76 12,870 
Related party expenses1,797 — — 1,797 888 — — 888 
Loss from operations(195,875)— (782)(196,657)(44,649)— (799)(45,448)
Total other income, net4,882 — — 4,882 (713)— — (713)
Net (loss) income and comprehensive loss(190,993)— (782)(191,775)(45,362)— (799)(46,161)
Third
Quarter		Fourth
Quarter
As
 reported		Misclass-ificationAdjustmentRestatedAs
 reported
Total revenue43,178 — — 43,178 57,801 
Cost of services58,752 (6,031)(1,234)51,487 60,607 
Gross (loss) profit(15,574)6,031 1,234 (8,309)(2,806)
Research and development17,831 — — 17,831 22,246 
Selling and marketing22,121 6,031 — 28,152 30,646 
General and administrative33,230 — (105)33,125 57,955 
Related party expenses847 — — 847 2,127 
Loss from operations(89,603)— 1,339 (88,264)(115,780)
Total other income, net120,995 — — 120,995 75,595 
Net (loss) income and comprehensive loss31,392 — 1,339 32,731 (40,185)
2020 interim statements of operations and comprehensive loss (in thousands)
First
Quarter		Second
Quarter		Third
Quarter		Fourth
Quarter
As reportedMisclass-ificationRestatedAs reportedMisclass-ificationRestatedAs reportedMisclass-ificationRestatedAs reportedMisclass-ificationRestated
Total revenue46,655 — 46,655 30,102 30,102 38,608 38,608 63,957 63,957 
Cost of services39,239 (2,101)37,138 35,985 (1,480)34,505 36,530 (2,508)34,022 72,894 (3,263)69,631 
Gross (loss) profit7,416 2,101 9,517 (5,883)1,480 (4,403)2,078 2,508 4,586 (8,937)3,263 (5,674)
Research and development13,096 — 13,096 9,361 — 9,361 19,083 — 19,083 31,160 — 31,160 
Selling and marketing11,733 2,101 13,834 8,686 1,480 10,166 12,735 2,508 15,243 20,677 3,263 23,940 
General and administrative7,164 — 7,164 8,121 — 8,121 24,342 — 24,342 61,115 — 61,115 
Related party expenses2,195 — 2,195 2,111 — 2,111 1,933 — 1,933 3,156 — 3,156 
Loss from operations(26,772)— (26,772)(34,162)— (34,162)(56,015)— (56,015)(125,045)— (125,045)
Total other income, net(218)— (218)2,110 — 2,110 (600)— (600)(638)— (638)
Net loss and comprehensive loss(26,990)— (26,990)(32,052)— (32,052)(56,615)— (56,615)(125,683)— (125,683)
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The adjustments also affected certain current asset and liability accounts previously reported in the Company expects that its existingcondensed balance sheets as of March 31, 2021 and June 30, 2021 and condensed consolidated balance sheets as of September 30, 2021 as follows (in thousands):
March 31, 2021June 30, 2021September 30, 2021
As reportedAdjust-
ment		RestatedAs reportedAdjust-
ment		RestatedAs reportedAdjust-mentRestated
Assets
Current assets:
Cash and cash equivalents58,652 — 58,652 26,501 — 26,501 461,276 — 461,276 
Accounts receivable33,490 (150)33,340 24,568 — 24,568 21,257 — 21,257 
Due from related parties349 — 349 437 — 437 413 — 413 
Inventory32,969 — 32,969 29,128 — 29,128 31,174 — 31,174 
Prepaid expenses and other current assets15,070 (139)14,931 18,378 — 18,378 24,391 — 24,391 
Total current assets140,530 (289)140,241 99,012 — 99,012 538,511 — 538,511 
Property and equipment, net64,632 — 64,632 62,097 — 62,097 60,333 — 60,333 
Restricted cash10,828 — 10,828 10,828 — 10,828 900 — 900 
Other assets3,596 — 3,596 3,596 — 3,596 3,613 — 3,613 
Total assets219,586 (289)219,297 175,533 — 175,533 603,357 — 603,357 
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable and accrued expenses41,609 493 42,102 43,650 1,581 45,231 43,079 242 43,321 
Due to related parties797 — 797 1,278 — 1,278 1,425 — 1,425 
Current contract liabilities2,810 — 2,810 1,341 — 1,341 493 — 493 
Other current liabilities22,991 — 22,991 24,764 — 24,764 26,369 — 26,369 
Total current liabilities68,207 493 68,700 71,033 1,581 72,614 71,366 242 71,608 
Long-term debt, net of current portion18,502 — 18,502 18,028 — 18,028 11,000 — 11,000 
Stock-based compensation liabilities296,952 — 296,952 295,049 — 295,049 — — — 
Warrant liability— — — — — — 46,629 — 46,629 
Earn-out contingent liability— — — — — — 61,400 — 61,400 
Other liabilities22,530 — 22,530 21,907 — 21,907 21,699 — 21,699 
Total liabilities406,191 493 406,684 406,017 1,581 407,598 212,094 242 212,336 
Redeemable convertible preferred stock:
Series A-1 redeemable convertible preferred stock51,811 — 51,811 51,811 — 51,811 — — — 
Series A-2 redeemable convertible preferred stock46,480 — 46,480 46,480 — 46,480 — — — 
Series B redeemable convertible preferred stock118,824 — 118,824 118,824 — 118,824 — — — 
Series C redeemable convertible preferred stock117,324 — 117,324 117,324 — 117,324 — — — 
Redeemable convertible preferred stock334,439 — 334,439 334,439 — 334,439 — — — 
Stockholders’ equity (deficit):
Preferred Stock— — — — — — — — — 
Class A common stock— — — — — — 24 — 24 
Class B convertible common stock— — — — — — — — — 
Additional paid-in capital— — — 1,483 — 1,483 926,253 — 926,253 
Accumulated deficit(521,044)(782)(521,826)(566,406)(1,581)(567,987)(535,014)(242)(535,256)
Total stockholders’ (deficit) equity(521,044)(782)(521,826)(564,923)(1,581)(566,504)391,263 (242)391,021 
Total liabilities, redeemable convertible preferred stock and stockholders’ equity219,586 (289)219,297 175,533 — 175,533 603,357 — 603,357 
F-12

The adjustments did not have any impact on the net cash andused in operating or investing activities, or net cash equivalentsused or provided by financing activities previously reported in the condensed statements of $108.1 million (excluding restricted cash) will be sufficient to fund itscash flows. However, certain line items within the operating expenses and capital expenditure requirements into the second half of 2021. The future viabilitysection of the Company beyond that point is dependent on its ability to raise additional capital to finance its operations.
The Company is seeking to merge with CM Life Sciences, Inc. (see Note 15). In the event the Company does not complete this transaction, the Company expects to seek additional funding through an initial public offeringcondensed statements of its common shares, private equity financings, debt financings or other capital sources, including collaborations with other companies or other strategic transactions. The Company may not be able to obtain financing on acceptable terms, or at all. The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders.
If the Company is unable to obtain funding, the Company will be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects, or the Company may be unable to continue operations. Although management continues to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all.
Based on its recurring losses from operations incurred since inception, expectation of continuing operating losses for the foreseeable future, and the need to raise additional capital to finance its future operations, as of May 6, 2021, the issuance date of the accompanying financial statements, the Company has concluded that there is substantial doubt about its ability to continue as a going concern for a period of one year from the date that these financial statements were issued.
The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. Accordingly, the financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.cash flows would change by immaterial amounts.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the consolidated financial statements as well as the reported amounts of revenues and expenses during the periods presented. The Company bases these estimates on current facts, historical and anticipated results, trends and various other assumptions that it believes are reasonable in the circumstances, including assumptions as to future events. These estimates include, but are not limited to, the transaction price for certain contracts with customers, the capitalization of software costs and the valuation of stock-based awards.awards, inventory, earn-out contingent liability and earn-out RSUs. Actual results could differ materially from those estimates, judgments and assumptions.
Concentration of Credit Risk and Other Risks and Uncertainties
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable.
The Company’s cash and cash equivalents are deposited with high-quality financial institutions. The Company has balances in financial institutions that exceed federal depository insurance limits. Management believes these financial institutions are financially sound and, accordingly, that minimal credit risk exists. The Company has not experienced any losses on its deposits of cash and cash equivalents.
The Company assesses both the customer and, if applicable, the third party payor that reimburses the Company on the customer’s behalf when evaluating concentration of credit risk. Significant customers and payors are those that represent more than 10% of the Company’s total annual revenues or accounts receivable balance at each respective balance sheet date. The significant concentrations of accounts receivable atas of December 31, 2021 and 2020 and 2019
F-9

were primarily from large managed care insurance companies and a reference laboratory. There was no individual customer that accounted for 10% or more of revenue or accounts receivable for any of the years presented. The Company does not require collateral as a means to mitigate customer credit risk.
For each significant payor, revenue as a percentage of total revenues and accounts receivable as a percentage of total accounts receivable are as follows:
RevenueAccounts ReceivableRevenueAccounts Receivable
Year Ended December 31,As of December 31,Year Ended December 31,As of December 31,
2020201920182020201920212020201920212020
Payor APayor A27%36%37%10%33%Payor A22 %27 %36 %15 %10 %
Payor BPayor B14%****Payor B13 %14 %***
Payor CPayor C***20%*Payor C****20 %
Payor DPayor D*24%27%*12%Payor D**24 %15 %*
Payor E**13%*21%
__________________
*less than 10%
The Company is subject to a concentration of risk from a limited number of suppliers for certain reagents and laboratory supplies. One supplier accounted for approximately 11%7%, 15%11% and 14% of purchases of lab supplies, reagents and kits15% for the years ended December 31, 2021, 2020 2019 and 2018,2019, respectively. Another supplier accounted for approximately 10%11%, 12%10% and 13% of purchases of lab supplies, reagents and kits12% for the years ended December 31, 2021, 2020 2019 and 2018,2019, respectively. This risk is managed by maintaining a target quantity of surplus stock.
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Impact of COVID-19
In March 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic. The ongoing COVID-19 pandemic has had, and continues to have, an extensive impact on the global health and economic environments.conditions. Many jurisdictions, including those in which the Company has locations,current operations, have implemented measures to combat the outbreak,spread and resurgence of COVID-19, such as travel restrictions and shelter in place orders. In addition, the healthcare sector generally experienced a decline in discretionary care services at the onset of the pandemic.
Beginning in April 2020, the Company’s diagnostic test volumes decreased significantly as compared to the prior year as a result of the COVID-19 pandemic and the related limitations and priorities across the healthcare system. In response, beginning in May 2020, the Company entered into several service agreements with state governments and healthcare institutions to provide testing for the presence of COVID-19 infection.variants. While test volumes have since improved, in the second half of 2020, the Company continuedcontinues to experience changes in the mix of tests due to the impact of COVID-19.the COVID-19 pandemic. COVID-19 could continue to have a material impact on the Company’s results of operations, cash flows and financial condition for the foreseeable future.
In March 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law which was a stimulus bill that, among other things, provided assistance to qualifying businesses and individuals and included funding for the healthcare system. The Company received $5.4 million inDuring 2020, as part of the stimulus provided by the CARES Act, the Company received $5.4 million, comprised of $2.6 million received under the Provider Relief Fund (“PRF”) distribution and $2.8 million received under the Employee Retention Credit (“ERC”) distribution.distribution which was recorded in other current liabilities and reflected in this balance as of December 31, 2020 and December 31, 2021.
PRF distributions to healthcare providers are not loans and will not be required to be repaid; however, as a condition to receiving these payments, providers must agree to certain terms and conditions and submit sufficient documentation demonstrating thatDuring 2021, the funds are being used for healthcare-related expenses or lost revenue attributable to the COVID-19 pandemic. The Company concluded it is probable that all terms and conditions associated withreceived an additional $5.6 million during 2021 under the PRF distribution, have been met. As a result, the Company recorded the PRF distributionwhich was recognized in other income (expense), net in the consolidated statements of operations and comprehensive loss.
ERC distributions are refundable tax credits for 50% of qualified wages paid to employees during the pandemic. A company is eligible for the ERC if it has not received a Paycheck Protection Program loanAdditionally, under the CaresCARES Act,
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and (1) its operations have been fully or partially suspended because the Company deferred payment of COVID-19 or (2) its gross receipts in a calendar quarterU.S. social security taxes in 2020 declined by more than 50% from the same period in 2019. At the time. As a result, $3.8 million of applying for the ERC, the Company concluded that it was reasonably possible the eligibility requirements would be met; however, due to a change in circumstances, the Company re-evaluated its position,employer payroll tax payments were deferred the recognition of the ERC distribution and recorded the proceeds in other liabilities as of December 31, 2020.2020 with $1.9 million paid in December 2021 and the remaining $1.9 million payment will be made in December 2022. As of December 31, 2021, the remaining payable is recorded in other current liabilities.
At this time, the Company is not certain of the availability, extent or impact of any future relief provided under the CARES Act or other stimulus initiatives.On December 15, 2021, it was announced that COVID-19 testing services would be discontinued by March 31, 2022.
Cash, Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. Cash equivalents consist of amounts invested in money market funds. Carrying values of cash equivalents approximate fair value due to the short-term nature of these instruments.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on the balance sheets that sum to the total of the same amounts shown on the statements of cash flows (in thousands):
As of December 31,As of December 31,
2020
2019
20212020
Cash and cash equivalentsCash and cash equivalents$108,132 $115,006 Cash and cash equivalents$400,569 $108,132 
Restricted cashRestricted cash10,828 –Restricted cash900 10,828 
TotalTotal$118,960 $115,006 Total$401,469 $118,960 
Restricted cash as of December 31, 20202021 consists of money market deposit accounts that secure an irrevocable standby lettersletter of credit that serve as collateral for security deposits for financing obligations and operating leases (see Note 7 and Note 8, respectively)9).
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Accounts Receivable
Accounts receivable consists of amounts due from customers and third party payors for services performed and reflect the consideration to which the Company expects to be entitled in exchange for providing those services. Accounts receivable are estimated and recorded in the period the related revenue is recorded. During the years ended December 31, 2020, 20192021 and 2018,2020, the Company did not record provisions for doubtful accounts. The Company wrote off accounts receivable balances of $0.2 million for the year ended December 31, 2020 and did not write off any accounts receivable balances for the yearsyear ended December 31, 20192021 and 2018.$0.2 million of accounts receivable was written off for the year ended December 31, 2020.
Inventory, net
Inventory, net which primarily consists of testing supplies and reagents, is capitalized when purchased and expensed when used in performing services. Inventory is stated at the lower of cost or net realizable value. Cost is determined using actual costs on a first-in, first-out basis. The Company periodically performs obsolescence assessments and writes off any inventory that is no longer usable. Any write-down of inventory to net realizable value creates a new cost basis. During the years endedThe Company recorded a reserve for excess and obsolete inventory of $2.1 million as of December 31, 2020, 2019 and 2018, the Company did not write off any inventory.2021. There was no reserve recorded as of December 31, 2020.
Property and Equipment, net
Property and equipment, including equipment contributed by ISMMS on the date of the Spin-out (see Note 5),net are stated at cost less accumulated depreciation and amortization. Equipment includes assets under capital lease. Improvements are capitalized, while maintenance and repairs are expensed as incurred. When assets are retired or otherwise disposed of, the cost and accumulated depreciation and amortization are removed from the balance sheets and any resulting gain or loss is reflected in the statements of operations and comprehensive loss in the period realized.
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Capital leases and leasehold improvements are amortized straight-line over the shorter of the term of the lease or the estimated useful life. All other property and equipment assets are depreciated using the straight-line method over the estimated useful life of the asset, which ranges from three to five years.
The Company reviews the recoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset or asset group may not be recoverable. An impairment loss is recognized when the total estimated future undiscounted cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. Impairment, if any, is assessed using discounted cash flows or other appropriate measures of fair value. There were no long-lived asset impairment losses recorded for any periods presented.
Capitalized Software
CostsWe capitalize certain costs incurred for computerrelated to the development of our software developed or obtainedapplications for internal use are capitalized forduring the application development activities and expensed asstate. If a project constitutes an enhancement to existing software, we assess whether the enhancement creates additional functionality to the software, thus qualifying the work incurred for preliminary project activitiescapitalization. Costs incurred prior to meeting these criteria together with costs incurred for training and post-implementation activities. Capitalization of such costs ceases when the project is substantially complete and ready for its intended purpose. Costs for maintenance and training are expensed as incurred. Once the project is available for general release, capitalization ceases and we estimate the useful life of the asset and begin amortization.
Capitalized software costs are amortized using the straight-line method over an estimated useful life of three years. Capitalized software is reviewed for impairment whenever events or changes in circumstances may indicate that the carrying amount of an asset may not be recoverable.recoverable
Fair Value Measurements
Financial assets and liabilities are recorded at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines the fair value of its financial instruments based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. The following
F-15

hierarchy lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market:
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.
Level 2: Observable inputs such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active or model-derived valuations whose significant inputs are observable.
Level 3: Unobservable inputs that are significant to the measurement of fair value but are supported by little to no market data.
The Company’s financial assets and liabilities consist of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities, capital leases and long-term debt. The Company’s cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to the relatively short-term nature of these accounts.
The Company’s capital leases and long-term debt are classified within level 1 of the fair value hierarchy because such long-term debt and capital lease agreements bear interest at rates for instruments with similar characteristics; accordingly, the carrying value of these liabilities approximate their fair values.
Stock-based CompensationThe Company’s loan from the Connecticut Department of Economic and Community Development is classified within level 2 of the fair value hierarchy. As of December 31, 2021, the long-term debt is recorded at its carrying value of $11.0 million in the consolidated balance sheet. The fair value is $10.2 million, which is estimated based on discounted cash flows using the yields of similar debt instruments of other companies with similar credit profiles.
Warrant Liability
As of the consummation of the Merger in July 2021, there were 21,995,000 warrants to purchase shares of Class A common stock outstanding, including 14,758,333 public warrants and 7,236,667 private placement warrants. As of December 31, 2021, there were 21,994,972 warrants to purchase shares of Class A common stock outstanding, including 14,758,305 public warrants and 7,236,667 private placement warrants outstanding. Each warrant expires five years after the Business Combination or earlier upon redemption or liquidation, and entitles the holder to purchase one share of Class A common stock at an exercise price of $11.50 per share, subject to adjustment, at any time commencing on September 4, 2021.
The Company records incentive stock options (“ISO”) and non-qualified stock options (“NSO”) offered to employees, consultants and directorsmay redeem the outstanding public warrants if the price per share of the Class A common stock equals or exceeds $18.00 as described below:
•in whole and not in part;
•at a price of $0.01 per public warrant;
•upon not less than 30 days’ prior written notice of redemption to each warrant holder; and
•if, and only if, the closing price of the Class A common stock equals or exceeds $18.00 per share (as adjusted) for any 20 trading days within a 30-trading day period ending three trading days before sending the notice of redemption to warrant holders.
The Company may redeem the outstanding public warrants if the price per share of the common stock equals or exceeds $10.00 as described below:
•in whole and not in part;
•at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares based on the estimatedredemption date and the fair market value of the awards and recognizescommon stock;
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•if, and only if, the closing price of the Class A common stock equals or exceeds $10.00 per share (as adjusted) for any 20 trading days within the 30-trading day period ending three trading days before the Company sends the notice of redemption to the warrant holders; and
•if the closing price of the common stock for any 20 trading days within a 30-trading day period ending three trading days before the Company sends notice of redemption to the warrant holders is less than $18.00 per share (as adjusted), the private placement warrants must also be concurrently called for redemption on the same terms as the outstanding public warrants, as described above.
The private placement warrants were issued to CMLS Holdings, LLC, Mr. Munib Islam, Dr. Emily Leproust and Mr. Nat Turner, and are identical to the public warrants underlying the units sold in the initial public offering, except that (1) the private placement warrants and the common stock issuable upon the exercise of the private placement warrants would not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions, (2) the private placement warrants are exercisable on a cashless basis, (3) the private placement warrants are non-redeemable (except as described above, upon a redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00) so long as they are held by the initial purchasers or their permitted transferees, and (4) the holders of the private placement warrants and the common stock issuable upon the exercise of the private placement warrants have certain registration rights. If the private placement warrants are held by someone other than the initial purchasers or their permitted transferees, the private placement warrants will be redeemable by the Company and exercisable by such holders on the same basis as the public warrants.
The Company accounts for warrants as liability-classified instruments based on an assessment of the warrant terms and applicable authoritative guidance in accordance with ASC 480-Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815-Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether the warrants meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815. This assessment is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
Earn-out contingent liability
In connection with the Merger, all Legacy Sema4 stockholders and option holders at that time became entitled to a pro rata share of 19,021,576 earn-out shares and earn-out Restricted Stock Units (“RSUs”). Based on an assessment of the earn-out shares for the Legacy Sema4 stockholders, the Company considered ASC 480 and ASC 815 and accounted for the earn-out shares as a liability. The Company subsequently measures the fair value of the liability at each reporting period and reports the changes in fair value recorded as a component of other income (expense), net in the consolidated statements of operations and comprehensive loss.
The Company determined the fair value of the earn-out shares issued to the Legacy Sema4 stockholders as of December 31, 2021 was $10.2 million.
As for the earn-out RSUs for the Legacy Sema4 option holders, a total of 2.7 million RSUs were granted on December 9, 2021. The vesting of such arrangement is conditioned on the satisfaction of both a service requirement and on the satisfaction of a market-based requirement. The market-based requirement would be achieved if the Company’s stock price is greater than or equal to $13 (Triggering Event I), $15 (Triggering Event II) and $18 (Triggering Event III) during the applicable performance period, based on the volume-weighted average price for a period of at least 20 days out of 30 consecutive trading days. Therefore, the Company accounts for this arrangement in accordance with ASC 718- Compensation — Stock Compensation (“ASC 718”) and stock-compensation expense is recognized over the longer of the expected achievement period for the market-based requirement and the service requirement. The Company recorded $0.2 million in relation to the earn-out RSU for the year ended December 31, 2021. In the event that any earn-out RSUs that are forfeited as a result of a failure to achieve the service requirement, the underlying shares will be reallocated on an annual basis to the Legacy Sema4 stockholders and to the Legacy Sema4 option holders who remain employed as of the date of such reallocation. The Company accounts for the re-allocations to Legacy Sema4 option holders as new grants.
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The estimated fair value of the earn-out is determined using a Monte Carlo valuation analysis.
Stock-based Compensation
The Company measures stock-based compensation at the grant date based on the fair value of the award and recognizes stock-based compensation expense over the requisite service period for each separate vesting portion of the award as ifon a straight-line basis. Determining the award was, in-substance, multiple awards.fair value of stock option awards requires judgment, including estimating stock price volatility and expected option life. Restricted stock awards are valued based on the fair value of the stock on the grant date. The Company uses the Black-Scholes option-pricing model to estimate the fair value of its stock option awards. Terms of the ISO and NSO stock options include a provision whereby the Company has a call option to repurchase the award for cash upon termination of employment or termination of the consulting agreement. The Company has concluded that it is probable it will continue to exercise its call option prior to the award holder being subject to the risks and rewards of equity ownership. As a result, stock options are classified as liabilities in the accompanying balance sheets.
ISO and NSO stock options granted vest solely based upon continued employment or service over a specific period of time. As such, the Company recognizes stock-based compensation liabilities only for those stock-based awards that are ultimately vested over their requisite service periods based on the vesting provisions of the individual grant awards, net of the shares exercised and forfeitures realized. Determination of fair value requires input of highly subjective assumptions.
The Company accounts for forfeituresissues new shares upon share option exercise and vesting of a restricted share unit. Forfeitures of stock-based compensation are recognized as they occur.
Income Taxes
Income taxes are accounted for under the asset and liability method. The provision for income taxes represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Current and deferred income taxes are measured based on the tax laws that are enacted as of the balance sheet date of the relevant reporting period. Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities and their respective tax bases using tax rates in effect for the year in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations and comprehensive loss in the period when the change is enacted. A valuation allowance is established when it is more likely than not that some or all of the deferred tax assets will not be realized. Based on the Company’s historical operating losses, the Company has recorded a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized.
The Company recognizes the effect of a tax position when it is more likely than not, based on technical merits, that the position will be sustained upon examination by the appropriate taxing authorities. The amount of tax benefit recognized for an uncertain tax position is the largest amount of benefit with a greater than 50 percent likelihood of being realized. Unrecognized tax benefits are included within other liabilities if recognized and are charged to earnings in the period that such determination is made. The Company records interest and penalties related to tax uncertainties, if applicable, as a component of income tax expense.
Leases
The Company categorizes lease agreements at their inception as either operating or capital leases.
For operating leases, the Company recognizes related rent expense on a straight-line basis over the term of the applicable lease agreement. Certain lease agreements contain rent holidays, scheduled rent increases and lease incentives. Rent holidays and scheduled rent increases are included in the determination of rent expense to be recorded over the lease term. LeaseAny lease incentives are recognized as a reduction ofreduce rent expense the Company records on a straight-line basis over the term of the lease. The Company recognizes rent expense beginning on the date it obtains the legal right to use and control the leased space.
For capital leases, the Company records a leased asset with a corresponding liability. Payments are recorded as reductions to the liability with an interest charge recorded based on the remaining liability.
Sale-leaseback arrangements characterized as “failed” due to the Company’s continuing involvement with the “sold” assets are accounted for as financing obligations. Specifically, in a failed sale-leaseback transaction, the Company does not derecognize the transferred assets and accounts for the proceeds as a financing obligation. The financing obligation is decreased over time by the Company’s lease payments, less the portion considered interest expense.
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Contingencies
Amounts related to contingencies are accrued if it is probable that a liability has been incurred and an amount can be reasonably estimated.
Revenue Recognition
The Company adopted Accounting Standards Codification (“ASC”) Topic 606 (“ASC 606”), Revenue from Contracts with Customers, on January 1, 2019 using the modified retrospective method applied to contracts which were not completed as of the adoption date. As a result, upon the adoption of ASC 606, the majority of what was previously classified as the provision for doubtful accounts recorded in general and administrative expense is now reflected as an implicit price concession and, therefore, is included as a reduction to diagnostic test revenue in the statements of operations and comprehensive loss. The Company recognizes any changes in customer credit issues not assessed at the date of service as provisions for doubtful accounts. Upon the adoption of ASC 606, the Company recognizes revenue when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration which the Company expects to be entitled to in exchange for those goods or services. If any changes in customer credit issues are identified which were not assessed at the date of service, provisions for doubtful accounts are recognized and recorded.
The majority of revenue is generated from diagnostic services provided to three groups of customers: patients with third-party insurance coverage; patients without third-party insurance coverage or those who elect to self-pay; and institutional clients, such as hospitals, clinics and reference laboratories. The Company also recognizes revenue from collaboration service agreements with pharmaceutical companies and other third parties pursuant to which the Company provides diagnostic testing and related data aggregation reporting services.
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Diagnostic test revenue
The Company’s diagnostic test revenue contracts typically consist of a single performance obligation to deliver diagnostic testing services to the ordering facility or patient.patient and therefore allocation of the contract transaction price is not applicable. Control over diagnostic testing services is generally transferred at a point in time. Specifically, the Company determinedtime when the customer obtains control of the promised service which is upon delivery of the test results.
Revenue from diagnostic testing services is recorded at the estimated transaction price, subject to the constraint for variable consideration, upon transfer of control of the service.test.
Diagnostic test revenues consist primarily of services reimbursed by third-party insurance payors. Third-party insurance payors include managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges, and employers. In these arrangements, the customer is the patient. In arrangements with third-party insurance payors, the transaction price is stated within the contract, however, the Company accepts payments from third-party payors that are less than the contractually stated price and is therefore variable consideration.consideration and the transaction price is estimated.
When determining the transaction price, the Company uses a portfolio approach as a practical expedient to account for categories of diagnostic test contracts as collective groups rather than on an individual contract basis. The portfolio consists of major payor classes based on third-party payors. Based on historical collection trends and other analyses, the Company believes that revenue recognized by utilizing the portfolio approach approximates the revenue that would have been recognized if an individual contract approach was used.
Estimates of allowances for third-party insurance payors that impact the estimated transaction price are based upon the pricing and payment terms specified in the related contractual agreements. Contractual pricing and payment terms in third-party insurance agreements are generally based upon predetermined rates per diagnosis, per diem rates or discounted fee-for-service rates. In addition, for third-party payors in general, the estimated transaction price is impacted by factors such as historical collection experience, contractual provisions and insurance reimbursement policies, payor mix, and other relevant information for applicable payor portfolios. The estimates for implicit price concessions require significant judgment and are based upon management’s assessment of expected net collections, business and economic conditions, historical trends, trends in federal, state and private employer health care coverage and other collection indicators.
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The Company monitors these accrual estimates at each reporting period based on actual cash collections in order to assess whether a revision to the estimate is required. Both the initial estimate and any subsequent revision to the estimate contain uncertainty and require the use of judgment in the estimation of the transaction price and application of the constraint for variable consideration. If actual results in the future vary from the Company’s estimates, the Company will adjust these estimates, which would affect revenue and earnings in the period such variances become known.
For self-pay patients, the Company determines the transaction price associated with services rendered in consideration of implicit price concessions that are granted to such patients. The estimates for implicit price concessions require significant judgment and are based upon management’s assessment of expected net collections, business and economic conditions, historical trends, trends in federal, state and private employer health care coverage and other collection indicators.
For institutional clients, the customer is the institution. The Company determines the transaction price associated with services rendered in accordance with the contractual rates established with each customer.
Payment terms and conditions vary by contract and customer. The Company’scustomer, however standard payment terms are generally less than 60 days from the invoice date. In instances where the timing of the Company’s revenue recognition differs from the timing of its invoicing, the Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised services to the customer will be one year or less.
Other revenue
The Company enters into both short-term and long-term project-based collaboration and service agreements with third parties, whereby the Company provides diagnostic testing, research and related data aggregation reporting services.customers. Certain of these contracts include the transfer of a license to the Company’s intellectual property or participation by the Company on joint steering committees with the customer, which was considered to be immaterial in the context of the contract. The Company concludes that the goods and services transferred to itsour customers pursuant to these agreements generally comprise a single performance obligation on the basis that such goods and services are not distinct within the context of the contract. This is because the goods and services are highly interdependent and interrelated such that the Company would not be able to fulfill its underlying promise to itsour customers by transferring each good or service independently.
The consideration to which the Company is entitled pursuant to its collaboration service agreements generally includes non-refundable upfront payments and variable payments based upon the achievement of certain milestones or fixed monthly payments during the contract term. Non-refundable upfront payments are generally received in advance ofprior to the Company performing the services and, therefore,performance obligation are recorded as a contract liability upon receipt. Milestone payments are included in the transaction price only when it is probable that doing so will not result in a significant reversal of cumulative revenue recognized when the uncertainty associated with the milestone is subsequently resolved. For longer-term contracts, the Company does not account for a significant financing component since a substantial amount of the consideration promised by the customer is variable and the amount or timing of that consideration varies on the basis of a future event that is not substantially within the control of either party.
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The Company satisfies its performance obligations pursuant to its collaboration service agreementsobligation generally over time asif the customer simultaneously receives and consumes the benefits provided by the Company’s services as the Company performs those services. The Company recognizes revenue over time using an input measure based on costs incurred on the basis that this measure best reflects the pattern of transfer of control of the services to the customer. In some contracts, the Company subcontracts certain services to other parties for which the Company is ultimately responsible. Costs incurred for such subcontracted services are included in the Company’s measure of progress for satisfying its performance obligation and are recorded in cost of services in the consolidated statements of operations and comprehensive loss. Changes in the total estimated costs to be incurred in measuring the Company’s progress toward satisfying its performance obligation may result in adjustments to cumulative revenue recognized at the time the change in estimate occurs.
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Revenue recognition
The Company recognized revenue pursuant to ASC Topic 605 (“ASC 605”), Revenue recognition, for the year ended December 31, 2018 prior to the adoption of ASC 606. Under ASC 605, diagnostic test revenue was recognized when persuasive evidence of a final agreement existed; delivery had occurred or services were rendered; the price of the product or service was fixed or determinable; and collectability from the customer was reasonably assured. The criterion for whether the price was fixed or determinable and whether collectability was reasonably assured were based on management’s judgments. When evaluating collectability, in situations where reimbursement coverage did not exist, the Company considered whether a sufficient history to reliably estimate a payer’s individual payment patterns existed. For most uninsured customers, the Company was not able to demonstrate a predictable pattern of collectability and, therefore, recognized revenue when payment was received. For customers who had demonstrated a consistent pattern of payment of tests billed at the appropriate amounts, the Company recognized revenue at estimated realizable amounts upon delivery of test results.
Revenues from providing diagnostic testing and related data aggregation reporting services pursuant to collaboration service agreements were recognized when the contractual obligations were met based on the terms of the respective agreements.
Cost of Services
Cost of services reflects the aggregate costs incurred in performing diagnostic testing and collaboration services. These costs include expenses for reagents and laboratory supplies, personnel-related expenses (comprising salaries and benefits), stock-based compensation, shipping and handling fees, costs of third-party reference lab testing and third-party providers of genetic counseling and phlebotomy services, amortization of software development costs and equipment and allocated facility costs associated with testing. Allocated facility costs include depreciation of laboratory equipment, facility occupancy and information technology costs. Cost of services are recorded as the services are performed.
Research and Development
Research and development expenses represent costs incurred to develop technology and future test offerings. These costs are principally associated with the Company’s efforts to develop the software used to analyze data and process customer orders. These costs primarily consist of personnel-related expenses (comprising salaries and benefits), stock-based compensation, costs of reagents and laboratory supplies, costs of consultants and third-party services, equipment and related depreciation expenses, non-capitalizable software development costs and allocated facility and information technology costs associated with genomics medical research. Research and development costs are expensed as incurred.
Selling and Marketing
Selling and marketing expenses primarily consist of personnel-related expenses (comprising salaries, and benefits) and stock-based compensation for employees performing commercial sales, account management, marketing and medical education. Selling and marketing costs are expensed as incurred.
General and Administrative
General and administrative expenses primarily consist of personnel-related expenses (comprising salaries and benefits) and stock-based compensation for employees in executive leadership, legal, finance and accounting, human resources, information technology, strategy and other administrative functions. In addition, these expenses include office occupancy and information technology costs. General and administrative costs are expensed as incurred.
Other Income, Net
Other income, net primarily consists of certain funding received under the CARES Act in 2020, sales and use taxes and gains and losses on equipment disposals. The Company recognized $2.6 million of the $5.4 million of funding received under the CARES Act as other income, net on the statements of operations and comprehensive loss during the year ended December 31, 2020.
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Net Loss per Share
For the years ended December 31, 2020 and 2019, basic and diluted net loss per share attributable to common stockholders is presented in conformity with the two-class method required for companies with participating securities. The Company considers all redeemable convertible preferred stock issued on and after August 2, 2019 to be participating securities as the holders are entitled to receive dividends on an as-converted to Class A common stock basis in the event that a dividend is paid on common stock.
Under the two-class method, the net loss attributable to common stockholders was not allocated to the redeemable convertible preferred stock, as holders of the redeemable convertible preferred stock did not have a contractual obligation to share in losses. The net loss attributable to common stockholders is allocated to Class A and Class B common stockholders based on the proportion to which each class of common stock shares in losses of the Company. This proportion is based on the rights of the holders of Class B common stock relative to those of the holders of Class A common stock (see Note 11 and Note 13). Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period.
Diluted net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding in the basic net loss per share calculation plus the number of shares of common stock that would be issued assuming exercise or conversion of all potentially dilutive instruments. For purposes of this calculation, common stock options and redeemable convertible preferred stock have been excluded as their effect is anti-dilutive.
Segment InformationINDEX TO FINANCIAL STATEMENTS
The Company operates and manages its business as one reportable operating segment based on the manner in which the Chief Executive Officer, who is the Company’s chief operating decision maker (“CODM”), assesses performance and allocates resources across the business.
Emerging Growth Company
The Company is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012. As such, the Company is eligible for exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies, including reduced reporting and extended transition periods to comply with new or revised accounting standards for public business entities. The Company has elected to avail itself of this exemption and, therefore, will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
Recently Adopted Accounting Pronouncements
Effective January 1, 2020, the Company adopted ASU 2018-13, Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). This ASU removes requirements to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation processes for Level 3 fair value measurements. ASU 2018-13 clarifies that disclosure regarding measurement uncertainty is intended to communicate information about the uncertainty in measurement as of the reporting date. ASU 2018-13 adds certain disclosure requirements, including disclosure of changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. ASU 2018-13 also requires entities that use the practical expedient to measure the fair value of certain investments at their net asset values to disclose (1) the timing of liquidation of an investee’s assets and (2) the date when redemption restrictions will lapse, but only if the investee has communicated this information to the entity or announced it publicly Adoption of ASU 2018-13 did not have a material impact on the Company’s financial statements.
Effective January 1, 2020, the Company adopted ASU 2018-07, Compensation – Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”), which was issued to
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simplify accounting for nonemployee share-based payment transactions by making the treatment of nonemployee share-based compensation similar to that of employee share-based compensation. Adoption of ASU 2018-07 did not have a material impact on the Company’s financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”), which requires lessees to recognize right-of-use assets and lease liabilities for most leases on their balance sheets. Expense recognition for lessees under ASU 2016-02 is similar to current lease accounting. ASU 2016-02 will require enhanced disclosures to help the financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The recognition, measurement and presentation of expenses and cash flows arising from a lease will primarily depend on its classification as a finance or operating lease. As an emerging growth company, the provisions of ASU 2016-02 are effective for the Company for annual and interim periods beginning after December 15, 2021. Early adoption is permitted. The Company is evaluating the transition options permissible under ASU 2016-02 and plans to adopt through a cumulative adjustment to retained earnings on the date of adoption. Significant implementation matters being addressed by the Company include documenting the new lease accounting process. The Company is evaluating the effect this ASU will have on its financial statements, related disclosures and ongoing financial reporting. The Company expects implementation of this ASU to result in the recognition of right-of-use assets and corresponding lease liabilities in its balance sheets, principally related to office and facility leases.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The new credit losses standard changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, contract assets recognized as a result of applying ASC 606, loans and certain other instruments, entities will be required to use a new forward looking “expected loss” model that generally will result in earlier recognition of credit losses than under today’s incurred loss model. As an emerging growth company, ASU 2016-13 is effective for annual periods beginning after December 31, 2022, with early adoption permitted. Application of the amendments is through a cumulative-effect adjustment to the opening retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company is currently evaluating the impact of the new guidance on its financial statements and related disclosures.
In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the standard. ASU 2018-15 will require an entity (customer) in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. ASU 2018-15 also requires the entity (customer) to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. ASU 2018-15 also requires the entity to present the expense related to the capitalized implementation costs in the same line item in the statement of income as the fees associated with the hosting element (service) of the arrangement and classify payments for capitalized implementation costs in the statement of cash flows in the same manner as payments made for fees associated with the hosting element. The entity is also required to present the capitalized implementation costs on the balance sheets in the same line item that a prepayment for the fees of the associated hosting arrangement would be presented. The amendments in ASU 2018-15 are effective for the Company in annual reporting periods beginning after December 15, 2020 and interim periods beginning after December 15, 2021. Early adoption is permitted. The Company is evaluating the transition options permissible under ASU 2018-15 of either (1) retrospectively adjusting prior periods presented or (2) prospectively applying amendments to all implementation costs incurred after the date of adoption. The Company is currently evaluating the impact of ASU 2018-15 will have on its financial statements and related disclosures.
In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements: Clarifying the Interaction between Topic 808 and Topic 606 (“ASU 2018-18”), which clarifies that certain transactions between participants in
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a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer. In addition, ASC Topic 808 (“ASC 808”), Collaborative Arrangements precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. The provisions of ASU 2018-18 are effective for the Company for annual and interim periods beginning after December 15, 2020. Early adoption is permitted. The amendments in ASU 2018-18 are to be applied retrospectively through a cumulative effect adjustment to the opening balance of retained earnings of the later of (1) the earliest annual period presented and (2) the annual period that includes the date of the entity’s initial application of ASC 606. Permissible transition options include the election to retrospectively apply the amendments to either (1) all contracts or (2) only the contracts that are not completed at the date of initial application of Topic 606. The Company is not currently a participant in any such collaborative arrangements that are accounted for under ASC 808 and will evaluate the impact the adoption of this standard for any potential collaborative arrangements the Company enters into in the future.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC 740 and clarifying and amending existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years beginning after December 15, 2021. Early adoption is permitted. The Company is currently assessing the impact of adopting this new accounting guidance will have on its financial statements and related disclosures.
3.    Revenue Recognition
As described in Note 2, the Company adopted ASC 606 on January 1, 2019 using the modified retrospective method applied to contracts which were not completed as of the adoption date. The only impact as a result of the adoption of ASC 606 was the change in presentation of bad debt expense from general and administrative expense to a reduction of diagnostic test revenue. The adoption of ASC 606 did not have a material impact on the Company’s financial statements.
Disaggregated revenue
The following table summarizes the Company’s revenue disaggregated by type of customer (in thousands):
Year Ended December 31,
202020192018
Diagnostic test revenue:
Patients with third-party insurance$138,153 $169,538 $112,542 
Institutional customers35,200 20,888 19,606 
Self-pay patients1,998 1,241 822 
Total diagnostic test revenue175,351 191,667 132,970 
Other revenue3,971 4,507 371 
Total$179,322 $196,174 $133,341 
Reassessment of variable consideration
Subsequent changes to the estimate of the transaction price, determined on a portfolio basis when applicable, are generally recorded as adjustments to revenue in the period of the change. The Company updates variable consideration estimated quarterly. The quarterly changes in estimates did not result in material adjustments to the Company’s previously reported revenue or accounts receivable amounts for the years ended December 31, 2020, 2019 and 2018.
Remaining performance obligations
Due to the long-term nature of some collaboration service agreements, the Company’s obligations pursuant to such agreements represent partially unsatisfied performance obligations at year-end. The revenues under existing
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collaboration service agreements with original expected durations of more than one year are estimated to be approximately $12.0 million. The Company expects to recognize the majority of this revenue over the next 4 years.
Contract assets and liabilities
Contract assets consist of the Company’s right to consideration that is conditional upon its future performance. Contract assets arise in collaboration service agreements for which revenue is recognized over time but the Company’s right to bill the customer is contingent upon the achievement of contractually-defined milestones.
Contract liabilities consist of customer payments in excess of revenues recognized. For collaboration service agreements, the Company assesses the performance obligations and recognizes contract liabilities as current or non-current based upon forecasted performance.
A reconciliation of the beginning and ending balances of contract assets and contract liabilities is shown in the table below (in thousands):
Contract
Assets		Contract Liabilities
December 31, 2018$— $— 
Contract asset additions1,057 — 
Customer prepayments— 3,754 
Revenue recognized— (355)
December 31, 2019$1,057 $3,399 
Contract asset additions1,097 — 
Amounts transferred to receivables(126)— 
Customer prepayments— 874 
Revenue recognized— (462)
December 31, 2020$2,028 $3,811 
The increase in contract assets and contract liabilities as of December 31, 2020 and 2019 is primarily due to the execution of a collaboration service agreement with a customer. The Company presents contracts assets and contract liabilities arising from this customer contract on a net basis on its balance sheets. As of December 31, 2020, $1.8 million is recorded as current contract liabilities. As of December 31, 2019, $1.5 million and $0.8 million are recorded as current contract liabilities and contract liabilities, net of current portion, respectively.
Costs to fulfill contracts
Costs associated with fulfilling the Company’s performance obligations pursuant to its collaboration service agreements include costs for services that are subcontracted to ISMMS. Amounts are generally prepaid and then expensed in line with the pattern of revenue recognition. Prepayment of amounts prior to the costs being incurred are recognized on the balance sheets as current or non-current based upon forecasted performance.
As of December 31, 2020 and 2019, the Company had outstanding deferred costs to fulfill contracts of $3.0 million and $1.1 million, respectively. As of December 31, 2020, all outstanding deferred costs were recorded as prepaid expenses and other current assets. As of December 31, 2019, $0.9 million and $0.2 million were recorded as prepaid expenses and other current assets and other assets, respectively.
Amortization of deferred costs was $0.9 million, $0.7 million and $0 for the years ended December 31, 2020, 2019 and 2018, respectively. The amortization of these costs is recorded in cost of services on the statements of operations and comprehensive loss.
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4.    Fair Value MeasurementsReport of Independent Registered Public Accounting Firm
The following tables set forthTo the fair valueShareholders and the Board of financial instruments that were measured at fair valueDirectors of Sema4 Holdings Corp.
Opinion on a recurring basis (in thousands):the Financial Statements
December 31, 2020
TotalLevel 1Level 2Level 3
Financial Assets:
Money market funds$92,940 $92,940 $— $— 
Total financial assets$92,940 $92,940 $— $— 
December 31, 2019
TotalLevel 1Level 2Level 3
Financial Assets:
Money market funds$100,272 $100,272 $— $— 
Total financial assets$100,272 $100,272 $— $— 
Money market funds are classified within Level 1We have audited the accompanying consolidated balance sheets of the fair value hierarchySema4 Holdings Corp. (the Company) as the fair value is based on quoted prices in active markets.
There were no transfers between Level 1, Level 2 and Level 3 during the periods presented.
5.    Property and Equipment
Property and equipment consisted of the following (in thousands):
As of December 31,
20202019
Laboratory equipment$22,818 $14,907 
Equipment under capital leases20,743 13,197 
Building under capital lease6,276 6,276 
Construction-in-progress4,673 5,959 
Capitalized software14,631 6,319 
Computer equipment4,118 3,188 
Furniture, fixtures and other equipment3,214 1,658 
Leasehold improvements16,736 2,124 
Total property and equipment93,209 53,628 
Less: Accumulated depreciation and amortization(30,099)(18,365)
Property and equipment, net$63,110 $35,263 
For the years ended December 31, 2021 and 2020, 2019 and 2018, depreciation and amortization expense was $11.7 million, $6.4 million and $5.4 million, respectively, which included software amortization expense of $3.0 million, $1.2 million and $0.4 million for the years ended December 31, 2020, 2019 and 2018, respectively. Depreciation
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and amortization expense is included within therelated consolidated statements of operations and comprehensive loss, redeemable convertible preferred stock and stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as follows (in thousands):
Year Ended December 31,
202020192018
Cost of services$9,055 $4,752 $4,223 
Research and development1,040 821 722 
Selling and marketing— — — 
General and administrative1,639 834 488 
Total depreciation and amortization expenses$11,734 $6,407 $5,433 
During 2018,the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company sold laboratory equipment to ISMMSat December 31, 2021 and 2020, and the results of its operations and its cash flows for $0.1 million and realized a losseach of $0.1 million, which is included in other income, netthe three years in the statementsperiod ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.
Restatement of operations and comprehensive loss. During 2020 and 2019 there were no sales of property and equipment made by the Company.Financial Statements
6.    Related Party Transactions
On June 1, 2017, the Company and ISMMS entered into the Contribution Agreement, pursuant to which certain assets and liabilities were contributedAs discussed in Note 2 to the Company by ISMMS in exchange for common and preferred stock ofconsolidated financial statements, the Company with dividends accrued at 3% per annum. In accordance with the Contribution Agreement, ISMMS committed to fund $55.0 million to the Company, of which $55.0 million was drawn as of December 31, 2019. ISMMS also assigned a loan funding commitment to the Company, for which ISMMS is the guarantor. See Note 7 and Note 10 for further information.
Related party revenues
The Company provides diagnostic testing services to entities within the Mount Sinai Health Network. Related party diagnostic testing revenues recognized totaled $0.3 million for the year ended December 31, 2020. The Company did not recognize any related party diagnostic testing revenues during the years ended December 31, 2019 and 2018.
The Company entered into collaboration service agreements with ISMMS and other entities within the Mount Sinai Health Network pursuant to which the Company performed various diagnostic testing, research and related data aggregation reporting services. Revenues recognized under these agreements were nominal for the year ended December 31, 2020. Revenues recognized under these agreements totaled $1.2 million and $0.3 million for the years ended December 31, 2019 and 2018, respectively. These amounts are presented in other revenue on the statements of operations and comprehensive loss.
The Company had amounts due from ISMMS and other entities within the Mount Sinai Health Network for revenues earned of $0.3 million and $0.2 million as of December 31, 2020 and 2019 respectively. financial statements have been restated to correct a misstatement.
Basis for Opinion
These amountsfinancial statements are presented as due from related partiesthe responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s balance sheets.
Related party costs
Thefinancial statements based on our audits. We are a public accounting firm registered with the Public Company is party to a TSA with ISMMS. The TSA was established to facilitate the continuity of the Company’s operations following the Spin-out. The TSA includes financial guarantees on debt and lease obligations (as further discussed in Note 7 and Note 8, respectively); rental of certain office spaces; and accounting, finance, billing, compliance, information technology and insurance services. Expenses recognized under this agreement totaled $7.2 million, $7.8 million and $6.0 million for the years ended December 31, 2020, 2019 and 2018, respectively,Accounting Oversight Board (United States) (PCAOB) and are presented within related party expenses in the statements of operations and comprehensive loss. The Company had TSA payables duerequired to ISMMS of $0.6 million and $0.5 million at December 31, 2020 and 2019, respectively. These amounts are included within due to related parties on the Company’s balance sheets.
The Company is also partybe independent with respect to the Service Agreements with ISMMS, whereby ISMMS provides services for the Company including certain revenue collection efforts, procurement efforts, office space, administrative and other
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services that are not covered under the TSA. ISMMS also provides personnel through employee lease arrangements pursuant to the Service Agreements. In addition, the Company incurs costs for research and development and other support provided by related parties, including costs for services that are subcontracted to related parties that support the Company in fulfilling its performance obligations with its customers. Expenses recognized pursuant to the Service Agreements and other service arrangements with ISMMS totaled $4.4 million, $3.5 million and $7.3 million for the years ended December 31, 2020, 2019 and 2018, respectively. These amounts are included in either cost of services or related party expenses on the statements of operations and comprehensive loss depending on the particular activity to which the costs relate. The Company had payables due to ISMMS for the Service Agreements and other service arrangements of $0.8 million and $1.3 million at December 31, 2020 and 2019, respectively. These amounts are included within due to related parties on the Company’s balance sheets.
Total related party costs are included within cost of services and related party expenses in the statements of operations and comprehensive loss as follows (in thousands):
Year Ended December 31,
202020192018
Costs of services$2,189 $1,859 $4,122 
Related party expenses9,395 9,452 9,132 
Total related party costs$11,584 $11,311 $13,254 
7.    Long-Term Debt
2016 Funding Commitment
In April 2016, ISMMS received a $5.0 million loan funding commitment (the “DECD Loan Agreement”) from the Connecticut Department of Economic and Community Development (“DECD”) to support the Genetic Sequencing Laboratory Project in Branford, Connecticut (the “Project”). The DECD made a commitment to offer a total of $9.5 million in loan funding for leasehold improvements, construction, equipment, research and development, and administrative expenses over a period of ten years at an annual interest rate of 2.0% (collectively, “Phase 1” and “Phase 2” of funding for the Project). On June 1, 2017, as part of the Spin-out, ISMMS assigned both the agreement underlying the Project and the DECD Loan Agreement to the Company. ISMMS guaranteed and continues to guarantee the Company’s obligation to repay the DECD.
In June 2018, the Company amended the existing $9.5 million DECD Loan Agreement (the “Amended DECD Loan Agreement”) with the DECD by increasing the total loan commitment to $15.5 million at the same fixed annual interest rate of 2.0% for a term of 10 years from the date the new funds are disbursed (“Phase 3” of funding for the Project).
The terms of the Amended DECD Loan Agreement require the Company to make interest-only payments through July 2023 and principal and interest payments commencing in August 2023. The final payment of principal and interest is due in July 2028.
In addition, under the terms of the Amended DECD Loan Agreement, the DECD may grant partial principal loan forgiveness of up to $12.3 million in the aggregate. Such forgiveness is contingent upon the Company achieving job creation and retention milestones, specifically:
–$4.5 million of Phase 1 funding will be forgiven based on creating and maintaining 35 new full-time positions in Connecticut, with a combined annual average compensation of $70,000, for a period of 24 continuous months by December 31, 2017;
–$2.8 million of Phase 2 funding will be forgiven based on creating 228 new full-time positions in Connecticut, with a combined annual average compensation of $83,000, and maintaining an average of 269 full-time positions for a period of 24 continuous months by December 31, 2021;
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–$3.0 million of Phase 3 funding will be forgiven based on creating an additional 181 full-time positions in Connecticut, with a combined annual average compensation of $83,000, and maintaining an average of 450 full-time positions for a period of 24 continuous months by December 31, 2022; and
–An additional $2.0 million of funding will be forgiven based on creating an additional 103 full-time positions in Connecticut, with a combined annual average compensation of $83,000, and maintaining an average of 553 full-time positions for a period of 24 continuous months by December 31, 2023.
The Amended DECD Loan Agreement terms require the completion of an employment audit by a certified public accountant and acceptance by the DECD to achieve principal loan forgiveness.
The following summarizes the phased funding and potential loan forgiveness milestones set forth in the Amended DECD Loan Agreement (in millions):
FundingPotential Loan Forgiveness
Phase 1$5.0 $4.5 
Phase 24.5 2.8 
Phase 36.0 3.0 
Final— 2.0 
Total$15.5 $12.3 
In September 2018, the Company received an official letter from the DECD stating that in accordance with the Amended DECD Loan Agreement and following its Phase 1 employment audit, the Company met the job creation and retention milestones for Phase 1 and earned the related $4.5 million principal loan forgiveness credit. Accordingly, the Company recorded a $4.5 million gain on extinguishment of debt in the statements of operations and comprehensive loss for the year ended December 31, 2018.
The Company received $4.5 million in loan funding for Phase 2 and $6.0 million in loan funding for Phase 3 in September 2018 and March 2020, respectively. The outstanding loan balance from the DECD was $11.0 million and $5.0 million at December 31, 2020 and 2019, respectively.
Debt due to the DECD is collateralized by providing a security interest in certain machinery and equipment the Company acquired from ISMMS, as defined in a separate security agreement (the “DECD Security Agreement”). The DECD Security Agreement provides a security for the payment and performance of meeting the Company’s obligations to the DECD until the obligations have been fully satisfied.
2020 Master Loan Agreement
In August 2020, the Company entered into a Master Loan and Security Agreement (“Master Loan Agreement”) with a bank, which was assigned to a separate lender in September 2020. The Master Loan Agreement set forth terms and conditions between the CompanyU.S. federal securities laws and the bank, inclusive of certain representationsapplicable rules and covenants. In October 2020, the Company entered into an equipment security note (“Equipment Note”), subject to all terms in the Master Loan Agreement, in which the Company received a loan of $6.3 million and deposited the proceeds into a deposit account held by the bank. The funds deposited into the account remain in the Company’s name; however, releaseregulations of the funds is controlled by the bank, as agreed upon under a separate deposit control agreement. Per the terms of the Master Loan Agreement, on an annual basis upon each anniversary of the executed Master Loan Agreement, funds in the deposit account will be released to the Company in such manner that the remaining balance in the deposit account is equal to 110% of the current principal balance of the outstanding loan. Once the funds are released, the Company can use the proceeds without any restrictions. The terms of the Equipment Note require the Company to make sixty consecutive monthly payments of principalSecurities and interest at a fixed monthly amount of $0.1 million beginning in November 2020. Interest payments are fixed at an annual interest rate of 4.75%. The Company granted the bank a security interest in the equipment listed in the Equipment Note as collateral for the loan financing arrangement. The Company retains the title to all equipment listed in the Equipment Note and fulfillment of the arrangement is not dependent on the use of the specified equipment. As such, the Company accounts for the
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financing arrangement as debt. The Company recorded the $6.3 million proceeds as restricted cash on the balance sheet at December 31, 2020. The outstanding loan balance was $6.1 million at December 31, 2020 following monthly payments made in November and December 2020.
In a separate subordination agreement between the bankExchange Commission and the DECD, the DECD agreed that any present or future security interests in collateral would be subordinate to the security interests of the bank.PCAOB.
2020 Master Lease Agreement
In December 2020, the Company entered into a Master Lease Agreement (“Master Lease Agreement”) with a lender whereby the Company agreed to sell certain equipment and immediately leaseback the equipment, resulting in proceeds of $3.6 million. The transaction does not qualify as a sale-leaseback transaction as there is a $1.00 repurchase option at the end of the lease term that does not represent the fair value of the underlying assets. Accordingly, the Company continues to reflect the transferred assets on the balance sheets and recorded the proceeds as a financing obligation.
The terms of the Master Lease Agreement require the Company to make sixty consecutive monthly payments of principal and interest at a fixed monthly amount of $0.1 million beginning in February 2021. Interest payments are fixed at an annual interest rate of 3.54%.
Per the terms of the Master Lease Agreement and a separate Letter of Credit Agreement (“LOC Agreement”), the Company was required to deliver a letter of credit, from a financial institution deemed satisfactory, equal to the amount of the transferred assets. Accordingly, in December 2020, a financial institution issued an irrevocable standby letter of credit to the lender for $3.6 million. The Company deposited the funds in an account held by the financial institution and,We conducted our audits in accordance with the termsstandards of a separate agreement withthe PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial institution,statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the Company must maintainpurpose of expressing an aggregate amount on deposit equal to at least 105% of the value of any outstanding letters of credit issued by the financial institutionopinion on the Company’s behalf. Per the terms of the LOC Agreement with the lender, the letter of credit must be in place until all obligations have been paid in full. Beginning in June 2021 and every December and June thereafter, the letter of credit will be reduced to the then outstanding balance of the obligation. In addition, beginning in June 2022 and continuing each fiscal year thereafter, the lender will consent to a 33% reduction of the then current balance of the letter of credit provided that certain conditions and covenants have been met. Further, the Company must furnish annual audited financial statements and other financial information to the lender on a regular basis. The Company was in compliance with the above covenants as of December 31, 2020.
The Company recorded the $3.6 million proceeds as restricted cash on the balance sheet at December 31, 2020. The outstanding loan balance was also $3.6 million at December 31, 2020.
In a separate intercreditor agreement between the lender and the DECD, the DECD agreed that any present or future security interests in collateral would be subordinate to the security interests of the lender.
Maturities of Long-Term Debt
As of December 31, 2020, long-term debt matures as follows (in thousands):
2021$1,770 
20221,906 
20232,865 
20244,208 
20254,106 
Thereafter5,886 
Total maturities of long-term debt20,741 
Less: Current portion of long-term debt(1,770)
Total long-term debt, net of current portion$18,971 
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8.    Commitments and Contingencies
Operating Leases
The Company entered into an agreement with ISMMS to sublease office space in Connecticut with a remaining term of approximately 13 years as of December 31, 2020. The lease is subject to escalating rent and rent-free period provisions and require the Company to pay additional amounts for operating expenses. In addition, the Company leased certain lab and office spaces in New York from ISMMS on a month-to-month basis during the years ended December 31, 2020, 2019 and 2018. See Note 6 for additional information.
In April 2019, the Company entered into a sublease agreement to rent a building located in Stamford, Connecticut to be used for office and laboratory space. As the land is more than 25% of the total value, the building is accounted for as a capital lease and the land as an operating lease.
In November 2019, the Company entered into a lease agreement with a third party for office space in Connecticut. The Company took occupancy of the facility and the lease commenced in November 2019 and has a remaining term of 13 years as of December 31, 2020. The lease provides for escalating rent over the lease term and requires the Company to pay additional amounts for operating expenses. Per the terms of the lease agreement, the Company was required to deliver a letter of credit from a financial institution equal to the amount of the security deposit on the office space. Accordingly, in February 2020, a financial institution issued an irrevocable standby letter of credit to the third party for $0.9 million. The Company recorded $0.9 million as restricted cash on the balance sheet as of December 31, 2020.
In January 2020, the Company entered into a lease agreement with a third party for lab space in Branford, Connecticut. The Company took occupancy of the facility and the lease commenced in February 2020 and has a remaining term of 9 years as of December 31, 2020. The lease provides for escalating rent over the lease term and requires the Company to pay additional amounts for operating expenses.
Future minimum payments under non-cancelable operating leases as of December 31, 2020 are as follows (in thousands):
2021$3,840 
20223,975 
20234,080 
20244,182 
20254,577 
Thereafter52,653 
Total operating lease obligations$73,307 
Rent expense related to non-cancelable operating leases was $5.3 million, $0.8 million and $0.9 million for the years ended December 31, 2020, 2019 and 2018, respectively. Rent expense related to month-to-month operating leases was $3.2 million, $2.8 million, and $3.2 million for the years ended December 31, 2020, 2019 and 2018, respectively.
Capital Leases
The Company entered into various capital lease agreements to obtain laboratory equipment which contain bargain purchase commitments at the end of the lease term. The terms of the capital leases range from 3 to 5 years with interest rates ranging from 1.9% to 12.0%. The leases are secured by the underlying equipment.
In April 2019, the Company entered into a sublease agreement to rent a building to be used for office and laboratory space for a base term of 325 months. The building is accounted for as a capital lease and the land as an operating lease.
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The Company has the option to renew the lease at the end of the initial base term for either one period of 10 years, or two periods of 5 years. There is also an early termination option in which the Company may cancel the lease after the 196th month with a cancellation charge of $8.4 million. The Company has no intent to exercise the renewal nor early termination options.
The building lease is amortized on a straight-line basis over 325 months. The interest rate related to the lease obligation is 13.1% and the maturity date is October 30, 2046.
The Company also incurs other lease-related expenses such as real estate taxes, operating expenses and maintenance that are generally based on the Company’s pro-rata share of the total square footage of the property being leased.
Property and equipment under capital leases was $27.0 million and $19.5 million as of December 31, 2020 and 2019, respectively. Accumulated amortization on capital lease assets was $9.7 million and $6.3 million at December 31, 2020 and 2019, respectively.
For all capital leases, the portion of the future payments designated as principal repayment is recorded as a capital lease obligation on the Company’s balance sheets in accordance with repayment terms. Future payments under capital leases at December 31, 2020, are as follows (in thousands):
2021$5,165 
20224,702 
20233,479 
20242,658 
20252,344 
Thereafter51,869 
Total capital lease obligations70,217 
Less: amounts representing interest(45,933)
Present value of net minimum capital lease payments24,284 
Less: current portion(3,506)
Capital lease obligations, net of current portion$20,778 
Interest expense related to capital leases was $2.2 million, $0.7 million and $0.1 million for the years ended December 31, 2020, 2019 and 2018, respectively.
Contingencies
The Company may, from time to time, become involved in legal proceedings arising out of the normal course of its operations. For instance, the Company may be subject to lawsuits alleging negligence or other similar legal claims related to its provision of genetic testing and/or information services. The Company establishes reserves for specific legal matters when it determines that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. The Company has also identified certain other legal matters where it believes an unfavorable outcome is not probable and, therefore, no reserve is established. Although management currently believes that resolving claims against the Company, including claims where an unfavorable outcome is reasonably possible, will not have a material impact on the liquidity, results of operations, or financial condition of the Company, these matters are subject to inherent uncertainties and management's view of these matters may change in the future. It is possible that an unfavorable outcome of one or more of these lawsuits or other contingencies could have a material impact on the liquidity, results of operations, or financial condition of the Company.
Significant judgment is required in both the determination of probability of loss and the determination as to whether the amount can be reasonably estimated. Accruals are based only on information available at the time of the assessment, due to the uncertain nature of such matters. As additional information becomes available, management reassesses potential liabilities related to pending claims and litigation and may revise its previous estimates, which could materially affect the Company’s results of operations in a given period.
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The Company maintains various liability insurance coverages for, among other things, claims that could result from providing, or failing to provide diagnostic testing services, including inaccurate testing results, and other exposures. The Company’s insurance coverage limits its maximum exposure on claims; however, the Company is responsible for any uninsured portion of losses. Management believes that present insurance coverage is sufficient to cover potential exposures.
The Company was not a party to any material legal proceedings at December 31, 2020, nor is it a party to any legal proceedings as of the date of issuance of these financial statements.
9.    Stock-Based Compensation
In April 2017, the Company adopted the 2017 Stock Incentive Plan (the “2017 Plan”), effectively replacing the 2016 Stock Incentive Plan, for which no shares had vested, therefore, resulting in no obligation to the Company. In February 2018, the Board of Directors approved a resolution to amend the 2017 Plan, whereby awards are to be granted for Class A common stock and/or Class B common stock of the Company. The 2017 Plan is intended to qualify as an incentive stock option under the section 422 of Internal Revenue Service code, however certain non-qualified stock options and stock appreciation rights have been awarded under the 2017 Plan.
The 2017 Plan offers total aggregate shares of up to 279,192 shares of Class A common stock and Class B common stock, collectively, on an as-converted to Class A common stock basis. Following the amendment to the 2017 Plan in February 2018, the Company intends to use available shares to grant Class B common stock awards.
Awards could be granted to directors, officers, employees and consultants (collectively referred to as Employees) at the discretion of the Company and under terms and provisions established by the Board of Directors. Under the terms of the 2017 Plan, options may be granted at an exercise price not less than fair value. For employees holding more than 10% of the voting rights of all classes of stock of the Company, the per share exercise price must be at least 110% of fair value of the common stock on the date of grant, as determined by the Board of Directors. The terms of the awards granted may not exceed ten years from the date of grant.
The 2017 Plan awards granted generally vest in tranches with different vesting dates over a period of four years solely based upon continued employment or engagement under a consulting agreement over a specific period of time. Generally, the options granted to newly hired employees vest in equal monthly or quarterly installments over the four-year vesting schedule.
Under the 2017 Plan, the Company has a call option to repurchase awards for cash from the plan participants. upon termination of the participant’s employment or consulting agreement. The Company concludes that it is probable it will exercise its call option prior to the award holder being subject to the risks and rewards of equity ownership. As a result, the Company’s stock-based compensation awards are classified as a liability.
The initial measurement of fair value and subsequent change in fair value are recognized as compensation expense over the requisite service period from grant date to settlement date for all awards that vest with a corresponding adjustment to stock-based compensation liabilities on the Company’s balance sheets. Shares of common stock issued upon settlement of an award continue to be classified as a liability and remeasured to fair value each reporting period until the stockholder bears the risks and rewards of equity ownership for a reasonable period of time, which the Company concludes is a period of at least six months.
In 2018, the Company granted stock appreciation rights (“SAR”) to one employee and one consultant. In 2019 and 2020, the Company did not grant SARs to any employees or consultants. The awards granted vest in tranches
with different vesting dates over a period of four years solely based upon continued employment or engagement under consulting agreement and vest in equal quarterly installments over the four-year vesting schedule. The SAR can only be exercised upon a liquidation event as defined in the related SAR agreement, which includes liquidations, mergers, and an initial public offering. The Company concluded that such liquidation events are not probable of occurring and, as such, no expense related to the SAR was recognized by the Company for the years ended December 31, 2020, 2019 and 2018.
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At December 31, 2020 and 2019, stock-based compensation liabilities were $132.0 million and $11.8 million, respectively. Stock-based compensation expense is included within the statements of operations and comprehensive loss as follows (in thousands):
Year Ended December 31,
202020192018
Cost of services$13,947 $710 $748 
Research and development26,650 1,281 1,135 
Selling and marketing10,750 650 416 
General and administrative68,884 2,841 3,306 
Total stock-based compensation expense$120,231 $5,482 $5,605 
The following summarizes the activity under the 2017 Plan for Class A and Class B common stock options (in thousands, except share and per share amounts):
Class A Common StockShares Available for GrantStock Options OutstandingWeighted- Average Exercise PriceWeighted- Average Remaining Contractual Life (years)Aggregate Intrinsic Value
Balances at December 31, 2018–142,500 18.94 8.57 $ 5,794
Options forfeited and cancelled14,000 (14,000)18.94 ––
Increase in share reserve for issuance of Class B grants(14,000)––––
Balances at December 31, 2019–128,500 18.94 7.58 $9,754 
Options forfeited and cancelled6,500 (6,500)18.94 ––
Increase in share reserve for issuance of Class B grants(6,500)––––
Balances at December 31, 2020–122,000 18.94 6.57 $80,565 
Options exercisable at December 31, 2020115,972 $18.94 6.56 $76,584 
All outstanding stock options for Class A common stock have an exercise price of $18.94.
Class B Common StockShares Available for GrantStock Options OutstandingWeighted- Average Exercise PriceWeighted- Average Remaining Contractual Life (years)Aggregate Intrinsic Value
Balances at December 31, 20183,315,972 2,434,028 $0.20 9.27 $969 
Options granted(3,247,815)3,247,815 0.95 ––
Options forfeited and cancelled369,000 (369,000)0.23 ––
Increase in share reserve for issuance under the 2017 Plan7,529,200 ––––
Increase in share reserve for issuance of Class B grants1,400,000 ––––
Balances at December 31, 20199,366,357 5,312,843 0.65 9.09 1,562 
Options granted(9,245,190)9,245,190 1.32 –
Options forfeited and cancelled537,000 (537,000)0.86 –
Increase in share reserve for issuance of Class B grants650,000 ––––
Options exercised–(105,429)0.95 –
Balances at December 31, 20201,308,167 13,915,604 $1.09 8.91 $79,334 
Options exercisable at December 31, 20205,615,734 $0.74 8.42 $34,005 
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As of December 31, 2020, stock options outstanding for Class B common stock consisted of the following:
Exercise PricesClass B Stock Options OutstandingWeighted- Average Remaining Contractual Life (years)
$0.18941,834,0287.27
$0.596050,0007.82
$0.94859,611,6338.98
$2.35642,419,9439.89
The aggregate intrinsic value in the tables above calculates the difference between the exercise price of the underlying stock options and the fair valueeffectiveness of the Company’s common stock for stock options that were in-the-money and representsinternal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the value that would have been received by the option holders had all option holders exercised their options on December 31, 2020.
The fair valuerisks of each stock option award granted was estimated on the date of grant and remeasured each reporting period using the Black-Scholes option-valuation model based on the following inputs and assumptions:
Expected volatility – Since the Company is privately-held and, therefore, does not have any trading history for its common stock, the expected volatility was estimated based on the average volatility for comparable publicly traded companies over a period equal to the expected term of stock option grants. When selecting these comparable companies, the Company considered the enterprise value, risk profiles, position within the industry, and whether there was sufficient historical share price information to meet the expected lifematerial misstatement of the stock-based awards. Historical volatility was computed usingfinancial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the daily closing prices foramounts and disclosures in the selected companies’ common stock duringfinancial statements. Our audits also included evaluating the equivalent periodaccounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the calculated expected term of the stock-based awards.financial statements. We believe that our audits provide a reasonable basis for our opinion.
Expected term – The expected term represents the period that awards are expected to be outstanding. The expected term was determined by the potential timing of a liquidity event since all awards/s/ ERNST & YOUNG LLP
We have accelerated vesting features upon a liquidation event and the Company generally does not expect grantees to exercise vested options prior to a liquidation event.
Risk-free interest rate – The risk-free interest rate is based on the U.S. Treasury yield curve in effect for bonds with maturities consistent with the expected holding periods corresponding with the expected term of the option.
Dividend yield – The Company has never paid dividends on its common stock and does not anticipate paying dividends on its common stock in the foreseeable future. Therefore, the Company used an expected dividend yield of zero.
Fair value of common stock –The absence of a public market forserved as the Company’s common stock for the years ended December 31, 2020, 2019 and 2018 required the Company’s Board of Directors to estimate the fair value of its common stock. The Company considered several objective and subjective factors, including the most recently available valuation of the Company’s common stock prepared by an independent third party valuation firm and factors that may have changed from the date of the most recent valuation through the end of the reporting period. In determining the fair value of common stock, the Company considered the valuation of comparable companies, the Company’s operating and financial performance, the lack of liquidity of the Company’s common stock, transactions in the Company’s common stock, general and industry specific economic outlook, amongst other factors.
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The estimated fair value of the stock option awards as of December 31, 2020, 2019, and 2018 was estimated using the Black-Scholes option pricing model with the following assumptions:
202020192018
Expected volatility65.80%60.00%70.00%
Expected term (in years)0.50-1.493.00–5.004.00
Risk-free interest rate0.10%1.40%–1.43%2.68%
Dividend yield———
Fair value of Class A common stock$679.31$94.85$59.60
Fair value of Class B common stock$6.7931$0.9485$0.5960
As of December 31, 2020, the fair value associated with the Company’s stock options totaled $160.6 million. The vested portion of this fair value at December 31, 2020 was $80.0 million and $52.0 million for Class A and Class B stock options, respectively, and is included in stock-based compensation liabilities on the Company’s balance sheets. As of December 31, 2020, unrecognized stock-based compensation cost related to the unvested portion of the Company’s stock options were $0.5 million and $28.1 million for Class A and Class B stock options, respectively. The Company expects to recognize the unrecognized compensation cost on a graded-vesting basis over a weighted-average period of 0.3 and 0.9 years for Class A and Class B stock options, respectively. Cash received from stock option exercise for the year ended December 31, 2020 was $0.1 million. No cash was received from stock option exercise for the years ended December 31, 2019 andauditor since 2018.
New York, New York
10.    Redeemable Convertible Preferred Stock
Series A Redeemable Convertible Preferred Stock
In June 2017, in connection with the Spin-out, the Company issued 800,000 shares of Series A redeemable convertible preferred stock (the “Series A Preferred Stock”) to ISMMS at an original issue price of $122.94 per share (the “Series A Original Issue Price”). ISMMS’s capital contribution to the Company was accounted for at the net book value of the assets transferred to and liabilities assumed by the Company since the Company and ISMMS are entities under common control (see Note 1). As a result, the difference between the fair value of the Series A Preferred Stock at the Series A Original Issue Price and the net book value of the assets and liabilities contributed to the Company as described in Note 6 results in additional preference of $55.0 million to ISMMS.
The holder of the Series A Preferred Stock was entitled to a number of votes equal to the number of whole shares of Class A common stock into which it is convertible. The Series A Preferred Stock was convertible to Class A common stock at the option of the holder at any time and without the payment of additional consideration and was mandatorily convertible upon the occurrence of certain events.
The holder of the Series A Preferred Stock was entitled to mandatory, cumulative dividends at a rate of 3% per annum that were satisfied through the issuance of additional shares on each anniversary of the issuance of the Series A Preferred Stock. As a result, the Company issued an additional 24,000 and 24,720 shares to the holder of the Series A Preferred Stock on June 1, 2018 and June 1, 2019, respectively.
In the event of a liquidation, dissolution or a deemed liquidation of the Company, the holder of the Series A Preferred Stock was to receive distributions prior to payment to the holder of Class A common stock.
Series A Preferred Stock Modification and Issuances of Redeemable Convertible Series B Preferred Stock and Redeemable Convertible Series C Preferred Stock
In August 2019, the Company amended its certificate of incorporation to change the structure of the redeemable convertible preferred stock by authorizing to issue three series of redeemable convertible preferred stock. Following the amended certificate of incorporation, the Company has authority to issue 1,308,663 shares of redeemable convertible preferred stock with $0.00001 par value per share, which consists of 447,373 shares designated as Series A-1 redeemable convertible preferred stock (the “Series A-1 Preferred Stock”), 522,627 shares designated as Series A-2 redeemable convertible preferred stock (the “Series A-2 Preferred Stock”) and 338,663 shares designated as
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Series B redeemable convertible preferred stock (the “Series B Preferred Stock”). The original issue price for Series A-1 Preferred Stock and Series A-2 Preferred Stock is the Series A Original Issue Price and the original issue price for Series B Preferred stock is $376.80 per share (the “Series B Original Issue Price”).
In consideration thereof on August 2, 2019, the Company issued 447,373 shares and 401,347 shares of its Series A-1 Preferred Stock and Series A-2 Preferred Stock, respectively, to ISMMS at the Series A Original Issue Price, replacing the Series A Preferred Stock issued and outstanding prior to the amendment to the certificate of incorporation. Also, on August 2, 2019, the Company entered into a stock purchase agreement with third-party investors, whereby the Company issued 338,663 shares of its Series B Preferred Stock at the Series B Original Issue Price, resulting in $118.8 million in cash proceeds, net of issuance costs.
In July and August 2020, the Company amended its certificate of incorporation to authorize the issuance of additional shares of redeemable convertible preferred stock. Following the amended certificate of incorporation, the Company has authority to issue 197,824 shares of redeemable convertible preferred stock with $0.00001 par value per share designated as Series C redeemable convertible preferred stock (the “Series C Preferred Stock”). The original issue price for Series C Preferred Stock is $613.67 per share (the “Series C Original Issue Price”). Concurrently with these amendments to the certificate of incorporation, the Company entered into stock purchase agreements with third-party investors, whereby the Company issued 197,821 shares of its Series C Preferred Stock at the Series C Original Issue Price, resulting in $117.3 million in cash proceeds, net of issuance costs.
The Series A-1 Preferred Stock, the Series A-2 Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock are collectively referred to as the “Redeemable Convertible Preferred Stock.”
Voting Rights
Holders of the Redeemable Convertible Preferred Stock are entitled to a number of votes equal to the number of whole shares of Class A common stock into which it is convertible.
Dividends
Holders of the Redeemable Convertible Preferred Stock are entitled to receive or participate in dividends to the extent that dividends are declared for holders of Class A common stock and Class B common stock, at which point the holders of the Redeemable Convertible Preferred Stock are entitled to participate on an as-converted to Class A common stock basis.
The Company has not declared any cash or other dividends through December 31, 2020.
Conversion Rights
The Redeemable Convertible Preferred Stock is convertible into Class A common stock at the option of the holder at any time and without the payment of additional consideration and is mandatorily convertible upon the occurrence of certain events. The conversion ratio could be adjusted upon the Company’s issuance of shares of common stock below the original issue prices of the Redeemable Convertible Preferred Stock; the issuance of certain options or securities convertible into common stock of the Company; the issuance of certain dividends; and events such as stock splits, merger and reorganization.
There were no conversions of Redeemable Convertible Preferred Stock into Class A common stock during the years ended December 31, 2020, 2019 and 2018. As of December 31, 2020 and 2019, all shares of Redeemable Convertible Preferred Stock were convertible into shares of Class A common stock at a 1:1 ratio.
Liquidation Preference
In the event of a liquidation, dissolution or deemed liquidation of the Company, the holders of the Series A-1 Preferred Stock, Series B Preferred Stock and Series C Preferred Stock are entitled to receive, prior to distribution to the holders of Series A-2 Preferred Stock, Class A common stock and Class B common stock, an amount per share equal to the greater of: (i) the liquidation preference amount for each series of preferred stock plus any accrued but unpaid dividends, or (ii) the amount per share that would have been payable had all shares been converted into Class
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A common stock immediately prior to such liquidation event. After the required distributions to the holders of the Series A-1 Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, holders of the Series A-2 Preferred Stock are entitled to receive distributions of the remaining assets of the Company prior to the holders of Class A common stock and Class B common stock.
The holders of the Series A-1 Preferred Stock and Series A-2 Preferred Stock are entitled to a liquidation preference equal to the Series A Original Issue Price.
The holders of the Series B Preferred Stock are entitled to a liquidation preference of $603.26 per share during the period commencing on original issue date of the Series B Preferred Stock (the “Series B Original Issue Date”) and ending on the date that is one day prior to the third anniversary of the Series B Original Issue Date; $612.69 per share during the period commencing on the third anniversary of the Series B Original Issue Date and ending on the date that is one day prior to the fourth anniversary of the Series B Original Issue Date; and $659.82 per share from and after the fourth anniversary of the Series B Original Issue Date, in each case as such amount is appropriately adjusted in the event of any stock dividend, stock split or other similar recapitalization with respect to the Series B Preferred Stock.
The holders of the Series C Preferred Stock are entitled to a liquidation preference equal to the Series C Original Issue Price.
Classification of Redeemable Convertible Preferred Stock
The Redeemable Convertible Preferred Stock has deemed liquidation provisions which provide the holders the option to redeem the shares upon a change in control or other deemed liquidation event. The deemed liquidation preference provisions of the Redeemable Convertible Preferred Stock are considered contingent redemption provisions that are not solely within the Company’s control. Accordingly, the Redeemable Convertible Preferred Stock is presented outside of permanent equity in the mezzanine portion of the Company’s balance sheets. No accretion was recorded during the years ended December 31, 2020, 2019 and 2018 as a deemed liquidation event was not considered probable.
Redeemable Convertible Preferred Stock at December 31, 2020 consists of the following (in thousands, except share data):
Redeemable Convertible Preferred StockShares AuthorizedShares Issued and OutstandingAmountAggregate Liquidation Preference
Series A-1447,373447,373$51,811 $55,000 
Series A-2522,627401,34746,480 49,342 
Series B338,663338,663118,824 204,302 
Series C197,824197,821117,324 121,397 
Total Redeemable Convertible Preferred Stock1,506,4871,385,204$334,439 $430,041 
11.    Common Stock
On March 1, 2018, the Company’s certificate of incorporation was amended to provide for two classes of common stock, Class A and Class B. The Company converted 57,500 Class A shares to Class B shares at a conversion ratio of 1:100. As a result, the Company has the authority to issue 1,942,500 shares of Class A common stock and 5,750,000 shares of Class B common stock, both at $0.00001 par value per share.
On August 2, 2019, the Company’s certificate of incorporation was amended to increase the number of shares the Company was authorized to issue for both Class A and Class B common stock. As a result of the amended certificate of incorporation, the Company has the authority to issue 2,500,000 shares of Class A common stock and 15,000,000 shares of Class B common stock, both at $0.00001 par value per share. The Company has authority to convert all Class B common stock to shares of Class A common stock on a basis of 100 shares of Class B common stock for each share of Class A common stock.
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The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion. Holders of Class A common stock are entitled to one vote per share and holders of Class B common stock are entitled to one one-hundredth of a vote per share. The Company has the authority at any time by notice given to the holders of Class B common stock to convert all of the Class B common stock to shares of Class A common stock on a basis of 100 shares of Class B common stock for each share of Class A common stock.
There was one share of Class A common stock issued and outstanding at December 31, 2020, 2019 and 2018. There were 105,429 shares of Class B common stock issued and outstanding at December 31, 2020. There were no shares of Class B common stock issued and outstanding at December 31, 2019 and 2018. The shares of Class B common stock issued and outstanding at December 31, 2020 remained liability-classified since the Company concluded that the stockholder did not yet bear the risks and rewards of equity ownership for a reasonable period of time.
12.    Income Taxes
For the years ended December 31, 2020, 2019 and 2018, the Company did not have a current or deferred income tax expense or (benefit). Accordingly, the effective tax rate for the Company for the years ended December 31, 2020, 2019 and 2018 was zero percent. A reconciliation of the anticipated income tax expense/(benefit) computed by applying the statutory federal income tax rate of 21% to income before taxes to the amount reported in the statement of operations and comprehensive loss is as follows:
Year Ended December 31,
202020192018
U.S. federal taxes at statutory rate21.0%21.0%21.0%
State taxes (net of federal benefit)2.13.52.1
Research and development tax credits0.63.43.7
Non-deductible stock-based compensation(7.8)(3.3)(4.3)
Non-deductible expenses—(0.5)(0.3)
Change in valuation allowance(15.9)(24.1)(22.2)
Effective tax rate—%—%—%
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The tax effects of temporary differences and carryforwards that give rise to significant portions of the net deferred tax assets were as follows:
As of December 31,
20202019
Deferred tax assets:
Net operating loss carryforwards$44,583 $17,599 
Stock-based compensation7,538 376 
Accrued compensation2,337 1,331 
Research and development credits4,667 2,190 
Deferred rent493 52 
Unearned revenue186 — 
Deferred employer taxes1,050 — 
Interest expense479 10 
Other23 18 
Gross deferred tax assets61,356 21,576 
Valuation allowance(58,264)(20,082)
Total deferred tax assets3,092 1,494 
Deferred tax liabilities:
Property and equipment(685)(344)
Capitalized software(2,407)(1,150)
Total deferred tax liabilities(3,092)(1,494)
Net deferred tax assets$— $— 
As of December 31, 2020, the Company had the following tax net operating loss carryforwards available to reduce future federal and state taxable income, and tax credit carryforwards available to offset future federal and Connecticut income taxes:14, 2022
AmountExpiration period
Tax net operating loss carryforwards:
Federal (pre-2018 net operating losses)Auditor Firm Id:33,056 No. 42Auditor Name:Ernst & Young LLP2036-2037
Federal (post-2017 net operating losses)Auditor Location:155,554 No expiration
State66,937 2028-2042
State10,356 No expiration
Tax credit carryforwards:
Federal research and development3,368 2038-2040
Connecticut research and experimental762 2034-2035
Connecticut research and development883 No expirationNew York, New York, United States
The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.
F-2
The CARES Act also provides for the elective deferral of the deposit and payment of the employer share of Social Security taxes for the period beginning March 27, 2020 and ending December 31, 2020. Under the CARES Act, 50% percent of the employer portion of Social Security tax is to be remitted no later than December 31, 2021, with the remaining 50% to be remitted no later than December 31, 2022. The Company has evaluated the effect of the elective deferral on its income tax positions and determined that the corresponding deduction related to the
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employer portion of Social Security tax is not deductible in the year ended December 31, 2020, resulting in a nominal deferred tax asset. The Company continues to evaluate the potential effects the CARES Act may have on its operations and consolidated financial statements in future periods.Sema4 Holdings Corp.
Future realization of the tax benefits of existing temporary differences and carryforwards ultimately depends on the existence of sufficient taxable income within the carryforward period. As of December 31, 2020 and 2019, the Company performed an evaluation to determine whether a valuation allowance was needed. Based on the Company’s analysis, which considered all available evidence, both positive and negative, the Company determined that it is more likely than not that its net deferred tax assets will not be realized. Accordingly, the Company maintained a full valuation allowance as of December 31, 2020 and 2019. The valuation allowance increased by $38.2 million in 2020 and $7.2 million in 2019 primarily due to the increase in net operating loss carryforwards, research and development tax credits, accrued compensation expenses, stock-based compensation and deferred rent expense.
Under Internal Revenue Code Section 382, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income may be limited. Generally, an ownership change occurs when certain shareholders increase their aggregated ownership by more than 50 percentage points over their lowest ownership percentage in a testing period (typically three years). The Company has not completed a study to assess whether an ownership change has occurred or whether there have been multiple ownership changes since becoming a “loss corporation” as defined in Section 382. Future changes in stock ownership, which may be outside of the Company’s control, may trigger an ownership change. In addition, future equity offerings or acquisitions that have an equity component of the purchase price could result in an ownership change. If an ownership change has occurred or does occur in the future, utilization of the NOL carryforwards or other tax attributes may be limited.
ASC 740 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements by prescribing a model for recognizing, measuring, and disclosing uncertain tax positions. Unrecognized income tax benefits represent income tax positions taken on income tax returns but not yet recognized in the financial statements.
As of December 31, 2020 and 2019, the Company had nominal gross unrecognized tax benefits which, if recognized, would not impact the effective tax rate due to the Company’s valuation allowance position. Due to the uncertainties associated with any examinations that may arise with the relevant tax authorities, it is not possible to reasonably estimate the impact of any significant increase or decrease to the unrecognized tax benefits within the next twelve months.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits for the years ended December 31, 2020 and 2019 is as follows:
As of December 31,
20202019
Unrecognized tax benefits – January 1$374 $195 
Gross increases – tax positions in current period163 179 
Unrecognized tax benefits – December 31$537 $374 
To the extent penalties and interest would be assessed on any underpayment of income tax, the Company’s policy is that such amounts would be accrued and classified as a component of income tax expense in the financial statements. As of December 31, 2020 and 2019, the Company had no accrued interest or penalties related to uncertain tax positions.
The Company files U.S federal and multiple state income tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. There are currently no pending federal or state income tax examinations. As a result of the Company’s net operating loss carryforwards, the Company’s federal and state
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statutes of limitations remain open for all years until the net operating loss carryforwards are utilized or expire prior to utilization.
As a result of legislation in the state of Connecticut, corporate entities have the opportunity to exchange certain research and development tax credit carryforwards for a cash payment of 65% of the research and development tax credits. The research and development expenses that qualify for Connecticut credits are limited to those costs incurred within Connecticut. The Company has elected to participate in the exchange program and, as a result, has recognized net benefits of $0.5 million for the year ended December 31, 2019 and $0.5 million for the year ended December 31, 2018 which is included in non-operating income in the statements of operations and comprehensive loss. The Company was not eligible for the exchange program for the year ended December 31, 2020 because it no longer qualified as a small business for purposes of the exchange program as its gross income exceeded $70.0 million for the previous tax year.
13.    Net Loss per Share
Basic net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. The following table sets forth the computation of basic net loss per share attributable to common stockholders (in thousands, except for share amounts):
Year Ended December 31,
202020192018
Numerator:
Net loss attributable to common stockholders$(241,340)$(32,743)$(26,823)
Weighted average Class A shares outstanding used in computing allocation of net loss attributable to common stockholders111
Weighted average Class B shares on an as converted to Class A basis used in computing allocation40— — 
Allocation of net loss attributable to common stockholders for basic:
Class A common stock(5,824)(32,743)(26,823)
Class B common stock(235,516)— — 
Denominator:
Weighted average shares used in computing net loss per share attributable to Class A common stockholders1 1 1 
Weighted average shares used in computing net loss per share attributable to Class B common stockholders4,044 — — 
Basic net loss per share attributable to Class A common stockholders$(5,824)$(32,743)$(26,823)
Basic net loss per share attributable to Class B common stockholders$(58)$— $— 
Diluted net loss per share is computed based on the weighted-average number of shares of common stock, including the dilutive effect of common stock equivalents, outstanding. Basic net loss per share is the same as diluted net loss per share for 2018 and 2019 as the inclusion of potentially dilutive shares would have been anti-dilutive.
For the year ended December 31, 2020, the Company’s diluted net loss per share of Class A common stock assumed the conversion of all Class B common stock into Class A common stock in accordance with the if-converted method. For the year ended December 31, 2020, the calculation of diluted net loss per share of Class B common stock did not differ from the calculation of basic net loss per share as the inclusion of potentially dilutive
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shares would have been anti-dilutive. The following table sets forth the computation of diluted net loss per share of Class A common stock for the year ended December 31, 2020 (in thousands, except for share amounts):
Year Ended December 31,
Net Loss Attributable to Class A common stockWeighted average shares outstandingLoss per share
Basic net loss per share$(5,824)1$(5,824)
Add:The effect of dilutive potential Class A common stock Class B common stock$(235,516)40
Diluted net loss per share attributable to Class A common stock$(241,340)41$(5,824)
The following table summarizes the outstanding shares of potentially dilutive securities that were excluded from the computation of diluted net loss per share attributable to common stockholders for the period presented because including them would have been anti-dilutive:
Year Ended December 31,
202020192018
Outstanding options to purchase Class A common stock122,000128,500142,500
Outstanding options to purchase Class B common stock13,915,6045,312,8432,434,028
Redeemable convertible preferred stock (on an if-
converted basis)		1,272,821979,526814,071
Total15,310,4256,420,8693,390,599
14.    Supplemental Financial Information
Other current liabilities
Other current liabilities consisted of the following (in thousands):
As of December 31,
20202019
Other current liabilities:
Accrued bonus$9,821 $5,296 
Accrued payroll6,834 1,892 
Accrued benefits3,663 291 
Accrued commissions1,540 1,425 
Current portion of long-term debt1,770 — 
Other4,509 1,503 
Total current other liabilities$28,137 $10,407 
15.    Subsequent Events
The Company has evaluated subsequent events through May 6, 2021, the date the financial statements were available to be issued.
On February 9, 2021, the Company, CM Life Sciences, Inc. (“CMLS”), and S-IV Sub, Inc., a direct and wholly-owned subsidiary of CMLS, entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which CMLS will acquire the Company through a merger of S-IV Sub, Inc. with and into the Company (the “Merger”), with the Company being the surviving corporation and a wholly-owned subsidiary of CMLS following the Merger. Once effective, all equity securities of the Company will be converted into the right to receive the applicable portion of merger consideration.
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Mount Sinai Genomics, Inc.
CondensedConsolidated Balance Sheets
(in thousands, except share and per share amounts)
(unaudited)
December 31,
March 31,
2021
December 31,
2020		20212020
AssetsAssetsAssets
Current assets:Current assets:Current assets:
Cash and cash equivalentsCash and cash equivalents$58,652 $108,132 Cash and cash equivalents$400,569 $108,132 
Accounts receivable33,490 32,044 
Accounts receivable, netAccounts receivable, net26,509 32,044 
Due from related partiesDue from related parties349 289 Due from related parties54 289 
Inventory32,969 24,962 
Prepaid expenses and other current assets15,070 8,681 
Inventory, netInventory, net33,456 24,962 
Prepaid expensesPrepaid expenses19,154 4,557 
Other current assetsOther current assets3,802 4,124 
Total current assetsTotal current assets140,530 174,108 Total current assets483,544 174,108 
Property and equipment, netProperty and equipment, net64,632 63,110 Property and equipment, net62,719 63,110 
Restricted cashRestricted cash10,828 10,828 Restricted cash900 10,828 
Other assetsOther assets3,596 3,596 Other assets6,930 3,596 
Total assetsTotal assets$219,586 $251,642 Total assets$554,093 $251,642 
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Deficit
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
Current liabilities:Current liabilities:Current liabilities:
Accounts payable and accrued expenses$41,609 $38,591 
Accounts payableAccounts payable$44,693 $26,737 
Accrued expensesAccrued expenses20,108 11,854 
Due to related partiesDue to related parties797 1,425 Due to related parties2,623 1,425 
Current contract liabilities2,810 1,783 
Current portion of capital lease obligationsCurrent portion of capital lease obligations3,419 3,506 
Contract liabilitiesContract liabilities473 1,783 
Other current liabilitiesOther current liabilities22,991 31,643 Other current liabilities29,968 28,137 
Total current liabilitiesTotal current liabilities68,207 73,442 Total current liabilities101,284 73,442 
Long-term debt, net of current portionLong-term debt, net of current portion18,502 18,971 Long-term debt, net of current portion11,000 18,971 
Stock-based compensation liabilitiesStock-based compensation liabilities296,952 131,989 Stock-based compensation liabilities— 131,989 
Capital lease obligations, net of current portionCapital lease obligations, net of current portion18,427 20,778 
Other liabilitiesOther liabilities22,530 22,852 Other liabilities3,480 2,074 
Warrant liabilityWarrant liability21,555 — 
Earn-out contingent liabilityEarn-out contingent liability10,244 — 
Total liabilitiesTotal liabilities406,191 247,254 Total liabilities165,990 247,254 
Commitments and contingencies (Note 8)
Commitments and contingencies (Note 9)Commitments and contingencies (Note 9)
Redeemable convertible preferred stock:Redeemable convertible preferred stock:Redeemable convertible preferred stock:
Series A-1 redeemable convertible preferred stock, $0.00001 par value: 447,373 shares authorized, issued and outstanding at March 31, 2021 and December 31, 2020; aggregate liquidation preference of $55,000 at March 31, 2021 and December 31, 202051,811 51,811 
Series A-2 redeemable convertible preferred stock, $0.00001 par value: 522,627 shares authorized at March 31, 2021 and December 31, 2020; 401,347 shares authorized, issued and outstanding at March 31, 2021 and December 31, 2020; aggregate liquidation preference of $49,342 at March 31, 2021 and December 31, 202046,480 46,480 
Series B redeemable convertible preferred stock, $0.00001 par value: 338,663 shares authorized, issued and outstanding at March 31, 2021 and December 31, 2020; aggregate liquidation preference of $204,302 at March 31, 2021 and December 31, 2020118,824 118,824 
Series C redeemable convertible preferred stock, $0.00001 par value: 197,824 shares authorized at March 31, 2021 and December 31, 2020; 197,821 shares issued and outstanding at March 31, 2021 and December 31, 2020; aggregate liquidation preference of $121,397 at March 31, 2021 and December 31, 2020117,324 117,324 
Redeemable convertible preferred stock334,439 334,439 
Series A-1 redeemable convertible preferred stock, $0.00001 par value: 0 and 55,399,943 shares authorized, issued and outstanding at December 31, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $0 and $55,000 at December 31, 2021 and December 31, 2020, respectivelySeries A-1 redeemable convertible preferred stock, $0.00001 par value: 0 and 55,399,943 shares authorized, issued and outstanding at December 31, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $0 and $55,000 at December 31, 2021 and December 31, 2020, respectively— 51,811 
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Mount Sinai Genomics, Inc.
Condensed Balance Sheets
(in thousands, except share and per share amounts)
(unaudited)
Stockholders’ deficit:
Class A common stock, $0.00001 par value: 2,500,000 shares authorized at March 31, 2021 and December 31, 2020; 1 share issued and outstanding at March 31, 2021 and December 31, 2020— — 
Class B convertible common stock, $0.00001 par value: 15,000,000 shares authorized at March 31, 2021 and December 31, 2020; 604,649 and 105,429 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively— — 
Additional paid-in capital— — 
Accumulated deficit(521,044)(330,051)
Total stockholders’ deficit(521,044)(330,051)
Total liabilities, redeemable convertible preferred stock and stockholders’ deficit$219,586 $251,642 
Series A-2 redeemable convertible preferred stock, $0.00001 par value: 0 and 64,718,940 shares authorized at December 31, 2021 and December 31, 2020, respectively; 0 and 49,700,364 shares authorized, issued and outstanding at December 31, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $0 and $49,342 at December 31, 2021 and December 31, 2020, respectively— 46,480 
Series B redeemable convertible preferred stock, $0.00001 par value: 0 and 41,937,960 shares authorized, issued and outstanding at December 31, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $0 and $204,302 at December 31, 2021and December 31, 2020, respectively— 118,824 
Series C redeemable convertible preferred stock, $0.00001 par value: 0 and 24,497,317 shares authorized at December 31, 2021 and December 31, 2020, respectively; 0 and 24,496,946 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $0 and $121,397 at December 31, 2021 and December 31, 2020, respectively— 117,324 
Redeemable convertible preferred stock— 334,439 
Stockholders’ equity (deficit):
Preferred Stock, $0.0001 par value: 1,000,000 and 0 shares authorized at December 31, 2021 and December 31, 2020, respectively; 0 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively— — 
Class A common stock, $0.0001 par value: 380,000,000 shares authorized, 242,647,604 shares issued and outstanding at December 31, 2021 and $0.00001 par value: 309,584,750 shares authorized, 124 shares issued and outstanding at December 31, 202024 — 
Class B convertible common stock, $0.00001 par value: 0 and 18,575,085 shares authorized at December 31, 2021 and December 31, 2020, respectively; 0 and 130,557 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively— — 
Additional paid-in capital963,520 — 
Accumulated deficit(575,441)(330,051)
Total stockholders’ equity (deficit)388,103 (330,051)
Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)$554,093 $251,642 
The accompanying notes are an integral part of these condensedconsolidated financial statements.
F-40F-4
Mount Sinai Genomics, Inc.
CondensedSema4 Holdings Corp.
Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except per share and share amounts)
(unaudited)
Year Ended December 31,
202120202019
Revenue
(Restated)(1)
(Restated)(1)
Diagnostic test revenue (including related party revenue of $90, $285 and $0 for the years ended December 31, 2021, 2020, and 2019, respectively)$205,100 $175,351 $191,667 
Other revenue (including related party revenue of $232, $3 and $1,180 for the years ended December 31, 2021, 2020, and 2019, respectively)7,095 3,971 4,507 
Total revenue212,195 179,322 196,174 
Cost of services (including related party expenses of $3,975, $2,189 and $1,859 for the years ended December 31, 2021, 2020, and 2019, respectively)228,797 175,296 113,389 
Gross (loss) profit(16,602)4,026 82,785 
Research and development105,162 72,700 34,910 
Selling and marketing112,738 63,183 39,352 
General and administrative205,988 100,742 29,484 
Related party expenses5,659 9,395 9,452 
Loss from operations(446,149)(241,994)(30,413)
Other income (expense):
Change in fair market value of warrant and earn-out contingent liabilities198,401 — — 
Interest income79 506 988 
Interest expense(2,835)(2,474)(783)
Other income, net5,114 2,622 504 
Total other income, net200,759 654 709 
Loss before income taxes(245,390)(241,340)(29,704)
Income tax provision— — — 
Net loss and comprehensive loss$(245,390)$(241,340)$(29,704)
Redeemable convertible preferred stock dividends— — 3,039 
Net loss attributable to common stockholders$(245,390)$(241,340)$(32,743)
Weighted average shares outstanding, Class A common stock108,077,439 5,131 124 
Basic and diluted net loss per share, Class A common stock$(2.27)$(47,036)$(264,056)
Three months ended March 31,
20212020
Revenue
Diagnostic test revenue (including related party revenue of $33 and $61 for the three months ended March 31, 2021 and 2020, respectively)$62,760 $46,070 
Other revenue (including related party revenue of $27 and $0 for the three months ended March 31, 2021 and 2020, respectively)1,591 585 
Total revenue64,351 46,655 
Cost of services (including related party expenses of $278 and $574 for the three months ended March 31, 2021 and 2020, respectively)71,812 39,239 
Gross (loss) profit(7,461)7,416 
Research and development53,131 13,096 
Selling and marketing31,569 11,733 
General and administrative101,917 7,164 
Related party expenses1,797 2,195 
Loss from operations(195,875)(26,772)
Other income (expense):
Interest income21 334 
Interest expense(723)(574)
Other income, net5,584 22 
Total other income (expense), net4,882 (218)
Loss before income taxes(190,993)(26,990)
Income tax provision— — 
Net loss and comprehensive loss$(190,993)$(26,990)
Weighted average shares outstanding of Class A common stock1 1 
Basic and diluted net loss per share, Class A common stock$(43)$(26,990)
Weighted average shares outstanding of Class B common stock443,864 —
Basic and diluted net loss per share, Class B common stock$0 $— 
___________________
(1)Certain expenses were previously misclassified as cost of services. These expenses are now reported as selling and marketing. This adjustment has no impact on total revenue, loss from operations, net loss and comprehensive loss or net loss per share. Refer to Note 2, “Summary of Significant Accounting Policies” to our consolidated financial statements for further information.
The accompanying notes are an integral part of these condensedconsolidated financial statements.
F-41F-5
Mount Sinai Genomics, Inc.
CondensedSema4 Holdings Corp.
Consolidated Statement of Redeemable Convertible Preferred Stock and Stockholders' DeficitStockholders’ Equity (Deficit)
(in thousands, except share amounts)
(unaudited)
Redeemable Convertible Preferred StockClass A Common StockClass B Common StockRedeemable Convertible Preferred StockClass A Common StockClass B Common Stock
SharesAmountSharesPer valueSharesPer valueAccumulated deficitTotal stockholders’ deficitSharesAmountSharesPer ValueSharesPer ValueAdditional paid-in capitalAccumulated deficitTotal stockholders’ equity (deficit)
Balance at December 31, 2018Balance at December 31, 2018102,039,134 $64,355 124 $— — $— — $(55,968)$(55,968)
Net lossNet loss— — — — — — — (29,704)(29,704)
Preferred Series A dividendPreferred Series A dividend3,061,173 3,039 — — — — — (3,039)(3,039)
Capital contributionsCapital contributions— 30,897 — — — — — — — 
Issuance of Preferred Series B, net of issuance costsIssuance of Preferred Series B, net of issuance costs41,937,960 $118,824 — — — — — — — 
Balance at December 31, 2019
Balance at December 31, 2019
$1,187,383 $217,115 1$— —$— $(88,711)$(88,711)Balance at December 31, 2019147,038,267 $217,115 124 $— — $— — $(88,711)$(88,711)
Net lossNet loss(26,990)(26,990)Net loss— — — — — — — (241,340)(241,340)
Balance at March 31, 2020
$1,187,383 $217,115 1$— —$— $(115,701)$(115,701)
Preferred Series A dividendPreferred Series A dividend— — — — 130,557 — — — — 
Capital contributionsCapital contributions24,496,946 117,324 — — — — — — — 
Balance at December 31, 2020Balance at December 31, 2020$1,385,204 $334,439 1$— 105,429$— $(330,051)$(330,051)Balance at December 31, 2020171,535,213 $334,439 124 $— 130,557 $— $(330,051)$(330,051)
Net lossNet loss(190,993)(190,993)Net loss— — — — — — (245,390)(245,390)
Common stock class B issued pursuant to stock options499,220
Balance at March 31, 2021
$1,385,204 $334,439 1$— 604,649$— $(521,044)$(521,044)
Stock option exercises Stock option exercises— — 995,526 — 1,253,179 — 1,783 — 1,783 
Conversion of Preferred Stock Conversion of Preferred Stock(171,535,213)(334,439)148,543,062 15 — — 104,517 — 104,532 
Conversion of Class B Common Stock Conversion of Class B Common Stock— — 1,309,320 — (1,383,736)— (744)— (744)
Net equity infusion from the Business Combination Net equity infusion from the Business Combination— — 90,333,562 9 — — 510,742 — 510,751 
Stock-based compensation modification reclassification Stock-based compensation modification reclassification— — — — — — 304,837 — 304,837 
Stock-based compensation expense Stock-based compensation expense— — — — — — 42,385 — 42,385 
Vested restricted stock units converted to common stockVested restricted stock units converted to common stock— — 1,466,010 — — — — — — 
Balance at December 31, 2021Balance at December 31, 2021— $— 242,647,604 $24 — $— $963,520 $(575,441)$388,103 
The accompanying notes are an integral part of these condensedconsolidated financial statements.
F-42F-6
Mount Sinai Genomics, Inc.
CondensedSema4 Holdings Corp.
Consolidated Statements of Cash Flows
(in thousands, except share amounts)thousands)
(unaudited)
Three months ended March 31,Year Ended December 31,
20212020202120202019
Operating activitiesOperating activitiesOperating activities
Net lossNet loss$(190,993)$(26,990)Net loss$(245,390)$(241,340)$(29,704)

Adjustments to reconcile net loss to net cash used in operating activities:Adjustments to reconcile net loss to net cash used in operating activities:Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expenseDepreciation and amortization expense4,902 2,398 Depreciation and amortization expense21,807 11,734 6,407 
Stock-based compensation expenseStock-based compensation expense164,962 815 Stock-based compensation expense219,421 120,231 5,482 
Change in fair value of warrant and contingent liabilitiesChange in fair value of warrant and contingent liabilities(198,401)— — 
Provision for excess and obsolete inventoryProvision for excess and obsolete inventory1,821 — Provision for excess and obsolete inventory2,129 — — 
Non-cash lease expenseNon-cash lease expense191 1,052 Non-cash lease expense1,555 2,400 (176)
Loss on extinguishment of debtLoss on extinguishment of debt301 — — 
Amortization of debt issuance costsAmortization of debt issuance costs66 — — 
Change in operating assets and liabilities:Change in operating assets and liabilities:Change in operating assets and liabilities:
Accounts receivableAccounts receivable(1,446)(2,094)Accounts receivable5,535 (10,611)(4,567)
InventoryInventory(9,828)2,675 Inventory(10,624)(8,979)(7,970)
Prepaid expenses and other current assetsPrepaid expenses and other current assets(6,466)(860)Prepaid expenses and other current assets(14,250)2,498 (2,526)
Due to/from related partiesDue to/from related parties(688)(438)Due to/from related parties1,433 (442)(919)
Other assetsOther assets— 1,174 Other assets(1,861)1,175 (4,395)
Accounts payable and accrued expensesAccounts payable and accrued expenses3,458 1,725 Accounts payable and accrued expenses25,916 14,805 12,847 
Contract liabilitiesContract liabilities1,027 (487)Contract liabilities(1,310)(559)2,342 
Other current liabilitiesOther current liabilities(9,148)(1,583)Other current liabilities3,239 15,960 4,451 
Net cash used in operating activitiesNet cash used in operating activities(42,208)(22,613)Net cash used in operating activities(190,434)(93,128)(18,728)


Investing activitiesInvesting activitiesInvesting activities
Purchases of property and equipmentPurchases of property and equipment(2,075)(3,907)Purchases of property and equipment(9,400)(24,094)(11,923)
Development of internal-use software assetsDevelopment of internal-use software assets(2,919)(1,414)Development of internal-use software assets(11,386)(7,880)(3,533)
Net cash used in investing activitiesNet cash used in investing activities(4,994)(5,321)Net cash used in investing activities(20,786)(31,974)(15,456)


Financing activitiesFinancing activitiesFinancing activities
Proceeds from long-term debt— 6,000 
Proceeds from issuance of Series B redeemable convertible preferred stock, net of issuance costsProceeds from issuance of Series B redeemable convertible preferred stock, net of issuance costs— — 118,824 
Proceeds from issuance of Series C redeemable convertible preferred stock, net of issuance costsProceeds from issuance of Series C redeemable convertible preferred stock, net of issuance costs— 117,324 — 
Proceeds from PIPE issuanceProceeds from PIPE issuance350,000 — — 
Proceeds from equity infusion from the merger, net of redemptionsProceeds from equity infusion from the merger, net of redemptions442,684 — — 
Legacy Sema4 Shareholder payoutLegacy Sema4 Shareholder payout(230,665)— — 
Payment of transaction costsPayment of transaction costs(51,760)— — 
Stock Appreciation Rights payoutStock Appreciation Rights payout(3,795)— — 
Repayment of long-term debtRepayment of long-term debt(8,741)— — 
Exercise of stock optionsExercise of stock options422 — Exercise of stock options1,271 — — 
Long-term debt principal payments(394)— 
Capital lease principal payments(1,052)(1,343)
Payment of deferred transaction costs(1,254)— 
Net cash (used in) provided by financing activities(2,278)4,657 

Net decrease in cash, cash equivalents and restricted cash(49,480)(23,277)
Cash, cash equivalents and restricted cash, at beginning of period118,960 115,006 
Cash, cash equivalents and restricted cash, at end of period$69,480 $91,729 

Supplemental disclosures of cash flow information
Interest expense paid$723 $629 
Purchases of property and equipment in accounts payable and accrued expenses$1,164 $2,580 
Software development costs in accounts payable and accrued expenses$1,570 $1,023 
Assets acquired under capital leases obligations$615 $4,340 
Unpaid deferred transaction costs included in accounts payable and accrued expenses$4,228 $— 
Capital contributions from ISMMSCapital contributions from ISMMS— — 30,897 
F-43F-7

Proceeds from long-term debt— 15,928 — 
Long-term debt principal payments(1,000)(186)— 
Debt issuance costs(537)— — 
Capital lease principal payments(3,728)(4,010)(1,709)
Net cash provided by financing activities493,729 129,056 148,012 
Net increase in cash, cash equivalents and restricted cash282,509 3,954 113,828 
Cash, cash equivalents and restricted cash, at beginning of year118,960 115,006 1,178 
Cash, cash equivalents and restricted cash, at end of year401,469 118,960 115,006 
Supplemental disclosures of cash flow information
Cash paid for interest$2,751 $1,745 $305 
Cash paid for taxes$349 $— $— 
Purchases of property and equipment in accounts payable and accrued expenses$761 $447 $818 
Software development costs in accounts payable and accrued expenses$1,149 $1,473 $1,040 
Non-cash Series A redeemable convertible preferred stock dividends declared and paid$— $— $3,039 
Debt issuance costs incurred but unpaid$1,000 $— $— 
The accompanying notes are an integral part of these consolidated financial statements.
F-8
Mount Sinai Genomics, Inc.
Sema4 Holdings Corp.
Notes to Unaudited CondensedConsolidated Financial Statements
1. Organization and Description of Business
Sema4 Holdings Corp., formerly Mount Sinai Genomics Inc., d/b/a Sema4 (the “Company”Delaware corporation (“Legacy Sema4”), as discussed further below, provides genomics-related diagnostic and information services and pursues genomics medical research. The CompanyLegacy Sema4 utilizes an integrated portfolio of laboratory processes, software tools and informatics capabilities to process DNA-containing samples, analyze information about patient-specific genetic variation and generate test reports for clinicians and their patients. The CompanyLegacy Sema4 provides a variety of genetic diagnostic tests and information with a focus on reproductive health, including pediatric, oncology and other conditions. In 2020, the CompanyLegacy Sema4 began to provide diagnostic testing services in response to the recent noveloutbreak of the coronavirus (“COVID-19”) outbreak. The Companypandemic. On December 15, 2021, it was announced that COVID-19 testing services would be discontinued by March 31, 2022. Legacy Sema4 primarily serves healthcare professionals who work with their patients and bills third partythird-party payors across the United States, with a substantial portion of its diagnostic testing volume occurring in the states of New York, California, Florida, Connecticut and New Jersey.
The Company was incorporated in the State of Delaware as a for-profit corporation on October 16, 2015, with limited operations focused on establishing the Company as a capitalized, standalone entity. On June 1, 2017, the Company signed a contribution and funding agreement and other agreements with Icahn School of Medicine at Mount Sinai (“ISMMS”July 22, 2021 (the “Closing Date”), whereby ISMMS contributed certain assets and liabilities related to the Company’s operations, provided certain services to the Company, and also committed to fund the Company up to $55.0 million in future capital contributions in exchange for equity in the Company (the “Spin-out”). Following the Spin-out, the Company commenced operations and began providing the services and performing research. The Company continues to be party to a Transition Services Agreement (“TSA”) as well as service agreements (“Service Agreements”) with ISMMS (see Note 6).
On February 9, 2021, the Company, CM Life Sciences, Inc. (“CMLS”), and S-IV Sub, Inc., a direct and wholly-owned subsidiary completed the acquisition of CMLS, entered into anLegacy Sema4, pursuant to that certain Agreement and Plan of Merger (the(as amended, the “Merger Agreement”), pursuant to which CMLS will acquiredated February 9, 2021. On the Company through a merger ofClosing Date, S-IV Sub, Inc. (“Merger Sub”) merged with and into the Company (the “Merger”),Legacy Sema4, with Legacy Sema4 surviving the Company being the surviving corporation andmerger as a wholly-owned subsidiary of CMLS following(the “Merger” and, together with the Merger. Once effective, allother transactions contemplated by the Merger Agreement, the “Business Combination”). In connection with the consummation of the Business Combination, CMLS changed its name to “Sema4 Holdings Corp.” (“Sema4 Holdings”) and Legacy Sema4 changed its name to “Sema4 OpCo, Inc.” All equity securities of the Company will beLegacy Sema4 were converted into the right to receive the applicable portion of the merger consideration.
The Merger was accounted for as a reverse recapitalization with Legacy Sema4 as the accounting acquirer and CMLS as the acquired company for accounting purposes. The shares and net loss per common share, prior to the Merger, have been retroactively restated as shares reflecting the exchange ratio established in the Merger (1 share of Legacy Sema4 Class A common stock for 123.8339 shares of Sema4 Holdings Class A common stock) (the “Conversion Ratio”).
Prior to the Merger, shares of CMLS Class A common stock, CMLS’s public warrants, and CMLS’s public units were traded on the Nasdaq Capital Market under the ticker symbols “CMLF”, “CMFLW”, and “CMLFU” respectively. On July 23, 2021, shares of Sema4 Holdings Class A common stock and Sema4 Holdings’ public warrants began trading on the Nasdaq Global Select Market (the “Nasdaq”) under the ticker symbols “SMFR” and “SMFRW,” respectively. See Note 3, “Business Combination,” for additional details.
Unless otherwise stated herein or unless the context otherwise requires, references in these notes to the “Company,” or “Sema4” refer to (i) Legacy Sema4 prior to the consummation of the Business Combination; and (ii) Sema4 Holdings and its subsidiary following the consummation of the Business Combination.

2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensedconsolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. As such, the accompanying unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto as of and for the years ended December 31, 2020, 2019 and 2018 that are included elsewhere in this proxy statement.
The accompanying condensed financial statements reflect all normal recurring adjustments that are necessary to state fairly the results for the interim periods presented. Interim results are not necessarily indicative of the results of operations or cash flows for a full year or any subsequent interim period.
. The Company’s historical financial information includes costs of certain services historically provided by ISMMSIcahn School of Medicine at Mount Sinai (“ISMMS”) pursuant to the TSATransition Services Agreement ("TSA") and Service Agreements. The Company’s historical results are not necessarily indicative of what its resultsservice.
Restatement – 2020 and 2019 annual statements of operations financial position, cash flows, or costs and expenses would have been had the Company been an independent entity during the historical periods presented or what its results of operations, financial position, cash flows, or costs and expenses will be in the future when it is a publicly traded, stand-alone company.
Liquidity and Going Concerncomprehensive loss
The Company has evaluated whether there are certain conditionsclassifies expenses incurred that directly relate to the delivery of revenue as cost of services in its consolidated statements of operations and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the condensed financial statements are issued.comprehensive loss.
F-44F-9
Mount Sinai Genomics, Inc.
Notes to Unaudited Condensed Financial Statements
Through March 31,As a result of expanded accounting resources, the Company identified the misclassification of certain expenses related to the genetic counseling department reported in cost of services that should have been reported in selling and marketing in the prior period financial statements. The Company quantified the amount and determined it necessary to restate its previously reported balances as follows (in thousands):
December 31, 2020December 31, 2019
As reportedMisclass-
ification		RestatedAs reportedMisclass-
ification		Restated
Total revenue179,322 — 179,322 196,174 — 196,174 
Cost of services184,648 (9,352)175,296 119,623 (6,234)113,389 
Gross (loss) profit(5,326)9,352 4,026 76,551 6,234 82,785 
Research and development72,700 — 72,700 34,910 — 34,910 
Selling and marketing53,831 9,352 63,183 33,118 6,234 39,352 
General and administrative100,742 — 100,742 29,484 — 29,484 
Related party expenses9,395 — 9,395 9,452 — 9,452 
Loss from operations(241,994)— (241,994)(30,413)— (30,413)
Total other income, net654 — 654 709 — 709 
Net loss and comprehensive loss(241,340)— (241,340)(29,704)— (29,704)
This misclassification did not have any impact to the Company's net loss or net loss per share as reported in the statements of operations and comprehensive loss in any interim or annual periods. Included in the misclassification amount is stock-based compensation expense of $1 million for 2020. There was no impact of misclassification for 2019 related to stock-based compensation expense.
Restatement – 2021 and 2020 interim financial statements (unaudited)
Additionally, the Company has funded its operations primarily with proceeds fromidentified quarterly out of period adjustments generally related to recognition of cost of services in the issuance of its redeemable convertible preferred stock and the issuance of long-term debt. The Company has incurred recurring losses since its inception, including net losses of $191.0 million and $27.0 million for the three monthsquarterly periods ended March 31, 2021, June 30, 2021 and September 30, 2021. The impact
F-10

of the misclassification and quarterly out of period adjustments identified on each of the three months periods in the year ended December 31, 2021 and 2020 respectively. Asare disclosed as follows (in thousands):
2021 interim statements of operations and comprehensive loss (in thousands)
First
Quarter		Second
Quarter
As
 reported		Misclass-ificationAdjustmentRestatedAs
 reported		Misclass-ificationAdjustmentRestated
Total revenue64,351 — (150)64,201 46,865 — 150 47,015 
Cost of services71,812 (3,837)549 68,524 49,631 (2,287)835 48,179 
Gross (loss) profit(7,461)3,837 (699)(4,323)(2,766)2,287 (685)(1,164)
Research and development53,131 — 2 53,133 11,954 — (2)11,952 
Selling and marketing31,569 3,837 (40)35,366 16,247 2,287 40 18,574 
General and administrative101,917 — 121 102,038 12,794 — 76 12,870 
Related party expenses1,797 — — 1,797 888 — — 888 
Loss from operations(195,875)— (782)(196,657)(44,649)— (799)(45,448)
Total other income, net4,882 — — 4,882 (713)— — (713)
Net (loss) income and comprehensive loss(190,993)— (782)(191,775)(45,362)— (799)(46,161)
Third
Quarter		Fourth
Quarter
As
 reported		Misclass-ificationAdjustmentRestatedAs
 reported
Total revenue43,178 — — 43,178 57,801 
Cost of services58,752 (6,031)(1,234)51,487 60,607 
Gross (loss) profit(15,574)6,031 1,234 (8,309)(2,806)
Research and development17,831 — — 17,831 22,246 
Selling and marketing22,121 6,031 — 28,152 30,646 
General and administrative33,230 — (105)33,125 57,955 
Related party expenses847 — — 847 2,127 
Loss from operations(89,603)— 1,339 (88,264)(115,780)
Total other income, net120,995 — — 120,995 75,595 
Net (loss) income and comprehensive loss31,392 — 1,339 32,731 (40,185)
2020 interim statements of operations and comprehensive loss (in thousands)
First
Quarter		Second
Quarter		Third
Quarter		Fourth
Quarter
As reportedMisclass-ificationRestatedAs reportedMisclass-ificationRestatedAs reportedMisclass-ificationRestatedAs reportedMisclass-ificationRestated
Total revenue46,655 — 46,655 30,102 30,102 38,608 38,608 63,957 63,957 
Cost of services39,239 (2,101)37,138 35,985 (1,480)34,505 36,530 (2,508)34,022 72,894 (3,263)69,631 
Gross (loss) profit7,416 2,101 9,517 (5,883)1,480 (4,403)2,078 2,508 4,586 (8,937)3,263 (5,674)
Research and development13,096 — 13,096 9,361 — 9,361 19,083 — 19,083 31,160 — 31,160 
Selling and marketing11,733 2,101 13,834 8,686 1,480 10,166 12,735 2,508 15,243 20,677 3,263 23,940 
General and administrative7,164 — 7,164 8,121 — 8,121 24,342 — 24,342 61,115 — 61,115 
Related party expenses2,195 — 2,195 2,111 — 2,111 1,933 — 1,933 3,156 — 3,156 
Loss from operations(26,772)— (26,772)(34,162)— (34,162)(56,015)— (56,015)(125,045)— (125,045)
Total other income, net(218)— (218)2,110 — 2,110 (600)— (600)(638)— (638)
Net loss and comprehensive loss(26,990)— (26,990)(32,052)— (32,052)(56,615)— (56,615)(125,683)— (125,683)
F-11

The adjustments also affected certain current asset and liability accounts previously reported in the condensed balance sheets as of March 31, 2021 and June 30, 2021 and condensed consolidated balance sheets as of September 30, 2021 as follows (in thousands):
March 31, 2021June 30, 2021September 30, 2021
As reportedAdjust-
ment		RestatedAs reportedAdjust-
ment		RestatedAs reportedAdjust-mentRestated
Assets
Current assets:
Cash and cash equivalents58,652 — 58,652 26,501 — 26,501 461,276 — 461,276 
Accounts receivable33,490 (150)33,340 24,568 — 24,568 21,257 — 21,257 
Due from related parties349 — 349 437 — 437 413 — 413 
Inventory32,969 — 32,969 29,128 — 29,128 31,174 — 31,174 
Prepaid expenses and other current assets15,070 (139)14,931 18,378 — 18,378 24,391 — 24,391 
Total current assets140,530 (289)140,241 99,012 — 99,012 538,511 — 538,511 
Property and equipment, net64,632 — 64,632 62,097 — 62,097 60,333 — 60,333 
Restricted cash10,828 — 10,828 10,828 — 10,828 900 — 900 
Other assets3,596 — 3,596 3,596 — 3,596 3,613 — 3,613 
Total assets219,586 (289)219,297 175,533 — 175,533 603,357 — 603,357 
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable and accrued expenses41,609 493 42,102 43,650 1,581 45,231 43,079 242 43,321 
Due to related parties797 — 797 1,278 — 1,278 1,425 — 1,425 
Current contract liabilities2,810 — 2,810 1,341 — 1,341 493 — 493 
Other current liabilities22,991 — 22,991 24,764 — 24,764 26,369 — 26,369 
Total current liabilities68,207 493 68,700 71,033 1,581 72,614 71,366 242 71,608 
Long-term debt, net of current portion18,502 — 18,502 18,028 — 18,028 11,000 — 11,000 
Stock-based compensation liabilities296,952 — 296,952 295,049 — 295,049 — — — 
Warrant liability— — — — — — 46,629 — 46,629 
Earn-out contingent liability— — — — — — 61,400 — 61,400 
Other liabilities22,530 — 22,530 21,907 — 21,907 21,699 — 21,699 
Total liabilities406,191 493 406,684 406,017 1,581 407,598 212,094 242 212,336 
Redeemable convertible preferred stock:
Series A-1 redeemable convertible preferred stock51,811 — 51,811 51,811 — 51,811 — — — 
Series A-2 redeemable convertible preferred stock46,480 — 46,480 46,480 — 46,480 — — — 
Series B redeemable convertible preferred stock118,824 — 118,824 118,824 — 118,824 — — — 
Series C redeemable convertible preferred stock117,324 — 117,324 117,324 — 117,324 — — — 
Redeemable convertible preferred stock334,439 — 334,439 334,439 — 334,439 — — — 
Stockholders’ equity (deficit):
Preferred Stock— — — — — — — — — 
Class A common stock— — — — — — 24 — 24 
Class B convertible common stock— — — — — — — — — 
Additional paid-in capital— — — 1,483 — 1,483 926,253 — 926,253 
Accumulated deficit(521,044)(782)(521,826)(566,406)(1,581)(567,987)(535,014)(242)(535,256)
Total stockholders’ (deficit) equity(521,044)(782)(521,826)(564,923)(1,581)(566,504)391,263 (242)391,021 
Total liabilities, redeemable convertible preferred stock and stockholders’ equity219,586 (289)219,297 175,533 — 175,533 603,357 — 603,357 
F-12

The adjustments did not have any impact on the Company had an accumulated deficitnet cash used in operating or investing activities, or net cash used or provided by financing activities previously reported in the condensed statements of $521.0 million.     The Company expects to continue to generate significantcash flows. However, certain line items within the operating losses for the foreseeable future. As of June 10, 2021, the issuance datesection of the condensed financial statements for the three months ended March 31, 2021, the Company expects that its existingof cash and cash equivalents of $58.7 million (excluding restricted cash) will be sufficient to fund its operating expenses and capital expenditure requirements into the third quarter of 2021. The future viability of the Company beyond that point is dependent on its ability to raise additional capital to finance its operations.
The Company is seeking to merge with CM Life Sciences, Inc. (see Note 1). In the event the Company does not complete this transaction, the Company expects to seek additional funding through an initial public offering of its common shares, private equity financings, debt financings or other capital sources, including collaborations with other companies or other strategic transactions. The Company may not be able to obtain financing on acceptable terms, or at all. The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders.
If the Company is unable to obtain funding, the Company will be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects, or the Company may be unable to continue operations. Although management continues to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all.
Based on its recurring losses from operations incurred since inception, expectation of continuing operating losses for the foreseeable future, and the need to raise additional capital to finance its future operations, as of June 10 2021, the issuance date of the accompanying condensed financial statements, the Company has concluded that there is substantial doubt about its ability to continue as a going concern for a period of one year from the date that these condensed financial statements were issued.
The accompanying condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty. Accordingly, the condensed financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.flows would change by immaterial amounts.
Use of Estimates
The preparation of condensedconsolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the condensedconsolidated financial statements as well as the reported amounts of revenues and expenses during the periods presented. The Company bases these estimates on current facts, historical and anticipated results, trends and various other assumptions that it believes are reasonable in the circumstances, including assumptions as to future events. These estimates include, but are not limited to, the transaction price for certain contracts with customers, the capitalization of software costs and the valuation of stock-based awards, inventory, earn-out contingent liability and inventory.earn-out RSUs. Actual results could differ materially from those estimates, judgments and assumptions.
Concentration of Credit Risk and Other Risks and Uncertainties
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable.
The Company’s cash and cash equivalents are deposited with high-quality financial institutions. The Company has balances in financial institutions that exceed federal depository insurance limits. Management believes these financial institutions are financially sound and, accordingly, that minimal credit risk exists. The Company has not experienced any losses on its deposits of cash and cash equivalents.
F-45
Mount Sinai Genomics, Inc.
Notes to Unaudited Condensed Financial Statements
The Company assesses both the customer and, if applicable, the third-partythird party payor that reimburses the Company on the customer’s behalf when evaluating concentration of credit risk. Significant customers and payors are those that represent more than 10% of the Company’s total annual revenues or accounts receivable balance at each respective balance sheet date. The significant concentrations of accounts receivable at Marchas of December 31, 2021 and December 31, 2020 were primarily from large managed care insurance companies and a reference laboratory. There was no individual customer that accounted for 10% or more of revenue or accounts receivable for any of the years presented. The Company does not require collateral as a means to mitigate customer credit risk.
For each significant payor, revenue as a percentage of total revenues and accounts receivable as a percentage of total accounts receivable are as follows:
RevenueAccounts ReceivableRevenueAccounts Receivable
Three months ended March 31,
As of
March 31,
As of
December 31,		Year Ended December 31,As of December 31,
202120202021202020212020201920212020
Payor APayor A14 %43 %13 %10 %Payor A22 %27 %36 %15 %10 %
Payor BPayor B*15 %**Payor B13 %14 %***
Payor CPayor C12 %13 %**Payor C****20 %
Payor DPayor D12 %11 %17 %*Payor D**24 %15 %*
Payor E***20 %
*less than 10%
__________________
*less than 10%
The Company is subject to a concentration of risk from a limited number of suppliers for certain reagents and laboratory supplies. One supplier accounted for approximately 7%, 11% and 12% of purchases of lab supplies, reagents and kits15% for the three monthsyears ended MarchDecember 31, 2021, 2020 and 2019, respectively. Another supplier accounted for approximately 11%, 10% and 12% for the years ended December 31, 2021, 2020 and 2019, respectively. This risk is managed by maintaining a target quantity of surplus stock.
F-13

Impact of COVID-19
In March 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic. The ongoing COVID-19 pandemic has had, and continues to have, an extensive impact on the global health and economic environments.conditions. Many jurisdictions, including those in which the Company has locations,current operations, have implemented measures to combat the outbreak,spread and resurgence of COVID-19, such as travel restrictions and shelter in place orders. In addition, the healthcare sector generally experienced a decline in discretionary care services at the onset of the pandemic.
Beginning in April 2020, the Company’s diagnostic test volumes decreased significantly as compared to the prior year as a result of the COVID-19 pandemic and the related limitations and priorities across the healthcare system. In response, beginning in May 2020, the Company entered into several service agreements with state governments and healthcare institutions to provide testing for the presence of COVID-19 infection.variants. While test volumes have since improved, the Company continues to experience changes in the mix of tests due to the impact of COVID-19.the COVID-19 pandemic. COVID-19 could continue to have a material impact on the Company’s results of operations, cash flows and financial condition for the foreseeable future.
In March 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law which was a stimulus bill that, among other things, provided assistance to qualifying businesses and individuals and included funding for the healthcare system. During 2020, as part of the stimulus provided by the CARES Act, the Company received $5.4 million, comprised of $2.6 million received under the Provider Relief Fund (“PRF”) distribution which was recognized in other income, net in the statements of operations and comprehensive loss, and $2.8 million received under the Employee Retention Credit (“ERC”) distribution which was recorded in the other current liabilities and reflected in this balance as of MarchDecember 31, 20212020 and December 31, 2020.2021.
During 2021, the Company received an additional $5.6 million during 2021 under the PRF distribution, which was recognized in other income (expense), net in the consolidated statements of operations and comprehensive loss. At this time, the Company is not certain of the availability, extent or impact of any future relief provided
Additionally, under the CARES Act, orthe Company deferred payment of U.S. social security taxes in 2020 . As a result, $3.8 million of employer payroll tax payments were deferred as of December 31, 2020 with $1.9 million paid in December 2021 and the remaining $1.9 million payment will be made in December 2022. As of December 31, 2021, the remaining payable is recorded in other stimulus initiatives.current liabilities.
F-46
Mount Sinai Genomics, Inc.
Notes to Unaudited Condensed Financial Statements
On December 15, 2021, it was announced that COVID-19 testing services would be discontinued by March 31, 2022.
Cash, Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. Cash equivalents consist of amounts invested in money market funds. Carrying values of cash equivalents approximate fair value due to the short-term nature of these instruments.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on the condensed balance sheets that sum to the total of the same amounts shown on the condensed statements of cash flows (in thousands):
(in thousands)As of March 31, 2021As of December 31, 2020
As of December 31,
20212020
Cash and cash equivalentsCash and cash equivalents$58,652 $108,132 Cash and cash equivalents$400,569 $108,132 
Restricted cashRestricted cash10,828 10,828 Restricted cash900 10,828 
TotalTotal$69,480 $118,960 Total$401,469 $118,960 
Restricted cash as of MarchDecember 31, 2021 consists of money market deposit accounts that secure an irrevocable standby lettersletter of credit that serve as collateral for security deposits for financing obligations and operating leases (see Note 79).
F-14

Accounts Receivable
Accounts receivable consists of amounts due from customers and Note 8, respectively).
Deferred transaction costs
third party payors for services performed and reflect the consideration to which the Company expects to be entitled in exchange for providing those services. Accounts receivable are estimated and recorded in the period the related revenue is recorded. During the years ended December 31, 2021 and 2020, the Company did not record provisions for doubtful accounts. The Company capitalizes deferred transaction costs,did not write off any accounts receivable balances for the year ended December 31, 2021 and $0.2 million of accounts receivable was written off for the year ended December 31, 2020.
Inventory, net
Inventory, net which primarily consistconsists of direct, incremental legal, professional, accountingtesting supplies and other third-party fees relatingreagents, is capitalized when purchased and expensed when used in performing services. Inventory is stated at the lower of cost or net realizable value. Cost is determined using actual costs on a first-in, first-out basis. The Company periodically performs obsolescence assessments and writes off any inventory that is no longer usable. Any write-down of inventory to net realizable value creates a new cost basis. The Company recorded a reserve for excess and obsolete inventory of $2.1 million as of December 31, 2021. There was no reserve recorded as of December 31, 2020.
Property and Equipment, net
Property and equipment, net are stated at cost less accumulated depreciation and amortization. Equipment includes assets under capital lease. Improvements are capitalized, while maintenance and repairs are expensed as incurred. When assets are retired or otherwise disposed of, the anticipated Merger. As of March 31, 2021,cost and accumulated depreciation and amortization are removed from the Company has deferred $5.5 million of transaction costs in prepaid expenses and other current assets on the condensed balance sheets that will be reclassified and offset against equity upon consummation of the Merger. Should the planned Merger be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expensesany resulting gain or loss is reflected in the condensed statements of operations and comprehensive loss.
Emerging Growth Company
The Company is an “emerging growth company” as definedloss in the Jumpstart Our Business Startups Actperiod realized.
Capital leases and leasehold improvements are amortized straight-line over the shorter of 2012. As such, the Company is eligible for exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies, including reduced reporting and extended transition periods to comply with new or revised accounting standards for public business entities. The Company has elected to avail itself of this exemption and, therefore, will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
Recently Adopted Accounting Pronouncements
Effective January 1, 2021, the Company adopted Accounting Standards Update (“ASU”) 2018-18, Collaborative Arrangements: Clarifying the Interaction between Topic 808 and Topic 606 (“ASU 2018-18”), which clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC Topic 606 (“ASC 606”), Revenue from Contracts with Customers, when the counterparty is a customer. In addition, ASC Topic 808 (“ASC 808”), Collaborative Arrangements precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. Adoption of ASU 2018-18 did not have an impact on the Company’s condensed financial statements as the Company is not currently a participant in any such collaborative arrangements.
Recently Issued Accounting Pronouncements Not Yet Adopted
In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”), which requires lessees to recognize right-of-use assets and lease liabilities for most leases on their balance sheets. Expense recognition for lessees under ASU 2016-02 is similar to current lease accounting. ASU 2016-02 will require enhanced disclosures to help the financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The recognition, measurement and presentation of expenses and cash flows arising from a lease will
F-47
Mount Sinai Genomics, Inc.
Notes to Unaudited Condensed Financial Statements
primarily depend on its classification as a finance or operating lease. As an emerging growth company, the provisions of ASU 2016-02 are effective for the Company for annual and interim periods beginning after December 15, 2021. Early adoption is permitted. The Company is evaluating the transition options permissible under ASU 2016-02 and plans to adopt through a cumulative adjustment to retained earnings on the date of adoption. Significant implementation matters being addressed by the Company include documenting the new lease accounting process. The Company is evaluating the effect this ASU will have on its financial statements, related disclosures and ongoing financial reporting. The Company expects implementation of this ASU to result in the recognition of right-of-use assets and corresponding lease liabilities in its balance sheets, principally related to office and facility leases.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The new credit losses standard changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, contract assets recognized as a result of applying ASC 606, loans and certain other instruments, entities will be required to use a new forward looking “expected loss” model that generally will result in earlier recognition of credit losses than under today’s incurred loss model. As an emerging growth company, ASU 2016-13 is effective for annual periods beginning after December 31, 2022, with early adoption permitted. Application of the amendments is through a cumulative-effect adjustment to the opening retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company is currently evaluating the impact of the new guidance on its financial statements and related disclosures.
In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”), which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the standard. ASU 2018-15 will require an entity (customer) in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. ASU 2018-15 also requires the entity (customer) to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. ASU 2018-15 also requireslease or the entityestimated useful life. All other property and equipment assets are depreciated using the straight-line method over the estimated useful life of the asset, which ranges from three to presentfive years.
The Company reviews the expenserecoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset or asset group may not be recoverable. An impairment loss is recognized when the total estimated future undiscounted cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. Impairment, if any, is assessed using discounted cash flows or other appropriate measures of fair value. There were no long-lived asset impairment losses recorded for any periods presented.
Capitalized Software
We capitalize certain costs incurred related to the capitalized implementationdevelopment of our software applications for internal use during the application development state. If a project constitutes an enhancement to existing software, we assess whether the enhancement creates additional functionality to the software, thus qualifying the work incurred for capitalization. Costs incurred prior to meeting these criteria together with costs incurred for training and maintenance are expensed as incurred. Once the project is available for general release, capitalization ceases and we estimate the useful life of the asset and begin amortization.
Capitalized software costs are amortized using the straight-line method over an estimated useful life of three years. Capitalized software is reviewed for impairment whenever events or changes in circumstances may indicate that the carrying amount of an asset may not be recoverable
Fair Value Measurements
Financial assets and liabilities are recorded at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company determines the fair value of its financial instruments based on assumptions that market participants would use in pricing an asset or liability in the same line item in the statement of income as the fees associated with the hosting element (service) of the arrangement and classify payments for capitalized implementation costs in the statement of cash flows in the same manner as payments made for fees associated with the hosting element.principal or most advantageous market. The entity is also required to present the capitalized implementation costs on the balance sheets in the same line item that a prepayment for the fees of the associated hosting arrangement would be presented. The amendments in ASU 2018-15 are effective for the Company in annual reporting periods beginning after December 15, 2020 and interim periods beginning after December 15, 2021. Early adoption is permitted. The Company is evaluating the transition options permissible under ASU 2018-15 of either 1) retrospectively adjusting prior periods presented or 2) prospectively applying amendments to all implementation costs incurred after the date of adoption. The Company is currently evaluating the impact of ASU 2018-15 will have on its financial statements and related disclosures.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC 740 and clarifying and amending existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years beginning after December 15, 2021. Early adoption is permitted. The Company is currently assessing the impact of adopting this new accounting guidance will have on its financial statements and related disclosures.following
F-48
Mount Sinai Genomics, Inc.
Notes to Unaudited Condensed Financial Statements
3. Revenue Recognition
Diagnostic Revenue
The majority of revenue is generated from diagnostic services provided to three groups of customers: patients with third-party insurance coverage; patients without third-party insurance coverage or those who elect to self-pay; and institutional clients, such as hospitals, clinics and reference laboratories. Revenue from diagnostic testing services is recorded at the estimated transaction price, subject to the constraint for variable consideration, upon transfer of control of the service.
Other Revenue
The Company enters into both short-term and long-term project-based collaboration service agreements with third parties, whereby the Company provides diagnostic testing, research and related data aggregation reporting services. The consideration to which the Company is entitled pursuant to its collaboration service agreements generally includes non-refundable upfront payments and variable payments based upon the achievement of certain milestones during the contract term. Non-refundable upfront payments are generally received in advance of performing the services and, therefore, are recorded as a contract liability upon receipt. Milestone payments are included in the transaction price only when it is probable that doing so will not result in a significant reversal of cumulative revenue recognized when the uncertainty associated with the milestone is subsequently resolved. Revenue for such collaboration service agreements is recognized over time using an input measure based on costs incurred to satisfy the performance obligation.
Disaggregated revenue
The following table summarizes the Company’s revenue disaggregated by type of customer (in thousands):
Three months ended March 31,
(in thousands)20212020
Diagnostic test revenue
Patients with third-party insurance$46,197 $44,396 
Institutional customers15,664 1,144 
Self-pay patients899 530 
Total diagnostic test revenue62,760 46,070 
Other revenue1,591 585 
Total$64,351 $46,655 
Reassessment of variable consideration
Subsequent changes to the estimate of the transaction price, determined on a portfolio basis when applicable, are generally recorded as adjustments to revenue in the period of the change. The Company updates estimated variable consideration quarterly.
For the three months ended March 31, 2021, the quarterly change in estimate resulted in a $3.5 million adjustment for tests in which the performance obligation of delivering the test results was met in prior periods. The change in estimate is a result of changes in the estimated transaction price due to contractual adjustments, obtaining updated information from payors and patients that was unknown at the time the performance obligation was met and settlements with third party payors. For the three months ended March 31, 2020, the quarterly change in estimate did not result in material adjustments to the Company’s previously reported revenue or accounts receivable amounts.
Remaining performance obligations
Due to the long-term nature of some collaboration service agreements, the Company’s obligations pursuant to such agreements represent partially unsatisfied performance obligations as of March 31, 2021. The revenues under
F-49F-15
Mount Sinai Genomics, Inc.
Notes to Unaudited Condensed Financial Statements
existing collaboration service agreements with original expected durationshierarchy lists three levels of more than one yearfair value based on the extent to which inputs used in measuring fair value are estimated to be approximately $11.8 million. The Company expects to recognize the majority of this revenue over the next 4 years.
Contract assets and liabilities
Contract assets consist of the Company’s right to consideration that is conditional upon its future performance. Contract assets arise in collaboration service agreements for which revenue is recognized over time but the Company’s right to bill the customer is contingent upon the achievement of contractually-defined milestones.
Contract liabilities consist of customer payments in excess of revenues recognized. For collaboration service agreements, the Company assesses the performance obligations and recognizes contract liabilities as current or non-current based upon forecasted performance.
A reconciliation of the beginning and ending balances of contract assets and contract liabilities is shownobservable in the table below (in thousands):market:
(in thousands)
Contract
Assets
Contract
Liabilities
December 31, 2020$2,028 $3,811 
Contract asset additions256 — 
Customer prepayments— 1,723 
Revenue recognized(100)(540)
March 31, 2021$2,184 $4,994 
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.
The increaseLevel 2: Observable inputs such as quoted prices for similar instruments in contract liabilities as of March 31, 2021 is primarily dueactive markets, quoted prices for identical or similar instruments in markets that are not active or model-derived valuations whose significant inputs are observable.
Level 3: Unobservable inputs that are significant to the executionmeasurement of a collaboration service agreement with a customer. The Company presents contracts assets and contract liabilities arising from another customer contract on a net basis on its condensed balance sheets. As of March 31, 2021 and December 31, 2020, $2.8 million and $1.8 million is recorded as current contract liabilities, respectively.
Revenues recognized for the three months ended March 31, 2021 and March 31, 2020 that were included in the contract liability balance at the beginning of each period were $0.5 million and $0.1 million, respectively.
Costsfair value but are supported by little to fulfill contracts
Costs associated with fulfilling the Company’s performance obligations pursuant to its collaboration service agreements include costs for services that are subcontracted to ISMMS. Amounts are generally prepaid and then expensed in line with the pattern of revenue recognition. Prepayment of amounts prior to the costs being incurred are recognized on the condensed balance sheets as current or non-current based upon forecasted performance.
As of March 31, 2021 and December 31, 2020, the Company had outstanding deferred costs to fulfill contracts of $2.8 million and $3.0 million, respectively. As of March 31, 2021 and December 31, 2020, all outstanding deferred costs were recorded as prepaid expenses and other current assets.
Amortization of deferred costs was $0.3 million and $0.3 million for the three months ended March 31, 2021 and 2020, respectively. The amortization of these costs is recorded in cost of services on the condensed statements of operations and comprehensive loss.
4. Fair Value Measurementsno market data.
The Company’s financial assets and liabilities consist of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities, capital leases and long-term debt. The Company’s cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to the relatively short-term nature of these accounts.
F-50
Mount Sinai Genomics, Inc.
Notes to Unaudited Condensed Financial Statements
The Company’s capital leases and long-term debt are classified within level 1 of the fair value hierarchy because such long-term debt and capital lease agreements bear interest at rates for instruments with similar characteristics; accordingly, the carrying value of these liabilities approximate their fair values.
The following tables set forth the fair value of financial instruments that were measured at fair value on a recurring basis (in thousands):
As of March 31, 2021
(in thousands)TotalLevel 1Level 2Level 3
Financial Assets:
Money market funds$50,919 $50,919 $— $— 
Total financial assets$50,919 $50,919 $— $— 
As of December 31, 2020
(in thousands)TotalLevel 1Level 2Level 3
Financial Assets:
Money market funds$92,940 $92,940 $— $— 
Total financial assets$92,940 $92,940 $— $— 
Money market funds are classified within Level 1 of the fair value hierarchy as the fair value is based on quoted prices in active markets.
There were no transfers between Level 1, Level 2 and Level 3 during the periods presented.
5. Property and Equipment
Property and equipment consisted of the following (in thousands):
(in thousands)
As of
March 31,
2021
As of
December 31,
2020
Laboratory equipment$23,931 $22,818 
Equipment under capital leases21,358 20,743 
Building under capital lease6,276 6,276 
Construction in-progress5,842 4,673 
Capitalized software17,647 14,631 
Computer equipment4,563 4,118 
Furnitures, fixtures and other equipment3,214 3,214 
Leasehold improvements16,802 16,736 
Total property and equipment99,633 93,209 
Less: accumulated depreciation and amortization(35,001)(30,099)
Property and equipment, net$64,632 $63,110 
For the three months ended March 31, 2021 and 2020, depreciation and amortization expense was $4.9 million and $2.4 million, respectively, which included software amortization expense of $1.2 million and $0.5 million for
F-51
Mount Sinai Genomics, Inc.
Notes to Unaudited Condensed Financial Statements
the three months ended March 31, 2021 and 2020, respectively. Depreciation and amortization expense is included within the condensed statements of operations and comprehensive loss as follows (in thousands):
Three months ended March 31,
(in thousands)20212020
Cost of services$3,058 $1,792 
Research and development1,251 249 
Selling and marketing— — 
General and administrative593 357 
Total depreciation and amortization expenses$4,902 $2,398 
During the three months ended March 31, 2021 and 2020, there were no sales of property and equipment made by the Company.
6. Related Party Transactions
Related party revenues
Related party revenue with Mount Sinai Health Network for diagnostic testing revenues were nominal for the three months ended March 31, 2021 and totaled $0.1 million for the three months ended March 31, 2020. Related party revenues from collaborative service agreements were nominal for the three months ended March 31, 2021, while there were none for the three months ended March 31, 2020.
The Company had amounts due from ISMMS and other entities within the Mount Sinai Health Network for revenues earned of $0.3 million and $0.3 million as of March 31, 2021 and December 31, 2020, respectively. These amounts are presented as due from related parties on the Company’s condensed balance sheets.
Related party costs
Expenses recognized under the TSA totaled $1.4 million and $1.9 million for the three months ended March 31, 2021 and 2020, respectively, and are presented within related party expenses in the condensed statements of operations and comprehensive loss. The Company had TSA payables due to ISMMS of $0.7 million and $0.6 million at March 31, 2021 and December 31, 2020, respectively. These amounts are included within due to related parties on the Company’s condensed balance sheets.
Expenses recognized pursuant to the Service Agreements and other service arrangements with ISMMS totaled $0.7 million and $0.9 million for the three months ended March 31, 2021 and 2020, respectively. These amounts are included in either cost of services or related party expenses on the condensed statements of operations and comprehensive loss depending on the particular activity to which the costs relate. Payables due to ISMMS for the Service Agreements and other service arrangements were nominal at March 31, 2021 and totaled $0.8 million at December 31, 2020. These amounts are included within due to related parties on the Company’s condensed balance sheets.
Total related party costs are included within cost of services and related party expenses in the condensed statements of operations and comprehensive loss as follows (in thousands):
Three months ended March 31,
(in thousands)20212020
Cost of services$278 $574 
Related party expenses1,797 2,195 
Total related party costs$2,075 $2,769 
F-52
Mount Sinai Genomics, Inc.
Notes to Unaudited Condensed Financial Statements
7. Long-Term Debt
2016 Funding Commitment
In June 2017, ISMMS assigned a loan funding commitment from the Connecticut Department of Economic and Community Development (“DECD”) tois classified within level 2 of the Company. The DECD loan agreement, as amended, provides for a total loan commitmentfair value hierarchy. As of $15.5 millionDecember 31, 2021, the long-term debt is recorded at a fixed annual interest rateits carrying value of 2.0% for a term of 10 years. The Company is required to make interest-only payments through July 2023 and principal and interest payments commencing in August 2023. The final payment of principal and interest is due in July 2028. This commitment is collateralized by providing a security interest in certain machinery and equipment the Company acquired from ISMMS, as defined in a separate security agreement. ISMMS also guarantees the Company’s obligation to repay the DECD.
The outstanding loan balance from the DECD was $11.0 million and $11.0in the consolidated balance sheet. The fair value is $10.2 million, at March 31, 2021 and December 31, 2020, respectively.which is estimated based on discounted cash flows using the yields of similar debt instruments of other companies with similar credit profiles.
2020 Master Loan Agreement
In August 2020, the Company entered into a loan and security agreement with a bank, in which the Company received a loan of $6.3 million and deposited the proceeds into a deposit account held by the bank. The Company is required to make sixty consecutive monthly payments of principal and interest at a fixed monthly amount of $0.1 million beginning in November 2020. Interest payments are fixed at an annual interest rate of 4.75%.
The Company recorded the $6.3 million proceeds as restricted cash on the condensed balance sheets at March 31, 2021 and December 31, 2020. The outstanding loan balance was $5.8 million and $6.1 million at March 31, 2021 and December 31, 2020, respectively.
2020 Master Lease Agreement
In December 2020, the Company entered into a lease agreement with a lender whereby the Company agreed to sell certain equipment and immediately leaseback the equipment, resulting in proceeds of $3.6 million. Per the terms of the agreement, a financial institution issued an irrevocable standby letter of credit to the lender for $3.6 million. The Company is required to make sixty consecutive monthly payments of principal and interest at a fixed monthly amount of $0.1 million beginning in February 2021. Interest payments are fixed at an annual interest rate of 3.54%.
The Company must maintain an aggregate amount on deposit equal to at least 105% of the value of any outstanding letters of credit issued by the financial institution on the Company’s behalf. The letter of credit must be in place until all obligations have been paid in full. Further, the Company must furnish annual audited financial statements and other financial information to the lender on a regular basis. The Company was in compliance with the covenants as of March 31, 2021.
The Company recorded the $3.6 million proceeds as restricted cash on the condensed balance sheets at March 31, 2021 and December 31, 2020. The outstanding loan balance was $3.5 million and $3.6 million at March 31, 2021 and December 31, 2020, respectively.
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Mount Sinai Genomics, Inc.
Notes to Unaudited Condensed Financial Statements
Maturities of Long-Term DebtWarrant Liability
As of March 31, 2021, long-term debt matures as follows (in thousands):
(in thousands)
2021 (remainder of year)$1,377 
20221,906 
20232,865 
20244,208 
20254,106 
Thereafter5,886 
Total maturities of long-term debt20,348 
Less: current portion of long-term debt(1,846)
Total long-term debt, net of current maturities$18,502 
8. Commitments and Contingencies
Operating Leases
The Company’s operating leases consist of office and lab space leases and a ground lease associated with a building under capital lease. The Company has entered into leases of office and lab space with ISMSS, including month-to-month leases in place during the three months ended March 31, 2021 and 2020. Pursuant to the terms of a lease agreement, the Company was required to have issued an irrevocable standby letter of credit to the lessor for $0.9 million, which was included in restricted cash on the condensed balance sheets as of March 31, 2021 and December 31, 2020.
Future minimum payments under non-cancelable operating leases as of March 31, 2021 are as follows (in thousands):
(in thousands)
2021 (remainder of year)$3,315 
20224,386 
20234,474 
20244,568 
20254,687 
Thereafter50,111 
Total operating lease obligations$71,541 
Rent expense related to non-cancelable operating leases was $1.4 million and $1.3 million for the three months ended March 31, 2021 and 2020, respectively. Rent expense related to month-to-month operating leases was $0.3 million and $0.8 million for the three months ended March 31, 2021 and 2020, respectively.
Capital Leases
The Company entered into various capital lease agreements to obtain laboratory equipment which contain bargain purchase commitments at the endconsummation of the lease term. The terms of the capital leases range from 3Merger in July 2021, there were 21,995,000 warrants to 5 years with interest rates ranging from 1.9% to 12.0%. The leases are secured by the underlying equipment. The Company also leases a building used for office and laboratory space in which the building is accounted for as a capital lease and the land is as an operating lease.
Property and equipment under capital leases was $27.6 million and $27.0 million as of March 31, 2021 and December 31, 2020, respectively. Accumulated amortization on capital lease assets was $10.7 million and $9.7 million at March 31, 2021 and December 31, 2020 and 2019, respectively.
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Mount Sinai Genomics, Inc.
Notes to Unaudited Condensed Financial Statements
For all capital leases, the portion of the future payments designated as principal repayment is recorded as a capital lease obligation on the Company’s condensed balance sheets in accordance with repayment terms. Future payments under capital leases at March 31, 2021, are as follows (in thousands):
(in thousands)
2021 (remainder of year)$3,761 
20224,794 
20233,570 
20242,749 
20252,437 
Thereafter51,882 
Total capital lease obligations69,193 
Less: amounts representing interest(45,407)
Present value of net minimum capital lease payments23,786 
Less : current portion(3,504)
Capital lease obligations, net of current portion$20,282 
Interest expense related to capital leases was $0.6 million and $0.5 million for the three months ended March 31, 2021 and 2020, respectively.
Contingencies
The Company may, from time to time, become involved in legal proceedings arising out of the normal course of its operations. For instance, the Company may be subject to lawsuits alleging negligence or other similar legal claims related to its provision of genetic testing and/or information services. The Company establishes reserves for specific legal matters when it determines that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. The Company has also identified certain other legal matters where it believes an unfavorable outcome is not probable and, therefore, no reserve is established. Although management currently believes that resolving claims against the Company, including claims where an unfavorable outcome is reasonably possible, will not have a material impact on the liquidity, results of operations, or financial condition of the Company, these matters are subject to inherent uncertainties and management's view of these matters may change in the future. It is possible that an unfavorable outcome of one or more of these lawsuits or other contingencies could have a material impact on the liquidity, results of operations, or financial condition of the Company.
Significant judgment is required in both the determination of probability of loss and the determination as to whether the amount can be reasonably estimated. Accruals are based only on information available at the time of the assessment, due to the uncertain nature of such matters. As additional information becomes available, management reassesses potential liabilities related to pending claims and litigation and may revise its previous estimates, which could materially affect the Company’s results of operations in a given period.
The Company maintains various liability insurance coverages for, among other things, claims that could result from providing, or failing to provide diagnostic testing services, including inaccurate testing results, and other exposures. The Company’s insurance coverage limits its maximum exposure on claims; however, the Company is responsible for any uninsured portion of losses. Management believes that present insurance coverage is sufficient to cover potential exposures.
The Company was not a party to any material legal proceedings at March 31, 2021, nor is it a party to any legal proceedings as of the date of issuance of these condensed financial statements.
9. Stock-Based Compensation
The Company adopted the 2017 Stock Incentive Plan (the 2017 Plan) in April of 2017. The 2017 Plan was amended in February 2018, offering total aggregate shares of up to 279,192purchase shares of Class A common stock outstanding, including 14,758,333 public warrants and
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Mount Sinai Genomics, Inc.
Notes 7,236,667 private placement warrants. As of December 31, 2021, there were 21,994,972 warrants to Unaudited Condensed Financial Statements
Class B common stock, collectively, on an as-converted topurchase shares of Class A common stock basis. Followingoutstanding, including 14,758,305 public warrants and 7,236,667 private placement warrants outstanding. Each warrant expires five years after the amendmentBusiness Combination or earlier upon redemption or liquidation, and entitles the holder to purchase one share of Class A common stock at an exercise price of $11.50 per share, subject to adjustment, at any time commencing on September 4, 2021.
The Company may redeem the outstanding public warrants if the price per share of the Class A common stock equals or exceeds $18.00 as described below:
•in whole and not in part;
•at a price of $0.01 per public warrant;
•upon not less than 30 days’ prior written notice of redemption to each warrant holder; and
•if, and only if, the closing price of the Class A common stock equals or exceeds $18.00 per share (as adjusted) for any 20 trading days within a 30-trading day period ending three trading days before sending the notice of redemption to warrant holders.
The Company may redeem the outstanding public warrants if the price per share of the common stock equals or exceeds $10.00 as described below:
•in whole and not in part;
•at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares based on the redemption date and the fair market value of the common stock;
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•if, and only if, the closing price of the Class A common stock equals or exceeds $10.00 per share (as adjusted) for any 20 trading days within the 30-trading day period ending three trading days before the Company sends the notice of redemption to the 2017 Plan,warrant holders; and
•if the closing price of the common stock for any 20 trading days within a 30-trading day period ending three trading days before the Company intendssends notice of redemption to use available sharesthe warrant holders is less than $18.00 per share (as adjusted), the private placement warrants must also be concurrently called for redemption on the same terms as the outstanding public warrants, as described above.
The private placement warrants were issued to grant Class BCMLS Holdings, LLC, Mr. Munib Islam, Dr. Emily Leproust and Mr. Nat Turner, and are identical to the public warrants underlying the units sold in the initial public offering, except that (1) the private placement warrants and the common stock awards.
Underissuable upon the 2017 Plan,exercise of the private placement warrants would not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions, (2) the private placement warrants are exercisable on a cashless basis, (3) the private placement warrants are non-redeemable (except as described above, upon a redemption of warrants when the price per share of Class A common stock equals or exceeds $10.00) so long as they are held by the initial purchasers or their permitted transferees, and (4) the holders of the private placement warrants and the common stock issuable upon the exercise of the private placement warrants have certain registration rights. If the private placement warrants are held by someone other than the initial purchasers or their permitted transferees, the private placement warrants will be redeemable by the Company has a call option to repurchase awardsand exercisable by such holders on the same basis as the public warrants.
The Company accounts for cash from the plan participants upon terminationwarrants as liability-classified instruments based on an assessment of the participant’s employment or consulting agreement.warrant terms and applicable authoritative guidance in accordance with ASC 480-Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815-Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether the warrants meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815. This assessment is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
Earn-out contingent liability
In connection with the Merger, all Legacy Sema4 stockholders and option holders at that time became entitled to a pro rata share of 19,021,576 earn-out shares and earn-out Restricted Stock Units (“RSUs”). Based on an assessment of the earn-out shares for the Legacy Sema4 stockholders, the Company concludes that it is probable it will exercise its call option prior toconsidered ASC 480 and ASC 815 and accounted for the award holder being subject to the risks and rewards of equity ownership. As a result, the Company’s stock-based compensation awards are classifiedearn-out shares as a liability. SharesThe Company subsequently measures the fair value of common stock issued upon settlement of an award continue to be classified as athe liability and remeasured to fair valueat each reporting period untiland reports the stockholder bearschanges in fair value recorded as a component of other income (expense), net in the risksconsolidated statements of operations and rewardscomprehensive loss.
The Company determined the fair value of equity ownershipthe earn-out shares issued to the Legacy Sema4 stockholders as of December 31, 2021 was $10.2 million.
As for the earn-out RSUs for the Legacy Sema4 option holders, a reasonabletotal of 2.7 million RSUs were granted on December 9, 2021. The vesting of such arrangement is conditioned on the satisfaction of both a service requirement and on the satisfaction of a market-based requirement. The market-based requirement would be achieved if the Company’s stock price is greater than or equal to $13 (Triggering Event I), $15 (Triggering Event II) and $18 (Triggering Event III) during the applicable performance period, of time, whichbased on the Company concludes isvolume-weighted average price for a period of at least six months.
20 days out of 30 consecutive trading days. Therefore, the Company accounts for this arrangement in accordance with ASC 718- Compensation — Stock Compensation (“ASC 718”) and stock-compensation expense is recognized over the longer of the expected achievement period for the market-based requirement and the service requirement. The Company historically granted stock appreciation rights (“SAR”)recorded $0.2 million in relation to one employeethe earn-out RSU for the year ended December 31, 2021. In the event that any earn-out RSUs that are forfeited as a result of a failure to achieve the service requirement, the underlying shares will be reallocated on an annual basis to the Legacy Sema4 stockholders and one consultant. The SAR can only be exercised upon a liquidation event, whichto the Company concludes is not probable of occurringLegacy Sema4 option holders who remain employed as of March 31, 2021. As a result, no expense related to the SAR was recognized by the Company during the three months ended March 31, 2021 and 2020.date of such reallocation. The Company did not grant SARsaccounts for the re-allocations to any employees or consultants during the three months ended March 31, 2021.
At March 31, 2021 and December 31, 2020, stock-based compensation liabilities were $297.0 million and $132.0 million, respectively. Stock-based compensation expense is included within the condensed statements of operations and comprehensive lossLegacy Sema4 option holders as follows (in thousands):
Three months ended March 31,
(in thousands)20212020
Cost of services$19,782 $120 
Research and development38,187 234 
Selling and marketing17,381 126 
General and administrative89,612 335 
Total Stock-based compensation expense$164,962 $815 
The following summarizes the activity under the 2017 Plan for Class A and Class B common stock options (in thousands, except share and per share amounts):
(in thousands)
Class A Common StockShares Available for GrantStock Options OutstandingWeighted Average Exercise PriceWeighted Average Remaining Contractual Life (years)Aggregate Intrinsic Value
Balances at December 31, 2020— 122,000 $18.94 6.57 $80,565 
Options forfeited and cancelled— — — 
Balances at March 31, 2021— 122,000 $18.94 6.32 $174,739 
Options exercisable at March 31, 2021117,816 $18.94 6.31 $168,747 
new grants.
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Mount Sinai Genomics, Inc.
Notes to Unaudited Condensed Financial Statements
All outstanding stock options for Class A common stock have an exercise price of $18.94.
(in thousands)
Class B Common StockShares Available for GrantStock Options OutstandingWeighted Average Exercise PriceWeighted Average Remaining Contractual Life (years)Aggregate Intrinsic Value
Balances at December 31, 20201,308,167 13,915,604 $1.09 8.91 $79,334 
Option granted(194,706)194,706 2.36 — 
Options forfeited and cancelled1,901,065 (1,901,065)1.45 — 
Options exercised— (499,220)0.95 — 
Balances at March 31, 20213,014,526 11,710,025 $1.06 8.60 $157,455 
Options exercisable at March 31, 20215,552,271 $0.80 8.18 $76,135 
The aggregate intrinsic value in the tables above calculates the difference between the exercise price of the underlying stock options and the fair value of the Company’s common stock for stock options that were in-the-money and represents the value that would have been received by the option holders had all option holders exercised their options on March 31, 2021.
The estimated fair value of the earn-out is determined using a Monte Carlo valuation analysis.
Stock-based Compensation
The Company measures stock-based compensation at the grant date based on the fair value of the award and recognizes stock-based compensation expense over the requisite service period for each separate vesting portion of the award on a straight-line basis. Determining the fair value of stock option awards as of March 31, 2021requires judgment, including estimating stock price volatility and March 31, 2020, was estimated using the Black-Scholesexpected option pricing model with the following assumptions:
Three Months ended March 31,
(in thousands)20212020
Expected volatility68.50%- 75.60%68.30%-73.30%
Expected term (in years)0.50- 1.753.00-5.00
Risk-free interest rate0.05%- 0.16%0.29%-0.37%
Dividend yield0.00 %0.00 %
Fair value of Class A common stock$565.85-$1,549.43$85.42-$97.58
Fair value of Class B common stock$5.66-$15.49$0.85-$0.98
As of March 31, 2021,life. Restricted stock awards are valued based on the fair value associated withof the Company’s stock options totaled $340.5 million.on the grant date. The vested portion of thisCompany uses the Black-Scholes option-pricing model to estimate the fair value at March 31, 2021 was $174.2 million and $122.8 million for Class A and Class B stock options, respectively, and is included in stock-based compensation liabilities on the Company’s condensed balance sheets. As of March 31, 2021, unrecognized stock-based compensation cost related to the unvested portion of the Company’s stock options were $0.6 million and $42.9 million for Class A and Class B stock options, respectively. The Company expects to recognize the unrecognized compensation cost on a graded-vesting basis over a weighted-average period of 0.3 and 0.9 years for Class A and Class B stock options, respectively. Cash received fromits stock option exercise for the three months ended March 31, 2021 was $0.4 million. No cash was received from stock option exercise for the three months ended March 31, 2020.
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Mount Sinai Genomics, Inc.
Notes to Unaudited Condensed Financial Statements
10. Redeemable Convertible Preferred Stock
Redeemable Convertible Preferred Stock at March 31, 2021 and December 31, 2020 consists of the following (in thousands, except share data):
(in thousands)
Redeemable Convertible Preferred StockShares AuthorizedShares Issued and OutstandingAmountAggregate Liquidation Preference
Series A-1447,373 447,373 $51,811 $55,000 
Series A-2522,627 401,347 46,480 49,342 
Series B338,663 338,663 118,824 204,302 
Series C197,824 197,821 117,324 121,397 
Total Redeemable Convertible Preferred Stock1,506,487 1,385,204 $334,439 $430,041 
Voting Rights
Holders of the Redeemable Convertible Preferred Stock are entitled to a number of votes equal to the number of whole shares of Class A common stock into which it is convertible.
Dividends
Holders of the Redeemable Convertible Preferred Stock are entitled to receive or participate in dividends to the extent that dividends are declared for holders of Class A common stock and Class B common stock, at which point the holders of the Redeemable Convertible Preferred Stock are entitled to participate on an as-converted to Class A common stock basis.awards.
The Company has not declared any cash or other dividends through March 31, 2021.
Conversion Rights
The Redeemable Convertible Preferred Stock is convertible into Class A common stock at the option of the holder at any time and without the payment of additional consideration and is mandatorily convertible upon the occurrence of certain events. The conversion ratio could be adjusted upon the Company’s issuance of shares of common stock below the original issue prices of the Redeemable Convertible Preferred Stock; the issuance of certain options or securities convertible into common stock of the Company; the issuance of certain dividends; and events such as stock splits, merger and reorganization.
There were no conversions of Redeemable Convertible Preferred Stock into Class A common stock during the three months ended March 31, 2021. As of March 31, 2021 and December 31, 2020, all shares of Redeemable Convertible Preferred Stock were convertible into shares of Class A common stock at a 1:1 ratio.
Classification of Redeemable Convertible Preferred Stock
The Redeemable Convertible Preferred Stock has deemed liquidation provisions which provide the holders the option to redeem theissues new shares upon share option exercise and vesting of a change in control or other deemed liquidation event. The deemed liquidation preference provisionsrestricted share unit. Forfeitures of the Redeemable Convertible Preferred Stockstock-based compensation are considered contingent redemption provisions that are not solely within the Company’s control. Accordingly, the Redeemable Convertible Preferred Stock is presented outside of permanent equity in the mezzanine portion of the Company’s condensed balance sheets. No accretion was recorded during the three months ended March 31, 2021 and 2020,recognized as a deemed liquidation event was not considered probable.they occur.
11. Common Stock
There was one share of Class A common stock issued and outstanding at March 31, 2021 and December 31, 2020. There were 604,649 and 105,429 shares of Class B common stock issued and outstanding at March 31, 2021 and December 31, 2020, respectively. The shares of Class B common stock issued and outstanding at March 31,
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Mount Sinai Genomics, Inc.
Notes to Unaudited Condensed Financial Statements
2021 remained liability-classified since the Company concluded that the stockholder did not yet bear the risks and rewards of equity ownership for a reasonable period of time.
12. Income Taxes
Income taxes are accounted for under the asset and liability method. The provision for income taxes represents income taxes paid or payable for the three months ended March 31, 2021current year plus the change in deferred taxes during the year. Current and March 31, 2020deferred income taxes are recorded atmeasured based on the Company’s estimated annual effective income tax rate, subject to adjustments for discrete events, should they occur. The Company’s estimated annual effectivelaws that are enacted as of the balance sheet date of the relevant reporting period. Deferred tax rate was 0.0%assets and liabilities are recognized for the three months ended March 31, 2021 and March 31, 2020. The primary reconciling itemsexpected future tax consequences of temporary differences between the federal statutory ratecarrying amounts of 21.0%assets and liabilities and their respective tax bases using tax rates in effect for these periods and the Company’s overall effective tax rate of 0.0% were relatedyear in which the differences are expected to the effects of deferred state income taxes, stock-based compensation, research and development credits, nondeductible transaction costs and the valuation allowance recorded against the full amount of its netreverse. The effect on deferred tax assets.
assets and liabilities of a change in tax rates is recognized in the statements of operations and comprehensive loss in the period when the change is enacted. A valuation allowance is requiredestablished when it is more likely than not that some portion or all of the Company’s deferred tax assets will not be realized. The realization of deferred tax assets dependsBased on the generation of sufficient future taxable income duringCompany’s historical operating losses, the period in which the Company’s related temporary differences become deductible. The Company has recorded a full valuation allowance against its netto reduce deferred tax assets asto the amount that is more likely than not to be realized.
The Company recognizes the effect of March 31, 2021 and March 31, 2020 since management believes that based on the earnings history of the Company,a tax position when it is more likely than not, based on technical merits, that the position will be sustained upon examination by the appropriate taxing authorities. The amount of tax benefit recognized for an uncertain tax position is the largest amount of benefit with a greater than 50 percent likelihood of being realized. Unrecognized tax benefits are included within other liabilities if recognized and are charged to earnings in the period that such determination is made. The Company records interest and penalties related to tax uncertainties, if applicable, as a component of these assets will not be realized.income tax expense.
Leases
13. Net Loss per ShareThe Company categorizes lease agreements at their inception as either operating or capital leases.
For operating leases, the three months ended March 31, 2021Company recognizes related rent expense on a straight-line basis over the term of the applicable lease agreement. Certain lease agreements contain rent holidays, scheduled rent increases and 2020, basiclease incentives. Rent holidays and diluted net loss per share attributablescheduled rent increases are included in the determination of rent expense to common stockholders is presented in conformitybe recorded over the lease term. Any lease incentives reduce rent expense the Company records on a straight-line basis over the term of the lease. The Company recognizes rent expense beginning on the date it obtains the legal right to use and control the leased space.
For capital leases, the Company records a leased asset with the two-class method. Net loss attributable to common stockholders was not allocateda corresponding liability. Payments are recorded as reductions to the redeemable convertible preferred stock, as holders of the redeemable convertible preferred stock did not have a contractual obligation to share in losses.
Basic net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. During the three months ended March 31, 2021 and 2020, the net loss attributable to common stockholders was equivalent to the Company’s net
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Mount Sinai Genomics, Inc.
Notes to Unaudited Condensed Financial Statements
loss and comprehensive loss. The following table sets forth the computation of basic net loss per share attributable to common stockholders (in thousands, except for share amounts):
Three months ended March 31,
(in thousands)20212020
Numerator:
Net loss attributable to common stockholders$(190,993)$(26,990)

Weighted average Class A shares outstanding used in computing allocation of net loss attributable to common stockholders1 1 
Weighted average Class B shares on an as converted to Class A basis used in computing allocation of net loss attributable to common stockholders4,439 — 

Allocation of net loss attributable to common stockholders for basic:
Class A common stock(43)(26,990)
Class B common stock(190,950)— 

Denominator:
Weighted average shares used in computing net loss per share attributable to Class A common stockholders1 1 
Weighted average shares used in computing net loss per share attributable to Class B common stockholders443,864 — 

Basic net loss per share attributable to Class A(43)(26,990)
Basic net loss per share attributable to Class B— — 
Diluted net loss per share is computedliability with an interest charge recorded based on the weighted-average number of shares of common stock, including the dilutive effect of common stock equivalents, outstanding. Basic net loss per share is the same as diluted net loss per share for the three months ended March 31, 2020 as the inclusion of potentially dilutive shares would have been anti-dilutive.remaining liability.
For the three months ended March 31, 2021, the Company’s diluted net loss per share of Class A common stock assumed the conversion of all Class B common stock into Class A common stock in accordance with the if-converted method. For the three months ended March 31, 2021, the calculation of diluted net loss per share of Class B common stock did not differ from the calculation of basic net loss per share as the inclusion of potentially dilutive shares would have been anti-dilutive. The following table sets forth the computation of diluted net loss per share of Class A common stock for the three months ended March 31, 2021 (in thousands, except for share amounts):
(in thousands)Three months ended March 31, 2021
Net loss attributable to Class A common stockWeighted average shares outstandingLoss per share
Basic net loss per share$(43)1 $(43)
Add: The effect of dilutive potential Class A common stock
Class B common stock(190,950)4,439 
Diluted net loss per share attributable to Class A common stock$(190,993)4,440 $(43)
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Mount Sinai Genomics, Inc.
Notes to Unaudited Condensed Financial Statements
The following table summarizes the outstanding shares of potentially dilutive securities that were excluded from the computation of diluted net loss per share attributable to common stockholders for the period presented because including them would have been anti-dilutive:
Three months ended March 31,
(in thousands)20212020
Outstanding options to purchase Class A common stock122,000 122,000 
Outstanding options to purchase Class B common stock11,710,025 12,073,090 
Redeemable convertible preferred stock (on an if-converted basis)1,385,204 1,187,383 
Total13,217,229 13,382,473 
14. Subsequent EventsRevenue Recognition
The Company has evaluated subsequent events through Juneadopted Accounting Standards Codification (“ASC”) Topic 606 (“ASC 606”), 10Revenue from Contracts with Customers, 2021,on January 1, 2019 using the modified retrospective method applied to contracts which were not completed as of the adoption date. The Company recognizes revenue when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration which the Company expects to be entitled to in exchange for those goods or services. If any changes in customer credit issues are identified which were not assessed at the date the condensed financial statements were available to be issued.of service, provisions for doubtful accounts are recognized and recorded.
F-61F-18

CM LIFE SCIENCES, INC.Diagnostic test revenue
The Company’s diagnostic test revenue contracts typically consist of a single performance obligation to deliver diagnostic testing services to the ordering facility or patient and therefore allocation of the contract transaction price is not applicable. Control over diagnostic testing services is generally transferred at a point in time when the customer obtains control of the promised service which is upon delivery of the test.
Diagnostic test revenues consist primarily of services reimbursed by third-party insurance payors. Third-party insurance payors include managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges, and employers. In arrangements with third-party insurance payors, the transaction price is stated within the contract, however, the Company accepts payments from third-party payors that are less than the contractually stated price and is therefore variable consideration and the transaction price is estimated.
When determining the transaction price, the Company uses a portfolio approach as a practical expedient to account for categories of diagnostic test contracts as collective groups rather than on an individual contract basis. The portfolio consists of major payor classes based on third-party payors. Based on historical collection trends and other analyses, the Company believes that revenue recognized by utilizing the portfolio approach approximates the revenue that would have been recognized if an individual contract approach was used.
Estimates of allowances for third-party insurance payors that impact the estimated transaction price are based upon the pricing and payment terms specified in the related contractual agreements. Contractual pricing and payment terms in third-party insurance agreements are generally based upon predetermined rates per diagnosis, per diem rates or discounted fee-for-service rates. In addition, for third-party payors in general, the estimated transaction price is impacted by factors such as historical collection experience, contractual provisions and insurance reimbursement policies, payor mix, and other relevant information for applicable payor portfolios.
For institutional clients, the customer is the institution. The Company determines the transaction price associated with services rendered in accordance with the contractual rates established with each customer.
Payment terms and conditions vary by contract and customer, however standard payment terms are generally less than 60 days from the invoice date. In instances where the timing of the Company’s revenue recognition differs from the timing of its invoicing, the Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised services to the customer will be one year or less.
Other revenue
The Company enters into both short-term and long-term project-based collaboration and service agreements with customers. Certain of these contracts include the transfer of a license to the Company’s intellectual property or participation by the Company on joint steering committees with the customer, which was considered to be immaterial in the context of the contract. The Company concludes that the goods and services transferred to our customers pursuant to these agreements generally comprise a single performance obligation on the basis that such goods and services are not distinct within the context of the contract. This is because the goods and services are highly interdependent and interrelated such that the Company would not be able to fulfill its underlying promise to our customers by transferring each good or service independently.
The consideration generally includes non-refundable upfront payments and variable payments based upon the achievement of certain milestones or fixed monthly payments during the contract term. Non-refundable upfront payments received prior to the Company performing performance obligation are recorded as a contract liability upon receipt. Milestone payments are included in the transaction price only when it is probable that doing so will not result in a significant reversal of cumulative revenue recognized when the uncertainty associated with the milestone is subsequently resolved. For longer-term contracts, the Company does not account for a significant financing component since a substantial amount of the consideration promised by the customer is variable and the amount or timing of that consideration varies on the basis of a future event that is not substantially within the control of either party.
F-19

The Company satisfies its performance obligation generally over time if the customer simultaneously receives and consumes the benefits provided by the Company’s services as the Company performs those services. The Company recognizes revenue over time using an input measure based on costs incurred on the basis that this measure best reflects the pattern of transfer of control of the services to the customer. In some contracts, the Company subcontracts certain services to other parties for which the Company is ultimately responsible. Costs incurred for such subcontracted services are included in the Company’s measure of progress for satisfying its performance obligation and are recorded in cost of services in the consolidated statements of operations and comprehensive loss. Changes in the total estimated costs to be incurred in measuring the Company’s progress toward satisfying its performance obligation may result in adjustments to cumulative revenue recognized at the time the change in estimate occurs.
INDEX TO FINANCIAL STATEMENTS
Page
F-632
Financial Statement as of March 31, 2021:
F-643
F-655
F-666
F-677
F-68

Financial Statement as of December 31, 2020
Balance Sheet (As Restated)
F-82
Statement of Operations (As Restated)
F-83
Statement of Changes in Stockholders’ Equity (As Restated)
F-84
Statement of Cash Flows (As Restated)
F-85
Notes to Financial Statements
F-869
F-62F-1

Report of Independent Registered Public Accounting Firm
To the StockholdersShareholders and the Board of Directors of
CM Life Sciences, Inc. Sema4 Holdings Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheetsheets of CM Life Sciences, Inc.Sema4 Holdings Corp. (the “Company”)Company) as of December 31, 2021 and 2020, the related consolidated statements of operations changes inand comprehensive loss, redeemable convertible preferred stock and stockholders’ equity (deficit) and cash flows for each of the three years in the period from July 10, 2020 (inception) throughended December 31, 2020,2021, and the related notes (collectively referred to as the “financial“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as ofat December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period from July 10, 2020 (inception) throughended December 31, 2020,2021, in conformity with accounting principlesU.S. generally accepted in the United States of America.accounting principles.
Restatement of 2020 and 2019 Financial Statements
As discussed in Note 2 to the consolidated financial statements, the Securities2020 and Exchange Commission issued a public statement entitled Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”) (the “Public Statement”) on April 12, 2021, which discusses the accounting for certain warrants as liabilities. The Company previously accounted for its warrants as equity instruments. Management evaluated its warrants against the Public Statement, and determined that the warrants should be accounted for as liabilities. Accordingly, the 20202019 financial statements have been restated to correct the accounting and related disclosure for the warrants.a misstatement.
Basis for Opinion
These financial statements are the responsibility of the Company’sCompany's management. Our responsibility is to express an opinion on the Company'sCompany’s financial statements based on our audit.audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our auditaudits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our auditaudits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company'sCompany’s internal control over financial reporting. Accordingly, we express no such opinion.
Our auditaudits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our auditaudits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit providesaudits provide a reasonable basis for our opinion.
/s/ WithumSmith+Brown, PCERNST & YOUNG LLP
We have served as the Company’s auditor since 2020.2018.
New York, New York
May 4, 2021March 14, 2022
Auditor Firm Id:No. 42Auditor Name:Ernst & Young LLPAuditor Location:New York, New York, United States
F-63F-2

Sema4 Holdings Corp.
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
December 31,
20212020
Assets
Current assets:
Cash and cash equivalents$400,569 $108,132 
Accounts receivable, net26,509 32,044 
Due from related parties54 289 
Inventory, net33,456 24,962 
Prepaid expenses19,154 4,557 
Other current assets3,802 4,124 
Total current assets483,544 174,108 
Property and equipment, net62,719 63,110 
Restricted cash900 10,828 
Other assets6,930 3,596 
Total assets$554,093 $251,642 
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable$44,693 $26,737 
Accrued expenses20,108 11,854 
Due to related parties2,623 1,425 
Current portion of capital lease obligations3,419 3,506 
Contract liabilities473 1,783 
Other current liabilities29,968 28,137 
Total current liabilities101,284 73,442 
Long-term debt, net of current portion11,000 18,971 
Stock-based compensation liabilities— 131,989 
Capital lease obligations, net of current portion18,427 20,778 
Other liabilities3,480 2,074 
Warrant liability21,555 — 
Earn-out contingent liability10,244 — 
Total liabilities165,990 247,254 
Commitments and contingencies (Note 9)
Redeemable convertible preferred stock:
Series A-1 redeemable convertible preferred stock, $0.00001 par value: 0 and 55,399,943 shares authorized, issued and outstanding at December 31, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $0 and $55,000 at December 31, 2021 and December 31, 2020, respectively— 51,811 
F-3

CM LIFE SCIENCES, INC.
CONDENSED BALANCE SHEETS
March 31,
2021		December 31,
2020
(Unaudited) 
ASSETS
Current Assets
Cash$627,415 $1,094,681 
Prepaid expenses293,754 277,031 
Total Current Assets921,169 1,371,712 
Cash and marketable securities held in trust account442,774,870 442,763,951 
Total Assets$443,696,039 $444,135,663 
  
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities  
Accounts payable and accrued expenses$1,491,735 $97,120 
Total Current Liabilities1,491,735 97,120 
  
Warrant liability126,960,100 70,322,418 
Deferred underwriting fee payable15,496,250 15,496,250 
Total Liabilities143,948,085 85,915,788 
Commitments and Contingencies
Class A common stock subject to possible redemption, 29,474,795 and 35,321,987 shares at $10.00 per share as of March 31, 2021 and December 31, 2020, respectively294,747,950 353,219,870 
Stockholders’ Equity
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding— — 
Class A common stock, $0.0001 par value; 380,000,000 shares authorized; 14,800,205 and 8,953,013 shares issued and outstanding (excluding 29,474,795 and 35,321,987 shares subject to possible redemption) as of March 31, 2021 and December 31, 2020, respectively1,480 895 
Class B common stock, $0.00001 par value; 20,000,000 shares authorized; 11,068,750 shares issued and outstanding as of March 31, 2021 and December 31, 20201,107 1,107 
Additional paid-in capital103,376,938 44,905,602 
Accumulated deficit(98,379,521)(39,907,599)
Total Stockholders’ Equity5,000,004 5,000,005 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$443,696,039 $444,135,663 
Series A-2 redeemable convertible preferred stock, $0.00001 par value: 0 and 64,718,940 shares authorized at December 31, 2021 and December 31, 2020, respectively; 0 and 49,700,364 shares authorized, issued and outstanding at December 31, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $0 and $49,342 at December 31, 2021 and December 31, 2020, respectively— 46,480 
Series B redeemable convertible preferred stock, $0.00001 par value: 0 and 41,937,960 shares authorized, issued and outstanding at December 31, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $0 and $204,302 at December 31, 2021and December 31, 2020, respectively— 118,824 
Series C redeemable convertible preferred stock, $0.00001 par value: 0 and 24,497,317 shares authorized at December 31, 2021 and December 31, 2020, respectively; 0 and 24,496,946 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $0 and $121,397 at December 31, 2021 and December 31, 2020, respectively— 117,324 
Redeemable convertible preferred stock— 334,439 
Stockholders’ equity (deficit):
Preferred Stock, $0.0001 par value: 1,000,000 and 0 shares authorized at December 31, 2021 and December 31, 2020, respectively; 0 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively— — 
Class A common stock, $0.0001 par value: 380,000,000 shares authorized, 242,647,604 shares issued and outstanding at December 31, 2021 and $0.00001 par value: 309,584,750 shares authorized, 124 shares issued and outstanding at December 31, 202024 — 
Class B convertible common stock, $0.00001 par value: 0 and 18,575,085 shares authorized at December 31, 2021 and December 31, 2020, respectively; 0 and 130,557 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively— — 
Additional paid-in capital963,520 — 
Accumulated deficit(575,441)(330,051)
Total stockholders’ equity (deficit)388,103 (330,051)
Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)$554,093 $251,642 
The accompanying notes are an integral part of the unaudited condensedthese consolidated financial statements.
F-64F-4

CM LIFE SCIENCES, INC.Sema4 Holdings Corp.
CONDENSED STATEMENT OF OPERATIONSConsolidated Statements of Operations and Comprehensive Loss
THREE MONTHS ENDED MARCH 31, 2021(in thousands, except per share and share amounts)
(Unaudited)
Year Ended December 31,
202120202019
Revenue
(Restated)(1)
(Restated)(1)
Diagnostic test revenue (including related party revenue of $90, $285 and $0 for the years ended December 31, 2021, 2020, and 2019, respectively)$205,100 $175,351 $191,667 
Other revenue (including related party revenue of $232, $3 and $1,180 for the years ended December 31, 2021, 2020, and 2019, respectively)7,095 3,971 4,507 
Total revenue212,195 179,322 196,174 
Cost of services (including related party expenses of $3,975, $2,189 and $1,859 for the years ended December 31, 2021, 2020, and 2019, respectively)228,797 175,296 113,389 
Gross (loss) profit(16,602)4,026 82,785 
Research and development105,162 72,700 34,910 
Selling and marketing112,738 63,183 39,352 
General and administrative205,988 100,742 29,484 
Related party expenses5,659 9,395 9,452 
Loss from operations(446,149)(241,994)(30,413)
Other income (expense):
Change in fair market value of warrant and earn-out contingent liabilities198,401 — — 
Interest income79 506 988 
Interest expense(2,835)(2,474)(783)
Other income, net5,114 2,622 504 
Total other income, net200,759 654 709 
Loss before income taxes(245,390)(241,340)(29,704)
Income tax provision— — — 
Net loss and comprehensive loss$(245,390)$(241,340)$(29,704)
Redeemable convertible preferred stock dividends— — 3,039 
Net loss attributable to common stockholders$(245,390)$(241,340)$(32,743)
Weighted average shares outstanding, Class A common stock108,077,439 5,131 124 
Basic and diluted net loss per share, Class A common stock$(2.27)$(47,036)$(264,056)
General and administrative expenses$1,845,158 
Loss from operations(1,845,158)
Other income:
Interest earned on marketable securities held in Trust Account10,919 
Change in fair value of warrants(56,637,684)
Loss before provision for income taxes(58,471,923)
Benefit from (Provision for) income taxes— 
Net Loss$(58,471,923)
Weighted average shares outstanding of Class A common stock44,275,000 
Basic and diluted net income per share, Class A common stock$—___________________
(1)Certain expenses were previously misclassified as cost of services. These expenses are now reported as selling and marketing. This adjustment has no impact on total revenue, loss from operations, net loss and comprehensive loss or net loss per share. Refer to Note 2, “Summary of Significant Accounting Policies” to our consolidated financial statements for further information.
Weighted average shares outstanding of Class B common stock11,068,750 
Basic and diluted net loss per share, Class B common stock$(5.28)
The accompanying notes are an integral part of the unaudited condensedthese consolidated financial statements.
F-65F-5

CM LIFE SCIENCES, INC.Sema4 Holdings Corp.
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITYConsolidated Statement of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
THREE MONTHS ENDED MARCH 31, 2021(in thousands, except share amounts)
(Unaudited)
 Class A
Common Stock		Class B
Common Stock		Additional
Paid-in
Capital		Accumulated
Deficit		 Total
Stockholders’
Equity
 SharesAmountSharesAmount 
Balance – January 1, 20218,953,013 $895 11,068,750$1,107 $44,905,602 $(39,907,599)$5,000,005 
        
Change in value of Common stock subject to possible redemption5,847,192 585 —— 58,471,335 — 58,471,920 
        
Net Loss— — —— — (58,471,923)(58,471,923)
        
Balance – March 31, 202114,800,205 $1,480 11,068,750$1,107 $103,376,937 $(98,379,522)$5,000,002 
Redeemable Convertible Preferred StockClass A Common StockClass B Common Stock
SharesAmountSharesPer ValueSharesPer ValueAdditional paid-in capitalAccumulated deficitTotal stockholders’ equity (deficit)
Balance at December 31, 2018102,039,134 $64,355 124 $— — $— — $(55,968)$(55,968)
Net loss— — — — — — — (29,704)(29,704)
Preferred Series A dividend3,061,173 3,039 — — — — — (3,039)(3,039)
Capital contributions— 30,897 — — — — — — — 
Issuance of Preferred Series B, net of issuance costs41,937,960 $118,824 — — — — — — — 
Balance at December 31, 2019147,038,267 $217,115 124 $— — $— — $(88,711)$(88,711)
Net loss— — — — — — — (241,340)(241,340)
Preferred Series A dividend— — — — 130,557 — — — — 
Capital contributions24,496,946 117,324 — — — — — — — 
Balance at December 31, 2020171,535,213 $334,439 124 $— 130,557 $— $(330,051)$(330,051)
Net loss— — — — — — (245,390)(245,390)
 Stock option exercises— — 995,526 — 1,253,179 — 1,783 — 1,783 
 Conversion of Preferred Stock(171,535,213)(334,439)148,543,062 15 — — 104,517 — 104,532 
 Conversion of Class B Common Stock— — 1,309,320 — (1,383,736)— (744)— (744)
 Net equity infusion from the Business Combination— — 90,333,562 9 — — 510,742 — 510,751 
 Stock-based compensation modification reclassification— — — — — — 304,837 — 304,837 
 Stock-based compensation expense— — — — — — 42,385 — 42,385 
Vested restricted stock units converted to common stock— — 1,466,010 — — — — — — 
Balance at December 31, 2021— $— 242,647,604 $24 — $— $963,520 $(575,441)$388,103 
The accompanying notes are an integral part of the unaudited condensedthese consolidated financial statements.
F-66F-6

CM LIFE SCIENCES, INC.Sema4 Holdings Corp.
CONDENSED STATEMENT OF CASH FLOWSConsolidated Statements of Cash Flows
THREE MONTHS ENDED MARCH 31, 2021(in thousands)
(Unaudited)
Year Ended December 31,
202120202019
Operating activities
Net loss$(245,390)$(241,340)$(29,704)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense21,807 11,734 6,407 
Stock-based compensation expense219,421 120,231 5,482 
Change in fair value of warrant and contingent liabilities(198,401)— — 
Provision for excess and obsolete inventory2,129 — — 
Non-cash lease expense1,555 2,400 (176)
Loss on extinguishment of debt301 — — 
Amortization of debt issuance costs66 — — 
Change in operating assets and liabilities:
Accounts receivable5,535 (10,611)(4,567)
Inventory(10,624)(8,979)(7,970)
Prepaid expenses and other current assets(14,250)2,498 (2,526)
Due to/from related parties1,433 (442)(919)
Other assets(1,861)1,175 (4,395)
Accounts payable and accrued expenses25,916 14,805 12,847 
Contract liabilities(1,310)(559)2,342 
Other current liabilities3,239 15,960 4,451 
Net cash used in operating activities(190,434)(93,128)(18,728)
Investing activities
Purchases of property and equipment(9,400)(24,094)(11,923)
Development of internal-use software assets(11,386)(7,880)(3,533)
Net cash used in investing activities(20,786)(31,974)(15,456)
Financing activities
Proceeds from issuance of Series B redeemable convertible preferred stock, net of issuance costs— — 118,824 
Proceeds from issuance of Series C redeemable convertible preferred stock, net of issuance costs— 117,324 — 
Proceeds from PIPE issuance350,000 — — 
Proceeds from equity infusion from the merger, net of redemptions442,684 — — 
Legacy Sema4 Shareholder payout(230,665)— — 
Payment of transaction costs(51,760)— — 
Stock Appreciation Rights payout(3,795)— — 
Repayment of long-term debt(8,741)— — 
Exercise of stock options1,271 — — 
Capital contributions from ISMMS— — 30,897 
Cash Flows from Operating Activities:
Net Loss$(58,471,923)
Adjustments to reconcile net loss to net cash used in operating activities:
Change in fair value of warrant liability56,637,684 
Interest earned on marketable securities held in trust account(10,919)
Changes in operating assets and liabilities:
Prepaid expenses(16,723)
Accrued expenses1,394,615 
Net cash used in operating activities(467,266)
Net Change in Cash(467,266)
Cash – Beginning of period1,094,681 
Cash – End of period$627,415
Non-Cash financing activities:
Change in value of common stock subject to possible redemption$(58,471,923)
F-7

Proceeds from long-term debt— 15,928 — 
Long-term debt principal payments(1,000)(186)— 
Debt issuance costs(537)— — 
Capital lease principal payments(3,728)(4,010)(1,709)
Net cash provided by financing activities493,729 129,056 148,012 
Net increase in cash, cash equivalents and restricted cash282,509 3,954 113,828 
Cash, cash equivalents and restricted cash, at beginning of year118,960 115,006 1,178 
Cash, cash equivalents and restricted cash, at end of year401,469 118,960 115,006 
Supplemental disclosures of cash flow information
Cash paid for interest$2,751 $1,745 $305 
Cash paid for taxes$349 $— $— 
Purchases of property and equipment in accounts payable and accrued expenses$761 $447 $818 
Software development costs in accounts payable and accrued expenses$1,149 $1,473 $1,040 
Non-cash Series A redeemable convertible preferred stock dividends declared and paid$— $— $3,039 
Debt issuance costs incurred but unpaid$1,000 $— $— 
The accompanying notes are an integral part of the unaudited condensedthese consolidated financial statements.
F-67F-8

Sema4 Holdings Corp.
Notes to Consolidated Financial Statements
1. Organization and Description of Business
Sema4 Holdings Corp., formerly Mount Sinai Genomics Inc., a Delaware corporation (“Legacy Sema4”), as discussed further below, provides genomics-related diagnostic and information services and pursues genomics medical research. Legacy Sema4 utilizes an integrated portfolio of laboratory processes, software tools and informatics capabilities to process DNA-containing samples, analyze information about patient-specific genetic variation and generate test reports for clinicians and their patients. Legacy Sema4 provides a variety of genetic diagnostic tests and information with a focus on reproductive health, including pediatric, oncology and other conditions. In 2020, the Legacy Sema4 began to provide diagnostic testing services in response to the outbreak of the coronavirus (“COVID-19”) pandemic. On December 15, 2021, it was announced that COVID-19 testing services would be discontinued by March 31, 2022. Legacy Sema4 primarily serves healthcare professionals who work with their patients and bills third-party payors across the United States, with a substantial portion of its diagnostic testing volume occurring in New York, California, Florida, Connecticut and New Jersey.
On July 22, 2021 (the “Closing Date”), CM LIFE SCIENCES, INC.Life Sciences, Inc. (“CMLS”) completed the acquisition of Legacy Sema4, pursuant to that certain Agreement and Plan of Merger (as amended, the “Merger Agreement”), dated February 9, 2021. On the Closing Date, S-IV Sub, Inc. (“Merger Sub”) merged with and into the Legacy Sema4, with Legacy Sema4 surviving the merger as a wholly-owned subsidiary of CMLS (the “Merger” and, together with the other transactions contemplated by the Merger Agreement, the “Business Combination”). In connection with the consummation of the Business Combination, CMLS changed its name to “Sema4 Holdings Corp.” (“Sema4 Holdings”) and Legacy Sema4 changed its name to “Sema4 OpCo, Inc.” All equity securities of Legacy Sema4 were converted into the right to receive the applicable portion of the merger consideration.
NOTES TO CONDENSED FINANCIAL STATEMENTSThe Merger was accounted for as a reverse recapitalization with Legacy Sema4 as the accounting acquirer and CMLS as the acquired company for accounting purposes. The shares and net loss per common share, prior to the Merger, have been retroactively restated as shares reflecting the exchange ratio established in the Merger (1 share of Legacy Sema4 Class A common stock for 123.8339 shares of Sema4 Holdings Class A common stock) (the “Conversion Ratio”).
MARCH 31,Prior to the Merger, shares of CMLS Class A common stock, CMLS’s public warrants, and CMLS’s public units were traded on the Nasdaq Capital Market under the ticker symbols “CMLF”, “CMFLW”, and “CMLFU” respectively. On July 23, 2021, shares of Sema4 Holdings Class A common stock and Sema4 Holdings’ public warrants began trading on the Nasdaq Global Select Market (the “Nasdaq”) under the ticker symbols “SMFR” and “SMFRW,” respectively. See Note 3, “Business Combination,” for additional details.
(Unaudited)
Unless otherwise stated herein or unless the context otherwise requires, references in these notes to the “Company,” or “Sema4” refer to (i) Legacy Sema4 prior to the consummation of the Business Combination; and (ii) Sema4 Holdings and its subsidiary following the consummation of the Business Combination.

NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
CM Life Sciences, Inc. (the “Company”) was incorporated in Delaware on July 10, 2020. The Company was formed for the purpose2. Summary of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company is not limited to a particular industry or sector for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.Significant Accounting Policies
As of March 31, 2021, the Company had not commenced any operations. All activity for the period from July 10, 2020 (inception) through March 31, 2021 relates to the Company’s formation, the initial public offering (“Initial Public Offering”), which is described below, and, subsequent to the Initial Public Offering, identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.
The registration statement for the Company’s Initial Public Offering was declared effective on September 1, 2020. On September 4, 2020 the Company consummated the Initial Public Offering of 44,275,000 units (the “Units” and, with respect to the Class A common stock included in the Units sold, the “Public Shares”), which includes the full exercise by the underwriter of its over-allotment option in the amount of 5,775,000 Units, at $10.00 per Unit, generating gross proceeds of $442,750,000 which is described in Note 3.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 7,236,667 warrants (the “Private Placement Warrants”) at a price of $1.50 per Private Placement Warrant in a private placement to CMLS Holdings LLC (the “Sponsor”) and certain of the Company’s independent directors, generating gross proceeds of $10,855,000, which is described in Note 4.
Transaction costs amounted to $24,895,463, consisting of $8,855,000 in cash underwriting fees, $15,496,250 of deferred underwriting fees and $544,213 of other offering costs.
Following the closing of the Initial Public Offering on September 4, 2020, an amount of $442,750,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”) located in the United States and will be invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund selected by the Company meeting certain conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the funds held in the Trust Account, as described below.
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or more initial Business Combinations with one or more operating businesses or assets with a fair market value equal to at least 80% of the net assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on the interest earned on the Trust Account). The Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target business sufficient for it not to be required to register as an investment company under the Investment Company Act.
The Company will provide the holders of the outstanding Public Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender
F-68
CM LIFE SCIENCES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially $10.00 per Public Share, plus any pro rata interest then in the Trust Account, net of taxes payable). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.
The Company will only proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 following any related redemptions and, if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by applicable law or stock exchange listing requirements and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to its Second Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by applicable law or stock exchange listing requirements, or the Company decides to obtain stockholder approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Company’s Sponsor and any other holders of the Company’s common stock prior to the Initial Public Offering (the “initial stockholders”) have agreed to vote their Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each Public Stockholder may elect to redeem their Public Shares without voting, and if they do vote, irrespective of whether they vote for or against the proposed transaction.
Notwithstanding the foregoing, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Certificate of Incorporation provides that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 20% of the Public Shares, without the prior consent of the Company.
The Sponsor has agreed (a) to waive its redemption rights with respect to the Founder Shares and Public Shares held by it in connection with the completion of a Business Combination and (b) not to propose an amendment to the Certificate of Incorporation (i) to modify the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the Company does not complete a Business Combination within the Combination Period (as defined below) or (ii) with respect to any other material provision relating to stockholders’ rights or pre-business combination activity, unless the Company provides the Public Stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.
If the Company has not completed a Business Combination by September 4, 2022 (the “Combination Period”), the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to pay taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.
The Sponsor has agreed to waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the Sponsor acquires Public Shares in or after the Initial Public Offering, such Public Shares will be entitled to liquidating distributions from the
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CM LIFE SCIENCES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
Trust Account if the Company fails to complete a Business Combination within the Combination Period. The underwriter has agreed to waive its rights to its deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.00).
In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per public Share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to monies held in the Trust Account nor will it apply to any claims under the Company’s indemnity of the underwriter of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except for the Company’s independent registered public accounting firm), prospective target businesses and other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of PresentationFounder Shares
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on 10-K/A as filed with the SEC on May 5, 2021. The interim results for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any future interim periods.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a
F-70
CM LIFE SCIENCES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future events. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of March 31, 2021 and December 31, 2020.
Class A common stock subject to possible redemption
The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Class A Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at March 31, 2021 and December 31, 2020, Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheets.
Offering Costs
Offering costs consist of underwriting, legal, accounting and other expenses incurred through the Initial Public Offering that are directly related to the Initial Public Offering. Offering costs amounting to $23,690,692 were charged to stockholders’ equity upon the completion of the Initial Public Offering, and $1,204,771 of offering costs were related to the warrant liability and charged to the statement of operations.
Warrant Liability
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and
F-71
CM LIFE SCIENCES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The fair value of the warrants was estimated using a Monte Carlo simulation approach (see Note 9).
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. As of March 31, 2021 and December 31,On July 16, 2020, the Company had a deferred tax assetFormer Sponsor purchased an aggregate of approximately $426,000 and $40,400, which had a full valuation allowance recorded against it of approximately $426,000 and $40,400, respectively.
The Company’s currently taxable income primarily consists of interest income on the Trust Account. The Company’s general and administrative costs are generally considered start-up costs and are not currently deductible. During the three months ended March 31, 2021, the Company recorded no income tax expense. The Company’s effective tax rate for the three months ended March 31, 2021 was approximately 0%, which differs from the expected income tax rate due to the start-up costs (discussed above) which are not currently deductible.
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 2021 and December 31, 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
Net Income (Loss) per Common Share
Net income (loss) per common share is computed by dividing net income by the weighted average number of common10,062,500 shares outstanding for the period. The Company has not considered the effect of warrants sold in the Initial Public Offering and private placement to purchase 21,995,000 shares of Class A common stock in the calculation of diluted income per share, since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.
The Company’s statement of operations includes a presentation of income (loss) per share for common shares similar to the two-class method of income (loss) per share. Net income per common share, basic and diluted, for Class A common stock is calculated by dividing the interest income earned on the Trust Account less income and franchise taxes, by the weighted average number of Class A common stock outstanding since original issuance. Net loss per share, basic and diluted, for Class B common stock is calculated by dividing the net loss, adjusted for income attributable to Class A common stock, net of applicable franchise and income taxes, by the weighted average number of Class B common stock outstandingof CMLS (the “Class B common stock”), for a total purchase price of $25,000, or approximately $0.002 per share. In August 2020, the period.Former Sponsor transferred 25,000 of Class B common stock includes the Founder Shares as these shares do not have any redemption featuresto each of Dr. Leproust and do not participateMr. Turner. On September 1, 2020, CMLS effected a 1:1.1 stock split of its Class B common stock, resulting in the income earnedFormer Sponsor holding an aggregate of 10,993,750 shares of Class B common stock. The shares of Class B common stock automatically converted into Class A common stock on the Trust Account.
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CM LIFE SCIENCES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31,July 22, 2021
(Unaudited)
The following table reflects the calculation of basic and diluted net income (loss) per common share (in dollars, except per share amounts):
Three
Months
Ended
March 31,
2021
Class A Common Stock
Numerator: Earnings allocable to Class A Common Stock
Interest Income$10,919 
Income and Franchise Tax(10,919)
Net Earnings$— 
Denominator: Weighted Average Class A Common Stock
Class A Common Stock, Basic and Diluted44,275,000 
Earnings/Basic and Diluted Class A Common Stock$0.00 
Class A and B Common Stock
Numerator: Net Loss minus Net Earnings
Net Loss$(58,471,923)
Net Earnings— 
Net Loss$(58,471,923)
Denominator: Weighted Average Class A and B Common Stock
Class A and B Common Stock, Basic and Diluted11,068,750 
Loss/Basic and Diluted Class A and B Common Stock$(5.28)
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their short-term nature.
Liquidity and Capital Resources
As of March 31, 2021, the Company had $627,415 in its operating bank accounts and a working capital deficit of $570,566.
Prior to the completion of the Initial Public Offering, the Company’s liquidity needs had been satisfied through a contribution of $25,000 from Sponsor to cover for certain offering costs in exchange for the issuance of the Founder Shares, the loan of up to $300,000 from the Sponsor pursuant to the Note (see Note 5), and the proceeds fromconnection with the consummation of the business combination (such shares, the “Founder Shares”).
Private Placement not held in the Trust Account. The Note was repaid onWarrants
On September 4, 2020. In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, provide the Company Working Capital Loans up to $1,500,000 (see Note 6). As of March 31, 2021, there were no amounts outstanding under any Working Capital Loan.
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CM LIFE SCIENCES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
Based on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, the Company will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
Recently Issued Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s condensed financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering, the Company sold 44,275,000 Units, which includes the full exercise by the underwriter of its over-allotment option in the amount of 5,775,000 Units, at a purchase price of $10.00 per Unit. Each Unit consists of one share of Class A common stock and one-third of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 7).
NOTE 4. PRIVATE PLACEMENT
Simultaneously1, 2020, simultaneously with the closing of the CMLS’s initial public offering (the “Initial Public Offering”), the Former Sponsor and certain of the Company’sCMLS’s independent directors purchased an aggregate of 7,236,667 private placement warrants (the “Private Placement Warrants”), at a price of $1.50 per Private Placement Warrant, for an aggregate purchase price of $10,855,000. The Former Sponsor purchased 6,903,335 Private Placement Warrants, and each of Mr. Islam and Dr. Leproust (and/or one or more entities controlled by them)her) purchased 166,666 Private Placement
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Warrants. Each Private Placement Warrant is exercisable to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (seeadjustment.
Promissory Note–Related Party
On July 16, 2020, the Former Sponsor issued an unsecured promissory note to CMLS (the “Promissory Note 7). Proceeds from”), pursuant to which CMLS could borrow up to an aggregate principal amount of $300,000. The Promissory Note was non-interest bearing and payable on the saleearlier of (i) December 31, 2020 or (ii) the consummation of the Initial Public Offering. The outstanding balance under the Promissory Note of $165,081 was repaid at the closing of the Initial Public Offering on September 4, 2020.
Insider Letter
On September 1, 2020, in connection with the Initial Public Offering, CMLS, the Former Sponsor and certain insiders of CMLS entered into a letter agreement (the “Insider Letter”) providing for, among other things, a lock-up in relation to the Founder Shares until the earlier of (a) one year after the completion of the business combination and (b) subsequent to the business combination, if the closing price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations, and the like) for any 20 trading days within any 30-day trading day period commencing at least 150 days after the business combination or (y) the date following the completion of the business combination on which we complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of our stockholders having the right to exchange their shares of Class A common stock for cash securities or other property. The Former Sponsor and each insider also agreed not to transfer any Private Placement Warrants (or any share of Class A common stock issued or issuable upon the exercise of the Private Placement Warrants were added toWarrants), until 30 days after the net proceeds fromcompletion of the business combination.
Forward Purchase Agreement
On September 1, 2020, in connection with the Initial Public Offering, heldCMLS entered into separate forward purchase agreements with Casdin Capital, LLC (“Casdin”) and Corvex Management LP (“Corvex”), in their capacities as investment advisors on behalf of one or more investment funds, clients or accounts managed by each of Casdin and Corvex, respectively (collectively, their “Clients”), pursuant to which, subject to the conditions provided therein, they caused the Clients to purchase from us up to an aggregate amount of 15,000,000 shares of Class A common stock the private placement that closed concurrently with the closing of the business combination.
Review, Approval or Ratification of Transactions with Related Parties
On July 22, 2021, we adopted a written related party transaction policy in connection with the completion of the business combination. The policy provides that officers, directors, holders of more than 5% of any class of our voting securities, and any member of the immediate family of and any entity affiliated with any of the foregoing persons, will not be permitted to enter into a related-party transaction with us without the prior consent of our audit committee, or other independent members of our Board in the Trust Account. Ifevent it is inappropriate for the Company does not completeaudit committee to review such transaction due to a Business Combination withinconflict of interest. Any request for us to enter into a transaction with an executive officer, director, principal stockholder, or any of their immediate family members or affiliates, in which the Combination Period,amount involved exceeds $120,000, must first be presented to our audit committee for review, consideration, and approval. In approving or rejecting the proceeds from the saleproposed transactions, our audit committee will take into account all of the Private Placement Warrants heldrelevant facts and circumstances available.
Director Independence
The rules of Nasdaq require that a majority of our Board be independent. An “independent director” is defined generally as a person other than an executive officer or employee of the issuer or any other individual having a relationship which, in the Trust Account willopinion of the issuer’s board of directors, would interfere with the exercise of independent judgement in carrying out the responsibilities of a director. Each individual serving on our Board, other than Eric Schadt and Jason Ryan, qualifies as an independent director under Nasdaq listing standards. Each director who serves on our audit committee, compensation committee and nominating and corporate governance committee are
253

independent under Nasdaq listing standards. See the section entitled “Corporate Governance of Sema4” elsewhere in this proxy statement for more information.
GeneDx
GeneDx had no related party transactions for the years ended December 31, 2021 and 2020.
254

REPORT OF THE AUDIT COMMITTEE
The information contained in the following report of our audit committee is not considered to be used"soliciting material," "filed" or incorporated by reference in any past or future filing by us under the Exchange Act or the Securities Act unless and only to fund the redemptionextent that we specifically incorporate it by reference.
Our audit committee has reviewed and discussed with our management and Ernst & Young LLP our audited consolidated financial statements for the year ended December 31, 2021. Our audit committee has also discussed with Ernst & Young LLP the matters required to be discussed by Auditing Standard No. 1301 adopted by the Public Company Accounting Oversight Board (United States) regarding “Communications with Audit Committees.”
Our audit committee has received and reviewed the written disclosures and the letter from Ernst & Young LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with our audit committee concerning independence, and has discussed with Ernst & Young LLP its independence from us.
Based on the review and discussions referred to above, our audit committee recommended to our board of directors that the audited consolidated financial statements be included in our annual report on Form 10-K for the year ended December 31, 2021 for filing with the U.S. Securities and Exchange Commission.
Submitted by the Audit Committee
Keith Meister, Chair
Dennis Charney
Emily Leproust
255

BENEFICIAL OWNERSHIP OF SECURITIES
Beneficial Ownership of Certain Stockholders, Directors and Executive Officers
The following table sets forth certain information with respect to the beneficial ownership of our Class A common stock as of February 22, 2022, by:
•each stockholder known by us to be the beneficial owner of more than 5% of our Class A common stock;
•each of our named executive officers;
•each of our directors and director nominees; and
•all of our current directors and executive officers as a group.
Percentage ownership of our Class A common stock is based on 244,727,239 shares of our Class A common stock outstanding on February 22, 2022. Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security or has the right to acquire a security, such as through the exercise of warrants or stock options or the vesting of restricted stock units, within 60 days of the date above. Shares (subjectsubject to warrants or options that are currently exercisable or exercisable within 60 days of the date above or subject to restricted stock units that vest within 60 days of such date are considered outstanding and beneficially owned by the person holding such warrants, options or restricted stock units for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
Except as described in the footnotes below and subject to applicable community property laws and similar laws, we believe that each person listed above has sole voting and investment power with respect to such shares. Unless
256

otherwise noted, the address of each beneficial owner is c/o Sema4 Holdings Corp., 333 Ludlow Street, North Tower, 8th Floor, Stamford, Connecticut 06902.
Name of Beneficial OwnersNumber of Shares of Class
A Common Stock Beneficially Owned
Percentage of Outstanding
Class A
Common Stock
5% Stockholders:
Entities affiliated with Blackstone Group Inc.(1)
25,866,50210.6
Entities affiliated with Deerfield Management Company, L.P.(2)
13,966,8245.7
Icahn School of Medicine at Mount Sinai(3)
88,355,47336.1
Directors and Named Executive Officers:
Eric Schadt(4)
7,484,1163.1
Isaac Ro(5)
395,294*
James Coffin (6)
2,696,0801.1
Dennis Charney——
Eli D. Casdin(7)
22,730,4199.3
Emily Leproust(8)
191,666*
Keith Meister(9)
22,230,4199.1
Michael Pellini(10)
3,714*
Jason Ryan(11)
3,714*
Joshua Ruch(12)
3,714*
Rachel Sherman(13)
181,609*
Nat Turner(14)
191,666*
Katherine Stueland——
Richard C. Fenniger Jr.——
Directors and executive officers as a group (15 individuals)(15)
39,485,25316.1
__________________
*Less than one percent
(1)Based solely on the information set forth in a Schedule 13D/A filed with the SEC on January 20, 2022 by Blackstone Holding III L.P. Consists of (i) 24,404,324 shares of Class A common stock held by BTO Sema4 Holdings L.P., (ii) 505,095 shares of Class A common stock held by Blackstone Tactical Opportunities Fund - FD L.P., (iii) 147,574 shares of Class A common stock held by Blackstone Family Tactical Opportunities Investment Partnership III ESC L.P., and (iv) (a) 100,000 shares of Class A common stock and (b) warrants to purchase 709,509 shares of Class A common stock which are exercisable within 60 days of February 22, 2022 held by Blackstone Aqua Master Sub-Fund, a sub-fund of Blackstone Global Master Fund ICAV. BTO Holdings Manager L.L.C. is the general partner of BTO Sema4 Holdings L.P. Blackstone Tactical Opportunities Associates L.L.C. is the managing member of BTO Holdings Manager L.L.C. BTOA L.L.C. is the sole member of Blackstone Tactical Opportunities Associates L.L.C. Blackstone Holdings III L.P. is the managing member of BTOA L.L.C. Blackstone Tactical Opportunities Associates III - NQ L.P. is the general partner of Blackstone Tactical Opportunities Fund - FD L.P. BTO DE GP - NQ L.L.C. is the general partner of Blackstone Tactical Opportunities Associates III - NQ L.P. Blackstone Holdings II L.P. is the managing member of BTO DE GP - NQ L.L.C. Blackstone Holdings I/II GP L.L.C. is the general partner of Blackstone Holdings II L.P. Blackstone Alternative Solutions L.L.C. is the investment manager of Blackstone Aqua Master Sub-Fund, a sub-fund of Blackstone Global Master Fund ICAV. Blackstone Holdings I L.P. is the sole member of Blackstone Alternative Solutions L.L.C. Blackstone Holdings I/II GP L.L.C. is the general partner of Blackstone Holdings I L.P. BTO Side-by-Side GP L.L.C. is the general partner of Blackstone Family Tactical Opportunities Investment Partnership III ESC L.P. Blackstone Holdings III L.P. is the sole member of BTO Side-by-Side GP L.L.C. Blackstone Holdings III GP L.P. is the general partner of Blackstone Holdings III L.P. Blackstone Holdings III GP Management L.L.C. is the general partner of Blackstone Holdings III GP L.P. The Blackstone Group Inc. is the sole member of each of Blackstone Holdings I/II GP L.L.C. and Blackstone Holdings III GP Management L.L.C. The sole holder of the Class C common stock of The Blackstone Group Inc. is Blackstone Group Management L.L.C. Blackstone Group Management L.L.C. is wholly-owned by Blackstone's senior managing directors and controlled by its founder, Stephen A. Schwarzman. Each of the Blackstone entities described in this footnote and Stephen A. Schwarzman may be deemed to beneficially own the shares directly or indirectly controlled by such Blackstone entities or him, but each disclaims beneficial ownership of such shares. The address of Mr. Schwarzman and each of the other entities listed in this footnote is c/o The Blackstone Group Inc., 345 Park Avenue, New York, New York 10154.
(2)Based solely on the information set forth in a Schedule 13G/A filed with the SEC on February 11, 2022 by James E. Flynn. Consists of (i) 7,042,580 shares of Class A common stock held by Deerfield Partners and (ii) 6,924,244 shares of Class A common stock held by DPDF. Deerfield Management Company, L.P. (“Deerfield Management”) is the investment manager of Deerfield Partners, L.P. (“Deerfield
257

Partners”) and Deerfield Private Design Fund V, L.P. (“DPDF”). Deerfield Mgmt, L.P. (“Deerfield Mgmt”) is the general partner of Deerfield Partners. Deerfield Mgmt V, L.P. (“Deerfield Mgmt V”) is the general partner of DPDF. James E. Flynn is the sole member of the general partner of each of Deerfield Management, Deerfield Mgmt and Deerfield Mgmt V. Deerfield Management, Deerfield Mgmt and Mr. Flynn may be deemed to beneficially own the securities held by Deerfield Partners. Deerfield Management, Deerfield Mgmt V and Mr. Flynn may be deemed to beneficially own the securities held by DPDF. The address for each of Deerfield Partners, DPDF, Deerfield Management, Deerfield Mgmt, Deerfield Mgmt V and Mr. Flynn is 345 Park Avenue South, New York, New York 10010.
(3)Based solely on the information set forth in a Schedule 13D/A filed with the SEC on January 21, 2022 by Icahn School of Medicine at Mount Sinai (“ISMMS”). Consists of 88,355,473 shares of Class A common stock held by ISMMS. The shares are held by ISMMS, a New York Education Corporation. The responsibility and authority for the voting and investment decisions with respect to the shares held by ISMMS is vested in those persons who from time to time are the executive officers of ISMMS under the oversight and direction of its board of directors and its sole member, Mount Sinai Health System, Inc., a New York Not-for-Profit Corporation. The address for Icahn School of Medicine at Mount Sinai is One Gustave L. Levy Place, New York, New York 10029.
(4)Consists of (i) 168,351 shares of Class A common stock and (ii) 7,315,765 shares of Class A common stock subject to options that are exercisable within 60 days of February 22, 2022.
(5)Consists of (i) 250,618 shares of Class A common stock and (ii) 144,676 shares of Class A common stock subject to options that are exercisable within 60 days of February 22, 2022.
(6)Consists of (i) 30,893 shares of Class A common stock and (ii) 2,665,187 shares of Class A common stock subject to options that are exercisable within 60 days of February 22, 2022. Dr. Coffin left the Company in February 2022.
(7)Based solely on the information set forth in a Schedule 13D/A filed with the SEC on January 19, 2022 by CMLS Holdings LLC. Includes (i) 5,000,000 shares of Class A common stock held indirectly by Casdin Partners Master Fund L.P., and (ii) (x) 10,993,750 shares of Class A common stock and (y) 6,736,669 shares of Class A common stock underlying private placement warrants that are exercisable within 60 days of February 22, 2022 held indirectly by CMLS Holdings LLC (the “Former Sponsor”). The Board of Managers of the Former Sponsor is comprised of Mr. Eli Casdin and Mr. Keith Meister who share voting and investment discretion with respect to the Class A common stock held of record by CMLS Holdings LLC. Mr. Casdin is a member of the Board. C-LSH LLC and M-LSH LLC are the members of CMLS Holdings LLC, and Mr. Casdin and Mr. Meister are the managing members of C-LSH LLC and M-LSH LLC, respectively. As such, each of the foregoing may be deemed to have or share beneficial ownership of the Class A common stock held directly by CMLS Holdings LLC. The business address of the Former Sponsor is c/o Corvex Management, L.P., 667 Madison Avenue, New York, NY 10065.
(8)Consists of (i) 25,000 shares of Class A common stock and (ii) 166,666 shares of Class A common stock underlying private placement warrants that are exercisable within 60 days of February 22, 2022.
(9)Based solely on the information set forth in a Schedule 13D/A filed with the SEC on January 19, 2022 by CMLS Holdings LLC. Includes (i) 4,500,000 shares of Class A common stock held indirectly by Corvex Management, L.P. and (ii) (x) 10,993,750 shares of Class A common stock and (y) 6,736,669 shares of Class A common stock underlying private placement warrants that are exercisable within 60 days of February 22, 2022 held indirectly by the Former Sponsor. The Board of Managers of the Former Sponsor is comprised of Mr. Eli Casdin and Mr. Keith Meister who share voting and investment discretion with respect to the Class A common stock held of record by CMLS Holdings LLC. C-LSH LLC and M-LSH LLC are the members of CMLS Holdings LLC, and Mr. Casdin and Mr. Meister are the managing members of C-LSH LLC and M-LSH LLC, respectively. As such, each of the foregoing may be deemed to have or share beneficial ownership of the Class A common stock held directly by CMLS Holdings LLC. The business address of the Former Sponsor is c/o Corvex Management LP, 667 Madison Avenue, New York, NY 10065.
(10)Consists of 3,714 shares of Class A common stock subject to options that are exercisable within 60 days of February 22, 2022.
(11)Consists of 3,714 shares of Class A common stock subject to options that are exercisable within 60 days of February 22, 2022.
(12)Consists of 3,714 shares of Class A common stock subject to options that are exercisable within 60 days of February 22, 2022.
(13)Consists of 181,609 shares of Class A common stock subject to options that are exercisable within 60 days of February 22, 2022.
(14)Consists of (i) 25,000 shares of Class A common stock held by Nat Turner and (ii) 166,666 shares of Class A common stock underlying private placement warrants held by NTWJ Holdings, LLC (“NTWJ”), that are exercisable within 60 days of February 22, 2022. Mr. Turner is a managing member of NTWJ. The address for NTWJ is 139 Reade Street, New York, New York 10013.
(15)Consists of (i) 21,376,237 shares of Class A common stock held directly and indirectly by all current directors and current executive officers of the Company as a group, (ii) 18,014 shares of Class A common stock issuable pursuant to RSUs held directly by all current directors and executive officers of the Company as a group and that will be vested within 60 days of February 22, 2022, (iii) 11,021,001 shares of Class A common stock subject to options held directly by all current directors and executive officers of the Company as a group and that are exercisable within 60 days of February 22, 2022, and (iv) 7,070,001 shares of Class A common stock underlying private placement warrants held directly and indirectly by all current directors and executive officers of the Company as a group and that are exercisable within 60 days of February 22, 2022.
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DELINQUENT SECTION 16(A) REPORTS
Section 16(a) of the Exchange Act requires our directors, executive officers, and any persons who own more than 10% of our common stock, to file initial reports of ownership and reports of changes in ownership with the SEC. Based solely on our review of the forms filed with the SEC and written representations from the directors and executive officers, we believe that all Section 16(a) filing requirements were timely met in the fiscal year ended December 31, 2021, with the exception of: a Form 4 with respect to the issuance of restricted stock units (“RSUs”) and an associated sale to cover transaction in respect of tax withholding obligations in connection with the vesting and settlement of a portion of the RSUs, which was filed one day late on October 6, 2021 on behalf of Shawn Assad; a Form 4 with respect to a sale to cover transaction in respect of tax withholding obligations in connection with the vesting and settlement of RSUs, which was filed one day late on November 15, 2021 on behalf of Shawn Assad; Forms 4 with respect to the issuance of RSUs and associated sale to cover transactions in respect of tax withholding obligations in connection with the vesting and settlement of a portion of the RSUs, which were filed four days late on November 2, 2021 on behalf of each of Shawn Assad, Daniel Clark, James Coffin, Anthony Prentice, Isaac Ro, Kareem Saad, Eric Schadt, and Karen White; a Form 5 with respect to the exercise of shares underlying the option grant, which was filed eighty-three days late on February 7, 2022 on behalf of Daniel Clark; and a Form 3 that was filed 29 days late on August 30, 2021 for affiliates of Blackstone, which was due within 10 calendar days of July 22, 2021 following the closing of the business combination, by BTO Sema4 Holdings L.P., BTO Holdings Manager L.L.C., Blackstone Tactical Opportunities Associates L.L.C., BTOA L.L.C., Blackstone Family Tactical Opportunities Investment Partnership III ESC L.P., BTO Side-by-Side GP L.L.C., Blackstone Holdings III L.P., Blackstone Holdings III GP L.P., Blackstone Holdings III GP Management L.L.C., Blackstone Tactical Opportunities Fund – FD L.P., Blackstone Tactical Opportunities Associates III – NQ L.P., BTO DE GP – NQ L.L.C., Blackstone Holdings II L.P., Blackstone Aqua Master Sub-Fund, a sub-fund of Blackstone Global Master Fund ICAV, Blackstone Alternative Solutions L.L.C., Blackstone Holdings I L.P., Blackstone Holdings I/II GP L.L.C., Blackstone Inc., Blackstone Group Management L.L.C. and Stephen A. Schwarzman.
MARKET PRICE, TICKER SYMBOL AND DIVIDEND INFORMATION
The Company
Market Price and Ticker Symbol
The Company’s Class A common stock and warrants are currently listed on Nasdaq under the symbols “SMFR” and “SMFRW”, respectively.
On January 14, 2022, the trading date before the public announcement of the Acquisition, the Company’s Class A common stock and warrants closed at $4.04 and $0.75, respectively. On March 30, 2022, the trading date immediately prior to the date of this proxy statement, the Company’s Class A common stock and warrants closed at $3.12 and $0.69, respectively.
Holders
As of March 25, 2022 there were 76 holders of record of our Class A common stock and 5 holders of record of our warrants. The number of holders of record does not include a substantially greater number of “street name” holders or beneficial holders whose Class A common stock and warrants are held of record by banks, brokers and other financial institutions.
Dividend Policy
We have not paid any cash dividends on our Class A common stock to date and do not intend to pay cash dividends prior to the completion of the Acquisition. The payment of any cash dividends subsequent to the Acquisition will be within the discretion of the Company’s board of directors at such time. Following the Acquisition, we currently expect that the Company will retain future earnings to finance operations and grow its business, and we do not expect the Company to declare or pay cash dividends for the foreseeable future.
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Representatives of our independent registered public accounting firm, Ernst & Young LLP, will be present at the special meeting of the Company’s stockholders. The representatives will have the opportunity to make a statement if they so desire and they are expected to be available to respond to appropriate questions.
APPRAISAL RIGHTS
Appraisal rights are not available to holders of our shares of Class A common stock in connection with the Acquisition.
HOUSEHOLDING INFORMATION
Unless we have received contrary instructions, we may send a single copy of this proxy statement to any household at which two or more stockholders reside if we believe the stockholders are members of the same family. This process, known as “householding,” reduces the volume of duplicate information received at any one household and helps to reduce our expenses. However, if stockholders prefer to receive multiple sets of our disclosure documents at the same address this year or in future years, the stockholders should follow the instructions described below. Similarly, if an address is shared with another stockholder and together both of the stockholders would like to receive only a single set of our disclosure documents, the stockholders should follow these instructions:
•If the shares are registered in the name of the stockholder, the stockholder should contact us at our offices at Sema4 Holdings Corp., 333 Ludlow Street, North Tower, 8th Floor, Stamford, Connecticut 06902 or by telephone at (800) 298-6470, to inform us of his or her request; or
•If a bank, broker or other nominee holds the shares, the stockholder should contact the bank, broker or other nominee directly.
TRANSFER AGENT AND REGISTRAR
The transfer agent for our securities is Continental Stock Transfer & Trust Company.
SUBMISSION OF STOCKHOLDER PROPOSALS
Our Board is aware of no other matter that may be brought before the Special Meeting. Under Delaware law, only business that is specified in the notice of Special Meeting to stockholders may be transacted at the Special Meeting.
FUTURE STOCKHOLDER PROPOSALS
We anticipate that the 2023 annual meeting of stockholders will be held no later than June 2023. For any proposal to be considered for inclusion in the proxy statement and form of proxy for the Company’s 2023 annual meeting of stockholders, it must be submitted in writing and comply with the requirements of Rule 14a-8 of the Exchange Act. Stockholder proposals submitted pursuant to Rule 14a-8 under the Exchange Act and intended to be presented at our 2023 annual meeting of stockholders must be received by us not later than December 1, 2022 in order to be considered for inclusion in our proxy materials for that meeting. Such proposals must be received by the Company at its principal executive offices at 333 Ludlow Street, North Tower, 8th Floor, Stamford, Connecticut 06902.
In addition to any other applicable law)requirements, for business and for nominations to be properly brought before an annual meeting by a stockholder, the Company’s bylaws provide that the stockholder must give timely notice in proper written form to our Corporate Secretary at the Company’s principal executive offices at 333 Ludlow Street, North Tower, 8th Floor, Stamford, Connecticut 06902, and such business must otherwise be a proper matter for stockholder action. Such notice, to be timely, must be received not less than 75 days nor more than 105 days prior to the first anniversary of the preceding year’s annual meeting. As a result, any notice given by or on behalf of a stockholder pursuant to these provisions of the Company’s bylaws (and not pursuant to SEC Rule 14a-8) must be received by February 11, 2023 (but not before January 12, 2023). However, that in the event that the date of the
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annual meeting is advanced by more than thirty (30) days, or delayed by more than sixty (60) days, a stockholder’s notice must be so received not earlier than the one hundred and fifth (105th) day prior to such annual meeting and not later than the close of business on the later of (A) the ninetieth (90th) day prior to such annual meeting and (B) the tenth (10th) day following the day on which notice of the date of such annual meeting was mailed or public disclosure of the date of such annual meeting was made, whichever first occurs. Nominations and proposals also must satisfy other requirements set forth in the bylaws. The chairman of our Board may refuse to acknowledge the introduction of any stockholder proposal not made in compliance with the foregoing procedures and requirements set forth in the bylaws.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC as required by the Exchange Act. You can read the Company’s SEC filings, including this proxy statement, over the Internet at the SEC’s website at http://www.sec.gov.
If you would like additional copies of this proxy statement or if you have questions about the transaction or the proposals to be presented at the Special Meeting, you should contact the Company at the following address and telephone number:
333 Ludlow Street
North Tower, 8th Floor
Stamford, Connecticut 06902
Telephone: (800) 298-6470
Attention: Investors@sema4.com
You may also obtain these documents by requesting them in writing or by telephone from the Company’s proxy solicitation agent at the following address and telephone number:
D.F. King & Co., Inc.
48 Wall Street, 22nd Floor
New York, NY 10005
Stockholders Call (toll-free): (800) 735-3591
Banks and Brokers Call: (212) 269-5550
Email: Sema4@dfking.com
If you are a stockholder of the Company and would like to request documents, please do so no later than five business days before the Special Meeting in order to receive them before the Special Meeting. If you request any documents from us, we will mail them to you by first class mail, or another equally prompt means.
All information contained in this proxy statement relating to the Company has been supplied by the Company, and all such information relating to GeneDx has been supplied by GeneDx. Information provided by either the Company or GeneDx does not constitute any representation, estimate or projection of any other party.
This document is a proxy statement of the Company for the Special Meeting. We have not authorized anyone to give any information or make any representation about the transaction, the Company or GeneDx that is different from, or in addition to, that contained in this proxy statement. Therefore, if anyone does give you information of this sort, you should not rely on it. The information contained in this proxy statement speaks only as of the date of this proxy statement, unless the information specifically indicates that another date applies.
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SEMA4 HOLDINGS CORP.
INDEX TO FINANCIAL STATEMENTS
Page
F-2
F-3
F-5
F-6
F-7
F-9
F-1

Report of Independent Registered Public Accounting Firm
To the Shareholders and the Private Placement Warrants will expire worthless.Board of Directors of Sema4 Holdings Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Sema4 Holdings Corp. (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, redeemable convertible preferred stock and stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.
Restatement of 2020 and 2019 Financial Statements
As discussed in Note 2 to the consolidated financial statements, the 2020 and 2019 financial statements have been restated to correct a misstatement.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ ERNST & YOUNG LLP
We have served as the Company’s auditor since 2018.
New York, New York
March 14, 2022
Auditor Firm Id:No. 42Auditor Name:Ernst & Young LLPAuditor Location:New York, New York, United States
F-2

Sema4 Holdings Corp.
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
December 31,
20212020
Assets
Current assets:
Cash and cash equivalents$400,569 $108,132 
Accounts receivable, net26,509 32,044 
Due from related parties54 289 
Inventory, net33,456 24,962 
Prepaid expenses19,154 4,557 
Other current assets3,802 4,124 
Total current assets483,544 174,108 
Property and equipment, net62,719 63,110 
Restricted cash900 10,828 
Other assets6,930 3,596 
Total assets$554,093 $251,642 
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable$44,693 $26,737 
Accrued expenses20,108 11,854 
Due to related parties2,623 1,425 
Current portion of capital lease obligations3,419 3,506 
Contract liabilities473 1,783 
Other current liabilities29,968 28,137 
Total current liabilities101,284 73,442 
Long-term debt, net of current portion11,000 18,971 
Stock-based compensation liabilities— 131,989 
Capital lease obligations, net of current portion18,427 20,778 
Other liabilities3,480 2,074 
Warrant liability21,555 — 
Earn-out contingent liability10,244 — 
Total liabilities165,990 247,254 
Commitments and contingencies (Note 9)
Redeemable convertible preferred stock:
Series A-1 redeemable convertible preferred stock, $0.00001 par value: 0 and 55,399,943 shares authorized, issued and outstanding at December 31, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $0 and $55,000 at December 31, 2021 and December 31, 2020, respectively— 51,811 
F-3

Series A-2 redeemable convertible preferred stock, $0.00001 par value: 0 and 64,718,940 shares authorized at December 31, 2021 and December 31, 2020, respectively; 0 and 49,700,364 shares authorized, issued and outstanding at December 31, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $0 and $49,342 at December 31, 2021 and December 31, 2020, respectively— 46,480 
Series B redeemable convertible preferred stock, $0.00001 par value: 0 and 41,937,960 shares authorized, issued and outstanding at December 31, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $0 and $204,302 at December 31, 2021and December 31, 2020, respectively— 118,824 
Series C redeemable convertible preferred stock, $0.00001 par value: 0 and 24,497,317 shares authorized at December 31, 2021 and December 31, 2020, respectively; 0 and 24,496,946 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $0 and $121,397 at December 31, 2021 and December 31, 2020, respectively— 117,324 
Redeemable convertible preferred stock— 334,439 
Stockholders’ equity (deficit):
Preferred Stock, $0.0001 par value: 1,000,000 and 0 shares authorized at December 31, 2021 and December 31, 2020, respectively; 0 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively— — 
Class A common stock, $0.0001 par value: 380,000,000 shares authorized, 242,647,604 shares issued and outstanding at December 31, 2021 and $0.00001 par value: 309,584,750 shares authorized, 124 shares issued and outstanding at December 31, 202024 — 
Class B convertible common stock, $0.00001 par value: 0 and 18,575,085 shares authorized at December 31, 2021 and December 31, 2020, respectively; 0 and 130,557 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively— — 
Additional paid-in capital963,520 — 
Accumulated deficit(575,441)(330,051)
Total stockholders’ equity (deficit)388,103 (330,051)
Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)$554,093 $251,642 
The accompanying notes are an integral part of these consolidated financial statements.
F-4

Sema4 Holdings Corp.
Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except per share and share amounts)
Year Ended December 31,
202120202019
Revenue
(Restated)(1)
(Restated)(1)
Diagnostic test revenue (including related party revenue of $90, $285 and $0 for the years ended December 31, 2021, 2020, and 2019, respectively)$205,100 $175,351 $191,667 
Other revenue (including related party revenue of $232, $3 and $1,180 for the years ended December 31, 2021, 2020, and 2019, respectively)7,095 3,971 4,507 
Total revenue212,195 179,322 196,174 
Cost of services (including related party expenses of $3,975, $2,189 and $1,859 for the years ended December 31, 2021, 2020, and 2019, respectively)228,797 175,296 113,389 
Gross (loss) profit(16,602)4,026 82,785 
Research and development105,162 72,700 34,910 
Selling and marketing112,738 63,183 39,352 
General and administrative205,988 100,742 29,484 
Related party expenses5,659 9,395 9,452 
Loss from operations(446,149)(241,994)(30,413)
Other income (expense):
Change in fair market value of warrant and earn-out contingent liabilities198,401 — — 
Interest income79 506 988 
Interest expense(2,835)(2,474)(783)
Other income, net5,114 2,622 504 
Total other income, net200,759 654 709 
Loss before income taxes(245,390)(241,340)(29,704)
Income tax provision— — — 
Net loss and comprehensive loss$(245,390)$(241,340)$(29,704)
Redeemable convertible preferred stock dividends— — 3,039 
Net loss attributable to common stockholders$(245,390)$(241,340)$(32,743)
Weighted average shares outstanding, Class A common stock108,077,439 5,131 124 
Basic and diluted net loss per share, Class A common stock$(2.27)$(47,036)$(264,056)
___________________
(1)Certain expenses were previously misclassified as cost of services. These expenses are now reported as selling and marketing. This adjustment has no impact on total revenue, loss from operations, net loss and comprehensive loss or net loss per share. Refer to Note 2, “Summary of Significant Accounting Policies” to our consolidated financial statements for further information.
The accompanying notes are an integral part of these consolidated financial statements.
F-5

Sema4 Holdings Corp.
Consolidated Statement of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(in thousands, except share amounts)
Redeemable Convertible Preferred StockClass A Common StockClass B Common Stock
SharesAmountSharesPer ValueSharesPer ValueAdditional paid-in capitalAccumulated deficitTotal stockholders’ equity (deficit)
Balance at December 31, 2018102,039,134 $64,355 124 $— — $— — $(55,968)$(55,968)
Net loss— — — — — — — (29,704)(29,704)
Preferred Series A dividend3,061,173 3,039 — — — — — (3,039)(3,039)
Capital contributions— 30,897 — — — — — — — 
Issuance of Preferred Series B, net of issuance costs41,937,960 $118,824 — — — — — — — 
Balance at December 31, 2019147,038,267 $217,115 124 $— — $— — $(88,711)$(88,711)
Net loss— — — — — — — (241,340)(241,340)
Preferred Series A dividend— — — — 130,557 — — — — 
Capital contributions24,496,946 117,324 — — — — — — — 
Balance at December 31, 2020171,535,213 $334,439 124 $— 130,557 $— $(330,051)$(330,051)
Net loss— — — — — — (245,390)(245,390)
 Stock option exercises— — 995,526 — 1,253,179 — 1,783 — 1,783 
 Conversion of Preferred Stock(171,535,213)(334,439)148,543,062 15 — — 104,517 — 104,532 
 Conversion of Class B Common Stock— — 1,309,320 — (1,383,736)— (744)— (744)
 Net equity infusion from the Business Combination— — 90,333,562 9 — — 510,742 — 510,751 
 Stock-based compensation modification reclassification— — — — — — 304,837 — 304,837 
 Stock-based compensation expense— — — — — — 42,385 — 42,385 
Vested restricted stock units converted to common stock— — 1,466,010 — — — — — — 
Balance at December 31, 2021— $— 242,647,604 $24 — $— $963,520 $(575,441)$388,103 
The accompanying notes are an integral part of these consolidated financial statements.
F-6

Sema4 Holdings Corp.
Consolidated Statements of Cash Flows
(in thousands)
Year Ended December 31,
202120202019
Operating activities
Net loss$(245,390)$(241,340)$(29,704)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense21,807 11,734 6,407 
Stock-based compensation expense219,421 120,231 5,482 
Change in fair value of warrant and contingent liabilities(198,401)— — 
Provision for excess and obsolete inventory2,129 — — 
Non-cash lease expense1,555 2,400 (176)
Loss on extinguishment of debt301 — — 
Amortization of debt issuance costs66 — — 
Change in operating assets and liabilities:
Accounts receivable5,535 (10,611)(4,567)
Inventory(10,624)(8,979)(7,970)
Prepaid expenses and other current assets(14,250)2,498 (2,526)
Due to/from related parties1,433 (442)(919)
Other assets(1,861)1,175 (4,395)
Accounts payable and accrued expenses25,916 14,805 12,847 
Contract liabilities(1,310)(559)2,342 
Other current liabilities3,239 15,960 4,451 
Net cash used in operating activities(190,434)(93,128)(18,728)
Investing activities
Purchases of property and equipment(9,400)(24,094)(11,923)
Development of internal-use software assets(11,386)(7,880)(3,533)
Net cash used in investing activities(20,786)(31,974)(15,456)
Financing activities
Proceeds from issuance of Series B redeemable convertible preferred stock, net of issuance costs— — 118,824 
Proceeds from issuance of Series C redeemable convertible preferred stock, net of issuance costs— 117,324 — 
Proceeds from PIPE issuance350,000 — — 
Proceeds from equity infusion from the merger, net of redemptions442,684 — — 
Legacy Sema4 Shareholder payout(230,665)— — 
Payment of transaction costs(51,760)— — 
Stock Appreciation Rights payout(3,795)— — 
Repayment of long-term debt(8,741)— — 
Exercise of stock options1,271 — — 
Capital contributions from ISMMS— — 30,897 
F-7

Proceeds from long-term debt— 15,928 — 
Long-term debt principal payments(1,000)(186)— 
Debt issuance costs(537)— — 
Capital lease principal payments(3,728)(4,010)(1,709)
Net cash provided by financing activities493,729 129,056 148,012 
Net increase in cash, cash equivalents and restricted cash282,509 3,954 113,828 
Cash, cash equivalents and restricted cash, at beginning of year118,960 115,006 1,178 
Cash, cash equivalents and restricted cash, at end of year401,469 118,960 115,006 
Supplemental disclosures of cash flow information
Cash paid for interest$2,751 $1,745 $305 
Cash paid for taxes$349 $— $— 
Purchases of property and equipment in accounts payable and accrued expenses$761 $447 $818 
Software development costs in accounts payable and accrued expenses$1,149 $1,473 $1,040 
Non-cash Series A redeemable convertible preferred stock dividends declared and paid$— $— $3,039 
Debt issuance costs incurred but unpaid$1,000 $— $— 
The accompanying notes are an integral part of these consolidated financial statements.
F-8

Sema4 Holdings Corp.
Notes to Consolidated Financial Statements
NOTE 5. RELATED PARTY TRANSACTIONS1. Organization and Description of Business
Sema4 Holdings Corp., formerly Mount Sinai Genomics Inc., a Delaware corporation (“Legacy Sema4”), as discussed further below, provides genomics-related diagnostic and information services and pursues genomics medical research. Legacy Sema4 utilizes an integrated portfolio of laboratory processes, software tools and informatics capabilities to process DNA-containing samples, analyze information about patient-specific genetic variation and generate test reports for clinicians and their patients. Legacy Sema4 provides a variety of genetic diagnostic tests and information with a focus on reproductive health, including pediatric, oncology and other conditions. In 2020, the Legacy Sema4 began to provide diagnostic testing services in response to the outbreak of the coronavirus (“COVID-19”) pandemic. On December 15, 2021, it was announced that COVID-19 testing services would be discontinued by March 31, 2022. Legacy Sema4 primarily serves healthcare professionals who work with their patients and bills third-party payors across the United States, with a substantial portion of its diagnostic testing volume occurring in New York, California, Florida, Connecticut and New Jersey.
On July 22, 2021 (the “Closing Date”), CM Life Sciences, Inc. (“CMLS”) completed the acquisition of Legacy Sema4, pursuant to that certain Agreement and Plan of Merger (as amended, the “Merger Agreement”), dated February 9, 2021. On the Closing Date, S-IV Sub, Inc. (“Merger Sub”) merged with and into the Legacy Sema4, with Legacy Sema4 surviving the merger as a wholly-owned subsidiary of CMLS (the “Merger” and, together with the other transactions contemplated by the Merger Agreement, the “Business Combination”). In connection with the consummation of the Business Combination, CMLS changed its name to “Sema4 Holdings Corp.” (“Sema4 Holdings”) and Legacy Sema4 changed its name to “Sema4 OpCo, Inc.” All equity securities of Legacy Sema4 were converted into the right to receive the applicable portion of the merger consideration.
The Merger was accounted for as a reverse recapitalization with Legacy Sema4 as the accounting acquirer and CMLS as the acquired company for accounting purposes. The shares and net loss per common share, prior to the Merger, have been retroactively restated as shares reflecting the exchange ratio established in the Merger (1 share of Legacy Sema4 Class A common stock for 123.8339 shares of Sema4 Holdings Class A common stock) (the “Conversion Ratio”).
Prior to the Merger, shares of CMLS Class A common stock, CMLS’s public warrants, and CMLS’s public units were traded on the Nasdaq Capital Market under the ticker symbols “CMLF”, “CMFLW”, and “CMLFU” respectively. On July 23, 2021, shares of Sema4 Holdings Class A common stock and Sema4 Holdings’ public warrants began trading on the Nasdaq Global Select Market (the “Nasdaq”) under the ticker symbols “SMFR” and “SMFRW,” respectively. See Note 3, “Business Combination,” for additional details.
Unless otherwise stated herein or unless the context otherwise requires, references in these notes to the “Company,” or “Sema4” refer to (i) Legacy Sema4 prior to the consummation of the Business Combination; and (ii) Sema4 Holdings and its subsidiary following the consummation of the Business Combination.

2. Summary of Significant Accounting Policies
Founder Shares
InOn July 16, 2020, the Former Sponsor paid $25,000 to cover certain offering costspurchased an aggregate of the Company in consideration for 10,062,500 shares of the Company’s Class B common stock of CMLS (the “Founder Shares”“Class B common stock”)., for a total purchase price of $25,000, or approximately $0.002 per share. In August 2020, the Former Sponsor transferred 25,000 Founder Sharesof Class B common stock to each of Munib Islam, EmilyDr. Leproust and Nat Turner, certain of the Company’s independent directors, at their original per-share purchase price, for an aggregate of 75,000 Founder Shares transferred.Mr. Turner. On September 1, 2020, the CompanyCMLS effected a 1:1.1 stock split of its Class B common stock, resulting in the Former Sponsor holding an aggregate of 10,993,750 Founder Shares and there being an aggregate of 11,068,750 Founder Shares outstanding. All share and per-share amounts have been retroactively restated to reflect the stock split, The Founder Shares included an aggregate of up to 1,443,750 shares subject to forfeiture by the Sponsor to the extent that the underwriter’s over-allotment was not exercised in full or in part, so that the number of Founder Shares would equal, on an as-converted basis, approximately 20% of the Company’s issued and outstanding shares of Class B common stock. The shares of Class B common stock after the Initial Public Offering. As a result of the underwriter’s election to fully exercise its over-allotment option, 1,443,750 Founder Shares are no longer subject to forfeiture.
The Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (A) one year after the completion of a Business Combination and (B) subsequent to a Business Combination, (x) if the last reported sale price of theautomatically converted into Class A common stock equals on July 22, 2021 in connection with the consummation of the business combination (such shares, the “Founder Shares”).
Private Placement Warrants
On September 1, 2020, simultaneously with the closing of CMLS’s initial public offering (the “Initial Public Offering”), the Former Sponsor and certain of CMLS’s independent directors purchased an aggregate of 7,236,667 private placement warrants (the “Private Placement Warrants”), at a price of $1.50 per Private Placement Warrant, for an aggregate purchase price of $10,855,000. The Former Sponsor purchased 6,903,335 Private Placement Warrants, and Dr. Leproust (and/or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after a Business Combination,one or (y)more entities controlled by her) purchased 166,666 Private Placement
F-74252
CM LIFE SCIENCES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in allWarrants. Each Private Placement Warrant is exercisable to purchase one share of the Public Stockholders having the right to exchange their shares ofClass A common stock for cash, securities or other property.at a price of $11.50 per share, subject to adjustment.
Promissory Note – Note–Related Party
On July 16, 2020, the Former Sponsor issued an unsecured promissory note to the CompanyCMLS (the “Promissory Note”“Promissory Note”), pursuant to which the CompanyCMLS could borrow up to an aggregate principal amount of $300,000. The Promissory Note was non-interest bearing and payable on the earlier of (i) December 31, 2020 or (ii) the consummation of the Initial Public Offering. The outstanding balance under the Promissory Note of $165,081 was repaid at the closing of the Initial Public Offering on September 4, 2020.
Related Party LoansInsider Letter
In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes may be repaid upon completion of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of the notes may be converted upon completion of a Business Combination into warrants at a price of $1.50 per warrant. Such warrants would be identical to the Private Placement Warrants. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. As of March 31, 2021, there were no amounts outstanding under the Working Capital Loans.
NOTE 6. COMMITMENTS AND CONTINGENCIES
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Registration Rights
Pursuant to a registration rights agreement entered into onOn September 1, 2020, the holders of the Founder Shares, Private Placement Warrants and securities that may be issued upon conversion of Working Capital Loans and forward purchase shares are entitled to registration rights. The holders of these securities will be entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination. The Company will bear the expenses incurred in connection with the filingInitial Public Offering, CMLS, the Former Sponsor and certain insiders of any such registration statements.
Underwriting Agreement
The underwriter is entitled toCMLS entered into a deferred fee of $0.35 per Unit, or $15,496,250letter agreement (the “Insider Letter”) providing for, among other things, a lock-up in the aggregate. The deferred fee will become payablerelation to the underwriter fromFounder Shares until the amounts held inearlier of (a) one year after the Trust Account solely incompletion of the event that the Company completes a Business Combination, subjectbusiness combination and (b) subsequent to the termsbusiness combination, if the closing price of the underwriting agreement.Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations, and the like) for any 20 trading days within any 30-day trading day period commencing at least 150 days after the business combination or (y) the date following the completion of the business combination on which we complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of our stockholders having the right to exchange their shares of Class A common stock for cash securities or other property. The Former Sponsor and each insider also agreed not to transfer any Private Placement Warrants (or any share of Class A common stock issued or issuable upon the exercise of the Private Placement Warrants), until 30 days after the completion of the business combination.
Forward Purchase Agreement
The CompanyOn September 1, 2020, in connection with the Initial Public Offering, CMLS entered into separate forward purchase agreements with affiliates of the Sponsor, Casdin Capital, LLC (“Casdin”) and Corvex Management LP (“Corvex”), in their capacities as investment advisors on behalf of one or more investment funds, clients or accounts managed by each of Casdin and Corvex, respectively (collectively, their “Clients”), pursuant to which, subject to the conditions described below,provided therein, they will causecaused the Clients to purchase
F-75
CM LIFE SCIENCES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
from the Companyus up to an aggregate amount of 15,000,000 shares of Class A common stock or the forward purchase shares, for $10.00 per forward purchase share, or an aggregate amount of up to $150,000,000, in a private placement that will closeclosed concurrently with the closing of the business combination.
Review, Approval or Ratification of Transactions with Related Parties
On July 22, 2021, we adopted a Business Combination.written related party transaction policy in connection with the completion of the business combination. The policy provides that officers, directors, holders of more than 5% of any class of our voting securities, and any member of the immediate family of and any entity affiliated with any of the foregoing persons, will not be permitted to enter into a related-party transaction with us without the prior consent of our audit committee, or other independent members of our Board in the event it is inappropriate for the audit committee to review such transaction due to a conflict of interest. Any request for us to enter into a transaction with an executive officer, director, principal stockholder, or any of their immediate family members or affiliates, in which the amount involved exceeds $120,000, must first be presented to our audit committee for review, consideration, and approval. In approving or rejecting the proposed transactions, our audit committee will take into account all of forwardthe relevant facts and circumstances available.
Director Independence
The rules of Nasdaq require that a majority of our Board be independent. An “independent director” is defined generally as a person other than an executive officer or employee of the issuer or any other individual having a relationship which, in the opinion of the issuer’s board of directors, would interfere with the exercise of independent judgement in carrying out the responsibilities of a director. Each individual serving on our Board, other than Eric Schadt and Jason Ryan, qualifies as an independent director under Nasdaq listing standards. Each director who serves on our audit committee, compensation committee and nominating and corporate governance committee are
253

independent under Nasdaq listing standards. See the section entitled “Corporate Governance of Sema4” elsewhere in this proxy statement for more information.
GeneDx
GeneDx had no related party transactions for the years ended December 31, 2021 and 2020.
254

REPORT OF THE AUDIT COMMITTEE
The information contained in the following report of our audit committee is not considered to be "soliciting material," "filed" or incorporated by reference in any past or future filing by us under the Exchange Act or the Securities Act unless and only to the extent that we specifically incorporate it by reference.
Our audit committee has reviewed and discussed with our management and Ernst & Young LLP our audited consolidated financial statements for the year ended December 31, 2021. Our audit committee has also discussed with Ernst & Young LLP the matters required to be discussed by Auditing Standard No. 1301 adopted by the Public Company Accounting Oversight Board (United States) regarding “Communications with Audit Committees.”
Our audit committee has received and reviewed the written disclosures and the letter from Ernst & Young LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with our audit committee concerning independence, and has discussed with Ernst & Young LLP its independence from us.
Based on the review and discussions referred to above, our audit committee recommended to our board of directors that the audited consolidated financial statements be included in our annual report on Form 10-K for the year ended December 31, 2021 for filing with the U.S. Securities and Exchange Commission.
Submitted by the Audit Committee
Keith Meister, Chair
Dennis Charney
Emily Leproust
255

BENEFICIAL OWNERSHIP OF SECURITIES
Beneficial Ownership of Certain Stockholders, Directors and Executive Officers
The following table sets forth certain information with respect to the beneficial ownership of our Class A common stock as of February 22, 2022, by:
•each stockholder known by us to be the beneficial owner of more than 5% of our Class A common stock;
•each of our named executive officers;
•each of our directors and director nominees; and
•all of our current directors and executive officers as a group.
Percentage ownership of our Class A common stock is based on 244,727,239 shares of our Class A common stock outstanding on February 22, 2022. Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security or has the right to acquire a security, such as through the exercise of warrants or stock options or the vesting of restricted stock units, within 60 days of the date above. Shares subject to warrants or options that are currently exercisable or exercisable within 60 days of the date above or subject to restricted stock units that vest within 60 days of such date are considered outstanding and beneficially owned by the person holding such warrants, options or restricted stock units for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
Except as described in the footnotes below and subject to applicable community property laws and similar laws, we believe that each person listed above has sole voting and investment power with respect to such shares. Unless
256

otherwise noted, the address of each beneficial owner is c/o Sema4 Holdings Corp., 333 Ludlow Street, North Tower, 8th Floor, Stamford, Connecticut 06902.
Name of Beneficial OwnersNumber of Shares of Class
A Common Stock Beneficially Owned
Percentage of Outstanding
Class A
Common Stock
5% Stockholders:
Entities affiliated with Blackstone Group Inc.(1)
25,866,50210.6
Entities affiliated with Deerfield Management Company, L.P.(2)
13,966,8245.7
Icahn School of Medicine at Mount Sinai(3)
88,355,47336.1
Directors and Named Executive Officers:
Eric Schadt(4)
7,484,1163.1
Isaac Ro(5)
395,294*
James Coffin (6)
2,696,0801.1
Dennis Charney——
Eli D. Casdin(7)
22,730,4199.3
Emily Leproust(8)
191,666*
Keith Meister(9)
22,230,4199.1
Michael Pellini(10)
3,714*
Jason Ryan(11)
3,714*
Joshua Ruch(12)
3,714*
Rachel Sherman(13)
181,609*
Nat Turner(14)
191,666*
Katherine Stueland——
Richard C. Fenniger Jr.——
Directors and executive officers as a group (15 individuals)(15)
39,485,25316.1
__________________
*Less than one percent
(1)Based solely on the information set forth in a Schedule 13D/A filed with the SEC on January 20, 2022 by Blackstone Holding III L.P. Consists of (i) 24,404,324 shares of Class A common stock held by BTO Sema4 Holdings L.P., (ii) 505,095 shares of Class A common stock held by Blackstone Tactical Opportunities Fund - FD L.P., (iii) 147,574 shares of Class A common stock held by Blackstone Family Tactical Opportunities Investment Partnership III ESC L.P., and (iv) (a) 100,000 shares of Class A common stock and (b) warrants to purchase 709,509 shares soldof Class A common stock which are exercisable within 60 days of February 22, 2022 held by Blackstone Aqua Master Sub-Fund, a sub-fund of Blackstone Global Master Fund ICAV. BTO Holdings Manager L.L.C. is the general partner of BTO Sema4 Holdings L.P. Blackstone Tactical Opportunities Associates L.L.C. is the managing member of BTO Holdings Manager L.L.C. BTOA L.L.C. is the sole member of Blackstone Tactical Opportunities Associates L.L.C. Blackstone Holdings III L.P. is the managing member of BTOA L.L.C. Blackstone Tactical Opportunities Associates III - NQ L.P. is the general partner of Blackstone Tactical Opportunities Fund - FD L.P. BTO DE GP - NQ L.L.C. is the general partner of Blackstone Tactical Opportunities Associates III - NQ L.P. Blackstone Holdings II L.P. is the managing member of BTO DE GP - NQ L.L.C. Blackstone Holdings I/II GP L.L.C. is the general partner of Blackstone Holdings II L.P. Blackstone Alternative Solutions L.L.C. is the investment manager of Blackstone Aqua Master Sub-Fund, a sub-fund of Blackstone Global Master Fund ICAV. Blackstone Holdings I L.P. is the sole member of Blackstone Alternative Solutions L.L.C. Blackstone Holdings I/II GP L.L.C. is the general partner of Blackstone Holdings I L.P. BTO Side-by-Side GP L.L.C. is the general partner of Blackstone Family Tactical Opportunities Investment Partnership III ESC L.P. Blackstone Holdings III L.P. is the sole member of BTO Side-by-Side GP L.L.C. Blackstone Holdings III GP L.P. is the general partner of Blackstone Holdings III L.P. Blackstone Holdings III GP Management L.L.C. is the general partner of Blackstone Holdings III GP L.P. The Blackstone Group Inc. is the sole member of each of Blackstone Holdings I/II GP L.L.C. and Blackstone Holdings III GP Management L.L.C. The sole holder of the Class C common stock of The Blackstone Group Inc. is Blackstone Group Management L.L.C. Blackstone Group Management L.L.C. is wholly-owned by Blackstone's senior managing directors and controlled by its founder, Stephen A. Schwarzman. Each of the Blackstone entities described in this footnote and Stephen A. Schwarzman may be deemed to beneficially own the shares directly or indirectly controlled by such Blackstone entities or him, but each disclaims beneficial ownership of such shares. The address of Mr. Schwarzman and each of the other entities listed in this footnote is c/o The Blackstone Group Inc., 345 Park Avenue, New York, New York 10154.
(2)Based solely on the information set forth in a Schedule 13G/A filed with the SEC on February 11, 2022 by James E. Flynn. Consists of (i) 7,042,580 shares of Class A common stock held by Deerfield Partners and (ii) 6,924,244 shares of Class A common stock held by DPDF. Deerfield Management Company, L.P. (“Deerfield Management”) is the investment manager of Deerfield Partners, L.P. (“Deerfield
257

Partners”) and Deerfield Private Design Fund V, L.P. (“DPDF”). Deerfield Mgmt, L.P. (“Deerfield Mgmt”) is the general partner of Deerfield Partners. Deerfield Mgmt V, L.P. (“Deerfield Mgmt V”) is the general partner of DPDF. James E. Flynn is the sole member of the general partner of each of Deerfield Management, Deerfield Mgmt and Deerfield Mgmt V. Deerfield Management, Deerfield Mgmt and Mr. Flynn may be deemed to beneficially own the securities held by Deerfield Partners. Deerfield Management, Deerfield Mgmt V and Mr. Flynn may be deemed to beneficially own the securities held by DPDF. The address for each of Deerfield Partners, DPDF, Deerfield Management, Deerfield Mgmt, Deerfield Mgmt V and Mr. Flynn is 345 Park Avenue South, New York, New York 10010.
(3)Based solely on the information set forth in a Schedule 13D/A filed with the SEC on January 21, 2022 by Icahn School of Medicine at Mount Sinai (“ISMMS”). Consists of 88,355,473 shares of Class A common stock held by ISMMS. The shares are held by ISMMS, a New York Education Corporation. The responsibility and authority for the voting and investment decisions with respect to the shares held by ISMMS is vested in those persons who from time to time are the executive officers of ISMMS under the oversight and direction of its board of directors and its sole member, Mount Sinai Health System, Inc., a New York Not-for-Profit Corporation. The address for Icahn School of Medicine at Mount Sinai is One Gustave L. Levy Place, New York, New York 10029.
(4)Consists of (i) 168,351 shares of Class A common stock and (ii) 7,315,765 shares of Class A common stock subject to options that are exercisable within 60 days of February 22, 2022.
(5)Consists of (i) 250,618 shares of Class A common stock and (ii) 144,676 shares of Class A common stock subject to options that are exercisable within 60 days of February 22, 2022.
(6)Consists of (i) 30,893 shares of Class A common stock and (ii) 2,665,187 shares of Class A common stock subject to options that are exercisable within 60 days of February 22, 2022. Dr. Coffin left the Company in February 2022.
(7)Based solely on the information set forth in a Schedule 13D/A filed with the SEC on January 19, 2022 by CMLS Holdings LLC. Includes (i) 5,000,000 shares of Class A common stock held indirectly by Casdin Partners Master Fund L.P., and (ii) (x) 10,993,750 shares of Class A common stock and (y) 6,736,669 shares of Class A common stock underlying private placement warrants that are exercisable within 60 days of February 22, 2022 held indirectly by CMLS Holdings LLC (the “Former Sponsor”). The Board of Managers of the Former Sponsor is comprised of Mr. Eli Casdin and Mr. Keith Meister who share voting and investment discretion with respect to the Class A common stock held of record by CMLS Holdings LLC. Mr. Casdin is a member of the Board. C-LSH LLC and M-LSH LLC are the members of CMLS Holdings LLC, and Mr. Casdin and Mr. Meister are the managing members of C-LSH LLC and M-LSH LLC, respectively. As such, each of the foregoing may be deemed to have or share beneficial ownership of the Class A common stock held directly by CMLS Holdings LLC. The business address of the Former Sponsor is c/o Corvex Management, L.P., 667 Madison Avenue, New York, NY 10065.
(8)Consists of (i) 25,000 shares of Class A common stock and (ii) 166,666 shares of Class A common stock underlying private placement warrants that are exercisable within 60 days of February 22, 2022.
(9)Based solely on the information set forth in a Schedule 13D/A filed with the SEC on January 19, 2022 by CMLS Holdings LLC. Includes (i) 4,500,000 shares of Class A common stock held indirectly by Corvex Management, L.P. and (ii) (x) 10,993,750 shares of Class A common stock and (y) 6,736,669 shares of Class A common stock underlying private placement warrants that are exercisable within 60 days of February 22, 2022 held indirectly by the Former Sponsor. The Board of Managers of the Former Sponsor is comprised of Mr. Eli Casdin and Mr. Keith Meister who share voting and investment discretion with respect to the Class A common stock held of record by CMLS Holdings LLC. C-LSH LLC and M-LSH LLC are the members of CMLS Holdings LLC, and Mr. Casdin and Mr. Meister are the managing members of C-LSH LLC and M-LSH LLC, respectively. As such, each of the foregoing may be deemed to have or share beneficial ownership of the Class A common stock held directly by CMLS Holdings LLC. The business address of the Former Sponsor is c/o Corvex Management LP, 667 Madison Avenue, New York, NY 10065.
(10)Consists of 3,714 shares of Class A common stock subject to options that are exercisable within 60 days of February 22, 2022.
(11)Consists of 3,714 shares of Class A common stock subject to options that are exercisable within 60 days of February 22, 2022.
(12)Consists of 3,714 shares of Class A common stock subject to options that are exercisable within 60 days of February 22, 2022.
(13)Consists of 181,609 shares of Class A common stock subject to options that are exercisable within 60 days of February 22, 2022.
(14)Consists of (i) 25,000 shares of Class A common stock held by Nat Turner and (ii) 166,666 shares of Class A common stock underlying private placement warrants held by NTWJ Holdings, LLC (“NTWJ”), that are exercisable within 60 days of February 22, 2022. Mr. Turner is a managing member of NTWJ. The address for NTWJ is 139 Reade Street, New York, New York 10013.
(15)Consists of (i) 21,376,237 shares of Class A common stock held directly and indirectly by all current directors and current executive officers of the Company as a group, (ii) 18,014 shares of Class A common stock issuable pursuant to RSUs held directly by all current directors and executive officers of the forward purchase agreementsCompany as a group and that will be determinedvested within 60 days of February 22, 2022, (iii) 11,021,001 shares of Class A common stock subject to options held directly by all current directors and executive officers of the Company as a group and that are exercisable within 60 days of February 22, 2022, and (iv) 7,070,001 shares of Class A common stock underlying private placement warrants held directly and indirectly by all current directors and executive officers of the Company as a group and that are exercisable within 60 days of February 22, 2022.
258

DELINQUENT SECTION 16(A) REPORTS
Section 16(a) of the Exchange Act requires our directors, executive officers, and any persons who own more than 10% of our common stock, to file initial reports of ownership and reports of changes in ownership with the SEC. Based solely on our review of the forms filed with the SEC and written representations from the directors and executive officers, we believe that all Section 16(a) filing requirements were timely met in the fiscal year ended December 31, 2021, with the exception of: a Form 4 with respect to the issuance of restricted stock units (“RSUs”) and an associated sale to cover transaction in respect of tax withholding obligations in connection with the vesting and settlement of a portion of the RSUs, which was filed one day late on October 6, 2021 on behalf of Shawn Assad; a Form 4 with respect to a sale to cover transaction in respect of tax withholding obligations in connection with the vesting and settlement of RSUs, which was filed one day late on November 15, 2021 on behalf of Shawn Assad; Forms 4 with respect to the issuance of RSUs and associated sale to cover transactions in respect of tax withholding obligations in connection with the vesting and settlement of a portion of the RSUs, which were filed four days late on November 2, 2021 on behalf of each of Shawn Assad, Daniel Clark, James Coffin, Anthony Prentice, Isaac Ro, Kareem Saad, Eric Schadt, and Karen White; a Form 5 with respect to the exercise of shares underlying the option grant, which was filed eighty-three days late on February 7, 2022 on behalf of Daniel Clark; and a Form 3 that was filed 29 days late on August 30, 2021 for affiliates of Blackstone, which was due within 10 calendar days of July 22, 2021 following the closing of the business combination, by BTO Sema4 Holdings L.P., BTO Holdings Manager L.L.C., Blackstone Tactical Opportunities Associates L.L.C., BTOA L.L.C., Blackstone Family Tactical Opportunities Investment Partnership III ESC L.P., BTO Side-by-Side GP L.L.C., Blackstone Holdings III L.P., Blackstone Holdings III GP L.P., Blackstone Holdings III GP Management L.L.C., Blackstone Tactical Opportunities Fund – FD L.P., Blackstone Tactical Opportunities Associates III – NQ L.P., BTO DE GP – NQ L.L.C., Blackstone Holdings II L.P., Blackstone Aqua Master Sub-Fund, a sub-fund of Blackstone Global Master Fund ICAV, Blackstone Alternative Solutions L.L.C., Blackstone Holdings I L.P., Blackstone Holdings I/II GP L.L.C., Blackstone Inc., Blackstone Group Management L.L.C. and Stephen A. Schwarzman.
MARKET PRICE, TICKER SYMBOL AND DIVIDEND INFORMATION
The Company
Market Price and Ticker Symbol
The Company’s Class A common stock and warrants are currently listed on Nasdaq under the symbols “SMFR” and “SMFRW”, respectively.
On January 14, 2022, the trading date before the public announcement of the Acquisition, the Company’s Class A common stock and warrants closed at $4.04 and $0.75, respectively. On March 30, 2022, the trading date immediately prior to the date of this proxy statement, the Company’s Class A common stock and warrants closed at $3.12 and $0.69, respectively.
Holders
As of March 25, 2022 there were 76 holders of record of our Class A common stock and 5 holders of record of our warrants. The number of holders of record does not include a substantially greater number of “street name” holders or beneficial holders whose Class A common stock and warrants are held of record by banks, brokers and other financial institutions.
Dividend Policy
We have not paid any cash dividends on our Class A common stock to date and do not intend to pay cash dividends prior to the completion of the Acquisition. The payment of any cash dividends subsequent to the Acquisition will be within the discretion basedof the Company’s board of directors at such time. Following the Acquisition, we currently expect that the Company will retain future earnings to finance operations and grow its business, and we do not expect the Company to declare or pay cash dividends for the foreseeable future.
259

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Representatives of our independent registered public accounting firm, Ernst & Young LLP, will be present at the special meeting of the Company’s stockholders. The representatives will have the opportunity to make a statement if they so desire and they are expected to be available to respond to appropriate questions.
APPRAISAL RIGHTS
Appraisal rights are not available to holders of our shares of Class A common stock in connection with the Acquisition.
HOUSEHOLDING INFORMATION
Unless we have received contrary instructions, we may send a single copy of this proxy statement to any household at which two or more stockholders reside if we believe the stockholders are members of the same family. This process, known as “householding,” reduces the volume of duplicate information received at any one household and helps to reduce our expenses. However, if stockholders prefer to receive multiple sets of our disclosure documents at the same address this year or in future years, the stockholders should follow the instructions described below. Similarly, if an address is shared with another stockholder and together both of the stockholders would like to receive only a single set of our disclosure documents, the stockholders should follow these instructions:
•If the shares are registered in the name of the stockholder, the stockholder should contact us at our offices at Sema4 Holdings Corp., 333 Ludlow Street, North Tower, 8th Floor, Stamford, Connecticut 06902 or by telephone at (800) 298-6470, to inform us of his or her request; or
•If a bank, broker or other nominee holds the shares, the stockholder should contact the bank, broker or other nominee directly.
TRANSFER AGENT AND REGISTRAR
The transfer agent for our securities is Continental Stock Transfer & Trust Company.
SUBMISSION OF STOCKHOLDER PROPOSALS
Our Board is aware of no other matter that may be brought before the Special Meeting. Under Delaware law, only business that is specified in the notice of Special Meeting to stockholders may be transacted at the Special Meeting.
FUTURE STOCKHOLDER PROPOSALS
We anticipate that the 2023 annual meeting of stockholders will be held no later than June 2023. For any proposal to be considered for inclusion in the proxy statement and form of proxy for the Company’s 2023 annual meeting of stockholders, it must be submitted in writing and comply with the requirements of Rule 14a-8 of the Exchange Act. Stockholder proposals submitted pursuant to Rule 14a-8 under the Exchange Act and intended to be presented at our 2023 annual meeting of stockholders must be received by us not later than December 1, 2022 in order to be considered for inclusion in our proxy materials for that meeting. Such proposals must be received by the Company at its principal executive offices at 333 Ludlow Street, North Tower, 8th Floor, Stamford, Connecticut 06902.
In addition to any other applicable requirements, for business and for nominations to be properly brought before an annual meeting by a stockholder, the Company’s bylaws provide that the stockholder must give timely notice in proper written form to our Corporate Secretary at the Company’s principal executive offices at 333 Ludlow Street, North Tower, 8th Floor, Stamford, Connecticut 06902, and such business must otherwise be a proper matter for stockholder action. Such notice, to be timely, must be received not less than 75 days nor more than 105 days prior to the first anniversary of the preceding year’s annual meeting. As a result, any notice given by or on behalf of a stockholder pursuant to these provisions of the Company’s bylaws (and not pursuant to SEC Rule 14a-8) must be received by February 11, 2023 (but not before January 12, 2023). However, that in the event that the date of the
260

annual meeting is advanced by more than thirty (30) days, or delayed by more than sixty (60) days, a stockholder’s notice must be so received not earlier than the one hundred and fifth (105th) day prior to such annual meeting and not later than the close of business on the later of (A) the ninetieth (90th) day prior to such annual meeting and (B) the tenth (10th) day following the day on which notice of the date of such annual meeting was mailed or public disclosure of the date of such annual meeting was made, whichever first occurs. Nominations and proposals also must satisfy other requirements set forth in the bylaws. The chairman of our Board may refuse to acknowledge the introduction of any stockholder proposal not made in compliance with the foregoing procedures and requirements set forth in the bylaws.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC as required by the Exchange Act. You can read the Company’s SEC filings, including this proxy statement, over the Internet at the SEC’s website at http://www.sec.gov.
If you would like additional copies of this proxy statement or if you have questions about the transaction or the proposals to be presented at the Special Meeting, you should contact the Company at the following address and telephone number:
333 Ludlow Street
North Tower, 8th Floor
Stamford, Connecticut 06902
Telephone: (800) 298-6470
Attention: Investors@sema4.com
You may also obtain these documents by requesting them in writing or by telephone from the Company’s proxy solicitation agent at the following address and telephone number:
D.F. King & Co., Inc.
48 Wall Street, 22nd Floor
New York, NY 10005
Stockholders Call (toll-free): (800) 735-3591
Banks and Brokers Call: (212) 269-5550
Email: Sema4@dfking.com
If you are a stockholder of the Company and would like to request documents, please do so no later than five business days before the Special Meeting in order to receive them before the Special Meeting. If you request any documents from us, we will mail them to you by first class mail, or another equally prompt means.
All information contained in this proxy statement relating to the Company has been supplied by the Company, and all such information relating to GeneDx has been supplied by GeneDx. Information provided by either the Company or GeneDx does not constitute any representation, estimate or projection of any other party.
This document is a proxy statement of the Company for the Special Meeting. We have not authorized anyone to give any information or make any representation about the transaction, the Company or GeneDx that is different from, or in addition to, that contained in this proxy statement. Therefore, if anyone does give you information of this sort, you should not rely on it. The information contained in this proxy statement speaks only as of the date of this proxy statement, unless the information specifically indicates that another date applies.
261

SEMA4 HOLDINGS CORP.
INDEX TO FINANCIAL STATEMENTS
Page
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F-7
F-9
F-1

Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Sema4 Holdings Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Sema4 Holdings Corp. (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, redeemable convertible preferred stock and stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.
Restatement of 2020 and 2019 Financial Statements
As discussed in Note 2 to the consolidated financial statements, the 2020 and 2019 financial statements have been restated to correct a misstatement.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s need for additional capitalfinancial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to consummate a Business Combination. Under each forward purchase agreement,be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to approach Casdin and Corvex if it proposeshave, nor were we engaged to raise additional capital by issuing any equity, or securities convertible into, exchangeable or exercisableperform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for equity securities in connection with a Business Combination. The respective obligationsthe purpose of Casdin and Corvex to purchase forward purchase shares will, among other things, be conditionedexpressing an opinion on the Company completing a Business Combination with a company engaged in a business that is within the investment objectiveseffectiveness of the Clients purchasing forward purchase shares and onCompany’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the Business Combination (including the target assets or business, and the termsrisks of material misstatement of the Business Combination) being reasonably acceptablefinancial statements, whether due to such Clientserror or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as determined by Casdinwell as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ ERNST & YOUNG LLP
We have served as the Company’s auditor since 2018.
New York, New York
March 14, 2022
Auditor Firm Id:No. 42Auditor Name:Ernst & Young LLPAuditor Location:New York, New York, United States
F-2

Sema4 Holdings Corp.
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
December 31,
20212020
Assets
Current assets:
Cash and cash equivalents$400,569 $108,132 
Accounts receivable, net26,509 32,044 
Due from related parties54 289 
Inventory, net33,456 24,962 
Prepaid expenses19,154 4,557 
Other current assets3,802 4,124 
Total current assets483,544 174,108 
Property and equipment, net62,719 63,110 
Restricted cash900 10,828 
Other assets6,930 3,596 
Total assets$554,093 $251,642 
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable$44,693 $26,737 
Accrued expenses20,108 11,854 
Due to related parties2,623 1,425 
Current portion of capital lease obligations3,419 3,506 
Contract liabilities473 1,783 
Other current liabilities29,968 28,137 
Total current liabilities101,284 73,442 
Long-term debt, net of current portion11,000 18,971 
Stock-based compensation liabilities— 131,989 
Capital lease obligations, net of current portion18,427 20,778 
Other liabilities3,480 2,074 
Warrant liability21,555 — 
Earn-out contingent liability10,244 — 
Total liabilities165,990 247,254 
Commitments and contingencies (Note 9)
Redeemable convertible preferred stock:
Series A-1 redeemable convertible preferred stock, $0.00001 par value: 0 and 55,399,943 shares authorized, issued and outstanding at December 31, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $0 and $55,000 at December 31, 2021 and December 31, 2020, respectively— 51,811 
F-3

Series A-2 redeemable convertible preferred stock, $0.00001 par value: 0 and 64,718,940 shares authorized at December 31, 2021 and December 31, 2020, respectively; 0 and 49,700,364 shares authorized, issued and outstanding at December 31, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $0 and $49,342 at December 31, 2021 and December 31, 2020, respectively— 46,480 
Series B redeemable convertible preferred stock, $0.00001 par value: 0 and 41,937,960 shares authorized, issued and outstanding at December 31, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $0 and $204,302 at December 31, 2021and December 31, 2020, respectively— 118,824 
Series C redeemable convertible preferred stock, $0.00001 par value: 0 and 24,497,317 shares authorized at December 31, 2021 and December 31, 2020, respectively; 0 and 24,496,946 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively; aggregate liquidation preference of $0 and $121,397 at December 31, 2021 and December 31, 2020, respectively— 117,324 
Redeemable convertible preferred stock— 334,439 
Stockholders’ equity (deficit):
Preferred Stock, $0.0001 par value: 1,000,000 and 0 shares authorized at December 31, 2021 and December 31, 2020, respectively; 0 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively— — 
Class A common stock, $0.0001 par value: 380,000,000 shares authorized, 242,647,604 shares issued and outstanding at December 31, 2021 and $0.00001 par value: 309,584,750 shares authorized, 124 shares issued and outstanding at December 31, 202024 — 
Class B convertible common stock, $0.00001 par value: 0 and 18,575,085 shares authorized at December 31, 2021 and December 31, 2020, respectively; 0 and 130,557 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively— — 
Additional paid-in capital963,520 — 
Accumulated deficit(575,441)(330,051)
Total stockholders’ equity (deficit)388,103 (330,051)
Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)$554,093 $251,642 
The accompanying notes are an integral part of these consolidated financial statements.
F-4

Sema4 Holdings Corp.
Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except per share and share amounts)
Year Ended December 31,
202120202019
Revenue
(Restated)(1)
(Restated)(1)
Diagnostic test revenue (including related party revenue of $90, $285 and $0 for the years ended December 31, 2021, 2020, and 2019, respectively)$205,100 $175,351 $191,667 
Other revenue (including related party revenue of $232, $3 and $1,180 for the years ended December 31, 2021, 2020, and 2019, respectively)7,095 3,971 4,507 
Total revenue212,195 179,322 196,174 
Cost of services (including related party expenses of $3,975, $2,189 and $1,859 for the years ended December 31, 2021, 2020, and 2019, respectively)228,797 175,296 113,389 
Gross (loss) profit(16,602)4,026 82,785 
Research and development105,162 72,700 34,910 
Selling and marketing112,738 63,183 39,352 
General and administrative205,988 100,742 29,484 
Related party expenses5,659 9,395 9,452 
Loss from operations(446,149)(241,994)(30,413)
Other income (expense):
Change in fair market value of warrant and earn-out contingent liabilities198,401 — — 
Interest income79 506 988 
Interest expense(2,835)(2,474)(783)
Other income, net5,114 2,622 504 
Total other income, net200,759 654 709 
Loss before income taxes(245,390)(241,340)(29,704)
Income tax provision— — — 
Net loss and comprehensive loss$(245,390)$(241,340)$(29,704)
Redeemable convertible preferred stock dividends— — 3,039 
Net loss attributable to common stockholders$(245,390)$(241,340)$(32,743)
Weighted average shares outstanding, Class A common stock108,077,439 5,131 124 
Basic and diluted net loss per share, Class A common stock$(2.27)$(47,036)$(264,056)
___________________
(1)Certain expenses were previously misclassified as cost of services. These expenses are now reported as selling and marketing. This adjustment has no impact on total revenue, loss from operations, net loss and comprehensive loss or Corvex, as relevant, as investment advisors on behalfnet loss per share. Refer to Note 2, “Summary of such Clients. EachSignificant Accounting Policies” to our consolidated financial statements for further information.
The accompanying notes are an integral part of Casdinthese consolidated financial statements.
F-5

Sema4 Holdings Corp.
Consolidated Statement of Redeemable Convertible Preferred Stock and Corvex will have the rightStockholders’ Equity (Deficit)
(in thousands, except share amounts)
Redeemable Convertible Preferred StockClass A Common StockClass B Common Stock
SharesAmountSharesPer ValueSharesPer ValueAdditional paid-in capitalAccumulated deficitTotal stockholders’ equity (deficit)
Balance at December 31, 2018102,039,134 $64,355 124 $— — $— — $(55,968)$(55,968)
Net loss— — — — — — — (29,704)(29,704)
Preferred Series A dividend3,061,173 3,039 — — — — — (3,039)(3,039)
Capital contributions— 30,897 — — — — — — — 
Issuance of Preferred Series B, net of issuance costs41,937,960 $118,824 — — — — — — — 
Balance at December 31, 2019147,038,267 $217,115 124 $— — $— — $(88,711)$(88,711)
Net loss— — — — — — — (241,340)(241,340)
Preferred Series A dividend— — — — 130,557 — — — — 
Capital contributions24,496,946 117,324 — — — — — — — 
Balance at December 31, 2020171,535,213 $334,439 124 $— 130,557 $— $(330,051)$(330,051)
Net loss— — — — — — (245,390)(245,390)
 Stock option exercises— — 995,526 — 1,253,179 — 1,783 — 1,783 
 Conversion of Preferred Stock(171,535,213)(334,439)148,543,062 15 — — 104,517 — 104,532 
 Conversion of Class B Common Stock— — 1,309,320 — (1,383,736)— (744)— (744)
 Net equity infusion from the Business Combination— — 90,333,562 9 — — 510,742 — 510,751 
 Stock-based compensation modification reclassification— — — — — — 304,837 — 304,837 
 Stock-based compensation expense— — — — — — 42,385 — 42,385 
Vested restricted stock units converted to common stock— — 1,466,010 — — — — — — 
Balance at December 31, 2021— $— 242,647,604 $24 — $— $963,520 $(575,441)$388,103 
The accompanying notes are an integral part of these consolidated financial statements.
F-6

Sema4 Holdings Corp.
Consolidated Statements of Cash Flows
(in thousands)
Year Ended December 31,
202120202019
Operating activities
Net loss$(245,390)$(241,340)$(29,704)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense21,807 11,734 6,407 
Stock-based compensation expense219,421 120,231 5,482 
Change in fair value of warrant and contingent liabilities(198,401)— — 
Provision for excess and obsolete inventory2,129 — — 
Non-cash lease expense1,555 2,400 (176)
Loss on extinguishment of debt301 — — 
Amortization of debt issuance costs66 — — 
Change in operating assets and liabilities:
Accounts receivable5,535 (10,611)(4,567)
Inventory(10,624)(8,979)(7,970)
Prepaid expenses and other current assets(14,250)2,498 (2,526)
Due to/from related parties1,433 (442)(919)
Other assets(1,861)1,175 (4,395)
Accounts payable and accrued expenses25,916 14,805 12,847 
Contract liabilities(1,310)(559)2,342 
Other current liabilities3,239 15,960 4,451 
Net cash used in operating activities(190,434)(93,128)(18,728)
Investing activities
Purchases of property and equipment(9,400)(24,094)(11,923)
Development of internal-use software assets(11,386)(7,880)(3,533)
Net cash used in investing activities(20,786)(31,974)(15,456)
Financing activities
Proceeds from issuance of Series B redeemable convertible preferred stock, net of issuance costs— — 118,824 
Proceeds from issuance of Series C redeemable convertible preferred stock, net of issuance costs— 117,324 — 
Proceeds from PIPE issuance350,000 — — 
Proceeds from equity infusion from the merger, net of redemptions442,684 — — 
Legacy Sema4 Shareholder payout(230,665)— — 
Payment of transaction costs(51,760)— — 
Stock Appreciation Rights payout(3,795)— — 
Repayment of long-term debt(8,741)— — 
Exercise of stock options1,271 — — 
Capital contributions from ISMMS— — 30,897 
F-7

Proceeds from long-term debt— 15,928 — 
Long-term debt principal payments(1,000)(186)— 
Debt issuance costs(537)— — 
Capital lease principal payments(3,728)(4,010)(1,709)
Net cash provided by financing activities493,729 129,056 148,012 
Net increase in cash, cash equivalents and restricted cash282,509 3,954 113,828 
Cash, cash equivalents and restricted cash, at beginning of year118,960 115,006 1,178 
Cash, cash equivalents and restricted cash, at end of year401,469 118,960 115,006 
Supplemental disclosures of cash flow information
Cash paid for interest$2,751 $1,745 $305 
Cash paid for taxes$349 $— $— 
Purchases of property and equipment in accounts payable and accrued expenses$761 $447 $818 
Software development costs in accounts payable and accrued expenses$1,149 $1,473 $1,040 
Non-cash Series A redeemable convertible preferred stock dividends declared and paid$— $— $3,039 
Debt issuance costs incurred but unpaid$1,000 $— $— 
The accompanying notes are an integral part of these consolidated financial statements.
F-8

Sema4 Holdings Corp.
Notes to transfer a portionConsolidated Financial Statements
1. Organization and Description of its purchase obligation under the forward purchase agreement to third parties, subject to compliance with applicable securities laws. To the extent that the Company obtains alternative financing to fund the initial Business Combination and the Clients participate in such financing, the aggregate commitment under the forward purchase agreement will be reduced by the amount of such alternative financing.
Business Combination Agreement
On February 10, 2021, the Company announced that it executed an Agreement and Plan of Merger (the “Merger Agreement”) withSema4 Holdings Corp., formerly Mount Sinai Genomics Inc., a Delaware corporation d/b/(“Legacy Sema4”), as discussed further below, provides genomics-related diagnostic and information services and pursues genomics medical research. Legacy Sema4 utilizes an integrated portfolio of laboratory processes, software tools and informatics capabilities to process DNA-containing samples, analyze information about patient-specific genetic variation and generate test reports for clinicians and their patients. Legacy Sema4 provides a variety of genetic diagnostic tests and information with a focus on reproductive health, including pediatric, oncology and other conditions. In 2020, the Legacy Sema4 began to provide diagnostic testing services in response to the outbreak of the coronavirus (“Sema4”COVID-19”) pandemic. On December 15, 2021, it was announced that COVID-19 testing services would be discontinued by March 31, 2022. Legacy Sema4 primarily serves healthcare professionals who work with their patients and bills third-party payors across the United States, with a substantial portion of its diagnostic testing volume occurring in New York, California, Florida, Connecticut and New Jersey.
On July 22, 2021 (the “Closing Date”), CM Life Sciences, Inc. (“CMLS”) completed the acquisition of Legacy Sema4, pursuant to that certain Agreement and Plan of Merger (as amended, the “Merger Agreement”), dated February 9, 2021. On the Closing Date, S-IV Sub, Inc. (“Merger Sub”) merged with and into the Legacy Sema4, with Legacy Sema4 surviving the merger as a wholly-owned subsidiary of CMLS (the “Merger” and, together with the other parties thereto (the transactions contemplated by the Merger Agreement, including the Merger (as defined below), the “Business Combination”). Specifically,In connection with the Company entered into the Merger Agreement with Sema4 and S-IV Sub, Inc., a Delaware corporation incorporated on February 1, 2021 and a direct, wholly-owned subsidiaryconsummation of the Company (“Merger Sub”). Pursuant to the terms of the Merger Agreement, the Company will acquire Sema4 through the merger of Merger Sub with and into Sema4, with Sema4 surviving as a wholly-owned subsidiary of the Company (the “Merger”)
The Business Combination, is expectedCMLS changed its name to close in the second quarter“Sema4 Holdings Corp.” (“Sema4 Holdings”) and Legacy Sema4 changed its name to “Sema4 OpCo, Inc.” All equity securities of 2021, following the receipt of the required approval by the Company’s stockholders and the satisfaction of certain other customary closing conditions.
At the effective time of the Merger (the “Effective Time”), each share ofLegacy Sema4 class B common stock, par value $0.00001 per share (“Sema4 Class B Common Stock”) issued and outstanding as of immediately prior to the Effective Time will be converted into 1/100th of a share of Sema4 class A common stock, par value $0.00001 per share (“Sema4 Class A Common Stock”, together with Sema4 Class B Common Stock, “Sema4 Common Stock”) in accordance with Sema4’s organizational documents.
Immediately thereafter, each share of Sema4 Common Stock and Sema4’s series A-1 preferred stock, series A-2 preferred stock, series B preferred stock and series C preferred stock (collectively, “Sema4 Capital Stock”) issued and outstanding immediately prior to the Effective Time (other than Excluded Shares and Dissenting Shares (each as defined in the Merger Agreement)) will bewere converted into the right to receive athe applicable portion of the total closing merger consideration,consideration.
The Merger was accounted for as a reverse recapitalization with each Sema4 stockholder being entitled to receive the following:
(c)if such stockholder has made a cash election as set forth and in accordance with the terms of the Merger Agreement, a portion of the specified aggregate amount of cash consideration payable under the terms of the Merger Agreement (such aggregate amount not to exceed $343,000,000) and pursuant to the terms of such stockholder’s cash election; and
(d)a number of shares of common stock, par value $0.0001 per share, of the Company (the “Common Stock”) equal to the quotient of: (i) (A) the product of (x) such stockholder’s total shares of Sema4 Capital Stock multiplied by (y) the per share amount calculated in accordance with the Merger Agreement minus (B) the amount of cash payable to such stockholder pursuant to its cash election, if any, divided by (ii) $10.
In addition, at the Effective Time, each outstanding option to purchase Sema4 Capital Stock, each outstanding and unsettled restricted stock unit in respect of shares of Sema4 Capital Stock and each outstanding stock
F-76
CM LIFE SCIENCES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
appreciation right will be rolled over into options to purchase Common Stock, restricted stock units in respect of Common Stock and stock appreciation rights in respect of Common Stock, all as further set forth in and in accordance with the terms of the Merger Agreement.
In addition to the payment of cash, issuance of Common Stock and rollover of other Sema4 equity awards described above as of the Effective Time, in the event that the closing sale price of Common Stock exceeds certain price thresholds for 20 out of any 30 consecutive trading days during the period of time commencing upon the expiration of the lock-up period applicable to the Sponsor under the Letter Agreement, dated as of August 27, 2021, by and among the Company, Sponsor and each of the executive officers and directors of the Company and ending on the second anniversary of the closing of the Merger, an additional number of shares equal to an amount up to an aggregate of 11% of the shares of Common Stock that would have been issuable upon closing of the Merger to the stockholders of the Company if no cash elections were made and the closing cash payment amount under the Merger Agreement was $0.00 (the “Earn-Out Shares”) shall become issuable, in accordance with the terms of the Merger Agreement following the achievement of those certain price thresholds, to the stockholders ofLegacy Sema4 as of immediatelythe accounting acquirer and CMLS as the acquired company for accounting purposes. The shares and net loss per common share, prior to the closing ofMerger, have been retroactively restated as shares reflecting the Merger; provided that the board of directors of Sema4 (or a duly authorized committee thereof) may, prior to the closing of the Merger, allocate a portion of such Earn-Out Shares to be issued to service providers of Sema4 in the form of restricted stock units of the Company.
Sponsor Support Agreement
On February 10, 2021, the Company entered into a Sponsor Support Agreement with the Sponsor and Sema4, whereby Sponsor has agreed to, among other things, (a) vote at any meeting of the stockholders of the Company all of their shares of capital stock of the Company held of record or thereafter acquired in favor of the Stockholder Approvals (as definedexchange ratio established 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(1 share of the Business Combination, in each case, on the terms and subject to the conditions set forth in the Sponsor Support Agreement. On February 10, 2021, concurrently with the execution of the Merger Agreement, the Company entered into subscription agreements (collectively, the “Subscription Agreements”) with certain investors (collectively, the “PIPE Investors” which include certain existing equity holders of Sema4), pursuant to, and on the terms and subject to the conditions of which, the PIPE Investors have collectively subscribed for 35,000,000 shares of our common stock for an aggregate purchase price equal to $350,000,000 (the “PIPE Investment”). The PIPE Investment will be consummated immediately prior to the closing of theLegacy Sema4 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; and (c) November 9, 2021.
NOTE 7. STOCKHOLDERS’ EQUITY
Preferred Stock — The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. At March 31, 2021 and December 31, 2020, there were no shares of preferred stock issued or outstanding.
Class A Common Stock — The Company is authorized to issue 380,000,000 shares of Class A common stock with a par valuefor 123.8339 shares of $0.0001 per share. HoldersSema4 Holdings Class A common stock) (the “Conversion Ratio”).
Prior to the Merger, shares of CMLS Class A common stock, are entitled to one vote for each share. At March 31,CMLS’s public warrants, and CMLS’s public units were traded on the Nasdaq Capital Market under the ticker symbols “CMLF”, “CMFLW”, and “CMLFU” respectively. On July 23, 2021, and December 31, 2020, there were 14,800,205 and 8,953,013 shares of Sema4 Holdings Class A common stock issuedand Sema4 Holdings’ public warrants began trading on the Nasdaq Global Select Market (the “Nasdaq”) under the ticker symbols “SMFR” and “SMFRW,” respectively. See Note 3, “Business Combination,” for additional details.
Unless otherwise stated herein or outstanding, excluding 29,474,795unless the context otherwise requires, references in these notes to the “Company,” or “Sema4” refer to (i) Legacy Sema4 prior to the consummation of the Business Combination; and 35,321,987 shares of Class A common stock subject to possible redemption, respectively.
Class B Common Stock — The Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of $0.0001 per share. Holders of Class B common stock are entitled to one vote for each share. At March 31, 2021(ii) Sema4 Holdings and December 31, 2020, there were 11,068,750 shares of Class B common stock issued and outstanding.
F-77
CM LIFE SCIENCES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
The shares of Class B common stock will automatically convert into Class A common stock concurrently with or immediatelyits subsidiary following the consummation of the Business Combination,Combination.

2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Company’s historical financial information includes costs of certain services historically provided by Icahn School of Medicine at Mount Sinai (“ISMMS”) pursuant to the Transition Services Agreement ("TSA") and service.
Restatement – 2020 and 2019 annual statements of operations and comprehensive loss
The Company classifies expenses incurred that directly relate to the delivery of revenue as cost of services in its consolidated statements of operations and comprehensive loss.
F-9

As a result of expanded accounting resources, the Company identified the misclassification of certain expenses related to the genetic counseling department reported in cost of services that should have been reported in selling and marketing in the prior period financial statements. The Company quantified the amount and determined it necessary to restate its previously reported balances as follows (in thousands):
December 31, 2020December 31, 2019
As reportedMisclass-
ification		RestatedAs reportedMisclass-
ification		Restated
Total revenue179,322 — 179,322 196,174 — 196,174 
Cost of services184,648 (9,352)175,296 119,623 (6,234)113,389 
Gross (loss) profit(5,326)9,352 4,026 76,551 6,234 82,785 
Research and development72,700 — 72,700 34,910 — 34,910 
Selling and marketing53,831 9,352 63,183 33,118 6,234 39,352 
General and administrative100,742 — 100,742 29,484 — 29,484 
Related party expenses9,395 — 9,395 9,452 — 9,452 
Loss from operations(241,994)— (241,994)(30,413)— (30,413)
Total other income, net654 — 654 709 — 709 
Net loss and comprehensive loss(241,340)— (241,340)(29,704)— (29,704)
This misclassification did not have any impact to the Company's net loss or net loss per share as reported in the statements of operations and comprehensive loss in any interim or annual periods. Included in the misclassification amount is stock-based compensation expense of $1 million for 2020. There was no impact of misclassification for 2019 related to stock-based compensation expense.
Restatement – 2021 and 2020 interim financial statements (unaudited)
Additionally, the Company has identified quarterly out of period adjustments generally related to recognition of cost of services in the quarterly periods ended March 31, 2021, June 30, 2021 and September 30, 2021. The impact
F-10

of the misclassification and quarterly out of period adjustments identified on each of the three months periods in the year ended December 31, 2021 and 2020 are disclosed as follows (in thousands):
2021 interim statements of operations and comprehensive loss (in thousands)
First
Quarter		Second
Quarter
As
 reported		Misclass-ificationAdjustmentRestatedAs
 reported		Misclass-ificationAdjustmentRestated
Total revenue64,351 — (150)64,201 46,865 — 150 47,015 
Cost of services71,812 (3,837)549 68,524 49,631 (2,287)835 48,179 
Gross (loss) profit(7,461)3,837 (699)(4,323)(2,766)2,287 (685)(1,164)
Research and development53,131 — 2 53,133 11,954 — (2)11,952 
Selling and marketing31,569 3,837 (40)35,366 16,247 2,287 40 18,574 
General and administrative101,917 — 121 102,038 12,794 — 76 12,870 
Related party expenses1,797 — — 1,797 888 — — 888 
Loss from operations(195,875)— (782)(196,657)(44,649)— (799)(45,448)
Total other income, net4,882 — — 4,882 (713)— — (713)
Net (loss) income and comprehensive loss(190,993)— (782)(191,775)(45,362)— (799)(46,161)
Third
Quarter		Fourth
Quarter
As
 reported		Misclass-ificationAdjustmentRestatedAs
 reported
Total revenue43,178 — — 43,178 57,801 
Cost of services58,752 (6,031)(1,234)51,487 60,607 
Gross (loss) profit(15,574)6,031 1,234 (8,309)(2,806)
Research and development17,831 — — 17,831 22,246 
Selling and marketing22,121 6,031 — 28,152 30,646 
General and administrative33,230 — (105)33,125 57,955 
Related party expenses847 — — 847 2,127 
Loss from operations(89,603)— 1,339 (88,264)(115,780)
Total other income, net120,995 — — 120,995 75,595 
Net (loss) income and comprehensive loss31,392 — 1,339 32,731 (40,185)
2020 interim statements of operations and comprehensive loss (in thousands)
First
Quarter		Second
Quarter		Third
Quarter		Fourth
Quarter
As reportedMisclass-ificationRestatedAs reportedMisclass-ificationRestatedAs reportedMisclass-ificationRestatedAs reportedMisclass-ificationRestated
Total revenue46,655 — 46,655 30,102 30,102 38,608 38,608 63,957 63,957 
Cost of services39,239 (2,101)37,138 35,985 (1,480)34,505 36,530 (2,508)34,022 72,894 (3,263)69,631 
Gross (loss) profit7,416 2,101 9,517 (5,883)1,480 (4,403)2,078 2,508 4,586 (8,937)3,263 (5,674)
Research and development13,096 — 13,096 9,361 — 9,361 19,083 — 19,083 31,160 — 31,160 
Selling and marketing11,733 2,101 13,834 8,686 1,480 10,166 12,735 2,508 15,243 20,677 3,263 23,940 
General and administrative7,164 — 7,164 8,121 — 8,121 24,342 — 24,342 61,115 — 61,115 
Related party expenses2,195 — 2,195 2,111 — 2,111 1,933 — 1,933 3,156 — 3,156 
Loss from operations(26,772)— (26,772)(34,162)— (34,162)(56,015)— (56,015)(125,045)— (125,045)
Total other income, net(218)— (218)2,110 — 2,110 (600)— (600)(638)— (638)
Net loss and comprehensive loss(26,990)— (26,990)(32,052)— (32,052)(56,615)— (56,615)(125,683)— (125,683)
F-11

The adjustments also affected certain current asset and liability accounts previously reported in the condensed balance sheets as of March 31, 2021 and June 30, 2021 and condensed consolidated balance sheets as of September 30, 2021 as follows (in thousands):
March 31, 2021June 30, 2021September 30, 2021
As reportedAdjust-
ment		RestatedAs reportedAdjust-
ment		RestatedAs reportedAdjust-mentRestated
Assets
Current assets:
Cash and cash equivalents58,652 — 58,652 26,501 — 26,501 461,276 — 461,276 
Accounts receivable33,490 (150)33,340 24,568 — 24,568 21,257 — 21,257 
Due from related parties349 — 349 437 — 437 413 — 413 
Inventory32,969 — 32,969 29,128 — 29,128 31,174 — 31,174 
Prepaid expenses and other current assets15,070 (139)14,931 18,378 — 18,378 24,391 — 24,391 
Total current assets140,530 (289)140,241 99,012 — 99,012 538,511 — 538,511 
Property and equipment, net64,632 — 64,632 62,097 — 62,097 60,333 — 60,333 
Restricted cash10,828 — 10,828 10,828 — 10,828 900 — 900 
Other assets3,596 — 3,596 3,596 — 3,596 3,613 — 3,613 
Total assets219,586 (289)219,297 175,533 — 175,533 603,357 — 603,357 
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable and accrued expenses41,609 493 42,102 43,650 1,581 45,231 43,079 242 43,321 
Due to related parties797 — 797 1,278 — 1,278 1,425 — 1,425 
Current contract liabilities2,810 — 2,810 1,341 — 1,341 493 — 493 
Other current liabilities22,991 — 22,991 24,764 — 24,764 26,369 — 26,369 
Total current liabilities68,207 493 68,700 71,033 1,581 72,614 71,366 242 71,608 
Long-term debt, net of current portion18,502 — 18,502 18,028 — 18,028 11,000 — 11,000 
Stock-based compensation liabilities296,952 — 296,952 295,049 — 295,049 — — — 
Warrant liability— — — — — — 46,629 — 46,629 
Earn-out contingent liability— — — — — — 61,400 — 61,400 
Other liabilities22,530 — 22,530 21,907 — 21,907 21,699 — 21,699 
Total liabilities406,191 493 406,684 406,017 1,581 407,598 212,094 242 212,336 
Redeemable convertible preferred stock:
Series A-1 redeemable convertible preferred stock51,811 — 51,811 51,811 — 51,811 — — — 
Series A-2 redeemable convertible preferred stock46,480 — 46,480 46,480 — 46,480 — — — 
Series B redeemable convertible preferred stock118,824 — 118,824 118,824 — 118,824 — — — 
Series C redeemable convertible preferred stock117,324 — 117,324 117,324 — 117,324 — — — 
Redeemable convertible preferred stock334,439 — 334,439 334,439 — 334,439 — — — 
Stockholders’ equity (deficit):
Preferred Stock— — — — — — — — — 
Class A common stock— — — — — — 24 — 24 
Class B convertible common stock— — — — — — — — — 
Additional paid-in capital— — — 1,483 — 1,483 926,253 — 926,253 
Accumulated deficit(521,044)(782)(521,826)(566,406)(1,581)(567,987)(535,014)(242)(535,256)
Total stockholders’ (deficit) equity(521,044)(782)(521,826)(564,923)(1,581)(566,504)391,263 (242)391,021 
Total liabilities, redeemable convertible preferred stock and stockholders’ equity219,586 (289)219,297 175,533 — 175,533 603,357 — 603,357 
F-12

The adjustments did not have any impact on the net cash used in operating or investing activities, or net cash used or provided by financing activities previously reported in the condensed statements of cash flows. However, certain line items within the operating section of the condensed statements of cash flows would change by immaterial amounts.
Use of Estimates
The preparation of consolidated financial statements requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the consolidated financial statements as well as the reported amounts of revenues and expenses during the periods presented. The Company bases these estimates on current facts, historical and anticipated results, trends and various other assumptions that it believes are reasonable in the circumstances, including assumptions as to future events. These estimates include, but are not limited to, the transaction price for certain contracts with customers, the capitalization of software costs and the valuation of stock-based awards, inventory, earn-out contingent liability and earn-out RSUs. Actual results could differ materially from those estimates, judgments and assumptions.
Concentration of Credit Risk and Other Risks and Uncertainties
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable.
The Company’s cash and cash equivalents are deposited with high-quality financial institutions. The Company has balances in financial institutions that exceed federal depository insurance limits. Management believes these financial institutions are financially sound and, accordingly, that minimal credit risk exists. The Company has not experienced any losses on its deposits of cash and cash equivalents.
The Company assesses both the customer and, if applicable, the third party payor that reimburses the Company on the customer’s behalf when evaluating concentration of credit risk. Significant customers and payors are those that represent more than 10% of the Company’s total annual revenues or accounts receivable balance at each respective balance sheet date. The significant concentrations of accounts receivable as of December 31, 2021 and 2020 were primarily from large managed care insurance companies and a reference laboratory. There was no individual customer that accounted for 10% or more of revenue or accounts receivable for any of the years presented. The Company does not require collateral as a means to mitigate customer credit risk.
For each significant payor, revenue as a percentage of total revenues and accounts receivable as a percentage of total accounts receivable are as follows:
RevenueAccounts Receivable
Year Ended December 31,As of December 31,
20212020201920212020
Payor A22 %27 %36 %15 %10 %
Payor B13 %14 %***
Payor C****20 %
Payor D**24 %15 %*
__________________
*less than 10%
The Company is subject to a concentration of risk from a limited number of suppliers for certain reagents and laboratory supplies. One supplier accounted for approximately 7%, 11% and 15% for the years ended December 31, 2021, 2020 and 2019, respectively. Another supplier accounted for approximately 11%, 10% and 12% for the years ended December 31, 2021, 2020 and 2019, respectively. This risk is managed by maintaining a target quantity of surplus stock.
F-13

Impact of COVID-19
In March 2020, the World Health Organization declared the COVID-19 outbreak a global pandemic. The ongoing COVID-19 pandemic has had, and continues to have, an extensive impact on global health and economic conditions. Many jurisdictions, including those in which the Company has current operations, have implemented measures to combat the spread and resurgence of COVID-19, such as travel restrictions and shelter in place orders. In addition, the healthcare sector generally experienced a decline in discretionary care services at the onset of the pandemic.
Beginning in April 2020, the Company’s diagnostic test volumes decreased significantly as compared to the prior year as a result of the COVID-19 pandemic and the related limitations and priorities across the healthcare system. In response, beginning in May 2020, the Company entered into several service agreements with state governments and healthcare institutions to provide testing for the presence of COVID-19 variants. While test volumes have since improved, the Company continues to experience changes in the mix of tests due to the impact of the COVID-19 pandemic. COVID-19 could continue to have a material impact on the Company’s results of operations, cash flows and financial condition for the foreseeable future.
In March 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law which was a stimulus bill that, among other things, provided assistance to qualifying businesses and individuals and included funding for the healthcare system. During 2020, as part of the stimulus provided by the CARES Act, the Company received $5.4 million, comprised of $2.6 million received under the Provider Relief Fund (“PRF”) distribution and $2.8 million received under the Employee Retention Credit (“ERC”) distribution which was recorded in other current liabilities and reflected in this balance as of December 31, 2020 and December 31, 2021.
During 2021, the Company received an additional $5.6 million during 2021 under the PRF distribution, which was recognized in other income (expense), net in the consolidated statements of operations and comprehensive loss.
Additionally, under the CARES Act, the Company deferred payment of U.S. social security taxes in 2020 . As a result, $3.8 million of employer payroll tax payments were deferred as of December 31, 2020 with $1.9 million paid in December 2021 and the remaining $1.9 million payment will be made in December 2022. As of December 31, 2021, the remaining payable is recorded in other current liabilities.
On December 15, 2021, it was announced that COVID-19 testing services would be discontinued by March 31, 2022.
Cash, Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. Cash equivalents consist of amounts invested in money market funds. Carrying values of cash equivalents approximate fair value due to the short-term nature of these instruments.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on the balance sheets that sum to the total of the same amounts shown on the statements of cash flows (in thousands):
As of December 31,
20212020
Cash and cash equivalents$400,569 $108,132 
Restricted cash900 10,828 
Total$401,469 $118,960 
Restricted cash as of December 31, 2021 consists of money market deposit accounts that secure an irrevocable standby letter of credit that serve as collateral for security deposits for operating leases (see Note 9).
F-14

Accounts Receivable
Accounts receivable consists of amounts due from customers and third party payors for services performed and reflect the consideration to which the Company expects to be entitled in exchange for providing those services. Accounts receivable are estimated and recorded in the period the related revenue is recorded. During the years ended December 31, 2021 and 2020, the Company did not record provisions for doubtful accounts. The Company did not write off any accounts receivable balances for the year ended December 31, 2021 and $0.2 million of accounts receivable was written off for the year ended December 31, 2020.
Inventory, net
Inventory, net which primarily consists of testing supplies and reagents, is capitalized when purchased and expensed when used in performing services. Inventory is stated at the lower of cost or net realizable value. Cost is determined using actual costs on a one-for-one basis, subjectfirst-in, first-out basis. The Company periodically performs obsolescence assessments and writes off any inventory that is no longer usable. Any write-down of inventory to adjustment. Innet realizable value creates a new cost basis. The Company recorded a reserve for excess and obsolete inventory of $2.1 million as of December 31, 2021. There was no reserve recorded as of December 31, 2020.
Property and Equipment, net
Property and equipment, net are stated at cost less accumulated depreciation and amortization. Equipment includes assets under capital lease. Improvements are capitalized, while maintenance and repairs are expensed as incurred. When assets are retired or otherwise disposed of, the case that additional shares of Class A common stock,cost and accumulated depreciation and amortization are removed from the balance sheets and any resulting gain or equity-linked securities, are issued or deemed issued in connection with a Business Combination, the number of shares of Class A common stock issuable upon conversion of all Founder Shares will equal,loss is reflected in the aggregate, on an as-converted basis, 20%statements of operations and comprehensive loss in the period realized.
Capital leases and leasehold improvements are amortized straight-line over the shorter of the term of the lease or the estimated useful life. All other property and equipment assets are depreciated using the straight-line method over the estimated useful life of the asset, which ranges from three to five years.
The Company reviews the recoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset or asset group may not be recoverable. An impairment loss is recognized when the total numberestimated future undiscounted cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. Impairment, if any, is assessed using discounted cash flows or other appropriate measures of fair value. There were no long-lived asset impairment losses recorded for any periods presented.
Capitalized Software
We capitalize certain costs incurred related to the development of our software applications for internal use during the application development state. If a project constitutes an enhancement to existing software, we assess whether the enhancement creates additional functionality to the software, thus qualifying the work incurred for capitalization. Costs incurred prior to meeting these criteria together with costs incurred for training and maintenance are expensed as incurred. Once the project is available for general release, capitalization ceases and we estimate the useful life of the asset and begin amortization.
Capitalized software costs are amortized using the straight-line method over an estimated useful life of three years. Capitalized software is reviewed for impairment whenever events or changes in circumstances may indicate that the carrying amount of an asset may not be recoverable
Fair Value Measurements
Financial assets and liabilities are recorded at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company determines the fair value of its financial instruments based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. The following
F-15

hierarchy lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market:
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.
Level 2: Observable inputs such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active or model-derived valuations whose significant inputs are observable.
Level 3: Unobservable inputs that are significant to the measurement of fair value but are supported by little to no market data.
The Company’s financial assets and liabilities consist of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities, capital leases and long-term debt. The Company’s cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities approximate their fair value due to the relatively short-term nature of these accounts.
The Company’s capital leases are classified within level 1 of the fair value hierarchy because such agreements bear interest at rates for instruments with similar characteristics; accordingly, the carrying value of these liabilities approximate their fair values.
The Company’s loan from the Connecticut Department of Economic and Community Development is classified within level 2 of the fair value hierarchy. As of December 31, 2021, the long-term debt is recorded at its carrying value of $11.0 million in the consolidated balance sheet. The fair value is $10.2 million, which is estimated based on discounted cash flows using the yields of similar debt instruments of other companies with similar credit profiles.
Warrant Liability
As of the consummation of the Merger in July 2021, there were 21,995,000 warrants to purchase shares of Class A common stock outstanding, after such conversion (after giving effectincluding 14,758,333 public warrants and 7,236,667 private placement warrants. As of December 31, 2021, there were 21,994,972 warrants to any redemptions ofpurchase shares of Class A common stock byoutstanding, including 14,758,305 public stockholders), including the total number of shares of Class A common stock issued, or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of a Business Combination (including the forward purchase shares), excluding any shares of Class A common stock or equity-linked securities or rights exercisable for or convertible into shares of Class A common stock issued, or to be issued, to any seller in a Business Combinationwarrants and any Private Placement Warrants issued to the Sponsor, officers or directors upon conversion of Working Capital Loans, provided that such conversion of Founder Shares will never occur on a less than one-for-one basis.
Warrants— Public Warrants may only be exercised for a whole number of shares. No fractional7,236,667 private placement warrants will be issued upon separation of the Units and only whole warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination and (b) 12 months from the closing of the Initial Public Offering. The Public Warrants will expireoutstanding. Each warrant expires five years after the completion of a Business Combination or earlier upon redemption or liquidation.
The Company will not be obligatedliquidation, and entitles the holder to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue shares of Class A common stock upon exercise of a warrant unless thepurchase one share of Class A common stock issuable upon such warrantat an exercise has been registered, qualified or deemedprice of $11.50 per share, subject to be exempt under the securities laws of the state of residence of the registered holder of the warrants.adjustment, at any time commencing on September 4, 2021.
The Company has agreed that as soon as practicable, but in no event later than 15 business days, aftermay redeem the closing of a Business Combination, it will use its best efforts to file withoutstanding public warrants if the SEC a registration statement for the registration, under the Securities Act,price per share of the Class A common stock issuable upon exercise of the Public Warrants. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the Public Warrants in accordance with the provisions of the warrant agreement. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the sixtieth (60th) business day after the closing of a Business Combination, warrant holders may, until such timeequals or exceeds $18.00 as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if the Class A common stock are, at the time of any exercise of a Public Warrant, not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their Public Warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, and in the event the Company does not so elect, it will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Redemption of Warrants When the Price per Share of Class A Common Stock Equals or Exceeds $18.00 — Once the warrants become exercisable, the Company may redeem the outstanding Public Warrants:described below:
•in whole and not in part;
•at a price of $0.01 per Public Warrant;public warrant;
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CM LIFE SCIENCES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
•upon not less than 30 days’ prior written notice of redemption to each warrant holder; and
•if, and only if, the reported last saleclosing price of the Company’s Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like)adjusted) for any 20 trading days within a 30-trading day period ending on the thirdthree trading day prior to the date on which the Company sendsdays before sending the notice of redemption to the warrant holders.
If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
Redemption of Warrants When the Price per Share of Class A Common Stock Equals or Exceeds $10.00 — Once the warrants become exercisable, theThe Company may redeem the outstanding warrants:public warrants if the price per share of the common stock equals or exceeds $10.00 as described below:
•in whole and not in part;
•at a price of $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares of Class A common stock determined based on the redemption date and the “fairfair market value”value of the Company’s Class A common stock;
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•
upon a minimum of 30 days’ prior written notice of redemption;
•if, and only if, the last reported saleclosing price of the Company’s Class A common stock equals or exceeds $10.00 per share (as adjustedadjusted) for stock splits, stock dividends, reorganizations, recapitalizations andany 20 trading days within the like) on the30-trading day period ending three trading day prior to the date on whichdays before the Company sends the notice of redemption to the warrant holders; and
•if and only if, there is an effective registration statement covering the issuanceclosing price of the shares of Class A common stock issuable upon exercise offor any 20 trading days within a 30-trading day period ending three trading days before the warrants and a current prospectus relating thereto is available throughout the 30-day period after the writtenCompany sends notice of redemption is given.
In addition, if (x)to the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective issue price ofwarrant holders is less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors, and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or its affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of a Business Combination on the date of the completion of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s Class A common stock during the 20 trading day period starting on the trading day after the day on which the Company completes a Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, the $18.00 per share (as adjusted), the private placement warrants must also be concurrently called for redemption trigger price will be adjusted (toon the nearest cent) to be equal to 180% ofsame terms as the higher of the Market Value and the Newly Issued Price, and the $10.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.outstanding public warrants, as described above.
The Private Placement Warrantsprivate placement warrants were issued to CMLS Holdings, LLC, Mr. Munib Islam, Dr. Emily Leproust and Mr. Nat Turner, and are identical to the Public Warrantspublic warrants underlying the Unitsunits sold in the Initial Public Offering,initial public offering, except that (1) the Private Placement Warrantsprivate placement warrants and the Class A common stock issuable upon the exercise of the Private Placement Warrants willprivate placement warrants would not be transferable, assignable or saleablesalable until 30 days after the completion of a Business Combination, subject to certain limited exceptions, (2) the Private Placement Warrants will beprivate placement warrants are exercisable on a cashless basis, (3) the Private Placement Warrants will beprivate placement warrants are non-redeemable (except as described above, in “Redemptionupon a redemption of Warrants Whenwarrants when the Priceprice per Shareshare of Class A Common Stock Equalscommon stock equals or Exceeds $10.00”)exceeds $10.00) so long as they are held by the initial purchasers or their permitted transferees, and (4) the holders of the Private Placement Warrantsprivate placement warrants and the Class A common stock issuable upon the exercise of the Private Placement Warrants willprivate placement warrants have certain registration rights. If the Private Placement Warrantsprivate placement warrants are held by someone
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CM LIFE SCIENCES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2021
(Unaudited)
other than the initial purchasers or their permitted transferees, the Private Placement Warrantsprivate placement warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
NOTE 8. FAIR VALUE MEASUREMENTSpublic warrants.
The Company accounts for warrants as liability-classified instruments based on an assessment of the warrant terms and applicable authoritative guidance in accordance with ASC 480-Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815-Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether the warrants meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815. This assessment is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
Earn-out contingent liability
In connection with the Merger, all Legacy Sema4 stockholders and option holders at that time became entitled to a pro rata share of 19,021,576 earn-out shares and earn-out Restricted Stock Units (“RSUs”). Based on an assessment of the earn-out shares for the Legacy Sema4 stockholders, the Company considered ASC 480 and ASC 815 and accounted for the earn-out shares as a liability. The Company subsequently measures the fair value of the liability at each reporting period and reports the changes in fair value recorded as a component of other income (expense), net in the consolidated statements of operations and comprehensive loss.
The Company determined the fair value of the earn-out shares issued to the Legacy Sema4 stockholders as of December 31, 2021 was $10.2 million.
As for the earn-out RSUs for the Legacy Sema4 option holders, a total of 2.7 million RSUs were granted on December 9, 2021. The vesting of such arrangement is conditioned on the satisfaction of both a service requirement and on the satisfaction of a market-based requirement. The market-based requirement would be achieved if the Company’s financial assetsstock price is greater than or equal to $13 (Triggering Event I), $15 (Triggering Event II) and liabilities reflects management’s estimate$18 (Triggering Event III) during the applicable performance period, based on the volume-weighted average price for a period of amounts thatat least 20 days out of 30 consecutive trading days. Therefore, the Company would have receivedaccounts for this arrangement in connectionaccordance with ASC 718- Compensation — Stock Compensation (“ASC 718”) and stock-compensation expense is recognized over the salelonger of the assets or paidexpected achievement period for the market-based requirement and the service requirement. The Company recorded $0.2 million in connection withrelation to the transferearn-out RSU for the year ended December 31, 2021. In the event that any earn-out RSUs that are forfeited as a result of a failure to achieve the service requirement, the underlying shares will be reallocated on an annual basis to the Legacy Sema4 stockholders and to the Legacy Sema4 option holders who remain employed as of the liabilities in an orderly transaction between market participantsdate of such reallocation. The Company accounts for the re-allocations to Legacy Sema4 option holders as new grants.
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The estimated fair value of the earn-out is determined using a Monte Carlo valuation analysis.
Stock-based Compensation
The Company measures stock-based compensation at the measurementgrant date based on the fair value of the award and recognizes stock-based compensation expense over the requisite service period for each separate vesting portion of the award on a straight-line basis. Determining the fair value of stock option awards requires judgment, including estimating stock price volatility and expected option life. Restricted stock awards are valued based on the fair value of the stock on the grant date. In connection with measuringThe Company uses the Black-Scholes option-pricing model to estimate the fair value of its stock option awards.
The Company issues new shares upon share option exercise and vesting of a restricted share unit. Forfeitures of stock-based compensation are recognized as they occur.
Income Taxes
Income taxes are accounted for under the asset and liability method. The provision for income taxes represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Current and deferred income taxes are measured based on the tax laws that are enacted as of the balance sheet date of the relevant reporting period. Deferred tax assets and liabilities are recognized for the Company seeks to maximizeexpected future tax consequences of temporary differences between the usecarrying amounts of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities and their respective tax bases using tax rates in effect for the year in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations and comprehensive loss in the period when the change is enacted. A valuation allowance is established when it is more likely than not that some or all of the deferred tax assets will not be realized. Based on the Company’s historical operating losses, the Company has recorded a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized.
The Company recognizes the effect of a tax position when it is more likely than not, based on technical merits, that the position will be sustained upon examination by the appropriate taxing authorities. The amount of tax benefit recognized for an uncertain tax position is the largest amount of benefit with a greater than 50 percent likelihood of being realized. Unrecognized tax benefits are included within other liabilities if recognized and are charged to earnings in the period that such determination is made. The Company records interest and penalties related to tax uncertainties, if applicable, as a component of income tax expense.
Leases
The Company categorizes lease agreements at their inception as either operating or capital leases.
For operating leases, the Company recognizes related rent expense on a straight-line basis over the term of the applicable lease agreement. Certain lease agreements contain rent holidays, scheduled rent increases and lease incentives. Rent holidays and scheduled rent increases are included in the determination of rent expense to be recorded over the lease term. Any lease incentives reduce rent expense the Company records on a straight-line basis over the term of the lease. The Company recognizes rent expense beginning on the date it obtains the legal right to use and control the leased space.
For capital leases, the Company records a leased asset with a corresponding liability. Payments are recorded as reductions to the liability with an interest charge recorded based on the observable inputsremaining liability.
Revenue Recognition
The Company adopted Accounting Standards Codification (“ASC”) Topic 606 (“ASC 606”), Revenue from Contracts with Customers, on January 1, 2019 using the modified retrospective method applied to contracts which were not completed as of the adoption date. The Company recognizes revenue when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration which the Company expects to be entitled to in exchange for those goods or services. If any changes in customer credit issues are identified which were not assessed at the date of service, provisions for doubtful accounts are recognized and unobservable inputs usedrecorded.
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Diagnostic test revenue
The Company’s diagnostic test revenue contracts typically consist of a single performance obligation to deliver diagnostic testing services to the ordering facility or patient and therefore allocation of the contract transaction price is not applicable. Control over diagnostic testing services is generally transferred at a point in ordertime when the customer obtains control of the promised service which is upon delivery of the test.
Diagnostic test revenues consist primarily of services reimbursed by third-party insurance payors. Third-party insurance payors include managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges, and employers. In arrangements with third-party insurance payors, the transaction price is stated within the contract, however, the Company accepts payments from third-party payors that are less than the contractually stated price and is therefore variable consideration and the transaction price is estimated.
When determining the transaction price, the Company uses a portfolio approach as a practical expedient to value the assets and liabilities:
Level 1:Quoted prices in active marketsaccount for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing informationcategories of diagnostic test contracts as collective groups rather than on an ongoingindividual contract basis. The portfolio consists of major payor classes based on third-party payors. Based on historical collection trends and other analyses, the Company believes that revenue recognized by utilizing the portfolio approach approximates the revenue that would have been recognized if an individual contract approach was used.
Estimates of allowances for third-party insurance payors that impact the estimated transaction price are based upon the pricing and payment terms specified in the related contractual agreements. Contractual pricing and payment terms in third-party insurance agreements are generally based upon predetermined rates per diagnosis, per diem rates or discounted fee-for-service rates. In addition, for third-party payors in general, the estimated transaction price is impacted by factors such as historical collection experience, contractual provisions and insurance reimbursement policies, payor mix, and other relevant information for applicable payor portfolios.
For institutional clients, the customer is the institution. The Company determines the transaction price associated with services rendered in accordance with the contractual rates established with each customer.
Payment terms and conditions vary by contract and customer, however standard payment terms are generally less than 60 days from the invoice date. In instances where the timing of the Company’s revenue recognition differs from the timing of its invoicing, the Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised services to the customer will be one year or less.
Other revenue
The Company enters into both short-term and long-term project-based collaboration and service agreements with customers. Certain of these contracts include the transfer of a license to the Company’s intellectual property or participation by the Company on joint steering committees with the customer, which was considered to be immaterial in the context of the contract. The Company concludes that the goods and services transferred to our customers pursuant to these agreements generally comprise a single performance obligation on the basis that such goods and services are not distinct within the context of the contract. This is because the goods and services are highly interdependent and interrelated such that the Company would not be able to fulfill its underlying promise to our customers by transferring each good or service independently.
The consideration generally includes non-refundable upfront payments and variable payments based upon the achievement of certain milestones or fixed monthly payments during the contract term. Non-refundable upfront payments received prior to the Company performing performance obligation are recorded as a contract liability upon receipt. Milestone payments are included in the transaction price only when it is probable that doing so will not result in a significant reversal of cumulative revenue recognized when the uncertainty associated with the milestone is subsequently resolved. For longer-term contracts, the Company does not account for a significant financing component since a substantial amount of the consideration promised by the customer is variable and the amount or timing of that consideration varies on the basis of a future event that is not substantially within the control of either party.
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Level 2:Observable inputsThe Company satisfies its performance obligation generally over time if the customer simultaneously receives and consumes the benefits provided by the Company’s services as the Company performs those services. The Company recognizes revenue over time using an input measure based on costs incurred on the basis that this measure best reflects the pattern of transfer of control of the services to the customer. In some contracts, the Company subcontracts certain services to other than Level 1 inputs. Examplesparties for which the Company is ultimately responsible. Costs incurred for such subcontracted services are included in the Company’s measure of Level 2 inputs include quoted pricesprogress for satisfying its performance obligation and are recorded in active marketscost of services in the consolidated statements of operations and comprehensive loss. Changes in the total estimated costs to be incurred in measuring the Company’s progress toward satisfying its performance obligation may result in adjustments to cumulative revenue recognized at the time the change in estimate occurs.
Segment Information
The Company operates and manages its business as one reportable operating segment based on how the Chief Executive Officer, who is the Company’s chief operating decision maker (“CODM”), assesses performance and allocates resources across the business.
Emerging Growth Company
The Company is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012. As such, the Company is eligible for similar assets or liabilities and quoted prices for identical assets or liabilities in marketsexemptions from various reporting requirements applicable to other public companies that are not active.emerging growth companies, including reduced reporting and extended transition periods to comply with new or revised accounting standards for public business entities. The Company has elected to avail itself of this exemption and, therefore, will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
Recently Adopted Accounting Pronouncements
Effective January 1, 2021, the Company adopted Accounting Standards Update (“ASU”) 2018-18, Collaborative Arrangements: Clarifying the Interaction between Topic 808 and Topic 606 (“ASU 2018-18”), which clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC Topic 606 (“ASC 606”), Revenue from Contracts with Customers, when the counterparty is a customer. In addition, ASC Topic 808 (“ASC 808”), Collaborative Arrangements precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. Adoption of ASU 2018-18 did not have an impact on the Company’s consolidated financial statements as the Company is not currently a participant in any such collaborative arrangements.
The Company adopted ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”) for the annual period ended December 31, 2021. ASU 2018-15 aligns the accounting for costs incurred to implement a cloud computing arrangement that is a service arrangement with the guidance on capitalizing costs associated with developing or obtaining internal-use software. The Company adopted and applied this update prospectively to all implementation costs incurred during the year ended December 31, 2021, $2.3 million of implementation costs are capitalized and recorded in other current and non-current assets. The Company capitalizes certain costs incurred during the application development stage and all costs incurred during the preliminary project and post-implementation stages are expensed as incurred. Amortization begins when the cloud computing arrangement is ready for its intended use and is calculated on a straight-line basis over the fixed noncancellable periods plus renewal periods the Company deems it reasonably certain to exercise.
The Company adopted ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 updates specific areas of ASC 740, Income Taxes, to reduce complexity while maintaining or improving the usefulness of the information provided to users of financial statements. The Company has adopted the new standard in the fourth quarter of 2021 and upon adoption we did not have a material impact on our consolidated financial position and results of operations.
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Recently Issued Accounting Pronouncements Not Yet Adopted
In February 2016, the FASB issued ASU 2016-02, Leases (“Topic 842”), which requires lessees to recognize right-of-use assets and lease liabilities for most leases on their balance sheets. Expense recognition for lessees under Topic 842 is similar to current lease accounting and once adopted, it will require enhanced disclosures to help the financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The recognition, measurement and presentation of expenses and cash flows arising from a lease will primarily depend on its classification as a finance or operating lease. As an emerging growth company, the Company elected to adopt the Topic 842 under the extended transition period available to entities in the “all other” category, which would be effective for the annual period beginning on January 1, 2022 and all interim periods within the year ended December 31, 2023. Early adoption is permitted. The Company has selected an information system application to centralize the tracking and accounting for the Company’s leases and is currently in the process of completing implementation of that application. The Company plans to adopt the Topic 842 using the modified retrospective transition method and will not restate comparative periods. The modified retrospective transition method requires the cumulative effect, if any, of initially applying the guidance to be recognized as an adjustment to our accumulated deficit as of that adoption date. The Company plans to elect the package of practical expedients permitted under the transition guidance within the Topic 842, which allows the Company to carry forward prior conclusions about lease identification, classification and initial direct costs for leases entered into prior to adoption of the Topic 842. Additionally, the Company plans to not separate lease and non-lease components of the leases. For leases with a term of 12 months or less, the Company plans to elect the short-term lease exemption, which allows it to not recognize right-of-use assets or lease liabilities for qualifying leases existing at transition and new leases we may enter into in the future. The Company is currently in the process of quantifying the impact, but is currently unable to estimate the impact on the consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The new credit losses standard changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, contract assets recognized as a result of applying ASC 606, loans and certain other instruments, entities will be required to use a new forward looking “expected loss” model that generally will result in earlier recognition of credit losses than under today’s incurred loss model. As an emerging growth company, ASU 2016-13 is effective for annual periods beginning after December 15, 2022, with early adoption permitted. Application of the amendments is through a cumulative-effect adjustment to the opening retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company is currently evaluating the impact of the new guidance on its financial statements and related disclosures.
In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832), Disclosures by Business Entities About Government Assistance, which requires entities to provide disclosures on material government assistance transactions for annual reporting periods. The disclosures include information around the nature of the assistance, the related accounting policies used to account for government assistance, the effect of government assistance on the entity’s financial statements, and any significant terms and conditions of the agreements, including commitments and contingencies. The new standard is effective for the Company on January 1, 2022 and only impacts annual financial statement footnote disclosures. The Company does not expect the impact of adopting this new accounting guidance to have a material effect on its consolidated financial statements and related disclosures.

3. Business Combination
As discussed in Note 1, on July 22, 2021, the Company consummated the Business Combination and received net cash proceeds of $510.0 million.
Pursuant to the Business Combination, the following occurred:
•Holders of 10,188 shares of CMLS’s Class A common stock sold in its initial public offering (the “public shares”) exercised their right to have such shares redeemed for a full pro rata portion of the trust account
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holding the proceeds from CMLS’s initial public offering (the “IPO”), which was approximately $10.00 per share, or $101,880 in aggregate.
•Each share of CMLS’s Class B common stock was automatically converted into common stock of the Company.
Level 3:•Unobservable inputs based on our assessmentEach share of the assumptionsLegacy Sema4 Class B common stock was converted into 1/100th of a share of Legacy Sema4 Class A common stock and each share of Legacy Sema4 common stock and preferred stock was canceled and received a portion of the merger consideration, resulting in certain Legacy Sema4 stockholders receiving $230,665,220 of cash and the Legacy Sema4 stockholders receiving an aggregate of 178,336,298 shares of common stock of the Company.
•Pursuant to subscription agreements entered into on February 9, 2021, certain investors agreed to subscribe for an aggregate of 35,000,000 newly-issued shares of common stock at a purchase price of $10.00 per share for an aggregate purchase price of $350,000,000 (the “PIPE Investment”). Concurrently with the closing of the Business Combination, the Company consummated the PIPE Investment.
•After giving effect to the Merger, the redemption of public shares and the conversion of the CMLS Class B common stock as described above, and the consummation of the PIPE Investment, there were 240,190,402 shares of the Company’s common stock issued and outstanding.
The Company recorded $51.8 million of transaction costs which consist of direct, incremental legal, professional, accounting, and other third-party fees that market participants would usewere directly related to the execution of the Merger in pricingadditional paid-in capital. Upon consummation of the assetMerger, $9.0 million of the transaction costs relates to costs incurred by Legacy Sema4 and reclassed to offset against equity from prepaid expense and other current assets.

4. Revenue Recognition
The following table summarizes the Company’s disaggregated revenue (in thousands):
Year Ended December 31,
202120202019
Diagnostic test revenue:
Patients with third-party insurance$169,576 $138,153 $169,538 
Institutional customers31,717 35,200 20,888 
Self-pay patients3,807 1,998 1,241 
Total diagnostic test revenue205,100 175,351 191,667 
Other revenue7,095 3,971 4,507 
Total$212,195 $179,322 $196,174 
Reassessment of variable consideration
Subsequent changes to the estimate of the transaction price, determined on a portfolio basis when applicable, are generally recorded as adjustments to revenue in the period of the change. The Company updates variable consideration estimated quarterly. Our assessment performed at year-end did not result in material adjustments to the Company’s previously reported revenue or liability.accounts receivable amounts.
Remaining performance obligations
Due to the long-term nature of the collaboration service agreement, the Company’s obligations pursuant to such agreements represent partially unsatisfied performance obligations as of December 31, 2021. The revenues under existing service agreements with original expected durations of more than one year are estimated to be approximately $10.2 million. The Company expects to recognize the majority of this revenue over the next 3.3 years.
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At MarchContract assets and liabilities
Contract assets consist of the Company’s right to consideration that is conditional upon its future performance. Contract assets arise in collaboration service agreements for which revenue is recognized over time but the Company’s right to bill the customer is contingent upon the achievement of contractually-defined milestones.
Contract liabilities consist of customer payments in excess of revenues recognized. For collaboration service agreements, the Company assesses the performance obligations and recognizes contract liabilities as current or non-current based upon forecasted performance.
A reconciliation of the beginning and ending balances of contract assets and contract liabilities is shown in the table below (in thousands):
Contract
Assets		Contract Liabilities
December 31, 2020$2,028 $3,811 
Contract asset additions1,163 — 
Customer prepayments— 2,223 
Revenue recognized105 (2,265)
December 31, 2021$3,296 $3,769 
The increase in contract assets as of December 31, 2021 is primarily due to the execution of a service agreement with a customer during the year. The Company presents contracts assets and contract liabilities arising from this customer contract on a net basis on its balance sheets. As of December 31, 2021 and December 31, 2020, assets held$0.5 million and $1.8 million are recorded as current contract liabilities, respectively.
Costs to fulfill contracts
Costs associated with fulfilling the Company’s performance obligations pursuant to its collaboration service agreements include costs for services that are subcontracted to ISMMS. Amounts are generally prepaid and then expensed in line with the Trust Account were comprisedpattern of $442,774,870 and $442,763,951 in money market funds whichrevenue recognition. Prepayment of amounts prior to the costs being incurred are invested primarily in U.S. Treasury Securities, respectively. Duringrecognized on the three months ended Marchbalance sheets as current or non-current asset based upon forecasted performance.
As of December 31, 2021 and 2020, the yearCompany had outstanding deferred costs to fulfill contracts of $1.8 million and $3.0 million, respectively. At each period, all outstanding deferred costs were recorded as other current assets.
Amortization of deferred costs was $1.4 million, $0.9 million and $0.7 million for the years ended December 31, 2021, 2020 and 2019, respectively. The amortization of these costs is recorded in cost of services of the Company did not withdraw any interest income from the Trust Account.consolidated statements of operations and comprehensive loss.
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5. Fair Value Measurements
The following table presents information abouttables set forth the Company’s assetsfair value of financial instruments that arewere measured at fair value on a recurring basis at March 31, 2021(in thousands):
December 31, 2021
TotalLevel 1Level 2Level 3
Financial Assets:
Money market funds$385,370 $385,370 $— $— 
Total financial assets$385,370 $385,370 $— $— 
Financial Liabilities:
Public warrant liability$14,463 $14,463 $— $— 
Private warrant liability7,092 — 7,092 — 
Earn-out contingent liability10,244 — — 10,244 
Total financial liabilities$31,799 $14,463 $7,092 $10,244 
December 31, 2020
TotalLevel 1Level 2Level 3
Financial Assets:
Money market funds$92,940 $92,940 $— $— 
Total financial assets$92,940 $92,940 $— $— 
Of the $400.6 million cash and December 31, 2020cash equivalents presented on the consolidated balance sheets, $385.4 million is in money market funds and indicatesis classified within Level 1 of the fair value hierarchy as the fair value is based on quoted prices in active markets.
The Company’s outstanding warrants include publicly-traded warrants (the “Public Warrants”) which were originally issued in the IPO and warrants sold in a private placement to CMLS Holdings LLC (the “Private Warrants”). The Company evaluated its warrants under ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, and concluded that they do not meet the criteria to be classified in stockholders’ equity. Since the Public Warrants and Private Warrants meet the definition of the valuation inputsa derivative under ASC 815, the Company utilized to determine such fair value:
DescriptionLevelMarch 31,
2021		December 31,
2020
Assets:
Investments held in Trust Account – U.S. Treasury Securities Money Market Fund1$442,774,870 $442,763,951 
The following table presents information aboutrecorded these warrants as non-current liabilities on the Company’s liabilities that are measuredbalance sheet at fair value upon the closing of the Business Combination, with subsequent changes in their respective fair values recognized in other income (expense), net on a recurring basisthe consolidated statements of operations and comprehensive loss at Marcheach reporting date. As of December 31, 2021, and December 31, 2020 and indicatesthe Public Warrants are classified within Level 1 of the fair value hierarchy as they are traded in active markets. The Private Warrants are classified within Level 2 of the valuation inputsfair value hierarchy as management determined the Company utilized to determine such fair value:
DescriptionLevelMarch 31,
2021		December 31,
2020
Liabilities:
Warrant Liability – Public Warrants1$76,448,164 $40,290,250 
Warrant Liability – Private Placement Warrants3$50,511,936 $30,032,168 
value of each Private Warrant is the same as that of a Public Warrant because the terms are substantially the same.
The Warrants werecontingent obligation to issue earn-out shares for Legacy Sema4 stockholders is accounted for as liabilities in accordance with ASC 815-40a liability and are presented within warrant liabilities on the accompanying balance sheets.required remeasurement at each reporting date. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within the change inestimated fair value of warrant liabilitiesthe total earn-out shares as of December 31, 2021 is determined based on a Monte Carlo simulation valuation model. The fair value of the earn-out contingent liability is sensitive to expected volatility estimated based on selected guideline public companies and Company’s common stock price which is sensitive to changes in the statementforecasts of operations. There were no transfers between levels forearnings and/or the three months ended March 31, 2021.relevant
F-80F-24
CM LIFE SCIENCES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCHoperating metrics. The key assumptions utilized in determining the valuation as of December 31, 2021 and Closing Date were the following:
(Unaudited)
December 31, 2021Closing Date
Stock price$4.46$11.60
Expected volatility62.5%70.0%
Expected term (in years)1.62.0
Risk-free interest rate0.58%0.20%
Level 3 financial liabilities consist of the Private Placement WarrantThe earn-out contingent liability for which there is no current market for these securities such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized withinas Level 3 of the fair value hierarchy are analyzed each period based on changesas the Company utilizes unobservable inputs in estimates or assumptionsestimating volatility rate. Initial fair value determined and recorded as appropriate.
The fair valueat the Closing Date was $143.1 million and a gain of the Private Placement Warrants$132.9 million was estimated at March 31, 2021 and December 31, 2020 to be $2.29 and $4.24, respectively, using the modified Black-Scholes option pricing model and the following assumptions:
March 31,
2021		December 31,
2020
Stock Price$14.89 $11.04 
Expected volatility42.5 %42.8 %
Risk-free interest rate0.96 %0.42 %
Remaining term5.17 5.42 
Exercise Price$11.50 $11.50 
The following table presents the changesrecorded in the change in fair market value of warrant liabilities:
Private PlacementPublicWarrant Liabilities
Fair value as of January 1, 2021$30,032,168 $40,290,250 $70,322,418 
Change in valuation inputs or other assumptions20,479,768 36,157,914 56,637,682 
Fair value as of March 31, 2021$50,511,936 $76,448,164 $126,960,100 
There were no transfers in or out of Level 3 from other levelsand earn-out contingent liability in the fair value hierarchy during the three months ended Marchconsolidated statements of operations and comprehensive loss based on re-measurement performed as of December 31, 2021.

NOTE 9. SUBSEQUENT EVENTS
The Company evaluated subsequent events6. Property and transactions that occurred afterEquipment
Property and equipment consisted of the balance sheet date up tofollowing (in thousands):
As of December 31,
20212020
Laboratory equipment$28,552 $22,818 
Equipment under capital leases21,384 20,743 
Leasehold improvements21,905 16,736 
Capitalized software25,693 14,631 
Building under capital lease6,276 6,276 
Construction in-progress940 4,673 
Computer equipment6,634 4,118 
Furniture, fixtures and other equipment3,241 3,214 
Total property and equipment114,625 93,209 
Less: accumulated depreciation and amortization(51,906)(30,099)
Property and equipment, net$62,719 $63,110 
For the date thatyears ended December 31, 2021, 2020 and 2019, depreciation and amortization expense was $21.8 million, $11.7 million and $6.4 million, respectively, which included software amortization expense of $5.6 million, $3.0 million and $1.2 million for the financialyears ended December 31, 2021, 2020 and 2019, respectively. Depreciation and amortization expense is included within the statements were issued. Based upon this review, other thanof operations and comprehensive loss as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.follows (in thousands):
Year Ended December 31,
202120202019
Cost of services$14,094 $9,055 $4,752 
Research and development5,819 1,040 821 
Selling and marketing3 — — 
General and administrative1,891 1,639 834 
Total depreciation and amortization expenses$21,807 $11,734 $6,407 
F-81F-25

7. Related Party Transactions
On June 1, 2017, the Company signed a contribution and funding agreement and other agreements with ISMMS, whereby ISMMS contributed certain assets and liabilities related to the Company’s operations, provided certain services to the Company, and also committed to funding the Company up to $55.0 million in future capital contributions in exchange for equity in the Company, of which $55.0 million was drawn as of December 31, 2019. Following the transaction, the Company commenced operations and began providing the services and performing research.
For years ended December 31, 2021, 2020 and 2019, the Company incurred certain costs with ISMMS. Expenses recognized under the TSA totaled $1.4 million, $7.2 million and $7.8 million for the years ended December 31, 2021, 2020 and 2019, respectively, and are presented within related party expenses in the consolidated statements of operations and comprehensive loss. The Company had TSA payables due to ISMMS of $0 and $0.6 million as of December 31, 2021 and 2020, respectively. These amounts are included within due to related parties on the Company’s consolidated balance sheets.
Expenses recognized pursuant to other service arrangements with ISMMS totaled $7.0 million, $4.4 million and $3.5 million for the years ended December 31, 2021, 2020 and 2019, respectively. These amounts are included in either cost of services or related party expenses on the consolidated statements of operations and comprehensive loss depending on the particular activity to which the costs relate. Payables due to ISMMS for the other service arrangements were $2.6 million and $0.8 million as of December 30, 2021 and 2020, respectively. These amounts are included within due to related parties on the Company’s consolidated balance sheets.
Additionally, the Company incurred $1.3 million in purchases of diagnostic testing kits and materials for the year ended December 31, 2021 from an affiliate of a member of the Board of Directors who has served in the role since July 2021. The prices paid represent market rates. Payables due were $0.1 million as of December 31, 2021.
Total related party costs are included within cost of services and related party expenses in the consolidated statements of operations and comprehensive loss as follows (in thousands):
Year Ended December 31,
202120202019
Costs of services$3,975 $2,189 $1,859 
Related party expenses5,659 9,395 9,452 
Total related party costs$9,634 $11,584 $11,311 

CM LIFE SCIENCES,8. Long-Term Debt
Loan and Security Agreement (the “SVB Agreement”)
On November 15, 2021, the Company and Sema4 OpCo (together, the “Borrower”) entered into the SVB Agreement with Silicon Valley Bank (“SVB”). The SVB Agreement provides for a Revolver up to an aggregate principal amount of $125.0 million, including a sublimit of $20.0 million for Letters of Credit (as such terms are defined in the SVB Agreement). The outstanding principal amount of any Advance (as such term is defined in the SVB Agreement) will bear interest at a floating rate per annum equal to the greater of (1) 4.00% and (2) the Prime Rate plus the Prime Rate Margin. The Revolver will mature on November 15, 2024.
The obligations under the SVB Agreement are secured by a first priority perfected security interest in substantially all of the Company’s assets except for (i) Governmental Collection Accounts (as defined in the SVB Agreement), (ii) more than 65% of the presently existing and thereafter arising issued and outstanding shares of capital stock owned by Borrowers in a Foreign Subsidiary (as such term is defined in the SVB Agreement) and (iii) intellectual property pursuant to the terms of the SVB Agreement.
The SVB Agreement contains affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, and dividends and other distributions.
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The SVB Agreement requires the Borrower to comply with certain financial covenants if Liquidity (as such term is defined in the SVB Agreement) falls below $135.0 million. These financial covenants include (i) a minimum Adjusted Quick Ratio (as such term is defined in the SVB Agreement) and (ii) the achievement of certain minimum revenue targets. On a monthly basis, the Borrowers would be required to maintain a minimum Adjusted Quick Ratio of greater than or equal to 1.25 to 1.0. The Borrower must also maintain certain trailing six-month minimum revenue targets through maturity if outstanding borrowings under the Revolver exceed $50.0 million.
The SVB Agreement also includes customary events of default, including failure to pay principal, interest or certain other amounts when due, material inaccuracy of representations and warranties, violation of covenants, certain bankruptcy and insolvency events, certain undischarged judgments, material invalidity of guarantees or grant of security interest, material adverse change, and involuntary delisting from the Nasdaq Stock Market, in certain cases subject to certain thresholds and grace periods. If one or more events of default occurs and continues beyond any applicable cure period, SVB may, without notice or demand to the Borrower, terminate its commitment to make further loans and declare all of the obligations of the Borrowers under the SVB Agreement to be immediately due and payable. The Company is in compliance with all covenants as of December 31, 2021.
No amounts have been drawn under the SVB Agreement as of December 31, 2021.
2016 Funding Commitment
In April 2016, ISMMS received a $5.0 million loan funding commitment (the “DECD Loan Agreement”) from the Connecticut Department of Economic and Community Development (“DECD”) to support the Genetic Sequencing Laboratory Project in Branford, Connecticut (the “Project”). The DECD made a commitment to offer a total of $9.5 million in loan funding for leasehold improvements, construction, equipment, research and development, and administrative expenses over a period of ten years at an annual interest rate of 2.0% (collectively, “Phase 1” and “Phase 2” of funding for the Project). On June 1, 2017, as part of the Spin-out, ISMMS assigned both the agreement underlying the Project and the DECD Loan Agreement to Sema4 OpCo, Inc. (“OpCo”). ISMMS guaranteed and continues to guarantee’s obligation to repay the DECD. Debt due to the DECD is collateralized by providing a security interest in certain machinery and equipment the Company acquired from ISMMS, as defined in a separate security agreement (the “DECD Security Agreement”). The DECD Security Agreement provides a security for the payment and performance of meeting the Company’s obligations to the DECD until the obligations have been fully satisfied.
In June 2018, the Company amended the existing $9.5 million DECD Loan Agreement (the “Amended DECD Loan Agreement”) with the DECD by increasing the total loan commitment to $15.5 million at the same fixed annual interest rate of 2.0% for a term of 10 years from the date the new funds are disbursed (“Phase 3” of funding for the Project). The terms of the Amended DECD Loan Agreement require the Company to make interest-only payments through July 2023 and principal and interest payments commencing in August 2023 through July 2028.
In addition, under the terms of the Amended DECD Loan Agreement, the DECD may grant partial principal loan forgiveness of up to $12.3 million in the aggregate. Such forgiveness is contingent upon the Company achieving job creation and retention milestones, specifically:
–$4.5 million of Phase 1 funding ($5.0 million) was forgiven in September 2018 based on creating and maintaining 35 new full-time positions in Connecticut, with a combined annual average compensation of $70,000 for a period of 24 continuous months by December 31, 2017;
–$2.8 million of Phase 2 funding ($4.5 million) will be forgiven based on creating 228 new full-time positions in Connecticut, with a combined annual average compensation of $83,000, and maintaining an average of 269 full-time positions for a period of 24 continuous months by December 31, 2021;
–$3.0 million of Phase 3 funding ($6.0 million) will be forgiven based on creating an additional 181 full-time positions in Connecticut, with a combined annual average compensation of $83,000, and maintaining an average of 450 full-time positions for a period of 24 continuous months by December 31, 2022; and
F-27

–An additional $2.0 million of funding will be forgiven based on creating an additional 103 full-time positions in Connecticut, with a combined annual average compensation of $83,000, and maintaining an average of 553 full-time positions for a period of 24 continuous months by December 31, 2023.
The outstanding loan balance from the DECD was $11.0 million at December 31, 2021 and 2020.
As of December 31, 2021, long-term debt matures as follows (in thousands):
2022$— 
2023875 
20242,131 
20252,174 
20262,218 
Thereafter3,602 
Total maturities of long-term debt11,000 
Less: Current portion of long-term debt— 
Total long-term debt, net of current portion$11,000 
Debt due to the DECD is collateralized by providing a security interest in certain machinery and equipment the Company acquired from ISMMS, as defined in a separate security agreement. The DECD Security Agreement provides a security for the payment and performance of meeting the Company’s obligations to the DECD until the obligations have been fully satisfied.
2020 Master Loan Agreement
In August 2020, the Company entered into a loan and security agreement with a bank (the “Master Loan Agreement”), in which the Company received a loan of $6.3 million and deposited the proceeds into a deposit account held by the bank. The Company was required to make sixty consecutive monthly payments of principal and interest at a fixed monthly amount of $0.1 million beginning in November 2020. Interest payments were fixed at an annual interest rate of 4.75%.
The Company recorded the $6.3 million proceeds as restricted cash on the consolidated balance sheets at December 31, 2020. The outstanding loan balance was $6.1 million at December 31, 2020. In July 2021, the Company terminated the Master Loan Agreement by paying off the full amount, including $5.4 million principal and interest and $0.1 million in early payment penalties assessed pursuant to the terms of the agreement which is included in other income, net in the consolidated statements of operations and comprehensive loss.
2020 Master Lease Agreement
In December 2020, the Company entered into a lease agreement with a lender whereby the Company agreed to sell certain equipment and immediately lease back the equipment, resulting in proceeds of $3.6 million. Per the terms of the agreement, a financial institution issued an irrevocable standby letter of credit to the lender for $3.6 million. The Company was required to make sixty consecutive monthly payments of principal and interest at a fixed monthly amount of $0.1 million beginning in February 2021. Interest payments were fixed at an annual interest rate of 3.54%.
The Company was required to maintain an aggregate amount on deposit equal to at least 105% of the value of any outstanding letters of credit issued by the financial institution on the Company’s behalf. The letter of credit was required to be in place until all obligations had been paid in full. Further, the Company was required to furnish annual audited financial statements and other financial information to the lender on a regular basis. The Company was in compliance with the covenants as of December 31, 2020.
The Company recorded the $3.6 million proceeds as restricted cash on the consolidated balance sheets at December 31, 2020. The outstanding loan balance was $3.6 million at December 31, 2020. In July 2021, the
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Company terminated the Master Lease Agreement by paying off the full amount, including $3.3 million principal and interest and early payment penalties of $0.2 million assessed pursuant to the terms of the agreement which is included in other income, net in the consolidated statements of operations and comprehensive loss.

9. Commitments and Contingencies
Operating Leases
The Company's operating lease arrangements are principally for office space and laboratory facilities. The Company’s headquarter lease was initially entered into via sub-lease agreements with ISMMS and a third party and they will expire in 2034. The agreements include escalating rent and rent-free period provisions. The third-party sub-lease agreement required the Company to deliver a letter of credit from a financial institution equal to the amount of the security deposit on the office space. Accordingly, in February 2020, a financial institution issued an irrevocable standby letter of credit to the third party for $0.9 million, which is recorded as restricted cash on the consolidated balance sheets as of December 31, 2021.
In April 2019, the Company entered into a sublease agreement to rent a building to be used for office and laboratory facility (the “Stamford Lease”) for a base term of 325 months, expiring in October 2046. The Company has the option to renew the lease at the end of the initial base term for either one period of 10 years, or two periods of 5 years. There is also an early termination option in which the Company may cancel the lease after the 196th month with cancellation fees. At inception of the Stamford Lease, the value of the land was determined to be more than 25% of the total value and therefore the building is accounted for as a capital lease and the land as an operating lease.
In January 2020, the Company entered into a lease agreement which expanded our existing laboratory facility in Branford, Connecticut. The lease commenced in February 2020 with a 10 year term. The lease includes escalating rent fees over the lease term.
Future minimum payments under non-cancelable operating leases as of December 31, 2021 are as follows (in thousands):
2022$4,383 
20234,474 
20244,562 
20254,684 
20264,775 
Thereafter45,463 
Total operating lease obligations$68,341 
Rent expense is recognized on a straight-line basis over the lease term and the Company recorded rent expense related to non-cancelable operating leases of $5.7 million, $5.3 million and $0.8 million for the years ended December 31, 2021, 2020 and 2019, respectively. Rent expense related to month-to-month operating leases was $1.2 million, $3.2 million, and $2.8 million for the years ended December 31, 2021, 2020 and 2019, respectively.
Capital Leases
The Company entered into various capital lease agreements to obtain laboratory equipment which contain bargain purchase commitments at the end of the lease term. The terms of the capital leases range from 3 to 5 years with interest rates ranging from 3.7% to 12.0% The leases are secured by the underlying equipment. Interest rate for the Stamford Lease is 13.1%.
Property and equipment under capital leases was $27.7 million and $27.0 million as of December 31, 2021 and 2020, respectively. Accumulated amortization on capital lease assets was $13.6 million and $9.7 million at December 31, 2021 and 2020, respectively.
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For all capital leases, the portion of the future payments designated as principal repayment is recorded as a capital lease obligation on the Company’s consolidated balance sheets in accordance with repayment terms. Future payments under capital leases at December 31, 2021, are as follows (in thousands):
2022$4,890 
20233,584 
20242,763 
20252,451 
20262,003 
Thereafter49,883 
Total capital lease obligations65,574 
Less: amounts representing interest(43,728)
Present value of net minimum capital lease payments21,846 
Less: current portion(3,419)
Capital lease obligations, net of current portion$18,427 
Assets acquired under capital leases was $0.6 million, $7.5 million and $9.8 million for the years ended December 31, 2021, 2020 and 2019, respectively. Interest expense related to capital leases was $2.3 million, $2.2 million and $0.7 million for the years ended December 31, 2021, 2020 and 2019, respectively.
Purchase Obligations
The following sets forth purchase obligations as of December 31, 2021 with a remaining term of at least one year (in thousands):
Contractual Obligations202220232024Total Commitments
Materials, services and reagents provider$11,184 $663 $— $11,847 
Software provider3,084 3,092 1,076 $7,252 
Research and development1,910 1,010 64 $2,984 
Equipment provider469 400 139 $1,008 
$16,647 $5,165 $1,279 $23,091 
The Company enters into contracts with suppliers to purchase materials needed for diagnostic testing. These contracts generally do not require multiple-year purchase commitments.
Contingencies
The Company is a party to various actions and claims arising in the normal course of business. The Company does not believe that the outcome of these matters will have a material effect on the Company’s consolidated financial position, results of operations or cash flows. However, no assurance can be given that the final outcome of such proceedings will not materially impact the Company’s financial condition or results of operations.
The Company was not a party to any material legal proceedings as of December 31, 2021, nor is it a party to any legal proceedings as of the date of issuance of these consolidated financial statements.
Defined Contribution Plan
Substantially all of the Company’s employees in the U.S. are eligible to participate in the defined contribution plan the Company sponsors. The defined contribution plan allows employees to contribute a portion of their compensation in accordance with specified guidelines. The Company, at its discretion, makes matching contributions. The Company contributed $8 million, $5.5 million and $4 million for the years ended December 31, 2021, 2020 and 2019, respectively.
F-30

10. Stock-Based Compensation
Stock Incentive Plans
The Company’s 2017 Equity Incentive Plan (the “2017 Plan”), as amended in February 2018, allowed the grant of options, restricted stock awards, stock appreciation rights and restricted stock units. No options granted under the 2017 Plan are exercisable after 10 years from the date of grant, and option awards generally vest over a four-year period.
The 2017 Plan was terminated in connection with the adoption of the Company's 2021 Equity Incentive Plan (the "2021 Plan"). Any awards granted under the 2017 Plan that remained outstanding as of the Closing Date and were converted into awards with respect to the Company’s Class A common stock in connection with the consummation of the Business Combination continue to be subject to the terms of the 2017 Plan and applicable award agreements, except for a modification of the repurchase provision, which is discussed further below.
On July 22, 2021, in connection with the Business Combination, the 2021 Plan became effective and 32,734,983 authorized shares of common stock were reserved for issuance thereunder. This Plan will be administered by the Compensation Committee of the Company’s Board of Directors, including determination of the vesting, exercisability and payment of the awards to be granted under this Plan. No awards granted under the 2021 Plan are exercisable after 10 years from the date of grant, and the awards granted under the 2021 Plan generally vest over a four-year period on a graded vesting basis.
As of December 31, 2021, there was an aggregate of 15,467,838 shares available for grants of stock options or other awards under the 2021 Plan.
Employee Stock Purchase Plan
The 2021 Employee Stock Purchase Plan (the “2021 ESPP”) became effective in connection with the Business Combination. The 2021 ESPP authorizes the issuance of shares of common stock pursuant to purchase rights granted to employees. A total of 4,804,011 shares of common stock have been reserved for future issuance under the 2021 ESPP. On each January 1 of each of 2022 through 2031, the aggregate number of shares of common stock reserved for issuance under the 2021 Plan may be increased automatically by the number of shares equal to one percent (1%) of the total number of shares of all classes of common stock issued and outstanding on the immediately preceding December 31. The Company did not make any grants of purchase rights under the 2021 ESPP during the year ended December 31, 2021.
Stock Option Activity
Under the 2017 Plan, the Company had a call option to repurchase awards for cash from the plan participants upon termination of the participant’s employment or consulting agreement (the “2017 Plan Call Option”). The options granted under the 2017 plan were accounted for as liability awards due to the 2017 Plan Call Option. The Company had a history of repurchase practice and the intention to repurchase the vested options. Therefore, the fair value of the liability awards was remeasured at each reporting period until the stockholder bears the risks and rewards of equity ownership for a reasonable period of time, which the Company concludes is at least six months.
Upon consummation of the Business Combination, the Company’s Board of Directors waived the Company’s right under the 2017 Plan Call Option to repurchase awards for cash from the plan participants upon termination of the participant’s employment or consulting agreement. As such, the Company modified the liability awards to equity awards and reclassified the modification date fair value of the awards to stockholders’ equity in the consolidated financial statements as of July 22, 2021. An incremental expense of $0.4 million resulting from the modification event was recorded in the year ended December 31, 2021.
All stock options granted under the 2021 Plan are accounted for as equity awards.
F-31

The following summarizes the stock option activity, which reflects the conversion of the options granted under the 2017 Plan into awards with respect to the Company Class A common stock in connection with the consummation of the Business Combination (in thousands, except share and per share amounts):

Stock Options OutstandingWeighted Average Exercise PriceWeighted Average Remaining Contractual Life (years)Aggregate Intrinsic Value
Balance at December 31, 202032,339,970$0.54 7.82$159,899 
Options granted3,474,905$7.29 — — 
Options exercised(2,248,705)$0.61 — — 
Options forfeited and canceled(2,660,627)$1.16 — — 
Balance at December 31, 202130,905,543$1.24 6.80$109,887 
Options exercisable at December 31, 202122,930,309$0.45 6.08$92,974 
Nonvested options outstanding at the end of the year was 7,975,234 with weighted average grant-date fair value of $8.38.
The weighted-average grant-date fair value of options granted and total fair value of the options with tranches vested was $4.97 and $44.6 million for the year ended December 31, 2021, respectively. The weighted-average grant-date fair value of options forfeited and canceled was $10.52 for the year ended December 31, 2021. The aggregate intrinsic value of exercised options was $17.1 million, $0.6 million and $0.0 million in the years ended December 31, 2021, 2020 and 2019, respectively, and is calculated based on the difference between the exercise price and the fair value of the Company’s common stock as of the exercise date. The total payments for share-based liabilities were $0.1 million, $0.3 million and $1.0 million in the years ended December 31, 2021, 2020 and 2019, respectively.
Due to the historical accounting under the liability awards and modification accounting applied upon consummation of the Business Combination, as described above, the Company used the fair value determined on the modification date when calculating the grant-date and total fair value disclosed.
The fair value of the stock option awards for the period ended December 31, 2021, and as of December 31, 2020, and 2019 were estimated using the Black-Scholes option pricing model with the following assumptions:
202120202019
Expected volatility49.60%-67.70%65.80%60.00%
Weighted-average expected volatility66.15%65.80%60.00%
Expected term (in years)5.00-6.060.50–1.493.00–5.00
Risk-free interest rate0.71%-1.26%0.10%1.40%–1.43%
Dividend yield———
Fair value of Class A common stock$7.62-$11.60$5.49$0.77
We estimated a volatility factor for the Company’s options based on analysis of historical share prices of a peer group of public companies. We did not rely on the volatility of the Company’s common stock because its limited trading history. We estimated the expected term of options granted using the “simplified method,” which is the mid-point between the vesting date and the ending date of the contractual term. We did not rely on the historical holding periods of the Company’s options due to the limited availability of exercise data. We used a risk-free interest rate based on the U.S. Treasury yield curve in effect for bonds with maturities consistent with the expected term of the option.
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Restricted Stock Units (RSU)
The Company issued time-based RSUs to employees under the 2021 Plan. The RSUs automatically convert to common stock on a one-for-one basis as the awards vest. The Company measures the value of RSUs at fair value based on the closing price of the underlying common stock on the grant date. The RSUs granted generally vest over a four year vesting period from the grant date, however, the Company also granted certain RSUs during the three months ended December 31, 2021, which were vesting beginning 12 months from the grant date and vesting immediately on the grant date. The following table summarizes the activity related to the Company's time-based RSUs:

Restricted Stock Units OutstandingWeighted Average Grant Date Fair Value Per Unit
Balance at December 31, 2020— — 
Restricted Stock Units granted14,250,909$7.55
Restricted Stock Units vested(1,466,010)$6.75
Restricted Stock Units forfeited(195,341)$7.62
Balance at December 31, 202112,589,558$7.64
Nonvested RSUs outstanding at the end of the year was 12,589,558 with weighted average grant-date fair value of $7.64. The total fair value of RSUs vested for the year ended December 31, 2021 was $9.9 million.
Earn-out RSUs
The grant date fair value determined for Triggering Event I, II and III was $1.82, $1.39 and $0.94 per unit, respectively. Any re-allocated RSUs due to the Sema4 Legacy option holders’ forfeiture activities were accounted for as new grants and the fair value determined for Triggering Event I, II and III was $0.86, $0.61 and $0.41 per unit, respectively. Based on the grant date fair value, the Company expects to record total expense related to the Earn-out RSU Awards of $3.5 million. The Company expects to recognize the stock-compensation cost over the longer of the derived service period or service period.
Stock Appreciation Rights (SAR) Activity
The Company historically granted SAR to one employee and one consultant with exercise condition of a liquidation event. As a result of the Business Combination, settlement of the outstanding vested SARs in exchange for a cash payment and to cancel the outstanding unvested SARs was agreed upon and an expense of $3.8 million related to the vested SAR was recognized by the Company during the year ended December 31, 2021. There were no outstanding SARs as of December 31, 2021.
Stock-Based Compensation Expense
Stock-based compensation expense is included within the consolidated statements of operations and comprehensive loss as follows (in thousands):
Year Ended December 31,
202120202019
(Restated)(1)
Cost of services$22,567 $12,942 $710 
Research and development47,183 26,650 1,281 
Selling and marketing29,110 11,755 650 
General and administrative120,561 68,884 2,841 
Total stock-based compensation expense$219,421 $120,231 $5,482 
______________
(1) Refer to Note 2, “Summary of Significant Accounting Policies.” for further details and discussions.
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As of December 31, 2021, unrecognized stock-based compensation cost related to the unvested portion of the Company’s stock options was $29.7 million, which is expected to be recognized on a graded-vesting basis over a weighted-average period of 1.6 years. As of December 31, 2021, unrecognized stock-based compensation cost related to the Company’s RSUs was $78.4 million, which is expected to be recognized on a graded-vesting basis over a weighted-average period of 1.7 years.

11. Redeemable Convertible Preferred Stock
There were no shares of Redeemable Convertible Preferred Stock outstanding as of December 31, 2021. Redeemable Convertible Preferred Stock as of December 31, 2020 consisted of the following (in thousands, except share data):
Redeemable Convertible Preferred StockShares AuthorizedShares Issued and OutstandingAmountAggregate Liquidation Preference
Series A-155,399,943 55,399,943 $51,811 $55,000 
Series A-264,718,940 49,700,364 46,480 49,342 
Series B41,937,960 41,937,960 118,824 204,302 
Series C24,497,317 24,496,946 117,324 121,397 
Total Redeemable Convertible Preferred Stock186,554,160 171,535,213 $334,439 $430,041 
Prior to the completion of the Business Combination, there were no significant changes to the terms of the Convertible Preferred Stock. Upon closing of the Merger, each share Preferred Stock (as defined in the Proxy Statement) was cancelled and received a portion of the merger consideration, resulting in certain Legacy Sema4 preferred stockholders receiving $230.0 million of cash and an aggregate of 148,543,062 shares of common stock. The Company recorded the conversion at the carrying value of the Redeemable Convertible Preferred Stock at the time of Closing.

12. Common Stock
There were 242,647,604 shares of Sema4 Holdings Class A common stock and 124 shares of Legacy Sema4 Class A common stock issued and outstanding as of December 31, 2021 and 2020, respectively. There were 0 and 130,557 shares of Class B common stock issued and outstanding as of December 31, 2021 and 2020, respectively.

13. Income Taxes
The components of income before incomes taxes consisted of the following (in thousands):
Year Ended December 31,
202120202019
Foreign$— $— $— 
Domestic(245,390)(241,340)(29,704)
Total(245,390)(241,340)(29,704)
F-34

Year Ended December 31,
202120202019
Current$— $— $— 
Federal— — — 
State and Local— — — 
Foreign— — — 
Total Current$— $— $— 
Deferred
Federal$— $— $— 
State and Local— — — 
Foreign— — — 
Total Deferred— — — 
Total Tax Expense$— $— $— 
For the years ended December 31, 2021, 2020 and 2019, the Company did not have a current or deferred income tax expense or (benefit). Accordingly, the effective tax rate for the Company for the years ended December 31, 2021, 2020 and 2019 was zero percent. A reconciliation of the anticipated income tax expense/(benefit) computed by applying the statutory federal income tax rate of 21% to income before taxes to the amount reported in the statement of operations and comprehensive loss is as follows (in thousands):
Year Ended December 31,
202120202019
U.S. federal taxes at statutory rate21.0%21.0%21.0%
State taxes (net of federal benefit)10.52.13.5
Research and development tax credits0.70.63.4
Non-deductible stock-based compensation(11.3)(7.8)(3.3)
162(m) Limitation(5.7)——
Permanent Items(0.2)—(0.5)
Unrealized fair market value gain on warrants17.0——
Change in valuation allowance(32.0)(15.9)(24.1)
Effective tax rate—%—%—%
F-35

The tax effects of temporary differences and carryforwards that give rise to significant portions of the net deferred tax assets were as follows (in thousands):
As of December 31,
20212020
Deferred tax assets:
Net operating loss carryforwards$132,075 $44,583 
Stock-based compensation12,311 7,538 
Accrued compensation4,170 2,337 
Transaction costs416 — 
Research and development credits7,285 4,667 
Deferred rent1,443 493 
Unearned revenue145 186 
Deferred employer taxes932 1,050 
Interest expense372 479 
Property and equipment608 — 
Obsolete inventory reserve655 — 
Other51 23 
Gross deferred tax assets160,463 61,356 
Valuation allowance(155,668)(58,264)
Total deferred tax assets4,795 3,092 
Deferred tax liabilities:
Property and equipment— (685)
Capitalized software(4,795)(2,407)
Total deferred tax liabilities(4,795)(3,092)
Net deferred tax assets$— $— 
As of December 31, 2021, the Company had the following tax net operating loss carryforwards available to reduce future federal and state taxable income, and tax credit carryforwards available to offset future federal and Connecticut income taxes (in thousands):
AmountExpiration period
Tax net operating loss carryforwards:
Federal (pre-2018 net operating losses)33,056 2036-2037
Federal (post-2017 net operating losses)395,421 No expiration
State and Local589,584 2028-2042
State and Local25,704 No expiration
Tax credit carryforwards:
Federal research and development5,096 2038-2040
Connecticut research and experimental1,633 2034-2035
Connecticut research and development556 No expiration
F-36

The Company had the following deferred tax valuation allowance balances (in thousands):
YearBalance at the Beginning of PeriodAdditionsWrite-Offs/OtherBalance at the End of Period
2021$58,264 97,404— $155,668 
2020$20,082 38,182— $58,264 
2019$12,928 7,154— $20,082 
The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.
The CARES Act also provides for the elective deferral of the deposit and payment of the employer share of Social Security taxes for the period beginning March 27, 2020 and ending December 31, 2020. Under the CARES Act, 50% percent of the employer portion of Social Security tax is to be remitted no later than December 31, 2021, with the remaining 50% to be remitted no later than December 31, 2022. The Company has evaluated the effect of the elective deferral on its income tax positions and determined that the corresponding deduction related to the employer portion of Social Security tax is not deductible in the year ended December 31, 2020, resulting in a nominal deferred tax asset. The Company continues to evaluate the potential effects the CARES Act may have on its operations and consolidated financial statements in future periods.
Future realization of the tax benefits of existing temporary differences and carryforwards ultimately depends on the existence of sufficient taxable income within the carryforward period. As of December 31, 2021 and 2020, the Company performed an evaluation to determine whether a valuation allowance was needed. Based on the Company’s analysis, which considered all available evidence, both positive and negative, the Company determined that it is more likely than not that its net deferred tax assets will not be realized. Accordingly, the Company maintained a full valuation allowance as of December 31, 2021, 2020 and 2019. The valuation allowance increased by $97.4 million in 2021, $38.1 million in 2020 and $7.1 million in 2019 primarily due to the increase in net operating loss carryforwards, research and development tax credits, accrued compensation expenses, stock-based compensation and deferred rent expense.
Under Internal Revenue Code Section 382, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income may be limited. Generally, an ownership change occurs when certain shareholders increase their aggregated ownership by more than 50 percentage points over their lowest ownership percentage in a testing period (typically three years). The Company has not completed a study to assess whether an ownership change has occurred or whether there have been multiple ownership changes since becoming a “loss corporation” as defined in Section 382. Future changes in stock ownership, which may be outside of the Company’s control, may trigger an ownership change. In addition, future equity offerings or acquisitions that have an equity component of the purchase price could result in an ownership change. If an ownership change has occurred or does occur in the future, utilization of the NOL carryforwards or other tax attributes may be limited.
ASC 740 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements by prescribing a model for recognizing, measuring, and disclosing uncertain tax positions. Unrecognized income tax benefits represent income tax positions taken on income tax returns but not yet recognized in the financial statements.
As of December 31, 2021, 2020 and 2019, the Company had nominal gross unrecognized tax benefits which, if recognized, would not impact the effective tax rate due to the Company’s valuation allowance position. Due to the uncertainties associated with any examinations that may arise with the relevant tax authorities, it is not possible to reasonably estimate the impact of any significant increase or decrease to the unrecognized tax benefits within the next twelve months.
F-37

A reconciliation of the beginning and ending amounts of unrecognized tax benefits for the years ended December 31, 2021, 2020 and 2019 is as follows (in thousands):
As of December 31,
202120202019
Unrecognized tax benefits – January 1$537 $374 $195 
Gross increases – tax positions in current period— 163 179 
Unrecognized tax benefits – December 31$537 $537 $374 
To the extent penalties and interest would be assessed on any underpayment of income tax, the Company’s policy is that such amounts would be accrued and classified as a component of income tax expense in the financial statements. As of December 31, 2021, 2020 and 2019, the Company has not accrued interest or penalties related to uncertain tax positions.
The Company files U.S federal and multiple state income tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. There are currently no pending federal or state income tax examinations. As a result of the Company’s net operating loss carryforwards, the Company’s federal and state statutes of limitations remain open from 2016 and forward until the net operating loss carryforwards are utilized or expire prior to utilization.

14. Net Loss per Share
Basic net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders (in thousands, except for share and per share amounts):
Year Ended December 31,
202120202019
Numerator:
Net loss attributable to common stockholders$(245,390)$(241,340)$(32,743)
Denominator:
Denominator for basic and diluted earnings per share-weighted-average common shares108,077,439 5,131 124 
Basic and diluted (loss) per share$(2.27)$(47,036)$(264,056)
As a result of the Merger, the Company has retroactively adjusted the weighted-average number of shares of common stock outstanding prior to the Merger by multiplying them by the conversion ratio of 123.8339 used to determine the number of shares of common stock into which they converted. The common stock issued as a result of the redeemable convertible preferred stock conversion upon closing of the Merger was included in the basic and diluted (loss) per share calculation on a prospective basis.
Prior to the consummation of the Merger, the Company applied the two-class method to calculate its basic and diluted net loss per share of common stock, as there were outstanding Class B common stock and redeemable convertible preferred stock that were participating securities. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common stockholders. As the securities were all converted into Sema4 Holdings Class A common stock upon consummation of the Merger, all outstanding Legacy Sema4 Class B common stock has been retroactively converted to the Sema4 Holdings Class A common stock.
F-38

The following tables summarize the outstanding shares of potentially dilutive securities that were excluded from the computation of diluted net loss per share attributable to common stockholders for the period presented because including them would have been anti-dilutive:
Year Ended December 31,
202120202019
Outstanding options and RSUs35,519,86732,339,97122,491,757
Outstanding warrants21,994,972— — 
Outstanding earn-out shares16,351,897— — 
Outstanding earn-out RSUs2,669,679 — — 
Redeemable convertible preferred stock (on an if-converted basis)— 157,618,388 121,298,525 
Total76,536,415 189,958,359 143,790,282 

15. Supplemental Financial Information
Other current liabilities consisted of the following (in thousands):
As of December 31,
20212020
Accrued bonus$13,561 $9,821 
Accrued payroll7,013 6,834 
Accrued benefits1,057 3,663 
Accrued commissions2,826 1,540 
Current portion of long-term debt— 1,770 
Other5,511 4,509 
Total current other liabilities$29,968 $28,137 

16. Subsequent Events
GeneDx Acquisition
On January 14, 2022, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with GeneDx, Inc., a New Jersey corporation (“GeneDx”) and a wholly-owned subsidiary of OPKO Health, inc, and the other parties thereto.
Subject to the terms and conditions of the Merger Agreement, the Company agreed to pay to OPKO Health Inc., of (i) $150 million in cash at the closing of the acquisition (the “Closing”), subject to certain adjustments as provided in the Merger Agreement, (ii) 80 million shares of the Company’s Class A common stock, to be issued at the Closing and (iii) up to $150 million payable following the Closing, if certain revenue-based milestones are achieved for each of the fiscal years ending December 31, 2022 and December 31, 2023 (the “Milestone Payments”). Each Milestone Payment, if and to the extent earned under the terms of the Merger Agreement, will be satisfied through the payment and/or issuance of a combination of cash and shares of Company Class A common stock (valued at $4.86 per share based on the average of the daily volume average weighted price of Company Class A common stock over the period of 30 trading days ended January 12, 2022), with such mix to be determined in Sema4’s sole discretion. The acquisition is expected to close in the first half of 2022, subject to the receipt of the required approval by the Company’s stockholders and the satisfaction of the closing conditions set forth in the Merger Agreement.
F-39

Subscription Agreements and PIPE Investment (Private Placement)
On January 14, 2022, concurrently with the execution of the Merger Agreement, the Company entered into subscription agreements for a private placement financing to issue and sell $200 million in Class A common stock at a price of $4.00 per share to a syndicate of institutional investors.
F-40

GENEDX, INC. AND SUBSIDIARY
BALANCE SHEETINDEX TO COMBINED CARVE OUT FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 and 2020 (As Restated)
ASSETS
Current assets
Cash$1,094,681 
Prepaid expenses277,031 
Total Current Assets1,371,712 
Cash and marketable securities held in trust account442,763,951 Page
$
444,135,663F-42
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued expenses$97,120 
Total Current Liabilities97,120 
Warrant Liability70,322,418 
Deferred underwriting fee payable15,496,250 
85,915,788F-44
Commitments and contingencies
Class A common stock subject to possible redemption, 35,321,987 shares at $10.00 per share353,219,870 
Stockholders’ Equity
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding— 
Class A common stock, $0.0001 par value; 380,000,000 shares authorized; 1,920,771 shares issued and outstanding (excluding 42,354,229 shares subject to possible redemption)895 
Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 11,068,750 shares issued and outstanding1,107 
Additional paid-in capital44,905,602 
Accumulated deficit(39,907,599)
5,000,005F-45
Total Liabilities and Stockholders’Combined Carve Out Statements of Equity
$
F-46
444,135,663F-47
F-48
The accompanying notes are an integral part of the financial statements.
F-82F-41

CM LIFE SCIENCES, INC.Report of Independent Auditors
STATEMENT OF OPERATIONSTo the Shareholders and the Board of Directors of GeneDx, Inc. and Subsidiary
FOR THE PERIOD FROM JULY 10,Opinion
We have audited the combined carve-out financial statements of GeneDx, Inc. and subsidiary (the Company), which comprise the combined balance sheets as of December 31, 2021 and 2020, (INCEPTION) THROUGH DECEMBERand the related combined statements of comprehensive loss, equity and cash flows for the years then ended, and the related notes (collectively referred to as the “combined financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, (As Restated)and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
General and administrative expenses$206,195 
Loss from operations
(206,195)
Other income:
Interest earned on investments held in Trust Account13,951 
Change in fair value of warrant liability(38,510,584)
Transaction Costs(1,204,771)
Loss before provision for income taxes$(39,907,599)
Provision for income taxes— 
Net loss
$(39,907,599)
Weighted average shares outstanding of Class A redeemable common stock44,275,000 
Basic and diluted income per share, Class A redeemable common stock
$0.00
Weighted average shares outstanding of Class B non-redeemable common stock10,633,062 
Basic and diluted net loss per share, Class B non-redeemable common stock
$(3.75)
Basis for Opinion
The accompanying notesWe conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are an integral partfurther described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date that the financial statements are available to be issued.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free of material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS, we:
•Exercise professional judgment and maintain professional skepticism throughout the audit.
•Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
•Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed.
•Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
•Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time.
F-83F-42

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
/s/ ERNST & YOUNG LLP
Miami, FL
March 15, 2022
F-43

CM LIFE SCIENCES, INC.GeneDx, Inc. and Subsidiary
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITYCOMBINED CARVE OUT BALANCE SHEETS
FOR THE PERIOD FROM JULY 10, 2020 (INCEPTION) THROUGH DECEMBER 31, 2020 (As Restated)(in thousands, except share and per share data)
Class A
Common Stock		Class B
Common Stock		Additional Paid-in CapitalAccumulated DeficitTotal
Stockholders’ Equity
SharesAmountSharesAmount
Balance – July 10, 2020 (Inception)
$— $— $— $— $— $— $— 
Issuance of Class B common stock to initial stockholders— — 11,068,750 1,107 23,893 — 25,000 
Sale of 44,275,000 Units, net of underwriting discounts44,275,000 4,427 — — 398,098,047 — 398,102,474 
Common stock subject to possible redemption(35,321,987)(3,532)— — (353,216,338)— (353,219,870)
Net loss— — — — — (39,907,599)(39,907,599)
Balance – December 31, 20208,953,013 $895 11,068,750 $1,107 $44,905,602 $(39,907,599)$5,000,005 
December 31,
20212020
ASSETS
Current assets:
Cash and cash equivalents$144 $199 
Accounts receivable, net20,341 22,587 
Inventory7,828 7,219 
Prepaid expenses and other current assets5,226 3,675 
Total current assets33,539 33,680 
Investment in related companies205 245 
Property, plant and equipment, net28,277 20,171 
Intangible assets, net166,888 183,702 
Goodwill282,024 282,024 
Due from Parent and its subsidiaries5 3 
Operating lease right-of-use assets5,789 6,858 
Other assets53 64 
Total assets$516,780 $526,747 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable$5,397 $4,897 
Accrued expenses15,565 15,779 
Income taxes payable180 163 
Other current liabilities571 691 
Total current liabilities21,713 21,530 
Deferred tax liabilities, net24,063 36,690 
Operating lease liabilities9,936 7,340 
Other long-term liabilities— 981 
Total long-term liabilities33,999 45,011 
Total liabilities55,712 66,541 
Equity:
Common Stock - $0.01 par value per share, 100 shares authorized; 100 shares issued and outstanding at December 31, 2021 and 2020, respectively— — 
Additional paid-in capital660,506 622,752 
Accumulated deficit(199,438)(162,546)
Total shareholder's equity461,068 460,206 
Total liabilities and equity$516,780 $526,747 
The accompanying notesNotes to Combined Financial Statements are an integral part of the financial statementsthese statements.
F-84F-44

CM LIFE SCIENCES, INC.GeneDx, Inc. and Subsidiary
STATEMENTCOMBINED CARVE OUT STATEMENTS OF CASH FLOWSCOMPREHENSIVE LOSS
FOR THE PERIOD JULY 10, 2020 (INCEPTION) THROUGH DECEMBER 31, 2020 (As Restated)(in thousands)
Cash Flows from Operating Activities:
Net loss$39,907,599 
Adjustments to reconcile net loss to net cash used in operating activities:
Interest earned on investments held in Trust Account(13,951)
Change in fair value of warrant liability38,510,584 
Transaction costs1,204,771 
Changes in operating assets and liabilities:
Prepaid expenses(277,031)
Accrued expenses97,120 
Net cash used in operating activities
(386,106)
Cash Flows from Investing Activities:
Investment of cash into Trust Account(442,750,000)
Net cash used in investing activities
(442,750,000)
Cash Flows from Financing Activities:
Proceeds from sale of Units, net of underwriting discounts paid433,895,000 
Proceeds from sale of Private Placement Warrants10,855,000 
Proceeds from promissory note – related party112,837 
Repayment of promissory note – related party(165,081)
Payment of offering costs(466,969)
Net cash provided by financing activities
444,230,787
Net Change in Cash
1,094,681
Cash – Beginning of period— 
Cash – End of period
$1,094,681
Non-Cash financing activities:
Initial classification of common stock subject to possible redemption$380,268,982 
Change in value of common stock subject to possible redemption$(27,049,112)
Initial classification of warrant liabilities$31,811,834 
Deferred underwriting fee payable$15,496,250 
Offering costs paid directly by Sponsor in consideration for the issuance of Class B common stock$25,000 
Payment of offering costs through promissory note — related party$52,244 
For the years ended December 31,
20212020
Revenues$116,595 $95,020 
Costs and expenses:
Cost of revenue84,361 74,367 
Selling, general and administrative52,439 41,583 
Research and development12,377 9,110 
Amortization of intangible assets16,813 16,813 
Total costs and expenses165,990 141,873 
Operating loss(49,395)(46,853)
Other expense, net:
Other expense(44)(87)
Other expense(44)(87)
Loss before income taxes(49,439)(46,940)
Income tax benefit12,547 12,037 
Net loss and comprehensive loss$(36,892)$(34,903)
The accompanying notesNotes to Combined Financial Statements are an integral part of the financialthese statements.
F-85F-45

CM LIFE SCIENCES, INC.GeneDx, Inc. and Subsidiary
COMBINED CARVE OUT STATEMENTS OF EQUITY
(in thousands, except share data)
For the years ended December 31, 2021 and 2020
Common StockAdditional Paid-In CapitalAccumulated DeficitTotal
SharesDollars
Balance at December 31, 2019100 — $601,312 $(127,755)$473,557 
Contributions from BioReference— — 21,321 — 21,321 
Equity-based compensation expense— — 119 — 119 
Genome dissolution entries— — — 112 112 
Net loss— — — (34,903)(34,903)
Balance at December 31, 2020100 — $622,752 $(162,546)$460,206 
Common StockAdditional Paid-In CapitalAccumulated DeficitTotal
SharesDollars
Balance at December 31, 2020100 — $622,752 $(162,546)$460,206 
Contributions from BioReference— — 35,932 — 35,932 
Equity-based compensation expense— — 1,822 — 1,822 
Net loss— — — (36,892)(36,892)
Balance at December 31, 2021100 — $660,506 $(199,438)$461,068 
The accompanying Notes to Combined Financial Statements are an integral part of these statements.
F-46

GeneDx, Inc. and Subsidiary
COMBINED CARVE OUT STATEMENTS OF CASH FLOWS
(in thousands)
For the years ended December 31,
20212020
Cash flows from operating activities:
Net loss$(36,892)$(34,903)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization21,947 20,905 
Dissolution of Gnome— 112 
Equity-based compensation1,822 119 
Provision for bad debts— 84 
Deferred income taxes(12,627)(12,240)
Gain on sale of equipment and other assets— 5 
Non-cash lease expense3,664 465 
Changes in assets and liabilities:
Accounts receivable2,246 11,753 
Inventory(609)32 
Prepaid expenses and other current assets(1,551)(1,228)
Other assets52 25 
Accounts payable500 (961)
Accrued expenses and other liabilities(1,496)3,969 
Net cash used in operating activities(22,944)(11,863)
Cash flows from investing activities:
Capital expenditures(13,041)(9,815)
Investment in related companies(245)
Proceeds from the sale of property, plant, and equipment— 90 
Net cash used in investing activities(13,041)(9,970)
Cash flows from financing activity:
Subsidiary financing(2)(4)
Equity contributions35,932 21,321 
Net cash provided by financing activity35,930 21,317 
Net decrease in cash and cash equivalents(55)(516)
Cash and cash equivalents at beginning of period199 715 
Cash and cash equivalents at end of period$144 $199 
Supplemental Information:
Income taxes paid, net$60 $75 
Purchases of property and equipment in accounts payable and accrued expenses198 1,278 
Cash paid for interest3 80 
The accompanying Notes to Combined Financial Statements are an integral part of these statements.
F-47

GeneDx, Inc. and Subsidiary
NOTES TO COMBINED CARVE OUT FINANCIAL STATEMENTS
DECEMBER
Note 1 Business and Organization
GeneDx, Inc., a New Jersey corporation (including its subsidiaries as described below, “GeneDx”, we, our or us), is a patient-centric health information company and leader in delivering clinical genomic answers to an ever-increasing community of patients, families and healthcare providers. With more than 20 years of experience in diagnosing rare disorders and diseases, we have pioneered panels, exome and whole genome sequencing and have developed a proprietary genomic interpretation and information services platform in support of healthcare partners and patients globally. We create, follow, and are informed by cutting-edge science and technology.
GeneDx, Inc. is a wholly owned subsidiary of BioReference Laboratories, Inc. (“BioReference”). BioReference and its subsidiaries, including GeneDx, are wholly owned subsidiaries of OPKO Health, Inc. (“OPKO” or “Parent”). MyGeneTeam and MyGeneTeam Canada are wholly owned subsidiaries of OPKO. GeneDx, MyGeneTeam, and MyGeneTeam Canada comprise the Combined Carve Out Financial Statements and are collectively referred to as GeneDx or the “Company”. All assets and liabilities directly attributable to entities outside GeneDx have been excluded. The accompanying Combined Carve Out Financials Statements present the combined financial results of GeneDx as of and for the years ended December 31, 2021 and 2020 and are being prepared in connection with the definitive agreement between Sema4 Holdings Corp (“Sema4”) and OPKO announced in January 2022 pursuant to which Sema4 has agreed to acquire GeneDx. If Sema4 does not acquire GeneDx, OPKO has committed to support the capital requirements of GeneDx necessary to meet our obligations through March 16, 2023.
In February 2020, we dissolved the operations of Genome Diagnostics, a wholly owned subsidiary of GeneDx.
Our corporate office and laboratory, which is our only physical location, is located at 207 Perry Parkway, Gaithersburg, Maryland 20877, which is a leased space.
Note 2 Impact of COVID-19
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONSAs the disease caused by SARS-CoV-2, a strain of coronavirus, COVID-19 continues to spread and severely impact the economy of the United States, we are committed to being a part of the coordinated public and private sector response to this unprecedented challenge. During the outbreak of the pandemic, the facility space and certain human resources and supplies of GeneDx were deployed to perform COVID-19 RT-PCR testing on behalf of our parent company BioReference. From 2020 through 2021, GeneDx resulted approximately 1.6 million COVID-19 RT-PCR tests. All COVID-19 testing operations of GeneDx ceased in June 2021. None of the revenue or associated costs with the COVID-19 operations run at the GeneDx facility are included in the GeneDx Combined Financial Statements.
CM Life Sciences, Inc. (the “Company”)In March 2020, in response to the outbreak of the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was incorporated in Delawaresigned into law. The CARES Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of net operating losses, temporary changes to the prior and future limitations on July 10, 2020. The Company was formedinterest deductions, temporary suspension of certain payment requirements for the purposeemployer portion of effectingSocial Security taxes, technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property, and the creation of certain payroll tax credits associated with the retention of employees.
We have received a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company isnumber of benefits under the CARES Act including, but not limited to:
•We are eligible to a particular industry or sectordefer depositing the employer’s share of Social Security taxes for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of December 31,payments due from March 27, 2020, the Company had not commenced any operations. All activity for the period from July 10, 2020 (inception) through December 31, 2020, relates tointerest-free and penalty-free;
•We received approximately $0.3 million during the Company’s formation, the initial public offering (“Initial Public Offering”), which is described below, and, subsequent to the Initial Public Offering, identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.
The registration statement for the Company’s Initial Public Offering was declared effective on September 1, 2020. On September 4, 2020 the Company consummated the Initial Public Offering of 44,275,000 units (the “Units” and, with respect to the Class A common stock included in the Units sold, the “Public Shares”), which includes the full exercise by the underwriter of its over-allotment option in the amount of 5,775,000 Units, at $10.00 per Unit, generating gross proceeds of $442,750,000 which is described in Note 4.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 7,236,667 warrants (the “Private Placement Warrants”) at a price of $1.50 per Private Placement Warrant in a private placement to CMLS Holdings LLC (the “Sponsor”) and certain of the Company’s independent directors, generating gross proceeds of $10,855,000, which is described in Note 5.
Transaction costs charged to equity amounted to $24,895,463, consisting of $8,855,000 in cash underwriting fees, $15,496,250 of deferred underwriting fees and $544,213 of other offering costs. Of the total transaction costs of the Initial Public Offering, $1,204,771 is included in transactions costs in the statement of operations and $23,690,693 is included in shareholders’ equity. In addition, as ofyear ended December 31, 2020 cash of $1,094,681 was held outside of the Trust Account (as defined below) and is available for the payment of offering costs and for working capital purposes.
Following the closing of the Initial Public Offering on September 4, 2020, an amount of $442,750,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”) located in the United States and will be invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 daysfunds that were distributed to healthcare providers for related expenses or less or in any open-ended investment companylost revenues that holds itself out as a money market fund selected by the Company meeting certain conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the funds held in the Trust Account, as described below.
The Company’s management has broad discretion with respectare attributable to the specific application of the net proceeds of the Initial Public OfferingCOVID-19 pandemic; and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or more initial Business Combinations with one or more operating businesses or assets with a fair market value equal to at least 80% of the net assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on the interest earned on the Trust Account). The Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target business sufficient for it not to be required to register as an investment company under the Investment Company Act.
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CM LIFE SCIENCES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
The Company will provide the holders of the outstanding Public Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection•Clinical laboratories are provided with a stockholder meeting calledone-year reprieve from the reporting requirements under the Protecting Access to approve the Business Combination or (ii) by means of a tender offer. The decisionMedicare Act as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially $10.00 per Public Share, plus any pro rata interest then in the Trust Account, net of taxes payable). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.
The Company will only proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 following any related redemptions and, if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by applicable law or stock exchange listing requirements and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to its Second Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by applicable law or stock exchange listing requirements, or the Company decides to obtain stockholder approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Company’s Sponsor and any other holders of the Company’s common stock prior to the Initial Public Offering (the “initial stockholders”) have agreed to vote their Founder Shares (as defined in Note 6) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each Public Stockholder may elect to redeem their Public Shares without voting, and if they do vote, irrespective of whether they vote for or against the proposed transaction.
Notwithstanding the foregoing, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Certificate of Incorporation provides that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert orwell as a “group” (as definedone-year delay of reimbursement rate reductions for clinical laboratory services provided under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respectMedicare that were scheduled to more than an aggregate of 20% of the Public Shares, without the prior consent of the Company.
The Sponsor has agreed (a) to waive its redemption rights with respect to the Founder Shares and Public Shares held by ittake place in connection with the completion of a Business Combination and (b) not to propose an amendment to the Certificate of Incorporation (i) to modify the substance or timing of the Company’s obligation to redeem 100% of its Public Shares if the Company does not complete a Business Combination within the Combination Period (as defined below) or (ii) with respect to any other material provision relating to stockholders’ rights or pre-business combination activity, unless the Company provides the Public Stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.
If the Company has not completed a Business Combination by September 4, 2022 (the “Combination Period”), the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to pay taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.
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2021.
CM LIFE SCIENCES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
The Sponsor has agreed to waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the Sponsor acquires Public Shares in or after the Initial Public Offering, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period. The underwriter has agreed to waive its rights to its deferred underwriting commission (see Note 7) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.00).
In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per Public Share and (ii) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per public Share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to monies held in the Trust Account nor will it apply to any claims under the Company’s indemnity of the underwriter of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except for the Company’s independent registered public accounting firm), prospective target businesses and other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
NOTE 2. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTSNote 3 Summary of Significant Accounting Policies
The Company previously accounted for its outstanding Public Warrants (as defined in Note 4) and Private Placement Warrants issued in connection with its Initial Public Offering as components of equity instead of as derivative liabilities. The warrant agreement governing the warrants includes a provision that provides for potential changes to the settlement amounts dependent upon the characteristics of the holder of the warrant. In addition, the warrant agreement includes a provision that in the event of a tender or exchange offer made to and accepted by holders of more than 50% of the outstanding shares of a single class of common shares, all holders of the warrants would be entitled to receive cash for their warrants (the “tender offer provision”).
In connection with the audit of the Company’s financial statements for the period ended December 31, 2020, the Company’s management further evaluated the warrants under Accounting Standards Codification (“ASC”) Subtopic 815-40, Contracts in Entity’s Own Equity. ASC Section 815-40-15 addresses equity versus liability treatment and classification of equity-linked financial instruments, including warrants, and states that a warrant may be classified as a component of equity only if, among other things, the warrant is indexed to the issuer’s common stock. Under ASC Section 815-40-15, a warrant is not indexed to the issuer’s common stock if the terms of the warrant require an adjustment to the exercise price upon a specified event and that event is not an input to the fair value of the warrant. Based on management’s evaluation, the Company’s audit committee, in consultation with management and after discussion with the Company’s independent registered public accounting firm, concluded that the Company’s Private Placement Warrants are not indexed to the Company’s common shares in the manner contemplated by ASC Section 815-40-15 because the holder of the instrument is not an input into the pricing of a fixed-for-fixed option on equity shares. In addition, based on management’s evaluation, the Company’s audit committee, in consultation with management and after discussion with the Company’s independent registered public accounting firm, concluded the tender offer provision included in the warrant agreement fails the “classified in shareholders’ equity” criteria as contemplated by ASC Section 815-40-25.
As a result of the above, the Company should have classified the warrants as derivative liabilities in its previously issued financial statements. Under this accounting treatment, the Company is required to measure the fair
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CM LIFE SCIENCES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
value of the warrants at the end of each reporting period and recognize changes in the fair value from the prior period in the Company’s operating results for the current period. In addition, at the IPO, the Company re-allocated a portion of the IPO transaction costs related to the warrant liabilities, which resulted in additional operating costs that were expensed through the statement of operations.
The Company’s accounting for the warrants as components of equity instead of as derivative liabilities did not have any effect on the Company’s previously reported operating expenses, cash flows or cash.
 As Previously ReportedAdjustmentsAs Restated
Balance sheet as of September 4, 2020 (audited)   
Warrant Liabilities$— $43,462,868 $43,462,868 
Class A Common Stock Subject to Possible Redemption423,731,850 (43,462,868)380,268,982 
Class A Common Stock190 434 624 
Additional Paid-in Capital5,001,390 12,855,371 17,856,761 
Accumulated Deficit(2,681)(12,855,805)(12,858,486)
Total Stockholders’ Equity5,000,006 — 5,000,006 
   
Balance sheet as of September 30, 2020 (unaudited)  
Warrant Liabilities$— $48,148,484 $48,148,484 
Class A Common Stock Subject to Possible Redemption423,677,610 (48,148,484)375,529,126 
Class A Common Stock191 481 672 
Additional Paid-in Capital5,055,629 17,540,941 22,596,570 
Accumulated Deficit(56,923)(17,541,422)(17,598,345)
Total Stockholders’ Equity5,000,004 — 5,000,004 
   
Balance sheet as of December 31, 2020 (audited)  
Warrant Liabilities— 70,322,418 70,322,418 
Class A Common Stock Subject to Possible Redemption423,542,290 (70,322,420)353,219,870 
Class A Common Stock192 703 895 
Additional Paid-in Capital5,190,948 39,714,654 44,905,602 
Accumulated Deficit(192,244)(39,715,355)(39,907,599)
Total Stockholders’ Equity5,000,003 2 5,000,005 
   
Period from July 10, 2020 (inception) to September 30, 2020 (unaudited)  
Change in value of warrant liability— 16,336,651 16,336,651 
Transaction costs— 1,204,771 1,204,771 
Net loss(56,923)(17,541,422)(17,598,345)
Weighted average shares outstanding of Class A redeemable common stock44,275,000 — 44,275,000 
Basic and diluted earnings per share, Class A redeemable common stock— — — 
Weighted average shares outstanding of Class B non-redeemable common stock11,068,750 — 11,068,750 
Basic and diluted net loss per share, Class B non-redeemable common stock(0.01)(1.58)(1.59)
Period from July 10, 2020 (inception) to December 31, 2020 (audited)
Change in value of warrant liability$— $38,510,584 $38,510,584 
Transaction costs— 1,204,771 1,204,771 
Net loss(192,244)(39,715,354)(39,907,599)
F-89

CM LIFE SCIENCES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
Weighted average shares outstanding of Class A redeemable common stock44,275,000 — 44,275,000 
Basic and diluted earnings per share, Class A redeemable common stock0.000.000.00
Weighted average shares outstanding of Class B non-redeemable common stock10,633,062 — 10,633,062 
Basic and diluted net loss per share, Class B non-redeemable common stock(0.02)(3.73)(3.75)
    
Cash Flow Statement for the Period from July 10, 2020 (inception) to September 30, 2020 (unaudited)   
Net loss$(56,923)$(17,541,422)$(17,598,345)
Allocation of initial public offering costs to warrant liability— 1,204,771 1,204,771 
Change in fair value of warrant liability— 16,336,651 16,336,651 
Initial classification of warrant liability— 31,811,834 31,811,834 
Initial classification of common stock subject to possible redemption423,731,850 (43,462,868)380,268,982 
Change in value of common stock subject to possible redemption(54,240)(4,685,617)(4,739,857)
   
Cash Flow Statement for the Period from July 10, 2020 (inception) to December 31, 2020 (audited)   
Net loss$(192,244)$(39,715,355)$(39,907,599)
Change in fair value of warrant liability— 38,510,584 38,510,584 
Allocation of initial public offering costs to warrant liability 1,204,771 1,204,771 
Initial classification of warrant liability— 31,811,834 31,811,834 
Initial classification of common stock subject to possible redemption423,731,850 (43,462,868)380,268,982 
Change in value of common stock subject to possible redemption(1,539,252)(25,509,860)(27,049,112)
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
presentation. The accompanying financial statementsCombined Carve Out Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (US GAAP).
Principles of America (“U.S. GAAP”)consolidation. The accompanying Combined Carve Out Financial Statements include the accounts of GeneDx and pursuant toof our wholly owned subsidiary, MyGeneTeam and MyGeneTeam Canada and were derived from the rulesConsolidated Financial Statements and regulationsaccounting records of the SEC.
Emerging Growth CompanyParent as if GeneDx were operated on a standalone basis during the periods presented and were prepared in accordance with US GAAP. All intercompany accounts and transactions were eliminated in consolidation.
The Company is an “emerging growth company,” as defined in Section 2(a)Combined Carve Out Statements of Operations of GeneDx reflect general corporate and operating expenses provided by both the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”),Parent and it may take advantage of certain exemptions from various reporting requirements that are applicableBioReference to other public companies that are not emerging growth companiesGeneDx, including, but not limited to, not being requiredexecutive management, finance, legal, information technology, employee benefits administration, treasury, procurement, and other shared services. Actual costs that may have been incurred had GeneDx been a standalone company would have depended on a number of factors, including the chosen organizational structure, outsourced functions versus those performed by employees, and strategic decisions made in areas such as information technology and infrastructure.
The Combined Carve Out Balance Sheets (the “Combined Carve Out Balance Sheets”) of GeneDx include Parent and BioReference assets and liabilities that were specifically identifiable or otherwise attributable to comply withGeneDx, including subsidiaries and affiliates in which the independent registered public accounting firm attestation requirementsParent has a controlling financial interest or is the primary beneficiary. All cash inflows and outflows obtained and used from operations were swept to BioReference’s centralized account. GeneDx reflects transfers of Section 404cash to and from BioReference’s cash management system as a component of Total Shareholder’s Equity in the Sarbanes-Oxley Act,Combined Carve Out Balance Sheets.
The Combined Carve Out Financial Statements include GeneDx’s net assets and statement of 2002, reduced disclosure obligations regarding executive compensation in its periodic reportscomprehensive loss as described above. All intercompany transactions and proxy statements, and exemptions fromaccounts within the requirementscombined businesses of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.GeneDx have been eliminated.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging
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CM LIFE SCIENCES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
estimates. The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future events. Accordingly, the actual Actual results could differ significantly from thosethese estimates.
Class A common stock subject to possible redemption
The Company accounts for its Class A common stock subject to possible redemption in accordanceCash and cash equivalents. Cash and cash equivalents include short-term, interest-bearing instruments with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Class A Common stock subject to mandatory redemption is classified as a liability instrument and is measuredoriginal maturities of 90 days or less at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at December 31, 2020, Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.
Offering Costs
Offering costs consist of underwriting, legal, accounting and other expenses incurred through the Initial Public Offering that are directly related to the Initial Public Offering. Offering costs amounting to $23,690,693 were charged to stockholders’ equity upon the completion of the Initial Public Offering. At the IPO date, $1,204,771 of offering costs were expensed through the statement of operations.
Warrant Liability
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance,purchase. We also consider all highly liquid investments with original maturities at the date of purchase of 90 days or less as cash equivalents. These investments include money markets and each balance sheet date thereafter. Changesbank deposits.
Inventory. Inventory is valued at the lower of cost and net realizable value. Cost is determined by the first-in, first-out method. We consider such factors as the amount of inventory on hand, estimated time required to sell such inventory, remaining shelf-life, quality assessments and current market conditions to determine whether inventory is stated at the lower of cost and net realizable value. Inventory consists primarily of purchased laboratory supplies, which are used in our testing laboratory. GeneDx relies on a limited number of suppliers for certain laboratory reagents, as well as sequencers and other equipment and materials that it uses in its laboratory operations. GeneDx does not have short- or long-term agreements with all of its suppliers, and its suppliers could cease supplying these materials and equipment at any time, or fail to provide it with sufficient quantities of materials or materials that meet its specifications.
Goodwill and intangible assets. Goodwill represents the difference between the purchase price and the estimated fair value of net assets acquired as accounted for under the warrants areacquisition method of accounting. We recognized goodwill and intangible assets as a non-cash gain or loss on the statementsresult of operations.applying pushdown accounting in connection with OPKO’s
F-91F-49

CM LIFE SCIENCES, INC.
NOTES TO FINANCIAL STATEMENTSacquisition of BioReference in 2015. We determined the fair value of our intangible assets using the “income method.”
DECEMBERGoodwill and indefinite lived intangible assets are tested at least annually as of October 1 for impairment, or when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable, by assessing qualitative factors, and performing a quantitative analysis if and when required, in determining whether it is more likely than not that its fair value exceeds the carrying value. Intangible assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.
Goodwill was $282.0 million as of both December 31, 2021 and 2020. Estimating the fair value of a reporting unit for goodwill impairment is highly sensitive to changes in projections and assumptions and changes in assumptions could potentially lead to impairment. We perform sensitivity analyses around our assumptions in order to assess the reasonableness of the assumptions and the results of our testing. Ultimately, potential changes in these assumptions may impact the estimated fair value of a reporting unit and result in an impairment if the fair value of such reporting unit is less than its carrying value.
Net intangible assets other than goodwill were $166.9 million and $183.7 million, respectively, as of December 31, 2021 and 2020.
We believe that our estimates and assumptions are reasonable and otherwise consistent with assumptions that marketplace participants would use in their estimates of fair value. However, if future results are not consistent with our estimates and assumptions, including as a result of the COVID-19 pandemic, then we may be exposed to an impairment charge, which could be material. We have one reporting segment and have reached a cumulative goodwill impairment loss of $170.6 million prior to January 1, 2019. No goodwill or intangible asset impairment was recorded for the years ended December 31, 2021 and 2020 as a result of our testing.
We amortize intangible assets with definite lives on a straight-line basis over their estimated useful lives, ranging from 3 to 20 years. We use the straight-line method of amortization as there is no reliably determinable pattern in which the economic benefits of our intangible assets are consumed or otherwise used up. Amortization expense was $16.8 million for each of the years ended December 2021 and 2020. Amortization expense from operations for our intangible assets is expected to be $16.8 million, $15.2 million, $12.3 million, $12.0 million, and $11.5 million for the years ended December 31, 2022, 2023, 2024, 2025 and 2026, respectively.
Fair value measurements. The carrying amounts of our cash and cash equivalents, accounts receivable and accounts payable approximate their fair values due to the short-term maturities of these instruments and accounts. The fair value of the due to/due from Parent and its subsidiaries is not practical to estimate due to the uncertainty regarding the timing of future payments.
Property, plant and equipment. Property, plant and equipment are recorded at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the assets and includes amortization expense for assets capitalized under capital leases. The estimated useful lives by asset class are as follows: software - 3 years, computer equipment - 5 years, machinery, medical and other equipment - 8 years, furniture and fixtures - 12 years, leasehold improvements - the lesser of 10 years or the lease term and automobiles - lease term. Expenditures for repairs and maintenance are charged to expense as incurred. Depreciation expense was $5.1 million and $4.1 million for the years ended December 31, 2021 and 2020, respectively.
Impairment of long-lived assets. Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, then an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. No impairment charges were recorded for the years ended December 31, 2021 and 2020.
F-50

Impairment of Equity Method Investments. Equity method investments are assessed for impairment annually or when events or circumstances suggest that the carrying amount of the investment may be impaired. An impairment charge is recorded in earnings when the decline in value below the carrying amount of its equity method investment is determined to be other-than-temporary.
Stock Compensation.OPKO grants stock options to certain employees of GeneDx and the annual contribution of non-cash employee stock compensation is recorded in operating expenses in the accompanying Combined Carve Out Statements of Comprehensive Loss with a corresponding contribution to additional paid in capital. Stock compensation for the years ended December 31, 2021 and and December 31, 2020 were:
20212020
Cost of services$293 $58 
Research and development274 39 
Selling and marketing133 7 
General and administrative1,122 15 
Total stock-based compensation expense$1,822 $119 
Income taxes. Income taxes are determined as if we filed tax returns on a standalone basis utilizing the Separate Return Method. We are included in the consolidated federal income tax return filed by OPKO.
Income Taxes
The Company followstaxes are accounted for under the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.”asset-and-liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and theirthe respective tax bases.bases and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in incomeoperations in the period that includedincludes the enactment date. We periodically evaluate the realizability of our net deferred tax assets. Our tax accruals are analyzed periodically and adjustments are made as events occur to warrant such adjustment. Valuation allowances are established, when necessary, to reduceon certain U.S. deferred tax assets toand non-U.S. deferred tax assets may be established because realization of these tax benefits does not meet the amount expected to be realized.more-likely-than-not threshold.
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognizedthe tax benefits as incomebenefit from an uncertain tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of December 31, 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
Net Income (Loss) per Common Share
Net income (loss) per common share is computed by dividing net income by the weighted average number of common shares outstanding for the period. The Company has not considered the effect of warrants sold in the Initial Public Offering and private placement to purchase 21,995,000 shares of Class A common stock in the calculation of diluted income per share, since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.
The Company’s statement of operations includes a presentation of income (loss) per share for common shares subject to possible redemption in a manner similar to the two-class method of income (loss) per share. Net income per common share, basic and diluted, for Class A redeemable common stock is calculated by dividing the interest income earned on the Trust Account less income and franchise taxes, by the weighted average number of Class A redeemable common stock outstanding since original issuance. Net loss per share, basic and diluted, for Class B non-redeemable common stock is calculated by dividing the net loss, adjusted for income attributable to Class A redeemable common stock, net of applicable franchise and income taxes, by the weighted average number of Class B non-redeemable common stock outstanding for the period. Class B non-redeemable common stock includes the Founder Shares as these shares do not have any redemption features and do not participate in the income earned on the Trust Account.
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CM LIFE SCIENCES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
The following table reflects the calculation of basic and diluted net income (loss) per common share (in dollars, except per share amounts):
For the Period From July 10, 2020 (inception) Through December 31,
2020
Redeemable Class A Common Stock
Numerator: Earnings allocable to Redeemable Class A Common Stock
Interest Income$13,951 
Income and Franchise Tax(13,951)
Net Earnings$— 
Denominator: Weighted Average Redeemable Class A Common Stock
Redeemable Class A Common Stock, Basic and Diluted44,275,000 
Earnings/Basic and Diluted Redeemable Class A Common Stock$— 
Non-Redeemable Class A and B Common Stock
Numerator: Net Income (Loss) minus Redeemable Net Earnings
Net Income (Loss)$(39,907,599)
Redeemable Net Earnings— 
Non-Redeemable Net Loss$(39,907,599)
Denominator: Weighted Average Non-Redeemable Class A and B Common Stock
Non-Redeemable Class A and B Common Stock, Basic and Diluted10,633,062 
Loss/Basic and Diluted Non-Redeemable Class A and B Common Stock$(3.75)
Note: As of December 31, 2020, basic and diluted shares are the same as there are no non-redeemable securities that are dilutive to the Company’s stockholders.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.
Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
•Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;
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DECEMBER 31, 2020
•Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
•Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.
Recently Issued Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.
NOTE 4. INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering, the Company sold 44,275,000 Units, which includes the full exercise by the underwriter of its over-allotment option in the amount of 5,775,000 Units, at a purchase price of $10.00 per Unit. Each Unit consists of one share of Class A common stock and one-third of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 8).
NOTE 5. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, the Sponsor and certain of the Company’s independent directors purchased an aggregate of 7,236,667 Private Placement Warrants, at a price of $1.50 per Private Placement Warrant, for an aggregate purchase price of $10,855,000. The Sponsor purchased 6,903,335 Private Placement Warrants, and each of Mr. Islam and Dr. Leproust (and/or one or more entities controlled by them) purchased 166,666 Private Placement Warrants. Each Private Placement Warrant is exercisable to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 8). Proceeds from the sale of the Private Placement Warrants were added to the net proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless
NOTE 6. RELATED PARTY TRANSACTIONS
Founder Shares
In July 2020, the Sponsor paid $25,000 to cover certain offering costs of the Company in consideration for 10,062,500 shares of the Company’s Class B common stock (the “Founder Shares”). In August 2020, the Sponsor transferred 25,000 Founder Shares to each of Munib Islam, Emily Leproust and Nat Turner, certain of the
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NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
Company’s independent directors, at their original per-share purchase price, for an aggregate of 75,000 Founder Shares transferred. On September 1, 2020, the Company effected a 1:1.1 stock split of its Class B common stock, resulting in the Sponsor holding an aggregate of 10,993,750 Founder Shares and there being an aggregate of 11,068,750 Founder Shares outstanding. All share and per-share amounts have been retroactively restated to reflect the stock split, The Founder Shares included an aggregate of up to 1,443,750 shares subject to forfeiture by the Sponsor to the extent that the underwriter’s over-allotment was not exercised in full or in part, so that the number of Founder Shares would equal, on an as-converted basis, approximately 20% of the Company’s issued and outstanding shares of common stock after the Initial Public Offering. As a result of the underwriter’s election to fully exercise its over-allotment option, 1,443,750 Founder Shares are no longer subject to forfeiture.
The Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (A) one year after the completion of a Business Combination and (B) subsequent to a Business Combination, (x) if the last reported sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of the Public Stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Promissory Note – Related Party
On July 16, 2020, the Sponsor issued an unsecured promissory note to the Company (the “Promissory Note”), pursuant to which the Company could borrow up to an aggregate principal amount of $300,000. The Promissory Note was non-interest bearing and payable on the earlier of (i) December 31, 2020 or (ii) the consummation of the Initial Public Offering. The outstanding balance under the Promissory Note of $165,081 was repaid at the closing of the Initial Public Offering on September 4, 2020.
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes may be repaid upon completion of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of the notes may be converted upon completion of a Business Combination into warrants at a price of $1.50 per warrant. Such warrants would be identical to the Private Placement Warrants. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. As of December 31, 2020, there were no amounts outstanding under the Working Capital Loans.
NOTE 7. COMMITMENTS AND CONTINGENCIES
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Registration Rights
Pursuant to a registration rights agreement entered into on September 1, 2020, the holders of the Founder Shares, Private Placement Warrants and securities that may be issued upon conversion of Working Capital Loans and forward purchase shares are entitled to registration rights. The holders of these securities will be entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the
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NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriter is entitled to a deferred fee of $0.35 per Unit, or $15,496,250 in the aggregate. The deferred fee will become payable to the underwriter from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Forward Purchase Agreement
The Company entered into separate forward purchase agreements with affiliates of the Sponsor, Casdin Capital, LLC (“Casdin”) and Corvex Management LP (“Corvex”), in their capacities as investment advisors on behalf of one or more investment funds, clients or accounts managed by each of Casdin and Corvex, respectively (collectively, their “Clients”), pursuant to which, subject to the conditions described below, they will cause the Clients to purchase from the Company up to an aggregate amount of 15,000,000 shares of Class A common stock, or the forward purchase shares, for $10.00 per forward purchase share, or an aggregate amount of up to $150,000,000, in a private placement that will close concurrently with the closing of a Business Combination. The amount of forward purchase shares sold pursuant to the forward purchase agreements will be determined in the Company’s discretion based on the Company’s need for additional capital to consummate a Business Combination. Under each forward purchase agreement, the Company is required to approach Casdin and Corvex if it proposes to raise additional capital by issuing any equity, or securities convertible into, exchangeable or exercisable for equity securities in connection with a Business Combination. The respective obligations of Casdin and Corvex to purchase forward purchase shares will, among other things, be conditioned on the Company completing a Business Combination with a company engaged in a business that is within the investment objectives of the Clients purchasing forward purchase shares and on the Business Combination (including the target assets or business, and the terms of the Business Combination) being reasonably acceptable to such Clients as determined by Casdin or Corvex, as relevant, as investment advisors on behalf of such Clients. Each of Casdin and Corvex will have the right to transfer a portion of its purchase obligation under the forward purchase agreement to third parties, subject to compliance with applicable securities laws. To the extent that the Company obtains alternative financing to fund the initial Business Combination and the Clients participate in such financing, the aggregate commitment under the forward purchase agreement will be reduced by the amount of such alternative financing.
NOTE 8. STOCKHOLDERS’ EQUITY
Preferred Stock — The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. At December 31, 2020, there were no shares of preferred stock issued or outstanding.
Class A Common Stock — The Company is authorized to issue 380,000,000 shares of Class A common stock with a par value of $0.0001 per share. Holders of Class A common stock are entitled to one vote for each share. At December 31, 2020, there were 8,953,013 shares of Class A common stock issued and outstanding, excluding 29,474,795 shares of Class A common stock subject to possible redemption.
Class B Common Stock — The Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of $0.0001 per share. Holders of Class B common stock are entitled to one vote for each share. At December 31, 2020, there were 11,068,750 shares of Class B common stock issued and outstanding.
The shares of Class B common stock will automatically convert into Class A common stock concurrently with or immediately following the consummation of the Business Combination, on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in connection with a Business Combination, the number of shares of Class A common stock issuable upon conversion of all Founder Shares will equal, in the aggregate, on an as-converted basis, 20% of the total number of shares of Class A common stock outstanding after such conversion (after giving effect to any
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CM LIFE SCIENCES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
redemptions of shares of Class A common stock by public stockholders), including the total number of shares of Class A common stock issued, or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of a Business Combination (including the forward purchase shares), excluding any shares of Class A common stock or equity-linked securities or rights exercisable for or convertible into shares of Class A common stock issued, or to be issued, to any seller in a Business Combination and any Private Placement Warrants issued to the Sponsor, officers or directors upon conversion of Working Capital Loans, provided that such conversion of Founder Shares will never occur on a less than one-for-one basis.
NOTE 9. WARRANT LIABILITY
Warrants — Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination and (b) 12 months from the closing of the Initial Public Offering. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue shares of Class A common stock upon exercise of a warrant unless the share of Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants.
The Company has agreed that as soon as practicable, but in no event later than 15 business days, after the closing of a Business Combination, it will use its best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the Class A common stock issuable upon exercise of the Public Warrants. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the Public Warrants in accordance with the provisions of the warrant agreement. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the sixtieth (60th) business day after the closing of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if the Class A common stock are, at the time of any exercise of a Public Warrant, not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their Public Warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, and in the event the Company does not so elect, it will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Redemption of Warrants When the Price per Share of Class A Common Stock Equals or Exceeds $18.00 — Once the warrants become exercisable, the Company may redeem the outstanding Public Warrants:
•in whole and not in part;
•at a price of $0.01 per warrant;
•upon not less than 30 days’ prior written notice of redemption, or the 30-day redemption period, to each warrant holder; and
•if, and only if the reported last sale price of the Company’s Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the
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CM LIFE SCIENCES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
like) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.
If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
Redemption of Warrants When the Price per Share of Class A Common Stock Equals or Exceeds $10.00 — Once the warrants become exercisable, the Company may redeem the outstanding warrants:
•in whole and not in part;
•at a price of $0.10 per warrant provided that holders will be able to exercise their warrants prior to redemption and receive that number of shares of Class A common stock determined based on the redemption date and the “fair market value” of the Company’s Class A common stock;
• upon a minimum of 30 days’ prior written notice of redemption;
• if, and only if, the last reported sale price of the Company’s Class A common stock equals or exceeds $10.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) on the trading day prior to the date on which the Company sends the notice of redemption to the warrant holders;
•if, and only if, there is an effective registration statement covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants and a current prospectus relating thereto is available throughout the 30-day period after the written notice of redemption is given.
In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors, and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or its affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of a Business Combination on the date of the completion of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s Class A common stock during the 20 trading day period starting on the trading day after the day on which the Company completes a Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, the $18.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price, and the $10.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that (1) the Private Placement Warrants and the Class A common stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or saleable until 30 days after the completion of a Business Combination, subject to certain limited exceptions, (2) the Private Placement Warrants will be exercisable on a cashless basis, (3) the Private Placement Warrants will be non-redeemable (except as described above in “Redemption of Warrants When the Price per Share of Class A Common Stock Equals or Exceeds $10.00”) so long as they are held by the initial purchasers or their permitted transferees, and (4) the holders of the Private Placement Warrants and the Class A common stock issuable upon the exercise of the Private Placement Warrants will have certain registration rights. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
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NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE 10. INCOME TAX
The Company’s net deferred tax assets are as follows:
December 31, 2020
Deferred tax asset
Net operating loss carryforward$16,902 
Organizational costs/Startup expenses23,469 
Total deferred tax asset40,371 
Valuation allowance(40,371)
Deferred tax asset, net of allowance$— 
The income tax provision consists of the following:
December 31, 2020
Federal
Current$— 
Deferred(40,371)
State
Current$— 
Deferred— 
Change in valuation allowance40,371 
Income tax provision$— 
As of December 31, 2020, the Company had a U.S. federal net operating loss carryover of approximately $80,000 available to offset future taxable income.
In assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portionthe tax position will be sustained on examination by the taxing authorities.
Revenue recognition. We recognize revenue when a customer obtains control of allpromised goods or services in accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“Topic 606”). The amount of revenue that is recorded reflects the consideration that we expect to receive in exchange for those goods or services. We apply the following five-step model in order to determine this amount: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation.
We apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, we review the contract to determine which performance obligations we must deliver and which of these performance obligations are distinct. We recognize as revenue the amount of the deferred tax assets will not be realized. The ultimate realization of deferred tax assetstransaction price that is dependent uponallocated to the generation of future taxable income duringrespective performance obligation when the periods inperformance obligation is satisfied or as it is satisfied.
Revenue for laboratory services is recognized at the time test results are reported, which temporary differences representing net future deductible amounts become deductible. Management considersapproximates when services are provided and the scheduled reversal of deferred tax liabilities, projected future taxable incomeperformance obligations are satisfied. Services are provided to patients covered by various third-party payer programs, including various managed care organizations, as well as the Medicare and tax planning strategies in making this assessment. After consideration of all of the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance.Medicaid programs. For the period from July 10, 2020 (inception) throughyears ended December 31, 2021 and 2020, approximately 8.6% and 6.2%, respectively, of our revenues were derived directly from the change in the valuation allowance was $40,371.
A reconciliation of the federal income tax rate to the Company’s effective tax rate at December 31, 2020 is as follows:
December 31, 2020
Statutory federal income tax rate21 %
State taxes, net of federal tax benefit— %
Change in fair value of warrant liability(20.0)%
Transaction costs(1.0)%
Change in valuation allowance— %
Income tax provision— %
Medicare and Medicaid programs. Billings for services under third-
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CM LIFE SCIENCES, INC.
NOTES TO FINANCIAL STATEMENTSparty payer programs are included in revenue net of allowances for contractual discounts, allowances for differences between the amounts billed and estimated program payment amounts and implicit price concessions provided to uninsured patients which are all elements of variable consideration.
DECEMBERThe complexities and ambiguities of billing, reimbursement regulations and claims processing, as well as issues unique to Medicare and Medicaid programs, require us to estimate the potential for retroactive adjustments in the recognition of revenue in the period the related services are rendered. Adjustments to the estimated payment amounts are recorded upon settlement as an adjustment to revenue.
Concentration of credit risk and allowance for doubtful accounts. Financial instruments that potentially subject us to concentrations of credit risk consist primarily of accounts receivable. Substantially all of our accounts receivable are with either companies in the health care industry or patients. However, credit risk is limited due to the number of our clients as well as their distribution across many different geographic regions.
While we have receivables due from federal and state governmental agencies, we do not believe that such receivables represent a credit risk because the related health care programs are funded by federal and state governments, and payment is primarily dependent upon submitting appropriate documentation. As of December 31, 2021 and 2020, receivable balances (net of explicit price concessions) from Medicare and Medicaid were 3.7% and 6.9%, respectively, of our Accounts receivable, net.
The portion of our accounts receivable due from individual patients comprises the largest portion of credit risk. As of December 31, 2021 and 2020, receivables due from patients represented approximately 2.0% and 3.0%, respectively, of our Accounts receivable, net.
We assess the collectability of accounts receivable balances by considering factors such as historical collection experience, customer credit worthiness, the age of accounts receivable balances, regulatory changes and current economic conditions and trends that may affect a customer’s ability to pay. Actual results could differ from those estimates. Our reported net loss is directly affected by our estimate of the collectability of accounts receivable.
Due to/from Parent and its subsidiaries. Due to/from Parent and its subsidiaries primarily represents operations between GeneDx and subsidiaries of the Parent. The Company uses a centralized approach to cash management and financing of its operations. The fair value of the due from/to Parent and its subsidiaries is not practical to estimate due to the uncertainty regarding the timing of future payments.
Shipping and handling costs. We do not charge customers for shipping and handling costs. Shipping and handling costs are classified as Cost of revenues in the Combined Carve Out Statements of Comprehensive Loss.
Recently adopted accounting pronouncements.
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. The ASU is effective for public entities for fiscal years beginning after December 15, 2019, with early adoption permitted. The adoption of ASU 2016-13 on January 1, 2020, did not have a significant impact on our Combined Financial Statements.
Pending accounting pronouncements.
In August 2020, the FASB issued ASU No. 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40).” ASU 2020-06 will simplify the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. The ASU is effective for public entities for fiscal years beginning after December 15, 2021, with early adoption permitted. We are currently evaluating the impact of this new guidance on our Combined Financial Statements.
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Note 4 Cost Allocations from BioReference
The historical costs and expenses reflected in our Combined Carve Out Financial Statements include an allocation for certain corporate and shared service functions provided by BioReference, including, but not limited to accounting, legal, human resources, information technology and other shared services. These expenses have been allocated to us on the basis of direct usage when identifiable, with the remainder allocated based on estimates to reasonably reflect the historical utilization of these services.
Management believes the assumptions underlying our Combined Carve Out Financial Statements, including the assumptions regarding the allocation of general corporate expenses from BioReference, are reasonable. Nevertheless, our Combined Carve Out Financial Statements may not include all of the actual expenses that would have been incurred had we operated as a standalone company during the periods presented and may not reflect our combined results of operations, financial position and cash flows had we operated as a standalone company during the periods presented. Actual costs that would have been incurred if we had operated as a standalone company would have depended on multiple factors, including organizational structure and strategic decisions made in various areas.
Note 5 Investments
In August 2020, GeneDx announced that it had entered into an operating agreement with Pediatrix Medical Group (“Pediatrix”), a provider of maternal-fetal, and pediatric medical and surgical subspecialty physician services, to offer genomic sequencing to support clinical diagnosis in neonatal intensive care units staffed by Pediatrix’s affiliated neonatologists (the “Operating Agreement”). The offering had planned to include whole exome and whole genome sequencing and genomic support services under the brand Detect Genomix (the “Joint Venture”).
Our initial capital investment in the Joint Venture was $245,000, for which we received a 49% ownership interest the Joint Venture. Beyong the initial investment, we have not made any other investments in or loans in the Joint Venture through December 31, 2021.
In order to determine the primary beneficiary of the Joint Venture, we evaluated our investment to identify if we had the power to direct the activities that most significantly impact the economic performance of the Joint Venture. Based on the capital structure, governing documents and overall business operations of the Joint Venture, we determined that, while a variable interest entity (VIE), we do not have the power to direct the activities that most significantly impact the Joint Venture’s economic performance. We determined, however, that we can significantly influence control of the Joint Venture through our board representation and voting power. Therefore, we have the ability to exercise significant influence over the Joint Venture’s operations and account for our investment the Joint Venture under the equity method.
In January 2022, GeneDx and Pediatrix reached a mutual agreement to withdraw as members of the Joint Venture, release each party’s restrictions and obligations under the Operating Agreement, cooperate to effect the winding down and dissolution of the Joint Venture, and effect other customary release and discharges related to the Joint Venture. We determined an other-than-temporary impairment on our equity method investment as a result of the termination and adjusted the carrying value of the investment as of December 31, 2021 to our recovery value.
The proportionate share of cash on hand at the Joint Venture was returned to GeneDx in February 2022.
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Note 6 Composition of Certain Combined Carve Out Financial Statement Captions
December 31,
(In thousands)20212020
Prepaid expenses and other current assets:
Prepaid supplies, insurance and maintenance$3,422 $953 
Taxes recoverable1,516 1,515 
Other receivables288 1,207 
$5,226 $3,675 
Property, plant and equipment, net:
Machinery, medical and other equipment$28,558 $32,232 
Leasehold improvements16,633 11,215 
Furniture and fixtures1,035 733 
Software179 35 
Less: accumulated depreciation(18,128)(24,044)
$28,277 $20,171 
Intangible assets, net:
Customer relationships$237,725 $237,725 
Technologies36,100 36,100 
Covenants not to compete3,400 3,400 
Less: accumulated amortization(110,337)(93,523)
$166,888 $183,702 
Accrued expenses:
Employee benefits$8,341 $7,021 
Other7,224 8,758 
$15,565 $15,779 
Other long-term liabilities:
Social Security employer deferral$— $980 
Other— 1 
$— $981 
Note 7 Shareholder’s Equity
Our authorized capital stock consists of 100 shares of common stock, $0.01 par value per share. As of December 31, 2021 and 2020, all shares of our common stock were issued and outstanding and held by BioReference.
Note 8 Debt Guarantee
On November 5, 2015, BioReference and certain of its subsidiaries, including GeneDx, entered into a credit agreement with JPMorgan Chase Bank, N.A. (“CB”), as lender and administrative agent, which was amended and restated on August 30, 2021 (the “A&R Credit Agreement”). The A&R Credit Agreement provides for a $75.0 million secured revolving credit facility and includes a $20.0 million sub-facility for swingline loans and a $20.0 million sub-facility for the issuance of letters of credit. The A&R Credit Agreement matures on August 30, 2024 and is guaranteed by all of BioReference and its domestic subsidiaries including GeneDx. The A&R Credit Agreement is also secured by substantially all assets of BioReference and its domestic subsidiaries, including GeneDx. Availability under the A&R Credit Agreement is based on a borrowing base composed of BioReference’s eligible accounts receivables, which includes GeneDx, as specified therein. As of December 31, 2021, there was no outstanding balance and as of December 31, 2020, $7.1 million was outstanding under the A&R Credit Agreement.
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At BioReference’s option, borrowings under the A&R Credit Agreement (other than swingline loans) will bear interest at (i) the CB floating rate (defined as the higher of (a) the prime rate and (b) the LIBOR rate (adjusted for statutory reserve requirements for Eurocurrency liabilities) for an interest period of one month plus 2.50%) plus an applicable margin of 0.75% or (ii) the LIBOR rate (adjusted for statutory reserve requirements for Eurocurrency liabilities) plus an applicable margin of 1.75%. Swingline loans will bear interest at the CB floating rate plus the applicable margin. The A&R Credit Agreement also calls for other customary fees and charges, including an unused commitment fee of 0.375% if the average quarterly availability is 50% or more of the revolving commitment, or 0.25% if the average quarterly availability is less than or equal to 50% of the revolving commitments.
As of December 31, 2021, $64.8 million remained available to BioReference for borrowing under the A&R Credit Agreement.
Note 9 Income Taxes
Our Carve Out Financial Statements and related disclosures apply the Separate Return Method and recognize the current and deferred income tax consequences that result from our activities during the current and preceding periods pursuant to the provisions of Accounting Standards Codification Topic 740, Income Taxes (ASC 740), as if we were a separate taxpayer rather than a member of OPKO’s consolidated income tax return. In 2021 and 2020, the difference between our separate company income tax benefit and cash flows attributable to income taxes have been recognized as capital contributions from BioReference.
We operate and are required to file tax returns in the United States and Canada, as well as with various U.S. states.
The provision for income taxes consists of the following benefit (expense):
For the years ended
December 31,
(In thousands)20212020
Current
Federal$— — 
State(4)(23)
Foreign(75)(180)
(79)(203)
Deferred
Federal10,382 9,838 
State2,244 2,402 
12,626 12,240 
Total income tax benefit, net$12,547 $12,037 
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Deferred income tax assets and liabilities as of December 31, 2021 and 2020 consist of the following:
For the year ended December 31,
(In thousands)20212020
Deferred income tax assets:
Accruals$16 $427 
Stock options1,361 949 
Lease liability2,467 1,819 
Federal net operating losses14,237 6,433 
State net operating losses3,444 1,576 
Other276 517 
Total deferred income tax assets21,801 11,721 
Deferred income tax liabilities:
Intangible assets(41,327)(45,319)
Fixed assets(1,572)(752)
Lease assets(2,215)(1,699)
Other(750)(641)
Deferred income tax liabilities(45,864)(48,411)
Net deferred income tax liabilities$(24,063)$(36,690)
As of December 31, 2021, we had tax-effected federal and state net operating loss carryforwards of approximately $14.2 million and $3.4 million respectively, which expire in varying amounts and various dates through 2041 unless indefinite in nature. While the Company fileson a separate return method has net operating losses, these net operating losses have been absorbed by OPKO. As of each reporting date, we evaluated the realization of our U.S. and Canadian deferred tax assets and have determined that all deferred tax assets will more likely than not be realized and no valuation allowance is required. We file federal income tax returns in the U.S. federal jurisdiction inand Canada, as well as with various state and local jurisdictions and isU.S. states. We are subject to examinationroutine tax audits in all jurisdictions for which we file tax returns. Tax audits by their very nature are often complex and can require several years to complete.
U.S. Federal: Under the tax statute of limitations applicable to the Internal Revenue Code, we are no longer subject to U.S. federal income tax examinations by the various taxing authorities.Internal Revenue Service for tax years before 2018.
State: Under the statutes of limitation applicable to most state income tax laws, we are no longer subject to state income tax examinations by tax authorities for years before 2017 in states in which we have filed income tax returns. Certain states may take the position that we are subject to income tax in such states even though we have not filed income tax returns in such states and, depending on the varying state income tax statutes and administrative practices, the statutes of limitations in such states may extend to years before 2017.
NOTE 11. FAIR VALUE MEASUREMENTSForeign: Under the statutes of limitations applicable to our operations in Canada, we are generally no longer subject to tax examination for years before 2018 in jurisdictions where we have filed income tax returns.
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Other Income Tax Disclosures
The fair valuesignificant elements contributing to the difference between the federal statutory tax rate and the effective tax rate are as follows:
For the years ended
December 31,
20212020
Federal statutory rate21.0 %21.0 %
State income taxes, net of federal benefit5.0 %5.1 %
Rate change(0.5)%(0.1)%
Permanent differences(0.1)%(0.1)%
Income tax refunds0.0 %0.0 %
Other0.0 %(0.2)%
Total25.4 %25.7 %
On December 22, 2017, the 2017 Tax Cuts and Jobs Act (the “Tax Act”) was enacted into law and the new legislation contained several key tax provisions, including a reduction of the Company’s financialcorporate income tax rate from 35% to 21% effective January 1, 2018. We were required to recognize the effect of the tax law changes in the period of enactment, such as remeasuring our U.S. deferred tax assets and liabilities, reflects management’s estimateas well as reassessing the net realizability of amounts thatour deferred tax assets and liabilities.
Prior to the Company would have received in connection with the saleenactment of the assets or paidTax Act, we regularly determined the undistributed earnings in connection withCanada to be indefinitely reinvested outside the transferUnited States. Our intent is to permanently reinvest these funds outside the U.S. and our current plans do not demonstrate a need to repatriate the cash to fund U.S. operations. However, if these funds were repatriated, we would be required to accrue and pay applicable U.S. taxes (if any) and withholding taxes payable to foreign tax authorities.
Note 10 Related Party Transactions
Dr. Roger Medel, a director of OPKO as of December 18, 2020, is the former Chief Executive Officer of Pediatrix. Dr. Medel continues to serve on the board of Pediatrix.
Note 11 Employee Benefit Plans
Effective January 1, 2017, employees of GeneDx were eligible for participation in the OPKO Health Savings and Retirement Plan (the “Plan”). The Plan permits employees to contribute up to 100% of qualified pre-tax annual compensation up to annual statutory limitations. The discretionary company match for employee contributions to the Plan is 100% up to the first 4% of the liabilities in an orderly transaction between market participants atparticipant’s earnings contributed to the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeksPlan. Our matching contributions to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
Level 1:Quoted prices in active marketsour plans, including our predecessor plans, was $1.9 million for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2:Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
Level 3:Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
At December 31, 2020, assets held in the Trust Account were comprised of $442,763,951 in money market funds which are invested primarily in U.S. Treasury Securities. During the year ended December 31, 2020,2021 and $1.7 million for the Company did not withdraw any interest incomeyear ended December 31, 2020.
Note 12 Commitments and Contingencies
On October 11, 2019, GeneDx received a letter from the Trust Account.
The following table presents information about the Company’s assetsCenters for Medicare and liabilitiesMedicaid Services (“CMS”), notifying GeneDx of CMS’s determination to suspend Medicare payments to GeneDx, which suspension became effective on September 27, 2019. CMS advised that are measured at fair valueit suspended payments due to possible overpayments to GeneDx in connection with reimbursement claims for genetic testing services based on a recurringdiagnosis of family history of cancer, which testing CMS has alleged is not covered by Medicare under the applicable provisions of the Social Security Act on the basis at December 31,that such testing is not reasonable and necessary for the diagnosis or treatment of illness or injury. CMS lifted the suspension on February 3, 2020 and indicates the fair value hierarchyissued an extrapolated overpayment finding of the valuation inputs the Company utilized to determine such fair value:approximately $576,332, which GeneDx paid.
DescriptionLevelDecember 31,
2020
Assets:
Investments held in Trust Account – U.S. Treasury Securities Money Market Fund1442,763,951
Liabilities:
Warrant Liability – Public Warrants1$40,290,250 
Warrant Liability – Private Placement Warrants3$30,032,168 
The Warrants were accountedIn September 2018, GeneDx received two document request letters from Cigna’s Special Investigations Unit in connection with claims submitted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilitieslaboratory services performed on our balance sheet. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the statement of operations.
The Private Warrants were initially valued using a Modified Black Scholes Option Pricing Model, which is considered to be a Level 3 fair value measurement. The Modified Black Scholes model’s primary unobservable input utilized in determining the fair value of the Private Warrants is the expected volatility of the common stock. The expected volatility as of the IPO date was derived from observable public warrant pricing on comparable ‘blank-check’ companies without an identified target. The expected volatility as of subsequent valuation dates will be implied from the Company’s own public warrant pricing. A Monte Carlo simulation methodology was used in estimating the fair value of the public warrants for periods where no observable traded price was available, using the same expected volatility as was used in measuring the fair value of the Private Warrants. For periods subsequent toCigna members by GeneDx. Cigna requested
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CM LIFE SCIENCES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
records and other documentation for 100 individual members for which GeneDx had submitted claims. The parties negotiated a final settlement agreement in January 2021 that included a $500,000 payment from GeneDx to Cigna without any admission of error or liability and a mutual release of any and all claims prior to the detachmentexecution of the warrantssettlement agreement.
We accrue a liability for legal contingencies when we believe that it is both probable that a liability has been incurred and that we can reasonably estimate the amount of the loss. We review established accruals and adjust them to reflect ongoing negotiations, settlements, rulings, advice of legal counsel and other relevant information. To the extent new information is obtained and our views on the probable outcomes of claims, suits, assessments, investigations or legal proceedings change, changes in our accrued liabilities would be recorded in the period in which such determination is made. For the matters referenced in the paragraph below, the amount of liability is not probable, or the amount cannot be reasonably estimated; and, therefore, accruals have not been made. In addition, in accordance with the relevant authoritative guidance, for matters which the likelihood of material loss is at least reasonably possible, we provide disclosure of the possible loss or range of loss; however, if a reasonable estimate cannot be made, we will provide disclosure to that effect.
From time to time, we may receive inquiries, document requests, Civil Investigative Demands (“CIDs”) or subpoenas from the Units,Department of Justice, the close priceOffice of Inspector General and Office for Civil Rights (“OCR”) of the public warrant price will be usedDepartment of Health and Human Services, the Centers for Medicare and Medicaid Services, various payors and fiscal intermediaries, and other state and federal regulators regarding investigations, audits and reviews. In addition to the matters discussed in this note, we are currently responding to CIDs, subpoenas or document requests for various matters relating to our laboratory operations. Some pending or threatened proceedings against us may involve potentially substantial amounts as well as the fair valuepossibility of civil, criminal, or administrative fines, penalties, or other sanctions, which could be material. Settlements of suits involving the types of issues that we routinely confront may require monetary payments as well as corporate integrity agreements. Additionally, qui tam or “whistleblower” actions initiated under the civil False Claims Act may be pending but placed under seal by the court to comply with the False Claims Act’s requirements for filing such suits. Also, from time to time, we may detect issues of non-compliance with federal healthcare laws pertaining to claims submission and reimbursement practices and/or financial relationships with physicians, among other things. We may avail ourselves of various mechanisms to address these issues, including participation in voluntary disclosure protocols. Participating in voluntary disclosure protocols can have the potential for significant settlement obligations or even enforcement action. The Company generally has cooperated, and intends to continue to cooperate, with appropriate regulatory authorities as and when investigations, audits and inquiries arise.
We are a party to other litigation in the ordinary course of business. While we cannot predict the ultimate outcome of legal matters, we accrue a liability for legal contingencies when we believe that it is both probable that a liability has been incurred and that we can reasonably estimate the amount of the loss. It is reasonably possible the ultimate liability could exceed amounts currently estimated and we review established accruals and adjust them to reflect ongoing negotiations, settlements, rulings, advice of legal counsel and other relevant information. To the extent new information is obtained and our views on the probable outcomes of claims, suits, assessments, investigations or legal proceedings change, changes in our accrued liabilities would be recorded in the period in which such determination is made. Because of the high degree of judgment involved in establishing loss estimates, the ultimate outcome of such matters could be material to our business, financial condition, results of operations, and cash flows.
We have employment agreements with certain executives that provide for compensation and certain other benefits and for severance payments under certain circumstances. During the years ended December 31, 2021 and 2020, we recognized $0.3 million and $0.2 million, respectively, of severance costs pursuant to employment agreements with former executives as a component of selling, general and administrative expense.
On December 31, 2021, we were committed to make future purchases for inventory and other items in 2022 that occur in the ordinary course of business under various purchase arrangements with fixed purchase provisions aggregating $14.5 million.
We maintain medical malpractice insurance coverage at a level in excess of historical claims.
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Note 13 Revenue Recognition
Revenue for laboratory services is recognized at the time test results are reported, which approximates when services are provided, and the performance obligations are satisfied. Services are provided to patients covered by various third-party payor programs including various managed care organizations, as well as Medicare and Medicaid programs. Billings for services are included in revenue net of allowances for explicit price concessions, and implicit price concessions provided to uninsured patients which are all elements of variable consideration.
The following are descriptions of our payors for laboratory services:
Healthcare Insurers. Reimbursements from healthcare insurers are based on negotiated fee-for-service schedules. Revenues consist of amounts billed, net of explicit price concessions and implicit price concessions for differences between amounts billed and the estimated consideration we expect to receive from such payors, which considers historical denial and collection experience and the terms of our contractual arrangements. Adjustments to the allowances, based on actual receipts from the third-party payors, are recorded upon settlement.
Government Payors. Reimbursements from government payors are based on fee-for-service schedules set by governmental authorities, including traditional Medicare and Medicaid. Revenues consist of amounts billed, net of explicit price concessions and implicit price concessions for differences between amounts billed and the estimated consideration we expect to receive from such payors, which considers historical denial and collection experience and the terms of our contractual arrangements. Adjustments to the allowances, based on actual receipts from the government payors, are recorded upon settlement.
Client Payors. Client payors include physicians, hospitals, employers, and other institutions for which services are performed on a wholesale basis and are billed and recognized as revenue based on negotiated fee schedules.
Patients. Uninsured patients are billed based on established patient fee schedules or fees negotiated with physicians on behalf of their patients. Insured patients (including amounts for coinsurance and deductible responsibilities) are billed based on fees negotiated with healthcare insurers. Collection of billings from patients is subject to credit risk and ability of the patients to pay. Revenues consist of amounts billed net of discounts provided to uninsured patients in accordance with our policies and implicit price concessions. Implicit price concessions represent differences between amounts billed and the estimated consideration that we expect to receive from patients, which considers historical collection experience and other factors including current market conditions. Adjustments to the estimated allowances, based on actual receipts from the patients, are recorded upon settlement.
The complexities and ambiguities of billing, reimbursement regulations and claims processing, as well as issues unique to Medicare and Medicaid programs, require us to estimate the potential for retroactive adjustments as an element of variable consideration in the recognition of revenue in the period the related services are rendered. Actual amounts are adjusted for the period in which those adjustments become known. For the years ended December 31, 2021 and 2020, revenue reductions due to changes in estimates of implicit price concessions for performance obligations satisfied in prior periods of $4.2 million and $5.0 million, respectively, were recognized.
Third-party payors, including government programs, may decide to deny payment or recoup payments for testing they contend were improperly billed or not medically necessary, against their coverage determinations, or for which they believe they have otherwise overpaid (including as a result of their own error), and we may be required to refund payments already received. Our revenues may be subject to retroactive adjustment as a result of these factors among others, including without limitation, differing interpretations of billing and coding guidance and changes by government agencies and payors in interpretations, requirements, and “conditions of participation” in various programs. We have processed requests for recoupment from third-party payors in the ordinary course of our business, and it is likely that we will continue to do so in the future. If a third-party payer denies payment for testing or recoups money from us in a later period, reimbursement revenue for our testing could decline.
As an integral part of our billing compliance program, we periodically assess our billing and coding practices, respond to payor audits on a routine basis, and investigate reported failures or suspected failures to comply with federal and state healthcare reimbursement requirements, as well as overpayment claims which may arise from time to time without fault on the part of the Company. We may have an obligation to reimburse Medicare, Medicaid, and
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third-party payors for overpayments regardless of fault. We have periodically identified and reported overpayments, reimbursed payors for overpayments and taken appropriate corrective action.
Settlements with third-party payors for retroactive adjustments due to audits, reviews or investigations are also considered variable consideration and are included in the determination of the estimated transaction price for providing services. These settlements are estimated based on the terms of the payment agreement with the payor, correspondence from the payor and our historical settlement activity, including an assessment of the probability a significant reversal of cumulative revenue recognized will occur when the uncertainty is subsequently resolved. Estimated settlements are adjusted in future periods as adjustments become known (that is, new information becomes available), or as years are settled or are no longer subject to such audits, reviews, and investigations. As of December 31, 2021 and 2020, we had liabilities of $0.0 million and $1.5 million, respectively, within Accrued expenses related to reimbursements for payor overpayments.
The composition of Revenue by payor for the years ended December 31, 2021 and 2020 is as follows:
(In thousands)20212020
Healthcare insurers$47,175 $35,314 
Government payors15,596 9,687 
Client payors52,047 47,326 
Patients1,777 2,693 
Total revenue$116,595 $95,020 
Note 14 Leases
We have an operating lease for office space and laboratory operations. We determine if a contract contains a lease at inception or modification of a contract. Our lease does not provide an implicit interest rate, and we therefore use our incremental borrowing rate as the discount rate when measuring operating lease liability. The incremental borrowing rate represents an estimate of the interest rate we would incur, calculated at the Parent level, at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease within a particular currency environment. We used the incremental borrowing rate as of January 1, 2019 for this operating lease. We factored into our determination of the lease payments any rental escalation, renewal options, and/or termination options as appropriate. Variable lease payment amounts that cannot be determined at the commencement of the lease are not included in the right-to-use assets or liabilities.
We elected the use of permitted practical expedients of not recording leases on our Combined Balance Sheet when the leases have terms of 12 months or less, and we elected not to separate nonlease components from lease components and instead account for each relevant date.separate lease component and the nonlease components associated with that lease component as a single lease component.
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The following table presents the changeslease balances within the Combined Balance Sheet as of December 31, 2021:
(in thousands)Classification on the Balance SheetDecember 31, 2021December 31, 2020
Assets
Operating lease assetsOperating lease right-of-use assets$5,789 $6,858 
Liabilities
Current
Operating lease liabilitiesCurrent maturities of operating leases— — 
Long-term
Operating lease liabilitiesOperating lease liabilities9,936 7,340 
Weighted average remaining lease term
Operating leases10 years11 years
Weighted average discount rate
Operating leases7.2 %7.2 %
The following table reconciles the undiscounted future minimum lease payments (displayed by year and in the fair valueaggregate) under noncancelable operating leases with terms of warrant liabilities:more than one year to the total operating lease liabilities recognized on our Combined Balance Sheet as of December 31, 2021:
 Private PlacementPublicTotal Warrant Liabilities
Fair value as of July 10, 2020 (inception)$— $— $— 
Initial measurement on September 4, 2020$10,855,001 $20,956,833 $31,811,834 
Change in valuation inputs or other assumptions$19,177,167 $19,333,417 $38,510,584 
Fair value as of December 31, 2020$30,032,168 $40,290,250 $70,322,418 
Year Ending(In thousands)
2022$(396)
20231,048 
20241,659 
20251,715 
20261,773 
Thereafter9,116 
Total undiscounted future minimum lease payments$14,915 
Less: Difference between lease payments and discounted lease liabilities4,979 
Total lease liabilities$9,936 
There were no transfers in or outThe minimum lease payments above include tenant improvement payments of Level 3 from other levels in$2.0 million and $0.6 million for the fair value hierarchy.years ended 2022 and 2023, respectively. We conduct certain of our operations under operating lease agreements. Rent expense under operating leases was approximately $1.3 million for the year ended December 31, 2021 and $0.9 million for the year ended December 31, 2020.
Supplemental cash flow information is as follows:
For the years ended December 31,
(in thousands)20212020
Operating cash out flows from operating leases$479 $801 
Total$479 $801 
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Note 15 Selected Quarterly Financial Data (Unaudited)
For the 2021 Quarters Ended
(In thousands)March 31June 30September 30December 31
Total revenues$23,159 $29,987 $30,351 $33,098 
Total costs and expenses, net35,787 35,098 36,020 46,582 
Net loss(12,628)(5,111)(5,669)(13,484)
For the 2020 Quarters Ended
(In thousands)March 31June 30September 30December 31
Total revenues$32,101 $23,365 $19,289 $20,265 
Total costs and expenses, net34,875 31,065 34,903 29,080 
Net loss(2,774)(7,700)(15,614)(8,815)
NOTE 12. SUBSEQUENT EVENTSNote 16 Subsequent Events
The Company evaluatedWe have reviewed all subsequent events and transactions that occurred after the balance sheetdate of our December 31, 2021 Combined Carve Out Balance Sheet date up tothrough March 15, 2022, which is the date that the financial statementsCombined Financial Statements were issued. Based upon this review, other than as described below and in Note 2, the Company did not identify any subsequent eventsavailable to be issued, noting no items that would have required adjustment or disclosuredisclosures in the financial statements.
On February 10, 2021,Combined Carve Out Financial Statements, except for, the Company announced that it executed an Agreement and Plan of Merger (the “Merger Agreement”) with Mount Sinai Genomics, Inc., a Delaware corporation, d/b/aJanuary 2022 announcement by Sema4 Holdings Corp. (“Sema4”) and the other parties thereto (the transactions contemplated by the Merger Agreement, including the Merger (as defined below), the “Business Combination”). Specifically, the Company entered into the Merger Agreement withOPKO that they had signed a definitive agreement pursuant to which Sema4 and S-IV Sub, Inc., a Delaware corporation incorporated on February 1, 2021 and a direct, wholly-owned subsidiary of the Company (“Merger Sub”). Pursuanthas agreed to acquire GeneDx, subject to the termssatisfaction of the Merger Agreement, the Company will acquire Sema4 through the merger of Merger Sub with and into Sema4, with Sema4 surviving as a wholly-owned subsidiary of the Companycustomary closing conditions (the “Merger”“GeneDx Transaction”)
. The Business CombinationGeneDx Transaction is expected to close in the second quarter of 2021, following the receipt of the required approval by the Company’s stockholders and the satisfaction of certain other customary closing conditions.
At the effective time of the Merger (the “Effective Time”), each share of Sema4 class B common stock, par value $0.00001 per share (“Sema4 Class B Common Stock”) issued and outstanding as of immediately prior to the Effective Time will be converted into 1/100th of a share of Sema4 class A common stock, par value $0.00001 per share (“Sema4 Class A Common Stock”, together with Sema4 Class B Common Stock, “Sema4 Common Stock”) in accordance with Sema4’s organizational documents.
Immediately thereafter, each share of Sema4 Common Stock and Sema4’s series A-1 preferred stock, series A-2 preferred stock, series B preferred stock and series C preferred stock (collectively, “Sema4 Capital Stock”) issued and outstanding immediately prior to the Effective Time (other than Excluded Shares and Dissenting Shares (each as defined in the Merger Agreement)) will be converted into the right to receive a portion of the total closing merger consideration, with each Sema4 stockholder being entitled to receive the following:
(c)if such stockholder has made a cash election as set forth and in accordance with the terms of the Merger Agreement, a portion of the specified aggregate amount of cash consideration payable under the terms of the Merger Agreement (such aggregate amount not to exceed $343,000,000) and pursuant to the terms of such stockholder’s cash election; and
(d)a number of shares of common stock, par value $0.0001 per share, of the Company (the “Common Stock”) equal to the quotient of: (i) (A) the product of (x) such stockholder’s total shares of Sema4 Capital Stock multiplied by (y) the per share amount calculated in accordance with the Merger Agreement minus (B) the amount of cash payable to such stockholder pursuant to its cash election, if any, divided by (ii) $10.2022.
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CM LIFE SCIENCES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
In addition, at the Effective Time, each outstanding option to purchase Sema4 Capital Stock, each outstanding and unsettled restricted stock unit in respect of shares of Sema4 Capital Stock and each outstanding stock appreciation right will be rolled over into options to purchase Common Stock, restricted stock units in respect of Common Stock and stock appreciation rights in respect of Common Stock, all as further set forth in and in accordance with the terms of the Merger Agreement.
In addition to the payment of cash, issuance of Common Stock and rollover of other Sema4 equity awards described above as of the Effective Time, in the event that the closing sale price of Common Stock exceeds certain price thresholds for 20 out of any 30 consecutive trading days during the period of time commencing upon the expiration of the lock-up period applicable to the Sponsor under the Letter Agreement, dated as of August 27, 2021, by and among the Company, Sponsor and each of the executive officers and directors of the Company and ending on the second anniversary of the closing of the Merger, an additional number of shares equal to an amount up to an aggregate of 11% of the shares of Common Stock that would have been issuable upon closing of the Merger to the stockholders of the Company if no cash elections were made and the closing cash payment amount under the Merger Agreement was $0.00 (the “Earn-Out Shares”) shall become issuable, in accordance with the terms of the Merger Agreement following the achievement of those certain price thresholds, to the stockholders of Sema4 as of immediately prior to the closing of the Merger; provided that the board of directors of Sema4 (or a duly authorized committee thereof) may, prior to the closing of the Merger, allocate a portion of such Earn-Out Shares to be issued to service providers of Sema4 in the form of restricted stock units of the Company.
On February 9, 2021, the Company entered into a Sponsor Support Agreement with the Sponsor and Sema4, whereby Sponsor has agreed to, among other things, (a) vote at any meeting of the stockholders of the Company all of their shares of capital stock of the Company held of record or thereafter acquired in favor of the Stockholder Approvals (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. On February 9, 2021, concurrently with the execution of the Merger Agreement, the Company entered into subscription agreements (collectively, the “Subscription Agreements”) with certain investors (collectively, the “PIPE Investors” which include certain existing equityholders of Sema4), pursuant to, and on the terms and subject to the conditions of which, the PIPE Investors have collectively subscribed for 35,000,000 shares of our common stock for an aggregate purchase price equal to $350,000,000 (the “PIPE Investment”). The PIPE Investment will be consummated immediately prior to the closing of the Sema4 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; and (c) November 9, 2021.
F-102F-62

CM LIFE SCIENCES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
ANNEX A
MERGER AGREEMENT

AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BY AND AMONGby and among
CM LIFE SCIENCES,SEMA4 HOLDINGS CORP.,
a Delaware corporation,
ORION MERGER SUB I, INC.,
S-IVa Delaware corporation,
ORION MERGER SUB II, LLC,
a Delaware limited liability company,
GENEDX, INC.,
anda New Jersey corporation,
MOUNT SINAI GENOMICS,GENEDX HOLDING 2, INC.,
DATED AS OF FEBRUARY 9, 2021a Delaware corporation,
AND
OPKO HEALTH, INC.,
a Delaware corporation,
Dated as of January 14, 2022


CM LIFE SCIENCES, INC.
NOTES TO FINANCIAL STATEMENTSTABLE OF CONTENTS
ARTICLE 1 DEFINITIONS3
1.1Defined Terms3
1.2Interpretation20
ARTICLE 2 THE MERGERS21
2.1The Mergers.21
2.2Closing22
2.3Closing Deliveries.22
2.4Effect on Holdco2 Common Stock.23
2.5Payment Procedures.24
2.6Post-Closing Adjustment25
2.7Milestone Payments.27
2.8Withholding Rights29
2.9Dispute Resolution30
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY PARTIES AND SELLER31
3.1Organization of Seller and the Company Group31
3.2Subsidiaries.31
3.3Authorization32
3.4Capitalization33
3.5Title to and Sufficiency of Real and Tangible Properties and Assets33
3.6Environmental Laws and Regulations34
3.7Absence of Certain Activities or Changes34
3.8Company Contracts34
3.9Noncontravention; Restrictions on Business37
3.10Financial Statements and Operating Budget37
3.11Liabilities38
3.12Taxes38
3.13Compliance with Law.41
3.14Permits42
3.15Regulatory Matters.42
3.16Litigation44
3.17Employment Matters44
3.18Employee Benefit Plans46
3.19Intellectual Property47
3.20Privacy, Data and Data Security52
3.21Transactions with Certain Persons53
3.22Insurance54
3.23No Brokers54
3.24Books and Records54
3.25Bank Accounts54
3.26Customers, Suppliers and Third Party Payors54
3.27Inventory55
3.28No Additional Representations55
DECEMBER 31, 2020
ii

ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE ACQUIRER PARTIES55
4.1Organization of Acquirer Parties56
4.2Authorization56
4.3Capitalization56
4.4Noncontravention.57
4.5Compliance with Laws57
4.6Securities Law Matters.57
4.7No Proceedings58
4.8No Brokers58
4.9No Insolvency Proceedings58
4.10Not an Investment Company58
4.11Anti-Corruption Laws58
4.12Taxes58
4.13Environmental Laws and Regulations60
4.14Litigation61
4.15Merger Sub Activities61
4.16Additional Representations61
ARTICLE 5 COVENANTS AND OTHER AGREEMENTS61
5.1Conduct of Business of the Company Group61
5.2Acquisition Proposals64
5.3Proxy Statement and Other SEC Filings; Acquirer Stockholder Meeting65
5.4Confidentiality; Public Disclosure67
5.5Access; Copy of VDR67
5.6Regulatory Approval; Reasonable Best Efforts.68
5.7Third-Party Consents; Notices; Seller Contracts69
5.8Notice of Developments.69
5.9Regulatory Matters70
5.10Delivery of Financial Statements70
5.11Tax Matters.71
5.12Insurance; Indemnification of Directors and Officers.73
5.13Employee Matters.74
5.14Transition Services Agreement and Accounts Receivable76
5.15Prohibited Activities76
5.16Subsidiary Compliance76
5.17Pre-Closing Restructuring76
ARTICLE 6 CONDITIONS TO THE MERGERS77
6.1Conditions to Obligations of Each Party to Effect the Merger77
6.2Additional Conditions to Obligations of Seller and the Company Group77
6.3Additional Conditions to the Obligations of Acquirer77
ARTICLE 7 TERMINATION79
7.1Termination79
7.2Effect of Termination79
ARTICLE 8 INDEMNIFICATION80
8.1Survival of Representations; Claims Period80
8.2Indemnification.80
8.3Notice of Claims.81
8.4Third Party Claims81
iii

8.5Limitations on Indemnity83
8.6Payment of Indemnification Claims; Release of Escrow Amount; Set-off.84
8.7Remedies85
ARTICLE 9 MISCELLANEOUS85
9.1Assignment; Binding Effect85
9.2Notices85
9.3Governing Law86
9.4Jurisdiction; Venue86
9.5WAIVER OF JURY TRIAL86
9.6Amendments and Waivers86
9.7Counterparts87
9.8Severability87
9.9Schedules; Exhibits87
9.10No Third Party Beneficiaries87
9.11Expenses87
9.12No Strict Construction87
9.13Injunctive Relief; Specific Performance87
9.14Further Assurances87
9.15Entire Agreement87
9.16Investigation and Non-Reliance88
iv

EXHIBITS
Exhibit AShareholder Agreement
ARTICLE I THE CLOSING TRANSACTIONSExhibit B2Support Agreement
Section 1.1Exhibit C-1Closing2First Certificate of Merger
Section 1.2Exhibit C-2Parent FinancingSecond Certificate2 of Merger
Section 1.3Closing Documents2
Section 1.4Closing Transactions3
ARTICLE II THE MERGER4
Section 2.1Effective Time4
Section 2.2The Merger4
Section 2.3Effect of the Merger4
Section 2.4Governing Documents4
Section 2.5Directors and Officers of the Surviving Corporation4
Section 2.6Merger Consideration4
Section 2.7Effect of the Merger on the Company Common Stock and Company Preferred Stock4
Section 2.8Surrender of Company Certificates and Disbursement of Closing Consideration5
Section 2.9Withholding Taxes7
Section 2.10Taking of Necessary Action; Further Action7
Section 2.11Tax Treatment of the Merger7
Section 2.12Effect on Company Options,7
Section 2.13Dissenting Shares9
ARTICLE III EARN OUT10
Section 3.1Issuance of Earn-Out Shares10
Section 3.2Acceleration Event10
Section 3.3Tax Treatment of Earn-Out Shares10
Section 3.4Earn-Out Service Providers11
ARTICLE IV REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY12
Section 4.1Organization and Qualification12
Section 4.2Exhibit DCompany Subsidiaries12
Section 4.3Capitalization12
Section 4.4Due Authorization13
Section 4.5No Conflict; Governmental Consents and Filings14
Section 4.6Legal Compliance; Approvals14
Section 4.7Government Contracts14
Section 4.8Financial Statements15
Section 4.9No Undisclosed Liabilities15
Section 4.10Absence of Certain Changes or Events15
Section 4.11Litigation15
Section 4.12Company Benefit Plans16
Section 4.13Labor Relations18
Section 4.14Real Property; Tangible Property19
Section 4.15Taxes20
Section 4.16Environmental Matters21
Section 4.17Brokers; Third Party Expenses22Net Working Capital Schedule
(i)


CM LIFE SCIENCES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
Section 4.18Intellectual Property22
Section 4.19Privacy24
Section 4.20Agreements, Contracts and Commitments24
Section 4.21Insurance26
Section 4.22Affiliate Matters26
Section 4.23Certain Provided Information26
Section 4.24Absence of Certain Business Practices26
Section 4.25Government Grants and Incentives27
Section 4.26OIG27
Section 4.27Suppliers and Customers.27
Section 4.28Disclaimer of Other Warranties27
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB29
Section 5.1Organization and Qualification29
Section 5.2Parent Subsidiaries29
Section 5.3Capitalization29
Section 5.4Authority Relative to this Agreement30
Section 5.5No Conflict; Required Filings and Consents31
Section 5.6Compliance; Approvals31
Section 5.7Parent SEC Reports and Financial Statements32
Section 5.8Absence of Certain Changes or Events32
Section 5.9Litigation33
Section 5.10Business Activities33
Section 5.11Parent Material Contracts33
Section 5.12Parent Listing33
Section 5.13Equity Financing Amount34
Section 5.14Trust Account34
Section 5.15Taxes35
Section 5.16Information Supplied35
Section 5.17Employees; Benefit Plans36
Section 5.18Board Approval; Stockholder Vote36
Section 5.19Title to Assets36
Section 5.20Affiliate Transactions36
Section 5.21Brokers36
Section 5.22Disclaimer of Other Warranties36
ARTICLE VI CONDUCT PRIOR TO THE CLOSING DATE38
Section 6.1Conduct of Business by the Company and the Company Subsidiaries38
Section 6.2Conduct of Business by Parent and Merger Sub40
ARTICLE VII ADDITIONAL AGREEMENTS42
Section 7.1Proxy Statement; Special Meeting42
(ii)


CM LIFE SCIENCES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
Section 7.2Regulatory Approvals44
Section 7.3Other Filings; Press Release44
Section 7.4Confidentiality; Access to Information45
Section 7.5Reasonable Best Efforts46
Section 7.6No Parent Securities Transactions47
Section 7.7No Claim Against Trust Account47
Section 7.8Disclosure of Certain Matters48
Section 7.9Securities Listing48
Section 7.10No Solicitation48
Section 7.11Trust Account49
Section 7.12Directors’ and Officers’ Liability Insurance49
Section 7.13[Intentionally Left Blank]50
Section 7.14Tax Matters50
Section 7.15Equity Financing Agreements50
Section 7.16Section 16 Matters51
Section 7.17Board of Directors51
Section 7.18LTIP and ESPP51
Section 7.19Release.52
ARTICLE VIII CONDITIONS TO THE TRANSACTION53
Section 8.1Conditions to Obligations of Each Party’s Obligations53
Section 8.2Additional Conditions to Obligations of the Company53
Section 8.3Additional Conditions to the Obligations of Parent and Merger Sub54
ARTICLE IX TERMINATION55
Section 9.1Termination55
Section 9.2Notice of Termination; Effect of Termination55
ARTICLE X NO SURVIVAL56
Section 10.1No Survival56
ARTICLE XI GENERAL PROVISIONS56
Section 11.1Notices56
Section 11.2Interpretation57
Section 11.3Counterparts; Electronic Delivery57
Section 11.4Entire Agreement; Third Party Beneficiaries57
Section 11.5Severability57
Section 11.6Other Remedies; Specific Performance58
Section 11.7Governing Law58
Section 11.8Consent to Jurisdiction; Waiver of Jury Trial58
Section 11.9Rules of Construction59
(iii)


CM LIFE SCIENCES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
Section 11.10Expenses59
Section 11.11Assignment59
Section 11.12Amendment59
Section 11.13Extension; Waiver59
Section 11.14No Recourse59
Section 11.15Legal Representation60
Section 11.16Disclosure Letters and Exhibits61
SCHEDULES
Schedule A Defined TermsA-64Lock-Up Holders
Schedule BSupporting Stockholders
Exhibit A Form of Parent Amended and Restated CharterSchedule CA-79Pre-Closing Budget
Schedule DPre-Closing Restructuring
Exhibit B Form of Parent Amended and Restated BylawsSchedule 2.3(b)(xiii)A-85Required Third Party Deliverables
Schedule 5.14Specified TSA Services
Exhibit C Form of LTIPSchedule 8.2(a)(vi)A-108
Exhibit D Form of Employee Stock Purchase PlanA-129
Exhibit E Form of Amended and Restated Registration Rights AgreementA-141Specific Indemnity Matters
(iv)

v

AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS This AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this “Agreement”), dated as of January 14, 2022 (the “Agreement Date”), is made and entered into as of February 9, 2021, by and among CM Life Sciences,Sema4 Holdings Corp., a Delaware corporation (“Acquirer”), Orion Merger Sub I, Inc., a Delaware corporation (“ParentMerger Sub I”), S-IVOrion Merger Sub II, LLC, a Delaware limited liability company (“Merger Sub II” and together with Merger Sub I, the “Merger Subs”), GeneDx, Inc., a New Jersey corporation (the “Company”), GeneDx Holding 2, Inc., a Delaware corporation and a direct, wholly-owned subsidiary of Parent (“Merger SubHoldco2”), and Mount Sinai Genomics,OPKO Health, Inc., a Delaware corporation d/b/a Sema4 (the “CompanySeller”). Each ofAcquirer, the Merger Subs, the Company, ParentHoldco2, and Merger Sub shall individually beSeller are sometimes referred to hereinindividually as a “Party”“Party” and collectively as the “Parties.”. The term “Agreement”
RECITALS
WHEREAS, Acquirer desires to acquire the Company upon the terms set forth herein;
WHEREAS, Seller owns indirectly 100% of the issued and outstanding shares of capital stock of the Company as usedof the Agreement Date;
WHEREAS, (a) Merger Sub I is a wholly owned direct Subsidiary of Acquirer that was formed for purposes of consummating the First Merger and (b) Merger Sub II is a wholly owned direct Subsidiary of Acquirer that was formed for purposes of consummating the Second Merger;
WHEREAS, prior to the First Merger and the Second Merger (each as defined below), the following steps will be taken: (i) OPKO Ireland R&D, Ltd, an indirect subsidiary of Seller, will transfer all the shares of MyGeneTeamCanada, Ltd. (“MGT Canada”) to Seller; (ii) Seller will contribute all of the shares of MGT Canada and of MyGeneTeam LLC. (“MGTUS” and together with MGT Canada, the “MGT Group”) to Bio-Reference Laboratories, Inc., a New Jersey corporation and wholly owned subsidiary of Seller (“BioReference” ); (iii) BioReference will contribute all of the shares of the MGT Group to the Company; (iv) Seller will form Bio-Reference Laboratories, Inc, a Delaware corporation (“BioReference Delaware”), as a direct subsidiary, and BioReference will merge with and into BioReference Delaware with BioReference Delaware surviving the merger; (v) Seller has formed GeneDx Holding 1, Inc. (“Holdco1”) and will transfer the shares of BioReference Delaware to Holdco1; (vi) BioReference Delaware will convert into an LLC (“BioReference Laboratories, LLC”) and transfer the shares of the Company to Holdco1; (vii) Holdco1 will form GeneDx, Inc, a Delaware corporation (“GeneDx Delaware”) and shall merge the Company with and into GeneDx Delaware with GeneDx Delaware surviving the merger with all of the rights and obligations of the Company; and (viii) all of the shares of Holdco 2, then a wholly owned subsidiary of Seller, will be contributed by Seller to Holdco1, and Holdco1 will transfer all of the shares of GeneDx Delaware to Holdco2 and GeneDx Delaware will convert to GeneDx, LLC, a Delaware LLC (“GeneDx Delaware LLC” or as of or subsequent to the Pre-Closing Restructuring, either “GeneDx Delaware LLC” or the “Company”), and will be a wholly owned subsidiary of Holdco2 and an indirect subsidiary of Seller, with all the rights and obligations of GeneDx Delaware, all as also set forth on Schedule D, together with such changes, if any, that do not adversely affect any of the Parties, as may be necessary or desirable for Tax purposes (collectively, the “Pre-Closing Restructuring” );
WHEREAS, upon the terms and conditions set forth herein, refers to this Agreementon the Closing Date but following consummation of the Pre-Closing Restructuring, Merger Sub I will merge with and Planinto Holdco2 (the “First Merger”), with Holdco2 as the surviving corporation in the First Merger;
WHEREAS, immediately after the consummation of the First Merger, as part of the same may be amended from time to time,overall transaction, Holdco2, as the surviving corporation in the First Merger, will merge with and all schedules, exhibitsinto Merger Sub II (the “Second Merger” and, annexes hereto (including the Company Disclosure Letter and the Parent Disclosure Letter, as defined herein). Defined terms used in this Agreement are listed alphabetically in Schedule A, together with the sectionFirst Merger, the “Mergers”), with Merger Sub II as the surviving corporation and if applicable, subsectionthe direct owner of all of the equity interests in whichGeneDx Delaware LLC;
WHEREAS, after giving effect to the definitionFirst Merger, Holdco2 shall be a wholly owned direct Subsidiary of Acquirer, and each such term is located.
RECITALS
WHEREAS, Parent is a blank check company incorporated in Delaware forshare of Holdco2 Common Stock will be converted into the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.
WHEREAS, uponright to receive the Merger Consideration, on the terms and subject to the conditions ofset forth in this Agreement and in accordance with the General Corporation LawAgreement;
A-1

WHEREAS, each of the State of Delaware (the “DGCL”) and other applicable Legal Requirements (collectively, as applicable based on context, the “Applicable Legal Requirements”), the Partiesparties hereto intend to enter into a business combination transaction by which Merger Sub will merge with and into the Company (the “Merger”), with the Company being the surviving corporation of the Merger (the Company, in its capacity as the surviving corporation of the Merger, is sometimes referred to as the “Surviving Corporation”).
WHEREAS,that, for U.S.United States federal income tax purposes, (and for purposes of any applicable state or local tax Legal Requirements that follows the U.S. federal income tax treatment), each of the Parties intends that the MergerMergers will constitutebe treated as a single integrated transaction that qualifiesand qualify as a “reorganization” within the meaning of Section 368(a) of the Code and any comparable provision of state or local tax Legal Requirements (the(a “Intended Tax TreatmentReorganization”), to which each of the Parties are to be parties under Section 368(b) of the Code, and that this Agreement be, and hereby is adopted asintended to constitute a “plan of reorganization” forwithin the purposesmeaning of Section 368 of the Code and Treasury Regulations Section 1.368-2(g).;
WHEREAS,, the board of directors of Holdco2 (the “Holdco2 Board”) has unanimously adopted the CompanyHoldco2 Board Approval and the board of directors of Seller (the “Seller Board”) has unanimously:unanimously adopted the Seller Board Approval;
WHEREAS, each of the boards of directors of the Acquirer and Merger Sub I, in its capacity as the sole member of Merger Sub II, has (a) approved and declared advisable this Agreement and Transactions, upon the terms set forth herein and (b) determined that it isthis Agreement and the Transactions are fair to, and in the best interests of, each such Acquirer Party and their respective equityholders;
WHEREAS, concurrent with the Companyexecution of this Agreement, and the stockholders of the Company,as a condition and declared it advisable,inducement to Acquirer’s willingness to enter into this Agreement, providing foreach of the MergerKey Employees has entered into an employment agreement with Acquirer, together with Acquirer’s customary form of proprietary information and inventions agreement (each, a “Key Employee Agreement”), each to become effective subject to and upon the Closing;
WHEREAS, immediately following the execution and delivery of this Agreement, Holdco2 shall seek to obtain and deliver to Acquirer a written consent in accordanceform and substance reasonably satisfactory to Acquirer (a “Written Consent”) executed by Seller, (a) evidencing the obtainment of the Holdco2 Stockholder Approval, (b) waiving any rights of Seller to appraisal rights under Section 262 of the DGCL in connection with the DGCL; (b) approvedTransactions, and (c) taking certain other actions in connection with the approval of this Agreement and the Transactions, including the Merger in accordanceMergers;
WHEREAS, concurrently with the DGCL,execution of this Agreement, and as a condition and inducement to Acquirer’s, Merger Sub I’s and Merger Sub II’s willingness to enter into this Agreement, Seller and each of the stockholders of Seller identified on Schedule A (collectively, the “Lock-Up Holders”) shall enter into and deliver to Acquirer a shareholder agreement in substantially the form attached hereto as Exhibit A (the “Shareholder Agreement”);
WHEREAS, concurrently with the execution of this Agreement, and as a condition and inducement to Seller’s and the Company Parties’ willingness to enter into this Agreement, each of the stockholders of Acquirer identified on Schedule B (the “Supporting Stockholders”) shall enter into and deliver to Seller and the Company a support agreement in substantially the form attached hereto as ExhibitB; and
WHEREAS, on or prior to the Agreement Date, Acquirer entered into Subscription Agreements with PIPE Investors pursuant to which, and on the terms and subject to the conditions of this Agreement; and (c) adopted a resolution recommendingwhich, such PIPE Investors agreed to purchase from Acquirer shares of Acquirer Stock for an aggregate purchase price equal to the plan of merger set forth in this AgreementPIPE Investment Amount, such purchases to be adopted byconsummated prior to or substantially concurrently with the stockholders of the Company.
WHEREAS, following execution of this Agreement, the Company shall to seek to obtain and deliver to Parent as promptly as practicable, and in any event no later than 24 hours following execution of this AgreementClosing (the “Company Stockholder Approval DeadlinePIPE Investment”): (a) a written consent of the stockholders of the Company (the “Stockholder Consent and Joinder”), pursuant to which the requisite number of stockholders of the Company required to approve and adopt this Agreement, the Merger and the other Transactions under the Company Charter and the DGCL (the “Company Stockholder Approval” and such consenting stockholders of the Company, the “Consenting Stockholders”) will so approve and adopt this Agreement, the Merger and the other Transaction and (b) a lock-up letter agreement (the “Stockholder Lock-Up Agreement”) executed by each Consenting Stockholder, pursuant to which such Consenting Stockholder agrees to certain restrictions on its ability to sell or otherwise dispose of the shares of Parent Class A Stock such Consenting Stockholder receives pursuant to the Merger.
WHEREAS, the board of directors of Parent has unanimously: (a) determined that it is in the best interests of Parent and the stockholders of Parent, and declared it advisable, to enter into this Agreement providing for the Merger in accordance with the DGCL; (b) determined that the fair market value of the Company is equal to at least 80% of the amount held in the Trust Account (excluding any deferred underwriting commissions and taxes payable on interest earned) as of the date hereof; (c) approved this Agreement and the Transactions, including the Merger in accordance with the DGCL, on the terms and subject to the conditions of this Agreement; and (d) adopted a.
A-1

A-2

resolution recommending the plan of merger set forth in this Agreement be adopted by the stockholders of Parent (the “Parent Recommendation”).AGREEMENT
WHEREAS, prior to the Closing, Parent shall: (a) subject to obtaining the approval of the Parent Stockholder Matters, adopt the Third Amended and Restated Certificate of Incorporation of Parent (the “Parent A&R Charter”) in the form attached hereto as Exhibit A; (b) amend and restate the existing bylaws of Parent (the “Parent A&R Bylaws”) in the form attached hereto as Exhibit B, (c) adopt an equity incentive plan in the form attached hereto as Exhibit C (as such form may be modified in accordance with Section 7.18) (the “LTIP”) and (d) adopt an employee stock purchase plan in the form attached hereto as Exhibit D (as such form may be modified in accordance with Section 7.18) (the “ESPP”).
WHEREAS, on or about the date hereof, Parent has obtained commitments from the Equity Financing Investors for equity financing pursuant to certain Subscription Agreements, with such equity financings to be consummated immediately prior to the consummation of the Transactions.
WHEREAS, in connection with the consummation of the Merger, Parent and the Company Stockholders will enter into an amended and restated Registration Rights Agreement (the “A&R Registration Rights Agreement”) substantially in the form attached hereto as Exhibit E.
WHEREAS, as a condition and inducement to the Company’s willingness to enter into this Agreement, simultaneously with the execution and delivery of this Agreement, the Sponsor has executed and delivered to the Company the Sponsor Support Agreement (as defined below) pursuant to which the Sponsor has agreed to, among other things, vote to adopt and approve this Agreement and the other documents contemplated hereby and the transactions contemplated hereby and thereby.
NOW THEREFORE,, in consideration of the respective covenants and promises and representations set forthcontained herein and for other good and valuable consideration, the receipt and sufficiencyadequacy of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:
ARTICLE I1
THE CLOSING TRANSACTIONSDEFINITIONS
Section 1.1ClosingDefined Terms. UnlessAs used herein, the terms below shall have the following meanings. Other terms may be defined elsewhere in the text of this Agreement and, unless otherwise indicated, shall have been terminatedsuch meaning indicated throughout this Agreement.
“Accounting Standards” means accounting principles generally accepted in the United States, consistently applied for the applicable periods presented.
“Acquirer Board” means the board of directors of Acquirer.
“Acquirer Disclosure Schedules” means the Disclosure Schedules delivered by Acquirer to the Company in connection with the execution of this Agreement.
“Acquirer Fundamental Representations” means the representations and warranties contained in Section 3.1 (Organization of the Acquirer Parties), Section 4.2 (Authorization), Section 4.3 (Capitalization) and Section 4.8 (No Brokers).
“Acquirer Group” means any consolidated, combined, unitary or other aggregate group of entities for Tax purposes (including Code Section 1504 and similar provisions of state and local Laws) in which Acquirer is the common parent entity.
“Acquirer Party” means Acquirer, Merger Sub I and Merger Sub II.
“Acquirer Stock” means shares of Class A common stock, par value $0.0001 per share, of Acquirer.
“Acquirer Stockholder Approval” means the approval of: (i) the issuance of the Stock Consideration pursuant to Section 9.1,this Agreement by the affirmative vote of holders of shares of Acquirer Stock having a majority in voting power of the votes cast by the holders of all of the shares of Acquirer Stock present or represented at the Acquirer Stockholders’ Meeting and voting affirmatively or negatively and (ii) the approval of an amendment to Acquirer’s current Third Amended and Restated Certificate of Incorporation to increase the authorized shares of Acquirer Stock as the Acquirer Board deems necessary or advisable in connection with the consummation of the Transactions (the “Closing”), other(but in no event to a number greater than the filing of the Certificate of Merger (as defined below), shall take place by electronic exchange of documents and signatures at a time and date to be specified in writing1.0 billion) by the Parties, which shall be no later than the third Business Day after the satisfaction or waiveraffirmative vote of the conditions set forth in Article VIII (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions), or at such other time, date and location as the Parties agree in writing (the date on which the Closing occurs, the “Closing Date”). The Parties agree that the Closing signatures may be transmitted by email pdf files.
Section 1.2 Parent Financing Certificate . Not more than two Business Days prior to the Closing, Parent shall deliver to the Company written notice (the “Parent Financing Certificate”) setting forth: (a) the aggregate amount of cash proceeds that will be required to satisfy any exercise of the Parent Stockholder Redemptions; (b) the amount of Parent Cash and Parent Transaction Costs as of the Closing; (c) the aggregate amount of the equity financing committed to Parent by the Equity Financing Agreements and (d) the numberholders of shares of Parent Class AAcquirer Stock to behaving a majority of the shares of Acquirer Stock outstanding as of the Closing after giving effectapplicable record date (and, for the elimination of doubt, abstentions and broker non-votes may be counted to determine the Parent Stockholder Redemptions,presence of a quorum at the Acquirer Stockholders’ Meeting but shall not be counted as votes cast for or against any forfeituresproposal).
“Acquisition Proposal” means any proposal or offer from any Person relating to any direct or indirect acquisition or purchase of shares of Parent Class A Stock by the Sponsor pursuant to the Sponsor Forfeiture Agreement, dated asa material portion of the date hereof, between the Parent andassets, net revenues or net income of the Company, andor 50% or more of the issuanceaggregate equity interests of sharesthe Company, any tender offer or exchange offer that if consummated would result in any Person beneficially owning 50% or more of Parent Class A Stock pursuant to the Equity Financing Agreements.aggregate equity interests of the Company, any merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving the acquisition of 50% or more of the aggregate equity interests or assets of the Company, in each case, other than the Transactions, any material joint venture or other strategic investment in or involving the Company, including any third party financing, investment in or recapitalization of the Company. For the elimination of doubt, the PIPE Investment is not an Acquisition Proposal.
Section 1.3 “Closing DocumentsAffiliate.” means, with respect to any Person, any other Person which directly or indirectly controls, is controlled by or is under common control with such first Person. As used in this definition, “
control” means (a) At the Closing, Parent or Merger Sub, as applicable, shall deliver to the Company:
(i) a certified copyownership of more than 50% of the Parent A&R Charter andvoting securities or other voting interest of any Person, or (b) the Parent A&R Bylaws;possession,
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(ii) a copydirectly or indirectly, of the A&R Registration Rightspower to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by Contract, as a general partner, as a manager or otherwise. From and after the Effective Time, the Company shall be considered an Affiliate of the Acquirer.
“Ancillary Agreements” means the Certificates of Merger, the Escrow Agreement, dulythe Shareholder Agreements, the Transition Services Agreement and each other agreement, document, instrument or certificate contemplated by this Agreement and executed by Parent, Sponsor and the other existing parties thereto;
(iii) copies of resolutions and actions taken by Parent’s and Merger Sub’s board of directors and stockholdersor to be executed in connection with the Transactions.
“Antitrust Laws” means any federal, state, provincial, territorial and foreign statutes, rules, regulations, governmental orders, administrative and judicial doctrines and other applicable Laws that are designed or intended to prohibit, restrict or regulate foreign investment or actions having the purpose or effect of monopolization or restraint of trade or lessening of competition through merger or acquisition.
“Bayh-Dole Act” means the Patent and Trademark Law Amendments Act of 1980, codified at 35 U.S.C. sections 200-212, as amended, as well as any regulations promulgated pursuant thereto, including in 37 C.F.R. Part 401.
“Benefit Plan” means each benefit plan, program, policy, practice, trust, fund, Contract, agreement or arrangement (whether or not an “employee benefit plan” within the meaning of Section 3(3) of ERISA), including any pension, profit-sharing, 401(k) retirement, bonus, incentive compensation, deferred compensation, loan, vacation, sick pay, employee stock ownership, stock purchase, stock option or other equity based compensation plans, severance, employment, Contractor, unemployment, death, hospitalization, sickness, or other medical, dental, vision, life, or other insurance, long- or short-term disability, change of control, fringe benefit, cafeteria plan or any other employee or fringe benefit plan, program, policy, practice, trust, fund, Contract, agreement or arrangement that provides benefits to current or former employees, directors, officers or independent contractors who are natural persons (or beneficiaries thereof).
“Business” means the business of the Company Group as currently conducted by the Company Group as of the date of this Agreement; provided, that, for purposes of, and subject to, Section 2.7 the “Business” means the business of the Company Group as conducted during the First Milestone Period and the Second Milestone Period, as applicable.
“Business Day” means a day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by applicable Law to remain closed.
“CARES Act” means the Coronavirus Aid, Relief, and Economic Security Act of 2020, Pub. L. No. 116-136, 131 Stat. 281.
“Cash Consideration” means: (i) $150,000,000 in cash, plus (ii) the Closing Net Working Capital Surplus, if any, minus (iii) the Closing Net Working Capital Shortfall, if any, minus (iv) the amount of Closing Indebtedness, if any, minus (v) the aggregate amount of Transaction Expenses that have not been fully paid as of immediately prior to the Closing.
“Closing Indebtedness” means the aggregate amount of all Indebtedness of the Company Group outstanding as of the Measurement Time (other than with respect to Taxes included in Indebtedness, which shall be calculated as of the end of the day on the Closing Date after giving effect to the Transactions); provided that, the calculation of Closing Indebtedness shall exclude: (i) in the event the Closing has not occurred within three months immediately following the Agreement Date, 100% of the portion of the Seller Debt attributable to the Company Group operations during the fourth through sixth months immediately following the Agreement Date, up to a maximum amount of $15,000,000 and (ii) in the event the Closing has not occurred within six months immediately following the Agreement Date, (A) the amounts excluded pursuant to clause (i) with respect to the fourth through the sixth months plus (B) with respect to each month during the period commencing with the seventh month immediately following the Agreement Date and ending at the Measurement Time, a portion of the Seller Debt attributable to the Company Group operations equal to 50% of the amount specified for the applicable month in the Pre-Closing Budget (clause (i) and (ii), collectively, the “Assumed Seller Debt”). For the elimination of doubt, any current or other portion of Indebtedness shall be included in Closing Indebtedness and not included in Company Net Working Capital.
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“Closing Net Working Capital Shortfall” means the amount, if any, by which the Closing Net Working Capital Target exceeds Company Net Working Capital.
“Closing Net Working Capital Surplus” means the amount, if any, by which the Company Net Working Capital exceeds the Closing Net Working Capital Target.
“Closing Net Working Capital Target” means $22,000,000. “Code” means the U.S. Internal Revenue Code of 1986.
“Commercial Software” means any Software or Software as a service services that are commercially available and (i) are licensed or provided as a service to any member of the Company Group pursuant to a nonexclusive Software license or Software services agreement for a one-time or annual fee of $100,000 or less, (ii) are not material to the conduct of the Business by the Company Group and (iii) have not been modified or customized for any member of the Company Group.
“Company Data” means all data Processed in connection with the marketing, or use of any Company Product or the conduct of the Business, including Company-Licensed Data, Company-Owned Data and Personal Data.
“Company Data Agreement” means any Contract relating to or otherwise addressing the Processing of Company Data by or on behalf of the Company Group or otherwise in connection with the conduct of the Business (including Contracts with third parties relating to the Processing of Company Data) to which any member of the Company Group, Seller or its Affiliates is a party or by which they are bound, including the standard terms of service entered into by users of the Company Products (copies of which have been Delivered to Acquirer).
“Company Databases” means each distinct electronic or other repository or database containing (in whole or in part) Company Data maintained by or for any member of the Company Group at any time, which for clarity contain more than 300,000 exomes and 2.1 million phenotypes.
“Company Disclosure Schedules” means the Disclosure Schedules delivered by the Seller and the Company Parties to Acquirer in connection with the execution of this Agreement.
“Company Employee” means each current and former officer or employee of any member of the Company Group.
“Company Fundamental Representations” means the representations and warranties contained in Section 3.1 (Organization of Seller and the Company Group), Section 3.2 (Subsidiaries), Section 3.3 (Authorization), Section 3.4 (Capitalization), Section 3.5(b) (Title to and Sufficiency of Real and Tangible Properties and Assets), Section 3.12 (Taxes), Section 3.19(b) and (p) (Sufficiency of Intangible Properties and Assets) and Section 3.23 (No Brokers).
“Company Group” means (x) the Company and its Subsidiaries as of the Agreement Date and (y) immediately following consummation of the Pre-Closing Restructuring, Holdco2 and its direct subsidiary, GeneDx Delaware LLC, together with the Subsidiaries of GeneDx Delaware LLC immediately following the Pre-Closing Restructuring.
“Company IP” means any Company Owned IP and any Company Licensed IP. “Company IP Contracts” means any and all Contracts concerning Intellectual Property to which any member of the Company Group is a party or beneficiary or by which any member of the Company Group, or any of its or their properties or assets, may be bound, including all (i) licenses of Intellectual Property by the Company Group to any third party, (ii) licenses of Intellectual Property by any third party to any member of the Company Group, (iii) other Contracts between any member of the Company Group and any third party relating to the transfer, development, maintenance or use of Intellectual Property and (iv) consents, settlements, and Orders governing the use, validity or enforceability of Intellectual Property.
“Company IT Assets” means any and all IT Assets used or held for use in connection with the operation of the Business that are owned or controlled by any member of the Company Group, Seller or its Affiliates.
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“Company-Licensed Data” means all data owned by third parties that are Processed by the Company Group or, otherwise, in connection with the marketing or use of any Company Product or the conduct of the Business.
“Company Licensed IP” means any Intellectual Property that is licensed to the Company Group from another Person, including for clarity any Intellectual Property in and to Company Products other than Company Owned IP.
“Company Net Working Capital” means, as of the Measurement Time: (i) the Company Group’s consolidated total current assets less (ii) the Company Group’s consolidated total current liabilities, in each case as specifically set forth in the Company Net Working Capital Schedule. For the elimination of doubt (A) the Company Group’s current assets shall exclude (I) accounts receivable that are aged longer than 150 days, (II) any deferred Tax assets and (III) any loans or indebtedness of the Company Group’s officers in favor of any member of the Company Group, (B) the Company Group’s current liabilities shall include, without duplication, all Liabilities for (I) accounts payable, (II) accrued expenses, (III) vacation and paid time off accrued by or for the Company Employees (iii) deferred revenue and customer deposits, and (iv) local non-income taxes payable and (C) the Company Group’s current assets and liabilities shall exclude all (I) operating lease assets and liabilities (including tenant improvement assets), (II) current income tax assets and liabilities (including current income tax assets, income tax receivable or recoverable, income taxes payable, valuation allowance for current income taxes), and (III) intercompany receivables and liabilities. For the avoidance of doubt, Company Net Working Capital shall exclude (x) all Liabilities for Transaction Expenses that are incurred but unpaid as of the Closing, (y) any Closing Indebtedness and (z) any Seller Debt. An example calculation of Company Net Working Capital as of November 30, 2021 is included in the Company Net Working Capital Schedule.
“Company Net Working Capital Schedule” means the example calculation, for illustrative purposes only, of Company Net Working Capital as of November 30, 2021 contained in Exhibit D.
“Company-Owned Data” means each element of data Processed that (a) is used or held for use in the Business that is not Personal Data or Company-Licensed Data and (b) the Company Group owns or purports to own.
“Company Owned IP” means any Intellectual Property in which any member of the Company Group has or purports to have an ownership interest (whether solely or jointly with one or more other persons).
“Company Parties” (and each, a “Company Party”) means (i) the Company and Holdco2 as of the Agreement Date until immediately prior to consummation of the Pre-Closing Restructuring and (ii) Holdco2 and GeneDx Delaware LLC following consummation of the Pre-Closing Restructuring.
“Company Privacy Commitments” means, collectively: (A) the Company Group’s obligations under the Company Privacy Policies, (B) providing adequate notice and obtaining any necessary consents from end users and other natural Persons, as applicable required for the Processing of Personal Data as conducted by or for the Company Group, (C) any notices, consents, authorizations and privacy choices (including opt-in and opt-out preferences, as required) of end users and other natural Persons relating to Personal Data and (D) industry self-regulatory principles and codes of conduct applicable to the protection or Processing of Personal Data, biometrics, internet of things, direct marketing, e-mails, text messages, robocalls, telemarketing or other electronic communications (including the Payment Card Industry Data Security Standards) to which any member of the Company Group is bound or otherwise represents compliance.
“Company Privacy Policies” means, collectively, any and all (A) of the Company Group’s currently applicable data privacy and security policies, procedures, and notices, whether applicable internally, or published on Company Websites or otherwise made available by the Company Group to any Person, and (B) public representations (including representations on Company Websites), made by or on behalf of the Company Group with regard to Personal Data.
“Company Product” means any product or service currently produced, marketed, licensed, sold, distributed or performed by the Company Group and any product or service that is being researched or under development for use in the Business, including those set forth in Section 3.15(b) of the Company Disclosure Schedule.
“Company Software” means all Software used or held for use in connection with the operation of the Business.
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“Company Websites” means all websites owned, operated or hosted by the Company Group or through which the Company Group conducts the Business, and the underlying platforms for such websites.
“Confidentiality Agreement” means the letter agreement between Seller, the Company and Acquirer, dated October 12, 2021.
“Consent” means any required consent, waiver or approval of a third party for the consummation of the Transactions or to the Transfer, or amendment of a Contract.
“Continuing Employees” means all employees of any member of the Company Group immediately prior to the Effective Time.
“Contract” means any agreement, understanding, contract, note, bond, deed, mortgage, lease, sublease, license, sublicense or instrument that is legally binding, whether written or oral.
“Controlled Group Liability” means any and all Liabilities (a) under Title IV of ERISA, (b) under Section 302 of ERISA, (c) under Section 412 and 4971 of the Code, and (d) as a result of a failure to comply with the continuation coverage requirements of Section 601 et seq. of ERISA and Section 4980B of the Code, other than such Liabilities that arise solely out of, or relate to, Company Benefit Plans.
“Copyrights” means all copyrights, whether in published or unpublished works; databases, data collections and rights therein, mask work rights, Software, web site content; rights to compilations, collective works and derivative works of any of the foregoing and moral rights in any of the foregoing; registrations and applications for registration for any of the foregoing and any renewals or extensions thereof.
“COVID-19” means the novel coronavirus known as SARS-CoV-2 or COVID-19, and variant thereof.
“COVID-19 Response” means any quarantine, travel restriction, “stay-at-home” orders, social distancing measures or other safety measures, workforce reductions, workplace or worksite shutdowns or slowdowns, factory closures, “shelter in place”, “stay at home”, workforce reduction sequester safety or similar Law, directive or guidelines promulgated by any applicable Governmental Authority or other measures initiated to the extent reasonably necessary to, respond to, or mitigate the effects of, the COVID-19 pandemic, as recommended by any applicable Governmental Authority, including the Centers for Disease Control and Prevention or the World Health Organization, in each case, in connection with or in response to COVID-19, including the Coronavirus Aid, Relief and Economic Security Act, as may be amended, or the Families First Coronavirus Response Act, as may be amended or any other applicable Law.
“Data Room” means the virtual data room for the Transactions hosted at securevdr.com, to which Acquirer and its Representatives have access.
“Default” means (i) any actual breach, violation or default, (ii) the existence of circumstances or the occurrence of an event that, with the passage of time or the giving of notice or both, would constitute a breach, violation or default or (iii) the existence of circumstances or the occurrence of an event that, with or without the passage of time or the giving of notice or both, would give rise to a right of cancellation, termination, modification renegotiation or acceleration.
“Deliver” means (i) providing to Acquirer a copy of any item required to be delivered to Acquirer directly or (ii) including any such item in the Data Room, in each case (clauses (i) and (ii)), not less than one Business Day prior to the Agreement Date (except if a particular date of Delivery is specified).
“Detect Genomix” shall mean Detect Genomix, LLC, a Florida limited liability company, with principal office at 1301 Concord Terrace, Sunrise, Florida 33323
“DGCL” means the General Corporation Law of the State of Delaware.
“Dispute” means any dispute, controversy or claim (of any and every kind or type, whether based on contract, tort, statute, regulation, or otherwise) arising out of, relating to, or in connection with this Agreement, the
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negotiation, execution or performance of this Agreement (including any such dispute, controversy or claim based upon, arising out of or related to any representation or warranty made in or in connection with this Agreement or as an inducement to enter into this Agreement) or the Transactions, including any dispute as to the construction, validity, interpretation, enforceability or breach of this Agreement.
“Domain Names” means Internet electronic addresses, uniform resource locators and alphanumeric designations associated therewith registered with or assigned by any domain name registrar, domain name registry or other domain name registration authority as part of an electronic address on the Internet and all applications for any of the foregoing.
“EMA” means the European Medicines Agency and any successor agency(ies) or authority having substantially the same function.
“Encumbrance” means any charge, claim, mortgage, lien, option, pledge, security interest, right of first refusal, easement, deed of trust or encumbrance.
“Environmental Law” means all applicable Laws which relate to pollution, the environment, natural resources or human health and safety, including any Laws which relate to (i) the protection, preservation or restoration of the environment (including air, water vapor, surface water, groundwater, drinking water supply, surface land, subsurface land, plant and animal life or any other natural resource), or (ii) the exposure to, or the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of Hazardous Substances.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended. “ERISA Affiliate” means any Person which is (or at any relevant time was or will be) a member of a “controlled group of corporations” with, under “common control” with, or a member of an “affiliate service group” with the Company Group as such terms are defined in Sections 414(b), (c), (m) or (o) of the Code.
“Escrow Account” means the escrow account established by the Escrow Agent to hold the Escrow Amount in trust.
“Escrow Amount” means $13,470,000 in cash and 8,314,815 shares of Acquirer Stock. “Escrow Expiration Date” shall mean the 12-month anniversary of the Closing Date. “Estimated Cash Consideration” means the Company’s good faith estimate of the Cash Consideration set forth in the Estimated Closing Statement.
“Estimated Closing Statement” means a statement, setting forth, Seller’s and the Company Parties’ good faith estimates of: (a) the Company Net Working Capital (including (i) the Company Group’s balance sheet as of the Closing Date prepared in accordance with the Accounting Standards, (ii) an itemized list of the Company Group’s consolidated total current assets (in each case as set forth in the Company Net Working Capital Schedule), (iii) an itemized list of the Company Group’s consolidated total current liabilities (in each case as set forth in the Company Net Working Capital Schedule) and (iv) the calculation of the Closing Net Working Capital Shortfall or Closing Net Working Capital Surplus, as applicable); (b) the amount of the Closing Indebtedness (including an itemized list of each item of Company Indebtedness with a description of the nature of such Company Indebtedness and the Person to whom such Company Indebtedness is owed) and the aggregate amount of Seller Debt (including itemized detail reflecting the amount attributable to each month of Company Group operations during the Pre-Closing Period); (c) unpaid Transaction Expenses (including an itemized list of each Transaction Expense with a description of the nature of such expense and the Person to whom such expense is owed); and (d) based on such amounts, the calculation of the Cash Consideration.
“European Union” means the economic, scientific and political organization of member states as it may be constituted from time to time, which as of the Agreement Date consists of Austria, Belgium, Bulgaria, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and that certain portion of Cyprus included in such organization.
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“Exchange Act” means the Securities Exchange Act of 1934, as amended. “FCPA” means the United States Foreign Corrupt Practices Act.
“FDA” means the United States Food and Drug Administration and any successor agency thereto.
“FDCA” means the United States Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 301 et seq.
“Fraud” means common law fraud with the element of scienter, as interpreted under the Laws of the State of Delaware and, for the avoidance of doubt, excluding claims based on negligence or recklessness.
“Fundamental Representations” means the Acquirer Fundamental Representations and the Company Fundamental Representations, as applicable.
“Governing Documents” means the legal document(s) by which any Person (other than an individual) establishes its legal existence or other organizational documents of such Person. For example, the “Governing Documents” of a corporation are its certificate or articles of incorporation and by-laws and the “Governing Documents” of a limited liability company are its operating or limited liability company agreement and certificate of formation.
“Governmental Authority” means any (a) nation, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (b) international, multinational, supra-national, federal, state, local, municipal, foreign or other government, agency or authority; (c) governmental or quasi-governmental authority of any nature (including any governmental division, department, agency, commission, securities exchange or instrumentality and any court or other tribunal) or (d) any bureau, instrumentality or commission or any court, tribunal, judicial or arbitral body, industry or trade or private body exercising any regulatory or quasi regulatory power or authority, including the FDA, European Commission and EMA, and any Institutional Review Board or Ethics Committee.
“Governmental Program” means all “federal health care programs” (as defined by 42
U.S.C. § 1320a–7b(f)), including Medicare, Medicaid, TRICARE, Maternal and Child Health Service Block Grant, Children’s Health Insurance Program, and any other similar or successor federal, state or local healthcare payment programs with, or sponsored in whole or in part by, any Governmental Authority or any agent or contractor of a Governmental Authority.
“Hazardous Substances” means any pollutant, chemical, substance and any toxic, infectious, carcinogenic, reactive, corrosive, ignitable or flammable chemical, chemical compound, hazardous substance, material or waste, whether solid, liquid or gas, that is subject to regulation, control or remediation under any Environmental Laws, including any quantity of petroleum product or byproduct, solvent, flammable or explosive material, radioactive material, asbestos, lead paint, polychlorinated biphenyls (or PCBs), dioxins, dibenzofurans, heavy metals, radon gas, mold, mold spores, and mycotoxins.
“Health Care Laws” means any applicable Law regarding health care products and services applicable to the Company Group or Company Products, including any applicable Law the purpose of which is to ensure the safety, efficacy and quality of genetic testing and diagnostic and similar products by regulating the research, development, manufacturing and distribution of such products, including applicable Law relating to CLIA requirements, record keeping and filing of required reports, and relating to promotion and sales of health care products to providers and facilities that bill or submit claims under government healthcare programs, including (i) CLIA, the PHSA, and applicable FDA Emergency Use Authorization (“EUA” ) requirements(ii) the federal Anti-kickback Statute (42 U.S.C. § 1320a-7b(b)); the Anti-Inducement Law (42 U.S.C. § 1320a-7a(a)(5)); the Stark Law (42 U.S.C. §1395nn et seq); the civil False Claims Act (31 U.S.C. §§ 3729 et seq.); the administrative False Claims Law (42 U.S.C. § 1320a- 7b(a)); the Exclusion Laws and the Civil Monetary Penalties Law (42 U.S.C. § 1320a-7 and 1320a-7a); the Medicare statute (Title XVIII of the Social Security Act), including Social Security Act §§ 1860D-1 to 1860D-43 (relating to Medicare Part D and the Medicare Part D Coverage Gap Program); the Medicaid statute (Title XIX of the Social Security Act); the Physician Payments Sunshine Act (42 U.S.C. § 1320a- 7h), and any other similar applicable Law, whether of the United States or any other applicable jurisdiction, (iii) the Clinical Laboratory
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Improvement Amendments of 1988, (iv) the Program Fraud Civil Remedies Act (31 U.S.C. §§ 3801-3812), (v) the Prohibition on Inducement of Beneficiaries Statute (42 U.S.C. § 1320a-7a(a)(5)), (vi) the Federal Health Care Fraud Law (18 U.S.C. § 1347), (vii) the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (codified at 42 U.S.C. § 300gg and 29 U.S.C. § 1181 et seq. and 42 USC 1320d et seq.), (viii) Medicare (Title XVIII of the Social Security Act), (ix) Medicaid (Title XIX of the Social Security Act) and (x) all applicable state privacy and confidentiality laws, and state laws, including those related to insurance, balance billing, out-of-network services and the waiver of deductibles, copayments or cost-sharing.
“Holdco2 Common Stock” means the common stock, par value $0.0001 per share, of Holdco2.
“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.
“Indebtedness” means (without duplication), as to any Person: (a) all obligations for the payment of principal, interest, penalties, fees or other Liabilities for borrowed money (including notes payable), incurred or assumed (including pursuant to the Paycheck Protection Program of the CARES Act to the extent not forgiven or subject to forgiveness under the CARES Act), including in the case of the Company Group, the Seller Debt, (b) all obligations for the deferred purchase price of property or services including pursuant to any earn-out or similar obligation (other than current trade payables or short-term accruals incurred in the Ordinary Course of Business), (c) any obligations for amounts drawn under any letter of credit, surety bond, debenture, promissory note, performance bond or other similar instrument, (d) all obligations as lessee under leases that are required to be recorded as capital or finance leases under the Accounting Standards (including leases excluded from the balance sheet due to duration of term), (e) (i) all obligations under that certain Amended and Restated Credit Agreement, dated August 30, 2021, by and among BioReference Laboratories, Inc., certain of its subsidiaries, including the Company, and JPMorgan Chase Bank, N.A., only to the extent the Company Group and its assets have not been fully and irrevocably released from all obligations thereunder and any corresponding security interest arising thereunder has not been terminated prior to the Closing and (ii) all indebtedness of Third Parties secured by an Encumbrance on any asset or property owned or acquired by such Person (if recourse for such security interest is limited to such asset or property, in an amount equal to the lesser of (x) such indebtedness and (y) the fair market value of such asset or property), (f) any obligation that is required to be reflected as debt on the balance sheet of such Person under the Accounting Standards, (g) all obligations in respect of interest rate and currency swaps, protection agreements, hedges, caps or collar agreements or similar arrangements either generally or under specific contingencies, (h) all obligations in respect of deferred compensation or unfunded or underfunded pension obligations, including any Controlled Group Liability, but excluding accrued but unpaid 401(k) plan employer match contributions under the Seller 401(k) Plan for the portion of the plan year ending on the Closing Date (the “Accrued 2022 401(k) Match” ) (i) any unpaid executive sign-on bonuses or bonuses related to COVID-19, unpaid discretionary annual bonuses for the period ending December 31, 2021 as determined in Seller’s sole discretion and unpaid pro-rated discretionary annual bonuses for the year-ended December 31, 2022 based on actual performance through the Closing Date) (and the employer portion of any payroll Taxes of such member of the Company Group or Acquirer arising from the payment of any such bonuses or payments), (j) any Repayment Obligations, (k) any Pre- Closing Taxes and any other Liabilities of the Company Group for Taxes as of the Closing, whether or not such Liabilities for Taxes would then be due and payable (including, for the avoidance of doubt, employer payroll taxes or other Taxes arising in connection with any payment required pursuant to, or arising as a result of, this Agreement or the Transactions, and including any such taxes that have been deferred pursuant to the CARES Act, and taking into account Transaction Tax Deductions to the extent permitted by applicable Law on a “more likely than not” basis), and (l) all indebtedness of others referred to in clauses (a) through (l) above guaranteed directly or indirectly in any manner by such Person.
“Intellectual Property” means all worldwide intellectual property or industrial property rights protected, created, arising under or recognized by any Laws or Governmental Authority, including (i) Patents; (ii) Trademarks; (iii) Copyrights; (iv) Trade Secrets; (v) all rights to sue and recover damages for past, present and future infringement, misappropriation, dilution or other violation of any of the foregoing;, and (vi) all other rights similar or pertaining to any of the foregoing in anywhere in the world.
“IRS” means the Internal Revenue Service of the United States.
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“IT Assets” means Software, databases, systems, servers, computers, hardware, firmware, middleware, storage media (e.g., backup tapes), networks, data communications lines, routers, hubs, switches, network devices and all other information technology equipment, and all associated documentation.
“Key Employee” means Katherine Stueland, Kevin Feeley and Jennifer Brendel.
“Knowledge” means: (i) with respect to the Company, the actual knowledge of the persons listed in Section 1.1 of the Company Disclosure Schedules, including such knowledge that would be acquired by such persons through their reasonable inquiry and (ii) with respect to Acquirer, the actual knowledge of the persons listed on Section 1.1 of the Acquirer Disclosure Schedules, including such knowledge that would be acquired by such persons through their reasonable inquiry.
“Law” means any applicable federal, state, local or other domestic or foreign law (including common law), statute, ordinance, rule, regulation, Order, writ, or other requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Authority.
“Liability” means any direct or indirect liability, indebtedness, obligation, commitment, expense, claim, deficiency, guaranty or endorsement of or by any Person of any type, known or unknown, and whether accrued, absolute, contingent, matured, unmatured or other.
“Material Adverse Effect” means any event, change, condition, circumstance, effect, development, occurrence or state of facts (“Effect”) that, individually or in the aggregate with all other Effects, has, or would reasonably be expected to have, a material adverse effect on (i) the condition (financial or otherwise), business, results of operations or assets of the Company Group (taken as a whole) or (ii) the ability of Seller or the Company Parties to perform their respective obligations under this Agreement; provided that no Effect attributable to any of the following shall be taken into account in determining the existence of a Material Adverse Effect solely for purposes of clause (i) above: (A) conditions affecting the industry, financial markets or securities markets in, or the economy as a whole of, the United States, (B) changes in Law or Accounting Standards (or, in each case, any interpretation thereof) after the Closing Date, (C) earthquakes, hostilities, acts of war, sabotage or terrorism or military actions, epidemic, public health event or pandemic (including COVID-19 and any worsening thereof (including any COVID-19 Response)), (D) any actions required under this Agreement or otherwise negotiated separately to obtain any approval or authorization under applicable antitrust or competition Laws for the consummation of the transactions contemplated hereby, (E) the announcement or pendency of this Agreement and the Transactions;consummation of the transactions contemplated hereby (including the effects of such announcement and pendency on relationships with customers, suppliers, Governmental Authorities, employees or other third-party relationships), (F) any actions taken (or omitted to be taken) by or at the written request of the Acquirer or as required by this Agreement, or (G) any failure, in and of itself, of the Company Group to meet any internal or published projections, forecasts or revenue or earnings predictions for any period (it being understood that the underlying causes of the facts or occurrences giving rise to such failure may be taken into account in determining whether a Material Adverse Effect has occurred), except, in the case of the forgoing clauses (A), (B) and (C), to the extent such conditions, changes or events disproportionately affect the Company Group relative to similarly situated industry participants (in which case the incremental disproportionate impact or impacts may be taken into account in determining whether there has been a Material Adverse Effect).
“Measurement Time” means 11:59 p.m., Eastern Time, on the date immediately preceding the Closing Date.
“Merger Consideration” means the Cash Consideration plus the Stock Consideration.
“Most Recent Balance Sheet” means the balance sheet of the Company as of September 30, 2021.
“Nasdaq” means the Nasdaq Global Select Market.
“Order” means any writ, judgment, injunction, determination, consent, order, decree, stipulation, award or executive order of or by any Governmental Authority.
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“Ordinary Course of Business” means the ordinary course of business of the Company Group, consistent with past practice.
“Parent” means OPKO Health Inc., a Delaware corporation.
“Parent Group” means any consolidated, combined, unitary or other aggregate group of entities for Tax purposes (including Code Section 1504 and similar provisions of state and local Laws) in which Parent is the common parent entity.
“Patents” means any and all patents, industrial and utility models, industrial designs, petty patents, design patents, patents of importation, patents of addition, certificates of invention, and other indicia of invention ownership issued or granted by any Governmental Authority; applications for any of the foregoing, including provisional, utility, design, priority, divisional, and continuation (in whole or in part) applications, and all other pre-grant forms of any of the foregoing; extensions, reissues, re- examinations, renewals, or other post-grant forms of any of the foregoing; equivalent or similar rights in inventions and discoveries anywhere in the world; counterparts of any of the foregoing anywhere in the world; and other forms of government issued rights substantially similar to any of the foregoing.
“Payor Parties” (and each, a “Payor Party”) means any payors administering Governmental Program benefits or any other healthcare service plan, any health maintenance organizations, any health insurers and any other private and commercial payors.
“Permits” means all licenses and operating licenses, permits, concessions, franchises, approvals, clearances, registrations, certificates, rights, grants, exceptions, exemptions, qualifications, privileges, exemptions, authorizations (including marketing and testing authorizations), easements, variances, permissions, consents or Orders of, any Governmental Authority, including any marketing authorizations, and any approvals or filings relating to any pre-clinical or clinical development, together with all applications therefor and all renewals, extensions, or modifications thereof and additions thereto.
“Permitted Encumbrances” means (i) Encumbrances for Taxes not yet due and payable and that are reserved for in full on the Most Recent Balance Sheet in accordance with the Accounting Standards, (ii) statutory, mechanics’, laborers’ and materialmen liens arising in the Ordinary Course of Business for sums not yet due and payable and not otherwise in default (or for which the validity or amount of which is being contested in good faith), (iii) zoning, entitlement, conservation restriction and other land use and environmental regulations promulgated by Governmental Authorities, (iv) written resignationsEncumbrances granted to any lender at the Closing in forms satisfactoryconnection with any financing by the Acquirer, (v) any right, interest, lien, title or other Encumbrance of a lessor or sublessor under any lease or other similar agreement or in the property (other than Intellectual Property) being leased, (vi) restrictions on the transfer of securities arising under federal and state securities laws, (viii) non-exclusive licenses of Intellectual Property granted in the Ordinary Course of Business (A) for the use of results generated by Company Products from a patient sample solely for the clinical care of the patient from which such sample was collected, or (B) for incidental use of trademarks by payors, customers or service providers solely to identify Company Group as the provider of Company Products ((A) and (B) collectively, “Ordinary Course Licenses”) and (ix) Encumbrances listed on Schedule 1.1(b) of the Company Disclosure Schedules.
“Person” means any person or entity, whether an individual, sole proprietorship, general partnership, limited partnership, limited liability partnership, corporation, limited liability company, limited liability limited partnership, business trust, joint stock company, trust, unincorporated association, joint venture, estate, Governmental Authority or other entity or organization.
“Personal Data” means all data or information that constitutes personal data, protected health information, individually identifiable health information or personal information under any applicable Law.
“PHSA” means the United States Public Health Service Act.
“PIPE Investment Amount” means the aggregate gross purchase price received by Acquirer prior to or substantially concurrently with Closing for the shares in the PIPE Investment.
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“PIPE Investors” means those certain investors participating in the PIPE Investment pursuant to the Subscription Agreements.
“Post-Closing Tax Period” means any Tax period beginning after the Closing Date and that portion of any Straddle Period beginning after the Closing Date.
“PPP Loan” means (i) any covered loan under paragraph (36) of Section 7(a) of the Small Business Act (15 U.S.C. 636(a)), as added by Section 1102 of the CARES Act, or (ii) any loan that is an extension or expansion of, or is similar to, any covered loan described in clause (i).
“Pre-Closing Budget” means the budget set forth on Schedule C.
“Pre-Closing Restructuring” has the meaning set forth in the Recitals, as further described on Schedule D.
“Pre-Closing Tax Period” means any Tax period ending on or before the Closing Date and that portion of any Straddle Period ending on and including the Closing Date.
“Pre-Closing Taxes” means (i) any Liability for any Tax of or owed by the Company Group in respect of any Pre-Closing Tax Period, (ii) any Liability for any Taxes of Seller, (iii) all Taxes imposed in respect of a Pre-Closing Tax Period the payment of which Taxes is deferred to a taxable period (or portion thereof) beginning after the Closing Date, (iv) all Taxes of any member of an affiliated group of corporations, within the meaning of Section 1504 of the Code (or any predecessor provision or comparable provision of state, local or foreign Law) of which any member of the Company Group (or any predecessor of any such member) is or was a member on or prior to the Closing Date, including pursuant to Treasury Regulations Section 1.1502-6 or any analogous or similar U.S. state or local, or non-U.S. Law, (v) Taxes of Seller arising from the Transactions, (vi) any Transfer Taxes for which Seller is liable pursuant to this Agreement or under applicable Law, and (vii) any Taxes of any Person imposed on any member of the Company Group as a transferee or successor, by Contract or pursuant to any Law, which Taxes relate to an event or transaction occurring before the Closing. Notwithstanding the foregoing, Pre-Closing Taxes shall not include Taxes otherwise included in the calculation of the amount of Company Net Working Capital, Closing Indebtedness or the Merger Consideration, Taxes attributable to transactions occurring after the Closing on the Closing Date outside the Ordinary Course of Business, or Taxes attributable to breaches by the Acquirer of its agreements, representations, warrants or covenants under this Agreement.
“Privacy Laws” means (i) each U.S. federal or state Law applicable to the Company Group with respect to protection or Processing or both of Personal Data, and includes, but is not limited to (A) the Health Insurance Portability and Accountability Act of 1996 as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 as otherwise amended from time to time, and the rules and regulations promulgated thereunder, including the Privacy Standards (45 C.F.R. Parts 160 and 164), the Electronic Transactions Standards (45 C.F.R. Parts 160 and 162), and the Security Standards (45 C.F.R. Parts 160, 162 and 164) (“HIPAA”), and (B) law, regulations and/or rules relating to the Processing of biometric data, direct marketing, e-mails, text messages, robocalls, telemarketing or other electronic commercial messages and (ii) binding guidance issued by a Governmental Authority that pertains to one of the laws, rules or regulations outlined in clause (i).
“Proceeding” means any suit, litigation, arbitration, mediation, alternative dispute resolution procedure, claim, action, complaint, proceeding, hearing, or investigation (whether civil or criminal, administrative or judicial, and whether public or private), in each case to, from, by or before any Governmental Authority.
“Process” or “Processing” or “Processed” means, with respect to data, the use, collection, processing, storage, recording, organization, adaption, alteration, transfer, retrieval, consultation, disclosure, dissemination or combination of such data.
“Public Official” means (a) any Representative of any Governmental Authority, (b) any Representative of any commercial enterprise that is wholly owned or controlled by a Governmental Authority, including any state-owned or controlled medical facility, and (c) any political party, party official or candidate for political office.
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“Public Software” means any Software that is distributed as freeware, shareware, open source Software (e.g., Linux) or similar licensing or distribution models. For the avoidance of doubt, “Public Software” includes Software licensed, distributed under or otherwise subject to any of the following licenses or distribution models (or licenses or distribution models similar thereto): (A) GNU’s General Public License (GPL) or Lesser/Library GPL (LGPL); (B) the GNU Affero GPL license; (C) the Artistic License (e.g., PERL); (D) the Mozilla Public License; (E) the Netscape Public License; (F) the Sun Community Source License (SCSL); (G) the Sun Industry Standards License (SISL); (H) the BSD License; (I) Red Hat Linux; (J) the Apache License; and (K) any other license or distribution model described by the Open Source Initiative as set forth on www.opensource.org, and any other free, open-source, or “copy left” license or terms that requires as a condition of use, modification or distribution that such software or other software combined or distributed with it be (i) disclosed or distributed in source code form; (ii) licensed for the purpose of making derivative works; (iii) redistributable at no charge; or (iv) licensed subject to a patent non-assert or royalty-free patent license.
“Registered Company IP” means all Registered IP included in the Company Owned IP. “Registered IP” means all Intellectual Property that is registered, issued, granted by any Governmental Authority (including the United States Patent and Trademark Office or United States Copyright Office), and all applications, registrations and grants for any of the foregoing.
“Regulatory Approval” means, with respect to a Company Product in a country, any and all approvals, licenses, registrations or authorizations of any Governmental Authority necessary to commercially distribute, sell or market such Company Product in such country, including, where applicable, pricing or reimbursement approval in such country and (ii) pre- and post-approval marketing authorizations (including any prerequisite manufacturing approval or authorization related thereto).
“Regulatory Authority” means any applicable Governmental Authority that regulates or otherwise exercises authority with respect to the Exploitation of any Company Product or administers Health Care Laws.
“Regulatory Documentation” means all (i) Regulatory Approvals and Regulatory Permits; correspondence and reports submitted to or received from Regulatory Authorities (including minutes and official contact reports relating to any communications with any Regulatory Authority) and all supporting documents with respect thereto, including all adverse event files and complaint files; and (iii) pre-clinical, clinical and other data contained or relied upon in any of the foregoing; in each case (clauses (i), (ii) and (iii)) relating to the Company Products.
“Regulatory Permit” means governmental licenses, franchises, permits, certificates, consents, approvals, registrations, concessions or other authorizations required to have been obtained from, or filings required to have been made with, Governmental Authorities pursuant to a Health Care Law in order to allow the conduct of a regulated activity.
“Related Party” means: (i) Seller; (ii) each Person who is, or who was at the time of the entry into this Agreement or the creation of the interest in question an officer or director of any member of the Company Group or Seller, or who, beneficially or of record, held shares or other equity interests in any member of the Company Group, or who served as a an officer or officer of a Person who, beneficially or of record, owned shares or other equity interests in any member of the Company Group; and (iii) each member of the immediate family of each of the Persons referred to in clause (i) or (ii) above. For purposes of this definition, the “immediate family” of an individual means (x) the individual’s spouse and (y) the individual’s parents, brothers, sisters and children.
“Repayment Obligations” means any repayment obligations of the Company Group arising from or related to services rendered prior to the Closing which are ultimately not paid, or where reimbursement is subsequently refunded to or recouped, in each case in whole or in part, by the applicable Payor Party due to actual or alleged errors or omissions, including improper coding, lack of coverage, lack of medical necessity or non-compliance with other applicable Payor Party requirements.
“Representative” means, with respect to any Person, any officer, director, principal, attorney, agent, employee or other representative of such Person.
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“Required Financial Statements” means such financial statements of the Company Group as are required by Regulation S-X to be included in the Proxy Statement or Closing 8-K.
“SEC” means the U.S. Securities and Exchange Commission. “Securities Act” means the Securities Act of 1933.
“Seller Debt” means the financing provided by Seller to the Company Group during the Pre-Closing Period in order to fund the Company Group’s operations in accordance with the Pre-Closing Budget and evidenced by an inter-company note bearing interest at the statutory applicable federal annual mid-term rate.
“Share Value” means $4.86.
“Software” means all (i) computer programs, applications, systems and code, including software implementations of algorithms, models and methodologies, and source code and object code, (ii) Internet and intranet websites, databases and compilations, including data and collections of data, whether machine-readable or otherwise, (iii) software development and design tools, library functions and compilers, (iv) technology supporting websites, and the contents and audiovisual displays of websites and (v) documentation, other works of authorship and media, including user manuals and training materials, relating to or embodying any of the foregoing or on which any of the foregoing is recorded.
“SPAC Merger Agreement” means that certain Agreement and Plan of Merger, dated February 9, 2021, entered into by and among CM Life Sciences, Inc., S-IV Sub, Inc. and Legacy Sema4, as amended.
“Specified Designees” means (i) one (1) individual designated by the Company and (ii) one (1) one individual designated by Seller who is independent from Seller and the Company Group, in each case as mutually agreed with Acquirer.
“Stock Consideration” means 80,000,000 shares of Acquirer Stock, as adjusted for any stock split, stock dividend, recapitalization, merger, consolidation or similar event occurring after the Agreement Date.
“Straddle Period” means any Tax period beginning on or before the Closing Date and ending after the Closing Date.
“Stueland Employment Agreement” means that certain Employment Agreement, dated as of June 7, 2021, by and among Katherine Stueland, Seller and the Company.
“Stueland Employment Agreement Obligations” means the sum of (i) the aggregate amount of the Sign On Bonus (within the meaning of the Stueland Employment Agreement) that has not been paid to Katherine Stueland as of the Closing Date, and effectiveplus (ii) the aggregate fair market value of the Initial Option (within the meaning of the Stueland Employment Agreement), regardless of whether or not the Initial Option is outstanding as of the Closing executed byDate or will remain outstanding as of immediately following the officers and directors of Merger SubClosing but subject to clause (C) below, and the officers and directorsAdditional Option (within the meaning of Parent who will not retainthe Stueland Employment Agreement), with such positions uponaggregate fair market value determined based on the closing price of Seller’s common stock as of the trading day immediately preceding the Closing Date minus the applicable exercise price per share (for the avoidance of doubt, if such closing price equals or exceeds the exercise price per share of the Initial Option or the Additional Option, the fair market value of the Initial Option or Additional Option, as mutually agreed by Parentapplicable, for purposes of this clause (ii) shall be zero); provided that: (A) if the Closing occurs prior to June 21, 2022 or Katherine Stueland waives her right to receive the Additional Option prior to or in connection with the Closing, then the Additional Option shall be deemed to have a fair market value of $0, (B) if the Closing occurs on or following June 21, 2022, the Additional Option has not been granted as of the trading day immediately preceding the Closing Date, and Katherine Stueland does not waive her right to receive the Company;
(v)Additional Option prior to or in connection with the Indemnification Agreements, duly executed by Parent;
(vi) all other documents, instruments or certificates requiredClosing, then the per share exercise price of the Additional Option shall be deemed to be delivered by Parent at orequal the closing price of Seller’s common stock as of June 21, 2022 (or if June 21, 2022 is not a trading day, the closing price of Seller’s common stock as of the immediately preceding trading day), and (C) if Katherine Stueland’s employment terminates for any reason prior to the Closing, then (i) any portion of the Initial Option that is forfeited in connection with such termination of employment and (ii) any portion
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of the Initial Option that is not forfeited in connection with such termination of employment and is exercised prior to the Closing, shall in each case be deemed to have a fair market value of $0.
“Subscription Agreements” means the subscription agreements pursuant to which the PIPE Investment will be consummated.
“Subsidiary” means, when used with respect to any Person, including the Company, any entity, corporation or other organization, whether incorporated or unincorporated, for which at least a majority of the securities or other interests having ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such entity, corporation or other organization is directly or indirectly owned or controlled by such Person or by any one or more of its Subsidiaries.
“Tax” means any and all federal, state, local or non-U.S. taxes and duties and similar governmental charges, assessments, levies, imposts or withholdings, including net income, gross income, capital gains, alternative minimum, base erosion anti-abuse, diverted profits, digital services, value added, goods and services, gross margin, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, unemployment, social security, disability, excise, severance, environmental, stamp, occupation, premium, property, unclaimed property, escheat, windfall profits, customs, duties or other actual or estimated taxes, together with any interest, fines, penalties, surcharges and charges in respect of Taxes (including as a result of any failure to timely file a Tax Return) and any additions to tax or additional amounts with respect thereto.
“Tax Authority” means any Governmental Authority responsible for the determination, assessment, collection or administration of Taxes.
“Tax Return” means any return, declaration, report, statement, claim for refund, information statement or other document filed or required to be filed with a Tax Authority in connection with the determination, assessment, collection or administration of Taxes, as well as any schedule, attachment thereto or amendment thereof.
“Third Party” means any Person other than the Company Parties, the Acquirer Parties, Seller and their respective Affiliates (including their respective Subsidiaries).
“Total Merger Consideration” means the Merger Consideration plus the Milestone Payments, if and to the extent such amounts become payable pursuant to Section 8.22.7.
(b) At“Trade Secrets” means unpublished inventions (whether patentable or not and whether or not reduced to practice), industrial designs, discoveries, improvements, ideas, designs, models, chemical and biological materials, compounds, formulae, recipes, patterns, compilations, results, data (including pre- clinical and clinical data), databases, data collections and compilations, analyses, diagrams, drawings, blueprints, mask works, devices, methods, compositions, algorithms, techniques, patterns, processes, know- how and other forms of technology (whether or not embodied in any tangible form and including all tangible embodiments of the foregoing, such as laboratory notebooks, studies and summaries), proprietary rights in confidential information of any kind, instructions, configurations, prototypes, samples, formulations, specifications, analytic models, customer lists, source code, development tools,, in each case, to the extent constituting a trade secret as defined under the Uniform Trade Secrets Act or other applicable Laws.
“Trademarks” means trademarks, service marks, trade names, service names, brand names, trade dress, logos, as well as Internet domain names, corporate and other business names, other like source or business identifiers and other proprietary rights to any words, names, slogans, symbols, logos, devices or combinations thereof to the extent that they are used and function to identify, distinguish and indicate the source or origin of goods or services, together with the goodwill associated with any of the foregoing; and all registrations and renewals, applications for registration, equivalents or counterparts thereof; and all statutory, federal, common law, and rights provided by international treaties or conventions, in any of the foregoing.
“Transaction Certificates” means all certificates contemplated by this Agreement to be delivered at Closing by the Parties pursuant to this Agreement.
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“Transaction Documents” means this Agreement and the Ancillary Agreements. “Transaction Expenses” means (a) any out-of-pocket fees, costs, payments and expenses of the Company shall deliverGroup, including legal and accounting fees, valuation services, investment banking fees, and related disbursements, in each case in connection with (i) the participation in or response to Parent:
(i) a copythe investigation, review and inquiry conducted by Acquirer and its Representatives with respect to the business of the CertificateCompany Group (and the furnishing of Merger, duly executed byinformation to Acquirer and its Representatives in connection with such investigation and review), (ii) the Company;
(ii) a copynegotiation, preparation, drafting, review, execution, delivery or performance of the A&R Registration Rightsthis Agreement duly executed by the Consenting Stockholders;
(iii) a copy of the Sponsoror any Ancillary Agreement duly executed by the Company;
(iv) copies of resolutions and actions taken by the Company’s board of directors and the Company Stockholdersor any other document delivered or to be delivered in connection with the Transactions, (iii) the obtaining of any consent, waiver or approval required to be obtained in connection with any of the Transactions; (b) 50% of the out-of-pocket fees, costs, payments and expenses incurred in connection with the preparation and submission of any regulatory filing or notice required to be made or given in connection with any of the Transactions, including pursuant to HSR; (c) any sale bonuses, change in control bonuses, payments in respect of equity awards, retention payments or similar amounts that become payable by any member of the Company Group by reason of, or in connection with, the Closing, other than any such bonus or payment (i) payable pursuant to a Contract entered into by or at the request of the Acquirer or (ii) to the extent that the amount thereof is increased pursuant to the amendment to a Contract undertaken at the request of Acquirer; provided that an amount equal to the Stueland Employment Agreement Obligations shall be treated as a “Transaction Expense,” (d) any severance or similar termination payments payable by any member of the Company Group to any current or former employee, or any current or former director, officer or contractor of any member of the Company Group, by reason of, or in connection with, the Closing, other than any such payment (i) payable pursuant to a Contract entered into at the request of the Acquirer, (ii) to the extent that the amount thereof is increased pursuant to the amendment to a Contract undertaken at the request of Acquirer or (iii) triggered by any action of Acquirer or the Company Group after the Closing; and (e) the employer portion of any payroll Taxes of any member of the Company Group or Acquirer arising from the payment of any amounts described in clauses (c) and (d), in each case ((a) through (e)), to the extent unpaid.
“Transaction Tax Deductions” means the aggregate amount of any Tax deductions relating to: (A) the payment prior to the Effective Time of any other costs or expenses incurred by any member of the Company Group in connection with the transactions contemplated hereby (including, for the avoidance of doubt, any amounts that would be Transaction Expenses but for the fact that they are not unpaid as of the Effective Time); and (B) any other items deductible for Tax purposes by any member of the Company Group and/or any of Subsidiaries of the Company Group attributable to the transactions contemplated hereby that are economically borne by the Seller; provided, that, with respect to success- based fees, seventy percent (70%) of success fees shall be treated as deductible in accordance with Revenue Procedure 2011-29, to the extent applicable.
“Transactions” means the transactions contemplated by the Transaction Documents, including the Pre-Closing Restructuring and the Mergers.
“Transfer” means to sell, convey, transfer, assign, novate, deliver, split or add or remove a party thereto.
“Transition Services Agreement” means the Transition Services Agreement to be entered into at the Closing, as may be mutually agreed upon in writing between the Parties pursuant to Section 5.14(a).
Index of Defined Terms.
Accounting Standards3Acquirer Indemnified Parties80
Accounts Receivable38Acquirer Party3
Accrued 2022 401(k) Match10Acquirer Stock3
Acquirer1Acquirer Stockholder Approval3
Acquirer 401(k) Plan75Acquirer Stockholders’ Meeting66
Acquirer Board3Acquisition Proposal3
Acquirer Disclosure Schedules3Affiliate3
Acquirer Fundamental Representations3Agreement1
Agreement Date1Company Privacy Commitments6
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Ancillary Agreements4Company Privacy Policies6
Antitrust Condition77Company Product6
Antitrust Laws4Company Software6
Applicable Withholding Law29Company Websites7
Assumed Seller Debt4Company-Licensed Data6
Author51Company-Owned Data6
Available Insurance Policies73Confidential Information51
Bayh-Dole Act4Confidentiality Agreement7
Benefit Plan4Consent7
BioReference1Continuing Claim84
Business4Continuing Employees7
Business Day4Contract7
Bylaws22Controlled Group Liability7
CARES Act4Copyrights7
Cash Consideration4COVID-197
Certificate of Incorporation22COVID-19 Response7
Claim Notice81D&O Indemnified Person73
CLIA43Damages80
Closing22De Minimis Claims83
Closing 8-K65Deductible116
Closing Date22Default7
Closing Indebtedness4Defense Notice81
Closing Net Working Capital Shortfall5Deliver7
Closing Net Working Capital Surplus5DGCL7
Closing Net Working Capital Target5Dispute7
Closing Statement25Dispute Notice30
CMS43Disputed Item25
COBRA47DOJ68
Code5Domain Names8
Commercial Software5Effect11
Company1Effective Time4
Company Balance Sheet38EMA8
Company Balance Sheet Date38Encumbrance8
Company Benefit Plan46Enforceability Exceptions32
Company Contracts36Environmental Law8
Company Data5ERISA8
Company Data Agreement5ERISA Affiliate8
Company Databases5Escrow Account8
Company Disclosure Schedules5Escrow Agent25
Company Employee5Escrow Agreement25
Company Fundamental Representations5Escrow Amount8
Company Group5Escrow Expiration Date8
Company Group Revenue27Estimated Cash Consideration8
Company IP5Estimated Closing Statement8
Company IP Contracts5EUA9
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Company IT Assets5European Union8
Company Licensed IP6Excess Amount27
Company Net Working Capital6Exchange Act4
Company Owned IP6Excluded Shares23
Company Parties6FCPA9
FDA9Merger Consideration5
FDCA9Merger Sub5
Final Cash Consideration27Merger Sub II5
Financial Statements37Merger Subs5
First Certificate of Merger21Mergers5
First Merger1Milestone Event28
First Milestone Period28Milestone Payment2
Fraud9Milestone Payment Date28
FTC68Milestone Unresolved Items30
Fundamental Claims84Most Recent Balance Sheet11
Fundamental Representations9Nasdaq11
FY2022 Company Group Revenue28New Litigation Claim70
FY2023 Company Group Revenue28Notice of Objection25
General Claims83Objection Period25
Governing Documents9Order11
Government Contract36Ordinary Course of Business12
Governmental Authority9Parent12
Governmental Program9Parent Group12
Hazardous Substances9Parties1
Health Care Laws9Party1
HHS Grants44Patents12
Holdco21Payor Parties14
Holdco2 Board2Permits12
Holdco2 Board Approval32Permitted Encumbrances12
Holdco2 Common Stock10Person12
Holdco2 Stockholder Approval33Personal Data12
HSR Act10PHSA12
HSR Filings68PIPE Investment2
Indebtedness10PIPE Investment Amount12
Indemnified Parties81PIPE Investors2
Indemnifying Party81Post-Closing Tax Period13
Indemnity Agreement73PPP Loan13
Independent Expert26Pre-Closing Budget13
In-Scope Employees44Pre-Closing Period61
Intellectual Property10Pre-Closing Restructuring1
Interim Financial Statements70Pre-Closing Tax Period13
IP Dispute49Pre-Closing Taxes13
IRS10Privacy Laws13
IT Assets11Proceeding13
Key Employee11Process13
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Knowledge11Processed13
Law11Processing13
Leased Property33Proxy Statement65
Leases34Public Official13
Liability11Public Software14
Lock-Up Agreement2Registered Company IP14
Lock-Up Holders2Registered IP14
Material Adverse Effect11Regulatory Approval14
Measurement Time11Regulatory Authority14
Medicare Advance Payment Program44Regulatory Documentation14
Medicare Advance Payments44Regulatory Permit14
Related Party14Stueland Employment Agreement15
Released Party24Subscription Agreements2
Releasing Party24Subsidiary16
Reorganization2Subsidiary Ownership Interests32
Representative14Surviving Corporation21
Required Closing Contracts69Surviving Entity22
Required Financial Statements15Tax16
Resale Registration Documents65Tax Authority16
Resolution Period26Tax Proceeding71
Sales Taxes39Tax Return16
SEC6Termination Date79
Second Merger1Third Party16
Second Merger Effective Time22Third Party Claim81
Second Milestone Period28Top Customers55
Securities Act6Top Payors54
Seller1Top Suppliers55
Seller 401(k) Plan75Total Merger Consideration16
Seller Benefit Plan46Trade Secrets16
Seller Benefit Plans46Trademarks16
Seller Board2Transaction Certificates16
Seller Board Approval32Transaction Documents17
Seller Contracts33Transaction Expenses17
Seller Debt15Transaction Tax Deductions17
Seller Indemnified Parties81Transactions2
Seller Revenue Contracts33Transfer2
Share Value15Transfer Taxes71
Shortfall Amount27Transition Services Agreement17
Software15Unresolved Escrow Amount84
Specified Designees15Unresolved Items26
Stock Consideration2Valid Pre-Closing Claims73
Straddle Period15Written Consent2

1.2Interpretation. Except where expressly stated otherwise in this Agreement, references: (a) to the Recitals, Articles, Sections, Exhibits or Schedules are to a Recital, Article or Section of, or Exhibit or Schedule to, this
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Agreement; (b) to any agreement (including this Agreement) or Contract are to the agreement or Contract as amended, modified, supplemented or replaced from time to time in accordance with the terms thereof (provided, that this clause (b) shall not apply with respect to the representations and warranties of the Company set forth in Section 3.8(a)); (c) to any statute, rule or regulation shall be deemed to refer to such statute, rule or regulation as amended from time to time and to any rules or regulations promulgated thereunder; provided that for purposes of any representations and warranties contained in this Agreement that are made as of a specific date or dates, references to any statute, rule or regulation shall be deemed to refer to such statute, rule or regulation, as amended (and, in the case of statutes, any rules and regulations promulgated under such statutes), in each case, as of such date; (d) to any Person include any successor to that Person or permitted assigns of that Person; and (e) to this Agreement are to this Agreement and the Transactions;
(v)Exhibits and Schedules to it, taken as a schedule reflecting: (A) the calculationwhole. The table of contents and headings contained herein are for reference purposes only and do not limit or otherwise affect any of the Closing Available Cash, Closing Available Excess Cash, Closing Cash Payment Amountprovisions of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” Whenever the words “herein” or “hereunder” or “hereof” and the Closing Number of Securities,similar words are used in each case, based upon the amounts containedthis Agreement, they shall be deemed to refer to this Agreement as a whole and not to any specific Section, unless otherwise indicated. The word “or” is used in the Parent Financing Certificate; (B)inclusive sense (and/or). The use of “extent” in the calculation, asphrase “to the extent” means the degree to which a subject or other thing extends, and such phrase does not mean simply “if.” The terms herein defined in the singular shall have a comparable meaning when used in the plural, and vice versa. References to “day” or “days” refer to calendar days. The masculine, feminine and neuter genders used herein shall include each other gender. The terms “dollars” and “$” means dollars of the Closing,United States of the Aggregate Company Share Amount, Total Outstanding Company Shares, each Company Stockholder’s Total Stockholder Outstanding Shares, the Per Share AmountAmerica. Any reference to “beneficial ownership”, including “beneficial owner” and the Earn-Out Total Outstanding Shares; (C) each Company Stockholder’s Cash Cap (if any), Cash Pro Rata Share (expressed as both a dollar amount and percentage), Cash Pro Rata Share Excess Percentage, Cash Pro Rata Share Excess Amount and Stockholder Cash Payment Amount; (D) the portion of the Closing Number of Securities issuable to each Company Stockholder at Closing pursuant to Section 2.7(a)(ii); and (E) each Company Stockholder’s Earn-Out Pro Rata Share of the Earn-Out Shares to“beneficially owns,” shall be issued upon the occurrence of each Triggering Eventdetermined in accordance with Article III, based on the Earn-Out Total Outstanding Shares and Earn-Out RSUs asSection 13(d) of the Closing;Exchange Act and the rules and regulations promulgated thereunder.
(vi) all other documents, instruments or certificates required to be delivered byARTICLE 2
THE MERGERS
2.1The Mergers.
(a)At the Company at or prior toEffective Time, Merger Sub I shall merge with and into Holdco2. Following the Closing pursuant to Section 8.3.Effective Time, the separate existence of Merger Sub I shall cease and Holdco2 shall continue as the surviving corporation of the First Merger (the “Surviving Corporation”).
Section 1.4 (b)Closing Transactions. At the Closing, and on the Closing Date, the Parties shall cause the consummationCertificate of the following transactionsMerger in the following order, upon the terms and subject to the conditionsform of this Agreement:
(a) Parent shall make any payments in the aggregate amountExhibit C-1 (the “First Certificate of cash proceeds that will be required to satisfy any exercise of the Parent Stockholder Redemptions.
(b) Parent shall pay, or causeMerger”) to be paid, all Parent Transaction Costs and Company Transaction Costs to the applicable payees, to the extent not paid prior to the Closing.
(c) The certificate of merger with respect to the Merger shall be prepared andproperly executed in accordance with the relevant provisions of the DGCL (the “Certificate of Merger”) and filed with the Secretary of State of the State of Delaware.
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(d) ParentDelaware and shall contributemake all other filings or recordings required under the DGCL in order to give effect to the Company an amount equal to or greater than the Company’s Required Funds.
(e) ParentFirst Merger. The First Merger shall deposit (or cause to be deposited) with the Exchange Agent the Closing Cash Payment Amount and the Closing Number of Securities.
ARTICLE II
THE MERGER
Section 2.1 Effective Time. Subject to the terms and subject to the conditions of this Agreement,become effective on the Closing Datedate and time at which the Company and Merger Sub shall cause the Merger to be consummated by filing theFirst Certificate of Merger withis accepted for filing by the Secretary of State of the State of Delaware in accordance withon the applicable provisions of the DGCL (the time of such filing,Closing Date or at such later date or time as may beis agreed in writing by the CompanyAcquirer and ParentHoldco2 and specified in the First Certificate of Merger (the time the First Merger becomes effective being referred to herein as the “Effective Time”“Effective Time”).
Section 2.2 (c)The Merger. At the Effective Time, upon the terms and subject to the conditions of this Agreement and in accordance with the applicable provisions of the DGCL, Merger Sub and the Company shall consummate the Merger, pursuant to which Merger Sub shall be merged with and into the Company, following which the separate corporate existence of Merger Sub shall cease and the Company shall continue as the Surviving Corporation after the Merger and as a direct, wholly-owned subsidiary of Parent.
Section 2.3 Effect of the Merger. At the Effective Time, the effect of theFirst Merger shall be as providedhave the effects set forth in this Agreement, the Certificate of Merger and the applicable provisionsSection 251 of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all of the property,assets, properties, rights, privileges, agreements, powers and franchises debts, liabilities,Holdco2 and Merger Sub I shall vest in the Surviving Corporation and all Liabilities, obligations and duties of each of Holdco2 and Merger Sub I shall become the Liabilities, obligations and duties of the Surviving Corporation, in each case, in accordance with the DGCL.
(d)At the Effective Time:
(i)the Governing Documents of Merger Sub I shall be the Governing Documents of the Surviving Corporation, in each case, until thereafter changed or amended as provided therein or by applicable Law; and
(ii)the directors and officers of Merger Sub I immediately prior to the Effective Time shall be the initial directors and officers of the Surviving Corporation, each to hold office in accordance with the Governing Documents of the Surviving Corporation until such director’s or officer’s successor is duly elected or appointed and qualified, or until the earlier of their death, resignation or removal.
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(e)Immediately following the First Merger, the Surviving Corporation shall be merged with and into Merger Sub II in accordance with the provisions of the DGCL and the Delaware Limited Liability Company Act. Merger Sub II shall becomebe the property,surviving company resulting from the Second Merger (the “Surviving Entity”) and shall continue its existence as a limited liability company under the laws of Delaware and succeed to and assume all the rights privileges, agreements, powers and franchises, debts, liabilities, duties and obligations of the Surviving Corporation which shall includein accordance with the assumption by the Surviving Corporation of any and all agreements, covenants, duties and obligations of Merger SubDGCL and the Delaware Limited Liability Company set forth in this Agreement to be performed afterAct. Upon the Effective Time.
Section 2.4 Governing Documents. Subject to Section 7.12, atconsummation of the Effective Time,Second Merger, the certificate of incorporation and bylawsseparate corporate existence of the Surviving Corporation shall terminate. The Second Merger shall (i) be consummated pursuant to the terms of this Agreement and (ii) become effective as of the date and time at which the Certificate of Merger attached hereto as Exhibit C-2 (the “Second Certificate of Merger”) is accepted for filing by the Secretary of State of the State of Delaware on the Closing Date or at such later date or time specified in the Second Certificate of Merger (the time the Second Merger becomes effective being referred to herein as the “Second Merger Effective Time”).
(f)At the Second Merger Effective Time, the Governing Documents of Merger Sub II shall be the Governing Documents of the Surviving Entity, in each case, until thereafter changed or amended as provided therein or by applicable Law.
2.2Closing. The consummation of the Mergers (the “Closing”) shall take place remotely by electronic exchange of documents and signatures at a date and time to readbe agreed by Acquirer and the sameCompany, which date shall, unless otherwise agreed by Acquirer and the Company, be no later than the third Business Day following the date on which all of the conditions set forth in Article 6 have been satisfied or waived (other than those conditions that, by their terms, are intended to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions. The date on which the Closing occurs is sometimes referred to herein as the “Closing Date.”
2.3Closing Deliveries.
(a)Certain Deliverables. Not less than five days prior to the Closing Date, the Company shall deliver to Acquirer the Estimated Closing Statement, including supporting calculations and documentation for the estimates set forth therein.
(b)Company Group Closing Deliveries. At the Closing, the Company Group and Seller, as applicable, shall deliver or cause to be delivered to Acquirer each of the following:
(i)a certificate, dated as of the Closing Date and executed on behalf of Holdco2 by its Chief Executive Officer, to the effect that each of the conditions set forth in Section 6.3(a) and Section 6.3(d) have been satisfied;
(ii)a certificate, dated as of the Closing Date and executed on behalf of Holdco2 by its Secretary, certifying (A) the certificate of incorporation andof Holdco2 (the “Certificate of Incorporation”) in effect as of the Closing, (B) the bylaws of Merger SubHoldco2 (the “Bylaws”) in effect as of the Closing, and (C) the resolutions of the Holdco2 Board reflecting the Holdco2 Board Approval;
(iii)payoff letters or similar instruments in effectform and substance reasonably satisfactory to Acquirer with respect to all Closing Indebtedness for borrowed money (including, for the avoidance of doubt, under that certain Amended and Restated Credit Agreement, dated August 30, 2021, by and among BioReference Laboratories, Inc., certain of its subsidiaries, including the Company, and JPMorgan Chase Bank, N.A., only to the extent the Company Group and its assets have not been fully and irrevocably released from all obligations thereunder and any corresponding security interest arising thereunder has not been terminated prior to the Closing), which letters provide for the release of all Encumbrances relating to such Closing Indebtedness following satisfaction of the terms contained in such payoff letters (including the payment in full and discharge of all principal and accrued but unpaid interest and any premiums or other fees payable in connection with such Closing Indebtedness);
(iv)invoices from each Person that is entitled to any Transaction Expenses at Closing reflecting the total amount of Transaction Expenses that has been incurred and remains payable to such Person as of the Closing;
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(v)the Written Consent and Shareholder Agreement, in each case executed by Seller;
(vi)the Shareholder Agreement executed by each of the Lock-Up Holders;
(vii)the Escrow Agreement, executed by Seller;
(viii)unless Acquirer provides written notice to Holdco2 no later than three Business Days prior to the Closing Date to the contrary, a resignation letter reasonably satisfactory to Acquirer executed by each director and officer of each member of the Company Group in office immediately prior to the Closing, in each case, effective as of, and contingent upon, the Effective Time, except thatTime;
(ix)a certificate from the nameSecretary of State of the Surviving Corporation shall be the name determined by the Company (and reasonably acceptable to Parent).
Section 2.5 DirectorsStates of Delaware and Officers of the Surviving Corporation. Immediately after the Effective Time, the board of directors and executive officers of the Surviving Corporation shall be the board of directors and executive officerseach other state or other jurisdiction in which any member of the Company as of immediatelyGroup is organized, dated within three Business Days prior to the Effective Time.Closing Date, certifying that such member of the Company Group is in good standing and that all applicable franchise and similar Taxes and fees of the Company and each applicable Subsidiary of the Company through and including the Closing Date have been paid;
(x)an IRS Form W-9 (Request for Taxpayer Number and Certification), duly executed by Seller (provided, that, if Seller to provide such form, Acquirer’s only recourse shall be to withhold applicable Taxes with respect to Seller’s proceeds in accordance with Section 2.6 2.8;
(xi)the First Certificate of Merger, executed by Holdco2;
(xii)evidence reasonably satisfactory to Acquirer of receipt of all consents, approvals, novations, amendments and terminations set forth on Schedule 2.3(b)(xiv); and
(xiii)a USB drive (or similar device) containing a copy of the contents of the Data Room.
(c)Acquirer Closing Deliveries. At the Closing, Acquirer shall deliver or cause to be delivered to Seller each of the following:
(i)a certificate, dated as of the Closing Date and executed on behalf of Acquirer by its Chief Executive Officer, to the effect that each of the conditions set forth in Section 6.2(a) and Section 6.2(c) have been satisfied;
(ii)a certificate, dated as of the Closing Date and executed on behalf of Acquirer by its Secretary, certifying (A) the certificate of incorporation of Acquirer in effect as of the Closing, (B) the bylaws of Acquirer in effect as of the Closing, and (C) the resolutions of the Acquirer Board approving the Transactions;
(iii)each Ancillary Agreement to which any Acquirer Party is a party that has not previously been delivered to the Holdco2 and Seller, executed and delivered by each Acquirer Party that is a party thereto; and
(iv)the Merger Consideration, as set forth in and in accordance with Section
2.5(a)(i).
2.4Effect on Holdco2 Common Stock.
(a)Treatment of Holdco2 Common Stock. Upon the terms and subject to the conditions of this Agreement, the aggregate consideration to be paid to the Company Stockholders shall be: (i) the Closing Merger Consideration; and (ii) the contingent right to receive the Earn-Out Shares following the Closing in accordance with Article III (collectively, the “Total Consideration”).
(b) The Closing Merger Consideration shall be paid or issued, as applicable, in the form of: (i) an amount in cash equal to the Closing Cash Payment Amount; and (ii) the Closing Number of Securities.
set forth herein, including Section 2.5(b), Section 2.6, Section 2.7, Effect of the Merger on the Company Common StockSection 2.8 and Company Preferred Stock. 
Upon the terms and subject to the conditions of this Agreement,Article 8, at the Effective Time, by virtue of the First Merger and without any further action on the part of Parent, Merger Sub,any Party or any other Person, the Company, the Company Stockholders or the holdersshares of any of the securities of Parent, the following shall occur:
(a) Each share of Class BHoldco2 Common Stock issued and outstanding immediately prior to the Effective Time will(other than Excluded Shares) shall be automatically converted into 1/100ththe right of a shareSeller to receive: (A) the Merger Consideration and (B) if and only to the extent payable pursuant to Section 2.7, the Milestone Payments.
(b)Treasury Shares. At the Effective Time, all shares of Class AHoldco2 Common Stock in accordance withthat are owned by the Company Organizational Documents. Immediately thereafter, each share of Company Common Stockas treasury stock immediately prior to the Effective Time (“Excluded Shares”) shall be cancelled and Company Preferred Stock (other
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than Excluded Sharesextinguished without any conversion thereof or payment of any cash or other property or consideration therefor and Dissenting Shares)shall cease to exist.
(c)Treatment of Merger Sub I Capital Stock. At the Effective Time, by virtue of the First Merger and without any action on the part of Acquirer, Merger Sub I or any other Person, each share of capital stock of Merger Sub I that is 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 Company Stockholder being entitled to receive:
(i) if such Company Stockholder has made a Cash Election, such Company Stockholder’s Cash Pro Rata Share of the Closing Available Cash and, if applicable, such Company Stockholder’s Cash Pro Rata Share Excess Amount of the Closing Available Excess Cash (such aggregate amount in cash, the “Stockholder Cash Payment Amount”); provided that in no event shall a Company Stockholder’s Stockholder Cash Payment Amount exceed an amount equal to the product of (x) such Company Stockholder’s Total Stockholder Outstanding Shares multiplied by (y) the Per Share Amount;
(ii) a number of shares of Parent Class A Stock equal to the quotient of: (A) (1) the product of (x) such Company Stockholder’s Total Stockholder Outstanding Shares multiplied by (y) the Per Share Amount minus (2) such Company Stockholder’s Stockholder Cash Payment Amount, divided by (B) the Parent Stock Price; and
(iii) its Earn-Out Pro Rata Share of any Earn-Out Shares in accordance with Article III, subject to adjustment in accordance with Section 2.7(e);
in each case, without interest, upon surrender of stock certificates representing all of such Company Stockholder’s Company Common Stock and Company Preferred Stock (each, a “Certificate”) and delivery of the other documents required pursuant to Section 2.8. As of the Effective Time, each Company Stockholder shall cease to have any other rights in and to the Company or Surviving Corporation, and each Certificate relating to the ownership of shares of Company Common Stock and Company Preferred Stock (other than Excluded Shares) shall thereafter represent only the right to receive the applicable portion of the Total Consideration.
(b) Notwithstanding anything in this Agreement to the contrary, no fraction of a share of Parent Class A Stock will be issued by virtue of the Merger. Any fractional shares that would otherwise be issued will be rounded down to the nearest whole share of Parent Class A Stock.
(c) Each issued and outstanding share of common stock of Merger Sub shall be converted into and become one validly issued, fully paid and nonassessable share of common stock par value $0.01 per share, of the Surviving Corporation which shall constitute(and the only outstanding shares of capital stock of the Surviving Corporation.Corporation into which the shares of Merger Sub I capital stock are so converted shall be the only shares of the Surviving Corporation’s capital stock that are issued and outstanding immediately after the Effective Time). From and after the Effective Time, all certificates representing the common stockeach certificate evidencing ownership of a number of shares of Merger Sub shall be deemed for all purposes to represent theI capital stock will evidence ownership of such number of shares of common stock of the Surviving Corporation into which they were converted in accordance with the immediately preceding sentence.Corporation.
(d) EachTreatment of Merger Sub II Membership Interests. At the Second Merger Effective Time, by virtue of the Second Merger and without any action on the part of Acquirer, Merger Sub II or any other Person, each share of Company Common Stockcommon stock of the Surviving Corporation that is issued and Company Preferred Stock held in the Company’s treasury or owned by Parent, Merger Sub or the Companyoutstanding immediately prior to the Second Merger Effective Time (each an “Excluded Share”), shall be cancelled and no considerationextinguished without any conversion thereof. At the Second Merger Effective Time, each membership interest of Merger Sub II that is issued and outstanding immediately prior to the Second Merger Effective Time will constitute a membership interest of the Surviving Entity (and the membership interests of the Surviving Entity shall be paid or payable with respect thereto.
(e) The numbers of shares of Parent Class A Stock that the Company Stockholders are entitled to receive as a resultonly membership interests of the Surviving Entity issued and outstanding immediately after the Second Merger and each other amount contained herein which is based uponEffective Time).
(e)Adjustments. In the number of shares of Parent Class A Stock, and as otherwise contemplated by this Agreement shall be adjusted to reflect appropriately the effectevent of any stock split, split-up, reverse stock split, stock dividend or distribution (including any dividend or distribution of securities convertible into Parent Class A Stock)capital stock), extraordinary cash dividend, reorganization, recapitalization, reclassification, combination, exchange of sharesrecapitalization or other like change with respect to Parent Class Athe Holdco2 Common Stock occurring on or after the date hereofAgreement Date and prior to the Closing.Effective Time, all references herein to specified numbers of shares of any class or series affected thereby, and all calculations provided for that are based upon numbers of shares of any class or series (or trading prices therefor) affected thereby, shall be equitably adjusted to the extent necessary to provide the parties the same economic effect as contemplated by this Agreement prior to such stock split, reverse stock split, stock dividend, reorganization, reclassification, combination, recapitalization or other like change.
Section 2.8 (f)SurrenderFractional Shares. No fraction of Company Certificatesa share of Acquirer Stock will be issued in connection with the Transactions and Disbursementin lieu thereof Seller will receive from Acquirer, an amount of Closing Considerationcash equal to the product (rounded upwards to the nearest whole cent) of such fraction of a share Seller would otherwise receive and the Share Value.
(g).No Interest. Notwithstanding anything to the contrary contained herein, no interest shall accumulate on any cash payable in connection with the consummation of the Transactions.
2.5Payment Procedures.
(a) SubjectPayment; Release of Claims.
(i)On the Closing Date, Acquirer shall pay and issue, as applicable, the Merger Consideration to Seller, in accordance with the wire and delivery instructions delivered in writing to Acquirer by Seller no less than three (3) Business Days prior to the Closing, less the Escrow Amount. Notwithstanding anything herein to the contrary, (A) all cash payments made under this Agreement in respect of the Total Merger Consideration shall be made in U.S. dollars and (B) any shares of Acquirer Stock issued by Acquirer in respect of the Total Merger Consideration shall be issued in the name of Seller.
(ii)Effective upon and only upon the consummation of the Closing, notwithstanding anything contained herein to the contrary, in consideration of the execution, delivery and performance by Acquirer, Merger Sub I and Merger Sub II of this Agreement, as of the Closing, Seller, on behalf of itself and its Affiliates (each, a “Releasing Party”) hereby RELEASES, WAIVES, ACQUITS AND FOREVER DISCHARGES the Company Parties (each, a “Released Party”), from any and all Damages, liabilities, costs, expenses, claims, damages, actions, causes of action, or suits in law or equity, of whatever kind or nature that any Releasing Party ever had or may now have against any Released Party relating to the Company or its business and that have accrued or arisen prior to the Closing, including those based on any fact or circumstance arising from Seller’s past or current
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ownership or alleged ownership, as applicable, of any Holdco2 Common Stock (including any claims relating to actual or alleged breaches of fiduciary or other duties by the Company’s directors, officers or stockholders), whether based on Contract or any applicable Law (including tort, statute, local ordinance, regulation or any comparable law) in any jurisdiction, including under California Civil Code Section 2.8,1542, which provides that “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.”; provided that nothing in the foregoing release shall or be deemed to release any rights or obligations of any Released Party or Releasing Party (i) for indemnification or contribution, in any Releasing Party’s capacity as an officer or director of the Company, under the DGCL, Section 5.12(b) any indemnification agreements to which the Releasing Party and the Company are parties that have been Delivered to Acquirer prior to the Agreement Date or the Company’s Governing Documents; (ii) for amounts owed pursuant to, or other rights and obligations set forth in, this Agreement and any Ancillary Agreement; or (iii) any claim based on fraud or any other matter that cannot be released as a matter of law.
(b)Escrow Account. Notwithstanding anything to the contrary in the other provisions of this Article 2, at Closing, Acquirer shall withhold the Effective Time, ParentEscrow Amount from the Merger Consideration payable to Seller pursuant to Section 2.4(a) and Section 2.5. On the Closing Date, Acquirer shall deposit the Escrow Amount with PNC Bank, National Association, a national banking association (or, if PNC Bank is unable or unwilling to act, another comparable escrow agent (the “Escrow Agent”), to be held in the Escrow Account, which shall be governed by this Agreement and the escrow agreement in customary form to be mutually agreed by the Parties acting reasonably prior to the Closing (the “Escrow Agreement”). Neither the Escrow Account (including any portion thereof) nor any beneficial interest therein may be pledged, subjected to any Encumbrance, sold, assigned or transferred by Seller or be taken or reached by any legal or equitable process in satisfaction of any debt or other Liability of Seller, in each case prior to the distribution of the Escrow Account to Seller in accordance with the applicable terms of this Agreement, except that Seller shall be entitled to assign Seller’s rights to amounts held in the Escrow Account by operation of law.
2.6Post-Closing Adjustment.
(a)Within 90 days after the Closing Date, Acquirer shall prepare and deliver, or cause to be prepared and delivered, to Seller a statement (the “Closing Statement”), setting forth its determination of the amount of Company Net Working Capital, prepared in accordance with the Company Net Working Capital Schedule (and any corresponding Closing Net Working Capital Shortfall or Closing Net Working Capital Surplus), Closing Indebtedness and Transaction Expenses that remained unpaid as of immediately prior to the Closing, and, based on the foregoing, its determination of the Cash Consideration, and the adjustment (if any) necessary to reconcile the amounts set forth in the Estimated Closing Statement to the Closing Statement in accordance with the terms and conditions of this Agreement. The Closing Statement shall be prepared in accordance with (i) the Accounting Standards and (ii) shall be based exclusively on the facts and circumstances as they shall have existed at the Measurement Time and shall exclude the effects of any event, act, information, decision, change in circumstances or similar development arising or occurring on (except with respect to Transaction Expenses) or after the Closing Date. The post-Closing purchase price adjustment as set forth in this Section 2.6 is not intended to permit the introduction of different accounting methods, policies, practices, procedures, conventions, categorizations, definitions, principles, judgments, assumptions, techniques or estimation methods with respect to financial statements, their classification or presentation or otherwise (including with respect to the nature of accounts, level of reserves or level of accruals) from the Accounting Standards.
(b)Unless Seller notifies Acquirer in writing (a “Notice of Objection”) within 45 days after Acquirer’s delivery of the Closing Statement (such 45-day period, the “Objection Period”) that Seller disagrees with the Closing Statement, specifying the nature and amount of any dispute as to Company Net Working Capital (and any corresponding Closing Net Working Capital Shortfall or Closing Net Working Capital Surplus), Closing Indebtedness and Transaction Expenses that remained unpaid as of immediately prior to the Closing, in each case as set forth in the Closing Statement (each, a “Disputed Item”), the Closing Statement and the determinations set forth therein shall be final, binding and conclusive on the Parties. Following the delivery of the Closing Statement and for purposes of Seller’s review of the Closing Statement and preparation of any Notice of Objection, Acquirer shall
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afford Seller and its Representatives with reasonable access, during normal business hours and upon reasonable prior notice, to the personnel, properties, books and records of Acquirer and the Surviving Entity and to any other information reasonably requested for purposes of preparing and reviewing the calculations contemplated by this Section 2.6. Acquirer shall authorize its and the Surviving Entity’s outside accountants to disclose to Seller and its Representatives work papers generated by such accountants in connection with preparing and reviewing the calculations specified in this Section 2.6; provided, that such accountants shall not be obligated to make any work papers available except in accordance with such accountants’ disclosure procedures. Any Notice of Objection shall specify the basis for the objections set forth therein. Seller shall be deemed to have agreed with those items and amounts contained in the Closing Statement not disputed by Seller in a Notice of Objection.
(c)If Seller provides the Notice of Objection to Acquirer within the Objection Period, Seller and Acquirer shall, during the 30-day period following Acquirer’s receipt of the Notice of Objection (such 30-day period, the “Resolution Period”), attempt in good faith to resolve each Disputed Item. During the Resolution Period, Seller shall afford Acquirer and its Representatives with reasonable access, during normal business hours and upon reasonable prior notice, to the personnel, properties, books and records of Seller and to any other information reasonably requested for purposes of preparing and reviewing the calculations contemplated by this Section 2.6. Seller shall authorize its outside accountants to disclose to Acquirer and its Representatives work papers generated by such accountants in connection with preparing and reviewing the calculations specified in this Section 2.6; provided, that such accountants shall not be obligated to make any work papers available except in accordance with such accountants’ disclosure procedures. If Seller and Acquirer are unable to resolve all of the Disputed Items within the Resolution Period (the “Unresolved Items”), the Unresolved Items shall be submitted to a nationally recognized independent valuation, accounting or specialty firm to be mutually agreed upon by Seller and Acquirer, which accounting firm shall not have worked with Seller, the Company Stockholderor Acquirer or any of their respective Affiliates in the preceding 12 months (such agreed firm being the “Independent Expert”). The Independent Expert shall be engaged pursuant to an engagement letter among Seller, Acquirer and the Independent Expert on terms and conditions consistent with this Section 2.6(c). The Independent Expert shall be instructed, pursuant to such engagement letter, to act as an expert and not as an arbitrator and to resolve only the Unresolved Items and not to otherwise investigate any matter independently. Seller and Acquirer each agree to furnish to the Independent Expert reasonable access to such individuals and such information, books and records as may be reasonably required by the Independent Expert to make its final determination (and any such information, books and records shall be provided to the other such Party prior to its submission or presentation to the Independent Expert). Seller and Acquirer shall also instruct the Independent Expert to render its reasoned written decision as promptly as practicable but in no event later than thirty (30) days from the date that information related to the unresolved objections is presented to the Independent Expert by Seller and Acquirer. With respect to each Unresolved Item, such decision shall be made based on the terms and conditions of this Agreement and shall not be in excess of the higher, nor less than the lower, of the amounts advocated by Acquirer in the Closing Statement or Seller in the Notice of Objection with respect to such Unresolved Item. Except as Seller and Acquirer may otherwise agree, all communications between Seller and Acquirer or any of their respective Representatives, on the one hand, and the Independent Expert, on the other hand, shall be in writing with copies simultaneously delivered to the other such Party. The resolution of Unresolved Items by the Independent Expert shall be final, binding and conclusive on the Parties (absent manifest error). All fees and expenses of the Independent Expert shall be borne on a proportionate basis by Acquirer, on the one hand, and Seller, on the other, based on the percentage which the portion of the Total Considerationcontested amount not awarded in favor of Acquirer or Seller bears to whichthe amount actually contested by such Company Stockholder is entitledPerson. For example, if Acquirer’s calculations would have resulted in a $1,000,000 net payment to Acquirer, and Seller’s calculations would have resulted in a $1,000,000 net payment to Seller and the Independent Expert’s final determination as adopted pursuant to clauses (i)this Section 2.6(c) results in an aggregate net payment of $500,000 to Seller, then Acquirer, on the one hand, and (ii)Seller, on the other hand, shall pay 75% and 25%, respectively, of Section 2.7(a) (collectively, the “Closing Consideration”).such fees and expenses.
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(b) Prior(d)After the Cash Consideration has been finally determined in accordance with this Section 2.6 (the Cash Consideration as so determined being referred to herein as the Effective Time, unless otherwise agreed by“Final Cash Consideration”), the Parties, Parentfollowing payments shall appoint a commercial bankbe made on or trust company reasonably acceptable to the Company (the “Exchange Agent”) for the purpose of exchanging Certificates for each Company Stockholder’s portion of the Closing Consideration. Not less than thirty (30) days prior to the anticipated Effective Time,third (3rd) Business Day immediately following such determination:
(i)If the CompanyFinal Cash Consideration exceeds the Estimated Cash Consideration (the “Excess Amount”), then Acquirer shall providepay, or cause to be paid, an election form for the Cash Electionamount in a form mutually acceptable to Parent and the Company to each Company Stockholder that has not previously submitted a Cash Election or confirmed in writingcash equal to the Company that it will not be making a Cash Election.
(c) At the Effective Time, Parent shall deposit with the Exchange Agent the aggregate amount of the cash portion of the Closing Consideration and make available the aggregate amount of the equity portion of the Closing Consideration. Such cash and equity deposited with the Exchange Agent shall be referredExcess Amount to in this Agreement as the “Exchange Fund”. At the Effective Time, Parent shall deliver irrevocable instructions to the Exchange Agent to deliver the Closing Consideration out of the Exchange Fund in the manner it is contemplated to be issued or paid pursuant to this Article II.
(d) Promptly after the Effective Time (and in any event within five Business Days thereafter), the Exchange Agent shall mail to each Company Stockholder who has not already received the Surrender Documentation (other than holders of Excluded Shares and Dissenting Shares): (i) a letter of transmittal in customary form specifying that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates (or affidavits of loss in lieu of the Certificates as provided in Section 2.8(g)) to the Exchange Agent, such letter of transmittal to be in such form and have such other provisions as Parent and the Company may reasonably agree; and (ii) instructions for surrendering the Certificates (or affidavits of loss in lieu of the Certificates as provided in Section 2.8(g)) to the Exchange Agent (the “Surrender Documentation”); provided, however, that the Exchange Agent shall not be required to deliver the Surrender Documentation to any Company Stockholder that has delivered its Surrender Documentation with respect to such Company Stockholder’s Certificates to the Exchange Agent at least two Business Days prior to the Closing Date. Upon surrender of a Certificate (or affidavit of loss in lieu of the Certificate as provided in Section 2.8(g)) to the Exchange Agent in accordance with the terms of the Surrender Documentation, the Exchange Agent will deliver to the holder of such Certificate in exchange therefor such holder’s portion of the Closing Consideration in accordance with Section 2.8(a) hereof, with: (A) any cash portion of the Closing Consideration being delivered viaSeller by wire transfer of immediately available funds to an account specified in writing by Seller; or
(ii)If the Estimated Cash Consideration exceeds the Final Cash Consideration (such excess, the “Shortfall Amount”), then Acquirer and Seller shall deliver joint written instructions to the Escrow Agent instructing the Escrow Agent to disburse to Acquirer, from the Escrow Account an amount in cash equal to the Shortfall Amount; provided, that, if the Shortfall Amount exceeds $2,500,000, then Acquirer may elect in writing to require that Seller pay, or cause to be paid, an amount in cash equal to the Shortfall Amount to Acquirer.
(e)For Tax purposes, any payments under this Section 2.6 shall be treated as an adjustment to the Merger Consideration.
2.7Milestone Payments.
(a)Definitions.
(i)“Acquirer Capital Stock” means any and all shares, interests (including partnership interests), rights to purchase, warrants, options, participations or other equivalents of or interest in (however designated) equity of Acquirer, including Acquirer Stock and any preferred stock.
(ii)“Acquirer Change in Control” means the occurrence of any of the following events:
(i)any “person” (as such term is used in Sections 13(d)(3) of the Exchange Act), becomes the “beneficial owner” (as defined in Rules 13d 3 and 13d 5 under the Exchange Act), directly or indirectly, of more than 50% of the total voting power of the Acquirer Voting Stock ; provided that the consummation of any such transaction resulting in such person owning more than 50% of the total voting power of the Acquirer Voting Stock shall not be considered a Change of Control if (a) the Company becomes a direct or indirect wholly owned subsidiary of a holding company and (b) immediately following such transaction, (x) the direct or indirect holders of the Acquirer Voting Stock of the holding company are substantially the same as the holders of the Acquirer Voting Stock immediately prior to such transaction or (y) no person is the beneficial owner, directly or indirectly, of more than 50% of the Voting Stock of such holding company;
(ii)the adoption by the Board of Directors of a plan relating to the liquidation or dissolution of Acquirer; or
(iii)the merger or consolidation of Acquirer with or into another Person or the merger of another Person with or into Acquirer, or the sale of all or substantially all the assets of Acquirer (determined on a consolidated basis) to another Person other than a transaction following which beneficial owners of securities that represented 100% of the Acquirer Voting Stock immediately prior to such transaction (or other securities into which such securities are converted as part of such merger or consolidation transaction) beneficially own directly or indirectly at least a majority of the voting power of the Voting Stock of the surviving Person or any direct or indirect parent company of the surviving Person in such merger or consolidation transaction immediately after such transaction.
(iii)“Acquirer Voting Stock” means all classes of Acquirer Capital Stock then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof.
(iv)“Company Group Revenue” means the Business’ recorded net revenue related to laboratory services performed or test results reported in the applicable period (including international and decentralized net revenue), plus the Business’ recorded net biopharma revenue generated from the Company Databases, calculated in accordance with instructions provided by such Company Stockholderthe Accounting Standards utilized in the letter of transmittal;Financial Statements (consistently
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applied throughout the applicable period) and (B)as set forth on the equity portionMilestone Financial Statements for such period, provided that Company Group Revenue shall be subject to adjustment based on information available following the expiration of the Closing Consideration being delivered via book-entry issuance (orapplicable period through the delivery of a Milestone Event Notice for the applicable period, including as applicable to the reconciliation of cash collected to revenue recognized.
(v)“First Milestone Period” means the period of time commencing on January 1, 2022 and ending at 11:59 p.m. Eastern time on December 31, 2022.
(vi)“FY2022 Company Group Revenue” means the written electionCompany Group Revenue for the First Milestone Period.
(vii)“FY2023 Company Group Revenue” means the Company Group Revenue for the Second Milestone Period.
(viii)“Milestone Financial Statements” means a report prepared by Acquirer reflecting the Company Group Revenue during the First Milestone Period and the Second Milestone Period, as applicable.
(ix)“Second Milestone Period” means the period of any Company Stockholder,time commencing on January 1, 2023 and ending at 11:59 p.m. Eastern time on December 31, 2023.
(b)Milestone Events. With respect to each milestone event set forth in certificated form)the table below (each, a “Milestone Event”), Acquirer shall pay the corresponding milestone payment set forth in the table below (each, a “Milestone Payment”) following the first achievement of such milestone event by the Business, in each case less any required Tax withholdingssubject to the terms and conditions set forth in this Section 2.7:
#Milestone EventMilestone Payment
1.FY2022 Company Group Revenue equal to or above $163 million$112.5 million
2.FY2023 Company Group Revenue equal to or above $219 million$37.5 million
Notwithstanding anything herein to the contrary, 80% of the Milestone Payment for the First Milestone Period or the Second Milestone Period, as providedapplicable, shall become payable in Section 2.9; provided, however, thatrespect of such period if the holderCompany Group achieves 90% of the applicable Milestone Event revenue target for such Certificate deliversperiod set forth in the table above, which amount will scale on a linear basis up to 100% of the Exchange Agentapplicable Milestone Payment at 100% of the Surrender Documentation with respectapplicable revenue target set forth in the table above. Solely for purposes of illustration: if the Business achieves Company Group Revenue of $154.85 million for the First Milestone Period (i.e. 95% of target), then Acquirer shall pay to such Company Stockholder’s Certificates at least two Business DaysSeller a Milestone Payment equal to $101.25 million (i.e. 90% of the target Milestone Payment).
(c)Payment of Milestone Payments. On or prior to the Closing Date,later of (x) the thirtieth (30th) day immediately following Acquirer’s receipt of its executed audit report from its independent registered public company accounting firm (or, if Acquirer is then not subject to the reporting requirements under Section 13(a) or 15(d) of the Exchange AgentAct, its independent auditor) and (y) April 30th, for each of the fiscal years ending December 31, 2022 and December 31, 2023, Acquirer shall deliver to Seller a notice (a “Milestone Event Notice”), containing (i) the holderMilestone Financial Statements for the applicable period, (ii) a statement whether and to what extent a Milestone Event was achieved during such fiscal year, (iii) if greater than zero but less than the full amount of the Milestone Payment is payable in respect of the applicable period, Acquirer’s calculation (in accordance with this Agreement) of the Milestone Payment due, (iv) the payment date for the applicable Milestone Payment, which will be within five (5) days of the date of such Certificate in exchange therefor such holder’s portionMilestone Event Notice (such date, the “Milestone Payment Date”) and (v) the specific amounts of the Closing Consideration covered by such Surrender Documentationcash and shares of Acquirer Stock to be paid and issued, respectively, to Seller (in each case in accordance with clauses (A)the immediately succeeding sentence). Each Milestone Payment shall be satisfied through the payment and (B)issuance of this sentence ona combination of cash and shares of Acquirer Stock (valued at the Closing Date or as promptly as practicable thereafter. The Certificate so surrenderedShare Value), with such mix to be determined in Acquirer’s sole discretion; provided that such allocation shall forthwith be cancelled. Until so surrendered, each Certificate shall represent afterdetermined such that the Effective Time for all purposes only the right to receive the applicable portionaggregate amount of cash included in the Total Merger Consideration attributableremains consistent with the Intended Tax Treatment. The maximum aggregate amount of Milestone Payments that may become due and payable by Acquirer pursuant to such Certificate. No interestthis Section 2.7 will be paid or accrued on any amount payable upon due surrender of the Certificates. In thein no event of a transfer of ownership of shares of Company Common Stock or Company Preferred Stock that is not registered in the transfer records of the Company, the applicable portion of the Total Consideration to be delivered upon due surrender of the Certificate may be issued to such transferee if the Certificate formerly representing such shares of Company Common Stock or Company Preferred Stock is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable stock transfer Taxes have been paid or are not applicable.
(e) From and after the Effective Time, there shall be no transfers on the stock transfer books of the Company of the shares of Company Common Stock or Company Preferred Stock that were outstanding immediately prior to the Effective Time. If, after the Effective Time, any Certificate is presented to the Surviving Corporation, Parent or the Exchange Agent for transfer, it shall be cancelled and deemed exchanged for (without interest and after giving effect to any required Tax withholdings as provided in Section 2.9) the portion of the Total Consideration represented by such Certificate.exceed $150,000,000.
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(f) Any portion(d)Acknowledgments. Seller acknowledges and agrees that the Company Group Revenue levels for the Milestone Events shall not be construed as representing an estimate or projection of the Exchange Fund (including the proceedsanticipated results or sales of any investmentsCompany Products and that such Milestone Events are merely intended to define Acquirer’s Milestone Payment obligations if such revenue levels are achieved. Seller further acknowledges and agrees that (i) nothing in this Section 2.7(d) is intended, or shall be construed, to require Acquirer to develop, commercialize or otherwise exploit a specific Company Product and (ii) nothing in this Section 2.7(d) is intended, or shall be construed, as restricting such business or imposing on Acquirer the duty to develop, commercialize or otherwise exploit any Company Product for which Milestone Payments are payable hereunder to the exclusion of, or in preference to, any other product or in any way other than in accordance with its normal commercial practices; provided that Acquirer will not, and cause its Subsidiaries not to, take any action in bad faith the Exchange Fund) that remains unclaimed bypurpose of which is to reduce or avoid payment of any Milestone Payment. Except as set forth in this Section 2.7(d), Acquirer shall have no other diligence obligations, express or implied, with respect to the Company Stockholders for 180 days afterProducts.
(e)Milestone Payments Not a Security. The Parties acknowledge and agree, and acknowledge and agree, that (i) the Effective Time shall be deliveredright to the Surviving Corporation. Any Company Stockholder who hasreceive any Milestone Payments is solely a contractual right and does not, theretofore complied with this Article II shall thereafter look only to the Surviving Corporation for paymentin and of their respective portion of the Total Consideration (after giving effect to any required Tax withholdings as provideditself, constitute an equity ownership interest in Section 2.9) upon due surrender of its Certificates (or affidavits of loss in lieu of the Certificates as provided in Section 2.8(g)), without any interest thereon. Notwithstanding the foregoing, none of the Surviving Corporation, Parent, the Exchange AgentAcquirer or any other Person, shall be liable(ii) Seller has no rights as a security holder of Acquirer or any other Person merely as a result of their right to any former Company Stockholder for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar Legal Requirements.
(g) Inreceive the event any Certificate shall have been lost, stolen or destroyed: (i) upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed;Milestone Payments and (ii) if required by Parent, the posting by such Person of a bond in customary amount and upon such terms(iii) no interest is payable as may be required by Parent as indemnity against any claim that may be made against it or the Surviving Corporationadditional consideration with respect to such Certificate, the Exchange Agent will issue the portionany Milestone Payment.
(f)Acknowledgment. Each of the Total Consideration attributableCompany Parties and Seller acknowledges that the Milestone Payments are subject to such Certificate (after giving effectnumerous factors outside the control of Acquirer, (ii) there is no assurance that any Milestone Event will be achieved, (iii) neither Acquirer nor its Affiliates owe, by virtue of their obligations under this Section 2.7, a fiduciary duty or any implied duties to any required Tax withholdings as provided in Section 2.9).Seller and (iv) the parties intend that the express provisions of this Agreement shall set forth the only obligations that apply to their relationship with respect to the Milestone Payments.
(g)Operation of the Company Group Following Closing Date. Following the Closing Date and through the end of the Second Milestone Period, Acquirer shall use its Commercially Reasonable Efforts to operate the Business in the Ordinary Course of Business and otherwise in accordance with the business plan and presumptions underlying the Pre-Closing Budget and provide the Business with capital to continue operations in the Ordinary Course of Business in order to achieve the Milestone Events. Acquirer shall not take any action in bad faith the purpose of which is to reduce or avoid payment of any Milestone Payment. As used in this Section 2.9 2.7(g), “Commercially Reasonable Efforts” means carrying out those obligations and tasks that comprise a commercially reasonable level of effort and expenditure of capital and resources (including appropriate allocation of resources) that Acquirer in good faith in the exercise of its reasonable business judgment.
(h)Acceleration of Milestone Payment. Notwithstanding anything to the contrary contained herein: if both (x) an Acquirer Change in Control shall have occurred at any time on or prior to the end of the Second Milestone Period and (y) FY2022 Company Group Revenue is equal to or above $163 million, such that the full $112.5 million Milestone Payment is earned in respect of Milestone Event #1, then Milestone Event #2 shall automatically be deemed to have been achieved and Acquirer shall pay, or shall cause to be paid, to Seller the full $37.5 million Milestone Payment owing in respect of Milestone Event #2 on or prior to the later of (A) the third (3rd) Business Day immediately following such Acquirer Change in Control and (B) the Milestone Payment Date for Milestone Event #1. Upon such accelerated payment of the $37.5 million Milestone Payment owing in respect of Milestone Event #2 in accordance with this Section 2.7(h), Acquirer shall have no further obligations under this Section 2.7.
2.8Withholding TaxesRights. Notwithstanding anything in this Agreementherein to the contrary, Parent, Merger Sub,each of Acquirer, Holdco2, the Company, the Surviving Corporation, the Exchange AgentEntity and their Affiliatesrespective agents shall be entitled to deduct and withhold from theany consideration otherwise payable pursuant to this Agreement any amounts required to be deducted and withheld therefrom under applicable Law on account of Taxes (“Applicable Withholding Law”). Notwithstanding the foregoing, if a party paying consideration determines that an amount is required to be deducted and withheld with respect to any amounts payable, at least five (5) days prior to the date the applicable payment is scheduled to be made, the party making the payment shall provide the recipient with written notice of its intent to deduct and withhold, which notice shall include a copy of the calculation of the amount to be deducted and withheld and a
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reference to the applicable provision of Law pursuant to which such deduction and withholding is required, and the party making the payment shall reasonably cooperate with the recipient to eliminate or reduce the basis for and amount of such payment under Applicable Legal Requirements; provided, that if Parent, Merger Sub, any of their respective Affiliates, or any party acting on their behalf determines that any payment to the Company Stockholders hereunder is subject to deduction and/or withholding then Parent shall(including providing the recipient with a reasonable opportunity to provide notice to the Company as soon as reasonably practicable afterforms or other evidence that would exempt such determination; provided, further, that the parties shall use commercially reasonable efforts to minimize any such deduction and/amounts. from withholding). Amounts so deducted or withholding. To the extent that amounts are so withheld and paid over to the appropriate Governmental Entity, such withheld amounts shall be treated for all purposes of this Agreement as having been paid hereunder to the Person in respect of which such deduction and withholding was made. AnyAcquirer, Holdco2, the Company, the Surviving Entity or their respective paying agent, as applicable, shall timely remit any amounts so withheld shall be timely remitted or deducted pursuant to this Section to the applicable Governmental Entity.Tax Authority.
2.9Dispute Resolution.
(a)In the event that Seller disputes (i) the purported occurrence or non-occurrence of any Milestone Event, (ii) the payment of any Milestone Payment, or (iii) any indemnification claim or setoff under Article 8 then Seller shall provide written notice to Acquirer (the “Dispute Notice”) specifying the amount disputed and the basis for the dispute. Acquirer and Seller shall thereafter attempt to resolve the dispute as set forth in this Section 2.10 2.9(a).
(b)TakingSeller and Acquirer shall attempt to resolve any dispute set forth in a Dispute Notice promptly by negotiation in good faith between an officer of Necessary Action; Further ActionSeller, on the one hand, and an officer of Acquirer, on the other, in each case who has authority to settle the dispute (subject to any limitations set by the board of directors or other governing body to which such officer reports). Each Party shall give the other Party involved written notice of any dispute not so resolved within thirty (30) days following Seller’s delivery of the Dispute Notice. Within ten (10) Business Days following delivery of such notice, the Party receiving notice shall submit to the other a written response thereto. The notice and the response shall include: (i) a statement of each Party’s position(s) regarding the matter(s) in dispute, and (ii) the name and title of the officer who will represent Seller and Acquirer and any other Person who will accompany that officer.
(c)Within ten (10) Business Days following delivery of a Dispute Notice, the designated officers of Acquirer and Seller shall meet at a mutually agreed time and place, and thereafter, as often as they reasonably deem necessary, to attempt to resolve the dispute. All negotiations conducted pursuant to this Section 2.9(a) (and any of the Parties’ submissions in contemplation hereof) shall be kept confidential by the Parties and shall be treated by the Parties and their representatives as compromise and settlement negotiations under the Federal Rules of Evidence and any similar state rules.
(d)If Seller and Acquirer are unable to resolve any dispute arising out of this Agreement in accordance with provisions (a), (b) and (c) of this Section 2.9 within thirty (30) days after delivery of any Dispute Notice, then, subject to Section 2.9(e), Acquirer and Seller shall be entitled to submit such dispute for final adjudication to the applicable court sitting in the State of Delaware in accordance with Section 9.4.
(e)Notwithstanding Section 2.9(d), any dispute with respect to (i) the purported occurrence or non-occurrence of any Milestone Event or (ii) the payment of any Milestone Payment that shall not have been resolved by Seller and Acquirer in accordance with provisions (a), (b) and (c) of this Section 2.9 within thirty (30) days after delivery of any Dispute Notice shall be submitted to the Independent Expert. The Independent Expert shall be engaged pursuant to an engagement letter among Seller, Acquirer and the Independent Expert on terms and conditions consistent with this Section 2.9(e). If, atThe Independent Expert shall be instructed, pursuant to such engagement letter, to act as an expert and not as an arbitrator and to resolve only the items contained in the applicable Dispute Notice that shall not have been resolved between Seller and the Acquirer (the “Milestone Unresolved Items”) and not to otherwise investigate any time aftermatter independently. Seller and Acquirer each agree to furnish to the Effective Time,Independent Expert reasonable access to such individuals and such information, books and records as may be reasonably required by the Independent Expert to make its final determination (and any further actionsuch information, books and records shall be provided to the other such Party prior to its submission or presentation to the Independent Expert). Seller and Acquirer shall also instruct the Independent Expert to render its reasoned written decision as promptly as practicable but in no event later than thirty (30) days from the date that information related to the unresolved objections is necessary or desirablepresented to carry out the purposesIndependent Expert by Seller and Acquirer. With respect to each Milestone Unresolved Item, such decision shall be made based on the terms and conditions of this Agreement and to vest the Surviving Corporation following the Merger with full right, title and possession to all assets, property, rights, privileges, powers and franchisesshall not be in excess of the Company and Merger Sub,higher, nor less than the officers and directors or members, as applicable, (or their designees)lower, of the Company and Merger Sub are fully authorizedamounts advocated by Acquirer in the name of their respective corporations or otherwise to take, and will take, all such lawful and necessary action, so long as such action is not inconsistent with this Agreement.
Section 2.11 Tax Treatment of the Merger. For U.S. federal income tax purposes (and for purposes of any applicable state or local Tax that follows the U.S. federal income tax treatment), the Parties will prepare and file all Tax Returns consistent with the treatment of the Merger as a reorganization within the meaning of Section 368(a) of the Code (or comparable provision of state and local Tax Legal Requirement) and will not take any inconsistent position on any Tax Return or during the course of any audit, litigation or other proceeding with respect to Taxes, except as otherwise required by Applicable Legal Requirements (in the case of Parent, the Company or Surviving Entity, as determined by Parent in good faith).
Section 2.12 Effect on Company Options,Company RSUs and Company SARs.
(a) Each Company Option that is outstanding as of immediately prior to the Effective Time shall be assumed by Parent and converted into an option to purchase shares of Parent Class A Stock upon substantially the same terms and conditions as are in effect with respect to such Company Option immediately prior to the Effective Time, including with respect to vesting, exercisability and termination-related provisions (each, a “Parent Option”) except that (a) such Parent Option shall provide the right to purchase that whole number of shares of Parent Class A Stock (rounded down to the nearest whole share) equal to the number of shares of Company Common Stock subject to such Company Option as of immediately prior to the Effective Time, multiplied by the Option Exchange RatioMilestone Event Notice
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applicable to such Company Option, and (b)or Seller in the exercise price per share for each such Parent Option shall be equal to the exercise price per share of such Company Option in effect immediately prior to the Effective Time, divided by the Option Exchange Ratio applicable to such Company Option (the exercise price per share, as so determined, being rounded up to the nearest full cent); provided, however, that the conversion of the Company Options will be made in a manner consistent with Treasury Regulation Section 1.424-1, such that such conversion will not constitute a “modification” of such Company Options for purposes of Section 409A or Section 424 of the Code.
(b) Each Company RSU that is outstanding as of immediately prior to the Effective Time shall be assumed by Parent and converted into a restricted stock unit representing the opportunity to be issued shares of Parent Class A Stock upon substantially the same terms and conditions as are in effectDispute Notice with respect to such Company RSU immediately priorMilestone Unresolved Item. Except as Seller and Acquirer may otherwise agree, all communications between Seller and Acquirer or any of their respective Representatives, on the one hand, and the Independent Expert, on the other hand, shall be in writing with copies simultaneously delivered to the Effective Time, including with respect to vestingother such Party. The resolution of Milestone Unresolved Items by the Independent Expert shall be final, binding and termination-related provisions (each,conclusive on the Parties (absent manifest error). All fees and expenses of the Independent Expert shall be borne on a “Parent RSU”) except that such Parent RSU shall provide opportunity to be issued that whole numberproportionate basis by Acquirer, on the one hand, and Seller, on the other, based on the percentage which the portion of sharesthe contested amount not awarded in favor of Parent Class A Stock (roundedAcquirer or Seller bears to the nearest whole share) equal to the number of Shares of Company Common Stock subject toamount actually contested by such Company RSU as of immediately prior to the Effective Time, Person.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY PARTIES AND SELLER
multiplied by the RSU Exchange Ratio; provided, however, that the conversionEach of the Company RSUs willParties and Seller hereby represents and warrants to the Acquirer Parties as follows, with each such representation and warranty subject to the exceptions set forth in the Company Disclosure Schedules (it being understood that the Company Disclosure Schedules shall be arranged in sections corresponding to the sections and subsections contained in this Article 3, and no disclosure made in any particular section of the Company Disclosure Schedules shall be deemed to be made in a manner consistent with the requirements of Section 409A of the Code and the applicable regulations promulgated thereunder.
(c) Except as otherwise set forth in this Section 2.12, each Company SAR that is outstanding as of immediately prior to the Effective Time shall be assumed by Parent and converted into a stock appreciation right with respect to shares of Parent Class A Stock upon substantially the same terms and conditions as are in effect with respect to such Company SAR immediately prior to the Effective Time, including with respect to vesting, exercisability, payment terms and termination-related provisions (each, a “Parent SAR”) except that (i) such Parent SAR shall be based on that whole number of shares of Parent Class A Stock (rounded down to the nearest whole share) equal to the number of shares of Company Common Stock subject to such Company SAR as of immediately prior to the Effective Time, multiplied by the SAR Exchange Ratio, and (ii) the base amount per share for each such Parent SAR shall be equal to the base amount per share of such Company SAR in effect immediately prior to the Effective Time, divided by the SAR Exchange Ratio (the base amount per share, as so determined, being rounded up to the nearest full cent); provided, however, that the conversionany other section of the Company SARs will beDisclosure Schedules unless expressly made intherein (by cross- reference or otherwise) or to the extent it is reasonably apparent from a manner consistent with Treasury Regulation Section 1.424-1, suchreading of the text of the disclosure that such conversion will not constitute a “modification” ofdisclosure is applicable to such Company SARs for purposes of Section 409A or Section 424other sections and subsections of the Code. For the avoidanceCompany Disclosure Schedules).
3.1Organization of doubt, the foregoing Section 2.12(c) shall not apply to any Company SAR that is deemed bySeller and the Company Group.
(a)Each Company Party is an entity duly organized and validly existing and in good standing under the Laws of the jurisdiction of its incorporation or formation with the requisite corporate power and corporate authority to conduct its business as it is presently being conducted, to own, lease or operate, as applicable, its assets and properties, and to perform all of its obligations under its Contracts. Each of the Company Parties is duly qualified to do business as a foreign entity and is duly qualified to do business and in good standing (if such concept is applicable in the relevant jurisdiction) in each jurisdiction where the character of its assets and properties owned, leased or operated or the nature of its activities make such qualification necessary, except where the failure to be exercisedso qualified or in good standing would not have a Material Adverse Effect. Other than in connection with the Closing.
(d) The Company shall take all necessary actions to effect the treatment of Company Options, Company RSUs and Company SARs pursuant to Sections 2.12(a) in accordance with the Company Incentive Plan and the applicable award agreements and to ensure that no Parent Option may be exercised prior to the effective date of an applicable Form S-8 (or other applicable form, including Form S-1 or Form S-3) of Parent. The board of directorsPre-Closing Restructuring, neither Seller nor any of the Company shall amendParties has ever approved or commenced any Proceeding or made any election contemplating the dissolution or liquidation of any of the Company Incentive Plan and take all other necessary actions, effective asParties or the winding up or cessation of immediately prior to the Closing, in order to (i) provide that the unallocated share reserve remaining underbusiness or affairs of any of the Company Incentive PlanParties. Other than in connection with the Pre-Closing Restructuring, there are no entities that have been merged into or that otherwise are predecessors to any of the Company Parties. True, complete and correct copies of the Governing Documents of each of the Company Parties, as amended and in effect as of the ClosingAgreement Date, (includinghave been Delivered to Acquirer. No Company Party is in violation of its Governing Documents.
(b)Holdco2 has been organized solely for the purpose of entering into the Transaction Documents and the Ancillary Agreements to which it is a party and consummating the Pre-Closing Restructuring, the Mergers and the other Transactions, and has not engaged in any shares subsequently returnedactivities or business, other than those incident or related to such share reserveor incurred in connection with its formation, the Pre-Closing Restructuring or the negotiation, preparation or execution of the Transaction Documents, the performance of its covenants or agreements in the Transaction Documents to which it is a party or any Ancillary Agreement or the consummation of the Transactions.
3.2Subsidiaries.
(a)Each Subsidiary of Holdco2 and the Company is either a corporation or limited liability company duly organized and validly existing and in good standing under the Laws of the jurisdiction of its incorporation or formation with the requisite corporate power and corporate authority to conduct its business as it is presently being conducted, to own, lease or operate, as applicable, its assets and properties, and to perform all of its obligations under its Contracts. Each Subsidiary of Holdco2 and the Company is duly qualified to do business as a result of the termination of awards issued under the Company Stock Plan) shall be includedforeign corporation and is duly qualified to do business and in good standing (if such concept is applicable in the share reserve underrelevant jurisdiction) in each jurisdiction where the LTIP, in accordance withcharacter of its assets and properties owned, leased or operated or the terms thereof, and (ii) provide that no new Company Options, Company RSUs or Company SARs will be granted under the Company Incentive Plan following the Closing. Prior to the Effective Time, the Company shall deliver to each holder of a Company Option, Company RSU or Company SAR a notice, in a form reasonably acceptable to Parent, setting forth the effect of the Merger on such holder’s Company Options, Company RSUs and Company SARs and describing the treatment of such Company Options, Company RSUs and Company RSUs in accordance with this Section 2.12.
(e) Parent shall take all actions that are necessary for the assumption and conversion of the Company Options, Company RSUs and Company SARs pursuant to Section 2.12(a). If registration of the Parent Options, Parent RSUs or Parent SARs is required under the Securities Act, Parent shall file, as promptly as practicable after the date that is sixty (60) days after the Form 8-K announcing the Closing is filed (or any such earlier date permitted by Applicable Legal Requirements), a registration statement on Form S-8 with respect to such Parent Options, Parent RSUs and Parent SARs, and shall use its commercially reasonable efforts to maintain the effectiveness of such registration statement for so long as the applicable Parent Options, Parent RSUs and Parent SARs remain
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outstanding andnature of its activities make such registrationqualification necessary, except where the failure to be so qualified or in good standing would not have a Material Adverse Effect.
(b)Section 3.2(b) of the sharesCompany Disclosure Schedule accurately lists the equity interests, whether direct or indirect, held by each of Parent Class A Common Stock issuable thereunder continuesHoldco2 and the Company in each of its Subsidiaries, including such ownership after giving effect to the Pre-Closing Restructuring (collectively, the “Subsidiary Ownership Interests”), as well as the names of any other Persons who hold equity interests in such Subsidiaries and the ownership interests held by any such Persons, including such ownership after giving effect to the Pre-Closing Restructuring. The Subsidiary Ownership Interests are (or will be required.at Closing) duly authorized, validly issued, fully paid and non-assessable and are free of any Encumbrances, outstanding subscriptions, preemptive rights or “put” or “call” rights created by statute, the Governing Documents of any Subsidiary of Holdco2 or the Company or any Contract to which any Subsidiary of Holdco2 or the Company is a party or by which such Subsidiary or any of its assets is bound. Other than the Subsidiary Ownership Interests, there are no options, warrants or rights of any kind to acquire securities or other ownership interests in any of the Subsidiaries of Holdco2 or the Company, or any interest convertible into or exchangeable or exercisable for, any equity or similar interest in, any of the Subsidiaries of Holdco2 or the Company.
(c)True, complete and correct copies of the Governing Documents of each Subsidiary of Holdco2 and the Company (as of the Agreement Date), as amended and in effect as of the Agreement Date, have been Delivered to Acquirer. No such Subsidiary of Holdco2 or the Company is in violation of its Governing Documents.
(d)Section 2.13 3.2(d) of the Company Disclosure Schedule sets forth a true and complete list of all Contracts (x) to which Detect Genomix, Seller or any member of the Company Group is a party or by which any such party, or any of their respective assets, is bound and (y) that pertain to Detect Genomix and the operation of its business. Detect Genomix has not engaged in any activities or business, other than those incident or related to or incurred in connection with its formation or the negotiation, preparation or execution of the Contracts set forth on Section 3.2(c) of the Company Disclosure Schedule.
3.3Dissenting SharesAuthorization.
(a). Notwithstanding anything inEach of the Company Parties and Seller has all requisite corporate power and authority, and has taken all corporate action necessary, to execute, deliver and perform its obligations under the Transaction Documents and to consummate the Transactions. Each of the Seller Board and the Holdco2 Board, at a meeting duly called and held at which all directors were present, duly and unanimously adopted resolutions (i) approving and declaring advisable this Agreement, to the contrary, shares of Company Common Stock or Company Preferred Stock outstanding immediately prior toAncillary Agreements, the Effective TimeMergers and held by a Company Stockholder who has not voted in favor of the Merger or consented thereto in writing or by electronic transmissionsother transactions contemplated hereby and has properly demanded appraisal for such shares in accordance with, and who complies in all respects with, Section 262 of the DGCL (such shares, “Dissenting Shares”), shall not be converted into the right to receivethereby, (ii) determining that the Merger Consideration and shall instead represent the right to receive payment of theis fair value of such Dissenting Shares in accordance with and to the extent provided by Section 262sole stockholder of Holdco2 and declaring that this Agreement, the DGCL. At the Effective Time, (i) all Dissenting Shares shall be cancelled, extinguished and cease to exist and (ii) the holders of Dissenting Shares shall be entitled to only such rights as may be granted to him, her or it under the DGCL. If any such Company Stockholder fails to perfect or otherwise waives, withdraws or loses such Company Stockholder’s right to appraisal under Section 262 of the DGCL or a court of competent jurisdiction shall determine such holder is not entitled to the relief provided by Section 262 of the DGCL, then the right of such holder to be paid the fair value of such Dissenting Shares under Section 262 of the DGCL shall cease and such Dissenting Shares shall be deemed to have been converted, as of the Effective Time, into and shall only represent the right to receive the Merger Consideration upon the surrender of such shares in accordance with this Article II. The Company shall give Parent reasonably prompt notice of any demands received by the Company for appraisal of shares of Company Common Stock or Company Preferred Stock, attempted withdrawals of such demands and any other instruments served pursuant to the DGCL and received by the Company relating to rights to be paid the fair value of Dissenting Shares, and Parent shall have the right to participate in and direct all negotiations and proceedings with respect to such demands. Prior to the Effective Time, the Company shall not, except with the prior written consent of Parent (such consent not to be unreasonably withheld, conditioned or delayed), make any payment with respect to, or settle or compromise or offer to settle or compromise, any such demands or waive any failure to timely deliver a written demand for appraisal or otherwise comply with the provisions under Section 262 of the DGCL, or agree or commit to do any of the foregoing.
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ARTICLE III
EARN OUT
Section 3.1 Issuance of Earn-Out Shares. 
(a) Following the Closing, and as additional consideration forAncillary Agreements, the Merger and the other Transactions within five Business Days after the occurrence of a Triggering Event, Parent shall issue or cause to be issued to each Company Stockholder (other than holders of Dissenting Shares) and Earn-Out Service Provider (in accordance with its respective Earn-Out Pro Rata Share and,are in the casebest interests of Holdco2’s stockholder, (iii) adopting this Agreement and the Earn-Out Service Providers, in accordance withAncillary Agreements, (iv) authorizing Seller and Holdco2 to enter into this Agreement and to consummate the terms ofMergers and the applicable Earn-Out Award Agreement) the following shares of Parent Class A Stock (which shall be equitably adjusted for stock splits, reverse stock splits, stock dividends, reorganizations, recapitalizations, reclassifications, combination, exchange of shares or other like change or transaction with respect to Parent Class A Stock occurringTransactions, on or after the Closing, the “Earn-Out Shares”), upon the terms and subject to the conditions set forth in this Agreement and the other TransactionAncillary Agreements, and,(v) in the case of the Earn-Out Service Providers, subjectHoldco2 Board, (A) directing that the Mergers and this Agreement and the Ancillary Agreements be submitted to the additional requirements set forth in Section 3.4stockholder of Holdco2 for a vote for adopting this Agreement and the applicable Earn-Out Award Agreement:
(i) uponAncillary Agreements and approving the occurrence of Triggering Event I, a one-time issuance of a number of Earn-Out Shares equalMergers and (B) recommending that the Holdco2 stockholder votes to 3.66% of the Earn-Out Total Outstanding Shares;
(ii) upon the occurrence of Triggering Event II, a one-time issuance of a number of Earn-Out Shares equal to 3.67% of the Earn-Out Total Outstanding Shares;approve and
(iii) upon the occurrence of Triggering Event III, a one-time issuance of a number of Earn-Out Shares equal to 3.67% of the Earn-Out Total Outstanding Shares; and
(iv) upon the last day of any calendar year in which an Earn-Out Forfeiture occurs, a one-time issuance of a number of Earn-Out Shares equal to the Forfeiture Pool as in effect as of such date.
(b) For the avoidance of doubt, the Company Stockholders adopt this Agreement and the Earn-Out Service Providers shall be entitled to receive Earn-Out Shares uponAncillary Agreements and approve the occurrence of each Triggering Event (and,Merger and (vi) in the case of the Earn-Out Service Providers, subjectSeller Board, authorizing Seller as the sole stockholder of Holdco2 to the additional requirements set forth in Section 3.4 and the applicable Earn-Out Award Agreement); provided, however, that each Triggering Event shall only occur once, if at all, and in no event shall the Company Stockholders and the Earn-Out Service Providers, in the aggregate, be entitled to receive more than an aggregate number of Earn-Out Shares equal to 11% of the Earn-Out Total Outstanding Shares.
Section 3.2 Acceleration Event. If, during the Earn-Out Period, there is a Change of Control that will result in the holders of Parent Class A Stock receiving a per share price equal to or in excess of the applicable Common Share Price required in connection with a given Triggering Event (an “Acceleration Event”), then immediately prior to the consummation of such Change of Control (the “Accelerated Vesting Date”): (a) any such Triggering Event that has not previously occurred shall be deemed to have occurred; and (b) Parent shall issue the applicable Earn-Out Shares (including any Earn-Out Shares accumulated in the Forfeiture Pool as of the Accelerated Vesting Date) to the Company Stockholders and Earn-Out Service Providers (in accordance with their respective Earn-Out Pro Rata Share and, in the case of Earn-Out Service Providers, if and to the extent required in accordance with the applicable Earn-Out Award Agreement), and the recipients of such issued Earn-Out Shares shall be eligible to participate with respect thereto in such Change of Control. If there is a Change in Control following the Earn-Out Period, then immediately prior to the consummation of such Change in Control, Parent shall issue the Earn-Out Shares then-accumulated in the Forfeiture Pool, if any, to the Company Stockholders and Earn-Out Service Providers (in accordance with their respective Earn-Out Pro Rata Share and, in the case of the Earn-Out Service Providers, if and to the extent required in accordance with the applicable Earn-Out Award Agreement), and the recipients of such issued Earn-Out Shares shall be eligible to participate with respect thereto in such Change of Control.
Section 3.3 Tax Treatment of Earn-Out Shares. Any issuance of Earn-Out Shares to Company Stockholders, including any issuance of Earn-Out Shares made upon the occurrence of an Acceleration Event pursuant to Section 3.2, shall be treated as an adjustment to the Total Consideration by the Parties for Tax purposes, unless otherwise required by Tax law and is intended to comply with and shall be effected in accordance with Rev. Proc. 84-42, 1984-1 C.B. 521.
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Section 3.4 Earn-Out Service Providers. The terms of the issuance of the Earn-Out Shares underlying an award of Earn-Out RSUs to the Earn-Out Service Providers shall be set forth in a written agreement between the Company and such Earn-Out Service Provider (each, an “Earn Out Award Agreement”), in a form reasonably acceptable to Parent, which may provide that the Earn-Out Shares that would otherwise become issuable to an Earn-Out Service Provider pursuant to Section 3.1(a) shall remain subject to certain additional vesting conditions as set forth therein, and which may provide for accelerated vesting in the event of a Change in Control. In the event that an Earn-Out Service Provider does not satisfy the vesting conditions set forth in his or her Earn-Out Award Agreement (an “Earn-Out Forfeiture”), such Earn-Out Service Provider shall be deemed to have forfeited his or her right to receive the applicable Earn-Out Shares for no consideration. Any such Earn-Out Shares that are so forfeited shall accumulate in a “Forfeiture Pool” and shall be issued in accordance with Section 3.1(a) or Section 3.2, as applicable. The delivery of Earn-Out Shares underlying the Earn-Out RSUs shall be subject to the payment of any applicable Tax withholdings and compliance with any applicable requirements of the securities and other laws.
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Article IV
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY
Except as set forth in the letter dated as of the date of this Agreement delivered by the Company to Parent and Merger Sub prior to or in connection with the execution and delivery of this Agreement (the “Company Disclosure Letter”), the Company hereby represents and warrants to Parent and Merger Sub as of the date hereof and as of the Closing Date as follows:
Section 4.1 Organization and Qualification. The Company is a corporation duly incorporated, validly existing and in good standing under the Legal Requirements of the State of Delaware and has all requisite corporate power and authority to own, lease and operate its assets and properties and to carry on its business as it is now being conducted, except as would not be material to the Group Companies, taken as a whole. The Company is duly licensed or qualified to do business in each jurisdiction in which the ownership of its property or the character of its activities is such as to require it to be so licensed or qualified, except where the failure to be so licensed or qualified or in good standing would not, individually or in the aggregate, reasonably be expected to prevent, materially delay or materially impair the ability of the Company to consummate the Transactions or have a Company Material Adverse Effect. Complete and correct copies of the certificate of incorporation and by-laws (or other comparable governing instruments with different names) (collectively referred to herein as “Charter Documents”) of the Company as amended and currently in effect, have been made available to Parent or its representatives.
Section 4.2 Company Subsidiaries.
(a) The Company’s direct and indirect Subsidiaries, together with their jurisdiction of incorporation or organization, as applicable, are listed on Schedule 4.2(a) of the Company Disclosure Letter (the “Company Subsidiaries”). Each Company Subsidiary has been duly formed or organized and is validly existing under the Legal Requirements of its respective jurisdiction of incorporation or organization and has the requisite power and authority to own, lease and operate its assets and properties and to conduct its business as now being conducted, except where the failure to be so formed, organized or existing, or to have such power and authority, would not, individually or in the aggregate, reasonably be expected to be material to the Group Companies, taken as a whole. The Company has previously provided to Parent or its representatives true and complete copies of the Charter Documents of the Company Subsidiaries, as amended and currently in effect.
(b) Except as set forth on Schedule 4.2(b) of the Company Disclosure Letter, each Company Subsidiary is duly licensed or qualified to do business and, where applicable, is in good standing as a foreign corporation (or other entity, if applicable) in each jurisdiction in which it is conducting business, or the operation, ownership or leasing of its property or the character of its activities is such as to require it to be so licensed or qualified, except where the failure to be so licensed or qualified or in good standing would not, individually or in the aggregate, reasonably be expected to prevent, materially delay or materially impair the ability of the Company to consummate the Transactions or have a Company Material Adverse Effect.
Section 4.3 Capitalization.
(a) The authorized capital stock of the Company consists of: (i) 2,500,000 shares of Class A Common Stock, of which one share is issued and outstanding as of the date of this Agreement; (ii) 15,000,000 shares of Class B Common Stock, of which 549,965 shares are issued and outstanding as of the date of this Agreement; (iii) 444,373 shares of Series A-1 Preferred Stock, par value $0.00001, of the Company (“Series A-1 Preferred Stock”), of which 447,373 shares are issued and outstanding as of the date of this Agreement; (iv) 522,267 shares of Series A-2 Preferred Stock, par value $0.00001, of the Company (“Series A-2 Preferred Stock”), of which 401,347 shares are issued and outstanding as of the date of this Agreement; (v) 338,663 shares of Series B Preferred Stock, par value $0.00001, of the Company (“Series B Preferred Stock”), of which 338,663 shares are issued and outstanding as of the date of this Agreement; and (vi) 197,824 shares of Series C Preferred Stock, par value $0.00001, of the Company (“Series C Preferred Stock” and, together with the Series A-1 Preferred Stock, Series A-2 Preferred Stock and Series B Preferred Stock, the “Company Preferred Stock”), of which 197,821 shares are issued and outstanding as of the date of this Agreement. All of the issued and outstanding shares of Company Common Stock and Company Preferred Stock have been duly authorized and validly issued and are fully paid and nonassessable and have not been
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issued in violation of any preemptive or similar rights. Each share of Company Common Stock and Company Preferred Stock has been issued in compliance in all material respects with: (A) Applicable Legal Requirements; and (B) the Company’s Charter Documents. Schedule 4.3(a) of the Company Disclosure Letter contains a true and correct list of all Company Common Stock and Company Preferred Stock owned by each Company Stockholder, and the respective class(es) thereof.
(b) The Company has previously provided to Parent a list, dated as of February 6, 2021, that is true and correct as of such date, setting forth the name of each holder of any Company Option granted under the Company Incentive Plan, the number of Company Options held by each holder, the class of shares underlying such Company Options and the applicable exercise price. Other than the Company Incentive Plan there are no stock appreciation, phantom stock, stock-based performance unit, profit participation, restricted stock, restricted stock unit or other equity-based compensation award or similar rights with respect to the Company. The Company has not granted any outstanding options, warrants, rights or other securities convertible into or exchangeable or exercisable for shares of the Company Common Stock or Company Preferred Stock, or any other commitments or agreements providingvote for the issuance of additional shares, the sale of treasury shares, or for the repurchase or redemption of shares of Company Common Stock or Company Preferred Stock, and there are no agreements of any kind which may obligate the Company to issue, purchase, register for sale, redeem or otherwise acquire any of its capital stock. Except for this Agreement, there are no registration rights, and there is no voting trust, proxy, rights plan, anti-takeover plan or other agreements or understandings with respect to the shares of Company Common Stock or Company Preferred Stock. No Company RSUs are outstanding as of the date of this Agreement.
(c) The outstanding shares of capital stock (or other equity interests) of each of the Company Subsidiaries have been duly authorized and validly issued and (if applicable) are fully paid and nonassessable (where such concepts are applicable) and have not been issued in violation of any preemptive or similar rights. The Company or one or more of its wholly owned Subsidiaries own of record and beneficially all the issued and outstanding shares of capital stock (or other equity interests) of such Company Subsidiaries free and clear of any Liens other than (i) as may be set forth on Schedule 4.3(c); (ii) for any restrictions on sales of securities under applicable securities laws; and (iii) Permitted Liens. There are no outstanding options, warrants, rights or other securities convertible into or exercisable or exchangeable for any shares of capital stock (or other equity interests) of such Company Subsidiaries, any other commitments or agreements providing for the issuance of additional shares (or other equity interests), the sale of treasury shares, or for the repurchase or redemption of such Company Subsidiaries’ shares of capital stock (or other equity interests), or any agreements of any kind which may obligate any Company Subsidiary to issue, purchase, register for sale, redeem or otherwise acquire any of its shares of capital stock (or other equity interests). Except for the equity interests of the Company Subsidiaries set forth on Schedule 4.2(a) of the Company Disclosure Letter and as otherwise set forth on Schedule 4.3(c) of the Company Disclosure Letter, neither the Company nor any of the Company Subsidiaries owns, directly or indirectly, any ownership, equity, profits or voting interest in any Person or have any agreement or commitment to purchase any such interest, and has not agreed and is not obligated to make nor is bound by any written, oral or other Contract, binding understanding, option, warranty or undertaking of any nature, as of the date hereof or as may hereafter be in effect under which it may become obligated to make, any future investment in or capital contribution to any other entity.
(d) Except as provided for in this Agreement, as a result of the consummation of the Transactions, no shares of capital stock, warrants, options or other securities of the Company are issuable and no rights in connection with any shares, warrants, options or other securities of the Company accelerate or otherwise become triggered (whether as to vesting, exercisability, convertibility or otherwise).
Section 4.4 Due Authorization. The Company has all requisite corporate power and authority to: (a) execute, deliver and perform this Agreement and the other Transaction Agreements to which it is a party; and (b) carry out the Company’s obligations hereunder and thereunder and to consummate the Transactions (including the Merger), in each case, subject to the consents, approvals, authorizations and other requirements described in Section 4.5. The execution and delivery by the Companyadoption of this Agreement and the other TransactionAncillary Agreements to which it is a partyand approval of the Mergers (the “Holdco2 Board Approval” and the consummation by“Seller Board Approval”). No Takeover Statute or similar statute or regulation applies or purports to apply to the Company ofwith respect to the Transactions (including the Merger) have been,Mergers, this Agreement or in the case of any Transaction Agreements to be executed at or in connection with the Closing, will be duly and validly authorized by all requisite action, including approval by the board of directors of the Company and, following receipt of the Company Stockholder Approval, the Company Stockholders as required by the DGCL, and no other
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corporate proceeding on the part of the Company is necessary to authorize this Agreement. Transaction. This Agreement and the other TransactionAncillary Agreements to which itthe Company Parties or Seller is a party have been duly and validly executed and delivered by the Company Parties and (assuming this Agreement constitutes a legal, valid and binding obligation of each of Parent and Merger Sub) constitute or will constitute the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with their terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights generally and subject, as to enforceability, to general principles of equity (collectively, the “Remedies Exception”).
Section 4.5 No Conflict; Governmental Consents and Filings .
(a) Except as set forth on Schedule 4.5(a) of the Company Disclosure Letter, subject to the receipt of the consents, approvals, authorizations and other requirements set forth in Section 4.5(b), the execution, delivery and performance of this Agreement (including the consummation by the Company of the Transactions) and the other Transaction Agreements to which the Company is a party by the Company do not and will not: (i) violate any provision of, or result in the breach of, any Applicable Legal Requirement to which any of the Group Companies is subject or by which any property or asset of any of the Group Companies is bound; (ii) conflict with or violate the Charter Documents of any of the Group Companies; (iii) violate any provision of or result in a breach, default or acceleration of, require a consent under, or create any right to payment under any Company Material Contract or Material Current Government Contract, or terminate or result in the termination of any Company Material Contract or Material Current Government Contract, or result in the creation of any Lien under any Company Material Contract or Material Current Government Contract upon any of the properties or assets of any of the Group Companies, or constitute an event which, after notice or lapse of time or both, would result in any such violation, breach, default, acceleration, termination or creation of a Lien; or (iv) result in a violation or revocation of any required Approvals, except to the extent that the occurrence of any of the foregoing items set forth in clauses (iii) or (iv) would not, individually or in the aggregate, reasonably be expected to prevent, materially delay or materially impair the ability of the Company to consummate the Transactions or have a Company Material Adverse Effect.
(b) Assuming the truth and completeness of the representations and warranties of Parent contained in this Agreement, no consent, notice, approval or authorization of, or designation, declaration or filing with, any Governmental Entity is required on the part of the Company with respect to the Company’s execution, delivery or performance of this Agreement, any of the other Transaction Agreements to which it is a party or the consummation by the Company of the Transactions (including the Merger), except for: (i) applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) or any similar foreign law; (ii) any consents, notices, approvals, authorizations, designations, declarations or filings, the absence of which would not reasonably be expected to have a Company Material Adverse Effect; (iii) compliance with any applicable requirements of the securities laws; (iv) as otherwise disclosed on Schedule 4.5(b); and (v) the filing of the Certificate of Merger in accordance with the DGCL.
Section 4.6 Legal Compliance; Approvals.
(a) Each of the Group Companies has during the past three years complied with, and is not currently in violation of, any Applicable Legal Requirements with respect to the conduct of its business, or the ownership or operation of its business, except for failures to comply or violations which, individually or in the aggregate, have not been and are not reasonably likely to be material to the Group Companies, taken as a whole. No written, or to the Knowledge of the Company, oral notice of non-compliance with any Applicable Legal Requirements has been received during the past three years by any of the Group Companies.
(b) Each Group Company is in possession of all franchises, grants, authorizations, licenses, permits, consents, certificates, approvals and orders from Governmental Entities (“Approvals”) necessary to own, lease and operate the properties it purports to own, operate or lease and to carry on its business as it is now being conducted, except where the failure to have such Approvals would not, individually or in the aggregate, reasonably be expected to be material to the Group Companies, taken as a whole.
Section 4.7 Government Contracts. Schedule 4.7 of the Company Disclosure Letter sets forth a list of each Current Government Contract in existence as of the date hereof that involves aggregate payments to the Company or
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any of the Company Subsidiaries that are reasonably expected to be in excess of $250,000 (each, a “Material Current Government Contract”). Each Current Government Contract was legally awarded to the Company or a Company Subsidiary, as applicable. Each Current Government Contract: (i) is a legal, valid binding obligation of the Company or such Company Subsidiary, as applicable; and (ii) is in full force and effect and enforceable against the Company or such Company Subsidiary,Seller, as applicable, in accordance with its terms.
Section 4.8 Financial Statements.
(a) The Company has previously provided to Parent: (i) the audited balance sheets and statements of operations and comprehensive loss, changes in equity and cash flows of the Company for the twelve- month periods ended December 31, 2019 and 2018 together with the auditor’s reports thereon (the “Audited Financial Statements”); and (ii) an unaudited balance sheet and statements of operations and comprehensive loss and cash flows of the Company as of and for the 11-month period ended November 30, 2021 (the “Interim Financial Statements” and, together with the Audited Financial Statements, the “Financial Statements”). The Financial Statements present fairly, in all material respects, the financial position and results of operations of the Company as of the dates and for the periods indicated in such Financial Statements in conformity with GAAP (except in the case of the Interim Financial Statements for the absence of footnotes and other presentation items and for normal year-end adjustments).
(b) The Company has established and maintained a system of internal controls. To the Knowledge of the Company, such internal controls are sufficient to provide reasonable assurance regarding the reliability of the Company’s financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with GAAP.
(c) There are no outstanding loans or other extensions of credit made by the Company to any executive officer (as defined in Rule 3b-7 under the Exchange Act) or director of the Company.
Section 4.9 No Undisclosed Liabilities. There is no liability, debt or obligation (absolute, accrued, contingent or otherwise) of any of the Group Companies of a type required to be reflected or reserved for on a balance sheet prepared in accordance with GAAP, except for liabilities, debts and obligations: (a) provided for in, or otherwise reflected or reserved for on the Financial Statements or disclosed in the notes thereto; (b) that have arisen since the date of the most recent balance sheet included in the Financial Statements in the ordinary course of the operation of business of the Group Companies; (c) incurred in connection with the transactions contemplated by this Agreement; or (d) which would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.
Section 4.10 Absence of Certain Changes or Events. Except as contemplated by this Agreement, since August 27, 2020 through the date of this Agreement, except as required to respond to Pandemic Measures, each of the Group Companies has conducted its business in the ordinary course consistent with past practice and there has not been: (a) any Company Material Adverse Effect; (b) any purchase, redemption or other acquisition by the Company of any of the shares of Company Common Stock, Company Preferred Stock or any other securities of the Company or any options, warrants, calls or rights to acquire any such Company Common Stock, Company Preferred Stock or other securities, other than pursuant to the terms of a Company Option; (c) any split, combination or reclassification of any of the shares of Company Common Stock or Company Preferred Stock; (d) any material change by the Company in its accounting methods, principles or practices, except as required by concurrent changes in GAAP or Applicable Legal Requirements; (e) any change in the auditors of the Company; (f) any issuance of shares of Company Common Stock or Company Preferred Stock, other than in connection with the exercise of a Company Option or Company SAR; (g) any revaluation by the Company of any of its assets, including any sale of assets of the Company other than with respect to sales in the ordinary course of business; or (h) any action taken or agreed upon by any of the Group Companies that would be prohibited by Section 6.1 (other than clauses (a), (c), (d), (i) and, to the extent related to the foregoing clauses, (p) thereof) if such action were taken on or after the date hereof without the consent of Parent.
Section 4.11 Litigation. Except as set forth on Schedule 4.11 of the Company Disclosure Letter or as would not be material to the Group Companies, taken as a whole, as of the date hereof, there are: (a) no pending or, to the
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Knowledge of the Company, threatened in writing, Legal Proceedings against any of the Group Companies or any of its properties or assets, or any of the directors or officers of any of the Group Companies with regard to their actions as such; (b) to the Knowledge of the Company, other than with respect to audits, examinations or investigations in the ordinary course of business conducted by a Governmental Entity pursuant to a Current Government Contract, no pending or threatened in writing, audits, examinations or investigations by any Governmental Entity against any of the Group Companies with regard to their actions as such; (c) no pending or threatened in writing Legal Proceedings by any of the Group Companies against any third party; (d) no settlements or similar agreements that imposes any material ongoing obligations or restrictions on any of the Group Companies; and (e) no Orders imposed or, to the Knowledge of the Company, threatened to be imposed upon any of the Group Companies or any of their respective properties or assets, or any of the directors or officers of any of the Group Companies with regard to their actions as such.
Section 4.12 Company Benefit Plans.
(a) Schedule 4.12(a) of the Company Disclosure Letter sets forth a complete list of each material Company Benefit Plan, including all employment contracts or offer letters unless any such arrangement is in a form substantially similar to a form of employment contract or offer letter identified on Schedule 4.12(a) of the Company Disclosure Letter (which schedule includes a general description of groups of employees that has entered into agreements on such forms). “Company Benefit Plan” means each “employee benefit plan” (within the meaning of Section 3(3) of ERISA), and each other retirement, supplemental retirement, deferred compensation, employment, bonus, incentive compensation, stock purchase, employee stock ownership, equity-based, phantom-equity, profit-sharing, severance, termination protection, change in control, retention, employee loan, retiree medical or life insurance, educational, employee assistance, fringe benefit and all other employee benefit plan, policy, agreement, program or arrangement, whether or not subject to ERISA, whether formal or informal, oral or written, which any Group Company sponsors or maintains for the benefit of its current or former employees, individuals who provide services and are compensated as individual independent contractors or directors, or with respect to which any Group Company has any direct or indirect present or future liability (including on account of its affiliation with an ERISA Affiliate). Notwithstanding anything to the contrary herein, in the case of any representation or warranty contained in this Section 4.12 concerning an employee benefit plan that is a Company Benefit Plan on account of the Company’s affiliation with an ERISA Affiliate, such representation and warranty is made to the Knowledge of the Company.
(b) With respect to each Company Benefit Plan on Schedule 4.12(a) of the Company Disclosure Letter, the Company has made available to Parent or its representatives copies of, as applicable: (i) such Company Benefit Plan, or the applicable form listed on Schedule 4.12(a) of the Company Disclosure Letter, and any trust agreement relating to such plan; (ii) the most recent summary plan description for such Company Benefit Plan for which such summary plan description is required; (iii) the most recent annual report on Form 5500 and all attachments thereto filed with the Internal Revenue Service with respect to such Company Benefit Plan (if applicable); (iv) the most audited financial statements, and actuarial or other valuation reports; (v) the most recent determination or opinion letter, if any, issued by the Internal Revenue Service with respect to such Company Benefit Plan; and (vi) any material non-routine correspondence with any Governmental Entity regarding any Company Benefit Plan during the past three years.
(c) Except as would not, individually or in the aggregate, reasonably be expected to be material to the Group Companies, taken as a whole:
(i) each Company Benefit Plan has been administered in accordance with its terms and all Applicable Legal Requirements, including ERISA and the Code;
(ii) all contributions required to be made with respect to any Company Benefit Plan on or before the date hereof have been made;
(iii) no non-exempt “prohibited transaction” (within the meaning of Section 406 of ERISA and Section 4975 of the Code) has occurred or is reasonably expected to occur with respect to any Company Benefit Plan;
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(iv) with respect to any Company Benefit Plan no actions, suits, claims (other than routine claims for benefits in the ordinary course), audits, inquiries, proceedings or lawsuits are pending, or, to the Knowledge of the Company, threatened against any Company Benefit Plan, the assets of any of the trusts under such plans or the plan sponsor or administrator, or against any fiduciary of any Employee Benefit Plan with respect to the operation thereof; and
(v) no event has occurred, and to the Knowledge of the Company, no condition exists that would, by reason of the Company’s affiliation with any of its ERISA Affiliates, subject any Group Company to any material tax, fine, lien, penalty or other liability imposed by ERISA, the Code or other Legal Requirements
(d) Each Company Benefit Plan which is intended to be qualified within the meaning of Section 401(a) of the Code: (A) has received a favorable determination or opinion letter as to its qualification; or (B) has been established under a standardized master and prototype or volume submitter plan for which a current favorable Internal Revenue Service advisory letter or opinion letter has been obtained by the plan sponsor and is valid as to the adopting employer, and nothing has occurred and no circumstances exist that would reasonably be expected to result in the loss of the qualification of such plan under Section 401(a) of the Code.
(e) Except as would not, individually or in the aggregate, reasonably be expected to be material to the Group Companies, taken as a whole, (i) no Company Benefit Plan covered by Title IV of ERISA, Section 412 of the Code or Section 302 of ERISA (a “Pension Plan”) has been terminated and no proceedings have been instituted to terminate or appoint a trustee to administer any such plan; (ii) no Pension Plan has failed to satisfy the minimum funding standard within the meaning of Section 412 of the Code or Section 302 of ERISA, or obtained a waiver of any minimum funding standard or an extension of any amortization period under Section 412 of the Code or Section 302 or 304 of ERISA; (iii) no Pension Plan is, or is expected to be, considered an at-risk plan within the meaning of Section 430 of the Code or Section 303 of ERISA; (iv) neither the Company, any of its Subsidiaries, or any of their respective ERISA Affiliates has incurred any unsatisfied withdrawal liability to any “multiemployer plan” within the meaning of Section (3)(37) of ERISA (“Multiemployer Plan”) and the aggregate liabilities of the Company and its Subsidiaries to all Multiemployer Plans in the event of a complete withdrawal therefrom, as of the close of the most recent fiscal year of each Multiemployer Plan ended prior to the date hereof, would not, individually or in the aggregate, reasonably be expected to be material to the Group Companies, taken as a whole and (v) to the Knowledge of the Company, no Multiemployer Plan is in endangered or critical status under Section 432 of the Code or Section 305 of ERISA. No Group Company nor any of their respective ERISA Affiliates has, within the past six years, sponsored, contributed to, been obligated to contribute to, or has any current or contingent liability in respect of a “multiple employer welfare arrangement” within the meaning of Section 3(40) of ERISA
(f) Except as would not, individually or in the aggregate, reasonably be expected to be material to the Group Companies, taken as a whole, with respect to the Company Benefit Plans or their administrators or fiduciaries: (i) no actions, suits or claims (other than routine claims for benefits in the ordinary course) are pending or, to the Knowledge of the Company, threatened; and (ii) no facts or circumstances exist that would reasonably be expected to give rise to any such actions, suits or claims.
(g) None of the Company Benefit Plans provides for, and the Group Companies have no liability in respect of, post-retiree or post-employment health, welfare or life insurance benefits or coverage for any participant or any beneficiary of a participant, except as may be required under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, or similar state or other Legal Requirements and at the sole expense of such participant or the participant’s beneficiary.
(h) Except as would not reasonably be expected to result in material Liabilities to the Group Companies, taken as a whole, since January 1, 2018, (i) no Group Company has been party to any proceeding, order, dispute, or claim involving any joint employer or co-employer causes of action by any individual who was employed or engaged by a third party and providing services to any Group Company; and (ii) no Group Company has been deemed to be, or to the Knowledge of the Company alleged to be, in a joint-employment, co-employment, or similar relationship with any third party, with respect to any of the Group Company’s employees or individual independent contractors.
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(i) Neither the execution and delivery of this Agreement nor the consummation of the Transactions will, either alone or in connection with any other event(s): (i) result in any payment or benefit becoming due to any current or former employee, contractor or director of the Group Companies or under any Company Benefit Plan; (ii) increase any amount of compensation or benefits otherwise payable to any current or former employee, contractor or director of the Group Companies or under any Company Benefit Plan; (iii) result in the acceleration of the time of payment, funding or vesting of any benefits to any current or former employee, contractor or director of the Group Companies or under any Company Benefit Plan; or (iv) result in any limit on the right to merge, amend or terminate any Company Benefit Plan.
(j) Neither the execution and delivery of this Agreement nor the consummation of the Transactions shall, either alone or in connection with any other event(s), give rise to any “excess parachute payment” as defined in Section 280G(b)(1) of the Code or any excise tax owing under Section 4999 of the Code.
(k) The Company maintains no obligations to gross-up or reimburse any individual for any tax or related interest or penalties incurred by such individual, including under Sections 409A or 4999 of the Code or otherwise.
(l) Each Company Benefit Plan which is a “nonqualified deferred compensation plan” subject to Section 409A of the Code has been established, operated and maintained in compliance with Section 409A of the Code in all material respects.
Section 4.13 Labor Relations.
(a) The Company has made available to the Parent a complete list of all employees of the Group Companies as of the date of this Agreement and, as applicable, their classification as exempt or non-exempt under the Fair Labor Standards Act, employer, title and/or job description, job location (city and state) and base compensation and any bonuses paid with respect to the 2020 fiscal year. As of the date of this Agreement, all employees of the Group Companies are legally permitted to be employed by the Group Companies in the jurisdiction in which such employees are employed in their current job capacities.
(b) No Group Company is a party to or negotiating any collective bargaining agreement with respect to employees of any Group Company.
(c) Except as would not reasonably be expected to result in material Liabilities to the Group Companies, taken as a whole, since January 1, 2018, there have been no strikes, work stoppages, slowdowns, lockouts, arbitrations, or material grievances or other labor disputes (including unfair labor practice charges, grievances, or complaints) pending, or, to the Knowledge of the Company, threatened against or involving any Group Company. Since the January 1, 2018, (i) no labor union or other labor organization, or group of employees of any Group Company, has made a written demand for recognition or certification with respect to any employees of any Group Company, and there are no representation or certification proceedings presently pending or, to the Knowledge of the Company, threatened to be brought or filed with the National Labor Relations Board or any similar labor relations tribunal or authority, (ii) to the Knowledge of the Company, there have been no pending or threatened union organizing activities with respect to employees of any Group Company, and (iii) there has been no actual or, to the Knowledge of the Company, threatened, material unfair labor practice charges against any Group Company.
(d) As of the date hereof, there are no, and since January 1, 2018 through the date hereof, there has been no, complaints, charges or claims against the Company pending or, to Knowledge of the Company, threatened before any Governmental Entity based on, arising out of, in connection with or otherwise relating to the employment, termination of employment or failure to employ by any Group Company, of any individual, except for those complaints, charges or claims which would not, individually or in the aggregate, reasonably be expected to be material to the Group Companies, taken as a whole.
(e) The Group Companies are, and since January 1, 2018 through the date hereof, have been, in compliance in all material respects with all Legal Requirements relating to the employment of labor, including all such Legal Requirements relating to wages (including minimum wage and overtime), hours or work, child labor, discrimination, civil rights, withholdings and deductions, classification and payment of employees, independent contractors, and consultants, employment equity, the federal Worker Adjustment and Retraining Notification Act (“WARN”) and
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any similar state or local “mass layoff” or “plant closing” Legal Requirement, collective bargaining, occupational health and safety, workers’ compensation, and immigration, except for instances of noncompliance which would not, individually or in the aggregate, reasonably be expected to be material to the Group Companies, taken as a whole. There has been no “mass layoff” or “plant closing” (as defined by WARN) with respect to the Group Companies within the six months prior to the date of this Agreement and no such events are reasonably expected to occur prior to Closing.
(f) Except as would not reasonably be expected to result in material Liabilities to the Group Companies, taken as a whole, since January 1, 2018, (i) each of the Group Companies has withheld all amounts required by Law or by agreement to be withheld from the wages, salaries and other payments that have become due and payable to employees; (ii) no Group Company has been liable for any arrears of wages, compensation or related Taxes, penalties, or other sums with respect to its employees; (iii) each of the Group Companies has paid in full to all employees and individual independent contractors all wages, salaries, commissions, bonuses and other compensation due and payable to or on behalf of such employees and such individual independent contractors; and (iv) to the Knowledge of the Company, each individual who since January 1, 2018 has provided or is providing services to any Group Company, and has been classified as (y) an independent contractor, consultant, leased employee, or other non-employee service provider, or (z) an exempt employee, has been properly classified as such under all Applicable Legal Requirements relating to wage and hour and Tax.
(g) During the three years ending on the date hereof, there have been no material employment discrimination or employment harassment allegations raised, brought, threatened, or settled relating to any appointed officer or director of any Group Company involving or relating to his or her services provided to the Group Companies. The policies and practices of the Group Companies comply in all material respects with all federal, state, and local Laws concerning employment discrimination and employment harassment, except as would not, individually or in the aggregate, reasonably be expected to be material to the Group Companies, taken as a whole.
(h) Except as would not reasonably be expected to result in material Liabilities to the Group Companies, taken as a whole, since January 1, 2018, (i) no Group Company has been party to any proceeding, order, dispute, or claim involving any joint employer or co-employer causes of action by any individual who was employed or engaged by a third party and providing services to any Group Company; and (ii) no Group Company has been deemed to be, or to the Knowledge of the Company alleged to be, in a joint-employment, co-employment, or similar relationship with any third party, with respect to any of the Group Company’s employees or individual independent contractors.
(i) The execution and delivery of this Agreement and the other Transaction Agreements and the performance of this Agreement and the Transactions do not require the Company to seek or obtain any consent, engage in consultation with, or issue any notice to any unions or labor organizations.
Section 4.14 Real Property; Tangible Property.
(a) Schedule 4.14(a) of the Company Disclosure Letter lists, as of the date of this Agreement, all real property owned by the Group Companies (the “Owned Real Property”). The Company or one of the Company Subsidiaries has good and marketable fee simple title to all Owned Real Property, subject only to any Permitted Liens.
(b) Schedule 4.14(b) of the Company Disclosure Letter lists, as of the date of this Agreement, all material real property leased by the Group Companies (the “Leased Real Property”). The Company or one of the Company Subsidiaries has a valid, binding and enforceable leasehold estate in, and enjoys peaceful and undisturbed possession of, all Leased Real Property and each of the leases, lease guarantees, agreements and documents related to any Leased Real Property, including all amendments, terminations and modifications thereof (collectively, the “Company Real Property Leases”), is in full force and effect. The Company has made available to Parent true, correct and complete copies of all material Company Real Property Leases. None of the Group Companies is in breach of or default under any Company Real Property Lease, and, to the Knowledge of the Company, no event has occurred and no circumstance exists which, if not remedied, and whether with or without notice or the passage of time or both, would result in such a breach or default, except for such breaches or defaults as would not individually
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or in the aggregate, reasonably be expected to be material to the Group Companies, taken as a whole. None of the Group Companies has received written notice from, or given any written notice to, any lessor of such Leased Real Property of, nor is there any default, event or circumstance that, with notice or lapse of time, or both, would constitute a default by the party that is the lessee or lessor of such Leased Real Property. No party to any Company Real Property Lease has exercised any termination rights with respect thereto.
(c) The Company or one of the Company Subsidiaries owns and has good and marketable title to, or a valid leasehold interest in or right to use, all of its material tangible assets or personal property, free and clear of all Liens other than: (i) Permitted Liens; and (ii) the rights of lessors under any leases. The material tangible assets or personal property (together with the Intellectual Property rights and contractual rights) of the Group Companies, or to which is has access pursuant to a formal written arrangement with ISMMS: (A) constitute all of the assets, rights and properties that are necessary for the operation of the businesses of the Group Companies as they are now conducted, and taken together, are adequate and sufficient for the operation of the businesses of the Group Companies as currently conducted; and (B) have been maintained in all material respects in accordance with generally applicable accepted industry practice, are in good working order and condition, except for ordinary wear and tear and as would not, individually or in the aggregate, reasonably be expected to be material to the business of the Group Companies, taken as a whole.
Section 4.15 Taxes.
(a) All material Tax Returns required to be filed by (or with respect to) the Group Companies have been timely filed (after giving effect to any valid extensions), and all such Tax Returns are true, correct and complete in all material respects.
(b) The Group Companies have paid all material amounts of their Taxes which are due and payable. All material Taxes incurred but not yet due and payable (i) for periods covered by the Financial Statements have been accrued and adequately disclosed on the Financial Statements of the Group Companies in accordance with GAAP, and (ii) for periods not covered by the Financial Statements have been accrued on the books and records of the Group Companies.
(c) The Group Companies have complied in all material respects with all Applicable Legal Requirements relating to the withholding and remittance of all material amounts of Taxes and all material amounts of Taxes required by Applicable Legal Requirements to be withheld by the Group Companies have been withheld and paid over to the appropriate Governmental Entity.
(d) No deficiency for any material amount of Taxes has been asserted or assessed by any Governmental Entity in writing against any Group Company (nor to the Knowledge of the Company is there any), which deficiency has not been paid, resolved, or being contested in good faith in appropriate Legal Proceedings and for which sufficient reserves have been established on the Financial Statements in accordance with GAAP. No material audit or other proceeding by any Governmental Entity is currently pending or threatened in writing against any Group Company with respect to any Taxes due from such entities (and, to the Knowledge of the Company, no such audit is pending or contemplated).
(e) There are no liens for material amounts of Taxes (other than Permitted Liens) upon any of the assets of the Group Companies.
(f) There are no Tax indemnification agreements or Tax sharing agreements under which any Group Company could be liable after the Closing Date for the Tax liability of any Person other than one or more of the Group Companies, except for customary agreements or arrangements with customers, vendors, lessors, lenders and the like or other similar agreements, in each case, that do not relate primarily to Taxes.
(g) None of the Group Companies has constituted either a “distributing corporation” or a “controlled corporation” in a distribution of stock intended to qualify for tax-free treatment under Section 355 of the Code in the past two years.
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(h) None of the Group Companies has entered into a “listed transaction” within the meaning of Treasury Regulation Section 1.6011-4(b).
(i) No Group Company: (i) has any liability for the Taxes of another Person (other than another Group Company) pursuant to Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign Tax Legal Requirement) or as a transferee or a successor; or (ii) has ever been a member of an affiliated, consolidated, combined or unitary group filing for U.S. federal, state or local income Tax purposes, other than a group the common parent of which was and is the Company (or another Group Company).
(j) No Group Company has consented to waive or extend the time in which any material Tax may be assessed or collected by any Governmental Entity (other than pursuant to extensions of time to file Tax Returns obtained in the ordinary course of business), which extension is still in effect, and no written request for any such waiver or extension is currently pending.
(k) No Group Company has a permanent establishment in any country other than the country of its organization or has been subject to income Tax in a jurisdiction outside the country of its organization, in each case, where it is required to file a material income Tax Return and does not file such Tax Return.
(l) No Group Company will be required to include any material item of income in, or exclude any material item or deduction from, taxable income for any taxable period beginning after the Closing Date or, in the case of any taxable period beginning on or before and ending after the Closing Date, the portion of such period beginning after the Closing Date, as a result of: (i) an installment sale or open transaction disposition that occurred on or prior to the Closing; (ii) any change in method of accounting on or prior to the Closing, including by reason of the application of Section 481 of the Code (or any analogous provision of state, local or foreign Tax Legal Requirements); (iii) other than in the ordinary course of business a prepaid amount received or deferred revenue recognized on or prior to the Closing; (iv) any intercompany transaction or excess loss account described in the Treasury Regulations under Section 1502 (or any corresponding or similar provision of state or local Tax Legal Requirements) that occurred or existed prior to the Closing; (v) any closing agreement pursuant to Section 7121 of the Code or any similar provision of state, local or foreign Tax Legal Requirements entered into prior to the Closing; or (vi) an inclusion under Section 965 of the Code.
(m) The Company is not, and has not been at any time during the five (5) year period ending on the Closing Date, a “United States real property holding corporation” within the meaning of Section 897(c)(2) of the Code.
(n) No claim has been made in writing (nor to the Knowledge of the Company is any such claim pending or contemplated) by any Governmental Entity in a jurisdiction in which any Group Company does not file Tax Returns that is or may be subject to taxation by, or required to file Tax Returns in, that jurisdiction.
Section 4.16 Environmental Matters. Each of the Group Companies is, and for the past three years, in compliance with all Environmental Laws, except for any such instance of non-compliance that would not reasonably be expected to be material to the Group Companies taken as a whole. The Group Companies have obtained, hold, are, and for the past three years have been, in material compliance with all permits required under applicable Environmental Laws to permit the Group Companies to operate their assets in a manner in which they are now operated and maintained and to conduct the business of the Group Companies as currently conducted, except where the absence of, or failure to be in material compliance with, any such permit would not reasonably be expected to be material to the Group Companies, taken as a whole. Except as set forth on Schedule 4.16 of the Company Disclosure Letter, there are no written claims or notices of violation pending or, to the Knowledge of the Company, threatened in writing against any of the Group Companies alleging violations of or liability under any Environmental Law, except for any such claim or notice that would not reasonably be expected to be material to the Group Companies. Neither the Group Companies nor, to the Knowledge of the Company, any other Person has disposed of or released any Hazardous Material at, on or under the any facility currently or formerly owned or operated by any of the Group Companies or any third- party site, in each case in a manner that would be reasonably likely to give rise to a material liability of the Group Companies for investigation costs, cleanup costs, response costs, corrective action costs, personal injury, property damage, natural resources damages or attorney fees under any Environmental Laws. None of the Group Companies has agreed to indemnify any Person or assumed by Contract the liability of any third party
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arising under Environmental Law. The Group Companies have made available to Parent copies of all material written environmental reports, audits, assessments, liability analyses, memoranda and studies in the possession of, or conducted by, the Group Companies with respect to compliance or liabilities under Environmental Law.
Section 4.17 Brokers; Third Party Expenses. No broker, finder, investment banker or other Person is entitled to, nor will be entitled to, either directly or indirectly, any brokerage fee, finders’ fee or other similar commission, for which Parent or any of the Group Companies would be liable in connection with the transactions contemplated by this Agreement or the Transactions based upon arrangements made by any of the Group Companies or any of their Affiliates.
Section 4.18 Intellectual Property.
(a) Schedule 4.18(a) of the Company Disclosure Letter sets forth a true, correct and complete list, as of the date of this Agreement of each registered Patent and Patent application, registered Trademark and application for Trademark registration, registered Copyright, internet domain name, and material unregistered Trademark which any of the Group Companies has (or purports to have) an ownership interest or an exclusive license or similar exclusive right in any field or territory, whether in the United States or internationally (in each case setting forth the applicable jurisdiction, title, application and registration or serial number and date, and record owner).
(b) The Company or one of the Company Subsidiaries owns, or has the right to use pursuant to a valid license, sublicense, or other written agreement all material Intellectual Property used in or necessary for the conduct and operation of the business of the Group Companies, as presently conducted. The Company or one of its Subsidiaries is the sole and exclusive owner of all right, title and interest in and to all Owned Intellectual Property free and clear of all Liens (other than Permitted Liens).
(c) The Group Companies and the conduct and operation of the business of the Group Companies as presently conducted (including the creation, licensing, marketing, importation, offering for sale, sale, or use of the products and services of the business of the Group Companies) have not infringed, misappropriated or otherwise violated, and are not infringing, misappropriating or otherwise violating any Intellectual Property of any Person. None of the Group Companies has received from any Person in the past three years ending on the date hereof any written notice, charge, complaint, claim or other assertion (i) of any infringement, misappropriation or other violation of any Intellectual Property of any Person or (ii) contesting the use, ownership, validity or enforceability of any of the Owned Intellectual Property. To the Knowledge of the Company, no other Person has infringed, misappropriated or violated, or is infringing, misappropriating or violating, any Intellectual Property of any of the Group Companies, and no such claims have been made in writing against any Person by any of the Group Companies in the past three years. None of the material Owned Intellectual Property is subject to any pending or outstanding Order, settlement, consent order or other disposition of dispute that adversely restricts the use, transfer or registration of, or adversely affects the validity or enforceability of, any material Owned Intellectual Property.
(d) To the Knowledge of the Company, no past or present director, officer or employee of any of the Group Companies owns (or has any ownership interest, in or to) any material Owned Intellectual Property. Each of the present employees, consultants and independent contractors of the Group Companies who are engaged in creating or developing for or on behalf of such Group Company any material Owned Intellectual Property in the course of such Person’s employment or engagement has executed and delivered a written agreement, pursuant to which such Person has: (i) agreed to hold all confidential information of such Group Company in confidence both during and after such Person’s employment or retention, as applicable; and (ii) presently assigned to such Group Company all of such Person’s rights, title and interest in and to all Owned Intellectual Property created or developed for such Group Company in the course of such Person’s employment or retention thereby. To the Knowledge of the Company, there is no material uncured breach by any such Person with respect to material Owned Intellectual Property under any such agreement.
(e) Each of the Group Companies, as applicable, has taken commercially reasonable steps to maintain the secrecy, confidentiality and value of all material Trade Secrets constituting Owned Intellectual Property and all material Trade Secrets of any Person to whom any Group Company has a contractual confidentiality obligation with respect to such Trade Secrets. No Trade Secret that is material to the business of the Group Companies has been
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authorized to be disclosed, or, to the Knowledge of the Company, has been disclosed to any other Person, other than (i) as subject to a written agreement restricting the disclosure and use of such Trade Secret or (ii) as requested by a Governmental Entity in connection with an audit conducted by a Governmental Entity in the ordinary course of business. No source code constituting material Owned Intellectual Property has been delivered, licensed or made available by any Group Company to, or accessed by, any escrow agent or other Person, other than employees or contractors of such Group Company subject to written agreements restricting the disclosure and use of such source code.
(f) No open source software is or has been included, incorporated or embedded in, linked to, combined, made available or distributed with, or used in the development, maintenance, operation, delivery or provision of any computer software constituting services or products currently offered by the Group Companies, in each case, in a manner that requires or obligates any Group Company to: (i) disclose, contribute, distribute, license or otherwise make available to any Person (including the open source community) any source code constituting material Owned Intellectual Property; (ii) license any computer software constituting material Owned Intellectual Property for making modifications or derivative works; (iii) disclose, contribute, distribute, license or otherwise make available to any Person any computer software constituting material Owned Intellectual Property for no or nominal charge; or (iv) grant a license to, or refrain from asserting or enforcing any of, its Patents. Each Group Company is in material compliance with the terms and conditions of all relevant licenses for material open source software used in the services and products currently offered by the Group Companies.
(g) No Governmental Entity has any: (i) ownership interest or exclusive license in or to any material Owned Intellectual Property; (ii) “unlimited rights” (as defined in 48 C.F.R. § 52.227-14 and in 48 C.F.R. § 252.227-7013(a)) in or to any of the software constituting material Owned Intellectual Property; or (iii) “march in rights” (pursuant to 35 U.S.C. § 203) in or to any Patents constituting material Owned Intellectual Property. To the Knowledge of the Company, no funding, facilities or personnel of any Governmental Entity were used, directly or indirectly, to develop or create, in whole or in part, any material Owned Intellectual Property.
(h) The Company or one of the Company Subsidiaries owns or has a valid right to access and use pursuant to a written agreement all Company IT Systems. The Company IT Systems: (i) are adequate in all material respects for the operation and conduct of the business of the Group Companies as currently conducted; and (ii) to the Knowledge of the Company, do not contain any viruses, worms, Trojan horses, bugs, faults or other devices, errors, contaminants or effects that (A) materially disrupt or adversely affect the functionality of the Company IT Systems, except as disclosed in their documentation or (B) enable or assist any Person to access without authorization any Company IT Systems. During the past three years, there has been no unauthorized access to or breach or violation of any Company IT Systems, except for any of the foregoing that were resolved without material cost or liability or the duty to notify any Person as required under Privacy Laws. In the last two years, there have been no material failures, material breakdowns, material data loss, material outages, material unscheduled downtime or other material adverse events affecting any such Company IT Systems that have caused or could reasonably be expected to result in the material disruption of or material interruption in or to the use of such Company IT Systems or the conduct and operation of the business of the Group Companies.
(i) Neither the execution and delivery of this Agreement nor the consummation of the Transactions (either alone or in combination with any other event) will result in the: (i) loss or impairment of, or any Lien (other than a Permitted Lien) on, any material Owned Intellectual Property or material Licensed Intellectual Property; (ii) release, disclosure or delivery of any source code constituting material Owned Intellectual Property to any Person; (iii) grant, assignment or transfer to any other Person of any license or other right or interest under, to or in any material Owned Intellectual Property; or (iv) payment of any additional consideration to, or the reduction of any payments from, any Person with respect to any material Owned Intellectual Property or material Licensed Intellectual Property.
(j) Other than as set forth in Section 4.20 and Section 4.25, this Section 4.18 contains the sole and exclusive representations and warranties of the Group Companies with respect to Intellectual Property and other proprietary rights matters.
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Section 4.19 Privacy & Cybersecurity; HIPAA Compliance.
(a) The Group Companies have at all times during the past three years materially complied with: (i) all applicable Privacy Laws; (ii) all of the Group Companies’ written policies and notices regarding Personal Information (“Group Companies’ Privacy Notices”); (iii) all of the Group Companies’ material contractual obligations regarding the storing, processing or handling of Personal Information; and (iv) all self-regulatory guidelines (including of any applicable foreign jurisdiction) that the Company has accepted in writing relating to data privacy, data protection and data security, including with respect to the collection, processing, receipt, security, storage, transmission, transfer (including cross-border transfers), disclosure, destruction and use of Personal Information. None of the Group Companies has received in the five years prior to the date of this Agreement any written notice of any material claims (including written notice from third parties acting on its or their behalf), investigations, inquiries, actions or been charged with, the material violation of, any Privacy Laws. To the Knowledge of the Company, none of the Group Companies’ Privacy Notices have contained any material omissions or been misleading or deceptive.
(b) Each of the Group Companies during the past three years has implemented and maintained in all material respects commercially reasonable security regarding the confidentiality, integrity and availability of Company IT Systems and the data thereon, including measures to protect Personal Information and other confidential, proprietary business data in its possession or under its control against loss, theft, misuse or unauthorized access, use, modification or disclosure.
(c) During the past three years, there have been no material breaches, security incidents, misuse of or unauthorized access to or disclosure of any Personal Information and other confidential proprietary business data in the possession or control of any of the Group Companies or collected, used or processed by or on behalf of the Group Companies. None of the Group Companies have provided or been legally or contractually required to provide any notices to any Person in connection with an unauthorized disclosure of Personal Information in the last three years. During the past three years, the Group Companies have implemented reasonable disaster recovery and business continuity plans, and taken actions materially consistent with such plans, to the extent required, to safeguard the data and Personal Information in its possession or control. The Company has conducted commercially reasonable data security testing or audits at reasonable and appropriate intervals and has resolved or remediated any material data security issues or vulnerabilities identified. Neither the Group Companies nor any third party acting at the direction or authorization of such Group Companies has paid: (i) any perpetrator of any data breach incident or cyber-attack; or (ii) any third party with actual or alleged information about a data breach incident or cyber-attack, pursuant to a request for payment from or on behalf of such perpetrator or other third party.
(d) The Group Companies have developed and have implemented policies and procedures, systems, and training programs, as appropriate, designed to ensure material compliance with HIPAA’s privacy, security, breach notification, and standard transactions regulations.
Section 4.20 Agreements, Contracts and Commitments.
(a) Schedule 4.20 of the Company Disclosure Letter sets forth a true, correct and complete list of each Company Material Contract (as defined below) that is in effect as of the date of this Agreement. For purposes of this Agreement, “Company Material Contract” of the Group Companies shall mean (x) each Company IP Contract, (y) each Company Real Property Lease and (z) each of the following Contracts to which any of the Group Companies is a party:
(i) Each Contract continuing over a period of more than 12 months from the date thereof, not terminable by the Company upon 60 days’ or less notice without liability or penalty (other than (A) agreements for the provision of Company’s products or services and (B) purchase orders with suppliers or customers, in each case (A) and (B), entered into in the ordinary course of business) that the Company reasonably anticipates will involve annual payments or consideration furnished by or to any of the Group Companies of more than $250,000;
(ii) Each note, debenture, other evidence of indebtedness, guarantee, loan, credit or financing agreement or instrument or other contract for money borrowed by any of the Group Companies from a third
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party, in each case, having an outstanding principal amount in excess of $250,000, but excluding guarantees of performance under Government Contracts entered into in the ordinary course of business;
(iii) Each Contract for the acquisition of any Person or any business division thereof or the disposition of any material assets of any of the Group Companies (other than in the ordinary course of business), in each case, whether by merger, purchase or sale of stock or assets or otherwise (other than Contracts for the purchase or sale of inventory or supplies entered into in the ordinary course of business) occurring in the last five years;
(iv) Each obligation to make payments, contingent or otherwise, arising out of the prior acquisition of the business, assets or stock of other Persons;
(v) Each collective bargaining agreement with any labor union;
(vi) Each employment or consulting (with respect to an individual, independent contractor) Contract providing for annual base salary or consulting fee payments in excess of $200,000, excluding any such employment, consulting, or management Contract that either: (A) is terminable by the Company or the applicable Company Subsidiary at will; or (B) provides for severance, notice and/or garden leave obligations of 90 days or less or such longer period as is required by Applicable Legal Requirements;
(vii) Each lease, rental agreement, installment and conditional sale agreement, or other Contract that, in each case, (A) provides for the ownership of, leasing of, title to, use of, or any leasehold or other interest in any personal property; and (B) involves annual payments in excess of $250,000;
(viii) Each joint venture Contract, partnership agreement or limited liability company agreement with a third party (in each case, other than with respect to wholly owned Company Subsidiaries);
(ix) Each Contract other than teaming agreements entered into in connection with the pursuit of a specific Government Contract or subcontract thereto or customary non-disclosure agreements that purports to limit or contains covenants expressly limiting in any material respect the freedom of any of the Group Companies to: (A) compete with any Person in a product line or line of business, (B) otherwise develop, market, sell, distribute or otherwise exploit any service or products; or (C) operate in any geographic area;
(x) Each Contract (other than those made in the ordinary course of business): (A) providing for the grant of any preferential rights to purchase or lease any material asset (other than any services or products) of the Group Companies; or (B) providing for any right (exclusive or non-exclusive) to sell or distribute any material product or service of any of the Group Companies;
(xi) Each Contract pursuant to which any of the Group Companies licenses material Intellectual Property from a third party, other than click-wrap, shrink-wrap and off-the-shelf software licenses, and any other software licenses that are available on standard terms to the public generally with license, maintenance, support and other fees less than $50,000 per year; and
(xii) Each obligation to register any Company Common Stock, Company Preferred Stock or other securities of the Company with any Governmental Entity.
(b) All Company Material Contracts are: (i) in full force and effect, subject to the Remedies Exception; and (ii) represent the valid and binding obligations of the Company or one of the Company Subsidiaries party thereto and, to the Knowledge of the Company, represent the valid and binding obligations of the other parties thereto. True, correct and complete copies of all Company Material Contracts have been made available to Parent. None of the Group Companies nor, to the Knowledge of the Company, any other party thereto, is in breach of or default under, and no event has occurred which with notice or lapse of time or both would become a breach of or default under, any of the Company Material Contracts, and no party to any Company Material Contract has given any written or, to the Knowledge of the Company, oral, claim or notice of any such breach, default or event, which individually or in the aggregate, would be reasonably likely to have a Company Material Adverse Effect.
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Section 4.21 Insurance. Schedule 4.21 of the Company Disclosure Letter contains a list of all material policies of property, fire and casualty, product liability, workers’ compensation, and other forms of insurance held by, or for the benefit of, the Group Companies as of the date of this Agreement (collectively, the “Insurance Policies”), which policies are in full force and effect as of the date of this Agreement. True and complete copies of the Insurance Policies (or, to the extent such policies are not available, policy binders) have been made available to Parent or its representatives. As of the date of this Agreement, none of the Group Companies has received any written notice from any insurer under any of the Insurance Policies, canceling, terminating or materially adversely amending any such policy or denying renewal of coverage thereunder and all premiums on such insurance policies due and payable as of the date of this Agreement have been paid. As of the date of this Agreement, there is no pending material claim by any Group Company against any insurance carrier for which coverage has been denied or disputed by the applicable insurance carrier (other than a customary reservation of rights notice).
Section 4.22 Affiliate Matters. Except: (a) the Company Benefit Plans; (b) Contracts relating to labor and employment matters set forth on Schedule 4.13 of the Company Disclosure Letter; and (c) Contracts between or among the Group Companies, none of the Group Companies is party to any Contract with any: (i) present or former officer, director, employee or Company Stockholder or a member of his or her immediate family of any of the Group Companies; or (ii) Affiliate of the Company (other than commercial contracts on arms-length terms). To the Knowledge of the Company, no present or former officer, director, employee, Company Stockholder or holder of derivative securities of the Company (each, an “Insider”) or any member of an Insider’s immediate family is, directly or indirectly, interested in any Contract with any of the Group Companies (other than such Contracts as relate to any such Person’s ownership of Company Common Stock, Company Preferred Stock or other securities of the Company or such Person’s employment or consulting arrangements with the Group Companies or commercial contracts on arms-length terms).
Section 4.23 Certain Provided Information. The information relating to the Group Companies supplied by the Company for inclusion in the Proxy Statement will not, as of the date on which the Proxy Statement (or any amendment or supplement thereto) is first distributed to holders of Parent Class A Stock or at the time of the Special Meeting, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. Notwithstanding the foregoing, the Company makes no representation, warranty or covenant with respect to statements made or incorporated by reference therein based on information supplied by Parent or Merger Sub for inclusion or incorporation by reference in the Proxy Statement or any Parent SEC Reports or Additional Parent SEC Reports.
Section 4.24 Absence of Certain Business Practices.
(a) For the past three years: (i) the Group Companies and their respective directors and officers (in their capacities as such) and, to the Knowledge of the Company, their respective employees or agents (in their capacities as such) have been in material compliance with all applicable Specified Business Conduct Laws; and (ii) none of the Group Companies has: (A) received written notice, inquiry or internal or external allegation of or made a voluntary, mandatory or directed disclosure to any Governmental Entity relating to any actual or potential violation of any Specified Business Conduct Law; or (B) been a party to or the subject of any pending or, to the Knowledge of the Company, threatened in writing Legal Proceeding or, to the Knowledge of the Company, investigation by or before any Governmental Entity related to any actual or potential violation of any Specified Business Conduct Law.
(b) None of the Group Companies, nor any of their respective directors or officers, nor to the Knowledge of the Company, any of their respective employees or agents is the subject or target of any sanctions or the target of restrictive export controls administered by the U.S. government, the United Nations Security Council, Her Majesty’s Treasury of the United Kingdom, or the European Union.
(c) None of the Group Companies, their respective directors or officers, or, to the Knowledge of the Company, their respective employees or agents is a person who is, or is owned or controlled by a person who is, the subject or target of any economic or financial sanctions or is located, organized or resident in a country or territory that is the subject of sanctions administered or enforced by OFAC, the U.S. Department of State, the United Nations Security Council, the European Union, Her Majesty’s Treasury, or other relevant sanctions authority, including
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currently, Crimea, Cuba, Iran, North Korea, and Syria). None of the Group Companies’ products are identified or described on the Commerce Control List of the EAR or otherwise controlled for export.
(d) None of the Group Companies, their respective directors or officers (in their capacities as such), or, to the Knowledge of the Company, their respective employees or agents (in their capacities as such) is subject to any pending Legal Proceeding by any Governmental Entity, and, to the Knowledge of the Company, no such Legal Proceeding is threatened in writing, alleging that any of the Group Companies or such Person has offered, made or received on behalf of any of the Group Companies any illegal payment of any kind, directly or indirectly, including payments, gifts or gratuities, to any Person, including any United States federal, state, local or foreign government officeholder, official, employee or agent or any candidate therefor.
Section 4.25 Government Grants and Incentives. Schedule 4.25 of the Company Disclosure Letter provides a complete list of all pending and outstanding grants, incentives, benefits, qualifications and subsidies from any Governmental Entity granted to the Company or any of its Subsidiaries (collectively, “Government Grants”). The Group Companies do not have any obligation whatsoever with respect to royalties or other payments relating to, arising out of or in connection with the Government Grants identified or required to be identified in Schedule 4.25 of the Company Disclosure Letter. The Group Companies are in material compliance with all of the terms, conditions and requirements of their respective Government Grants and have duly fulfilled all the undertakings relating thereto. None of the Group Companies or their agents, contractors, vendors, or licensors has developed any material Owned Intellectual Property through the application of any financing made available by any Government Grants, and no material Owned Intellectual Property is subject to any assignment, grant-back, license or other right of any Governmental Entity as a result of any Government Grants.
Section 4.26 OIG. None of the employees of the Group Companies are included on the List of Excluded Individuals/Entities maintained by the Office of Inspector General of the United States Department of Health and Human Services.
Section 4.27 Suppliers and Customers.
(a) Schedule 4.27(a) lists the 20 largest customers (by revenue) of the Group Companies, during the 12-month period ending on December 31, 2020 (each, a “Top Customer”). Since the commencement of such 12-month period until the date of this Agreement, (i) no Top Customer has terminated, or otherwise materially and adversely modified, its relationship with the Group Companies, and (ii) none of the Group Companies has received written notice from any Top Customer notifying any of the Group Companies that such Top Customer intends to terminate, or otherwise materially and adversely modify its relationship with the Group Companies.
(b) Schedule 4.27(b) lists the 20 largest suppliers (by amounts paid/payable to such suppliers) of the Group Companies, during the 12-month period ending on December 31, 2020 (each, a “Top Supplier”). Since the commencement of such 12-month period until the date of this Agreement, (i) no such Top Supplier has terminated, or otherwise materially and adversely modified, its relationship with the Group Companies and (ii) none of the Group Companies has received written notice from any such Top Supplier notifying any of the Group Companies that such Top Supplier intends to terminate, or otherwise materially and adversely modify, its relationship with the Group Companies.
Section 4.28 Disclaimer of Other Warranties. THE COMPANY HEREBY ACKNOWLEDGES THAT, EXCEPT AS EXPRESSLY PROVIDED IN Article V, NONE OF PARENT, MERGER SUB, OR ANY OF THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES HAS MADE, IS MAKING, OR SHALL BE DEEMED TO MAKE ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, TO THE COMPANY, ANY OF ITS AFFILIATES OR REPRESENTATIVES OR ANY OTHER PERSON, WITH RESPECT TO PARENT, MERGER SUB, OR ANY OF THEIR RESPECTIVE BUSINESSES, ASSETS OR PROPERTIES OF THE FOREGOING, OR OTHERWISE, INCLUDING ANY REPRESENTATION OR WARRANTY AS TO MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, FUTURE RESULTS, PROPOSED BUSINESSES OR FUTURE PLANS. WITHOUT LIMITING THE FOREGOING AND NOTWITHSTANDING ANYTHING TO THE CONTRARY: (a) NONE OF PARENT, MERGER SUB, OR ANY OF THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES SHALL BE DEEMED TO MAKE TO THE
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COMPANY, COMPANY STOCKHOLDERS, OR THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES ANY REPRESENTATION OR WARRANTY OTHER THAN AS EXPRESSLY MADE BY PARENT AND MERGER SUB TO THE COMPANY IN Article V; AND (b) NONE OF PARENT, MERGER SUB, OR ANY OF THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES, HAS MADE, IS MAKING, OR SHALL BE DEEMED TO MAKE TO THE COMPANY, COMPANY STOCKHOLDERS, OR THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES OR ANY OTHER PERSON ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO: (i) THE INFORMATION DISTRIBUTED OR MADE AVAILABLE TO THEM BY OR ON BEHALF OF PARENT OR MERGER SUB IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS; (ii) ANY MANAGEMENT PRESENTATION, CONFIDENTIAL INFORMATION MEMORANDUM OR SIMILAR DOCUMENT; OR (iii) ANY FINANCIAL PROJECTION, FORECAST, ESTIMATE, BUDGET OR SIMILAR ITEM RELATING TO PARENT, MERGER SUB, OR ANY OF THEIR BUSINESS, ASSETS, LIABILITIES, PROPERTIES, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND PROJECTED OPERATIONS OF THE FOREGOING. THE COMPANY HEREBY ACKNOWLEDGES THAT IT HAS NOT RELIED ON ANY PROMISE, REPRESENTATION OR WARRANTY THAT IS NOT EXPRESSLY SET FORTH IN Article V OF THIS AGREEMENT. THE COMPANY ACKNOWLEDGES THAT IT HAS CONDUCTED, TO ITS SATISFACTION, AN INDEPENDENT INVESTIGATION AND VERIFICATION OF PARENT, MERGER SUB, AND THE BUSINESS, ASSETS, LIABILITIES, PROPERTIES, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND PROJECTED OPERATIONS OF THE FOREGOING AND, IN MAKING ITS DETERMINATION THE COMPANY HAS RELIED ON THE RESULTS OF ITS OWN INDEPENDENT INVESTIGATION AND VERIFICATION, IN ADDITION TO THE REPRESENTATIONS AND WARRANTIES OF THE COMPANY EXPRESSLY AND SPECIFICALLY SET FORTH IN Article V OF THIS AGREEMENT. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS Section 4.28, CLAIMS AGAINST PARENT, MERGER SUB, OR ANY OTHER PERSON SHALL NOT BE LIMITED IN ANY RESPECT IN THE EVENT OF INTENTIONAL FRAUD IN THE MAKING OF THE REPRESENTATIONS AND WARRANTIES IN Article V BY SUCH PERSON.
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Article V
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except: (a) as set forth in the letter dated as of the date of this Agreement and delivered by Parent and Merger Sub to the Company on or prior to the date of this Agreement (the “Parent Disclosure Letter”); and (b) as disclosed in the Parent SEC Reports filed with the SEC prior to the date of this Agreement (to the extent the qualifying nature of such disclosure is readily apparent from the content of such Parent SEC Reports) excluding disclosures referred to in “Forward-Looking Statements”, “Risk Factors” and any other disclosures therein to the extent they are of a predictive or cautionary nature or related to forward-looking statements, Parent and Merger Sub represent and warrant to the Company as of the date hereof and as of the Closing Date as follows:
Section 5.1 Organization and Qualification.
(a) Each of Parent and Merger Sub is duly incorporated, validly existing and in good standing under the laws of the State of Delaware, and as of immediately prior to the Closing, will be a company duly organized, validly existing and in good standing under the laws of the State of Delaware.
(b) Each of Parent and Merger Sub has the requisite corporate or limited liability power and authority to own, lease and operate its assets and properties and to carry on its business as it is now being conducted, except as would not be material to Parent and Merger Sub, taken as a whole.
(c) None of Parent or Merger Sub are in violation of any of the provisions of their respective Charter Documents.
(d) Each of Parent and Merger Sub is duly qualified or licensed to do business as a foreign corporation and is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its activities makes such qualification or licensing necessary. Each jurisdiction in which Parent and Merger Sub are so qualified or licensed is listed on Schedule 5.1(d) of the Parent Disclosure Letter.
Section 5.2 Parent Subsidiaries. Parent has no direct or indirect Subsidiaries or participations in joint ventures or other entities, and does not own, directly or indirectly, any equity interests or other interests or investments (whether equity or debt) in any Person, whether incorporated or unincorporated, other than Merger Sub. Merger Sub has no assets or properties of any kind, does not now conduct and has never conducted any business, and has and will have at the Closing no obligations or liabilities of any nature whatsoever, except for such obligations as are imposed under this Agreement. Merger Sub is an entity that has been formed solely for the purpose of engaging in the Transactions.
Section 5.3 Capitalization. 
(a) As of the date of this Agreement: (i) 380,000,000 Class A common shares of Parent, par value $0.0001 per share (“Parent Class A Stock”), are authorized and 44,275,000 shares of Parent Class A Stock are issued and outstanding; (ii) 20,000,000 Class B common shares of Parent, par value $0.0001 per share (“Parent Class B Stock” and, together with the Parent Class A Stock, the “Parent Shares”), are authorized and 11,068,750 shares of Parent Class B Stock are issued and outstanding; (iii) upon the closing of the transactions contemplated by the Equity Financing Agreements, Parent has committed to issue 35,000,000 shares of Parent Class A Stock to the Equity Financing Investors; (iv) 7,236,667 warrants to purchase one share of Parent Class A Stock (the “Private Placement Warrants”) are outstanding; and (v) 14,758,333 warrants to purchase one share of Parent Class A Stock (the “Public Warrants”, collectively with the Private Placement Warrants, the “Parent Warrants”) are outstanding. All outstanding Parent Class A Stock, Parent Class B Stock, Private Placement Warrants and Public Warrants have been duly authorized, validly issued, fully paid and are non-assessable and are not subject to preemptive rights.
(b) The authorized capital stock of Merger Sub consists of 100 shares of common stock, par value $0.0001 per share (the “Merger Sub Common Stock”). As of the date hereof, 100 shares of Merger Sub Common Stock are issued and outstanding. All outstanding shares of Merger Sub Common Stock have been duly authorized, validly issued, fully paid and are non-assessable and are not subject to preemptive rights, and are held by Parent.
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(c) Except for the Parent Warrants and the Equity Financing Agreements, there are no outstanding options, warrants, rights, convertible or exchangeable securities, “phantom” stock rights, stock appreciation rights, stock-based performance units, commitments or Contracts of any kind to which Parent or Merger Sub is a party or by which any of them is bound obligating Parent or Merger Sub to issue, deliver or sell, or cause to be issued, delivered or sold, additional Parent Shares, Merger Sub Common Stock or any other shares of capital stock or membership interests other interest or participation in, or any security convertible or exercisable for or exchangeable into Parent Shares, Merger Sub Common Stock or any other shares of capital stock or membership interests or other interest or participation in Parent or Merger Sub.
(d) Each Parent Share, share of Merger Sub Common Stock and Parent Warrant: (i) has been issued in compliance in all material respects with: (A) Applicable Legal Requirements; and (B) the Charter Documents of Parent or Merger Sub, as applicable; and (ii) was not issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any Applicable Legal Requirements, the Charter Documents of Parent or Merger Sub, as applicable or any Contract to which any of Parent or Merger Sub is a party or otherwise bound by.
(e) All outstanding shares of capital stock of the Subsidiaries of Parent are owned by Parent, or a direct or indirect wholly-owned Subsidiary of Parent, free and clear of all Liens (other than Permitted Liens).
(f) Subject to approval of the Parent Stockholder Matters, the shares of Parent Class A Stock to be issued by Parent in connection with the Transactions, upon issuance in accordance with the terms of this Agreement will be duly authorized, validly issued, fully paid and nonassessable, and will not be subject to any preemptive rights of any other stockholder of Parent and will be capable of effectively vesting in the Company Stockholders title to all such securities, free and clear of all Liens (other than Liens arising pursuant to applicable securities Legal Requirements).
(g) Each holder of any of Parent Shares initially issued to the Sponsor in connection with Parent’s initial public offering: (i) is obligated to vote all of such Parent Shares in favor of approving the Transactions; and (ii) is not entitled to elect to redeem any of such Parent pursuant to the Parent Organizational Documents.
(h) Except as set forth in the Parent Organizational Documents and in connection with the Transactions, there are no registration rights, and there is no voting trust, proxy, rights plan, anti-takeover plan or other agreements or understandings to which Parent is a party or by which Parent is bound with respect to any ownership interests of Parent.
(i) The holders of the Parent Class B Stock have waived any adjustment to the Initial Conversion Ratio (as defined in the Parent Charter).
Section 5.4 Authority Relative to this Agreement.
(a) Each of Parent and Merger Sub has the requisite power and authority to: (a) execute, deliver and perform this Agreement and the other Transaction Agreements to which it is a party, and each ancillary document that it has executed or delivered or is to execute or deliver pursuant to this Agreement; and (b) carry out its obligations hereunder and thereunder and, to consummate the Transactions (including the Merger). The execution and delivery by Parent and Merger Sub of this Agreement and the other Transaction Agreements to which each of them is a party, and the consummation by Parent and Merger Sub of the Transactions (including the Merger) have been duly and validly authorized by all necessary corporate or limited liability company action on the part of each of Parent and Merger Sub, and no other proceedings on the part of Parent or Merger Sub are necessary to authorize this Agreement or the other Transaction Agreements to which each of them is a party or to consummate the transactions contemplated thereby, other than approval of the Parent Stockholder Matters. This Agreement and the other Transaction Agreements to which each of them is a party have been, or in the case of any Transaction Agreements to be executed at or in connection with the Closing, will be duly and validly executed and delivered by Parent and Merger Sub and, assuming the due authorization, execution and delivery hereof and thereof by the other Parties, constitute or willparties hereto and thereto, constitute the legal, valid and binding obligations of Parentthe Company Parties and Merger Sub (as applicable),Seller, as applicable, enforceable against Parentthe Company Parties and Merger Sub (as applicable)Seller, as applicable, in accordance with their respective terms, subject to the Remedies Exception.except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting creditors’ rights generally and by general principles of equity, regardless of whether enforcement is sought in a Proceeding at law or in equity (the “Enforceability Exceptions”).
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(b)The only vote of holders of any class or series of Holdco2 Common Stock or other equity securities necessary to approve and adopt this Agreement, the Ancillary Agreements, the Merger and the other transactions contemplated hereby and thereby is the affirmative vote of (i) a majority of the votes cast by the stockholders of Parent present in person or represented by proxy at the Special Meeting and entitled to vote thereon at the Special Meeting shall be required to approve the ParentSeller (the “Holdco2 Stockholder Matters (other than the amendment and restatement of the Parent Organizational Documents) and (ii) holders representing a majority of the outstanding capital stock of Parent entitled to vote thereon at the Special Meeting shall be required to approve the amendment and restatement of the Parent Organizational Documents ((i) and (ii), such approval by the stockholders of Parent, the “Parent Stockholder Approval”Approval”). The Parent Stockholder Approval is the onlyNo vote of the holders of any class or series of capital stock of Parent requiredSeller is necessary to approve and adopt this Agreement, the Ancillary Agreements, the Merger and approve the other Transactions.
(c) At3.4Capitalization.
(a)The total number of authorized, issued and outstanding shares of capital stock of Holdco2 consists of 1,000 shares of Holdco2 Common Stock, all of which are issued and outstanding as of the Agreement Date. The total number of authorized, issued and outstanding shares of capital stock of the Company consists of 100 shares of common stock, par value $0.01, of the Company, all of which are issued and outstanding as of the Agreement Date. As of the Agreement Date, BioReference owns all right, title and interest in and to, all of the shares of outstanding capital stock of the Company free and clear of all Encumbrances. As of the Closing, Holdco2 will own all right, title and interest in and to, all of the shares of outstanding capital stock or other equity interests of the Company free and clear of all Encumbrances. There are no other issued and outstanding shares of capital stock or other securities of Holdco2 and no outstanding commitments or Contracts to issue any shares of capital stock or other securities of Holdco2.
(b)(i) There are no preemptive or other outstanding rights, options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, Contracts or securities under which Seller or Holdco2 is or may become obligated to issue or sell, or giving any Person a meeting duly calledright to subscribe for or acquire any shares of the capital stock or other voting securities of Holdco2 or the Company and (ii) the outstanding capital stock or other voting securities of each of Holdco2 and the Company is not subject to any voting trust agreement or other Contract restricting the voting, dividend rights or disposition of such capital stock or other voting securities of Holdco2 or the Company, as applicable, except in each case as set forth in this Agreement.
3.5Title to and Sufficiency of Real and Tangible Properties and Assets.
(a)Each member of the Company Group has good, valid and marketable title to or, in the case of leased tangible property assets and tangible properties or assets held under license, a good and valid leasehold or license interest in, all of their respective material tangible properties and assets. Each member of the boardCompany Group holds title to all material tangible property and assets which it purports to own, free and clear of directorsany Encumbrances other than Permitted Encumbrances. The tangible assets and personal property owned or leased by the Company Group and currently being used in the Business are, in all material respects, in good operating condition and repair, normal wear and tear excepted, and are useable in the Ordinary Course of ParentBusiness.
(b)The tangible assets and properties owned by or licenses entered into by the Company Group for same constitute all of the tangible assets and properties that are necessary to conduct and operate the Business as currently conducted by the Company Group as of the Agreement Date, without the material breach or violation of any Contracts. Except as set forth on Section 3.5(b) of the Company Disclosure Schedules, neither Seller nor its Affiliates (but excluding the members of the Company Group) own or license to the Company Group any tangible property that are necessary for the Company Group to conduct, operate or continue the conduct and operation of the Business. Except as set forth on Section 3.5(b) of the Company Disclosure Schedules, there are no Contracts to which members of the Company Group are not the sole counterparties (other than Third Parties) (i) from which the Business or any member of the Company Group generates any revenue, (ii) that are material to the Business, or (iii) that are primarily used by the Company Group or in the conduct of the Business (the Contracts under clause (i), “Seller Revenue Contracts” and the Contracts under clauses (i), (ii) or (iii), collectively, “Seller Contracts”).
(c)Except as set forth in Section 3.5 of the Company Disclosure Schedules, no member of the Company Group owns or has unanimously: (i) determinedever owned, any real property or interest in real property. Section 3.5 of the Company Disclosure Schedules lists all interests in real property leased, subleased or otherwise used or occupied by a member of the Company Group (each, a “Leased Property”), including the address of the property and the name and address of the landlord. Holdco2 has Delivered complete copies of all documents in Holdco2’s possession relating to the use or occupancy of such Leased Property, including all leases, subleases, offers to lease or agreements to lease, lease
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guarantees, tenant estoppels, subordinations, non-disturbance, operating agreements and attornment agreements (with any amendments or modifications related thereto, collectively, the “Leases”). With respect to the Leased Property, the applicable member of the Company Group has a valid leasehold interest in the leasehold estate relating thereto, free and clear of any Encumbrance, easement, covenant or other restriction applicable to such Leased Property which would reasonably be expected to materially impair the current uses or the occupancy by the applicable member of the Company Group of such Leased Property. No member of the Company Group has received written notice that it is in default of any of the best interestsLeases, nor has any member of Parentthe Company Group sent written notice to any other party to any of the Leases that such other party is in default thereof, in each case, except as would not reasonably be likely to result in material liability to such member of the Company Group.
3.6Environmental Laws and Regulations. The Company Group and all facilities or real property currently owned, leased or operated by the stockholdersCompany Group, are now and, since such time as the Company Group has owned, leased or operated the facilities or real property, have been in compliance in all material respects with all applicable Environmental Laws. No member of Parent,the Company Group has, since the Company Group has owned, leased or operated the facilities or real property, received from any Governmental Authority any notice or demand letter alleging that any member of the Company Group is in violation of any Environmental Law, and declared it advisable,no member of the Company Group is subject to enter intoany Order of any Governmental Authority imposing liability or obligations relating to any Environmental Law. There has been no release by any member of the Company Group, or for which any member of the Company Group would reasonably be expected to be liable by Contract or by operation of Law, of any Hazardous Substance at, under, from or to any facility or real property currently or formerly owned, leased or operated by any member of the Company Group. No member of the Company Group has assumed, undertaken or otherwise become subject to any liability of another Person relating to Environmental Laws.
3.7Absence of Certain Activities or Changes. Since June 30, 2021, (a) the Company Group has conducted its operations in the Ordinary Course of Business (except as required by any COVID-19 Response), (b) there has been no Material Adverse Effect, and (c) no member of the Company Group has taken any action which would require the consent of Acquirer pursuant to Section 5.1 if taken during the Pre-Closing Period.
3.8Company Contracts.
(a)Section 3.8(a) of the Company Disclosure Schedules sets forth, as of the Agreement Date, a complete and correct list of each of the following Contracts: (x) which are Seller Contracts, (y) to which any member of the Company Group is a party or (z) by which any member of the Company Group’s properties or assets are bound as of the Agreement Date:
(i)any customer, supplier or payor Contract under which a member of the Company Group has made or received payments in any calendar year period since January 1, 2019 that are material in amount, which for purposes of this Agreementsubsection shall be supplier Contracts in an amount of $500,000 or more per year, customer Contracts in an amount of $400,000 or more per year or payer Contracts in an amount of $100,000 or more per year, which shall include the contracts identified in Section 3.8(a)(ii);
(ii)any Contract with a (A) Top Customer, (B) Top Supplier or (C) Top Payor;
(iii)any distributor, referral or similar agreement;
(iv)(A) any joint venture, partnership or limited liability company Contract, (B) any Contract that involves a sharing of revenues, profits, cash flows, expenses or losses with other Persons, (C) any Contract that involves the payment by any member of the Company Group of royalties to any other Person and (D) any Contracts providing for payment of amounts calculated based upon the revenues or income of any member of the Company Group, earnouts, milestones, royalties or contingent payments (I) by or (II) to any member of the Company Group;
(v)all material Contracts that relate to research, development, manufacturing and/or commercialization of Company Products other than Contracts with suppliers, payers, customers and distributors or referral or similar agreements;
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(vi)any agreement or Contract providing for the Mergerpayment of compensation or benefits (including any accelerated vesting) upon any termination of employment or service, or in accordanceconnection with the DGCL; (ii) determined that the fair market valueTransactions, with any current or former employees under which any member of the Company Group has any actual or potential Liability;
(vii)any Contract (A) pursuant to which any other Person is equalgranted exclusive rights or that requires any member of the Company Group to deal exclusively with any Persons, (B) containing a “most-favored-party,” best pricing or other term or provision by which any Person is, or could become, entitled to any benefit, right or privilege which, under the terms of such Contract, must be at least 80%as favorable to such Person as those offered to another Person, (C) that limits or would limit the freedom of any member of the amount heldCompany Group or any of their successors or assigns or their respective Affiliates (including Acquirer, the Surviving Entity and their respective Affiliates after Closing) to engage or participate, or compete with any other Person, in any line of business, market or geographic area, or to make use of any Intellectual Property, (D) containing any “take or pay,” minimum commitments or similar provisions or provisions to purchase goods or services from a sole source other than reagent agreements entered into in the Trust Account (excludingOrdinary Course of Business that include minimum purchase obligations solely as a condition to maintaining preferential pricing conditions for such reagent, (E) in which the any deferred underwriting commissionsmember of the Company Group grants rights of first refusal or first offer, right of negotiation or similar preferential rights to, any Person, or (F) that would, by its terms apply, or purport to apply, to the business of any acquirer of any member of the Company Group or the business of Acquirer following the Closing;
(viii)all Company IP Contracts (other than employee invention assignments on Company’s form, Contracts that are Company IP Contracts solely because they contain licenses of Commercial Software, confidentiality obligations, licenses for feedback or incidental non-exclusive trademark licenses limited solely for the purpose of identifying the Company, any of its Subsidiaries or any counterparty as a participant in a health insurance program, a participating health insurer or service provider);
(ix)any and taxes payableall Seller Contracts concerning Intellectual Property or IT Assets to which a member of the Company Group is a beneficiary or by which such member, or any of its properties or assets, may be bound, including, as applicable, all (i) licenses of Intellectual Property to any third party, licenses of Intellectual Property by any third party, (iii) other Seller Contracts relating to the transfer, development, maintenance or use of Intellectual Property, including data, or IT Assets and (iv) consents, settlements, and Orders governing the use, validity or enforceability of Intellectual Property or IT Assets (“Seller IP Contracts”), other than Contracts that are Seller IP Contracts solely because they contain licenses of Commercial Software, confidentiality obligations, licenses for feedback, incidental non- exclusive trademark licenses solely for the purpose of identifying a member of the Company Group or any counterparty as a participant in a health insurance program, a participating health insurer or service provider;
(x)any Contract providing for the development of any software, technology or Intellectual Property, independently or jointly, either by or for a member of the Company Group (other than employee invention assignment agreements with employees of a member of the Company Group on interest earned)the Company’s or any Subsidiary of the Company’s respective standard form of agreement, copies of which have been Delivered to Acquirer);
(xi)any confidentiality, secrecy or non-disclosure Contract other than any such Contract entered into by a member of the Company Group in the Ordinary Course of Business;
(xii)(A) any settlement agreement with respect to any Proceeding, (B) any settlement or similar Contract restricting in any respect the operations or conduct of the Business, as currently conducted or as proposed to be conducted, of a member of the Company Group (or the Acquirer or its Affiliates after the Closing), and (C) any settlement or similar Contract with a Governmental Authority;
(xiii)any Contract to which a member of the Company Group is a party or by which it or any of its properties or assets is bound as of the date hereof;Agreement Date with any labor union or any collective bargaining agreement or similar Contract with its employees;
(xiv)any Contract related to Indebtedness;
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(xv)any Contract to which a member of the Company Group is a party or by which it or any of its properties or assets is bound as of the Agreement Date for capital expenditures in excess of $150,000 individually or in the aggregate;
(xvi)any Contract pursuant to which a member of the Company Group is a lessor or lessee of any machinery, equipment, motor vehicles, office furniture, fixtures or other personal property involving expenditures in excess of $500,000 in any calendar year;
(xvii)any Contract pursuant to which a member of the Company Group has acquired a business or entity, or substantially all of the assets of a business or entity, whether by way of merger, consolidation, purchase of stock, purchase of assets, license or otherwise, or any Contract pursuant to which it has any equity or equity-linked interest or other material ownership interest in any other Person;
(xviii)all Contracts (i) that would require consent, (ii) that would require or permit a member of the Company Group (or any successor) or an acquirer of any member of the Company Group to make any payment to another Person, (iii) approved this Agreement andthat would be subject to modification or termination that contain any clause that would trigger adverse consequences for Acquirer, (v) pursuant to which rights of any third party would be triggered or become exercisable, (vi) under which any other consequence, result or effect arises, in each case, by virtue of the change in control resulting from the completion of the Transactions, including the MergerPre-Closing Restructuring, or in accordanceconnection with the DGCL, on the terms and subject to the conditionsor as a result of this Agreement; and (iv) adopted a resolution recommending the plan of merger set forth in this Agreement be adopted by the stockholders of Parent.
Section 5.5 No Conflict; Required Filings and Consents.
(a) Neither the execution delivery nor performance by Parent and Merger Sub of this Agreement or the other Transaction Agreements to which each of them is a party, nor (assuming approval of the Parent Stockholder Matters is obtained) the consummation of the Transactions, shall:including the Pre-Closing Restructuring, either alone or in combination with any other event;
(xix)(A) any Contract to which a member of the Company Group is a party or by which it or any of its properties or assets is bound as of the Agreement Date with a Related Party, (B) any Contract for or relating to the employment or service of any member of the Company Group’s employees with the title of Senior Director or any more senior title which is not terminable by the Company Group on less than 30 days’ notice and without severance and (C) any other type of Contract with any member of the Company Group’s employees with the title of Senior Director or any more senior title, except for Company Benefit Plans or Seller Benefit Plans applicable to Company Group employees;
(xx)any Contract providing for indemnification to any director, officer, member, manager, employee, trustee or fiduciary of the Company Group;
(xxi)any Contract with any Governmental Authority, including any Contract relating to the grant, incentive, benefit, qualification or subsidy from any Governmental Authority, any Permit that is required for the conduct of the Business as currently conducted and as proposed to be conducted, or for a member of the Company Group holding of its assets, or any Contract with a government prime contractor, or higher-tier government subcontractor, including any indefinite delivery/indefinite quantity contract, firm-fixed-price contract, schedule contract, blanket purchase agreement, or task or delivery order (a “Government Contract”);
(xxii)any Contract between any member of the Company Group on the one side and any of Seller or its Affiliates on the other side;
(xxiii)all Contracts with non-employee health care professionals who provide services to or on behalf of a member of the Company Group; and
(xxiv)all Company Data Agreements.
(b)All Contracts required to be listed in Section 3.8(a) of the Company Disclosure Schedules are referred to as the “Company Contracts.” True, complete and correct copies of all written Company Contracts and summaries of all material oral Contracts that constitute Company Contracts, in each case, including all amendments thereto and waivers thereunder, have been Delivered to Acquirer.
(c)Each Company Contract is existing, in full force and effect and is legal, valid, binding and enforceable against the applicable member of the Company Group and, to the Knowledge of the Company, each other party thereto, in accordance with their respective terms except as enforcement may be limited by the
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Enforceability Exceptions. No member of the Company Group, and in the case of Seller Contracts, neither the Seller nor any of its Affiliates, shall be, as a result of the execution and delivery or effectiveness of this Agreement or the performance of Holdco2’s obligations under this Agreement (including the Merger), and Company Group, in the case of Seller Contracts, Seller and its Affiliates, and, to the Knowledge of the Company, no other party is, in material Default under any Company Contract. No written notice of any claim of material Default under, or termination of, a Company Contract has been made or received by a member of the Company Group, Seller or Seller Affiliate. No member of the Company Group, and in the case of Seller Contracts, neither the Seller nor any of its Affiliates, have waived any of its material rights under any Company Contract.
3.9Noncontravention; Restrictions on Business.
(a)The execution, delivery and performance by the Company of and the Company’s compliance with this Agreement and consummation by the Company of the Transactions do not and will not (i) violate the Governing Documents of any member of the Company Group, (ii) assuming any consents and approvals referred to in Section 3.9(b) are duly obtained, conflict with or violate their respective Charter Documents; (ii) assuming thatconstitute a material Default under any Laws, Orders or Permits applicable to a member of the consents, approvals, orders, authorizations, registrations, filingsCompany Group or permits referred to in Section 5.5(b) are duly and timely obtained or made,(iii) conflict with, give rise to or violate any Applicable Legal Requirements; or (iii) result in a material Default under any breachmaterial Company Contract, other than those Contracts listed in Section 3.9(a) of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or materially impair their respective rights or alter the rights or obligations of any third party under, or give to others any rights of consent, termination, amendment, acceleration or cancellation of,Company Disclosure Schedules, or result in the creation of a Lienany Encumbrance (other than anya Permitted Lien)Encumbrance) on any of the properties, assets, Holdco2 Common Stock or assetsother equity securities of Parent or any of its Subsidiaries pursuant to, any Parent Material Contracts, except, with respect to clause (iii), as would not, individually or in the aggregate, have a Parent Material Adverse Effect.Company.
(b) The execution and delivery by each of Parent and Merger Sub of this Agreement and the other Transaction Agreements to which it is a party, does not, and the performance of its obligations hereunder and thereunder will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Entity, except: (i) forOther than (x) the filing of the First Certificate of Merger and Second Certificate of Merger and (y) such filings and notifications as may be required to be made by the Company Group in accordanceconnection with the DGCL; (ii) for applicable requirements, if any, of the Securities Act, the Exchange Act, blue sky laws, and the rules and regulations thereunder, and appropriate documents with the relevant authorities of other jurisdictions in which Parent is qualified to do business; (iii) for the filing of any notifications requiredTransactions under the HSR Act and other applicable Antitrust Laws and the expiration or early termination of the requiredapplicable waiting period thereunder;under the HSR Act and (iv) whereother applicable Antitrust Laws, no consent, approval, Order or authorization of, or registration, declaration or filing with, any Governmental Authority or any other Person (including any Institutional Review Board, Privacy Board or Ethics Committee for any clinical trial being conducted by or on behalf of a member of the failureCompany Group) is required to obtain such consents, approvals, authorizationsbe made, obtained or permits,given by a member of the Company Group in connection with the execution, delivery and performance by the Company of this Agreement or to make such filings or notifications, would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect, or prevent the consummation by the Company of the Merger.Transactions.
3.10Financial Statements and Operating Budget.
(a)Seller has Delivered to Acquirer the unaudited consolidated financial statements of the Company for the fiscal years ended December 31, 2019 and 2020 (including, in each case, consolidated balance sheets, statements of operations and statements of cash flows, collectively, the “Financial Statements”), which are included on Section 5.6 Compliance; Approvals. Since its incorporation or organization, as applicable, each3.10(a) of Parentthe Company Disclosure Schedules. The Financial Statements (i) are derived from and Merger Sub has compliedin accordance with the books and records of the Company, (ii) fairly present, in all material respects, the consolidated financial condition of the Company at the dates therein indicated and the consolidated results of operations and cash flows of the Company for the periods therein specified, and (iii) were prepared in accordance with and has not been in violation of any Applicable Legal Requirements with respectthe Accounting Standards applied on a consistent basis throughout the periods involved. When delivered to Acquirer, the conduct of its business, or the ownership or operation of its business. Since the date of its incorporation or organization, as applicable, to the Knowledge of Parent, no investigation or review by any Governmental Entity with respect to Parent or any of its Subsidiaries has been pending or threatened. No written, or to the Knowledge of Parent, oral notice of non-compliance with any Applicable Legal Requirements has been received by Parent or Merger Sub. Each of Parent and Merger Sub is in possession of all Approvals necessary to own, lease and operate the properties it purports to own, operate or lease and to carry on its business as it is now being conducted, except where the failure to have such Approvals would not, individually or in the aggregate, reasonably be expected to be material to Parent and Merger Sub, taken as a whole.
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Section 5.7 Parent SEC Reports andRequired Financial Statements.
(a) Parent has filed all forms, reports, schedules, statements (i) will be derived from and other documents, including any exhibits thereto, required to be filed or furnished by Parentin accordance with the SEC under the Exchange Act or the Securities Act since the initial registration of Parent Class A Common Stock to the date of this Agreement, together with any amendments, restatements or supplements thereto (allbooks and records of the foregoing filed prior toCompany, (ii) fairly present, in all material respects, the date of this Agreement, the “Parent SEC Reports”), and will have filed all such forms, reports, schedules, statements and other documents required to be filed subsequent to the date of this Agreement through the Closing Date (the “Additional Parent SEC Reports”). All Parent SEC Reports, Additional Parent SEC Reports, any correspondence from or to the SEC or Nasdaq (other than such correspondence in connection with the initial public offering of Parent) and all certifications and statements required by: (i) Rule 13a-14 or 15d-14 under the Exchange Act; or (ii) 18 U.S.C. § 1350 (Section 906)consolidated financial condition of the Sarbanes-Oxley Act with respect to anyCompany at the dates therein indicated and the consolidated results of operations and cash flows of the foregoing (collectively,Company for the “Certifications”) are available on the SEC’s Electronic Data-Gathering, Analysisperiods therein specified, and Retrieval system (EDGAR) in full without redaction. Parent has heretofore furnished to the Company true and correct copies of all amendments and modifications that have not been filed by Parent with the SEC to all agreements, documents and other instruments that previously had been filed by Parent with the SEC and are currently in effect. The Parent SEC Reports were, and the Additional Parent SEC Reports(iii) will be prepared in accordance with the requirementsAccounting Standards applied on a consistent basis throughout the periods involved, except, in the case of any unaudited interim financial statements, for the omission of footnotes and normal, immaterial year-end adjustments.
(b)Except as set forth in Section 3.10(b) of the Securities Act,Company Disclosure Schedules, no member of the Exchange ActCompany Group has applied for or accepted any loan or other benefit made available by the CARES Act.
(c)Section 3.10(c) of the Company Disclosure Schedules sets forth a true, correct and complete list of all Indebtedness for borrowed money of the Company Group as of the Agreement Date, including, for each such item, the Contract governing such item and the Sarbanes-Oxley Act, asinterest rate, maturity date, any assets securing such instrument and any prepayment or other penalties payable in connection with the case may be,repayment of such instrument at the Closing.
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(d)The Company Group has established and maintain a system of internal accounting controls sufficient to provide reasonable assurances (i) that transactions, receipts and expenditures of the Company Group are being executed and made only in accordance with appropriate authorizations of management and the rulesapplicable board of directors and regulations thereunder. The Parent SEC Reports did not, and the Additional Parent SEC Reports will not, at the time they were or(ii) that transactions are filed,recorded as the case may be,necessary to permit preparation of financial statements in conformity with the SEC containAccounting Standards. No member of the Company Group or, to the Knowledge of the Company, its independent auditors or any untrue statementcurrent employee, consultant or director of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in lightmember of the circumstances under which they were made, not misleading. The Certifications are each true and correct. Parent maintains disclosure controls and procedures required by Rule 13a-15(e) or 15d-15(e) under the Exchange Act. Each director and executive officer of Parent has filed with the SEC on a timely basis all statements required with respect to Parent by Section 16(a) of the Exchange Act and the rules and regulations thereunder. As used in this Section 5.7, the term “file” shall be broadly construed to include any manner in which a document or information is furnished, supplied or otherwise made available to the SEC or Nasdaq. None of Parent (including any employee thereof), Merger Sub or Parent’s independent auditorsCompany Group has identified or been made aware of (A) any significant deficiency or material weakness in the system of internal accounting controls utilized by Parent, (B) any fraud, whether or not material, that involves Parent’sa member of the Company Group’s management or other current or former employees, consultants or directors of any member of the Company Group who have a role in the preparation of financial statements or the internal accounting controls utilized by Parentthe Company Group, or (C) any claim or allegation regarding either (A)any of the foregoing. No member of the Company Group has received and the Company has no Knowledge of any material written complaint, allegation, assertion or (B).
(b) The financial statements and notes containedclaim, in each case, regarding deficient accounting or incorporated by referenceauditing practices, procedures, methodologies or methods of the Company Group or its internal accounting controls or any material inaccuracy in the Parent SEC Reports fairly present, and the financial statements and notes to be contained inof the Company Group. There are no significant deficiencies or to be incorporated by referencematerial weaknesses in the Additional Parent SEC Reportsdesign or operation of the Company Group’s internal controls that would reasonably be expected to adversely affect the Company Group’s ability to record, process, summarize and report financial data. There has been no change in the Company Group’s accounting policies since January 1, 2017, except as described in the Financial Statements.
(e)Except as set forth in Section 3.10(e) of the Company Disclosure Schedules, the accounts receivable of the Company Group (collectively, the “Accounts Receivable”) as reflected on the Company Balance Sheet and as will fairly present,be reflected in the financial conditionEstimated Closing Statement arose in the Ordinary Course of Business and represent bona fide claims against debtors for sales and other charges, and have been collected or are collectible in the resultsbook amounts thereof within one-hundred and fifty (150) days following the applicable invoice date, less an amount not in excess of operations, changesthe allowance for doubtful accounts provided for in stockholders’ equity and cash flows of Parentthe Company Balance Sheet or in the Estimated Closing Statement, as at the respective dates of, andcase may be. Allowances for the periods referred to, in such financial statements, alldoubtful accounts have been prepared in accordance with: (i) GAAP;with Accounting Standards consistently applied. To the Knowledge of the Company, none of the Accounts Receivable is subject to any claim of offset, recoupment, set-off or counter-claim. Except as set forth in Section 3.10(e) of the Company Disclosure Schedules, no Person has any Encumbrance on any Accounts Receivable, and (ii) Regulation S-Xno agreement for deduction or Regulation S-K,discount has been made with respect to any such Accounts Receivable. Section 3.10(e) of the Company Disclosure Schedule sets forth, as applicable, subject,of the Agreement Date, an aging of the Accounts Receivable in the caseaggregate.
3.11Liabilities. The Company Group does not have any Liabilities of interim financial statements,any nature other than (a) those set forth or adequately provided for in the balance sheet included in the Financial Statements as of September 30, 2021 (such date, the “Company Balance Sheet Date” and such balance sheet, the “Company Balance Sheet”), (b) those incurred in the conduct of the Company’s business since the Company Balance Sheet Date in the Ordinary Course of Business and do not result from any material breach of Contract or violation of Law and (c) those incurred by the Company Group in connection with the execution of this Agreement. Except for Liabilities reflected in the Financial Statements, no member of the Company Group has any material off-balance sheet Liability of any nature to normal recurring year-end adjustments (theany Third Parties or entities, the purpose or effect of which will not, individuallyis to defer, postpone, reduce or otherwise avoid or adjust the recording of expenses incurred by the Company Group. All reserves that are set forth in or reflected in the Company Balance Sheet have been established in accordance with the Accounting Standards consistently applied. Without limiting the generality of the foregoing, no member of the Company Group currently guarantees any debt or other obligation of any other Person.
3.12Taxes. Except as provided in Section 3.12 of the Company Disclosure Schedules:
(a)Each member of the Company Group, and any consolidated, combined, unitary or aggregate group composed of members of the Company Group for Tax purposes, has timely filed all federal income Tax Returns and other material Tax Returns it is required to have filed. All Tax Returns filed by or with respect to any member of the Company Group are accurate, complete and correct in all material respects.
(b)Each member of the Company Group has paid in full all material Taxes required to have been paid. All Taxes due in connection with the operations of each member of the Company Group until the Closing Date have been paid in full. No member of the Company Group has any Liability for Taxes in excess of the amounts so
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paid, except for Taxes which are not yet due and payable or Taxes of other members of the Parent Group which shall be material)paid by other members of the Parent Group.
(c)The Company Balance Sheet reflects all Liabilities for unpaid Taxes of the Company Group for periods (or portions of periods) through the Company Balance Sheet Date, except for Taxes of other members of the Parent Group which shall be paid by other members of the Parent Group. The Company Group does not have any Liability for unpaid Taxes accruing after the Company Balance Sheet Date except for Taxes arising in the Ordinary Course of Business subsequent to the Company Balance Sheet Date and Taxes of other members of the omissionParent Group which shall be paid by other members of notesthe Parent Group. The Company Group has no Liability for Pre-Closing Taxes that is not included in the calculation of Closing Indebtedness except for Taxes of other members of the Parent Group which shall be paid by other members of the Parent Group.
(d)Within the last five (5) years, no claim has been made by any Governmental Authority in any jurisdiction where a member of the Company Group does not file Tax Returns that such member is or may be subject to Tax by that jurisdiction.
(e)Section 3.12(e) of the Company Disclosure Schedules sets forth a complete and accurate listing of (i) all types of Taxes paid, and all types of Tax Returns filed, by or on behalf of each member of the Company Group and (ii) all of the jurisdictions in which each member of the Company Group files such Tax Returns.
(f)No extensions or waivers of statutes of limitations with respect to the Tax Returns have been given by or requested from the Company or any of its Subsidiaries (except for extensions to file Tax Returns that are granted automatically under applicable Law).
(g)There is (i) no past or pending audit of, or Tax controversy associated with, any Tax Return of a member of the Company Group that has been or is being conducted by a Tax Authority which has not been fully settled or resolved and (ii) no other procedure, proceeding or contest of any refund or deficiency in respect of Taxes pending or on appeal with any Governmental Authority.
(h)All deficiencies asserted or assessments made against any member of the Company Group as a result of any examinations by any Tax Authority have been fully paid.
(i)There are no Encumbrances for Taxes upon the assets of any member of the Company Group other than Encumbrances arising by operation of Law for Taxes not yet due and payable.
(j)The Company Group has collected and remitted all sales, use, value added, ad valorem, personal property and similar Taxes (“Sales Taxes”) with respect to sales made or services provided and, for all sales or provision of services that are exempt from Sales Taxes and that were made without charging or remitting Sales Taxes, the Company Group has received and retained any required Tax exemption certificates or other documentation qualifying such sale or provision of services as exempt.
(k)Except as provided in Section 3.12(k) of the Company Disclosure Schedules, no member of the Company Group is party to or bound by any Tax indemnity, Tax sharing, Tax allocation or similar agreement, and no member of the Company Group has any Liability or potential Liability to any Third Party under any such agreement.
(l)No member of the Company Group is party to and has not requested any closing agreement (as described in Section 7121 of the Code or any corresponding, analogous, or similar provision under any state, local or foreign Law related to Taxes), offer in compromise, technical advice memoranda, private letter ruling or other similar agreement with any Tax Authority.
(m)No member of the Company Group has ever entered into any “listed transaction” as defined in Treasury Regulations Section 1.6011-4(b) or any similar provision under state, local or foreign law. Each member of the Company Group has disclosed on its U.S. federal income Tax Returns all positions taken therein that could give rise to a “substantial understatement of income tax” within the meaning of Section 6662 of the Code (or any comparable, analogous or similar provision under any state, local or foreign Law related to Taxes).
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(n)HoldCo has (i) at all times since its formation been a “C corporation” within the meaning of Section 1361(a)(2) of the Code; (ii) except for being a member of the Parent Group, never been a member of an affiliated group of corporations, within the meaning of Section 1504 of the Code (or any predecessor provision or comparable provision of state, local or foreign Law), or a member of a combined, consolidated or unitary group for state, local or foreign Tax purposes; and (iii) except for Taxes of other members of the Parent Group which shall be paid by other members of the Parent Group, no Liability for Taxes of any Person under Treasury Regulations Section 1.1502-6 (or any corresponding provision of state, local or foreign Law related to income Taxes), as transferee or successor, by Contract or otherwise.
(o)No member of the Company Group has ever been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code.
(p)No member of the Company Group is a party to any joint venture, partnership or other arrangement or Contract that could reasonably be expected to be treated as a partnership for Tax purposes.
(q)Except as provided in Section 3.12(p) of the Company Disclosure Schedules, no member of the Company Group is a “United States shareholder” within the meaning of Section 951(b) of the Code with respect to any “controlled foreign corporation” within the meaning of Section 957(a) of the Code or “deferred foreign income corporation” within the meaning of Section 965(d)(1) of the Code. No member of the Company Group is subject to Tax in any jurisdiction other than the jurisdiction in which it is formed or organized by virtue of having employees, a permanent establishment or any other place of business in such jurisdiction.
(r)No member of the Company Group owns any equity interest in an entity that is or, at any time when the Company Group owned such interest, was treated as a passive foreign investment company within the meaning of Section 1297(a) of the Code with respect to such member of the Company Group.
(s)No member of the Company Group has ever been a “distributing corporation” or a “controlled corporation” in connection with a distribution described in Section 355 of the Code.
(t)Each member of the Company Group has withheld and paid all material Taxes required to be withheld in connection with any amounts paid or owing to any employee, creditor, independent contractor or other Third Party.
(u)No member of the Company Group (i) has agreed, or is required, to make any adjustment under Section 481(a) of the Code by reason of a change in accounting method or otherwise for a Pre-Closing Tax Period; (ii) has made an election, or is required, to treat any of its assets as owned by another Person pursuant to the provisions of former Section 168(f) of the Code or as tax-exempt bond financed property or tax-exempt use property within the meaning of Section 168 of the Code; (iii) has acquired, or owns, any assets that directly or indirectly secure any debt the interest on which is tax exempt under Section 103(a) of the Code; or (iv) has made any of the foregoing elections, or is required to apply any of the foregoing rules, under any comparable state or local Law related to Taxes.
(v)No member of the Company Group will be required to include in a Post-Closing Tax Period taxable income attributable to income that accrued (for purposes of financial statements) in a Pre-Closing Tax Period but was not recognized for Tax purposes in any Pre-Closing Tax Period as a result of (i) the installment method of accounting, the completed contract method of accounting, the long-term contract method of accounting, or the cash method of accounting, (ii) any prepaid amount received or paid in a Pre-Closing Tax Period, (iii) any deferred intercompany transaction in a Pre-Closing Tax Period or excess loss account, (iv) a change in method of accounting or Section 481 of the Code in a Pre-Closing Tax Period, (v) except with respect to MGT Canada, any inclusion under Section 951(a) or Section 951A of the Code, (vi) any gain recognition agreement entered into in a Pre-Closing Tax Period, (vii) any transaction under which previously utilized Tax losses or credits may be recaptured (including a dual consolidated loss or an excess loss account), (viii) Section 1400Z-2(a)(1)(A) of the Code, or (ix) any comparable provisions of state or local Tax law, domestic or foreign, or for any other reason. The Company Group has not made an election pursuant to Section 965(h) of the Code to pay the net tax liability under Section 965 of the Code in installments.
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(w)No member of the Company Group has applied for and not yet received a ruling or determination from a Tax Authority regarding a past or prospective transaction.
(x)Each member of the Company Group has (i) to the extent permitteddeferred, properly complied in all respects with applicable Law in order to defer the amount of the employer’s share of any “applicable employment taxes” under Section 2302 of the CARES Act, and (ii) to the extent applicable, eligible, and claimed, properly complied in all material respects with applicable Law and duly accounted for any available Tax credits under Sections 7001 through 7004 of the Families First Coronavirus Response Act and Section 2301 of the CARES Act, and (iii) not deferred any payroll Tax obligations (including those imposed by Regulation S-XSections 3101(a) and 3201 of the Code) (for example, by a failure to timely withhold, deposit or Regulation S-K,remit such amounts in accordance with the applicable provisions of the Code and the Treasury Regulations) pursuant to or in connection with any U.S. presidential memorandum or executive order, and (iv) not sought a PPP Loan.
(y)No event has occurred with respect to a Company Benefit Plan that would be treated by Section 409A(b) of the Code as applicable. Parenta transfer of property for purposes of Section 83 of the Code. No member of the Company Group is under any obligation to gross up any Taxes under Section 409A of the Code.
(z)Except as set forth on Section 3.12(z) of the Company Disclosure Schedule, there is no agreement, plan, arrangement or other Contract covering any current or former employee or other service provider of a member of the Company Group to which a member of the Company Group or any of their ERISA Affiliate is a party or by which a member of the Company Group or any of its ERISA Affiliates or their assets are bound that, considered individually or considered collectively with any other such agreements, plans, arrangements or other Contracts, will, or would reasonably be expected to, as a result of the Transactions (whether alone or upon the occurrence of any additional or subsequent events), give rise directly or indirectly to the payment of any amount that would reasonably be expected to be non-deductible under Section 162 of the Code (or any corresponding or similar provision of state, local or foreign Tax law) or, disregarding any arrangements implemented by or at the direction of Acquirer, be characterized as a “parachute payment” within the meaning of Section 280G of the Code (or any corresponding or similar provision of state, local or foreign Tax law).
(aa) Notwithstanding anything to the contrary in this Agreement, (x) this Section 3.12 and Section 3.18 set forth the sole and exclusive representations and warranties regarding Tax matters of the Company Group, (y) Seller, members of the Company Group and their Affiliates are not making, and shall not be construed to have made, any representation or warranty as to the amount of, or Acquirer’s or any other Person’s ability to utilize, any net operating loss, tax credit, tax basis or other Tax attribute in any taxable period (or portion thereof) beginning after the Closing Date and (z) none of the representations in this Section 3.12 (except for subsections (l), (n), (t), (u) and (w) of this Section 3.12) may be relied upon or form a basis to claim indemnification for or relating to Taxes for any taxable period (or portion thereof) beginning after the Closing Date.
3.13Compliance with Law.
(a)The operation of the business of each member of the Company Group has been conducted in material compliance with all Laws and Orders applicable to such member or its business and all Permits required for the operation of its business, properties and assets. Except as set forth in Section 3.13(a) of the Company Disclosure Schedule, no member of the Company Group has received any written notice to the effect that, or otherwise been advised in writing that it is not in material compliance with any such Laws, Orders or Permits.
(b)No member of the Company Group, nor any of the officers or directors of a member of the Company Group has, directly or indirectly, (i) taken any action in violation of any Law relating to anticorruption matters, including the FCPA, or (ii) offered, paid, given, promised to pay or give, or authorized the payment or gift of anything of value, directly or indirectly, to any Public Official, for purposes of (A) influencing any act or decision of any Public Official in his or her official capacity, (B) inducing such Public Official to do or fail to do any act in violation of his or her lawful duty, (C) securing any improper advantage or (D) inducing such Public Official to use his or her influence with a Governmental Authority, or commercial enterprise owned or controlled by any Governmental Authority (including state-owned or controlled veterinary or medical facilities), in order to assist the Company or any Person related to the Company, in obtaining or retaining business. None of the Representatives of
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the Company or any of its Subsidiaries are themselves Public Officials. There have been no false or fictitious entries made in the books or records of the Company or any of its Subsidiaries relating to any payment that the FCPA prohibits, and neither the Company nor any of its Subsidiaries has established or maintained a secret or unrecorded fund for use in making any such payments.
(c)No member of the Company Group, nor any of the officers or directors of a member of the Company Group has, directly or indirectly, taken any action in violation of any Law relating to export control, trade or economic sanctions, or antiboycott, in the U.S. or any other jurisdiction, including: the Arms Export Control Act (22 U.S.C.A. § 2278), the Export Administration Act (50 U.S.C. App. §§ 2401-2420), the International Traffic in Arms Regulations (22 C.F.R. 120-130), the Export Administration Regulations (15 C.F.R. 730 et seq.), the Office of Foreign Assets Control Regulations (31 C.F.R. Chapter V), the Customs Laws of the United States (19 U.S.C. § 1 et seq.), the International Emergency Economic Powers Act (50 U.S.C. § 1701-1706), the U.S. Commerce Department antiboycott regulations (15 C.F.R. 560), the U.S. Treasury Department antiboycott requirements (26 U.S.C. § 999), any other export control regulations issued by the agencies listed in Part 730 of the Export Administration Regulations, or any Law outside of the United States of a similar nature. No member of the Company Group or any of their respective Representatives is listed on the U.S. Office of Foreign Assets Control “Specifically Designated Nationals and Blocked Persons” or any other similar list.
3.14Permits. Section 3.14 of the Company Disclosure Schedules sets forth a complete and correct list of all material Permits used by the Company Group in the operation of the Business, all of which are valid and in full force and effect. Complete and correct copies of such Permits have been Delivered to Acquirer. Each member of the Company Group has all Permits required in the operation of the Business, and such Permits are in full force and effect and are owned by the applicable member of the Company Group free and clear of all Encumbrances except Permitted Encumbrances, except for such Permits which the failure to hold would not be reasonably likely to be material to the applicable member of the Company Group. No member of the Company Group is in material Default, or has received any written notice of any claim of material Default, with respect to any such Permit. No suspension or cancellation of any such Permits is pending or, to the Company’s Knowledge, threatened.
3.15Regulatory Matters.
(a)Except as set forth in Section 3.15(a) of the Company Disclosure Schedules, each member of the Company Group is, and since inception each member of the Company Group has been, in material compliance with all applicable Health Care Laws. Except as set forth in Section 3.15(a) of the Company Disclosure Schedules, no member of the Company Group has received any notice or other communication from any Governmental Authority alleging any violation of any Health Care Law with respect to such activities. Except as set forth in Section 3.15(a) of the Company Disclosure Schedules, no member of the Company Group has received any notice or other written communication from any applicable Governmental Authority alleging any violation of any Health Care Law.
(b)Section 3.15(b) of the Company Disclosure Schedules sets forth a complete and correct list of all products that are being researched or under development by or on behalf of any member of the Company Group as of the Agreement Date. All Company Products are in material compliance with all applicable requirements under the Health Care Laws, including all requirements relating to research, storing, testing, record-keeping, reporting, import and export. Except as set forth in Section 3.15(b) of the Company Disclosure Schedules, no member of the Company Group has received any notice or other communication from the FDA or any other Governmental Authority alleging any violation of such requirements.
(c)All studies performed in connection with or as the basis for any Regulatory Permit or Regulatory Approval required for any Company Product either (i) have been conducted in accordance, in all material respects, with applicable requirements or (ii) have employed in all material respects the procedures and controls generally used by qualified experts. No member of the Company Group has received any notice or other written communication from an applicable Governmental Authority requiring the termination or suspension or material modification of any study with respect to any Company Products. No member of the Company Group collected, maintained, altered, or reported data from any study performed in connection with or as the basis for any Regulatory Permit, Regulatory Approval required for the Company Products in a manner that, if such data were reported to the
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FDA or another Regulatory Authority, would be or would result in an untrue statement of material fact or fraudulent statement to the FDA or any other Regulatory Authority.
(d)All clinical trials conducted by or on behalf of any member of the Company Group have been conducted in compliance in all material respects with all applicable Laws. No clinical trial conducted by or on behalf of any member of the Company Group has been terminated or suspended prior to completion primarily for safety reasons. No applicable Governmental Authority, clinical investigator who has participated or is participating in, or Institutional Review Board that has or has had jurisdiction over, a clinical trial conducted by or on behalf of any member of the Company Group has commenced, or threatened to initiate, any action to place a clinical hold order on, or otherwise terminate, delay or suspend, any ongoing clinical investigation conducted by or on behalf of any member of the Company Group.
(e)Holdco2 has Delivered to Acquirer true, complete and correct copies of all material Regulatory Documentation in its possession or control related to the Company Products. Each applicable member of the Company Group has filed with the applicable Regulatory Authority all required filings. All such filings were in material compliance with all applicable Laws when filed, and no deficiencies have been asserted in writing by any applicable Regulatory Authority with respect to any such filings.
(f)The Company has no off-balance sheet arrangementsKnowledge of any fact that arewould reasonably be expected to materially impact, limit, or alter any existing Regulatory Permit or Regulatory Approval for any Company Product in any applicable jurisdiction.
(g)No member of the Company Group is a party to any corporate integrity agreement, deferred prosecution agreement, consent decree, settlement order or similar agreement with or imposed by any Governmental Authority, and no such action is pending as of the date hereof. No member of the Company Group is subject to any material enforcement, regulatory or administrative proceedings against or affecting the Company or any of its Subsidiaries relating to or arising under any Health Care Law and no such enforcement, regulatory or administrative proceeding has been threatened. No member of the Company Group has made and is not disclosed in the Parent SEC Reports.process of making any voluntary self-disclosure to any Governmental Program or Governmental Authority, including any voluntary self-disclosures to the Centers for Medicare & Medicaid Services (“CMS”).
(h)All applications, information and other data and conclusions derived therefrom provided to an applicable Regulatory Authority with respect to the Company Products, when submitted by the applicable member of the Company Group, and to the Knowledge of the Company to a Regulatory Authority with respect to the Company Products, were true, complete, and correct in all material respects as of the date of submission by or on behalf of such member of the Company Group. No financial statements other than thosemember of Parentthe Company Group: (i) has (A) been placed under or otherwise made subject to or (B) committed an act, made a statement, or failed to make a statement that, at the time such disclosure was made, would reasonably be expected to provide a basis for an applicable Governmental Authority to invoke its Application Integrity Policy “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities,” set forth in 56 Fed. Reg. 46191 (September 10, 1991) or any similar policy; (ii) has been charged with or convicted of any criminal offense relating to the delivery of an item or service under any Governmental Program; (iii) has been subject to, or convicted of any crime or engaged in any conduct that would reasonably be expected to result in, disqualification, debarment, deregistration, exclusion, or suspension from participation in any Governmental Program, or otherwise under 42 U.S.C. Section 1320a-7b(f), 21 U.S.C. Section 335a or any similar Law; (iv) has had a civil monetary penalty assessed against it, him or her under Section 1128A of the Social Security Act, codified at Title 42, Chapter 7, of the United States Code; (v) is currently listed on the United States General Services Administration published list of parties excluded from federal procurement programs and non-procurement programs; or (vi) to the Knowledge of the Company, is the target or subject of any current or potential investigation relating to any Governmental Program-related offense.
(i)Each member of the Company Group has operated and currently are in material compliance with the Clinical Laboratory Improvement Amendments of 1998 (“CLIA”), all applicable rules and regulations of all Governmental Authorities engaged in regulation of clinical laboratories or biohazardous materials, and all Regulatory Permits. No member of the Company Group has received written notice from any such governmental agencies or bodies requiring the termination, suspension, clinical hold or material modification of any tests, studies
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or trials conducted by or on behalf of any member of the Company Group. No suspension, revocation, termination, sanction, corrective action or limitation of any currently existing CLIA certification or accreditation of any member of the Company Group is pending or threatened. Section 3.15(i) of the Company Disclosure Schedules sets forth a complete and correct list of (i) all Regulatory Permits and Regulatory Approvals used in the operation of the Company Group’s business or otherwise held by any member of the Company Group and (ii) all laboratory developed tests developed or offered by or on behalf of any member of the Company Group.
(j)(x) Each member of the Company Group has in effect all Regulatory Permits required by GAAPany applicable Regulatory Authority to be includedpermit the conduct of its business as currently conducted, (y) all of such Regulatory Permits and Regulatory Approvals are in full force and effect and (z) each member of the Company Group is in compliance with, and is not in default under, any such Regulatory Permit or Regulatory Authorization.
(k)Except as set forth on Section 3.15(k) of the Company Disclosure Schedules, no member of the Company Group has (i) received advance payments (“Medicare Advance Payments”) from CMS pursuant to the Accelerated and Advance Payment Program (the “Medicare Advance Payment Program”) or (ii) received proceeds from funds appropriated in the consolidated financial statementsPublic Health and Social Services Emergency Fund for relief under Division B of Parent.Public Law 116-127 (“HHS Grants”). Each member of the Company Group has deployed any such proceeds in compliance in all material respects with all applicable Laws governing the HHS Grants and have maintained accounting records associated with the HHS Grants in material compliance with all the terms and conditions of all applicable CARES Act relief programs.
Section 5.8 3.16Absence of Certain Changes or EventsLitigation. Except as set forth in Parent SEC Reports filedSection 3.16 of the Company Disclosure Schedules, there is no, and since January 1, 2019 there has not been any, Proceeding (a) pending or, to the Company’s Knowledge, threatened against or affecting any member of the Company Group or their business, (b) pending or, to the Company’s Knowledge, threatened against any Person whose Liability any member of the Company Group has retained or assumed, either contractually or by operation of Law, or (c) pending or, to the Company’s Knowledge, threatened against any stockholder, officer, director or employee of any member of the Company Group in connection with such stockholder’s, officer’s, director’s or employee’s relationship with, or actions taken on behalf of, such member of the Company Group. No member of the Company Group is a party to or named in, and none of its properties or assets are subject to, any Order.
3.17Employment Matters.
(a)Section 3.17(a) of the Company Disclosure Schedules contains a complete and correct list of each employee of each member of the Company Group and each employee of Seller or any of its Subsidiaries who, as of the Agreement Date, is expected to become an employee of a member of the Company Group prior to the Closing Date (collectively, the “In-Scope Employees”), including for each such employee: name, job title, date of thishire, work location and employee entity. As soon as practicable following the Agreement Date, the Company shall provide to Acquirer each In-Scope Employee’s classification status under the Fair Labor Standards Act, full time or part time status and exceptimmigration status. Seller has provided to counsel to Acquirer, on an outside counsel only basis, a true and correct list of the following for each In-Scope Employee: annual base salary or wage, annual target incentive or bonus compensation for the current fiscal year and the prior fiscal year, and accrued paid time off. To the Company’s Knowledge, no Key Employee is a party to, or is otherwise bound by, any agreement or arrangement with any Third Party, including any confidentiality or non-competition agreement, that adversely affects or restricts the performance of such employee’s duties for the applicable member of the Company Group. To the Company’s Knowledge, no In-Scope Employee has provided written notice to terminate his or her relationship with his or her employing member of the Company Group. To the Company’s Knowledge, each employee of each member of the Company Group is (i) a citizen or lawful permanent resident of the jurisdiction in which such employee resides, or (ii) an alien authorized to work in the jurisdiction in which such employee resides either specifically for the Company or for any other employer in such jurisdiction. Except as contemplated by this Agreement, since December 31, 2020, thereset forth in Section 3.17(a) of the Company Disclosure Schedules, each member of the Company Group has not been: (a) any Parent Material Adverse Effect; (b) any declaration, setting aside or paymentcompleted a Form I-9 (Employment Eligibility Verification) for each of their employees. No employee of any dividend on,member of the Company Group has a principal place of employment outside the United States or other distribution in respectis subject to the labor and employment laws of any country other than the United States. Except as set forth in Section 3.17(a) of Parent’s capital stock,the Company Disclosure Schedules, the employment of each of the employees of each member of the Company Group is “at will” and no member of the Company Group
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has any obligation to provide any particular form or any purchase, redemption or other acquisition by Parentperiod of any of Parent’s capital stock or any other securities of Parent or any options, warrants, calls or rightsnotice prior to acquire any such shares or other securities; (c) any split, combination or reclassification of any of Parent’s capital stock; (d) any material change by Parent in its accounting methods, principles or practices, except as required by concurrent changes in GAAP (or any interpretation thereof) or Applicable Legal Requirements; (e) any change interminating the auditors of Parent; (f) any revaluation by Parentemployment of any of its assets,employees. As of the Agreement Date, no member of the Company Group has (i) entered into any Contract that obligates or purports to obligate Acquirer to make an offer of employment to any present or former employee or consultant of any member of the Company Group or (ii) promised or otherwise provided any assurances (contingent or otherwise) to any present or former employee or consultant of any member of the Company Group of any terms or conditions of employment with Acquirer following the Effective Time.
(b)No member of the Company Group has, and no member of the Company Group would reasonably be expected to have, any Liability with respect to any Taxes (or the withholding thereof) in connection with any independent contractor, consultant or other non-employee service provider of the Company Group (or who served in such capacity since January 1, 2017 (collectively, “Contractors”)). To the Company’s Knowledge, no Contractor is a party to, or is otherwise bound by, any agreement or arrangement with any Third Party, including without limitation, any saleconfidentiality or non-competition agreement, that in any way adversely affects or restricts the performance of assetssuch Contractor’s duties for any member of Parentthe Company Group. No current Contractor used by any member of the Company Group has provided written notice to terminate his, her or its relationship with any member of the Company Group. Each member of the Company Group has properly classified each Contractor ever retained by the Company as an “independent contractor” pursuant to the Code and other applicable Laws.
(c)No member of the Company Group has, at any time, been a party to or had any obligations under a collective bargaining, works council or similar agreement, in each case in respect of the Business. No member of the Company Group has experienced at any time, nor to the Company’s Knowledge, is there now threatened, any walkout, union activity, work stoppage, any effort to organize or other similar occurrence or any attempt to organize or represent the labor force of such member of the Company Group or strike. No union or other collective bargaining unit or employee organizing entity has been certified or recognized by a member of the Company Group as representing any of its employees.
(d)All members of the Company Group are in compliance in all material respects with all Laws relating to labor and employment, including with respect to employment practices, worker classification, wages and hours, duration of work, overtime, collective bargaining, discrimination, leaves of absence, immigration, civil rights, safety and health, workers’ compensation, pay equity, the collection and payment of withholding and social security Taxes, and other employment-related Taxes. Each member of the Company Group has, or will have no later than the Closing Date, paid all accrued salaries, bonuses, commissions, wages, severance and accrued vacation pay of the employees due to be paid through the Closing Date. No member of the Company Group has committed any unfair labor practice in connection with the conduct of the Business. There are no Proceedings pending or, to the Company’s Knowledge, threatened between any member of the Company Group, on the one hand, and any of such member’s current employees or independent contractors or former employees or independent contractors, on the other. No review, complaint or Proceeding by any Governmental Authority or current or former employee or Contractor with respect to any member of the Company Group in relation to the employment or engagement of any individual is pending or, to the Company’s Knowledge, threatened, nor has any member of the Company Group received any notice from any Governmental Authority indicating an intention to conduct the same in the future. No member of the Company Group is liable for any payment to any trust or other fund or to any Governmental Authority, with respect to unemployment compensation benefits, social security or other benefits or obligations for employees (other than routine payments to be made in the normal course of business and consistently with past practice). No member of the Company Group has any obligations under COBRA with respect to any former employees or qualifying beneficiaries thereunder.
(e)The Company has Delivered to Acquirer true and correct copies of each of the following with respect to each member of the Company Group, in each case that are currently used in the Business and solely if the Company or such member of the Company Group has a standard form: (i) all forms of offer letters, (ii) all forms of employment agreements and severance agreements, (iii) all forms of services agreements and agreements with current consultants and/or advisory board members and (iv) all forms of confidentiality, non-competition or inventions agreements between current and former employees/consultants and the Company Group.
(f)In the past two years, (i) no member of the Company Group has effectuated a “plant closing” (as defined in the Worker Adjustment Retraining Notification Act of 1988, as amended (the “WARN Act”)), or any
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similar state or local law, affecting any site of employment or one or more facilities or operating units within any site of employment or facility of its business, (ii) there has not occurred a “mass layoff” (as defined in the WARN Act) affecting any site of employment or facility of the Company or any of its Subsidiaries and (iii) no member of the Company Group has been affected by any transaction or engaged in layoffs or employment terminations sufficient in number to trigger application of any similar state, local or foreign law or regulation.
(g)No allegations of sexual harassment or sexual misconduct have been made to any member of the Company Group against any director, officer or other employee of any member of the Company Group and, to the Company’s Knowledge, there have not been any such allegations. There are no disciplinary actions pending against any of the employees of any member of the Company Group.
3.18Employee Benefit Plans.
(a)Section 3.18(a) of the Company Disclosure Schedules contains a complete and correct list, as of the date hereof, of each Benefit Plan maintained or sponsored by any member of the Company Group (each, a “Company Benefit Plan”) and each Benefit Plan contributed to or required to be contributed to by a member of the Company Group, but which is not sponsored by a member of the Company Group (each, a “ Seller Benefit Plan” and collectively, the “Seller Benefit Plans”); provided, that Company Benefit Plans that are independent contractor agreements with independent contractors whose annual compensation is less than $100,000 are not required to be listed in Section 3.18(a) of the Company Disclosure Schedules. No Company Benefit Plan is subject to any Laws other than those of the United States or any state, county or municipality in the ordinary courseUnited States. No member of business;the Company Group has or (g)would reasonably be expected to have any action takenLiability under any Benefit Plan maintained, contributed to or agreed uponrequired to be contributed to by Parentany ERISA Affiliate of the Company or any of its Subsidiaries other than the Seller Benefit Plans.
(b)With respect to each Company Benefit Plan, the Company has Delivered to Acquirer an accurate and complete copy of: (i) the current plan document, as amended through the Agreement Date, or a written summary of any unwritten Company Benefit Plan, (ii) the current summary plan description (if required) and any material modifications thereto, (iii) any annual reports on Forms 5500 to the extent applicable, (iv) material contracts including trust agreements, insurance contracts, and administrative services agreements, (v) the most recent determination or opinion letters for any plan intended to be qualified under Section 401(a) of the Code and (vi) any material correspondence with the Department of Labor, Internal Revenue Service or any other Governmental Authority regarding the plan in the past twelve (12) months.
(c)On or prior to the Closing Date, each applicable member of the Company Group shall have made all contributions required to be made to or with respect to each Company Benefit Plan and each Seller Benefit Plan by the Company Group on or prior to the Closing Date or accrued any such amounts in accordance with the past custom and practice of each member of the Company Group. No Company Benefit Plan is intended to include a Code Section 401(k) arrangement.
(d)There has been no amendment to, written interpretation or announcement (whether or not written) by the any member of the Company Group or any ERISA Affiliate relating to, or change in participation or coverage under, any Company Benefit Plan that would materially increase the expense of maintaining such Company Benefit Plan above the level of expense incurred with respect to such Company Benefit Plan for the most recent full fiscal year included in the Financial Statements.
(e)Each Company Benefit Plan has been, since January 1, 2017, in all material respects, established, maintained and administered in accordance with its terms and with all provisions of ERISA, the Code and other applicable Laws. No actions, investigations, suits or claims with respect to any Company Benefit Plan or, to the extent relating to the Company Group or any of their current and former employees, Seller Benefit Plan are pending or, to the Company’s Knowledge, threatened, in each case excluding routine claims for benefits. No employee of any member of the Company Group is a “leased employee” within the meaning of Section 414(n) of the Code. The Company Group is in compliance in all material respects with the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010. With respect to each Company Benefit Plan in the past three (3) years, (i) no lien has been imposed under the Code, ERISA or any other applicable law, and (ii) no member
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of the Company Group has made any filing in respect of such Company Benefit Plan under the Employee Plans Compliance Resolution System, the Department of Labor Delinquent Filer Program or any other voluntary correction program. No Company Benefit Plan is sponsored by a human resources and benefits outsourcing entity or professional employer organization.
(f)Each Company Benefit Plan and Seller Benefit Plan that is intended to be qualified within the meaning of Section 401(a) of the Code is so qualified and has received a favorable determination letter from the IRS (or, if such plan is a prototype or volume submitter plan document, such prototype or volume submitter plan document has received a favorable opinion from the IRS that the form meets the tax qualification requirements and the applicable member of the Company Group or Parent Group is entitled to rely on such favorable opinion) to the effect that such Company Benefit Plan or Seller Benefit Plan satisfies the requirements of Section 401(a) of the Code in form and that its related trust is exempt from taxation under Section 501(a) of the Code.
(g)No member of the Company Group has any obligation to provide post-retirement or post-termination medical or life insurance benefits to any current or former employee, officer, Contractor, or director, or any dependent or beneficiary thereof, other than as required under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) or similar state law for which the covered individual pays the full cost of coverage. There has been no “prohibited transaction” (within the meaning of Section 406 of ERISA and Section 4975 of the Code and not exempt under Section 408 of ERISA and regulatory guidance thereunder) with respect to any Company Benefit Plan. No member of the Company Group or any ERISA Affiliate is subject to Liability or penalty under Sections 4967 through 4980 of the Code or Title I of ERISA with respect to any Company Benefit Plans. No member of the Company Group or any of its ERISA Affiliates sponsors, maintains or contributes or is obligated to contribute to, or has incurred any liability with respect to any plan subject to Title IV of ERISA or Section 412 of the Code. No Company Benefit Plan is (i) any “multiemployer plan” within the meaning of Section 4001(a)(3) or 3(37) of ERISA, (ii) any “multiple employer plan” within the meaning of Section 4063 or 4064 of ERISA, (iii) any “multiple employer welfare arrangement” within the meaning of Section 3(40) of ERISA or (iv) any health or other welfare arrangement that is self-insured. No Company Benefit Plan is or has ever been, or currently funds or has ever been funded by, a “voluntary employees’ beneficiary association” within the meaning of Section 501(c)(9) of the Code or other funding arrangement for the provision of welfare benefits. Each Company Benefit Plan that provides health, life or other welfare or welfare-type benefits is fully insured by a third-party insurance company. No member of the Company Group sponsors or maintains any self-funded employee benefit plans providing for health or welfare benefits, including any plan to which a stop-loss policy applies.
(h)Neither the execution and delivery of this Agreement nor the consummation of the Transactions will (either alone or in combination with another event): (i) result in any payment becoming due, or increase the amount of any compensation due, to any current or former employee or Contractor of a member of the Company Group; (ii) increase any benefits otherwise payable under any Company Benefit Plan; (iii) result in the acceleration of the time of payment or vesting of any such compensation or benefits; (iv) result in the triggering or imposition of any restrictions or limitations on the rights of the Company or any of its Subsidiaries to amend or terminate any Company Benefit Plan; or (v) entitle the recipient of any payment or benefit to receive a “gross up” payment for any income or other taxes that might be owed with respect to such payment or benefit.
3.19Intellectual Property.
(a)Section 3.19(a) of the Company Disclosure Schedules accurately and completely sets forth as of the Agreement Date: all (i) Registered Company IP, (ii) material unregistered Trademarks included in the Company Owned IP, (iii) material Software included in the Company Owned IP, (v) other Company Owned IP that is material to the Company Group or its business as currently conducted other than Trade Secrets, and (v) Company IP that is licensed exclusively to a member of the Company Group. For each item of Registered Company IP, Section 3.19(a) of the Company Disclosure Schedules indicates, as applicable, the legal (and record) owner(s) thereof and, if jointly-owned, all joint-owners of such Intellectual Property, the countries and jurisdictions in which such Intellectual Property is registered or in which an application for the same has been filed, the registration or application number, the filing, registration, and expiration dates thereof (as applicable), in the case of unregistered Trademarks, countries of use and approximate dates of first use. All Registered Company IP is subsisting and in full force and effect and, except as set forth in Section 3.19(a) of the Company Disclosure Schedules, to the Knowledge of the Company, the
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registrations forming part of the Registered Company IP are valid and enforceable. The Company Group does not own any patents or patent applications and Seller and its Affiliates do not own or control any patents or patent applications relating to the Business. Section 3.19(a) of the Company Disclosure Schedules also accurately and completely sets forth as of the Agreement Date all Domain Names registered by or used or held for use for the Business by any member of the Company Group, Seller or any Seller Affiliate, including the applicable registrar and expiration date. All of the Domain Names listed in Section 3.19(a) of the Company Disclosure Schedules are registered solely by the applicable member of the Company Group and are active and all registration fees, renewals or other actions necessary on or before the Agreement Date to maintain such registrations active have been paid, filed and taken. All use of such Domain Names complies with and has complied in all material respects with all terms and conditions, terms of use, terms of service and other Contracts with the applicable registrar for such Domain Names.
(b)To the Knowledge of the Company, the Company Group has sufficient rights to use the Company IP and the Company IT Assets in the manner used by the Company Group in connection with the operation of its Business as currently conducted. The Company IP and Company IT Assets includes all material Intellectual Property and IT Assets, respectively, used or held for use in connection with the operation of the Business as currently conducted, and, to the Knowledge of the Company, there are no other items of Intellectual Property or IT Assets that are material to or necessary for the operation of the Company Group’s Business as currently conducted, or for the continued operation of the Company Group’s Business immediately after the Closing in substantially the same manner as currently conducted. Except as set forth in Section 3.19(b) of the Company Disclosure Schedules, the Company Group is the sole and exclusive owner of all right, title and interest in and to each item of Company Owned IP and each IT Asset owned or purported to be owned by the Company Group, free and clear of all Encumbrances and licenses other than Permitted Encumbrances, or any obligation to grant any of the foregoing. The Company Group has a license to use the Company Licensed IP in connection with the operation of its Business as currently conducted and proposed to be conducted, subject only to the terms of the applicable Company IP Contracts, and, to the Knowledge of the Company, such licenses are valid.
(c)Except as set forth on Section 3.19(c) of the Company Disclosure Schedules, no member of the Company Group has assigned, transferred, conveyed, or granted any license with respect to (other than licenses granted to Company Group customers in the Ordinary Course of Business), or authorized the retention of any rights in or joint ownership of, any Company Owned IP or any IT Asset owned or purported to be owned by the Company Group or other Intellectual Property that would have been Company Owned IP or IT Asset owned by the Company Group but for such assignment, transfer, conveyance to third parties or, caused or permitted any Encumbrance to attach to any Company Owned IP or IT Asset owned by the Company Group. Except as set forth on Section 3.19(c) of the Company Disclosure Schedule, no Person other than a member of the Company Group has any proprietary, commercial, joint ownership, royalty or other interest in the Company Owned IP or the goodwill, if any, associated therewith.
(d)No member of the Company Group has entered into any Contracts with any other Person (i) that materially limit or restrict use or require any payments for use of the Company Owned IP, the Company Licensed IP (other than the obligations or restrictions expressly contained in the agreement granting such member of the Company Group a license under such Intellectual Property) or Company Products by a member of the Company Group, (ii) pursuant to which any Person other than a member of the Company Group has been granted or retains the right to bring any infringement or other enforcement actions with respect to, or otherwise to enforce, any of the Company Owned IP, (iii) pursuant to which any Person has been granted or retains the right to defend any claim of infringement, misappropriation or other violation arising from the practice or other Exploitation of any of the Company Owned IP or pursuant to which any member of the Company Group expressly agrees to indemnify any Person against any such claim or pursuant to which any member of the Company Group has assumed any existing or potential Liability of another Person for any infringement, misappropriation or other violation of Intellectual Property or similar claim (other than indemnification obligations under Contracts with customers and service providers of the Company Group and Company IP Contracts entered into in the Ordinary Course of Business), or (iv) pursuant to which any Person has been granted or retains the right to control the prosecution of any applications or registrations for Company Owned IP.
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(e)Except as set forth on Section 3.19(e) of the Company Disclosure Schedules, all necessary registration, maintenance and renewal fees and other payments that have become due in connection with the Registered Company IP have been timely paid in full, with the understanding that “timely” includes payment during a grace period, extension period, further processing period, reinstatement period, or any of its Subsidiaries that wouldother time period, payment during which will not allow such Registered Company IP to lapse, be prohibited by Section 6.2 if such action were takencancelled or otherwise be deemed abandoned or lost. All necessary documents, recordations, certificates and other materials in connection with Registered Company IP required to be filed on or afterbefore the date hereof withoutAgreement Date have been timely filed with the consentrelevant patent, copyright, trademark or other authorities in the United States or foreign jurisdictions, as the case may be, for the purposes of maintaining such Registered Company IP registered in such jurisdiction. Except as set forth on Section 3.19(e) of the Company.
Section 5.9 Litigation. As of the date of this Agreement,Company Disclosure Schedules, there are no Legal Proceedings pendingactions that must be taken by any member of the Company Group within ninety (90) days of the Agreement Date that, if not taken, will result in the loss or delay of any Registered Company IP, including the payment of any registration, maintenance or renewal fees or the filing of any responses to U.S. Patent and Trademark Office (or equivalent authority) actions, documents, applications or certificates for the purposes of obtaining, maintaining, perfecting or preserving or renewing any Registered Company IP.
(f)Except as set forth on Section 3.19(f) of the Company Disclosure Schedules, since January 1, 2017, no member of the Company Group is, or has been, subject to any proceeding or outstanding decree, Order, judgment, injunction, settlement, action, investigation, opposition, interference, reexamination, cancellation, lawsuit, hearing, investigation, complaint, arbitration, mediation, demand, inquiries or requests for documents or any other Intellectual Property dispute, disagreement, or claim, whether brought by a third party or by a member of the Company Group (including, with respect to Trademarks, invalidity, nullity, opposition, cancelation, concurrent use or similar proceeding), whether by subpoena or informal letter, or any Order restricting the any member of the Company Group’s rights in, to and under any Company IP or Company Product, or the validity, enforceability, use, right to use, ownership, registration, right to register, priority, duration, scope or effectiveness of any Company IP or triggering any additional payment obligations with respect to any such Company IP (collectively, “IP Dispute”), nor has any IP Dispute been threatened against any member of the Company Group challenging the legality, validity, enforceability or ownership of any Company IP or Company Product. To the Knowledge of the Company, no circumstances or grounds exist that would give rise to an IP Dispute. Except as set forth on Section 3.19(f) of the Company Disclosure Schedules, no member of the Company Group has sent any notice of any IP Dispute.
(g)None of the Company Owned IP, or to the Knowledge of Parent, threatenedthe Company, any Company Licensed IP, has been adjudged invalid or unenforceable, in writing againstwhole or in part, and, except as set forth on Section 3.19(g) of the Company Disclosure Schedules, to the Knowledge of the Company, no facts or circumstances exist that would render any registrations forming part of the Registered Company IP invalid or unenforceable.
(h)Except as set forth in Section 3.19(h) of the Company Disclosure Schedules, in each case in which a member of the Company Group has acquired any material Intellectual Property that it purports to own from any Third Party (including any contractor or consultant) other than, in the case of Copyrights, by operation of law, such member of the Company Group obtained a written assignment, which, to the Knowledge of the Company, is valid and enforceable and sufficient to irrevocably transfer all of such Third Party’s rights in such Intellectual Property to the member of the Company Group and, to the maximum extent provided for by, and in accordance with, applicable laws, for each registration or registration application for Intellectual Property assigned by a Third Party to a member of the Company Group, the applicable member of the Company Group has recorded each such assignment with the relevant Governmental Authority, including, as applicable, the U.S. Patent and Trademark Office, the U.S. Copyright Office, or their respective equivalents in any relevant foreign jurisdiction, as the case may be.
(i)The Company IT Assets perform in a manner that is sufficient for the Company Group to conduct its Business as currently conducted. The Company IT Assets have not materially malfunctioned or failed since January 1, 2017 and do not, to the Knowledge of the Company, contain any viruses, worms, trojan horses, bugs, faults or other devices, errors, contaminants or effects that (i) significantly disrupt or adversely affect the functionality of any Company IT Asset, except as disclosed in their documentation or (ii) enable or assist any Person to access without authorization any Company IT Asset. The Company Group has implemented commercially reasonable backup, security and disaster recovery technology consistent with current industry practices for comparable businesses and have taken commercially reasonable actions consistent with current industry practices
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for comparable businesses to protect the confidentiality, integrity and security of the Company IT Assets and all information and transactions stored or contained on Company IT Assets. To the Knowledge of the Company, no Person has gained unauthorized access to any Company IT Asset. Section 3.19(i) of the Company Disclosure Schedules sets forth an accurate and complete list and description of all material Company IT Assets other than licenses for Commercial Software. All Company IT Assets are (A) owned by a member of the Company Group, or (B) currently in the public domain or otherwise available to the Company Group without the approval or consent of any Person or (C) to the Knowledge of the Company, licensed or otherwise used by the Company Group pursuant to terms of valid, binding written agreements with third parties, or are provided by Seller or its Affiliates for use by the Company Group under a Seller IP Contract.
(j)Except as set forth in Section 3.19(j) of the Company Disclosure Schedules, no Public Software forms part of, is incorporated into or has been distributed, used or compiled with, in whole or in part, any Company Software or any Software included in the Company IT Assets that are distributed by the Company Group to Third Parties.
(k)Each member of the Company Group is in material compliance with the terms and conditions of all licenses for the Public Software that such member of the Company Group has licensed from a Third Party that forms part of, has been used in connection with the development of, is incorporated into used or compiled with, in whole or in part, any Company Software and any Software included in the Company IT Assets. Except as set forth in Section 3.19(k) of the Company Disclosure Schedules, the Company Group does not use, incorporate or distribute Public Software in a manner that, (A) requires or purports to require the licensing, disclosure or distribution of any source code (other than source code that is a part of such Public Software) of any Company Software or any Software included in the Company IT Assets or of Company Owned IP, to licensees or any other Person, (B) prohibits or limits the receipt of consideration in connection with licensing, sublicensing or distributing any Company Software or other Software included in the Company IT Assets, (C) except as specifically permitted by Law, allows any Person to decompile, disassemble or otherwise reverse-engineer any Company Software other Software included in the Company IT Assets or (D) requires the licensing of Company Software or any other Software included in the Company IT Assets to any other Person for the purpose of making derivative works.
(l)Each member of the Company Group, the Company Products, the operation of the Company’s Business as currently conducted, and the use of the Company IP and Company IT Assets in connection the conduct of the Business as currently conducted, has not infringed, misappropriated or otherwise violated and will not infringe, misappropriate, or otherwise violate the Intellectual Property rights of any Third Party, Seller or its Affiliates, provided that the foregoing representation is made to the Knowledge of the Company with respect to Third Party Patents. There is no Proceeding pending, asserted or threatened against any member of the Company Group concerning any of the foregoing, nor, except as set forth in Section 3.19(l) of the Company Disclosure Schedules, has any member of the Company Group and, to the Knowledge of the Company, any licensor of any Company Licensed IP, since January 1, 2017, received any notification (including any invitation to take a license) that a license under any other Person’s Intellectual Property is or may be required or alleging that the Company Group or such licensor (solely with respect to such Company Licensed IP) has infringed, misappropriated or otherwise violated any Person’s Intellectual Property rights. The Company Group, Seller and its Affiliates are not aware of any facts or circumstances which could lead or give rise to any such claim or assertion of infringement, misappropriation or other violation of Intellectual Property. No Person is, to the Knowledge of the Company, engaging, or, except as set forth in Section 3.19(l) of the Company Disclosure Schedules, has engaged, in any activity that infringes, misappropriates or otherwise violates any Company IP, and there is no Proceeding pending, asserted or threatened by a member of the Company Group against any other Person concerning any of the foregoing. No member of the Company Group has received or requested any opinion of counsel, verbal or written, regarding the validity or enforceability of Company IP or any Intellectual Property of a Third Party or regarding the infringement of any Intellectual Property of any Third Party.
(m)To the Knowledge of the Company, no current or former Company Employee, consultant, advisor or independent contractor of any member of the Company Group is in default or breach of any term of any employment agreement, non-disclosure agreement, assignment of invention agreement or similar agreement relating to Parentthe protection, ownership, development, use or transfer of Company IP or any other Intellectual Property. Except as set forth in Section 3.19(m) of the Company Disclosure Schedules, the Company Group has obtained from all
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current and former Company Employees, consultants, advisors and independent contractors practice, creation or development of any Company Owned IP (any such Person, an “Author” ), through a written assignment, unencumbered and unrestricted exclusive ownership of all right, title and interest in and to such Company Owned IP and the Company Group has obtained the waiver of all non-assignable rights from such Authors. To the Knowledge of the Company, none of the current or former Company Employees, consultants, advisors and independent contractors is or was, at the time services were provided to the Company Group party to any Contract with any Person other than a member of the Company Group which requires such Company Employee, consultant, advisor or independent contractor to (i) assign any interest in any Intellectual Property that is used or held for use in the conduct of the business of the Company Group as it is currently conducted or proposed to be conducted by the Company Group, to any Person other than a member of the Company Group, or (ii) keep confidential any Trade Secrets of any Person other than a member of the Company Group.
(n)The Company Group has taken commercially reasonable steps to maintain the confidentiality and otherwise protect its rights in all Trade Secrets and other confidential or non-public information or data used or held for use in connection with the operation of the Business(“Confidential Information”). To the Knowledge of the Company, all disclosure of Confidential Information by or on behalf of a member of the Company Group to any Third Party, including any Company Employee or other Person, has been subject to a binding obligation of confidentiality on the part of such Third Party and to the Knowledge of the Company, no such Third Party has breached such obligation. All use, disclosure or appropriation by or on behalf of a member of the Company Group of Confidential Information not owned a member of the Company Group has been in compliance with any applicable legal obligations of the Company Group to the owner of such Confidential Information. To the Knowledge of the Company: (i) no former or current Company Employee, consultant, advisor, independent contractor or agent of any member of the Company Group has misappropriated any Trade Secrets of any other Person in the course of performance as a former or current Company Employee, consultant, advisor, independent contractor or agent of any member of the Company Group and (ii) no Company Employee, independent contractor or agent of any member of the Company Group, is in default or breach of any term of any Contract relating in any way to the protection, ownership, development, use or transfer of the Company IP or any other Intellectual Property.
(o)There are no Contracts pursuant to which (i) any member of the Company Group grants any Third Party, Seller or its Affiliates exclusive rights under any Company IP or (ii) any member of the Company Group grants to a Third Party, Seller or its Affiliates a right to grant sublicenses to Third Parties with respect to any Company Owned IP.
(p)Immediately following the Closing, the Company Group (including, as applicable, the Surviving Entity) will have all of the rights of the Company Group under the Company IP and the Company IP Contracts, and to use the Company IT Assets, to the same extent the applicable member of the Company Group would have had immediately prior to the Closing if the Transactions had not occurred, and without the payment of any additional amounts or consideration other than ongoing fees, royalties or payments that the Company would otherwise be required to pay. Except as set forth in Section 3.19(p) of the Company Disclosure Schedules, there are no royalties, honoraria, fees, milestone or other payments payable by any member of the Company Group to any Person (other than salaries payable to Company Employees not contingent on or related to use of their work product and fees payable under licenses for Commercial Software) as a result of the ownership, use, possession, license-in, license-out, sale, marketing, advertising or disposition of any Company IP by a member of the Company Group, and the execution and delivery of this Agreement and consummation of the Transactions will not result in any such royalties, honoraria, fees or other payments being payable by Acquirer, provided, however, that no representation is made with respect to any such payments becoming payable by Acquirer or its Affiliates based on the respective Contracts of Acquirer and its Affiliates (other than the Company Group) or other obligations or any acts or omissions to act by Acquirer or its Affiliates (other than the Company Group), and provided further that the foregoing representations are made to the Knowledge of the Company with respect to any payments required based on infringement of Third Party Patents. None of the execution and delivery of this Agreement, the consummation of the Transactions, or the performance by the Company Parties of their respective obligations hereunder will result in (i) any increase in or acceleration of royalties or other payments payable by a member of the Company Group, Acquirer or its Affiliates in respect of any Company IP; (ii) reduction of any royalties or other payments the Company Group, or Acquirer or any of its Affiliates would otherwise be entitled to in respect of any Company IP;
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(iii) the creation of any Encumbrance on any Company Owned IP or Intellectual Property that is owned by or licensed to the Acquirer or any of its Affiliates prior to the Closing; (iv) Acquirer or any of its Affiliates being bound by or subject to any non- compete or licensing obligation, covenant not to sue or other restriction on the operation or scope of its business, or in the grant or obligation to grant by Acquirer, any of its Affiliates or the Company Group to any Person of any rights with respect to any Intellectual Property, which Acquirer or its Affiliates were not bound by or subject to prior to the Closing; (v) the modification, cancellation, termination, or suspension of any Company IP Contract; or (vi) the creation or enhancement of the right to do or cause any of the foregoing for any non-Company Group party to any such Contracts, except in each case arising from any Contract or other obligation or any acts or omissions to act of Acquirer or any of its Affiliates (other than the Company Group) and except, in each case, as may occur with respect to the modification or termination of a Seller Contract that is replaced by a new Company IP Contract entered into by the Company to replace a Seller Contract in accordance with Section 5.7(b),
(q)Except as set forth in Section 3.19(q) of the Company Disclosure Schedules, none of the Company Owned IP was developed by or on behalf of, or using grants or any other subsidies of, any Governmental Authority or any university, and no government funding, facilities, faculty or students of a university, college, other educational institution or research center was used in the development of Company Owned IP that has resulted in any such Governmental Authority or any university, faculty or students of a university, college, other educational institution or research center, or any other third party, to acquire or to have a right to acquire any right, title or interest in such Company Owned IP. To the Knowledge of the Company, no current or former Company Employee, consultant, advisor or independent contractor of a member of the Company Group, who was involved in, or who contributed to, the creation or development of any Company Owned IP, has performed services for a Governmental Authority, university, college, or other educational institution or research center during a period of time during which such employee, consultant or contractor was also performing services with respect to development of such Company Owned IP for the applicable member of the Company Group.
3.20Privacy, Data and Data Security.
(a)The Company Group’s data, privacy and security practices conform, and at all times have conformed, to all of the Company Privacy Commitments, Privacy Laws and Company Data Agreements in all material respects. The execution, delivery and performance of this Agreement will not cause, constitute, or result in a breach or violation of any Privacy Laws, Company Privacy Commitments, or any Company Data Agreements by the members of the Company Group, provided, however, that no representation is made with respect to any acts or omissions by Acquirer or its Affiliates (other than the Company Group) with respect to any Company Data. Copies of all current Company Privacy Policies have been Delivered to Acquirer and such copies are true, correct and complete. To the Knowledge of the Company, the Company Group has, and, except as may be affected by notices, consents, waivers or new Contracts described in Section 5.7, the Company Group will have, all rights and consents necessary to collect and Process all Company Data and confidential information collected and Processed by them in the Business of the Company Group. The Company Group is not subject to the European Union General Data Protection Regulation.
(b)The Company Group has established and maintains commercially reasonable technical, physical and organizational controls, policies, procedures, safeguards, measures and security systems, plans and technologies with respect to Processing and security of Personal Data required under applicable data security requirements under applicable Privacy Laws, Company Data Agreements and Company Privacy Commitments. The Company Group and, to the Knowledge of the Company, its data processors have taken commercially reasonable steps to ensure that all employees or other Persons with the right to access Company Data are under obligations of confidentiality with respect to such data.
(c)Except as set forth in Section 3.20(c) of the Company Disclosure Schedules, no member of the Company Group has received or become subject to and, to the Knowledge of the Company, there is no circumstance (including any circumstance arising as the result of an audit or inspection carried out by any Governmental Authority) that would reasonably be expected to give rise to, any Proceeding, Order, notice, communication, warrant, regulatory opinion, settlement, audit result or allegation from a Governmental Authority or any other Person: (i) alleging or confirming non-compliance with or breach of a relevant requirement of Privacy Laws or Company Privacy Commitments, (ii) requiring or requesting any member of the Company Group to amend, rectify,
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cease Processing, de-combine, permanently anonymize, block or delete any Company Data (other than pursuant to a valid data subject request in the ordinary course of business), (iii) permitting or mandating relevant Governmental Authorities to investigate, requisition information from, or enter the premises of, a member of the Company Group or (iv) claiming compensation from the Company Group based on a violation of Privacy Laws or Company Privacy Commitments or relating to the Company Group’s Processing of Personal Data.
(d)Where any member of the Company Group uses a data processor other than Seller or its Affiliates to Process Personal Data, there is in existence a written Contract between the Company and each such data processor that complies with the requirements of all Privacy Laws and Company Privacy Commitments. To the Knowledge of the Company, the data processors of the Company Group are in material compliance with Privacy Laws and Company Privacy Commitments with respect to their Processing activities on behalf of the Company Group. To the Knowledge of the Company, such data processors have not breached any such Company Data Agreements pertaining to Personal Data Processed by such Persons on behalf of any member of the Company Group. True, correct and complete copies of all material Company Data Agreements have been Delivered to Acquirer. To the Knowledge of the Company, no member of the Company Group is under investigation by any Governmental Authority for a violation of HIPAA or applicable HIPAA regulations. Each applicable member of the Company Group has entered into “business associate contracts” whether as a “covered entity” or as a “business associate” (as described in 45 C.F.R. § 164.504(e)) to the extent required pursuant to HIPAA and in compliance with all applicable Privacy Laws and is not in breach of any business associate contract.
(e)Except as set forth in Section 3.20(e) of the Company Disclosure Schedules, to the Knowledge of the Company, no material breach (including as defined under 45 C.F.R. § 164.402), security incident (including as defined under 45 C.F.R. § 164.304), unauthorized access or violation of any data security policy in relation to Company Data, Company Databases, or Confidential Information has occurred or is threatened, and there has been no actual or threatened unauthorized or illegal Processing of, or accidental or unlawful destruction, loss or alteration of, any Company Data. To the Knowledge of the Company, no circumstance has arisen in which: (A) applicable Laws (including Privacy Laws) would require the Company or any of its Subsidiaries beforeto notify a Governmental Authority of a data security breach or security incident or (B) applicable guidance or codes of practice promulgated under applicable Laws (including Privacy Laws) would recommend any member of the Company Group to notify a Governmental Entity: (a) challenging or seeking to enjoining, alter or materially delay the Transactions; or (b) that would, individually or in the aggregate, reasonably be expected to be material to Parent.Authority of a data security breach.
Section 5.10 (f)Business Activities ; Liabilities.
(a) Since their respective incorporation, neither Parent, nor Merger SubTo the Knowledge of the Company, the Company Group has conducted any business activities other than activities: (i) in connection with its organization;valid and subsisting contractual rights to Process or (ii) directed toward the accomplishment of a business combination. Except as set forth in the Parent Organizational Documents, there is no Contract or Order binding upon Parent or Merger Sub or to which any of them is a party which has or could reasonably be expected to have the effect of prohibiting or materially impairing any business practice of it, any acquisition of property by it or the conduct of business by it as currently conducted or as currently contemplated to be conducted (including, in each case, following the Closing). Other than under the Transaction Agreements or pursuant to the performance of its obligations thereunder, neither Parent nor Merger Sub has any material liabilities, debts or obligations (absolute, accrued, contingent or otherwise).
(b) Merger Sub was formed solelyProcessed for the purpose of effectingCompany Group all Company-Licensed Data and all Personal Data Processed by or for the transactions contemplated by this Agreement and has not engaged in any business activities or conducted any operations other thanCompany Group in connection with the transactions contemplated herebyconduct of the Business in the manner that it is currently Processed.
(g)To the Knowledge of the Company, any Third Party who has provided Personal Data to a member of the Company Group has done so in compliance with applicable Privacy Laws, including providing notice and obtaining consent required under such applicable Privacy Laws.
(h)The Company Group owns all right, title and interest in and to each element of Company-Owned Data and Company Databases or otherwise has no,all rights, permissions, consents and atauthorizations required to Process such Company-Owned Data and the data in Company Databases in the Business in the manner currently Processed by the Company Group, all times prior toof which rights shall survive unchanged, and without any change in the Effective Time,terms and conditions under which the Company Group has such rights, following the execution and delivery of this Agreement and the consummation of the Transactions except as expressly contemplatedmay be affected by this Agreement, the Transaction Agreements and the other documents and transactions contemplated hereby and thereby, will have no, assets, liabilitiesnotices, consents, waivers or obligations of any kind or nature whatsoever other than those incident to its formation.
(c) Except for this Agreement, the Transaction Agreements, the Transactions and the Parent Materialnew Contracts Parent has no material interests, rights, obligations or liabilities with respect to, and is not party to, bound by or has its assets or property subject to,described in each case whether directly or indirectly, any Parent Material Contract (as defined below) or party to any transaction which is, or would reasonably be interpreted as constituting, a Parent Business Combination. Except for the transactions contemplated by this Agreement, the Transaction Agreements, or the Trust Agreement, Merger Sub does not own or have a right to acquire, directly or indirectly, any interest or investment (whether equity or debt) in any corporation, partnership, joint venture, business, trust or other entity.Section 5.7.
(i)Section 5.11 Parent Material Contracts. Schedule 5.113.20(e) of the ParentCompany Disclosure LetterSchedules sets forth a true, correct and complete list and description of eachCompany Databases.
3.21Transactions with Certain Persons. Except as set forth in Section 3.21(a)of the Company Disclosure Schedules, no Related Party has or has had at any time since January 1, 2019, either directly or indirectly, any material interest, financial or otherwise, in: (a) any Person which purchases from or sells, provides, licenses or furnishes to any member of the Company Group any goods, services property, technology, Intellectual Property or
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other property rights or (b) any Contract to which Parenta member of the Company Group is a party. To the Company’s Knowledge, no event has occurred that has resulted in, or Merger Sub is partywould reasonably be expected to result in, any claim by any employee, officer, director, stockholder or agent of any member of the Company Group for indemnification or advancement of expenses related thereto pursuant to (i) the terms of the Governing Documents of any member of the Company Group, (ii) any indemnification agreement or other Contract between a member of the Company Group and any such employee, officer, director, stockholder or agent or (iii) any applicable Laws. No amounts are owed to or by a member of the Company Group to or from any Related Party except for compensation and reimbursement of expenses.
3.22Insurance. Section 3.22 of the Company Disclosure Schedules sets forth a complete and correct list of all material insurance policies of the Company Group currently in force and effect. True, complete and correct copies of such insurance policies have been Delivered to Acquirer. Except as set forth in Section 3.22 of the Company Disclosure Schedules, there is no material claim pending under any such policies. All such insurance policies insure the applicable member of the Company Group in reasonably sufficient amounts against normal risks usually insured against by Persons operating similar businesses or properties of similar size in the localities where such businesses or properties are located, and are sufficient for compliance in all material respects with applicable Law and for compliance with applicable obligations under any material Contract of such member of the Company Group. No member of the Company Group has any self-insurance or co-insurance programs. All premiums due and payable under all such policies have been paid and no member of the Company Group is in material Default under any provision of any such insurance policy and no member of the Company Group has received any written notice of threatened termination, cancellation or nonrenewal of any such insurance.
3.23No Brokers. Except as set forth in Section 3.23 of the Company Disclosure Schedules, no member of the Company Group or any of its Representatives has entered into any Contract with any broker, finder or similar agent or any Person which greaterwill result in an obligation of Acquirer, any member of the Company Group, or any of their respective Affiliates to pay any finder’s fee, brokerage fees or commission or similar payment in connection with the Transactions.
3.24Books and Records. The Company Group has made and kept true, complete and correct copies of its books and records and accounts, which set forth in reasonable detail and accurately and fairly reflect the activities of each member of the Company Group. The books, records and accounts of each member of the Company Group have been maintained in accordance with reasonable business practices on a basis consistent with prior years.
3.25Bank Accounts. Section 3.25 of the Company Disclosure Schedules contains a complete and correct list of all bank accounts maintained by the Company Group, including each account number and the name and address of each bank and the name of each Person who has signature power with respect to each such account or power of attorney to act on behalf of any member of the Company Group. Holdco2 has Delivered to Acquirer true, complete and correct copies of all statements with respect to such bank accounts received by a member of the Company Group.
3.26Customers, Suppliers and Third Party Payors.
(a)Section 3.26(a) of the Company Disclosure Schedules sets forth a list of Payor Parties that generated in excess of $100,000 of revenue for the Business during the 12-month period ended December 31, 2021 (such parties, “Top Payors”), together with the revenue amount derived from each such Top Payor for such 12-month period. Except as set forth in Section 3.26(a) of the Company Disclosure Schedules, no member of the Company Group or Seller currently has or has since January 1, 2017 had any material disputes with any Payor Party related to the Business. Except as set forth in Section 3.26(a) of the Company Disclosure Schedules, no member of the Company Group or Seller has received written notice from any Payor Party that such Payor Party shall not continue its relationship with the Company Group or, to the extent applicable to the Business, Seller, after the Closing or that such Top Payor intends to terminate or materially modify an existing Contract with any member of the Company Group or Seller, as applicable. For purposes of this Section 3.26(a), a “material dispute” means any alleged overpayments, erroneous payments or underpayments, which, individually or in the aggregate, exceed 10% of annual payor revenue or $150,000, whichever is less.
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(b)Section 3.26(b)of the Company Disclosure Schedules sets forth a list of customers (other than $50,000Payor Parties) that generated in excess of $400,000 of revenue for the Business during the 12- month period ended December 31, 2021 (the “Top Customers”), together with the revenue amount derived from each such Top Customer for such 12-month period. No member of the Company Group has outstanding material disputes with any Top Customer. No member of the Company Group or Seller has received written notice from any Top Customer that such Top Customer shall not continue as a customer of the Company Group after the Closing or that such Top Customer intends to terminate or materially modify an existing Contract with the applicable member of the Company Group.
(c)Section 3.26(a) of the Company Disclosure Schedules sets forth a a list of suppliers or providers of services to the Company Group that generated in excess of $500,000 in expenditures by the Business during the 12-month period ending on December 31, 2021 (the “Top Suppliers”), together with the amount paid to each such Top Supplier for such 12-month period. No member of the Company Group has outstanding material disputes with any Top Supplier. No member or the Company Group or Seller has received written notice from any Top Supplier that such Top Supplier shall not continue as a supplier or service provider of the Company Group after the Closing or that such Top Supplier intends to terminate or materially modify an existing Contract with it’s the applicable member of the Company Group.
3.27Inventory. The inventories shown on the Company Balance Sheet (net of any reserve on the Company Balance Sheet) or thereafter acquired by the Company Group, consisted of items of a quantity and quality usable or salable in the Ordinary Course of. Business. Since the Company Balance Sheet Date, the Company Group has continued to maintain inventories in the Ordinary Course of. Business. No member of the Company Group has received written, or to the Knowledge of the Company, oral notice that it will experience in the foreseeable future any difficulty in obtaining, in the desired quantity and quality and at a reasonable price and upon reasonable terms and conditions, the raw materials, supplies or component products required for the manufacture, assembly or production of its products.
3.28No Additional Representations. THE COMPANY ACKNOWLEDGES AND AGREES THAT, EXCEPT AS EXPRESSLY SET FORTH IN ARTICLE 4, NO ACQUIRER PARTY, NO REPRESENTATIVE OF ANY ACQUIRER PARTY OR ANY OTHER PERSON MAKES ANY REPRESENTATION OR WARRANTY, EXPRESSED OR IMPLIED, AT LAW OR IN EQUITY, WITH RESPECT TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING THE MERGERS, THE ACQUIRER PARTIES (OR ANY OF THEM), OR ANY INFORMATION PROVIDED OR MADE AVAILABLE TO THE COMPANY OR ITS REPRESENTATIVES IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY (INCLUDING ANY FORECASTS, PROJECTIONS, ESTIMATES OR BUSINESS PLANS), AND ALL OTHER SUCH REPRESENTATIONS OR WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE ACQUIRER PARTIES
The Acquirer Parties hereby represent and warrant to Seller as follows, with each such representation and warranty subject to (x) the exceptions set forth in the Acquirer Disclosure Schedules (it being understood that the Acquirer Disclosure Schedules shall be arranged in sections corresponding to the sections and subsections contained in this Article 4, and no disclosure made in any particular section of the Acquirer Disclosure Schedules shall be deemed to be made in any other section of the Acquirer Disclosure Schedules unless expressly made therein (by cross-reference or otherwise) or to the extent it is reasonably expectedapparent from a reading of the text of the disclosure that such disclosure is applicable to be duesuch other sections and subsections of the Acquirer Disclosure Schedules) and (y) matters disclosed in any single calendar year and pursuant (the “Parent Material Contracts”), other than any such Parent Material Contract that is listed as an exhibit to Parent’s Form S-1 Registration Statement, initiallythe SEC Reports filed with the SEC on August 14, 2020. Toprior to the Agreement Date (to the extent Parentthe qualifying nature of the matters disclosed and the disclosure thereof is readily apparent from the disclosure thereof in such SEC Reports), excluding disclosures contained in sections entitled “Forward-Looking Statements” and “Risk Factors” (and any similarly titled sections) and any other disclosures contained in the SEC Reports to the extent they are of a predictive or Merger Subcautionary nature or related to forward-looking statements; provided, that, none of the qualifications contained in clauses (x) and (y) of the immediately preceding sentence shall apply to the representations and warranties contained in Section 4.3.
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4.1Organization of Acquirer Parties. Each Acquirer Party is either a corporation or limited liability company duly organized and validly existing and in good standing under the Laws of the jurisdiction of its incorporation or formation, with the requisite corporate or limited liability company power and authority to conduct its business as it is presently being conducted, to own, lease or operate, as applicable, its assets and properties, and to perform all of its obligations under its Contracts.
4.2Authorization.
(a)Each Acquirer Party has all requisite corporate or limited liability company power and authority, and, except for the Acquirer Stockholder Approval, has taken all corporate or limited liability company action necessary, to execute, deliver and perform its obligations under this Agreement and the Ancillary Agreements and to consummate the transactions contemplated to be consummated by it hereby and thereby. This Agreement and the Ancillary Agreements to which an Acquirer Party is a party have been duly executed and delivered by each Acquirer Party thereto and, assuming the due authorization, execution and delivery hereof and thereof by the other parties hereto and thereto, constitute the legal, valid and binding obligation of each Acquirer Party thereto, enforceable against such Acquirer Party in accordance with their respective terms, except as enforcement may be limited by the Enforceability Exceptions.
(b)The Acquirer Stockholder Approval is the only vote of the holders of any voting securities of Acquirer under any Law, the rules and regulations of Nasdaq, and Acquirer’s certificate of incorporation and bylaws necessary to a Contract thatapprove the Transactions.
4.3Capitalization.
(a)The authorized capital stock of Acquirer consists of 380,000,000 shares of common stock, par value of $0.0001 per share and 1,000,000 shares of preferred stock, par value of $0.0001 per share. As of December 31, 2021, 242,578,824 shares of Acquirer common stock were issued and outstanding, and no shares of Acquirer’s preferred stock were issued and outstanding. As of December 31, 2021, Acquirer had reserved 33,354,727 shares of Acquirer’s common stock for issuance upon the exercise of outstanding common stock options, 12,600,859 shares of Acquirer’s common stock for issuance upon the vesting of restricted stock units, 21,994,972 shares of Acquirer’s common stock for issuance upon conversion of Acquirer’s outstanding warrants, and 15,434,321 shares of Acquirer’s common stock were available for issuance under Acquirer’s 2021 Equity Incentive Plan. There are no options, warrants, convertible securities or other rights or Contracts pursuant to which Acquirer is obligated to issue or sell any of its securities, other than this Agreement, the Ancillary Documents, Acquirer’s employee stock purchase plan, Acquirer’s equity incentive plans and awards thereunder, inducement awards granted by Acquirer and Acquirer’s outstanding warrants, the SPAC Merger Agreement and Acquirer is not a Parent Materialparty to any Contract Parentpursuant to which it is obligated to register any of its securities under the Securities Act (other than the Ancillary Documents, the SPAC Merger Agreement and the registration rights agreement and subscription agreements entered into with investors in connection with the SPAC Merger Agreement) or with respect to the voting of any securities issued by Acquirer.
(b)The shares of Acquirer Stock to be issued in accordance with this Agreement will, upon such issuance, be duly authorized, validly issued, fully paid and non-assessable, free of statutory or contractual pre-emptive rights and free of any Encumbrances (other than this Agreement and restrictions on transfer under the Securities Act and applicable U.S. state securities laws). Subject to the accuracy of Seller’s representations set forth herein and in the Ancillary Agreements, the offer, sale and issuance of the shares of Acquirer Stock as contemplated by this Agreement are exempt from the registration requirements of the Securities Act.
(c)The equity securities of each of Merger Sub (as applicable) may terminate suchI and Merger Sub II (i) have been duly authorized and validly issued and are fully paid and nonassessable, (ii) were issued in compliance in all material respects with applicable Law, and (iii) were not issued in breach or violation of any preemptive rights or Contract to which Acquirer is a party or bound. All of the outstanding equity securities of Merger Sub I and Merger Sub II are owned by Acquirer free of any Encumbrances (other than this Agreement and restrictions on transfer under the Securities Act and applicable U.S. state securities laws). Neither Merger Sub I nor Merger Sub II has any Subsidiaries or owns, directly or indirectly, any equity securities in any Person.
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4.4Noncontravention.
(a)The execution, delivery and performance by each Acquirer Party and each Acquirer Party’s compliance with this Agreement and consummation by each Acquirer Party of the Transactions do not and will not (i) violate the Governing Documents of Acquirer, Merger Sub, (ii) violate any loan or credit agreement, guarantee, note, bond, mortgage, indenture, lease or other Contract without post-termination liabilityagreement, permit, franchise or obligation beyond payments owing throughlicense to which, as of the date of termination.this Agreement, Acquirer is a party or by which Acquirer’s properties or assets are bound, (iii) violate any statute or any judgment, order, rule or regulation of any court or governmental agency, taxing authority or regulatory body, domestic or foreign, having jurisdiction over Acquirer or any of its properties or (iv) assuming any consents and approvals referred to in Section 4.4(b) are duly obtained, conflict with or constitute a Default under any Laws, Orders or Permits applicable to the Acquirer Parties, except, in the case of clauses (i) and (iv) for any such violation or Default which would not materially affect the Acquirer Parties’ ability to perform any of their respective obligations hereunder or consummate the Transactions, and, in the case of clauses (ii) and (iii), for Defaults or violations that have not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
Section 5.12 (b)Parent ListingOther than the filing of the Certificate of Merger for the Merger, filings with the SEC and Nasdaq and such filings and notifications as may be required to be made by Acquirer in connection with the Transactions under the HSR Act or other applicable Antitrust Laws and the expiration or early termination of the applicable waiting period under the HSR Act or other applicable Antitrust Laws, no consent, approval, Order or authorization of, or registration, declaration, or filing with, any Governmental Authority or any other Person is required to be made, obtained or given by any Acquirer Party in connection with the execution, delivery and performance by each Acquirer Party of this Agreement or the consummation by each Acquirer Party of the Transactions.
4.5Compliance with Laws. The issuedEach Acquirer Party is in compliance with all applicable laws and outstanding Parent Units are registered pursuanthas not received any written communication from a governmental entity that alleges that Acquirer is not in compliance with or is in default or violation of any applicable law, except where such non-compliance, default or violation would not, individually or in the aggregate, be reasonably likely to Section 12(b) of the Exchange Act and are listed for trading on the Nasdaq Capital Market (“have a Material Adverse Effect.
4.6NasdaqSecurities Law Matters.
(a)”) under the symbol “CMLFU”. The issued and outstanding shares of Parent Class AAcquirer Stock are registered pursuant to Section 12(b) of the Exchange Act, and are listed for trading on Nasdaq under the symbol “CMLF”“SMFR”. The issued and outstanding Public Warrants are registered pursuant to Section 12(b) of the Exchange Act and are listed for trading on Nasdaq under the symbol “CMLFW”. Parent is a member in good standing with Nasdaq. There is no suit, action, proceeding or proceedinginvestigation pending or, to the Knowledge of Parent,Acquirer, threatened in writing against ParentAcquirer by Nasdaq or the SEC with respect to any intention by such entity to deregister the Parent Units, the shares of Parent Class AAcquirer Stock or Public Warrantsprohibit or terminate the listing of Parentthe Acquirer Stock on Nasdaq. NoneNasdaq, excluding, for the purposes of Parent or anyclarity, the customary ongoing review by Nasdaq of its Affiliatesthe Acquirer’s listing of additional shares application in connection with the Transactions. Acquirer has taken anyno action in an attemptthat is designed to terminate or is reasonably expected to result in the termination of the registration of the Parent Units, the Parent Class AAcquirer Stock or Public Warrants under the Exchange Act.
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Section 5.13 Equity Financing Amount. Section 5.13Act or the listing of the Parent Disclosure Letter sets forth a true, accurateAcquirer Stock on Nasdaq and complete list of each of the subscription agreements (the “Equity Financing Agreements”) entered into by Parent with the applicable investors named therein (collectively, the “Equity Financing Investors”), pursuant to which the Equity Financing Investors have committed to provide equity financing to Parentis in the aggregate amount of $350,000,000 (the “Equity Financing Amount”). The Equity Financing Amount, together with the amount in the Trust Account at the Closing, are in the aggregate sufficient to enable Parent to: (a) pay all cash amounts required to be paid by Parent or its Subsidiaries under or in connection with this Agreement; and (b) pay any and all fees and expenses of or payable by Parent with respect to the Transactions. To Parent’s Knowledge with respect, as of the date hereof, the Equity Financing Agreements are in full force and effect and have not been withdrawn or terminated, or otherwise amended or modified, in any respect, and no withdrawal, termination, amendment or modification is contemplated by Parent. Each Equity Financing Agreement is a legal, valid and binding obligation of Parent and, to Parent’s Knowledge, each Equity Financing Investor. As of the date hereof, Parent does not know of any facts or circumstances that may reasonably be expected to result in any of the conditions set forth in any Equity Financing Agreement not being satisfied, or the Equity Financing Amount not being available to Parent, on the Closing Date. No event has occurred that, with or without notice, lapse of time or both, would constitute a default or breach on the part of Parent under any material term or condition of any Equity Financing Agreement and, as of the date hereof, Parent has no reason to believe that it will be unable to satisfycompliance in all material respects on a timely basis any termwith the listing requirements of Nasdaq.
(b)Each report, statement and form (including exhibits and other information incorporated therein) filed by Acquirer with the SEC under Sections 13(a), 14(a) or condition of closing to be satisfied by it contained in any Equity Financing Agreement. The Equity Financing Agreements contain all15(d) of the conditions precedent (other than the conditions contained in the other Transaction Agreements) to the obligations of the Equity Financing Investor to contribute to Parent the applicable portion of the Equity Financing Amount set forth in the applicable Equity Financing Agreement on the terms therein.
Section 5.14 Trust Account.
(a) As of January 29, 2021, Parent had $442,767,712.12 in a trust account (the “Trust Account”), maintained and invested pursuant to that certain Investment Management Trust Agreement (the “Trust Agreement”) effective as of September 1, 2020, by and between Parent and Continental Stock Transfer & Trust Company, a New York corporation (“Continental”) for the benefit of its public stockholders, with such funds invested in United States Government securitiesExchange Act or money market funds meeting all of the applicable conditions under Rule 2a-7 promulgated under the Investment Company Act. Other thanfiled pursuant to the Trust Agreement and the Equity Financing Agreements, the obligations of Parent under this Agreement are not subject to any conditions regarding Parent’s, its Affiliates’, or any other Person’s ability to obtain financing for the consummation of the Transactions.
(b) The Trust Agreement has not been amended or modified and is valid and in full force and effect and is enforceable in accordance with its terms, except insofar as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally or by principles governing the availability of equitable remedies. Parent hasSecurities Act since July 22, 2021 (the “SEC Reports”) when filed complied in all material respects with the termsrequirements of the Trust AgreementSecurities Act and is not in breach thereof or default thereunderthe Exchange Act and there does not existthe rules and regulations of the SEC promulgated thereunder. None of the SEC Reports filed under the Trust Agreement any event which, with the giving of notice or the lapse of time, would constitute such a breach or default by Parent or, to the Knowledge of Parent, Continental. There are no separate Contracts, side letters or other understandings (whether written or unwritten, express or implied): (i) between Parent and Continental that would cause the description of the Trust Agreement in the Parent SEC Reports to be inaccurate in any material respect; or (ii) to the Knowledge of Parent, that would entitle any Person (other than stockholders of Parent holding Parent Class A Stock sold in Parent’s initial public offering who shall have elected to redeem their shares of Parent Class A Stock pursuant to Parent’s Charter Documents) to any portion of the proceeds in the Trust Account. Prior to the Closing, none of the funds held in the Trust Account may be released except: (A) to pay income and franchise taxes from any interest income earned in the Trust Account; and (B) to redeem Parent Class A Stock in accordance with the provisions of Parent’s Charter Documents. There are no Legal Proceedings pending or, to the Knowledge of Parent, threatened in writing with respect to the Trust Account. Parent has performed all material obligations required to be performed by it to date under, and is not in default, breach or delinquent in performance or any other respect (claimed or actual) in connection with, the Trust Agreement, and no event has occurred which, with due notice or lapse of time or both, would constitute such a default or breach thereunder. As of the Effective Time, the obligations of Parent to dissolve or liquidate pursuant to Parent’s Charter Documents shall terminate, and as of the
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Effective Time, Parent shall have no obligation whatsoever pursuant to Parent’s Charter Documents to dissolve and liquidate the assets of Parent by reason of the consummation of the transactions contemplated hereby. To the Knowledge of Parent, following the Effective Time, no stockholder of Parent shall be entitled to receive any amount from the Trust Account exceptExchange Act (except to the extent such stockholder of Parent validly elects to redeem their shares of Parent Class A Stock. As of the date hereof, assuming the accuracy of the representations and warranties of the Companythat information contained herein and the compliancein any SEC Report has been superseded by the Company with its obligations hereunder, neither Parent nor Merger Sub have any reason to believe that any of the conditions to the use of funds in the Trust Account will not be satisfied or funds available in the Trust Account will not be available to Parent and Merger Sub on the Closing Date.
Section 5.15 Taxes.
(a) All material Tax Returns required to be filed by Parent have beena later timely filed (after giving effect to any valid extensions) and all such Tax Returns are true, correct and complete in all material respects.
(b) Parent has paid all material amounts of its Taxes which are due and payable.
(c) Parent has complied in all material respects with all Applicable Legal Requirements relating to withholding and remittance of all material amounts of Taxes and all material amounts of Taxes required by Applicable Legal Requirements to be withheld by Parent have been withheld and paid over to the appropriate Governmental Entity.
(d) No deficiency for any material amount of Taxes has been asserted or assessed by any Governmental Entity in writing against Parent (nor to the Knowledge of Parent is there any), which deficiency has not been paid or resolved. No material audit or other proceeding by any Governmental Entity is currently pending or threatened in writing against Parent with respect to any Taxes due from Parent.
(e) There are no Tax indemnification agreements or Tax sharing agreements under which Parent could be liable after the Closing Date for the Tax liability of any Person other than Parent or Merger Sub, except for customary agreements or arrangements with customers, vendors, lessors, lenders and the like or other similar agreements, in each case, that do not relate primarily to Taxes.
(f) Parent has not consented to extend the time in which any material Tax may be assessed or collected by any Governmental Entity (other than pursuant to extensions of time to file Tax Returns obtained in the ordinary course of business), which extension is still in effect and no written request for any such waiver or extension is currently pending.
(g) Parent will not be required to include any material item of income in, or exclude any material item or deduction from, taxable income for any taxable period beginning after the Closing Date or, in the case of any taxable period beginning on or before and ending after the Closing Date, the portion of such period beginning after the Closing Date, as a result of: (i) an installment sale or open transaction disposition that occurred prior to the Closing; (ii) any change in method of accounting on or prior to the Closing, including by reason of the application of Section 481 of the Code (or any analogous provision of state, local or foreign Tax Legal Requirements); or (iii) any closing agreement pursuant to Section 7121 of the Code or any similar provision of state, local or foreign Tax Legal Requirements entered into prior to the Closing.
(h) There are no liens for material amounts of Taxes (other than Permitted Liens) upon any of Parent’s assets.
Section 5.16 Information Supplied. None of the information supplied or to be supplied by Parent for inclusion or incorporation by reference in the Proxy Statement will, at the date mailed to stockholders of Parent or at the time of the Special Meeting, containSEC Report) contained, when filed, any untrue statement of a material fact or omitomitted to state anya material fact required to be stated therein or necessary to make the statements therein not misleading, in the case of any SEC Report that is a registration statement, or included, when filed, any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they arewere made, not misleading. Notwithstandingmisleading, in the foregoing, Parent makescase of all other SEC Reports. Acquirer has timely filed each SEC Report that Acquirer was required to file with the SEC since July 22, 2021. There are no representation, warrantymaterial outstanding or covenantunresolved comments in comment letters from the SEC staff with respect to: (a) statementsto any of Acquirer’s SEC Reports. In addition, Acquirer has made or incorporated by reference therein based on information supplied byavailable to Seller (including via the Company orSEC’s EDGAR system) a copy of the Company Subsidiaries for inclusion or incorporation by referenceSEC Reports since July 22, 2021. Except as disclosed in the Proxy Statement; or (b)SEC Reports,
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each of the Sema4 Financial Statements (including, in each case, any projections or forecasts includednotes thereto) contained in the Proxy Statement.SEC Reports was prepared in accordance with U.S. generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC), each complied in all material respects with the rules and regulations of the SEC with respect thereto as in effect at the time of filing and each fairly presents, in all material respects, the financial position, results of operations and cash flows of Acquirer or Mount Sinai Genomics, Inc. d/b/a Sema4 (“Legacy Sema4”), as applicable, as at the respective dates thereof and for the respective periods indicated therein. For purposes of this Section 4.6(b), the “Sema4 Financial Statements” means, to the extent contained in the SEC Reports, (i) the audited balance sheets of Legacy Sema4 as of December 31, 2020 and 2019, the related statements of operations and comprehensive loss, redeemable convertible preferred stock and stockholders’ deficit and cash flows for each of the three years in the period ended December 31, 2020, and the related notes, (ii) the unaudited condensed financial statements of Legacy Sema4 as of March 31, 2021 and for the three months ended March 31, 2021 and 2020 and the related notes, (iii) the unaudited condensed financial statements of Legacy Sema4 as of June 30, 2021 and for the three and six months ended June 30, 2021 and 2020 and the related notes, and (iv) the unaudited condensed consolidated financial statements of Acquirer as of September 30, 2021 and for the three months and nine months ended September 30, 2021 and 2020 and the related notes.
4.7No Proceedings. Except for such matters as have not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, there is no (i) investigation, action, suit, claim or other proceeding, in each case by or before any Governmental Authority pending, or, to the Knowledge of Acquirer, threatened against any Acquirer Party or (ii) judgment, decree, injunction, ruling or order of any governmental entity outstanding against any Acquirer Party.
4.8No Brokers. No Acquirer Party has entered into any Contract with any broker, finder or similar agent or any Person which will result in Seller being obligated to pay any finder’s fee, brokerage fees or commission or similar payment in connection with the Transactions.
4.9No Insolvency Proceedings. Neither Acquirer nor any of its subsidiaries has taken any steps to seek protection pursuant to any law or statute relating to bankruptcy, insolvency, reorganization, receivership, liquidation, administration or winding up or failed to pay its debts when due, nor does Acquirer or any subsidiary have any knowledge or reason to believe that any of their respective creditors intend to initiate involuntary bankruptcy proceedings or seek to commence an administration.
4.10Not an Investment Company. Acquirer is not, and immediately after the consummation of the Transactions, will not be, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
4.11Anti-Corruption Laws. There has been no action taken by Acquirer, or, to the Knowledge of Acquirer, any officer, director, equityholder, manager, employee, agent or representative of Acquirer, in each case, acting on behalf of Acquirer, in violation of any applicable Anti-Corruption Laws (as herein defined), (i) Acquirer has not been convicted of violating any Anti-Corruption Laws or subjected to any investigation by a Governmental Authority for violation of any applicable Anti-Corruption Laws, (ii) Acquirer has not conducted or initiated any internal investigation or made a voluntary, directed, or involuntary disclosure to any Governmental Authority regarding any alleged act or omission arising under or relating to any noncompliance with any Anti-Corruption Laws and (iii) Acquirer has not received any written notice or citation from a Governmental Authority for any actual or potential noncompliance with any applicable Anti-Corruption Laws. As used herein, “Anti-Corruption Laws” means any applicable laws relating to corruption and bribery, including the U.S. Foreign Corrupt Practices Act of 1977 (as amended), the UK Bribery Act 2010, and any similar law that prohibits bribery or corruption.
4.12Taxes. Except as provided in Section 4.12 of the Acquirer Disclosure Schedules:
(a)Each member of the Acquirer Group, and any consolidated, combined, unitary or aggregate group composed of members of the Acquirer Group for Tax purposes, has timely filed all federal income Tax Returns and other material Tax Returns it is required to have filed. All Tax Returns filed by or with respect to any member of the Acquirer Group are accurate, complete and correct in all material respects.
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Section 5.17 (b)Employees; Benefit Plans. Other than any former officers or as describedEach member of the Acquirer Group has paid in the Parent SEC Reports, Parent has never had any employees. Other than reimbursement of any out-of-pocket expenses incurred by Parent’s officers and directorsfull all material Taxes required to have been paid. All Taxes due in connection with activities on Parent’s behalfthe operations of each member of the Acquirer Group until the Closing Date have been paid in an aggregate amount notfull. No member of the Acquirer Group has any Liability for Taxes in excess of the amountamounts so paid, except for Taxes which are not yet due and payable.
(c)The balance sheet of cash held by Parent outsideAcquirer dated September 30, 2021 set forth in the SEC Documents included reflects all Liabilities for unpaid Taxes of the Trust Account, ParentAcquirer Group for periods (or portions of periods) through such date. The Acquirer Group does not have any Liability for unpaid Taxes accruing after such date except for Taxes arising in the Ordinary Course of Business subsequent to such date.
(d)Within the last five (5) years, no claim has no unsatisfied material liabilitybeen made by any Governmental Authority in any jurisdiction where a member of the Acquirer Group does not file Tax Returns that such member is or may be subject to Tax by that jurisdiction.
(e)No extensions or waivers of statutes of limitations with respect to the Tax Returns have been given by or requested from the Acquirer Group (except for extensions to file Tax Returns that are granted automatically under applicable Law).
(f)There is (i) no past or pending audit of, or Tax controversy associated with, any employee. Parent doesTax Return of a member of the Acquirer Group that has been or is being conducted by a Tax Authority which has not currently maintainbeen fully settled or resolved and (ii) no other procedure, proceeding or contest of any refund or deficiency in respect of Taxes pending or on appeal with any Governmental Authority.
(g)All deficiencies asserted or assessments made against any member of the Acquirer Group as a result of any examinations by any Tax Authority have been fully paid.
(h)There are no Encumbrances for Taxes upon the assets of any directmember of the Acquirer Group other than Encumbrances arising by operation of Law for Taxes not yet due and payable.
(i)The Acquirer Group has collected and remitted all Sales Taxes with respect to sales made or services provided and, for all sales or provision of services that are exempt from Sales Taxes and that were made without charging or remitting Sales Taxes, the Acquirer Group has received and retained any required Tax exemption certificates or other documentation qualifying such sale or provision of services as exempt.
(j)No member of the Acquirer Group is party to or bound by any Tax indemnity, Tax sharing, Tax allocation or similar agreement, and no member of the Acquirer Group has any Liability or potential Liability to any Third Party under any such agreement.
(k)No member of the Acquirer Group is party to and has not requested any closing agreement (as described in Section 7121 of the Code or any corresponding, analogous, or similar provision under any state, local or foreign Law related to Taxes), offer in compromise, technical advice memoranda, private letter ruling or other similar agreement with any Tax Authority.
(l)No member of the Acquirer Group has ever entered into any “listed transaction” as defined in Treasury Regulations Section 1.6011 4(b) or any similar provision under state, local or foreign law. Each member of the Acquirer Group has disclosed on its U.S. federal income Tax Returns all positions taken therein that could give rise to a “substantial understatement of income tax” within the meaning of Section 6662 of the Code (or any comparable, analogous or similar provision under any state, local or foreign Law related to Taxes).
(m)Acquirer has (i) except for being a member of the Acquirer Group, never been a member of an affiliated group of corporations, within the meaning of Section 1504 of the Code (or any predecessor provision or comparable provision of state, local or foreign Law), or a member of a combined, consolidated or unitary group for state, local or foreign Tax purposes; and (ii) no Liability for Taxes of any Person under Treasury Regulations Section 1.1502-6 (or any corresponding provision of state, local or foreign Law related to income Taxes), as transferee or successor, by Contract or otherwise.
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(n)No member of the Acquirer Group is subject to Tax in any jurisdiction other than the jurisdiction in which it is formed or organized by virtue of having employees, a permanent establishment or any other place of business in such jurisdiction.
(o)No member of the Acquirer Group has ever been a “distributing corporation” or a “controlled corporation” in connection with a distribution described in Section 355 of the Code.
(p)Each member of the Acquirer Group has withheld and paid all material Taxes required to be withheld in connection with any amounts paid or owing to any employee, creditor, independent contractor or other Third Party.
(q)No member of the Acquirer Group (i) has agreed, or is required, to make any adjustment under Section 481(a) of the Code by reason of a change in accounting method or otherwise for a Pre-Closing Tax Period; (ii) has made an election, or is required, to treat any of its assets as owned by another Person pursuant to the provisions of former Section 168(f) of the Code or as tax-exempt bond financed property or tax-exempt use property within the meaning of Section 168 of the Code; (iii) has acquired, or owns, any assets that directly or indirectly secure any debt the interest on which is tax exempt under Section 103(a) of the Code; or (iv) has made any of the foregoing elections, or is required to apply any of the foregoing rules, under any comparable state or local Law related to Taxes.
(r)No member of the Acquirer Group will be required to include in a Post-Closing Tax Period taxable income attributable to income that accrued (for purposes of financial statements) in a Pre-Closing Tax Period but was not recognized for Tax purposes in any Pre-Closing Tax Period as a result of (i) the installment method of accounting, the completed contract method of accounting, the long-term contract method of accounting, or the cash method of accounting, (ii) any prepaid amount received or paid in a Pre-Closing Tax Period, (iii) any deferred intercompany transaction in a Pre-Closing Tax Period or excess loss account, (iv) a change in method of accounting or Section 481 of the Code in a Pre-Closing Tax Period, (v) any inclusion under Section 951(a) or Section 951A of the Code, (vi) any gain recognition agreement entered into in a Pre-Closing Tax Period, (vii) any transaction under which previously utilized Tax losses or credits may be recaptured (including a dual consolidated loss or an excess loss account), (viii) Section 1400Z-2(a)(1)(A) of the Code, or (ix) any comparable provisions of state or local Tax law, domestic or foreign, or for any other reason. The Acquirer Group has not made an election pursuant to Section 965(h) of the Code to pay the net tax liability under any benefit plan, and neither the execution and delivery of this Agreement or the other Transaction Agreements nor the consummationSection 965 of the Transactions will, either aloneCode in installments.
(s)No member of the Acquirer Group has applied for and not yet received a ruling or determination from a Tax Authority regarding a past or prospective transaction.
(t)(x) Each member of the Acquirer Group has (i) to the extent deferred, properly complied in all respects with applicable Law in order to defer the amount of the employer’s share of any “applicable employment taxes” under Section 2302 of the CARES Act, and (ii) to the extent applicable, eligible, and claimed, properly complied in all material respects with applicable Law and duly accounted for any available Tax credits under Sections 7001 through 7004 of the Families First Coronavirus Response Act and Section 2301 of the CARES Act, and (iii) not deferred any payroll Tax obligations (including those imposed by Sections 3101(a) and 3201 of the Code) (for example, by a failure to timely withhold, deposit or remit such amounts in accordance with the applicable provisions of the Code and the Treasury Regulations) pursuant to or in connection with any other event: (a) result inU.S. presidential memorandum or executive order, and (iv) not sought a PPP Loan.
(u)Each such nonqualified deferred compensation plan to which the Company or any payment (including severance, unemployment compensation, golden parachute, bonus or otherwise) becoming due to any director, officer or employee of Parent; (b) result inits Subsidiaries is a party complies with the accelerationrequirements of paragraphs (2), (3) and (4) of Section 409A(a) of the timeCode by its terms and has been operated in accordance with such requirements. No event has occurred that would be treated by Section 409A(b) of payment or vestingthe Code as a transfer of property for purposes of Section 83 of the Code. No member of the Acquirer Group is under any such benefits; or (c) give riseobligation to gross up any “excess parachute payment” as defined inTaxes under Section 280G(b)(1)409A of the Code or otherwise.
4.13Environmental Laws and Regulations. Acquirer and all facilities or real property currently owned, leased or operated by Acquirer, are now and, since such time as Acquirer has owned, leased or operated the facilities or real property, have been in compliance in all material respects with all applicable Environmental Laws. Acquirer has not, since Acquirer has owned, leased or operated the facilities or real property, received from any excise tax owingGovernmental
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Authority any notice or demand letter alleging that Acquirer is in violation of any Environmental Law, and Acquirer is not subject to any Order of any Governmental Authority imposing liability or obligations relating to any Environmental Law, in each case except as is not, and would not reasonably be expected to be, material to Acquirer and its Subsidiaries, taken as a whole. There has been no release by Acquirer, or for which Acquirer would reasonably be expected to be liable by Contract or by operation of Law, of any Hazardous Substance at, under, from or to any facility or real property currently or formerly owned, leased or operated by Acquirer, in each case except as is not, and would not reasonably be expected to be, material to Acquirer and its Subsidiaries, taken as a whole. Acquirer has not assumed, undertaken or otherwise become subject to any liability of another Person relating to Environmental Laws, except as is not, and would not reasonably be expected to be, material to Acquirer and its Subsidiaries, taken as a whole.
4.14Litigation. Except as set forth in Section 49994.13 of the Code.Acquirer Disclosure Schedules or as is not, and would not reasonably be expected to be, material to Acquirer and its Subsidiaries, taken as a whole, there is no, and since July 22, 2021 there has not been any, Proceeding (a) pending or, to the Acquirer’s Knowledge, threatened against or affecting Acquirer, (b) pending or, to the Acquirer’s Knowledge, threatened against any Person whose Liability either Acquirer has retained or assumed, either contractually or by operation of Law, or (c) pending or, to the Acquirer’s Knowledge, threatened against any stockholder, officer, director or employee of Acquirer in connection with such stockholder’s, officer’s, director’s or employee’s relationship with, or actions taken on behalf of, Acquirer. Acquirer is not a party to or named in, and none of its properties or assets are subject to, any Order that is material to Acquirer and its Subsidiaries, taken as a whole.
Section 5.18 4.15Board Approval; Stockholder VoteMerger Sub Activities. The board of directors of ParentMerger Sub I and Merger Sub (includingII were organized solely for the purpose of entering into this Agreement and the Ancillary Agreements and consummating the Merger and the other Transactions and thereby, and have not engaged in any required committeeactivities or subgroup ofbusiness, other than those incident or related to or incurred in connection with its formation or the board of directors of Parentnegotiation, preparation or Merger Sub, as applicable), as of the dateexecution of this Agreement unanimously: (a) approved and declaredor any Ancillary Agreements, the advisabilityperformance of its covenants or agreements in this Agreement the other Transaction Agreements andor any Ancillary Agreement or the consummation of the Transactions; and (b) determined that the consummation of the Transactions is in the best interest of, as applicable, the stockholders of Parenttransactions contemplated hereby or Merger Sub (as applicable). Other than the approval of the Parent Stockholder Matters, no other corporate proceedings on the part of Parent are necessary to approve the consummation of the Transactions.thereby.
Section 5.19 4.16Title to AssetsAdditional Representations. Subject to the restrictions on use of the Trust Account set forth in the Trust Agreement, Parent owns good and marketable title to, or holds a valid leasehold interest in, or a valid license to use, all of the assets used by Parent in the operation of its business and which are material to Parent, free and clear of any Liens (other than Permitted Liens).
Section 5.20 Affiliate Transactions. Except as described in the Parent SEC Reports, no Contract between Parent, on the one hand, and any of the present or former directors, officers, employees, stockholders or warrant holders or Affiliates of Parent (or an immediate family member of any of the foregoing), on the other hand, will continue in effect following the Closing, other than any such Contract that is not material to Parent.
Section 5.21 Brokers. Other than fees or commissions for which Parent will be solely responsible, none of Parent, Merger Sub, or any of their respective Affiliates, including Sponsor, has any liability or obligation to pay, or is entitled to receive, any fees or commissions to any broker, finder or agent with respect to the Transactions.
Section 5.22 Disclaimer of Other Warranties. PARENTEACH ACQUIRER PARTY ACKNOWLEDGES AND MERGER SUB HEREBY ACKNOWLEDGEAGREES THAT, (x) NONE OF ISMMS OR ANY OTHER MSHS ENTITY, OR (y) EXCEPT AS EXPRESSLY PROVIDEDSET FORTH IN Article IV,3, NONE OF THE COMPANY, ANY REPRESENTATIVE OF ITS SUBSIDIARIESTHE COMPANY, SELLER OR ANY OF THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES HAS MADE, IS MAKING, OR SHALL BE DEEMED TO MAKEOTHER PERSON MAKES ANY REPRESENTATION OR WARRANTY, WHATSOEVER, EXPRESSEXPRESSED OR IMPLIED, AT LAW OR IN EQUITY, TO PARENT, MERGER SUB, ANY OF THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES OR ANY OTHER PERSON, WITH RESPECT TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING THE MERGER, THE COMPANY, STOCKHOLDERS (OR ANY HOLDER OF DERIVATIVE SECURITIES OF THE COMPANY), ANY OF THE GROUP COMPANIES OR ANY OF THE DIRECTORS, OFFICERS, EMPLOYEES, BUSINESSES, ASSETS OR PROPERTIES OF THE FOREGOING, OR OTHERWISE, INCLUDING ANY REPRESENTATION OR WARRANTY AS TO MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, FUTURE RESULTS, PROPOSED BUSINESSES OR FUTURE PLANS. WITHOUT LIMITING THE FOREGOING AND NOTWITHSTANDING ANYTHING TO THE CONTRARY: (a) NONE OF ISMMS OR ANY OTHER MSHS ENTITY OR THE COMPANY, ANY OF ITS SUBSIDIARIES OR ANY OF THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES SHALL BE DEEMED TO MAKE TO PARENT, MERGER SUB, OR THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES ANY REPRESENTATION OR WARRANTY WHATSOEVER OTHER THAN SOLELY IN THE CASE OF THE COMPANY AS EXPRESSLY MADE BY THE COMPANY TO PARENT AND MERGER SUB IN Article IV; AND (b) NONE OF THE COMPANY NOR ANY OF ITS SUBSIDIARIES, NOR THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES, HAS MADE, IS MAKING, OR SHALL BE DEEMED TO MAKE TO PARENT, MERGER SUB, OR THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES OR ANY OTHER PERSON ANY REPRESENTATION
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OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO: (i) THE INFORMATION DISTRIBUTEDPROVIDED OR MADE AVAILABLE TO PARENTTHE ACQUIRER PARTIES OR ITSTHEIR REPRESENTATIVES BY OR ON BEHALF OF THE COMPANY IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS; (ii) ANY MANAGEMENT PRESENTATION, CONFIDENTIAL INFORMATION MEMORANDUM OR SIMILAR DOCUMENT; OR (iii) ANY FINANCIAL PROJECTION, FORECAST, ESTIMATE, BUDGET OR SIMILAR ITEM RELATING TO THE COMPANY, ANY OF ITS SUBSIDIARIES AND/OR THE BUSINESS, ASSETS, LIABILITIES, PROPERTIES, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND PROJECTED OPERATIONS OF THE FOREGOING. EACH OF PARENT AND MERGER SUB HEREBY ACKNOWLEDGES THAT IT HAS NOT RELIED ON ANY PROMISE, REPRESENTATION OR WARRANTY THAT IS NOT EXPRESSLY SET FORTH IN Article IV, OF THIS AGREEMENT. EACH OF PARENT AND MERGER SUB ACKNOWLEDGES THAT IT HAS CONDUCTED, TO ITS SATISFACTION, AN INDEPENDENT INVESTIGATION AND VERIFICATION OF THE COMPANY, ITS SUBSIDIARIES AND THE BUSINESS, ASSETS, LIABILITIES, PROPERTIES, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND PROJECTED OPERATIONS OF THE FOREGOING AND, IN MAKING ITS DETERMINATION TO PROCEED WITH THE TRANSACTIONS EACH OF PARENTCONTEMPLATED HEREBY (INCLUDING ANY FORECASTS, PROJECTIONS, ESTIMATES, BUDGETS OR BUSINESS PLANS), AND MERGER SUB HAS RELIED ON THE RESULTS OF ITS OWN INDEPENDENT INVESTIGATIONALL OTHER SUCH REPRESENTATIONS OR WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED.
ARTICLE 5
COVENANTS AND VERIFICATION, IN ADDITION TO THE REPRESENTATIONS AND WARRANTIES OF THE COMPANY EXPRESSLY AND SPECIFICALLY SET FORTH IN Article IV, OF THIS AGREEMENT. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS Section 5.22, CLAIMS AGAINST THE COMPANY OR ANY OTHER PERSON SHALL NOT BE LIMITED IN ANY RESPECT IN THE EVENT OF INTENTIONAL FRAUD IN THE MAKING THE OF THE REPRESENTATIONS AND WARRANTIES IN Article IV, BY SUCH PERSON. PARENT AND MERGER SUB HEREBY ACKNOWLEDGE THAT: (A) ISSMS DOES NOT CONTROL OR DIRECT THE BUSINESS OF THE COMPANY AND DOES NOT HAVE OR EXERCISE THE POWER TO DIRECT OR CAUSE THE DIRECTION OF THE MANAGEMENT OR POLICIES OF THE COMPANY; (B) THAT ANY OFFICER OF THE COMPANY WHO MAY ALSO HOLD A POSITION WITH ISMMS ACTS SOLELY AT THE DIRECTION AND INSTRUCTION OF THE COMPANY IN HIS/HER CAPACITY AS AN OFFICER OF THE COMPANY AND THAT ISMMS DOES NOT DIRECT OR INSTRUCT THE ACTIONS OF SUCH OFFICER OF THE COMPANY IN SUCH CAPACITY; AND (C) THAT TO THE EXTENT THAT ANY REPRESENTATION OR WARRANTY OF THE COMPANY IS MADE “TO THE KNOWLEDGE” OF THE COMPANY AND THE KNOWLEDGE OF AN OFFICER OF THE COMPANY IS IMPUTED TO THE COMPANY FOR SUCH PURPOSE, AND TO THE EXTENT THAT SUCH OFFICER MAY ALSO HOLD A POSITION WITH ISMMS, THE KNOWLEDGE OF SUCH OFFICER FOR PURPOSES OF SUCH REPRESENTATION OR WARRANTY IS LIMITED TO THE KNOWLEDGE OF SUCH OFFICER IN HIS/HER CAPACITY AS AN OFFICER OF THE COMPANY AND NOT IN THE CAPACITY OF SUCH OFFICER IN HIS/HER POSITION WITH ISMMS.
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Article VI
CONDUCT PRIOR TO THE CLOSING DATE
Section 6.1 5.1Conduct of Business byof the Company and the Company SubsidiariesGroup. During the period from the date of this Agreement and continuing untilDate through the earlier of (x) the termination of this Agreement pursuant toin accordance with its terms orand (y) the Closing, the Company shall, and shall cause the Company Subsidiaries to, use its commercially reasonable efforts to carry on its business in the ordinary course, except: (a) to the extent that Parent shall otherwise consent in writing (such consent not to be unreasonably withheld, conditioned or delayed); (b) as expressly contemplated by this Agreement or the Company Disclosure Letter or (c) as may be required by Applicable Legal Requirements (including Pandemic Measures). Without limiting the generality of the foregoing,Effective Time (the “Pre-Closing Period”), except as required or expressly permitted by the terms of this Agreement,(i) as set forth on Schedule 6.1Section 5.1 of the Company Disclosure Letter,Schedule or in the Pre-Closing Budget, (ii) to the extent necessary to comply with the Company Parties’ obligations under this Agreement, including completion of the Pre-Closing Restructuring, (iii) as required by Applicable Legal Requirements (including Pandemic Measures), withoutapplicable Law, or (iv) with the prior written consent of ParentAcquirer (such consent not to be unreasonably withheld, conditioned or delayed), during the period from the date of this Agreement(A) Seller and continuing until the earlier of the termination of this Agreement pursuant to its terms or the Closing, the Company shall not, andHoldco2 shall cause the Company Subsidiaries not to, do any of the following:
(a) except as otherwise required by any existing Company Benefit Plan, this Agreement or Applicable Legal Requirements: (i) increase or grant any increase in the compensation, bonus, fringe or other benefits of, or pay, grant or promise any bonus to, any current or former employee, director or independent contractor except for any such Person with an annual base salary or wage rate of less than $350,000 in the ordinary course of business; (ii) grant or pay any severance or change in control pay or benefits to, or otherwise increase the severance or change in control pay or benefits of, any current or former employee, director or independent contractor; (iii) enter into, amend (other than immaterial amendments) or terminate any Company Benefit Plan or any employee benefit plan, policy, program, agreement, trust or arrangement that would have constituted an Company Benefit Plan if it had been in effect on the date of this Agreement (other than annual renewal of welfare plans in the ordinary course of business that does not result in a material increase in cost to the Group Companies); (iv) take any action to accelerate the vesting or payment of, or otherwise fund or secure the payment of, any compensation or benefits under any Company Benefit Plan; (v) grant any equity or equity-based compensation awards; or (vi) terminate any employee or independent contractor (other than for cause), if such terminated employee or consultant receives, annual base compensation (or annual base wages or fees) in excess of $350,000; or (vii) enter into, amend or terminate any collective bargaining agreement or other agreement with a labor union, works council or similar organization respecting employees of the Group Companies;
(b) (i) transfer, sell, assign, license, sublicense, encumber, impair, abandon, fail to diligently maintain, transfer or otherwise dispose of any right, title or interesteach member of the Company in any Owned Intellectual Property or Licensed Intellectual Property, inGroup to, and each case, that is material to any of the businesses of the Group Companies; (ii) extend, amend, waive, cancel or modify any material rights in or to any Owned Intellectual Property or Licensed Intellectual Property, in each case, that is material to anyCompany Parties shall, carry on its business of the Group Companies; (iii) fail to diligently prosecute the Patent applications owned by the Company other than applications the Company, in the exerciseOrdinary Course of Business and in compliance in all material respects with applicable Law and the Pre-Closing Budget, pay its debts and Taxes when due (subject to good faith disputes regarding such debts and Taxes), pay or perform other material obligations when due and use its commercially reasonable efforts to preserve intact its present business organizations, keep available the services of its good faith business judgment, has determined to abandon; or (iv) divulge, furnish to or make accessible any Trade Secrets constituting material Owned Intellectual Property or any Trade Secrets of any Person to whom any Group Company has a confidentiality obligation to any third party who is not subject to an enforceable written agreement to maintain the confidentiality of such Trade Secrets, other than, in each of (i) through (iv), in the ordinary course of business; present officers and key employees and preserve its present relationships with customers, suppliers, distributors, licensors and licensees and (B) neitherprovided, that in no event shall the Company license on an exclusive basis or sell any material Owned Intellectual Property;
(c) except for transactions solely among the Group Companies: (i) declare, set aside or pay any dividends on or make any other distributions (whether in cash, stock, equity securities or property) in respect of any capital stock or split, combine or reclassify any capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for any capital stock; (ii) repurchase, redeem or otherwise acquire, or offer to repurchase, redeem or otherwise acquire, any membership interests, capital stock or any other equity interests, as applicable, in any Group Company, other than pursuant to the terms of a Company Option; (iii) grant, issue, sell or otherwise dispose, or authorize to issue, sell, or otherwise dispose any membership interests, capital stock or any other equity interests (such as stock options, stock units, restricted stock or other Contracts for the purchase or acquisition of such capital stock), as applicable, in any Group Company, other than the Earn-Out RSUs issued in
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Seller or Holdco2 shall and each shall cause each member of the Company Group not to, and the Company Parties shall not:
accordance(a)amend the Governing Documents of any member of the Company Group;
(b)acquire (by merger, consolidation or combination, or acquisition of stock or assets) any Person or division or assets (other than in the Ordinary Course of Business) thereof, or otherwise effect any merger, consolidation or reorganization of any member of the Company Group, or effect any conversion or restructuring of any equity or equity-linked interest, purchase any securities of, voting interests in or any assets of any Person, other than acquiring or purchasing equipment or supplies in the Ordinary Course of Business;
(c)split, combine or reclassify the outstanding shares of Holdco2 Common Stock nor enter into any agreement with respect to voting of any of Holdco2 Common Stock;
(d)Section 3.4; (iv) declare, set aside or pay any dividend or makeother distribution, payable in cash, stock, property or otherwise, in respect of any Holdco2 Common Stock;
(e)purchase, redeem or otherwise acquire any shares of Holdco2 Common Stock or any securities convertible or exchangeable or exercisable for any shares of Holdco2 Common Stock;
(f)transfer, lease, license, guarantee, sell, mortgage, pledge, dispose of or encumber any material asset, except for (i) the incurrence of Permitted Encumbrances, (ii) non-exclusive licenses of the Company IP in the Ordinary Course of Business, (iii) sales or other dispositions of inventory and other assets in the Ordinary Course of Business, (iv) sales of obsolete or written off assets and (v) sales or dispositions for an amount less than $500,000 in the aggregate;
(g)incur any Indebtedness or issue any debt securities or warrants or other rights to acquire debt securities of any member of the Company Group or assume, guarantee or endorse, as an accommodation or otherwise, the obligations of any other distribution;person for Indebtedness or (v) issue, deliver, sell, authorize, pledge or otherwise encumber, or agree tocapital obligations, in the case of any of the foregoing, with respect to,other than (i) incurrences of Indebtedness under the Pre-Closing Budget and (ii) the incurrence of Seller Debt;
(h)issue, sell, pledge, dispose of or encumber any shares of, capital stock or other equity securities or ownership interests or any securities convertible into or exchangeable for shares of capital stock or other equity securities or ownership interests, or subscriptions, rights, warrantsexercisable for, or options, warrants, calls, commitments or rights of any kind to acquire, any shares of capital stock or other equity securities or ownership interests or any securities convertible into or exchangeable for shares of capital stock or other equity securities or other ownership interests, or enter into other agreements or commitments of any character obligating it to issue any such shares, equity securities or other ownership interests or convertible or exchangeable securities;
(d) amend its Charter Documents, or form or establish any Subsidiary;
(e) (i) merge, consolidate or combine with any Person; or (ii) acquire or agree to acquire by merging or consolidating with, purchasing any equity interest in or a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof;
(f) sell, lease, license, sublicense, abandon, divest, transfer, cancel, abandon or permit to lapse or expire, dedicate to the public, or otherwise dispose of, any material assets (other than Intellectual Property) or material properties, other than any sale, lease or disposition in the ordinary course of business or as set forth on Schedule 6.1(f) of the Company Disclosure Letter;Holdco2 Common Stock;
(g) (i) issue or sell any debt securities or rights to acquire any debt securities of any of the Group Companies or guarantee any debt securities of another Person; (ii) make, incur, create or assume any loans, advances or capital contributions to, or investments in, or guarantee any Indebtedness of, any Person other than any of the Group Companies except for (A) loans, advances or capital contributions pursuant to and in accordance with the terms of agreements or legal obligations existing as of the date of this Agreement, in each case set forth on Schedule 6.1(g) of the Company Disclosure Letter; provided, that any such amounts do not exceed $250,000 in the aggregate and remain with the Company for general working capital expenditures in the ordinary course of business and (B) equipment financing arrangements entered into in the ordinary course of business; (iii) except in the ordinary course of business, create any material Liens on any material property or assets of any of the Group Companies in connection with any Indebtedness thereof (other than Permitted Liens); (iv) cancel or forgive any Indebtedness owed to any of the Group Companies; or (v) make, incur or commit to make or incur any capital expenditures, other than in the ordinary course of business;
(h) release, assign, compromise, settle or agree to settle any Legal Proceeding material to the Group Companies, taken as a whole;
(i) except in the ordinary course of business: (i) enter into any Contract that would have been a Company Material Contract or Material Current Government Contract (other than pursuant to offers, bids or proposals made by any Group Company on or prior to the date hereof that, if accepted, would result in a Government Contract) had it been entered into prior to the date of this Agreement or (ii) waive, delay the exercise of, release or assign any material rights or claims under any Company Material Contract or Material Current Government Contract;
(j) modify, amend or terminate in a manner that is materially adverse to the applicable Group Companies, taken as a whole, any Company Material Contract or Material Current Government Contract (other than pursuant to (i) offers, bids or proposals made by any Group Company on or prior to the date hereof that, if accepted, would result in a Government Contract or (ii) requirements from any Governmental Entity to modify the scope of work under any Government Contract);
(k) incur or enter into a Contract requiring the Company to make any capital expenditures in excess of $250,000 in any 12-month period;
(l) except as required by U.S. GAAP (or any interpretation thereof) or Applicable Legal Requirements, make any change in accounting methods, principles or practices;practices (including for Tax purposes), except as required by the Accounting Standards or by applicable Law or a Governmental Authority;
(m) (i) make(j)revalue any of its material assets except as required by the Accounting Standards;
(k)other than in the Ordinary Course of Business, enter into any Contract that would constitute a Company Contract if it had been in existence on the Agreement Date, or rescindamend, modify or consent to the termination of any Company Contract or the applicable member of the Company Group’s rights thereunder, or waive, release or assign any rights or claims thereunder;
(l)enter into, modify, amend or terminate any Contract, or waive, release, assign or fail to exercise or pursue any material Tax election; (ii) settlerights or compromiseclaims thereunder, other than in the Ordinary Course of Business, which if so entered into, modified, amended, terminated, waived, released, assigned, or not exercised or pursued would reasonably be expected to (i) adversely affect in any material Tax claim;respect any member of the Company Group; (ii) impair in any material respect the ability of any of the Company Parties or Seller to perform its obligations under this Agreement; or (iii) change (or requestprevent or materially delay the consummation of the Mergers;
(m)make any loan, advance, capital contribution to, change)or investment in, any methodPerson other than business expense advances to employees of accounting for Tax purposes; (iv) file any amendment to an materialmember of the Company Group in the Ordinary Course of Business;
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(n)enter into any Contract to the extent consummation of the Transactions or compliance with the provisions of this Agreement would reasonably be expected to conflict with, or result in a violation or breach of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of, or result in, termination, cancellation or acceleration of any obligation or to the loss of a benefit under, or result in the creation of any Encumbrance (other than Permitted Encumbrances) in or upon any of the properties or other assets (including Intellectual Property) of the any member of the Company Group under, or require Acquirer to license or transfer any Company IP or other material assets (other than Permitted Encumbrances) under such Contract;
(o)(i) abandon, disclaim, allow to lapse, dedicate to the public, sell, assign (in whole or in part), transfer, license, covenant not to sue, otherwise encumber or grant any right or interest (other than Permitted Encumbrances, but including any security interest) in, to or under any Company IP or Company IP Contract, including failing to perform or cause to be performed all applicable filings, recordings and other acts, or to pay or cause to be paid all required fees and Taxes, to maintain and protect its interest in the Company IP and Company IP Contracts, in each case other than Permitted Encumbrances; (ii) grant to any Third Party any license with respect to any Company IP, other than Permitted Encumbrances; (iii) disclose any confidential Company IP or Confidential Information to any Person, other than employees of the Company or any of its Subsidiaries, or in the Ordinary Course of Business, collaboration partners, that are subject to a confidentiality or non-disclosure covenant protecting against further disclosure thereof; (iv) fail to notify Acquirer promptly of any infringement, misappropriation or other violation of or conflict with any Company IP of which any member of the Company Group becomes aware, or fail to consult with Acquirer regarding and take such actions as Acquirer may reasonably request to protect such Company IP; or (v) fail to diligently prosecute any Company IP in the U.S. or in any non- U.S. jurisdiction material to the Company’s business, or fail to exercise a right of renewal or extension under or with respect to any Company IP;
(p)enter into any Contract with any Related Parties;
(q)(i) adopt, enter into, terminate or amend any Company Benefit Plan (other than offer letters and independent contractor agreements in the Ordinary Course of Business to the extent not in contravention of Section 5.1(q)(iv)), or collective bargaining agreement, (ii) increase the compensation, bonus or fringe or other benefits provided by the Company Group to any Company Employee or independent contractor who is a natural person, other than (A) increases in base compensation in the Ordinary Course of Business and in accordance with the Company’s third-party market study which do not total more than $3,000,000 of aggregate annual base compensation and which do not represent an increase of more than 4% for any Company Employee who has either annual base compensation of more than $250,000 or a title at or above the level of Senior Director, and (B) increases in base compensation in the Ordinary Course of Business for independent contractors who are natural persons whose annual compensation is less than $50,000, (iii) grant or pay any special bonus or special remuneration (cash, equity or otherwise) to any Company Employee or independent contractor who is a natural person, other than pursuant to an existing Company Benefit Plan in accordance with its terms as in effect as of the Agreement Date, (iv) hire any employee or engage or terminate (other than for cause) any (A) Company Employee who has either annual base compensation in excess of $250,000 or a title at or above the level of Senior Director or (B) independent contractor who is a natural person who has annual base compensation in excess of $100,000; provided that no such newly hired employee or newly engaged Contractor shall be provided with severance or termination pay, a sign-on bonus or special remuneration, or receive a commitment regarding equity-based incentive compensation without the prior written consent of Acquirer, or (v) transfer the employment of an In-Scope Employee from a member of the Company Group to Seller or any of its subsidiaries (other than a member of the Company Group), or transfer the employment of any individual who is not an In-Scope Employee from Seller or any of its subsidiaries (other than a member of the Company Group) to a member of the Company Group;
(r)grant any severance or termination pay (cash, equity or otherwise) to any Company Employee or Contractor or adopt any new severance plan, or amend or modify or alter in any material respect any severance plan, agreement or arrangement existing on the Agreement Date;
(s)(i) make or change any material Tax Return; (v) waiveelection, except to the extent required by applicable Law or extendin furtherance of the Pre-Closing Restructuring, (ii) adopt or change any statute of limitationsTax accounting method, (iii) agree or settle any material claim or assessment in respect of a period within which an assessment or reassessment of material Taxes, may be issued (other than any extension pursuant to an extension to(iv) file any material amendment to any material Tax Return); (vi) knowingly surrender any claim for a refund of Taxes; or (vii)Return,
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(v) enter into any “closing agreement” as describedTax allocation agreement, Tax sharing agreement, Tax indemnity agreement or closing agreement relating to any Tax, (vi) surrender any right to claim a material Tax refund or extend or waive the limitation period applicable to any claim or assessment in Section 7121respect of Taxes, or (vii) take any other similar action relating to the filing of any Tax Return or the payment of any Tax; in the case of each of the Code (orimmediately preceding clauses (i) through (vii), if such action would have the effect of increasing the Tax liability of Acquirer or its Affiliates for any similar Legal Requirement)period ending after the Closing Date or decreasing any Tax attribute of Holdco2 or the Company existing on the Closing Date;
(t)commence any material Proceeding;
(u)except for Proceedings with respect to which an insurer has the right to control the decision to settle, waive, release, assign, or compromise any Governmental Entity; (viii) incurclaim, litigation, complaint, investigation or Proceeding, waive, release, assign, settle, pay, discharge or satisfy any liability for TaxesProceeding other than in the ordinary courseOrdinary Course of business; (ix) prepareBusiness;
(v)make any Tax Returncapital expenditures or commitments, capital additions or capital improvements in a manner inconsistentexcess of such amounts specified in the Pre-Closing Budget;
(w)fail to keep or cause to be kept the material existing insurance policies (or substantial equivalents) of any member of the Company Group as in force on the Agreement Date;
(x)employ or use any contractor or consultant that, to the Company’s Knowledge, employs any Person that is: (A) debarred by the FDA, or excluded from participation in government programs (or subject to any similar sanction of any other applicable Governmental Authority); or (B) who is the subject of an FDA debarment investigation or Proceeding (or similar Proceeding of any other applicable Governmental Authority); or
(y)authorize, agree or enter into an agreement to do any of the foregoing. Notwithstanding anything to the contrary in this Section 5.1, Acquirer, Seller and the Company Parties acknowledge and agree that (x) nothing in this Agreement shall give Acquirer, directly or indirectly, the right to control or direct the Company’s operations for purposes of the HSR Act prior to the expiration or termination of any applicable waiting period pursuant to the HSR Act, (y) no consent of Acquirer shall be required with past practice;(x)respect to any matter set forth in this Agreement to the extent the requirement of such consent would violate any Antitrust Law, and (z) nothing in this Agreement shall prevent or limit the Pre-Closing Restructuring or the transactions contemplated thereby.
5.2Acquisition Proposals.
(a)No Solicitation. Each of Seller and the Company Parties agrees that neither it nor any of its officers and directors shall, and that it shall use its reasonable best efforts to cause its employees, equityholders, controlled Affiliates, agents and Representatives (including any investment banker, attorney or accountant retained by it) not to (and shall not authorize any of them to) directly or indirectly: (i) solicit, initiate, encourage, facilitate, entertain, discuss or negotiate any offer or proposal for an Acquisition Proposal, or any of the foregoing which would be reasonably expected to lead to an Acquisition Proposal; (ii) engage in discussions with any Person with respect to any Acquisition Proposal, furnish to any Person any non-public information with respect to any Acquisition Proposal or take any other action relating to (or which would reasonably be expected to be used for the purpose of formulating an offer or failproposal with respect to), or otherwise assist, cooperate with, facilitate or encourage any effort or attempt by any such Person with regard to, take any actionAcquisition Proposal; (iii) approve, agree to, accept, endorse or recommend any Acquisition Proposal; (iv) enter into any letter of intent or similar document or any Contract, agreement or commitment contemplating or otherwise relating to any Acquisition Proposal; or (v) submit any Acquisition Proposal to the vote of the stockholder of any Company Party. Each of Seller and each Company Party will immediately (x) cease any and all existing activities, discussions or negotiations with any Third Parties conducted heretofore with respect to any Acquisition Proposal and (y) revoke or withdraw access of any Person (other than Acquirer, its Affiliates, agents and Representatives) to any data room (virtual or actual) containing any non-public information with respect to the Company Parties in connection with an Acquisition Proposal and request from each such Person the prompt return or destruction of all non-public information with respect to the Company Parties previously provided to such Person in connection with an Acquisition Proposal; provided, however, that nothing in this Section 5.2(a) shall preclude Seller or its Representatives from contacting any Person solely for the purpose of complying with the provisions of the first clause of this sentence.
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(b)Notification of Unsolicited Acquisition Proposals. As promptly as practicable (and in any event within one Business Day) after receipt of any offer or proposal (formal or informal) relating to, or that would reasonably be expected to prevent, impairlead to, an Acquisition Proposal or impedeany request for nonpublic information or inquiry related to or which would reasonably be expected to lead to an Acquisition Proposal, each of Seller, Holdco2 and the Intended Tax Treatment; or (xi) authorize, recommend, propose or announce an intention to adopt a plan of complete or partial liquidation, restructuring, recapitalization, dissolution or winding-upCompany, as applicable, shall, provide Acquirer with written notice and the material details thereof, including the identity of the Person or group (within the meaning of Section 13(d)(3) of the Exchange Act) making any such Acquisition Proposal, request, inquiry or contact as well as a copy of any such Acquisition Proposal, indication, inquiry or request (or, where given orally to Seller, Holdco2 or the Company, a description of such Acquisition Proposal) and will keep Acquirer reasonably informed on a current basis of the status and details of any such offer or proposal and of any Company Subsidiary;
(n) subject to clause (c) above, enter into or amend any agreement with, or pay, distribute or advance any assets or property to, any of its officers, directors, employees, partners, stockholders or other Affiliates, other than payments or distributions relating to obligations in respect of arms-length commercial transactions pursuantmodifications to the agreements set forth on Schedule 6.1(n) of the Company Disclosure Letter as existing on the date ofterms thereof, provided, however, that this Agreement;
(o) engageprovision will not in any material new line of business; or
(p) agree in writing or otherwise agree, commit or resolve to take any of the actions described in Section 6.1(a) through (o) above.
Notwithstanding anything to the contrary herein, the Company may, in connection with COVID-19, take such actions in good faith as are reasonably necessary (x) to protect the health and safety of the Company’s employees and other individuals having business dealings with the Company or (y) to respond to third-party supply or service disruptions caused by COVID-19, including, but not limited to Pandemic Measures, and any such actions taken (or not taken) as a result of, in response to, or otherwise related to COVID-19 shallway be deemed to be takenlimit the obligations of Seller, Holdco2 or the Company and its respective Representatives set forth in Section 5.2(a).
(c)Acknowledgement. Each of Seller, the “ordinary course of business” for all purposes ofCompany Parties and Acquirer acknowledge that this Section 6.015.2 was a significant inducement for Acquirer to enter into this Agreement.
5.3Proxy Statement and not be consideredOther SEC Filings; Acquirer Stockholder Meeting.
(a)As promptly as reasonably practicable following the date hereof (but in no event later than the 60th day immediately following the date hereof), Acquirer shall prepare (and Seller and the Company Parties shall provide reasonable assistance in connection therewith), and Acquirer shall file with the SEC, a breach of this Section 6.01; provided that,proxy statement relating to the extentAcquirer Stockholder Approval and the nomination and appointment of the Specified Designees to the Acquirer Board for terms that expire no earlier than the end of the Second Milestone Period (the “Proxy Statement”). Acquirer shall use its reasonable best efforts to ensure that the Company took any actions pursuant to the immediately preceding clause that caused deviations from its business being conducted in the ordinary course of business, the Company shall resume conducting its business in the ordinary course of businessProxy Statement complies in all material respects as soon as reasonably practicable.
Nothing contained in this Agreement shall give Parent, directly or indirectly, any right to control or directwith the operationsapplicable provisions of the Group CompaniesExchange Act. Acquirer shall use its reasonable best efforts to cause the Proxy Statement to be mailed to the holders of Acquirer Stock as promptly as practicable following the date on which Acquirer files with the SEC the Proxy Statement in definitive form, following confirmation from the staff of the SEC (whether orally or in writing) that the comment process with respect to the Proxy Statement, if any, has concluded. Acquirer shall promptly (and in any event within one Business Day) notify Seller upon the receipt of any comments from the SEC or any request from the SEC for amendments or supplements to the Proxy Statement, and shall, as promptly as practicable after receipt thereof, provide Seller with copies of all correspondences between it and its Representatives, on the one hand, and the SEC, on the other hand, and all written comments with respect to the Proxy Statement received from the SEC and advise Seller of any oral comments with respect to the Proxy Statement received from the SEC. Acquirer shall use its reasonable best efforts to respond as promptly as practicable to any comments received from the SEC with respect to the Proxy Statement. Notwithstanding the foregoing, prior to mailing in definitive form the Closing. PriorProxy Statement (or any amendment or supplement thereto), or responding to any comments received from the SEC with respect thereto, Acquirer shall provide Seller a reasonable opportunity to review and comment on such document or response (including the proposed final version of such document or response). Seller and the Company Parties shall reasonably cooperate to prepare appropriate responses thereto (and will provide each other with copies of any such responses given to the Closing, eachSEC) and make such modifications to the Proxy Statement as shall be reasonably appropriate.
(b)The Parties shall reasonably cooperate in preparing and filing with the SEC the Proxy Statement and any necessary amendments or supplements thereto. Seller and the Company Parties shall furnish all information concerning Seller, the Company Group and the Business (including any audited and unaudited financial statements of the Company Group that may be required under Regulation S-X), as required under applicable securities laws in connection with (i) the preparation, filing and Parent shall exercise, consistentdistribution of the Proxy Statement and any necessary amendments or supplements thereto, (ii) the preparation and filing of a Current Report on Form 8-K reporting the Closing and any necessary amendments thereto (the “Closing 8-K”) and (iii) the preparation, filing and distribution of any registration statement and related prospectus registering the resale of the shares of Acquirer Stock issued as the Stock Consideration and any necessary amendment or supplements thereto (the “Resale Registration Documents” and, together with the other termsProxy Statement and conditions of this Agreement, complete control and supervision over their respective businesses.
Section 6.2 Conduct of Business by Parent and Merger Sub. During the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement pursuant to its terms or the Closing Parent8-K, the “Applicable SEC Filings”). Seller shall and shall cause its Subsidiaries to, use its commercially reasonable best efforts to carry on its business in the ordinary course, except to the extent that the Company shall otherwise consent in writing or as contemplated by this Agreement (including as contemplated by the Equity Financing Agreements). Without limiting the generality of the foregoing, except as required or permitted by the terms of this Agreement or as required by Applicable Legal Requirements (including Pandemic Measures), without the priorobtain any necessary written consent of the auditor of the audited financial statements of the Company Group for the inclusion of its audit report on such audited financial statements in the Applicable SEC Filings for which such consent is required in order for such audit report to be included in such filing. Acquirer shall
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not file or mail the Proxy Statement or any amendment or supplement thereto to stockholders without the written consent of Seller (such consent not to be unreasonably withheld, conditioned or delayed), during.
(c)The Proxy Statement shall state that the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement pursuant to its terms or the Closing, Parent shall not, and shall cause its Subsidiaries not to, do any of the following:
(a) declare, set aside or pay dividends on or make any other distributions (whether in cash, stock, equity securities or property) in respect of any capital stock (or warrant) or split, combine or reclassify any capital stock (or warrant), effect a recapitalization or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for any capital stock or warrant, or effect any like change in capitalization;
(b) purchase, redeem or otherwise acquire, directly or indirectly, any equity securities of Parent or any of its Subsidiaries;
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(c) other than in connection with the Equity Financing Agreements, grant, issue, deliver, sell, authorize, pledge or otherwise encumber, or agree to any of the foregoing with respect to, any shares of capital stock or other equity securities or any securities convertible into or exchangeable for shares of capital stock or other equity securities, or subscriptions, rights, warrants or options to acquire any shares of capital stock or other equity securities or any securities convertible into or exchangeable for shares of capital stock or other equity securities, or enter into other agreements or commitments of any character obligating it to issue any such shares of capital stock or equity securities or convertible or exchangeable securities;
(d) amend its Charter Documents or form or establish any Subsidiary;
(e) (i) merge, consolidate or combine with any Person; or (ii) acquire or agree to acquire by merging or consolidating with, or by purchasing any equity interest in or a portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, or otherwise acquire or agree to acquire any assets, or enter into any joint ventures, strategic partnerships or alliances;
(f) incur any Indebtedness or guarantee any such Indebtedness of another Person or Persons, issue or sell any debt securities or options, warrants, calls or other rights to acquire any debt securities of Parent, as applicable, enter into any “keep well” or other agreement to maintain any financial statement condition or enter into any arrangement having the economic effect of any of the foregoing, in each case, except in the ordinary course of business;
(g) except as required by GAAP (or any interpretation thereof) or Applicable Legal Requirements, make any change in accounting methods, principles or practices;
(h) (i) make or rescind any material Tax election (ii) settle or compromise any material Tax claim; (iii) change (or request to change) any method of accounting for Tax purposes; (iv) file any amendment to any material Tax Return; (v) waive or extend any statute of limitations in respect of a period within which an assessment or reassessment of material Taxes may be issued (other than any extension pursuant to an extension to file any Tax Return); (vi) knowingly surrender any claim for a refund of Taxes; or (vii) enter into any “closing agreement” as described in Section 7121 of the Code (or any similar Legal Requirement) with any Governmental Entity; (viii) create any material Liens on any material property or assets of Parent or Merger Sub; (ix) incur any liability for Taxes other than in the ordinary course of business; or (x) take any action or fail to take any action that would reasonably be expected to prevent, impair or impede the Intended Tax Treatment;
(i) liquidate, dissolve, reorganize or otherwise wind up the business or operations of Parent or Merger Sub;
(j) commence, settle or compromise any Legal Proceeding;
(k) engage in any material new line of business;
(l) amend the Trust Agreement or any other agreement related to the Trust Account;
(m) (i) adopt or amend any employee benefit plan, or enter into any employment contract or collective bargaining agreement other than the LTIP or the ESPP, or (ii) hire any employee or any other individual to provide services to Parent or its Subsidiaries;
(n)  (i) enter into any Parent Material Contract or other Contract that will not be terminable for convenience on or before Closing without requiring the payment of any amount or any post-Closing liability or obligation, (ii) modify, amend or terminate any Parent Material Contract or (iii) waive, delay the exercise of, release or assign any material rights or claims under any Parent Material Contract;
(o) make any expenditures utilizing funds in the Trust Account; or
(p) agree in writing or otherwise agree, commit or resolve to take any of the actions described in Sections 6.2(a) through (o) above.
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ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Proxy Statement; Special Meeting.
(a) Proxy Statement.
(i) As promptly as practicable following the execution and delivery ofAcquirer Board has approved this Agreement and the delivery of the PCAOB Financial Statements, Parent shall, in accordance with this Section 7.1(a), prepare, with the assistance of the Company,Transactions, approved and file with the SEC, in preliminary form, a proxy statement in connection with the Transactions (as amended or supplemented, the “Proxy Statement”) to be sent to the stockholders of Parent in advance of the Special Meeting, for the purpose of, among other things: (A) providing Parent’s stockholders with the opportunity to redeem shares of Parent Class A Stock (the “Parent Stockholder Redemption”); and (B) soliciting proxies from holders of Parent Class A Stock to vote at the Special Meeting in favor of: (1) the adoption of this Agreement and approval of the Transactions; (2)declared advisable the issuance of shares of Parent Class AAcquirer Stock in connection with Section 2.6; (3)contemplated by this Agreement and include (i) the amendment and restatementrecommendation of the Parent Organizational DocumentsAcquirer Board to vote in favor thereof and (ii) the formrecommendation of the Parent A&R Charter attached hereto as Exhibit AAcquirer Board to vote in favor of the appointment of the Specified Designees to the Acquirer Board for terms that expire no earlier than the end of the Second Milestone Period (the Acquirer Board recommendations described in this clause (ii) and the Parent A&R Bylaws attached hereto as Exhibit B; (4) adoption ofimmediately preceding clause (i), collectively, the LTIP“Acquirer Board Recommendation”) and ESPP and (5)(iii) any other proposalsproposal that the Parties deemAcquirer Board reasonably deems necessary or desirableadvisable to consummate the Transactions (collectively, the “Parent Stockholder Matters”). The Proxy Statement will comply as to form and substance with the applicable requirementsTransactions. None of the Exchange Act and the rules and regulations thereunder. ParentAcquirer Board or any duly authorized committee thereof shall file the definitive Proxy Statement once approved by the Company as provided in clause (iii), below, with the SEC and cause the Proxy Statement(i) fail to be mailed to its stockholders of record, as of the record date to be established by the board of directors of Parent, as promptly as practicable following the earlier to occur of: (Y) in the event the preliminary Proxy Statement is not reviewed by the SEC, the expiration of the waiting period in Rule 14a-6(a) under the Exchange Act; or (Z) in the event the preliminary Proxy Statement is reviewed by the SEC, receipt of oral or written notification of the completion of the review by the SEC (such earlier date, the “Proxy Clearance Date”).
(ii) As soon as reasonably practicable following the date of this Agreement, the Company shall deliver to Parent (A) audited balance sheets as of December 31, 2020 and statements of operations and comprehensive (loss) income, stockholders’ deficit and cash flows of the Group Companies for the 12-month period ended December 31, 2020 together with the auditor’s reports thereon, which comply in all material respects with the applicable accounting requirements and with the rules and regulations of the SEC, the Exchange Act and the Securities Act applicable to a registrant (collectively, the “PCAOB Financial Statements”); provided, that, upon delivery of such PCAOB Financial Statements, such financial statements shall be deemed “Audited Financial Statements” for all the purposes of this Agreement and the representation and warranties set forth in Section 4.8 shall be deemed to apply to such Audited Financial Statements with the same force and effect as if made as of the date of this Agreement; (B) all other audited and unaudited financial statements of the Group Companies and any company or business units acquired by it, as applicable, required under the Applicable Legal Requirements of the SEC to be includedinclude in the Proxy Statement and/the Acquirer Board Recommendation or fail to make the Acquirer Board Recommendation; (ii) change, modify, withhold, qualify or withdraw, or resolve or propose publicly to change, modify, withhold, qualify or withdraw, in each case, in a manner adverse to Seller or the Closing Form 8-K (including pro forma financial information); (C) all selected financial dataCompany Parties, the Acquirer Board Recommendation; or (iii) fail to publicly reaffirm the Acquirer Board Recommendation, in each case, within 10 Business Days after any written request of the Group Companies required by Item 301Seller to do so.
(d)Acquirer shall advise Seller promptly after receiving oral or written notice of Regulation S-K, as necessary for inclusion in(i) any requirement that Acquirer supplement or amend the Proxy Statement and the Closing Form 8-K; and (D) management’s discussion and analysis of financial condition and results of operations prepared in accordance with Item 303 of Regulation S-K of the SEC with respect(whether to the periods ended December 31, 2020, 2019 and 2018, as necessary for inclusion in the Proxy Statement and Closing Form 8-K (including pro forma financial information).
(iii) Priorcorrect a misstatement or omission to filing the Proxy Statement with the SEC, Parent will make available to the Company drafts of the Proxy Statement andstate a material fact or otherwise) or (ii) any other documents to be filed with the SEC, both preliminary and final, and any amendment or supplement to the Proxy Statement or such other document and will provide the Company with a reasonable opportunity to comment on such drafts and shall consider such comments in good faith. Parent shall not file the Proxy Statement with the SEC without the Company’s final approval thereof, such approval not to be unreasonably withheld, delayed or conditioned. Parent will advise the Company promptly after it receives notice thereof, of: (A) the time when the Proxy Statement has been
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filed; (B) in the event the preliminary Proxy Statement is not reviewed by the SEC, the expiration of the waiting period in Rule 14a-6(a) under the Exchange Act; (C) in the event the preliminary Proxy Statement is reviewed by the SEC, receipt of oral or written notification of the completion of the review by the SEC; (D) the filing of any supplement or amendment to the Proxy Statement; (E) the issuance of any stop order by the SEC; (F) any request by the SEC for amendment of the Proxy Statement; (G) anyStatement or SEC comments from the SEC relating to the Proxy Statement and responses thereto; and (H)thereon or requests by the SEC for additional information. ParentAcquirer shall promptly respondprovide Seller with copies of any written communication from the SEC with respect to any SEC comments on the Proxy Statement and Acquirer, Seller and the Company Parties shall cooperate to prepare appropriate responses thereto (and will provide each other with copies of any such responses given to the SEC) and make such modifications to the Proxy Statement as shall be reasonably appropriate.
(e)If, at any time prior to the Effective Time, any event or circumstance shall be discovered by a Party that should be set forth in an amendment or a supplement to the Proxy Statement so that any such document would not include any misstatement of a material fact or fail to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, such Party shall promptly inform the other parties hereto and the Parties shall cause an appropriate amendment or supplement describing such information to be promptly filed with the SEC and, in the case of Acquirer to the extent required by Law, disseminated to stockholders.
(f)Each of Seller, the Company Parties and Acquirer shall use its reasonable best efforts to have(i) cooperate with the Proxy Statement cleared byother party to prepare pro forma financial statements that comply with the SEC under the Exchange Act as promptly as practicable.
(iv) Each of Parentrules and the Company shall cooperate and mutually agree upon (such agreement not to be unreasonably withheld or delayed), any response to commentsregulations of the SEC or its staff with respect to the Proxy Statementextent required for the Applicable SEC Filings, including the requirements of Regulation S-X, and any amendment to(ii) provide and make reasonably available upon reasonable notice the Proxy Statement filed in response thereto. If Parent or the Company becomes aware that any information contained in the Proxy Statement shall have become false or misleading in any material respect or that the Proxy Statement is required to be amended in order to comply with Applicable Legal Requirements, then (A) such party shall promptly informsenior management employees of the other party to discuss the materials prepared and (B) Parent, on the one hand, and the Company, on the other hand, shall cooperate and mutually agree upon (such agreement not to be unreasonably withheld or delayed) an amendment or supplement to the Proxy Statement. Parent and the Company shall use reasonable best efforts to cause the Proxy Statement as so amended or supplemented, to be filed with the SEC and to be disseminated to the holders of shares of capital stock of Parent, as applicable, in each casedelivered pursuant to Applicable Legal Requirementsthis Section 5.3(f).
(g)Acquirer shall take all lawful action to call, give notice of, convene and subject to the terms and conditionshold a meeting of this Agreement and the Parent Organizational Documents.
(v) Parent shall make all necessary filings with respect to the Transactions under the Securities Act, the Exchange Act and applicable “blue sky” laws, and any rules and regulations thereunder. The Company agrees to promptly provide Parent with such information concerning the business, management, operations and financial condition of the Company and the Company Subsidiaries, in each case, as is reasonably requested by Parent for inclusion in the Proxy Statement. The Company shall cause the officers and employees of the Company and the Company Subsidiaries to be reasonably available to Parent and its counsel in connection with the drafting of the Proxy Statement and responding in a timely manner to comments on the Proxy Statement from the SEC.
(b) Parent shall,stockholders (the “Acquirer Stockholders’ Meeting”) as promptly as practicable following the Proxy Clearance Date, establish a record date (which date shall be mutually agreed withon which the Company) for, duly call and give notice of, the Special Meeting. Parent shall convene and hold, no later than 45 days afterSEC clears (whether orally or in writing) the Proxy Statement is mailed, a meeting of Parent’s stockholders (the “Special Meeting”), for the purpose of obtaining the approvalAcquirer Stockholder Approval and approving the appointment of the Parent Stockholder Matters. ParentSpecified Designees to the Acquirer Board, which meeting shall be held not later than 35 days following the date on which the Proxy Statement is first mailed (or made available in accordance with Rule 14a-16 under the Exchange Act) to Acquirer’s stockholders. Acquirer shall include in the Proxy Statement the Acquirer Board Recommendation and solicit and use its reasonable best efforts to obtain the approvalAcquirer Stockholder Approval. If, on a date for which the Acquirer Stockholders’ Meeting is scheduled, Acquirer shall have not received proxies representing a sufficient number of shares of outstanding Acquirer Stock to obtain the ParentAcquirer Stockholder Matters at the Special Meeting, including by soliciting proxies as promptly as practicable in accordance with Applicable Legal Requirements for the purpose of seeking the approval of the Parent Stockholder Matters. SubjectApproval, or if necessary to the proviso in the following sentence, Parent shall include the Parent Recommendationmake or modify any disclosure contained in the Proxy Statement. Except as otherwise required by Applicable Legal Requirements, the board of directors of Parent shall not (and no committee or subgroup thereof shall) change, withdraw, withhold, qualify or modify, or publicly proposeStatement in order to change, withdraw, withhold, qualify or modify, the Parent Recommendation (a “Change in Recommendation”). Parent agrees that its obligation to establish a record date for, duly call, give notice of, convene and hold the Special Meeting for the purpose of seeking approval of the Parent Stockholder Matters shall not be affected by any Change in Recommendation, and Parent agrees to establish a record date for, duly call, give notice of, convene and hold the Special Meeting and submit for the approval of its stockholders the matters contemplated by the Proxy Statement as contemplated by this Section 7.1(b), regardless of whether or not there shall have occurred any Change in Recommendation. Notwithstanding anything to the contrary contained in this Agreement, Parent shall be entitled to postpone or adjourn the Special Meeting: (i) to ensure that any supplement or amendment to the Proxy Statement that the board of directors of Parent hascomply with applicable Law (as determined in good faith by the Acquirer Board, after consultation with its outside legal counsel), irrespective of whether a quorum is required by Applicable Legal Requirements is disclosedpresent, Acquirer shall have the right to Parent’s stockholders and for such supplementannounce one or amendment to be promptly disseminated to Parent’s stockholders prior to the Special Meeting; (ii) if, asmore successive postponements or adjournments of the time for whichAcquirer Stockholders’ Meeting; provided that the SpecialAcquirer Stockholders’ Meeting is originally scheduled (as set forthnot postponed or adjourned, in the Proxy Statement), there are insufficient shares of Parent Class A Stock represented (either inaggregate, to a date that is
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person or by proxy) to constitute a quorum necessary to conduct the business to be conducted at the Special Meeting; (iii) in order to solicit additional proxies from stockholders for purposes of obtaining approval of the Parent Stockholder Matters; or (iv) if the holders of Parent Class A Stock have elected to redeem a number of Parent Class A Stock as of such time that would reasonably be expected to result in Parent not satisfying the Company’s Required Funds; provided, that in the event of a postponement or adjournment pursuant to clauses (i), (ii), (iii) or (iv) above, the Special Meeting shall be reconvened as promptly as practicable following such time as the matters described in such clauses have been resolved.
(c) Company Stockholder Approval. The Company shall obtain the Company Stockholder Approval via the Stockholder Consent and Joinder no latermore than the Company Stockholder Approval Deadline. The Company will provide Parent with a copy of each executed Stockholder Consent and Joinder. In connection therewith, as promptly as practicable, the board of directors of the Company shall set a record date for determining the stockholders required to execute such Stockholder Consent and Joinder. The Company shall, through its board of directors, recommend to the Company Stockholders that they provide the Company Stockholder Approval and execute the Stockholder Consent and Joinder.
Section 7.2 Regulatory Approvals. As promptly as practicablethirty (30) days after the date for which the Acquirer Stockholders’ Meeting initially was scheduled (excluding, however, any adjournments or postponements required by applicable Law).
5.4Confidentiality; Public Disclosure. The Parties acknowledge that Seller and Acquirer have previously executed the Confidentiality Agreement and that, effective as of thisthe Closing, the Confidentiality Agreement Parent and the Company shall each prepare and file the notification required of it under the HSR Act within 10 Business Days after the date hereof in connection with the Transactionsterminate and shall promptly and in good faith respond to all information requestedbe of it by the U.S. Federal Trade Commission, U.S. Department of Justiceno further force or any other Governmental Entity in connectioneffect with such notification and otherwise cooperate in good faith with each other and such Governmental Entities. Eachno surviving obligations. No Company Party will promptly furnish to the other such information and assistance as the other may reasonably request in connection with its preparation of any filing or submission that is necessary under the HSR Act and will use reasonable best efforts to cause the expiration or termination of the applicable waiting periods as soon as practicable. Each Party will promptly furnish to the other such information and assistance as the other may reasonably request in connection with its preparation of any filing or submission that is necessary under the HSR Act or any other Antitrust Laws and will use reasonable best efforts to cause the expiration or termination of the applicable waiting periods or obtain the applicable approvals as soon as practicable. Each Party will promptly provide the other with copies of all substantive written communications (and memoranda setting forth the substance of all substantive oral communications) between each of them, any of their Affiliates and their respective agents, representatives and advisors,Seller, on the one hand, and any Governmental Entity, on the other hand, with respect to this Agreement or the Transactions. Without limiting the foregoing, Parent and the Company shall: (i) promptly inform the other of any communication to or from the U.S. Federal Trade Commission, the U.S. Department of Justice or any other Governmental Entity regarding the Transactions; (ii) permit each other to review in advance any proposed substantive written communication to any such Governmental Entity and incorporate reasonable comments thereto; (iii) give the other prompt written notice of the commencement of any Legal Proceeding with respect to such transactions; (iv) not agree to participate in any substantive meeting or discussion with any such Governmental Entity in respect of any filing, investigation or inquiry concerning this Agreement or the Transactions unless, to the extent reasonably practicable, it consults with the otherAcquirer Party, in advance and, to the extent permitted by such Governmental Entity, gives the other Party the opportunity to attend; (v) keep the other reasonably informed as to the status of any such Legal Proceeding; and (vi) promptly furnish each other with copies of all correspondence, filings (except for filings made under the HSR Act) and written communications between such Party and their Affiliates and their respective agents, representatives and advisors, on one hand, and any such Governmental Entity, on the other hand, in each case, with respect to this Agreement and the Transactions. Each of the Company Transaction Fees and Parent Transaction Feesdirectly or indirectly through their respective Representatives or any other Person shall include 50% ofissue any filing fees required by Governmental Entities, including with respect to any registrations, declarations and filings required in connection with the execution and delivery ofpress release or other public statement or announcement regarding this Agreement, the performance of the obligations hereunder and the consummation of the Transactions, including filing fees in connection with filings under the HSR Act.
Section 7.3 Other Filings; Press Release.
(a) As promptly as practicable after execution of this Agreement, Parent will prepare and file a Current Report on Form 8-K pursuant to the Exchange Act to report the execution of this Agreement, the form and substance of which shall be approved in advance in writing by the Company.
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(b) Promptly after the execution of this Agreement, Parent and the Company shall also issue a joint press release announcing the execution of this Agreement; provided that any references to ISMMS in such press release will be subject to the prior review and approval of ISMMS.
(c) The Parties shall prepare a draft Current Report on Form 8-K announcing the Closing, together with, or incorporating by reference, the financial statements prepared by the Company and its accountant, and such other information that may be required to be disclosed with respect to the Transactions in any report or form to be filed with the SEC (“Closing Form 8-K”). Prior to Closing, Parent and the Company shall prepare a joint press release announcing the consummation of the Transactions hereunder (“Closing Press Release”). Concurrently with the Closing, Parent shall issue the Closing Press Release. Concurrently with the Closing, or as soon as practicable thereafter, Parent shall file the Closing Form 8-K with the SEC.
Section 7.4 Confidentiality; Access to Information.
(a) The Company acknowledges that it is a party to the Confidentiality Agreement, the terms of which are incorporated herein by reference, and Parent agrees to be bound by the Confidentiality Agreement in the same capacity as Casdin Capital LLC. Following Closing, the Confidentiality Agreement shall be superseded in its entirety by the provisions of this Agreement; provided, however, that if for any reason this Agreement is terminated prior to the Closing, the Confidentiality Agreement shall nonetheless continue in full force and effect in accordance with its terms. Beginning on the date hereof and ending on the second anniversary of this Agreement (but perpetually with respect to any trade secrets), each Party agrees to maintain in confidence any non-public information received from the other Parties, and to use such non-public information only for purposes of consummating the Transactions. Such confidentiality obligations will not apply to: (i) information which was known to one Party or its agents or representatives prior to receipt from the Company or the Company Stockholders, on the one hand, or Parent or Merger Sub, on the other hand, as applicable; (ii) information which is or becomes generally known to the public without breach of this Agreement or an existing obligation of confidentiality; (iii) information acquired by a Party or their respective agents or representatives from a third party who was not bound to an obligation of confidentiality; (iv) information developed by such Party independently without any reliance on the non-public information received from any other Party; (v) disclosure required by Applicable Legal Requirement or stock exchange rule; or (vi) disclosure consented to in writing by Parent or Merger Sub (in the case of the Company Stockholders and, prior to the Closing, the Company) or the Company (in the case of Parent or Merger Sub).
(b) Notwithstanding the foregoing, none of the Parties will make any public announcement or issue any public communication regarding this Agreement, any other Transaction AgreementAncillary Agreements or the Transactions or any matter related to the foregoing, without, the prior written consent of the Company, in the case of a public announcementpress release or statement by Parent,any Company Party or Parent, inSeller, the case of a public announcement by the Company Stockholders or the Company (such consents, in either case, notconsent (not to be unreasonably withheld, conditioned or delayed), except: (i) if such announcement of Acquirer, or, other communication is required by Applicable Legal Requirements, in which case the disclosing Party shall, to the extent permitted by Applicable Legal Requirements, first allow such other Parties to review such announcement or communication and have the opportunity to comment thereon and the disclosing Party shall consider such comments in good faith; (ii) in the case of a press release or statement by any Acquirer Party, the Companyconsent (not to be unreasonably withheld, conditioned or delayed) of Seller. Notwithstanding anything to the Company Stockholders, Parentcontrary in the foregoing, a Party shall be permitted to disclose any and their respective Affiliates, if such announcement or other communicationall terms to its financial, tax and legal advisors (each of whom is made in connection with fundraising or other investment related activities and is made to such Person’s direct and indirect investors or potential investors or financing sources subject to ana similar obligation of confidentiality; (iii) announcementsconfidentiality), and communications regarding this Agreement and the Transactions to the Group Companies’ stockholders, Affiliates, and its and their respective directors, officers, employees, managers and advisors, in each case subject to an obligation of confidentiality; (iv)any Governmental Authority or administrative agency to the extent necessary or advisable in compliance with applicable Law and the rules of a national stock exchange on which such announcements or other communications contain only information previously disclosed in a public statement, press release or other communication previously approved in accordance with Section 7.3 or this Section 7.4(b); (v) announcementsParty’s capital stock is traded.
5.5Access; Copy of VDR.
(a)Subject to applicable Law and communications to Governmental Entities in connection with registrations, declarationsupon reasonable notice, each of Seller and filings relating to the Transactions required to be made under this Agreement; and (vi) communications to customers and suppliers of the Group Companies for purposes of seeking any consents and approvals required in connection with the Transactions.
(c) The Company willParties shall afford ParentAcquirer and its financial advisors,employees, attorneys, accountants, counselconsultants, Representatives and other representativesadvisors and agents reasonable access, during normal business hours upon reasonable notice,during the Pre-Closing Period, to the Company Group’s properties, books,
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contracts and records and appropriate individuals as Acquirer may reasonably request (including employees, attorneys, accountants, consultants and other professionals, in each case subject to applicable privilege), in each case concerning the business, properties and personnel of the Company Group, and during the period priorPre-Closing Period, each of Seller and the Company Parties shall reasonably promptly furnish to the Closing to obtain allAcquirer such information concerning the business, including the status of business development efforts, properties results of operations and personnel of the Company Group as ParentAcquirer may reasonably request; provided that each of Seller and the Company Parties may restrict the foregoing access to the extent that (i) any applicable Law requires such Party or its Subsidiaries to restrict or prohibit access to any such properties or information to Acquirer, (ii) such access would give rise to a risk of waiving any attorney-client privilege, work product doctrine or other applicable privilege applicable to such documents or information or (iii) such access would be in breach of any confidentiality obligation, commitment or provision by which Seller or any member of the Company Group, as applicable, is bound or affected as of the Agreement Date, which confidentiality obligation, commitment or provision shall be disclosed to Acquirer; provided, that Seller and the applicable Company Party: (x) will be entitled to withhold only such information that may not be provided without causing such waiver; and (y) at the request of Acquirer, will reasonably cooperate with Acquirer and use its commercially reasonable efforts to obtain the consent or waiver of any third party to the disclosure in full of all such information to Acquirer. With respect to the furnishing by Seller or the Company Parties of competitively sensitive information, outside antitrust counsel will be consulted prior to the exchange of such information, and such information shall not be exchanged to the extent such counsel to Seller or the applicable Company Party reasonably advises against such exchange. In addition, any information obtained from Seller or the Company Parties pursuant to the access contemplated by this Section 5.5 shall be subject to the Confidentiality Agreement. Any access to any of Seller’s, or any member of the Company Group’s facilities shall be subject to, as applicable, Seller’s, or such member of the Company Group’s reasonable security and health-related measures and the requirements of the applicable Leases, and shall not include the right to perform any invasive testing or soil, air and groundwater sampling, including, any environmental assessment.
(b)After the Closing, Seller agrees to provide, or cause to be provided, to Acquirer, the Surviving Entity or their designated Affiliate, as soon as reasonably practicable after written request therefor, reasonable access during normal business hours, to its and its Affiliates’ employees (without unreasonable disruption of employment) and to such books, records, documents and files in the possession or under the control of the Seller or its Affiliates to Acquirer, the Surviving Entity or their designated Affiliate to the extent reasonably required by Acquirer or the Surviving Entity (i) in order to comply with reporting, disclosure, filing or other similar requirements imposed on Acquirer, the Surviving Entity or their respective Affiliates under applicable Laws or (ii) in connection with any Proceeding related to the consummation of the Transactions;Business; provided however, that (i) any such access shall be conducted in a manner not to interfere with the businesses or operations of the Company, (ii) the CompanySeller shall not be required to provide access to or to disclose
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information where such access or disclosure would (x) contraveneviolate any Applicable Legal Requirement, OrderLaw or Contractagreement, or waive any attorney client or other similar privilege, and may redact information regarding itself or its Subsidiaries or otherwise not relating to Business, and, in the event such provision of any Group Companies or, if determined by the Company in good faith after consulting with counsel, reasonably be expected to result in antitrust risk for the Company, (y)information could reasonably be expected to violate any Law or result in a lossagreement or impairment ofwaive any attorney client legal or work productother similar privilege, the Parties shall take all reasonable measures to permit the compliance with such obligations in a manner that avoids any such harm or (z) exposeconsequence.
5.6Regulatory Approval; Reasonable Best Efforts.
(a)Each of the CompanyParties shall coordinate and cooperate with one another and shall each use reasonable best efforts to riskcomply with, and shall each refrain from taking any action that would impede compliance with, applicable Laws, and as soon as reasonably practicable and advisable after the Agreement Date, each of liabilitythe Parties shall make all filings, notices, petitions, statements, registrations, submissions of information, applications or submissions of other documents required by any Governmental Authority in connection with the Mergers and the other Transactions, including (i) Notification and Report Forms with the United States Federal Trade Commission (the “FTC”) and the Antitrust Division of the United States Department of Justice (“DOJ”) as required by the HSR Act (the “HSR Filings”), and (ii) any filings required under the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, any applicable state or securities or “blue sky” laws and the securities laws of any foreign country, or any other applicable Law relating to the Mergers. Each Party will cause all documents that such Party is responsible for disclosurefiling with any Governmental Authority under this Section 5.6 to comply in all material respects with all applicable Law.
(b)Acquirer agrees to use reasonable best efforts to promptly take any and all steps necessary to avoid or eliminate each and every impediment under the HSR Act and any other applicable Antitrust Law that may be asserted by any Governmental Authority or any other Person so as to enable the Parties to expeditiously close the Transactions. For the avoidance of sensitive or Personal Informationdoubt and (iii) the Companynotwithstanding anything else in this agreement, Acquirer shall not be required to provide such access if(i) propose, negotiate, commit to or effect, by consent decree, hold, separate order, or otherwise, the sale, the divestiture or disposition of any of its assets, properties or businesses, including those of Affiliates, or of the assets, properties or businesses to be acquired by it pursuant to this Agreement, and (ii) otherwise taking or committing to take actions that after the Closing Date would limit Acquirer’s or its Affiliates’ freedom of action with respect to, or its or their ability to retain, one or more of the businesses, product lines or assets of the Company (the foregoing actions individual and in good faith determines,the aggregate being “Remedial Actions”), in lighteach case, as may be required in order to avoid the entry of, or to effect the dissolution of, any Pandemic Measures, thatpreliminary or permanent injunction, in any Proceeding under the HSR Act or any other Antitrust Law, which would otherwise have the effect of preventing or delaying the Closing, unless such accessRemedial Actions would not, individually or in the aggregate, reasonably be expected to jeopardizebe materially detrimental to the health and safety of any Group Company personnel or representatives.
(d) Parent will afford the Companybenefits to be derived by Acquirer and its financial advisors, underwriters, accountants, counsel and other representatives reasonable access during normal business hours, upon reasonable notice, to the properties, books, records and personnel of Parent during the period prior to the Closing to obtain all information concerning the business, including properties, results of operations and personnel of Parent, as the Company may reasonably request in connection with the consummation of the Transactions; provided, however, that any such access shall be conducted in a manner not to interfere with the businesses or operations of Parent.
Section 7.5 Reasonable Best Efforts.
(a) Upon the terms and subject to the conditions set forth in this Agreement, each of the Parties agrees to use its reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other Parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Merger and the other Transactions, including using reasonable best efforts to accomplish the following: (i) the taking of commercially reasonable acts necessary to cause the conditions precedent set forth in Article VIII to be satisfied; (ii) the obtaining of all necessary actions, waivers, consents, approvals, orders and authorizations from Governmental Entities and the making of all necessary registrations, declarations and filings (including registrations, declarations and filings with Governmental Entities, if any); (iii) the taking of commercially reasonable acts necessary to obtain all consents, approvals or waivers from third parties requiredAffiliates as a result of the Transactions, includingMergers and the other Transactions. Further, Acquirer and its Affiliates shall not be obligated to contest, administratively or in court, any litigated Proceeding under the HSR Act or any other consents, approvalsAntitrust Law seeking to enjoin the Mergers and the other Transactions, or waivers from third parties referred to on Schedule 4.5(b)impose any Remedial Actions upon the Acquirer, Seller or the Company and their respective Affiliates.
(c)Each of the Parties shall work together and promptly supply the other with any information which may be required and reasonable assistance as the other may request in order to effectuate any filings or applications pursuant to Section 5.6. Except where prohibited by applicable Antitrust Laws relating to the exchange of information, and subject to the Confidentiality Agreement, each of Seller and the Company Disclosure Letter,Parties, on one hand, and Acquirer, on the other, shall use commercially reasonable efforts to (i) consult with the other party prior to taking a position with respect to any such filing, (ii) permit the other party to review and discuss in advance, and consider in good faith, the case of Parent, to terminate any Contracts to which Parent or Merger Sub is a party that are not required for the operationviews of the Surviving Company following Closing, ifother in connection with any analyses, appearances, presentations, memoranda, briefs, white papers, arguments, opinions and proposals before making or submitting any of the foregoing to the extent reasonably requested by the Company; (iv) the defending of any suits, claims, actions,Governmental Authority in connection with any investigations or proceedings, whether judicial or administrative, challengingProceedings in connection with this Agreement or the consummationTransactions (including under any antitrust or fair trade applicable Law), (iii) coordinate with the other Party in preparing and exchanging such information and (iv) promptly provide the other party (and its counsel) with copies of all filings, presentations or submissions (and a summary of any oral presentations) made by such party with any Governmental Authority in connection with this Agreement or the Transactions including seeking(though sensitive negotiation and deal valuation materials may be redacted); provided that the final determination as to have any stay or temporary restraining order entered by any court or other Governmental Entity vacated or reversed; and (v) the execution or delivery of any additional instruments reasonably necessary to consummate, and to fully carry out the purposes of, the Transactions. This obligation shall include, on the part of Parent, sending a termination letter to Continental substantially in the applicable form attached to the Trust Agreement (the “Trust Termination Letter”).
(b) Notwithstanding anything herein to the contrary, nothing in this Section 7.5 shall be deemed to require (i) Parent or the Company to agree to any divestiture by itself or any of its Affiliates of shares of capital stock or of any business, assets or property, the imposition of any limitation on the ability of any of them to conduct their business or to own or exercise control of their respective assets, properties and capital stock, or the incurrence of any liability or expense or (ii) the Company to obtain the consent of ISMMS to any amendment, modification, extension or termination of any existing Contract between the Company and ISMMS.
(c) From and after the date of this Agreement until the earlier of the Closing and the valid termination of this Agreement pursuant to its terms, Parent, on the one hand, and the Company, on the other hand, shall each notify the other in writing promptly after learning of any stockholder demands or other stockholder Legal Proceedings (including derivative claims) relating to this Agreement, any Transaction Agreement or any matters relating thereto other than any appraisal claims contemplated by Section 2.13 (collectively, the “Transaction Litigation”) commenced against, in the case of Parent or Merger Sub, any of Parent or Merger Sub or any of their respective
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Representatives (in their capacity as a representative of Parent or Merger Sub) or, instrategy for dealing with the case ofFTC, the Company, any Group CompanyDOJ or any of their respective Representatives (in their capacity as a representative of a Group Company). Parent and the Companyother applicable Governmental Authority shall each (i) keep the other reasonably informed regarding any Transaction Litigation, (ii) give the other the opportunity to, at its own cost and expense,be made by Acquirer.
(d)Further, neither Party shall participate in the defense, settlement and compromise of any such Transaction Litigation and reasonably cooperatemeeting or material discussion with the other in connection with the defense, settlement and compromise of any such Transaction Litigation and (iii) consider in good faith the other’s adviceGovernmental Authorities with respect to any such filings, applications, investigation, or other inquiry without giving the other party prior notice of the meeting or discussion and, to the extent permitted by the relevant Governmental Authority, the opportunity to attend and participate in such meeting or discussion (which, at the request of either Party, shall be limited to outside antitrust counsel only).
(e)Each of Acquirer and Seller shall equally split (i) all filing fees and local counsel fees payable in connection with the filings described in this Section, and (ii) all fees of economists and any other expert fees deemed advisable or necessary by counsel for the Parties in connection with compliance with a “second request” issued by the FTC or DOJ pursuant to the HSR Act, or to respond to any investigation of the agreements contemplated herein by a Governmental Authority prior to Closing. (with Holdco2’s portion of such fees being included in Transaction Litigation; provided, however, that in no event shall Parent or Merger Sub, on one hand,Expenses).
5.7Third-Party Consents; Notices; Seller Contracts.
(a)Promptly after the Agreement Date, following consultation with Acquirer, Seller or the applicable Company any other Group Company, on the other hand, or, in any case, any ofParty will send each notice and will use their respective Representatives settlecommercially reasonable efforts to obtain all consents, waivers and approvals from all Persons that are necessary for the execution and delivery of, and the performance of its obligations pursuant to, this Agreement and the Ancillary Agreements, including under any Permit or compromise any Transaction Litigation withoutContract whereby the prior written consentconsummation of the CompanyTransactions would, in the absence of the Consent of a third party, constitute or Parent, asgive rise to (A) a breach of applicable Law or such Contract; (B) loss of any material rights or benefits under such Contract; or (C) an entitlement to accelerate, terminate, forfeit or dispose of such Contract. Such notices, consents, waivers and approvals will be in a form reasonably acceptable to Acquirer.
(b)With respect to the case may be.
Section 7.6 No Parent Securities Transactions. Neither the Company nor any of its controlled Affiliates, directly or indirectly, shall engage in any transactions involving the securities of ParentSeller Contracts, prior to the time ofClosing Date, the making of a public announcement regarding all of the material terms of the business and operations of the Company and the Transactions. The Company shall use its commercially reasonable efforts to require eachenter into new Contracts on substantially similar terms as the Seller Contracts with the respective Third Parties thereto, including such new Contracts with respect to the Seller Contracts to which Top Customers, Top Suppliers and Top Payors are parties (such new Contracts with Top Customers, Top Suppliers and Top Payors, “Required Closing Contracts” ). If any Seller Contract is not Transferred on or prior to the Closing Date, Seller hereby agrees to use commercially reasonable efforts in cooperation with Acquirer to (i) implement arrangements (including subleasing, sublicensing or subcontracting) (A) to provide the underlying rights and benefits of its officers, directorsthe Company to Acquirer, the Surviving Entity and employeestheir designated Affiliates and (B) for the Surviving Entity or Acquirer or their designated Affiliate to assume all Company obligations thereunder and (ii) obtain any requisite Consent, substitution, novation, or amendment required to Transfer the portion of the Seller Contract attributable to the Business to Acquirer, the Surviving Entity, or their designated Affiliate.
5.8Notice of Developments.
(a)During the Pre-Closing Period:
(i)Each of Acquirer, on the one hand, and Seller and the Company Parties, on the other, will promptly advise the other Party in writing of any event or circumstance that would reasonably be expected to result in any representation or warranty made by it in this Agreement becoming untrue or inaccurate in any material respect so as to cause the Closing conditions set forth in Section 6.1 or in Section 6.2 or Section 6.3, respectively, to fail to be satisfied.
(ii)Each of Acquirer, on the one hand, and Seller and the Company Parties, on the other, will promptly advise the other Party in writing of any event or circumstance that would reasonably be expected to result in the failure by it to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it under this Agreement prior to the foregoing requirement.Effective Time in any respect so as to cause the Closing conditions set forth in Section 6.1 or in Section 6.2 or Section 6.3, respectively, to fail to be satisfied.
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(iii)Seller or Holdco2, as applicable, will promptly advise Acquirer in writing of any change or event having, or which is reasonably likely to have, alone or in combination with other changes or events, a Material Adverse Effect with respect to the Company Group.
Section 7.7 (iv)No Claim Against Trust Account. For andSeller or Holdco2, as applicable, will promptly advise Acquirer in considerationwriting of Parent entering into this Agreement, the receipt and sufficiencyany Proceeding initiated by or against any member of which are hereby acknowledged, the Company on behalfGroup or, to the Company’s Knowledge, any Proceeding threatened against any member of itself and its Affiliates agrees that:
(a) neither the Company norGroup, or brought or threatened against any of its Affiliates do nowdirector, officer, or at any time hereafter have any right, title, interest or claimequityholder of any kind in or to any monies inmember of the Trust Account or distributions therefrom, and shall not make any claim against the Trust Account (including any distributions therefrom),Company Group, in each case regardlessin its capacity as such (a “New Litigation Claim”), and notify Acquirer of whetherongoing material developments in any New Litigation Claim and consult in good faith with Acquirer regarding the conduct of the defense of any New Litigation Claim.
(v)Seller or Holdco2, as applicable, will promptly advise Acquirer in writing of any written notice from any Person (from which Acquirer and Seller shall have not previously determined to obtain consent), alleging that the consent of such claim arises as a result of,Person is or may be required in connection with the Mergers.
(vi)Seller or relatingHoldco2, as applicable, will deliver to Acquirer as soon as practicable, but in any wayevent within three Business Days, of applicable Governmental Authority contact, copies of any associated correspondence. Neither the Seller, Holdco2 or any member of the Company Group shall have any further communication with such Applicable Government Authority without prior written notice to Acquirer.
(b)No notification pursuant to this Section 5.8 will be deemed to prevent or cure any breach of, or inaccuracy in, amend or supplement any Section of the Company Disclosure Schedules or the Acquirer Disclosure Schedules, or otherwise disclose an exception to, or affect in any manner, the representations, warranties, covenants or agreements of the Parties (or remedies with respect thereto) or the conditions to the obligations of the parties under this Agreement or the Transactions orAncillary Agreements.
5.9Regulatory Matters. During the Pre-Closing Period, the Seller and the Company Parties shall use and shall cause their respective Affiliates to use commercially reasonable efforts to make available to Acquirer and its Representatives, as and to the extent requested by Acquirer, complete and accurate copies of all written correspondence between any proposed or actual business relationship between Parent or its Representatives,member of the Company Group, on the one hand, and the Company or its Representatives,applicable Regulatory Authorities, on the other, hand,other than routine, non-material communications in the Ordinary Course of Business, that is or any other matter, and regardless of whether such claim arises based on contract, tort, equitycomes into the Seller’s, its Affiliates’ or any other theory of legal liability (any and all such claims against the Trust Account are collectively referred to hereafter as the “Released Claims”);
(b) the Company on behalf of itself and its Affiliates, hereby irrevocably waives any Released Claims thatGroup’s possession or control during the Pre-Closing Period promptly after Seller or the Company Parties obtain such possession or any of its Affiliates may have against the Trust Account (including any distributions therefrom) now or in the future as a result of, or arising out of, any negotiations, Contracts or agreements with Parent or its Representatives, including this Agreement or the Transactions, and will not seek recourse against the Trust Account (including any distributions therefrom) in connection therewith (including for an alleged breach of this Agreement or any other agreement with Parent or its Affiliates);
(c) the irrevocable waiver set forth in the immediately preceding clause (b) is material to this Agreement and specifically relied upon by Parent and its Affiliates to induce Parent to enter in this Agreement, and the Company further intends and understands such waiver to be valid, binding and enforceable against the Company and each of its Affiliates under Applicable Legal Requirements; and
(d)control thereof, except to the extent any such material is immaterial to the Company or any of its Affiliates commences any action or proceeding based upon, in connection with, relating to or arising out of any matter relating to Parent or its Representatives, including this Agreement or the Transactions, which proceeding seeks, in whole or in part, monetary relief against Parent or Representatives, theGroup. The Company hereby acknowledges and agrees that the Company’s and its Affiliates’ sole remedy shall be against funds held outside of the Trust Account and such claim shall not permit the Company or its Affiliates (or any Person claiming on any of their behalves or in lieu of any of them) to have any claim against the Trust Account (including any distributions therefrom) or any amounts contained therein.
(e) For the avoidance of doubt, (i) nothing herein shall serve to limit or prohibit the Company’s right to pursue a claim against Parent pursuant to this Agreement for legal relief against monies or other assets of Parent held outside the Trust Account or for specific performance or other equitable relief in connection with the Transactions or for intentional fraud in the making of the representations and warranties in Article V; and (ii)
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nothing herein shall serve to limit or prohibit any claims that the Company may have in the future pursuant to this Agreement against Parent’s assets or funds that are not held in the Trust Account.
Section 7.8 Disclosure of Certain Matters. Each of Parent, Merger Sub and the Company will promptly provide the other Parties with prompt written notice of any event, development or condition of which they have Knowledge that: (a) is reasonably likely to cause any of the conditions set forth in Article VIII not to be satisfied; or (b) would require any amendment or supplement to the Proxy Statement.
Section 7.9 Securities Listing ; Parent Public Filings.
(a) Parent will use its reasonable best efforts to cause the shares of Parent Class A Stock issued in connection with the Transactions to be approved for listing on Nasdaq at Closing. During the period from the date hereof until the Closing, Parent shall use its reasonable best efforts to ensure Parent remains listed as a public company on Nasdaq and keep the Parent Class A Stock and Parent Warrants listed for trading on Nasdaq. After the Closing, Parent shall use commercially reasonable efforts to: (a) continue the listing for trading of the Parent Class A Stock and Parent Warrants on Nasdaq; and (b) in the event any Earn-Out Shares become issuable pursuant to Article III, cause such Earn-Out Shares to be approved for listing on Nasdaq.
(b) From the date hereof through the Closing, Parent will keep current and timely file all reports required to be filed or furnished with the SEC and otherwise comply in all material respects with its reporting obligations under applicable securities laws.
Section 7.10 No Solicitation.
(a) During the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement pursuant to its terms or the Closing, the Company shall not, and shall cause its Subsidiaries not to, and shall direct its stockholders, employees, agents, officers, directors, representatives and advisors (collectively, in each case in their capacity as such, “Representatives”) 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 Parent and its agents, representatives, advisors) concerning any merger, sale of ownership interests and/or assets of the Company, 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. In addition, the Company shall, and shall cause its Subsidiaries and the Company Stockholders to, and shall cause their respective Representatives to, immediately cease any and all existing discussions or negotiations with any Person with respect to any Company Business Combination.
(b) During the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement pursuant to its terms or the Closing, Parent and Merger Sub shall not, and shall direct their respective Representatives not to, directly or indirectly: (i) solicit, initiate, enter into or continue discussions or transactions with, or encourage or respond to any inquiries or proposals by, or provide any information to, any Person (other than the Company, the Company Stockholders and their respective Representatives) concerning any merger, purchase of ownership interests or assets of Parent, recapitalization or similar business combination transaction (each, a “Parent 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 Parent Business Combination; or (iii) commence, continue or renew any due diligence investigation regarding a Parent Business Combination. Parent and Merger Sub shall, and shall cause their respective Representatives to immediately cease anyconsult and all existing discussions or negotiationsreasonably cooperate with Acquirer, as and to the extent reasonably requested by Acquirer, and take into good faith consideration the views of Acquirer in connection with any Personclinical and preclinical trials and any regulatory filings, and any communications with any Regulatory Authority, in each case with respect to any Parent Business Combination.the Company Group, during the Pre-Closing Period.
(c) Each Party shall promptly (and in no event5.10Delivery of Financial Statements. During the Pre-Closing Period, Seller or Holdco2 will deliver to Acquirer, (a) not later than 24 hourseight Business Days after becoming awarethe end of each calendar month, an unaudited consolidated balance sheet as of the end of such inquiry, proposal, offermonth and unaudited consolidated statements of operations and cash flows for such month; provided that the cash flow statements need only be included on a quarterly basis; and (b) on or submission) notifybefore the other Parties (and in the case of Parent’s receipt of a Parentfifth (5th) Business Combination proposal, Parent shall also provide noticeDay prior to the Company)Closing, audited consolidated financial statements, including consolidated balance sheets and consolidated statements of income, changes in stockholder equity, and cash flows, of the Company Group for the twelve (12) months ended December 31, 2021 prepared in accordance with the Accounting Standards (the “Interim Financial Statements”), and provide such additional supporting or related information as may be reasonably requested by Acquirer in respect of such Interim Financial Statements. Holdco2 covenants and agrees that such financial statements and the notes thereto, if it or, to its Knowledge, any, will fairly present in all material respects the financial condition of the Company Group at the respective dates thereof and the results of its or its Representatives receives any inquiry, proposal, offer or submissionoperations for the respective months then ended, and will be prepared in accordance with respect to a Company Business Combination or Parent Business Combination, as applicable (including the identitybooks and records of the Person making suchCompany Group in conformity with the Accounting Standards, consistently applied with the Financial Statements, except for the omission of footnotes and normal, immaterial year-end adjustments.
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inquiry or submitting such proposal, offer or submission), after5.11Tax Matters.
(a)Cooperation. Without limiting any of the execution and deliveryother provisions of this Agreement. If either PartySection 5.11, the Parties shall cooperate fully, as and to the extent reasonably requested by any of them, in connection with the filing of Tax Returns and any audit, litigation or its Representatives receives an inquiry, proposal, offer or submissionother Proceeding with respect to Taxes. In this regard, Acquirer shall retain all books and records with respect to Tax matters of the Company Group which are or may be pertinent to any Tax period beginning before the Closing Date until the expiration of the applicable statute of limitations and shall make them available to Seller in connection with any audit, litigation or other Proceeding relating to the Company Group or with respect to which the Company Group is relevant.
(b)Transfer Taxes. All transfer, documentary, sales, use, stamp, registration and other such Taxes, and any conveyance fees, recording charges and other fees and charges (including any penalties and interest) incurred in connection with consummation of the Transactions (“Transfer Taxes”), if any, shall be borne and paid fifty percent (50%) by Seller and fifty percent (50%) by Acquirer; provided that any Transfer Taxes incurred as a result of or in connection with the Pre-Closing Restructuring shall be borne and paid 100% by, and be the sole responsibility of, Seller. Seller or Acquirer (as required by applicable Law) shall prepare and timely file (or cause to be prepared and timely filed) at its own expense all Tax Returns required to be filed in respect of any such Taxes, provided, however, that Taxes relating to such Tax Returns shall be borne and paid by the Seller and Acquirer as provided in the preceding sentence.
(c)Straddle Periods. For purposes of determining the liability for Taxes (as well as any refund or credit with respect thereto) of or in respect of, or payable by, Holdco2 or the Company Business CombinationGroup in respect of any Straddle Period, (i) the amount of any such Taxes based on or measured by income, sales, use, receipts, or other similar items of the Company Group that constitute a Tax in respect of a Pre-Closing Tax Period shall be determined based on an interim closing of the books as of the close of business on the Closing Date and (ii) the amount of any other Taxes of the Company Group for a Straddle Period that relate to and constitute a Tax in respect of a Pre-Closing Tax Period shall be deemed to be the amount of such Tax for the entire Straddle Period multiplied by a fraction the numerator of which is the number of days in the portion of the Straddle Period ending on the Closing Date and the denominator of which is the number of days in the entire Straddle Period. For purposes of determining the amount of Taxes attributable to the pre-Closing portion of any Straddle Periods under this Agreement, all applicable Transaction Tax Deductions shall be allocated to and deducted in the pre-Closing portion of any Straddle Period to the extent permitted by applicable Law on a “more likely than not” basis.
(d)Tax Returns. At the cost and expense of Seller, Seller or Parent Business Combination, as applicable, such Partyshall prepare and file (or cause to be prepared and filed) all Tax Returns of or relating to the Company Group for any Pre- Closing Tax Period that are due after the Closing. Seller shall provide the other Parties with a copy of such inquiry, proposal, offerTax Return to Acquirer at least fifteen (15) days before the due date for filing such Tax Return (or as soon as reasonably practicable, if such due date is less than fifteen (15) days after the Closing Date) for Acquirer’s review. Seller or submission (andParent, as applicable, shall consider in good faith all reasonable written comments made by Acquirer with respect to such Tax Returns within five Business Days prior to the casedue date for filing such Tax Return. All such Tax Returns shall be timely filed as finally prepared by Seller. Tax Returns for any Pre-Closing Tax Periods and Straddle Periods shall include therein as deductions all Transaction Tax Deductions to the extent permitted by applicable Law on a “more likely than not” basis. Notwithstanding anything to the contrary in this Agreement, Seller, Parent and Subsidiaries of Parent’s receipt, Parent shall alsonot be required to provide copiesany Person with any Tax Return or copy of any Tax Return of (i) Parent or any Subsidiary of Parent, or (ii) a consolidated, combined, affiliated or unitary group that includes Parent or any Subsidiary of Parent.
(e)Tax Proceedings. Acquirer shall inform Seller of the receipt by Acquirer or its Affiliates (including the Surviving Entity after the Closing) of notice of any deficiency, proposed adjustment, adjustment, assessment, audit, claim, inquiry, examination, suit, dispute or other proceeding relating to Taxes with respect to which Acquirer intends to seek indemnification under Article 8 (a “Tax Proceeding”). Seller shall not be relieved of its indemnification obligations hereunder if such notice is not delivered promptly except to the Company).
Section 7.11 Trust Account. Priorextent Seller is materially prejudiced thereby. Seller or Parent shall have the exclusive right to control, conduct and settle any Tax Proceeding. Seller or Parent shall keep Acquirer reasonably informed of all material developments of such Tax Proceeding. Notwithstanding anything in Article 8 to the Closing, nonecontrary, this Section 5.11(d), and not Section 8.3, shall govern the conduct of Tax Proceedings.
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(f)Tax Free Reorganization Matters. The Parties intend that, for United States federal income tax purposes, the Mergers will qualify as a Reorganization to which each of the funds heldParties are to be parties under Section 368(b) of the Code and this Agreement is intended to be, and is adopted as, a plan of reorganization for purposes of Sections 354, 361 and 368 of the Code and within the meaning of Treasury Regulations Section 1.368-2(g) (the “Intended Tax Treatment”). The Mergers shall be reported by the Parties for all Tax and other purposes in accordance with the Trust Account may be used or released except forforegoing and will not take any position inconsistent with the withdrawal of interest to pay any tax obligation owedIntended Tax Treatment, unless otherwise required by Parenta Governmental Authority as a result of assets owned by Parent, including franchise taxes. Upon satisfaction or waivera “determination” within the meaning of Section 1313(a) of the conditions set forthCode. Notwithstanding any other provisions of this Agreement, the composition of payments under this Agreement shall be consistent with the qualification of the transactions contemplated hereby as a Reorganization, including the requirements of Treasury Regulations Section 1.368-1(e) and a minimum proprietary interest under such regulations of at least forty percent (40%), and adjustments shall be made to the composition of payments and satisfaction of indemnity claims as between Acquirer Stock, cash and any other items to the extent necessary to comply with the foregoing. The Parties shall consult and cooperate with each other in Article VIIIgood faith for purposes of making any such adjustments. The parties covenant and provisionagree that they will not take any actions before or after the Closing that would be reasonably expected to adversely affect the status of notice thereofthe Mergers as a Reorganization. The Parties shall cooperate with each other and their respective counsel to Continental (which notice Parentdocument and support the Tax treatment of transactions contemplated by this Agreement consistently with the Intended Tax Treatment, including providing factual support letters and customary tax representations to counsel for purposes of rendering any Tax opinions that may be provided by counsel. Each Party shall providepromptly notify the other Party in writing if, before the Closing Date, such Party knows or has reason to Continentalbelieve that the transactions contemplated by this Agreement may not qualify for the Intended Tax Treatment.
(g)Tax Refunds. All refunds of Taxes of any member of the Company Group for any Pre-Closing Tax Period (or portion of a Straddle Period ending on the Closing Date as determined in accordance with the same principles provided for in Section 5.11(c)) (whether in the form of cash received or a credit or offset against Taxes otherwise payable) shall be for the benefit of the Seller. To the extent that the Acquirer, any member of the Company Group, or any of their Affiliates receives a Tax refund that is for the benefit of the Sellers that was not included in the calculation of Company Net Working Capital, the Acquirer shall pay to the Seller the amount of such Tax refund (and interest received from the Governmental Authority with respect to such refund), net of out-of-pocket Taxes and reasonable professional fees and expenses incurred to obtain such. Tax refund. The amount due to the Seller shall be payable ten (10) days after receipt of the refund from the applicable Governmental Authority (or, if the Tax refund is in the form of a credit or offset, ten (10) days after the due date of the Tax Return claiming such credit. or offset). The Acquirer shall, and shall cause the members of the Company Group, to take all reasonable actions necessary, or requested by the Seller, to timely claim any Tax refunds that will give rise to a payment under this Section 5.11(g). Notwithstanding the foregoing, in the event it is subsequently determined that any Tax refund or Tax credit for which the Acquirer made a payment hereunder was improperly obtained or otherwise disallowed, the Seller shall pay to the Acquirer an amount equal to the amount such Tax refund or Tax credit so disallowed (not exceeding the amount of the applicable Tax refund or Tax credit for which Acquirer made a payment to the Seller Representative under this Section 5.11(g)) within ten (10) days after delivery of a written notice to the Seller of such determination or disallowance. Payments under this paragraph (g) shall be treated as adjustments to the Merger Consideration.
(h)Post-Closing Actions. Acquirer shall not permit the Company or any of its Affiliates to take any action on the Closing Date that could increase Seller’s liability for Taxes or reduce the amount of any Tax refund or Tax credit of Seller. None of the Acquirer, the Company Group nor any of their respective Affiliates shall (or shall cause or permit any members of the Company Group or their Subsidiaries) to (i) file, amend, re-file or otherwise modify any Tax Return relating in whole or in part to the Company or any of its Subsidiaries, with respect to any Pre-Closing Tax Period, (ii) make any Tax election pursuant to Sections 336 or 338 of the Code in connection with the transactions contemplated hereby, or any other election that has retroactive effect to any Pre-Closing Tax Period of any member of the Company Group or their Subsidiaries or Affiliates, (iii) file any ruling or request with any taxing authority that relates to Taxes or Tax Returns of the Company or any of its Subsidiaries or their Affiliates for a Pre-Closing Tax Period, or (iv) enter into any voluntary disclosure with any taxing authority regarding any Tax or Tax Returns of the Company or any of its Subsidiaries for a Pre-Closing Tax Period (including any voluntary disclosure with a taxing authority with respect to filing Tax Returns or paying Taxes for any Pre-Closing Tax Period
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in a jurisdiction that the Company did not previously file a Tax Return or pay Taxes), in each case, without the prior written consent of the Seller, which shall not be unreasonably withheld, delayed or conditioned.
5.12Insurance; Indemnification of Directors and Officers.
(a)_________Insurance.
(i)_________Following the Closing and for the duration of the term of the Transition Services Agreement, with respect to claims for events or Damages related to the Company Products with respect to pre-Closing occurrences that are covered by Seller’s occurrence-based third-party liability insurance policies (the “Available Insurance Policies”), subject in all cases to the terms and limitations of such policies (such claims, the “Valid Pre-Closing Claims”), (A) Acquirer may promptly notify Seller in writing of any matter that is reasonably expected to give rise to a Valid Pre-Closing Claim under any such Available Insurance Policy (provided that the failure to promptly notify Seller shall not relieve Seller from its obligations under clause (B), except to the extent that such failure invalidates the validity of any purportedly Valid Pre-Closing Claim), and (B) Seller shall, and shall cause its Affiliates to, (1) make Valid Pre-Closing Claims and reasonably pursue and seek to recover on such claims under the terms of the Trust Agreement): (a)applicable Available Insurance Policies and (2) reasonably promptly deliver to Acquirer any insurance proceeds received with respect thereto (calculated net of reasonable expenses incurred in accordance withprocuring such recovery and pursuantany increase in premiums or retroactive premium adjustments or chargebacks paid by or on behalf of Seller to the Trust Agreement,extent resulting from such claims, and taking into account the available coverage under each Available Insurance Policy, it being understood that such coverage shall first be available to satisfy other claims of Seller or its Affiliates that are pending under such policy at the time the claim for the benefit of Acquirer is made); provided that, unless otherwise deducted from the proceeds received by Acquirer, Acquirer shall pay (or reimburse Seller for), without duplication, any deductibles, retentions, loss-sensitive, self-insurance amounts or other costs, in each case, to the extent resulting from any Valid Pre-Closing Claim made by Seller or its Affiliates on behalf of any of Acquirer or the Company Group under such policies for Valid Pre-Closing Claims. For the avoidance of doubt, Acquirer shall be liable for all uninsured, uncovered, unavailable or uncollectible Damages associated with any such Valid Pre-Closing Claim. Following the Closing, Parent: if permitted under the applicable Available Insurance Policy, Seller hereby authorizes Acquirer and its Subsidiaries, under the direction and control of Seller, to notify, make and pursue Valid Pre-Closing Claims as contemplated by this Section 5.12(a)(i) under the Available Insurance Policies, subject to the payment and reimbursement provisions set forth in the prior sentence. Notwithstanding anything to the contrary herein, Seller shall not have any Liability or obligation to bring any Proceedings to obtain any insurance coverage for any Valid Pre-Closing Claim.
(ii)In connection with the pursuit of any Valid Pre-Closing Claim, Acquirer shall, and shall cause the documents, opinionsCompany Group to, fully cooperate with Seller in pursuing coverage for any Valid Pre-Closing Claim. If Acquirer or any of its Affiliates breach, or cause any member of Seller to breach, any terms or conditions of any Available Insurance Policies with respect to any Valid Pre-Closing Claim, Acquirer shall be solely responsible for, and notices requiredshall bear the risk of any loss of coverage cause by such breach (and, in all events, the Acquirer shall bear the risk of any lack of coverage under the Available Insurance Policies). Acquirer shall, and shall cause the Company Group to, be delivereduse commercially reasonable efforts to Continental pursuantpursue rights of recovery against third parties with respect to claims7, Liabilities, occurrences, accidents, events, matters, Proceedings or Damages for which the Company Group has the ability to mitigate via contract or tort and shall cooperate with Seller with respect to the Trust Agreement to be so delivered, including providing Continental with the Trust Termination Letter; and (ii) shall use best efforts to cause Continental to, and Continental shall thereupon be obligated to, distribute the Trust Account as directed in the Trust Termination Letter, including all amounts payable to: (A) to stockholders who elect to have their Parent Class A Stock converted to cash in accordance with the provisionspursuit of Parent’s Charter Documents in respect of Parent Stockholder Redemptions; (B) for income tax or other tax obligations of Parent prior to Closing; (C) for any Parent Transaction Costs and any Company Transaction Costs; and (D) as repayment of loans and reimbursement of expenses to directors, officers and stockholders of Parent; and (b) thereafter, the Trust Account shall terminate, except as otherwise provided therein.such rights.
Section 7.12 (b)Directors’Indemnification of Directors and Officers’ Liability Insurance.Officers.
(a) Parent agrees(i)Each of Acquirer, Seller and Holdco2 agree that all rights to exculpation, indemnification, and advancement of expenses and exculpation from liability for or in connection with acts or omissions occurring at any time prior to or on the Closing Date (including in connection with this Agreement and the Transactions), that now existingexist in favor of any Person who prior to or on the Closing Date is or was a current or former directorsdirector, manager, officer or officers, as the case may be,employee of any member of the Company Group, Companyor who at the request of Seller, Holdco2 or any of their respective Affiliates served prior to or on the Closing Date as a director, officer, member, manager, employee, trustee or fiduciary of any other entity of any type (each together with such person’s heirs, executors or administrators, a “D&O Indemnified Party”Person”), including as provided in their respective Charterthe Governing Documents or inof any indemnification agreement with respect to any Group Company set forth on Schedule 7.12(a)member of the Company Disclosure Letter shallGroup (an “Indemnity Agreement”), will survive the Closing
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and shallwill continue in full force and effect. For aeffect following the Closing Date. In furtherance (and not in limitation of) the foregoing, for the six (6) year period of six years fromfollowing the Closing Date, Parent shall use reasonable best effortsAcquirer will cause the Company Group Companies to, and the Company Group will maintain in effect the exculpation,Governing Documents of each applicable member of the Company Group provisions with respect to indemnification, and advancement of expenses provisions ofand exculpation from liability that in each such Group Company’s Charterrespect are at least as favorable to each D&O Indemnified Person as those contained in such member’s Governing Documents as in effect immediately prior toon the Closing Date or in any indemnification agreements of each Group Company with any D&O Indemnified Party as in effect immediately prior to the Closing Date, and Parent shall, and shall use reasonable best efforts to cause the Group Companies to,date hereof, which provisions will not amend, repealbe amended, repealed or otherwise modify any such provisionsmodified in any manner that would adversely affect the rights thereunder of any D&O Indemnified Party; provided, however,Person. Each Indemnity Agreement shall continue without termination, revocation, amendment or other modification that allwould adversely affect the rights to indemnification or advancement of expenses in respectthereunder of any Legal Proceedings pending or asserted or any claim made within such period shall continue until the disposition of such Legal Proceeding or resolution of such claim. From and after the Closing Date, Parent shall use reasonable best efforts to cause the Group Companies to honor,D&O Indemnified Person, in each case in accordance with their respective terms, eachits terms.
(ii)If Acquirer or any member of the covenants contained in this Section 7.12 without limit as to time.
(b) Prior to the Closing, the Company shall use reasonable best efforts to purchase a “tail” or “runoff” directors’ and officers’ liability insurance policy (the “D&O Tail”) in respect of acts or omissions occurring prior to the Effective Time covering each such Person that is a director or officer of a Group Company currently covered by a directors’ and officers’ liability insurance policy of one or more Group Companies on terms with respect to coverage, deductibles and amounts no less favorable than those of such policy in effect on the date of this Agreement for the six-year period following the Closing. Parent shall, and shall use reasonable best efforts to cause the Surviving Corporation to, maintain the D&O Tail in full force and effect for its full term and cause all obligations thereunder to be honored by the Group Companies, as applicable, and no other party shall have any further obligation to purchase or pay for such insurance pursuant to this Section 7.12(b).
(c) The rights of each D&O Indemnified Party hereunder shall be in addition to, and not in limitation of, any other rights such person may have under the Charter Documents of any Group Company, any other indemnification arrangement, any Legal Requirement or otherwise. The obligations of Parent and the Group Companies under this Section 7.12 shall not be terminated or modified in such a manner as to adversely affect any D&O Indemnified Party without the consent of such D&O Indemnified Party. The provisions of this Section 7.12
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shall survive the Closing and expressly are intended to benefit, and are enforceable by, each of the D&O Indemnified Parties, each of whom is an intended third-party beneficiary of this Section 7.12.
(d) If Parent or, after the Closing, any Group Company, or(or any of their respectiveits successors or assigns: (i)assigns) (A) consolidates with or merges into any other Person and shallis not be the continuing or surviving corporation or entity of such consolidation or merger;merger or (ii)(B) transfers or conveys all or substantially all of its properties and assets to any other Person (including by dissolution, liquidation, assignment for the benefit of creditors or similar action), then, and in each such case, proper provision shallwill be made so that the successors and assigns of Parent or such Group Company, as applicable, assumeother Person fully assumes the obligations set forth in this Section 7.12.5.12(b).
(e) On(iii)The provisions of this Section 5.12(b) shall survive the Closing. This Section 5.12(b) shall be for the irrevocable benefit of, and will be enforceable by, each D&O Indemnified Person and his or beforeher respective heirs, executors, administrators, estates, successors and assigns, and each such Person will be an express intended third party beneficiary of this Agreement for such purposes. Acquirer will pay, or will cause the applicable member of the Company Group, as and when incurred by any Person referred to in the immediately preceding sentence, all fees, costs, charges and expenses (including attorneys’ fees and expenses) incurred by such Person in enforcing such Person’s rights under this Section 5.12(b). Notwithstanding anything in this Agreement to the contrary, the obligations under this Section 5.12(b) will not be terminated, revoked, modified or amended in any way so as to adversely affect any Person referred to in the second sentence of this Section 5.12(b)(iii) without the written consent of such Person. With respect to any right to indemnification or advancement for actual or claimed acts or omissions occurring prior to or on the Closing Parent shall obtain a directors’Date (including in connection with this Agreement and officers’ liability insurance policy on terms satisfactorythe Transactions), the applicable member of the Company Group will be the indemnitor of first resort, responsible for all such indemnification and advancement that any D&O Indemnified Person may otherwise have from any direct or indirect stockholder or equity holder of any of the members of the Company Group (or any Affiliate of such stockholder or equity holder).
(iv)Notwithstanding anything to the Company, which policy shall provide coverage for thecontrary contained in this Section 5.12(b), Seller’s directors and officers of Parentinsurance policies, in each case as in effect as of the Closing Date, shall be the first and primary recourse for any indemnification to which any D&O Indemnified Person may be entitled under this Section 5.12(b). For the six (6) year period following the Closing Date, Seller agrees to treat any such claim for indemnification against its directors and officers insurance policies as a Valid Pre-Closing Claim in accordance with Section 5.1(a).
5.13Employee Matters.
(a)All Continuing Employees shall continue as employees of the Company Group as of and immediately following the Closing. For a period of at least one (1) year following the Closing Date, Acquirer shall cause to be provided to the Continuing Employees (i) base salary or wages, as applicable, and cash bonus opportunities (and excluding, for the avoidance of doubt, equity or equity-based bonus opportunities), in each case no less favorable than those provided to such Continuing Employees as of the Agreement Date and (ii) employee benefits that are no less favorable in the aggregate than those provided to the Continuing Employees as of the Agreement Date.
(b)As of the Closing Date, the Company and ParentGroup shall reasonably cooperate withcease to be participating employers in the Seller Benefit Plans that provide retirement, health or welfare benefits. With respect thereto).
Section 7.13 [Intentionally Left Blank]
Section 7.14 Tax Matters.
(a) Parent covenants that it will file a consolidated U.S. federal income Tax Return withto each benefit plan, program, practice, policy or arrangement maintained by the applicable Group Companies forAcquirer or any of its Affiliates (including the period starting on the dayCompany) following the Closing Date and for U.S. federal income Tax purposes, and the applicable Group Companies will become membersin which any of the affiliated groupContinuing Employees participate (the “Acquirer Plans”), each Continuing Employee shall be credited with the same amount of corporations of which Parent isservice as was credited by the common parent or Company Group as
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of which Parent is a member on the day following the Closing Date.
(b) All transfer, documentary, sales,under similar or comparable Company Benefit Plans (including for purposes of eligibility to participate, vesting, benefit accrual and eligibility to receive benefits), except to the extent such service credit would result in any duplication of benefits. Acquirer shall use stamp, registration, excise, recording, registration value addedcommercially reasonable efforts to cause each applicable Acquirer Plan to waive, to the extent permitted by applicable Law, eligibility waiting periods, evidence of insurability requirements and other such similar Taxespre-existing condition limitations. To the extent permitted by applicable Law and fees (including any penalties and interest)to the extent applicable in the plan year that become payable in connection with or by reason of the execution of this Agreement and the Transactions shall be borne and paid by the Parent. Parent shall timely file any Tax Return or other document with respect to such Taxes or fees (and the Company and Parent shall reasonably cooperate with respect thereto as necessary).
(c) Oncontains the Closing Date, Acquirer shall use commercially reasonable efforts to give the Company shall provide Parent with a certificate on behalf ofContinuing Employees credit under the Company, prepared in a manner consistent and in accordance with the requirements of Treasury Regulation Sections 1.897-2(g), (h) and 1.1445-2(c)(3), certifying that no interest in the Company is, or has been during the relevant period specified in Section 897(c)(1)(A)(ii) of the Code, a “U.S. real property interest” within the meaning of Section 897(c) of the Code, and a form of notice to the Internal Revenue Service prepared in accordance with the provisions of Treasury Regulations Section 1.897-2(h)(2); provided, that, notwithstanding anything to the contrary, Parent’s sole remedy in the event the Company fails to deliver such certificate shall be to make a proper withholding of Tax to the extent required by applicable Tax law.
(d) All Tax sharing agreements or similar arrangements with respect to or involving any Group Company (other than any agreement entered into in the ordinary course of business and not primarily concerning Taxes or any agreement the only parties to which are Group Companies) shall be terminatedAcquirer Plan for amounts paid prior to the Closing Date and, afterduring the calendar year in which the Closing Date noneoccurs under a corresponding benefit plan for purposes of applying deductibles, co-payments and out of pocket maximums, as though such amounts had been paid in accordance with the terms and conditions of the Acquirer Plan.
(c)Acquirer shall cause an Acquirer Plan that is intended to be tax qualified under Section 401(a) of the Code (“Acquirer 401(k) Plan” ) to permit Continuing Employees with account balances in a Seller Benefit Plan intended to be qualified under Section 401(a) of the Code (“Seller 401(k) Plan” ) to roll over their account balances, and shall use commercially reasonable efforts to include any loans, to such Acquirer 401(k) Plan. Seller shall provide a matching contribution under the Seller 401(k) Plan with respect to each Continuing Employee’s accrued matching contribution under the Seller 401(k) Plan as of the Closing Date for the portion of the plan year that includes the Closing Date for compensation earned prior to the Closing Date by contributing the Accrued 2022 401(k) Match to the Seller 401(k) Plan.
(d)Prior to the Closing, the Company Group Companies shall be bound therebypay discretionary annual bonuses for the performance period ended December 31, 2021, as determined in Seller’s sole discretion, and any commissions or have any liability thereunder for amounts due inother cash incentives with respect ofto performance periods ending on or before the Closing Date to the extent payable prior to the Closing in the Ordinary Course of Business. With respect to any other commissions or other cash incentives for performance periods ending on or after January 1, 2022 and there shall be no continuing obligation afteron or before the Closing Date, Acquirer shall cause the Company Group to makepay out the incentives thereunder in accordance with the terms thereof and consistent with past practice. With respect to performance periods in progress as of the Closing Date for any payments under anyannual cash bonuses, commissions or other cash incentives, Acquirer shall cause the Company Group to maintain the terms of such agreements or arrangements programs in effect for the remainder of such performance periods and to pay out the incentives thereunder in accordance with such terms and consistent with past practice.
Section 7.15 (e)Equity Financing Agreements.Prior to the Closing, Seller may in its sole discretion accelerate the vesting of equity and equity based incentive awards held by Company Employees under Seller’s equity incentive plans, and may in its sole discretion extend the exercise period of stock options held by Company Employees under Seller’s equity incentive plans to the one (1) year anniversary of the Closing Date.
(a) Parent(f)Acquirer shall provide COBRA continuation coverage to each Continuing Employee who is an “M&A qualified beneficiary” (within the meaning of Treasury Regulation Section 54.4980B-9) in connection with the Transactions. Seller shall provide COBRA continuation coverage to each individual who is an M&A qualified beneficiary in connection with the Transactions and is not a Continuing Employee.
(g)As soon as practicable following the Agreement Date, Acquirer and the Company’s Chief Executive Officer shall mutually consult regarding the terms of an equity and cash retention pool for the benefit of certain Company Employees.
(h)Prior to the Closing, the Company shall use its commercially reasonable efforts (which for the avoidance of doubt shall not permitrequire the Company to pay any amendmentconsideration) to obtain executed confirmatory assignments of Intellectual Property, in form and substance reasonably satisfactory to Acquirer, from any Authors that have not previously executed such agreements.
(i)Nothing contained in this Section 5.13 shall, or modificationshall be construed so as to, be made
(j)prevent or restrict in any way the right of Acquirer to terminate reassign, promote or demote any waiver ofemployee, consultant, director or other service provider (or to cause any provision or remedy under, or any replacements of the Equity Financing Agreements, in each case, withoutforegoing actions) at any time following the prior written consentClosing, or to change (or cause the change of) the title, powers, duties, responsibilities, functions, locations, or conditions of employment or service, to the Company (such consentextent not to be unreasonably withheld, conditioned or delayed in respectcovered by this Section 5.13, of any such amendment, modification, waiver or replacement that is not and would not reasonably be expected to be materially adverse to the Company or the Company Stockholders). Parent shall use its reasonable best efforts to take, or cause to be taken, all actions and do, or cause to be done, all things necessary, proper or advisable to consummate the transactions contemplated by the Equity Financing Agreements on the terms and conditions described therein, including maintaining in effect the Equity Financing Agreements and using its reasonable best efforts to: (i) satisfy in all material respects on a timely basis all conditions and covenants applicable to Parent in the Equity Financing Agreements and otherwise comply with its obligations thereunder; (ii) in the event that all
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conditionsemployee, consultant, director or other service provider at any time following the Closing, (ii) constitute an amendment or modification of any Company Benefit Plan or other employee benefit plan, (iii) create any third-party rights in the Equity Financing Agreements (other than conditions that Parentany such current or former employee, consultant, director or other service provider (including any beneficiary or dependent thereof) or (iv) except as set forth in Section 5.13(c)obligate Acquirer or any of its Affiliates control the satisfaction of andto adopt or maintain any particular plan or program or other than those conditions that by their nature are to be satisfiedcompensatory or benefits arrangement at the Closing) have been satisfied, consummate transactions contemplated by the Equity Financing Agreements atany time or prior to Closing; and (iii) enforce its rights under the Equity Financing Agreements in the event that all conditions in the Equity Financing Agreements (other than conditions that Parentprevent Acquirer or any of its Affiliates controlfrom modifying or terminating any such plan, program or other compensatory or benefits arrangement at any time.
5.14Transition Services Agreement and Accounts Receivable.
(a)During the satisfactionPre-Closing Period, the Parties shall cooperate with each other and promptly negotiate and finalize the Transition Services Agreement covering the provision of certain transition services from Seller and its relevant Affiliates to the Company Group, acting reasonably and in good faith. In connection with the foregoing, Seller and Acquirer will take any other than those conditionsactions reasonably required to identify and define the services provided by Seller and its relevant Affiliates to the Company Group prior to Closing that by their nature are material to be satisfied ator reasonably necessary for the Closing) have been satisfied, to cause the applicable Equity Financing Investor to contribute to Parent the applicable portionconduct of the Equity Financing AmountBusiness following the Closing. The Transition Services Agreement shall cover transition services permitted under applicable Law and reasonably necessary for the conduct of Business by the Company Group following the Closing and provision that relate to the matters set forth in Schedule 5.14(a). All such transition services will be provided at Seller’s cost, without markup or margin, in accordance with applicable Laws and at the same or better standard of service as such services were provided to the Company Group prior to Closing. Individual Transition Services Agreements shall be established for each jurisdiction other than the United States in which the applicable Equity Financing Agreement atBusiness, service recipients or prior toservice providers are located or are organized, as mutually agreed by Seller and Acquirer, in substantially the Closing. Without limiting the generalityform of the foregoing, Parent shall give the Company prompt (and, in any event within three (3) Business Days) written notice: (A) of any breach or default (or any event or circumstance that, with or without notice, lapse of time or both, could give rise to any breach or default) by any party to any Equity Financing Agreement known to Parent; (B) of the receipt of any written notice or other written communication from any party to any Equity Financing Agreement with respect to any actual, potential or claimed expiration, lapse, withdrawal, breach, default, termination or repudiation by any party to any Equity Financing Agreement or any provisions of any Equity Financing Agreement; and (C) if Parent does not expect to receive all or any portion of the Equity Financing Amount on the terms, in the manner or from the sources contemplated by the Equity Financing Agreements. The Equity Financing Agreements contain all of the conditions precedent to the obligations of the Equity Financing Investors to contribute to Parent the applicable portion of the Equity Financing Amount set forth in the applicable Equity Financing Agreement on the terms therein.Transition Services Agreement.
(b) Parent shall use its reasonable best efforts to cause the Equity Financing Investors to contribute the Equity Financing Amount at or prior toIf, following the Closing, if all conditions set forth in the applicable Equity Financing Agreement have been satisfied or waived (other than those conditions that by their nature are to be satisfied at the Closing and other than conditions that ParentSeller or any of its Affiliates controlreceive payment of a receivable that should have been paid to Company Group, Seller shall notify Acquirer and deliver such payment to Acquirer or its designee promptly following the satisfaction of)receipt thereof. Acquirer may direct all relevant trade debtors to make payment on such receivables to Acquirer’s specified address and/or account.
5.15Prohibited Activities.
(a)Seller shall not, and shall not permit or cause any of its controlled Affiliates to, at any time prior to four (4) years from the Closing, directly or indirectly, (i) solicit the employment or services (whether as an employee, consultant, independent contractor or otherwise) of any employee of the Company Group as of Closing or any Person who had been an employee of the Company Group within the twelve (12) month period immediately preceding the Closing, without Acquirer’s prior written consent, or (ii) hire in any capacity (whether as an employee, consultant, independent contractor or otherwise) any Key Employee, unless such Person has been terminated by Acquirer or any of its Affiliates subsequent to the Closing and who has not been employed or engaged by the Company Group for a period of at least six (6) months prior to the date of such hire, without Acquirer’s prior written consent. For purposes of this Section 5.15(a), the terms “solicit the employment or services” shall be deemed not to include generalized searches for employees through media advertisements of general circulation, employment search firms, open job fairs or otherwise.
(b)Seller shall not, and shall not permit, cause or encourage any of its controlled Affiliates to, for a period of four (4) years following the Closing, directly or indirectly, for Seller or on behalf of or in conjunction with any other Person (other than Acquirer and its Affiliates, including the Company Group) engage in the Business anywhere in the world.
5.16Subsidiary Compliance. ParentAcquirer shall cause each Merger Sub to comply with all of such Merger Sub’s obligations under or relating to this Agreement and, prior to the Closing, each of Seller, the Company and Holdco2 shall cause the Company Group to comply with all of the Company Group’s obligations under or relating to this Agreement.
5.17Pre-Closing Restructuring. Seller and the Company Parties shall use itstheir respective reasonable best efforts to, take, or cause to be taken, all actions required to obtain the Equity Financing Amount contemplated by the Equity Financing Agreements, including enforcing the rights of Parent under the Equity Financing Agreements.
Section 7.16 Section 16 Matters. Prior to the Effective Time, Parent shall take all reasonable steps as may be required or permitted to cause any acquisition or disposition of the Parent Class A Stock that occurs or is deemed to occur by reason of or pursuant to the Transactions by each individual who is or will be subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to Parent to be exempt under Rule 16b-3 promulgated under the Exchange Act, including by taking steps in accordance with the No-Action Letter, dated January 12, 1999, issued by the SEC regarding such matters.
Section 7.17 Board of Directors.
(a) Subject to the terms of the Parent’s Charter Documents, Parent shall take all such action within its power as may be necessary or appropriate such that immediately following the Effective Time:
(i) the board of directors of Parent shall consist of up to nine (9) directors, which shall initially include: (i) Nat Turner, Emily Leproust and Eli Casdin, as designees of Parent; and (ii) the remaining director nominees to be designated by the Company pursuant to written notice to Parent as soon as reasonably practicable following the date of this Agreement; and
(ii)Agreement Date, complete the board of directors of Parent shall have a majority of “independent” directors for the purposes of Nasdaq rules, each of whom shall serve in such capacityPre-Closing Restructuring in accordance with the terms of the Parent’s Organizational Documents following the Effective Time.
(b) On the Closing Date, Parent shall enter into customary indemnification agreements reasonably satisfactory to the Company with each individual to be appointed to, or servingsteps set forth on the board of directors of Parent upon the Closing, which indemnification agreements shall continue to be effective following the Closing (the “Indemnification Agreements”).
Section 7.18 LTIP and ESPP.Schedule D Effective as of (and contingent on)and obtain and deliver to Acquirer written confirmation from the Closing, Parent shall adopt (a) the LTIP, in substantially the form attached hereto as Exhibit C (as such form may be modified in accordance with this
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Section 7.18) and (b) the ESPP, in substantially the form attached hereto as Exhibit D (as such form may be modified in accordance with this Section 7.18). The Company may propose further editsIRS (or other evidence reasonably satisfactory to the LTIP and the ESPP based on recommendations from the Company’s compensation consultant and the board of directors of the Company, which, after consideration and approval by Parent, not to be unreasonably withheld or delayed, shall be incorporated into the LTIP and the ESPP in advance of the Special Meeting.
Section 7.19 Release.
(a) Effective upon and following the Closing, Parent, on its own behalf and on behalf of its respective Affiliates and Representatives, generally, irrevocably, unconditionally and completely releases and forever discharges the Company, each Company Stockholder, its Affiliates, and its and their respective Related Parties, (collectively, the “Company Stockholder Released Parties”) from all disputes, claims, losses, controversies, demands, rights, Liabilities, actions and causes of action of every kind and nature, whether known or unknown, arising from any matter concerning any Group Company occurring prior to the Closing Date (other than as contemplated by this Agreement and the other Transaction Agreements), including for controlling equityholder liability or breach of any fiduciary duty relating to any pre-Closing actions or failures to act by the Company Stockholder Released Parties; provided, however, that nothing in this 7.19(a) shall release any Company Stockholder Released Parties from (i) their obligations under this Agreement or the other Transaction Agreements; (ii) as applicable, any disputes, claims, losses, controversies, demands, rights, Liabilities, breaches of fiduciary duty, actions and causes of action arising out of such Company Stockholder Released Party’s employment by any Group Company; (iii) any commercial Contract between the Company and a Company Stockholder Released Party that is in force as of the Closing Date or (iv) from any claim of fraud on the part of any Company Stockholder Released Party.
(b) Effective upon and following the Closing, each Company Stockholder (solely in its capacity as a stockholder of the Company), on its own behalf and on behalf of each of its Affiliates and Representatives (collectively, the “Company Stockholder Releasing Parties”), generally, irrevocably, unconditionally and completely releases and forever discharges each of Parent and each Group Company, their respective Affiliates, and its and their respective Related Parties (collectively, the “Parent Released Parties”) from all disputes, claims, losses, controversies, demands, rights, Liabilities, actions and causes of action of every kind and nature, whether known or unknown, arising from (i) the Company Stockholder Releasing Party’s ownership or purported ownership of (or right to acquire) shares of capital stock, warrants, options or other securities of or interests in the Company or relating to the governance of the Company, including any and all claimsAcquirer) stating that the Company Stockholder Releasing Party may have against anywill retain its EIN following completion of the Parent Released Parties with respect thereto whether pursuant to any contract or agreement with respect thereto, breach or alleged breach of fiduciary duty or otherwise and (ii) the negotiation or execution of this Agreement or the other Transaction Agreement, or the consummation of any of the Transactions; provided, however, that, for the avoidance of doubt, nothing in this Section 7.19(b) shall release the Parent Released Parties from their obligations or otherwise modify, waive, replace, supersede, or impair in any way any rights of any Company Stockholder Releasing Party (A) under this Agreement or the other Transaction Agreements, (B) with respect to any salary, bonuses, vacation pay or employee benefits accrued pursuant to a Company Benefit Plan in effect as of the date of this Agreement or any expense reimbursement pursuant to a policy of the Group Companies in effect as of the date of this Agreement accrued in the ordinary course of business; or (C) under any Contract between the Company Stockholder and a Parent Released Party to the extent that such Contract does not specifically pertain to such Company Stockholder’s ownership or purported ownership of (or right to acquire) shares of capital stock, warrants, options or other securities of or interests in the Company or specifically relate to the governance of the Company; (D) with respect to any rights to indemnification, exculpation or expense reimbursement to the extent provided for in the Company Organizational Documents or in any indemnification agreement with a Group Company; or (E) from any claim of fraud on the part of any Parent Released Party.
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Transactions.
ARTICLE VIII6
CONDITIONS TO THE TRANSACTIONMERGERS
Section 8.1 6.1Conditions to Obligations of Each Party’s ObligationsParty to Effect the Merger. The respective obligations of each Party to this Agreement to effectconsummate the Merger and the other Transactions shall be subject to the satisfaction or waiver in writing at or prior to the Closing of each of the following conditions:
(a)Stockholder Approval. The ParentHoldco2 Stockholder MattersApproval shall have been duly adopted byand validly obtained and the stockholders of Parent.
(b) ParentAcquirer Stockholder Approval shall have at least $5,000,001been duly and validly obtained.
(b)Illegality. No Order issued by any court of net tangible assets (as determined in accordance with Rule 3a51-1(g)(i) of the Exchange Act) following the exercise by the holders of Parent Class A Common Stock issued in Parent’s initial public offering of securities and outstanding immediately before the Closing of their right to convert their Parent Class A Common Stock held by them into a pro rata share of the Trust Account in accordance with Parent’s Organizational Documents.
(c) All applicable waiting periods (and any extensions thereof) under the HSR Act will have expired or otherwise been terminated.
(d) No provision of any Applicable Legal Requirement prohibiting, enjoining or making illegalcompetent jurisdiction preventing the consummation of the TransactionsMergers shall be in effect, and no temporary, preliminaryaction shall have been taken by any Governmental Authority seeking the foregoing, and no Law or permanent restraining Order prohibiting, enjoiningshall have been enacted or making illegalentered that makes the consummation of the Transactions willMergers illegal.
(c)Governmental Approvals. All filings with and approvals of any Governmental Authority required to be made or obtained prior to the Closing and in connection with the Mergers shall have been made or obtained and shall be in effect.full force and effect, and the applicable waiting period under the HSR Act, including any extensions thereof agreed to by the parties and the relevant Governmental Authority, shall have expired or early termination of such waiting period shall have been granted by the applicable Governmental Authority (the “Antitrust Condition”).
Section 8.2 6.2Additional Conditions to Obligations of Seller and the Company Group. The obligations of Seller and the Company Parties to consummate and effect the Merger and the other Transactions shall be subject to the satisfaction or waiver at or prior to the Closing of each of the following conditions any(it being understood and agreed that each such condition is solely for the benefit of whichSeller and the Company Parties and may be waived only by Seller (on behalf of itself and/or the Company Parties) in writing exclusively by the Company:in its sole discretion without notice or Liability to any Person):
(a)Representations, Warranties and Covenants. The Fundamental Representations of Parent, other than Section 5.3,representations and warranties made by Acquirer herein shall be true and correct in all material respects (without giving effect(except for such representations and warranties that are qualified by their terms by a reference to any limitation as to “materiality”materiality or “Parent Material Adverse Effect” or any similar limitation contain herein)Effect, which representations and warranties as so qualified shall be true and correct in all respects) on and as of the date of this Agreement Date and on and as of the Closing Date as though such representations and warranties were made on and as of the Closing Datesuch dates (except for representations and warranties that address matters only as to the extent that any such representationa specified date or dates, which representations and warranty expressly speaks as of an earlier date, in which case such representation and warrantywarranties shall be true and correct with respect to such specified date or dates). Acquirer shall have performed and complied in all material respects with all covenants, agreements and obligations herein required to be performed and complied with by Acquirer at or prior to the Closing.
(b)Receipt of Closing Deliveries. Seller, the Company or Holdco2 shall have received each of the agreements, instruments, certificates and other documents set forth in Section 2.3(c) (other than clause (iv) thereof, which shall be delivered upon Closing as set forth in and in accordance with Section 2.5(a)(i)).
(c)No Material Adverse Effect. There shall not have occurred a Material Adverse Effect (substituting, in each case, “the Acquirer” for references to the Company Group or Company Parties) with respect to the Acquirer and its Subsidiaries (taken as a whole) that is continuing.
(d)Nasdaq Listing. The Stock Consideration issuable pursuant to this Agreement in connection with the Mergers (including pursuant to Section 2.7) shall have been approved for listing on Nasdaq (or any successor national securities exchange thereto), subject to official notice of issuance.
6.3Additional Conditions to the Obligations of Acquirer. The obligations of Acquirer and the Merger Subs to consummate the Transactions shall be subject to the satisfaction or waiver at or prior to the Closing of each of the following conditions (it being understood and agreed that each such earlier date);condition is solely for the benefit of Acquirer
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and the Merger Subs and may be waived by Acquirer (on behalf of itself and/or Merger Sub) in writing in its sole discretion without notice or Liability to any Person):
(a)Representations, Warranties and Covenants. (i) The Company Fundamental Representations (other than those representations and warranties of Parent set forthcontained in Section 5.33.12 (Taxes)) shall be true and correct in all respects on and as of the date of this Agreement Date and on and as of the Closing Date as though such representations and warranties were made on and as of the Closing Datesuch dates (except for representations and warranties that address matters only as to the extent that any such representationa specified date or dates, which representations and warranty expressly speaks as of an earlier date, in which case such representation and warrantywarranties shall be true and correct as ofwith respect to such earlier date), except for any deminimis inaccuracies; andspecified date or dates); (ii) all other representations and warranties of Parent set forth(including those contained in Article V hereof shall be true and correct (without giving effect to any limitation as to “materiality” or “Parent Material Adverse Effect” or any similar limitation contained herein) on and as of the date of this Agreement and on as of the Closing Date as thoughSection 3.12 (Taxes)) made on and as of the Closing Date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date), except where the failure of such representations and warranties of Parent to be so true and correct, individually or in the aggregate, has not had and is not reasonably likely to have a Parent Material Adverse Effect.
(b) Parent and Merger Sub shall have performed or complied with all agreements and covenants required by this Agreement to be performed or complied with by them on or prior to the Closing Date, in each case in all material respects.
(c) Parent shall have delivered to the Company a certificate, signed by an executive officer of ParentParties and dated as of the Closing Date, certifying as to the matters set forth in Section 8.2(a) and Section 8.2(b).
(d) Parent shall have delivered or shall stand ready to deliver all of the certificates, instruments, Contracts and other documents specified to be delivered by it hereunder, including copies of the documents to be delivered by Parent pursuant to Section 1.3(a), duly executed by Parent and Merger Sub, as applicable.
(e) The Parent Charter shall be amended and restated in the form of the Parent A&R Charter and the Parent Bylaws shall be amended and restated in the form of the Parent A&R Bylaws.
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(f) Parent shall have made appropriate arrangements to have the Trust Account, less amounts paid and to be paid pursuant to Section 7.11, available to Parent for payment of the Closing Cash Payment Amount, the Company Transaction Costs and the Parent Transaction Costs at the Closing.
(g) The funds contained in the Trust Account, together with the Equity Financing Amount to be received substantially concurrently with the Closing, shall equal or exceed the Company’s Required Funds, following (i) payment of the aggregate amount of cash proceeds that will be required to satisfy any exercise of the Parent Stockholder Redemptions, and (ii) payment of all Company Transaction Costs and Parent Transaction Costs.
(h) The shares of Parent Class A Stock to be issued in connection with the Merger shall have been approved for listing on the Nasdaq.
(i) No Parent Material Adverse Effect shall have occurred since the date of this Agreement and be continuing.
Section 8.3 Additional Conditions to the Obligations of Parent and Merger Sub. The obligations of Parent and Merger Sub to consummate and effect the Merger and the other Transactions shall be subject to the satisfaction at or prior to the Closing of each of the following conditions, any of which may be waived, in writing, exclusively by Parent:
(a) The Fundamental Representations of the Company, other than Section 4.3,Seller herein shall be true and correct in all material respects (without giving effect(except for such representations and warranties that are qualified by their terms by a reference to any limitation as to “materiality”materiality or “Company Material Adverse Effect” or any similar limitation contain herein)Effect, which representations and warranties as so qualified shall be true and correct in all respects) on and as of the date of this Agreement Date and on and as of the Closing Date as though such representations and warranties were made on and as of the Closing Datesuch dates (except for representations and warranties that address matters only as to the extent that any such representationa specified date or dates, which representations and warranty expressly speaks as of an earlier date, in which case such representation and warrantywarranties shall be true and correct aswith respect to such specified date or dates); and (iii) each of such earlier date); the representationsSeller and warranties of the Company set forth in Section 4.3 shall be true and correct in all respects on and as of the date of this Agreement and on as of the Closing Date as though made on and as of the Closing Date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date), except for any de minimis inaccuracies; and all other representations and warranties of the Company set forth in Article IV hereof shall be true and correct (without giving effect to any limitation as to “materiality” or “Company Material Adverse Effect” or any similar limitation contained herein) on and as of the date of this Agreement and on as of the Closing Date as though made on and as of the Closing Date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date), except where the failure of such representations and warranties of the Company to be so true and correct, individually or in the aggregate, has not had and is not reasonably likely to have a Company Material Adverse Effect.
(b) The CompanyParties shall have performed orand complied in all material respects with all covenants, agreements and covenantsobligations herein required by this Agreement to be performed orand complied with by itSeller and the Company Parties, respectively, at or prior to the Closing.
(b)Receipt of Closing Date,Deliveries. Acquirer shall have received each of the agreements, instruments, certificates and other documents set forth in each case in all material respects.Section 2.3(b).
(c) TheInjunctions or Restraints on Conduct of Business. No Order issued by any court of competent jurisdiction or other legal or regulatory restraint or prohibition materially limiting or restricting Acquirer’s ownership, conduct or operation of the Business following the Closing shall be in effect, and no Proceeding seeking any of the foregoing shall be pending or threatened.
(d)No Material Adverse Effect. There shall not have occurred a Material Adverse Effect with respect to the Company Group (taken as a whole) that is continuing.
(e)Financial Statements. Holdco2 shall have delivered to ParentAcquirer, on or prior to five days prior to the Closing, the Required Financial Statements; provided that, the financial statements required by Item 9.01(a) and (b) of Form 8-K shall not be a certificate, signedcondition to the Closing if the 71-day grace period provided by an executive officerItem 9.01(a)(3) of Form 8-K shall then be available to Acquirer.
(f)Completion of the Pre-Closing Restructuring. Prior to the Closing, Seller and the Company Parties shall have completed the Pre-Closing Restructuring in accordance with the steps set forth on Schedule D and datedHoldco2 shall have delivered to Acquirer written confirmation from the IRS (or other evidence reasonably satisfactory to Acquirer) stating that the Company will retain its EIN following completion of the Transactions (the “Pre-Closing Restructuring Condition”).
(g)Key Employee. Katherine Stueland shall have remained continuously employed on a full-time basis with the Company through the Closing, Ms. Stueland’s Key Employment Agreement shall continue to be in full force and effect and no action shall have been taken by Ms. Stueland to repudiate or rescind such agreement and Ms. Stueland shall, as of the Closing, Date, certifying asbe ready, willing and able to perform the mattersduties contemplated by the Key Employment Agreement following the Closing.
(h)Required Closing Contracts. A member of the Company Group and the applicable Third Parties shall have entered into the Required Closing Contracts and delivered copies thereof to Acquirer (together with the condition set forth in Section 8.3(a) and Section 8.3(b).
(d) The Company Stockholder Approval shall have been obtained.
(e) No Company Material Adverse Effect shall have occurred since2.3(b)(xii), the date of this Agreement and be continuing.
(f) The Company shall have delivered, or caused to be delivered, or shall stand ready to deliver all of the certificates, instruments, Contracts and other documents specified to be delivered by it hereunder, including copies of the documents to be delivered by the Company pursuant to Section 1.3(b), duly executed by the applicable signatory or signatories specified in Section 1.3(b), if any.“Required Consent Condition”).
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ARTICLE IX7
TERMINATIONDEFINITIONS
Section 9.1 1.1TerminationDefined Terms. This AgreementAs used herein, the terms below shall have the following meanings. Other terms may be terminated at any time prior to the Closing:
(a) by mutual written agreement of Parent and the Company at any time;
(b) by either Parent or the Company if the Transactions shall not have been consummated by November 9, 2021 (the “Outside Date”); provided, however, that the right to terminate this Agreement under this Section 9.1(b) shall not be available to any Party whose action or failure to act has been a principal cause of or resulteddefined elsewhere in the failure of the Transactions to occur on or before such date and such action or failure to act constitutes a breach of this Agreement;
(c) by either Parent or the Company if a Governmental Entity shall have issued an Order or taken any other action, in any case having the effect of permanently restraining, enjoining or otherwise prohibiting the Transactions, including the Merger, which Order or other action is final and nonappealable;
(d) by the Company, upon a breach of any representation, warranty, covenant or agreement set forth in this Agreement on the part of Parent or Merger Sub, or if any representation or warranty of Parent or Merger Sub shall have become untrue, in either case such that the conditions set forth in Article VIII would not be satisfied as of the time of such breach or as of the time such representation or warranty shall have become untrue; provided, that if such breach by Parent or Merger Sub is curable by Parent or Merger Sub prior to the Closing, then the Company must first provide written notice of such breach and may not terminate this Agreement under this Section 9.1(d) until the earlier of: (i) 30 days after delivery of written notice from the Company to Parent of such breach; and (ii) the Outside Date; provided, further, that each of Parent and Merger Sub continues to exercise commercially reasonable efforts to cure such breach (it being understood that the Company may not terminate this Agreement pursuant to this Section 9.1(d) if: (A) it shall have materially breached this Agreement and such breach has not been cured; or (B) if such breach by Parent or Merger Sub is cured during such 30-day period);
(e) by Parent, upon a breach of any representation, warranty, covenant or agreement set forth in this Agreement on the part of the Company or if any representation or warranty of the Company shall have become untrue, in either case such that the conditions set forth in Article VIII would not be satisfied as of the time of such breach or as of the time such representation or warranty shall have become untrue; provided, that if such breach is curable by the Company prior to the Closing, then Parent must first provide written notice of such breach and may not terminate this Agreement under this Section 9.1(e) until the earlier of: (i) 30 days after delivery of written notice from Parent to the Company of such breach; and (ii) the Outside Date; provided, further, that the Company continues to exercise commercially reasonable efforts to cure such breach (it being understood that Parent may not terminate this Agreement pursuant to this Section 9.1(e) if: (A) it shall have materially breached this Agreement and such breach has not been cured; or (B) if such breach by the Company is cured during such 30-day period);
(f) by either Parent or the Company, if, at the Special Meeting (including any adjournments thereof), the Parent Stockholder Matters are not duly adopted by the stockholders of Parent by the requisite vote under the DGCL and the Parent Organizational Documents;
(g) by the Company, if the Parent Stockholder Redemption results in the condition set forth in Section 8.2(g) becoming incapable of being satisfied at the Closing; or
(h) by Parent within twenty-four hours of the Company Stockholder Approval Deadline if the Company Stockholder Approval shall not have been obtained by the Company Stockholder Approval Deadline.
Section 9.2 Notice of Termination; Effect of Termination.
(a) Any termination of this Agreement under Section 9.1 above will be effective immediately upon the delivery of written notice of the terminating Party to the other Parties.
(b) In the event of the termination of this Agreement as provided in Section 9.1, this Agreement shall be of no further force or effect and the Transactions shall be abandoned, except for and subject to the following: (i)
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Section 7.4, Section 7.7, this Section 9.2, Article XI and the Confidentiality Agreement shall survive the termination of this Agreement; and (ii) nothing herein shall relieve any Party from liability for any willful and intentional breach of this Agreement or intentional fraud in the making of the representations and warranties in this Agreement.
ARTICLE X
NO SURVIVAL
Section 10.1 No Survival. None of the representations, warranties, covenants or agreements in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Closing and all rights, claims and causes of action (whether in contract or in tort or otherwise, or whether at law or in equity) with respect thereto shall terminate at the Closing. Notwithstanding the foregoing, neither this Section 10.1 nor anything else in this Agreement to the contrary shall limit: (a) the survival of any covenant or agreement of the Parties which by its terms is required to be performed or complied with in whole or in part after the Closing, which covenants and agreements shall survive the Closing in accordance with their respective terms; or (b) any claim against the Company with respect to intentional fraud in the making of the representations and warranties by the Company in Article IV or any claim against Parent with respect to intentional fraud in the making of the representations and warranties by Parent in Article V, as applicable.
ARTICLE XI
GENERAL PROVISIONS
Section 11.1 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given: (a) on the date established by the sender as having been delivered personally; (b) one Business Day after being sent by a nationally recognized overnight courier guaranteeing overnight delivery; (c) on the date delivered, if delivered by email, with confirmation of transmission; or (d) on the fifth Business Day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications, to be valid, must be addressed as follows:
if to Parent or Merger Sub, to:
CM Life Sciences, Inc.
667 Madison Avenue
New York, NY 10065
Attention: Eli Casdin, Chief Executive Officer
E-mail: eli@casdincapital.com
with a copy (which shall not constitute notice) to:
White & Case LLP
1221 Avenue of the Americas
New York, NY 10020-1095
Attention: Matthew Kautz; Joel Rubinstein
Email: mkautz@whitecase.com; joel.rubinstein@whitecase.com
if to the Company, prior to the Closing, to:
Mount Sinai Genomics, Inc. d/b/a Sema4
333 Ludlow Street
Stamford, Connecticut 06902
Attention: General Counsel
Email: legal@sema4.com
with a copy (which shall not constitute notice) to:
Fenwick & West LLP
902 Broadway
New York, NY 10010
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Attention: Ethan A. Skerry; Robert A. Freedman; David K. Michaels
Email: eskerry@fenwick.com; rfreedman@fenwick.com; dmichaels@fenwick.com
or to such other address or to the attention of such Person or Persons as the recipient Party has specified by prior written notice to the sending Party (or in the case of counsel, to such other readily ascertainable business address as such counsel may hereafter maintain). If more than one method for sending notice as set forth above is used, the earliest notice date established as set forth above shall control.
Section 11.2 Interpretation. The words “hereof,” “herein,” “hereinafter,” “hereunder,” and  “hereto” and words of similar import refer to this Agreement as a whole and not to any particular section or subsectiontext of this Agreement and, reference to a particular section of this Agreement will include all subsections thereof, unless, in each case, the context otherwise requires. The definitions of the terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context shall require, any pronoun shall include the corresponding masculine, feminine and neuter forms. When a reference is made in this Agreement to an Exhibit, such reference shall be to an Exhibit to this Agreement unless otherwise indicated. When a reference is madeindicated, shall have such meaning indicated throughout this Agreement.
“Accounting Standards” means accounting principles generally accepted in this Agreement to Sections or subsections, such reference shall be to a Section or subsection of this Agreement. Unless otherwise indicated the words “include,” “includes” and “including” when used herein shall be deemed in each case to be followed by the words “without limitation.” The words “made available” mean that the subject documents or other materials were included in and available at the “Project Snow” online datasite hosted by “Datasite Diligence” prior to the date of this Agreement. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. When reference is made herein to “the business of” an entity, such reference shall be deemed to include the business of all direct and indirect subsidiaries of such entity. Reference to the subsidiaries of an entity shall be deemed to include all direct and indirect subsidiaries of such entity. The word “or” shall be disjunctive but not exclusive. When calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded and if the last day of such period is a non-Business Day, the period in question shall end on the next succeeding Business Day. References to a particular statute or regulation including all rules and regulations thereunder and any predecessor or successor statute, rule, or regulation, in each case as amended or otherwise modified from time to time. All references to currency amounts in this Agreement shall mean United States, dollars. The Parties acknowledge and agree that ISMMS shall not be deemed to be a Person “acting on behalfconsistently applied for the applicable periods presented.
“Acquirer Board” means the board of any Group Company” for any purpose with respect to directors of Acquirer.
“Article IVAcquirer Disclosure Schedules of this Agreement solely” means the Disclosure Schedules delivered by virtue of ISMMS’s provision of transition or other servicesAcquirer to the Company in connection with the Company’s spinout from ISMMSexecution of this Agreement.
“Acquirer Fundamental Representations” means the representations and warranties contained in 2017 or by virtueSection 3.1 (Organization of the fact that employeesAcquirer Parties), Section 4.2 (Authorization), Section 4.3 (Capitalization) and Section 4.8 (No Brokers).
“Acquirer Group” means any consolidated, combined, unitary or other aggregate group of entities for Tax purposes (including Code Section 1504 and similar provisions of state and local Laws) in which Acquirer is the common parent entity.
“Acquirer Party” means Acquirer, Merger Sub I and Merger Sub II.
“Acquirer Stock” means shares of Class A common stock, par value $0.0001 per share, of Acquirer.
“Acquirer Stockholder Approval” means the approval of: (i) the issuance of the Company may also holdStock Consideration pursuant to this Agreement by the affirmative vote of holders of shares of Acquirer Stock having a majority in voting power of the votes cast by the holders of all of the shares of Acquirer Stock present or have held positions with ISMMSrepresented at any particular time.
Section 11.3 Counterparts; Electronic Delivery. This Agreement, the Transaction AgreementsAcquirer Stockholders’ Meeting and each other document executedvoting affirmatively or negatively and (ii) the approval of an amendment to Acquirer’s current Third Amended and Restated Certificate of Incorporation to increase the authorized shares of Acquirer Stock as the Acquirer Board deems necessary or advisable in connection with the consummation of the Transactions (but in no event to a number greater than 1.0 billion) by the affirmative vote of holders of shares of Acquirer Stock having a majority of the shares of Acquirer Stock outstanding as of the applicable record date (and, for the elimination of doubt, abstentions and the consummation thereof,broker non-votes may be executed in onecounted to determine the presence of a quorum at the Acquirer Stockholders’ Meeting but shall not be counted as votes cast for or against any proposal).
“Acquisition Proposal” means any proposal or offer from any Person relating to any direct or indirect acquisition or purchase of a material portion of the assets, net revenues or net income of the Company, or 50% or more counterparts, all of which shall be considered one and the same document and shall become effective when oneaggregate equity interests of the Company, any tender offer or exchange offer that if consummated would result in any Person beneficially owning 50% or more counterparts have been signed by each of the Parties and delivered to the other Parties, it being understood that all Parties need not sign the same counterpart. Delivery by electronic transmission to counsel for the other Parties of a counterpart executed by a Party shall be deemed to meet the requirementsaggregate equity interests of the previous sentence.Company, any merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving the acquisition of 50% or more of the aggregate equity interests or assets of the Company, in each case, other than the Transactions, any material joint venture or other strategic investment in or involving the Company, including any third party financing, investment in or recapitalization of the Company. For the elimination of doubt, the PIPE Investment is not an Acquisition Proposal.
Section 11.4 “Entire Agreement; Third Party BeneficiariesAffiliate. This Agreement, the other Transaction Agreements and any other documents and instruments and agreements among the Parties as contemplated by or referred to herein, including the Exhibits and Schedules hereto: (a) constitute the entire agreement among the Parties” means, with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the Parties with respect to the subject matter hereof; and (b) other than the rights, at and after the Effective Time, of Persons pursuant to the provisions of Section 7.3(b), Section 7.12 and Section 11.14 (which will be for the benefit of the Persons set forth therein), are not intended to confer uponany Person, any other Person which directly or indirectly controls, is controlled by or is under common control with such first Person. As used in this definition, “control” means (a) the ownership of more than 50% of the voting securities or other thanvoting interest of any Person, or (b) the Parties any rights or remedies.
Section 11.5 Severability. In the event that any term, provision, covenant or restriction of this Agreement, or the application thereof, is held to be illegal, invalid or unenforceable under any present or future Legal Requirement: (a) such provision will be fully severable; (b) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof; (c) the remaining provisions of this Agreement willpossession,
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remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom; and (d) in lieu of such illegal, invalid or unenforceable provision, there will be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms of such illegal, invalid or unenforceable provision as may be possible.
Section 11.6 Other Remedies; Specific Performance. Except as otherwise provided herein, prior to the Closing, any and all remedies herein expressly conferred upon a Party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such Party, and the exercise by a Party of any one remedy will not preclude the exercise of any other remedy. The Parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that each Party shall be entitled to enforce specifically the terms and provisions of this Agreement in any court of the United States or any state having jurisdiction and immediate injunctive relief to prevent breaches of this Agreement, without the necessity of proving the inadequacy of money damages as a remedy and without bond or other security being required, this being in addition to any other remedy to which they are entitled at law or in equity. Each of the Parties hereby acknowledges and agrees that it may be difficult to prove damages with reasonable certainty, that it may be difficult to procure suitable substitute performance, and that injunctive relief and/or specific performance will not cause an undue hardship to the Parties. Each of the Parties hereby further acknowledges that the existence of any other remedy contemplated by this Agreement does not diminish the availability of specific performance of the obligations hereunder or any other injunctive relief. Each Party hereby further agrees that in the event of any action by any other party for specific performance or injunctive relief, it will not assert that a remedy at law or other remedy would be adequate or that specific performance or injunctive relief in respect of such breach or violation should not be available on the grounds that money damages are adequate or any other grounds.
Section 11.7 Governing Law. This Agreement and the consummation the Transactions, and any action, suit, dispute, controversy or claim arising out of this Agreement and the consummation of the Transactions, or the validity, interpretation, breach or termination of this Agreement and the consummation of the Transactions, shall be governed by and construed in accordance with the internal law of the State of Delaware regardless of the law that might otherwise govern under applicable principles of conflicts of law thereof.
Section 11.8 Consent to Jurisdiction; Waiver of Jury Trial.
(a) Any proceeding based upon or arising out of this Agreement, the other Transaction Agreements and the consummation of the Transactions must be brought in the Court of Chancery of the State of Delaware (or, to the extent such court does not have subject matter jurisdiction, the Superior Court of the State of Delaware). Each of the Parties irrevocably consents to the exclusive jurisdiction and venue of such courts, agrees that process may be served upon them in any manner authorized by the laws of the State of Delaware for such Person and waives and covenants not to assert or plead any objection which they might otherwise have to such manner of service of process. Each Party and any Person asserting rights as a third-party beneficiary may do so only if he, she or it hereby waives, and shall not assert as a defense in any legal dispute, that: (i) such Person is not personally subject to the jurisdiction of the above named courts for any reason; (ii) such Legal Proceeding may not be brought or is not maintainable in such court; (iii) such Person’s property is exempt or immune from execution; (iv) such Legal Proceeding is brought in an inconvenient forum; or (v) the venue of such Legal Proceeding is improper. Each Party and any Person asserting rights as a third-party beneficiary hereby agrees not to commence or prosecute any such action, claim, cause of action or suit other than before one of the above-named courts, nor to make any motion or take any other action seeking or intending to cause the transfer or removal of any such action, claim, cause of action or suit to any court other than one of the above-named courts, whether on the grounds of inconvenient forum or otherwise. Each Party hereby consents to service of process in any such proceeding in any manner permitted by Delaware law, and further consents to service of process by nationally recognized overnight courier service guaranteeing overnight delivery, or by registered or certified mail, return receipt requested, at its address specified pursuant to Section 11.1. Notwithstanding the foregoing in this Section 11.8, any Party may commence any action, claim, cause of action or suit in a court other than the above-named courts solely for the purpose of enforcing an order or judgment issued by one of the above-named courts.
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(b) TO THE EXTENT NOT PROHIBITED BY APPLICABLE LEGAL REQUIREMENTS WHICH CANNOT BE WAIVED, EACH OF THE PARTIES AND ANY PERSON ASSERTING RIGHTS AS A THIRD-PARTY BENEFICIARY MAY DO SO ONLY IF HE, SHE OR IT IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT TO TRIAL BY JURY ON ANY CLAIMS OR COUNTERCLAIMS ASSERTED IN ANY LEGAL DISPUTE RELATING TO THIS AGREEMENT, EACH OTHER TRANSACTION AGREEMENTS AND THE CONSUMMATION OF THE TRANSACTIONS, AND FOR ANY COUNTERCLAIM RELATING THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING. IF THE SUBJECT MATTER OF ANY SUCH LEGAL DISPUTE IS ONE IN WHICH THE WAIVER OF JURY TRIAL IS PROHIBITED, NO PARTY NOR ANY PERSON ASSERTING RIGHTS AS A THIRD-PARTY BENEFICIARY SHALL ASSERT IN SUCH LEGAL DISPUTE A NONCOMPULSORY COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER TRANSACTION AGREEMENTS AND THE CONSUMMATION OF THE TRANSACTIONS. FURTHERMORE, NO PARTY NOR ANY PERSON ASSERTING RIGHTS AS A THIRD-PARTY BENEFICIARY SHALL SEEK TO CONSOLIDATE ANY SUCH LEGAL DISPUTE WITH A SEPARATE ACTION OR OTHER LEGAL PROCEEDING IN WHICH A JURY TRIAL CANNOT BE WAIVED.
Section 11.9 Rules of Construction. Each of the Parties agrees that it has been represented by independent counsel of its choice during the negotiation and execution of this Agreement and each Party hereto and its counsel cooperated in the drafting and preparation of this Agreement and the documents referred to herein and, therefore, waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the Party drafting such agreement or document.
Section 11.10 Expenses. Except as otherwise expressly provided in this Agreement, whether or not the Transactions are consummated, each Party will pay its own costs and expenses incurred in anticipation of, relating to and in connection with the negotiation and execution of this Agreement and the Transaction Agreements and the consummation of the Transactions.
Section 11.11 Assignment. No Party may assign, directly or indirectly, including by operation of law, either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other Parties. Subject to the first sentence of this Section 11.11, this Agreement shall be binding upon and shall inure to the benefit of the Parties and their respective successors and permitted assigns.
Section 11.12 Amendment. This Agreement may be amended by the Parties at any time by execution of an instrument in writing signed on behalf of each of the Parties; provided that, following the receipt of the Company Stockholder Approval, there shall be no amendment to this Agreement (or any of the provisions hereof) which under the DGCL or other Applicable Legal Requirements would require further approval by the stockholders of the Company in accordance with the Company Organizational Documents without such approval.
Section 11.13 Extension; Waiver. At any time prior to the Closing, Parent (on behalf of itself and Merger Sub), on the one hand, and the Company (on behalf of itself and the Company Stockholders), on the other hand, may, to the extent not prohibited by Applicable Legal Requirements: (a) extend the time for the performance of any of the obligations or other acts of the other Party; (b) waive any inaccuracies in the representations and warranties made to the other Party contained herein or in any document delivered pursuant hereto; and (c) waive compliance with any of the agreements or conditions for the benefit of such Party contained herein. Any agreement on the part of a Party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such Party. Delay in exercising any right under this Agreement shall not constitute a waiver of such right. In the event any provision of any of the other Transaction Agreement in any way conflicts with the provisions of this Agreement (except where a provision therein expressly provides that it is intended to take precedence over this Agreement), this Agreement shall control.
Section 11.14 No Recourse. Notwithstanding anything that may be expressed or implied in this Agreement, this Agreement may only be enforced against, and any Legal Proceeding for breach of this Agreement may only be made against, the entities that are expressly identified herein as Parties to this Agreement, and no Related Party of a Party shall have any liability for any liabilities or obligations of the Parties for any Legal Proceeding (whether in tort, contract or otherwise) for breach of this Agreement or in respect of any oral representations made or alleged to be
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made in connection herewith. No Party shall have any right of recovery in respect hereof against any Related Party of a Party and no personal liability shall attach to any Related Party of a Party through such Party, whether by or through attempted piercing of the corporate veil, by the enforcement of any judgment, fine or penalty or by virtue of any Legal Requirement or otherwise. Without limiting the generality of the foregoing, the Parties will not, and will not cause or permit any other Person to, hold or attempt to hold any Related Party liable for any actual or alleged inaccuracies, misstatements or omissions with respect to any information or materials of any kind furnished by the Company or any Related Party, or their respective agents or other Representatives, concerning a Group Company, this Agreement or the Transactions. The provisions of this Section 11.14 are intended to be for the benefit of, and enforceable by the Related Parties of the Parties and each such Person shall be a third-party beneficiary of this Section 11.14. This Section 11.14 shall be binding on all successors and assigns of Parties.
Section 11.15 Legal Representation.
(a) Parent hereby agrees on behalf of its directors, members, partners, officers, employees and Affiliates (including after the Closing, the Company), and each of their respective successors and assigns (all such parties, the “Parent Waiving Parties”), that Fenwick & West LLP (or any successor) may represent the Company Stockholders or any of their respective directors, members, partners, officers, employees or Affiliates (other than the Company) (collectively, the “Stockholder Group”), in each case, in connection with any Legal Proceeding or obligation arising out of or relating to this Agreement, any Transaction Agreement or the Transactions, notwithstanding its representation (or any continued representation) of the Group Companies or other Parent Waiving Parties, and each of Parent and the Company on behalf of itself and the Parent Waiving Parties hereby consents thereto and irrevocably waives (and will not assert) any conflict of interest, breach of duty or any other objection arising therefrom or relating thereto. Parent and the Company acknowledge that the foregoing provision applies whether or not Fenwick & West LLP provides legal services to any Group Companies after the Closing Date. Each of Parent and the Company, for itself and the Parent Waiving Parties, hereby further irrevocably acknowledges and agrees that all communications, written or oral, between any Group Company or any member of the Stockholder Group and its counsel, including Fenwick & West LLP, made in connection with the negotiation, preparation, execution, delivery and performance under, or any dispute or Legal Proceeding arising out of or relating to, this Agreement, any Transaction Agreements or the Transactions, or any matter relating to any of the foregoing, are privileged communications that do not pass to the Company notwithstanding the Merger, and instead survive, remain with and are controlled by the Stockholder Group (the “Stockholder Privileged Communications”), without any waiver thereof. Parent and the Company, together with any of their respective Affiliates, Subsidiaries, successors or assigns, agree that no Person may use or rely on any of the Stockholder Privileged Communications, whether located in the records or email server of the Company or otherwise (including in the knowledge or the officers and employees of the Company), in any Legal Proceeding against or involving any of the Parties after the Closing, and Parent and the Company agree not to assert that any privilege has been waived as to the Stockholder Privileged Communications, whether located in the records or email server of the Company or otherwise (including in the knowledge of the officers and employees of the Company).
(b) The Company hereby agrees on behalf of its directors, members, partners, officers, employees and Affiliates and the Company Stockholders, and each of their respective successors and assigns (all such parties, the “Company Waiving Parties”), that White & Case LLP (or any successor) may represent the Sponsor, Parent or any of their respective directors, members, partners, officers, employees or Affiliates (other than the Company) (collectively, the “Parent Group”), in each case, in connection with any Legal Proceeding or obligation arising out of or relating to this Agreement, any Transaction Agreement or the Transactions, notwithstanding its representation (or any continued representation) of the Parent Group, and the Company on behalf of itself and Company Waiving Parties hereby consents thereto and irrevocably waives (and will not assert) any conflict of interest, breach of duty or any other objection arising therefrom or relating thereto. The Company acknowledges that the foregoing provision applies whether or not White & Case LLP provides legal services to the Sponsor or Parent after the Closing Date. The Company, for itself and the Waiving Parties, hereby further irrevocably acknowledges and agrees that all communications, written or oral, between any of the Parent Group and its counsel, including White & Case LLP, made in connection with the negotiation, preparation, execution, delivery and performance under, or any dispute or Legal Proceeding arising out of or relating to, this Agreement, any Transaction Agreements or the Transactions, or any matter relating to any of the foregoing, are privileged communications that do not pass to the Company
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notwithstanding the Merger, and instead survive, remain with and are controlled by the Sponsor and Parent (the “Parent Privileged Communications”), without any waiver thereof. Sponsor and Parent, together with any of their respective Affiliates, Subsidiaries, successors or assigns, agree that no Person may use or rely on any of the Stockholder Privileged Communications, whether located in the records or email server of the Company or otherwise (including in the knowledge or the officers and employees of the Company), in any Legal Proceeding against or involving any of the Parties after the Closing, and the Company Waiving Parties agree not to assert that any privilege has been waived as to the Parent Privileged Communications.
Section 11.16 Disclosure Letters and Exhibits. The Company Disclosure Letter and Parent Disclosure Letter shall each be arranged in separate parts corresponding to the numbered and lettered sections and subsections in this Agreement, and the information disclosed in any numbered or lettered part shall be deemed to relate to and to qualify only the particular provision set forth in the corresponding numbered or lettered Section or subsection of this Agreement, except to the extent that: (a) such information is cross-referenced in another part of the Company Disclosure Letter or Parent Disclosure Letter, as applicable; or (b) it is reasonably apparent on the face of the disclosure (without any independent knowledge on the part of the reader regarding the matter disclosed) that such information qualifies another provision in this Agreement. The specification of any dollar amount in the representations and warranties contained in this Agreement or the inclusion of any specific item in the Company Disclosure Letter and Parent Disclosure Letter is not intended to imply that such amounts (or higher or lower amounts) are or are not material, and no Party shall use the fact of the setting of such amounts or the fact of the inclusion of any such item in the Company Disclosure Letter or Parent Disclosure Letter in any dispute or controversy between the Parties as to whether any obligation, item, or matter not described herein or included in Company Disclosure Letter or the Parent Disclosure Letter is or is not material for purposes of this Agreement. The inclusion of any item in the Company Disclosure Letter or Parent Disclosure Letter shall not be deemed to constitute an acknowledgment by the Company or Parent, as applicable, that the matter is required to be disclosed by the terms of this Agreement, nor shall such disclosure be deemed (a) an admission of any breach or violation of any Contract or Legal Requirement, (b) an admission of any liability or obligation to any third party, or (c) to establish a standard of materiality. The disclosure of any items or information that is not required by this Agreement to be so included is solely for informational purposes and the convenience of Parent and Merger Sub or the Company, as applicable. In addition, under no circumstances shall the disclosure of any matter in this Company Disclosure Letter or Parent Disclosure Letter, where a representation or warranty of the Company or Parent, as applicable, is limited or qualified by the materiality of the matters to which the representation or warranty is given or by Company Material Adverse Effect, imply that any other undisclosed matter having a greater value or other significance is material or would have a Company Material Adverse Effect. Neither the Company nor Parent shall be prejudiced in any manner whatsoever, and no presumptions shall be created, by virtue of the disclosure of any matter in the Company Disclosure Letter or Parent Disclosure Letter, as applicable, which otherwise is not required to be disclosed by this Agreement.
[Signature Pages Follow]

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the date first written above.
CM LIFE SCIENCES, INC.
By:/s/ Eli Casdin
Name: Eli Casdin
Title: Chief Executive Officer
S-IV SUB, INC.
By:/s/ Eli Casdin
Name: Eli Casdin
Title: Chief Executive Officer
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
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MOUNT SINAI GENOMICS, INC.
By:/s/ Eric Schadt
Name: Dr. Eric Schadt
Title: Chief Executive Officer
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SCHEDULE A
DEFINED TERMS
Section 1.1. Defined Terms. Terms defined in this Agreement are organized alphabetically as follows, together with the Section and, where applicable, paragraph, number in which definition of each such term is located:
“A&R Registration Rights Agreement”Recitals
“Acceleration Event”Section 3.2
“Additional Parent SEC Reports”Section 5.7(a)
“Affiliate”Schedule A, Section 1.2
“Agreement”Preamble
“Antitrust Laws”Schedule A, Section 1.2
“Applicable Legal Requirements”Recitals
“Approvals”Section 4.6(b)
“Audited Financial Statements”Section 4.8(a)
“Base Value”Schedule A, Section 1.2
“Business Day”Schedule A, Section 1.2
“Cash Pro Rata Share”Schedule A
“Certificate”Section 2.7(a)
“Certificate of Merger”Section 1.4(c)
“Certifications”Section 5.7(a)
“Change in Recommendation”Section 7.1(b)
“Change of Control”Schedule A, Section 1.2
“Charter Documents”Section 4.1
“Class A Common Stock”Schedule A, Section 1.2
“Class B Common Stock”Schedule A, Section 1.2
“Closing”Section 1.1
“Closing Cash Payment Amount”Schedule A, Section 1.2
“Closing Consideration”Section 2.8(a)
“Closing Date”Section 1.1
“Closing Form 8-K”Section 7.3(c)
“Closing Merger Consideration”Schedule A, Section 1.2
“Closing Number of Securities”Schedule A, Section 1.2
“Closing Press Release”Section 7.3(c)
“Closing Securities Payment Amount”Schedule A, Section 1.2
“Code”Schedule A, Section 1.2
“Common Share Price”Schedule A, Section 1.2
“Company”Preamble
“Company Benefit Plan”Section 4.12(a)
“Company Business Combination”Section 7.10(a)
“Company Common Stock”Schedule A, Section 1.2
“Company Disclosure Letter”Article IV, Preamble
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“Company Organizational Documents”Schedule A, Section 1.2
“Company Material Adverse Effect”Schedule A, Section 1.2
“Company Material Contract”Section 4.20(a)
“Company Stockholder”Schedule A, Section 1.2
“Company Stockholder Approval”Recitals
“Company Subsidiaries”Section 4.2(a)
“Company Transaction Costs”Schedule A, Section 1.2
“Company’s Required Funds”Schedule A, Section 1.2
“Company Waiving Parties”Section 11.15
“Confidentiality Agreement”Schedule A, Section 1.2
“Continental”Section 5.14(a)
“Contract”Schedule A, Section 1.2
“Copyright”Schedule A, Section 1.2
“Current Government Contract”Schedule A, Section 1.2
“D&O Indemnified Party”Section 7.12(a)
“D&O Tail”Section 7.12(b)
“DGCL”Recitals
“EAR”Definition of Specified Business Conduct Laws
“Earn-Out Period”Schedule A, Section 1.2
“Earn-Out Pro Rata Share”Schedule A
“Earn-Out Shares”Section 3.1(a)
“Effective Time”Section 2.1
“Environmental Law”Schedule A, Section 1.2
“ERISA”Schedule A, Section 1.2
“ERISA Affiliate”Schedule A, Section 1.2
“Equity Financing Agreement”Section 5.13
“Equity Financing Amount”Section 5.13
“Equity Financing Investors”Section 5.13
“ESPP”Recitals
“Exchange Act”Schedule A, Section 1.2
“Exchange Agent”Section 2.8(a)
“Exchange Fund”Section 2.8(c)
“Excluded Share”Section 2.7(d)
“Financial Statements”Section 4.8(a)
“Fully Diluted Company Shares”Schedule A, Section 1.2
“Fundamental Representations”Schedule A, Section 1.2
“GAAP”Schedule A, Section 1.2
“Governmental Entity”Schedule A, Section 1.2
“Government Grants”Section 4.25
“Group Companies”Schedule A, Section 1.2
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“Group Companies’ Privacy Notices”Section 4.19(a)
“Hazardous Material”Schedule A, Section 1.2
“HSR Act”Section 4.5(b)
“Indebtedness”Schedule A, Section 1.2
“Insider”Section 4.22
“Intended Tax Treatment”Recitals
“Insurance Policies”Section 4.21
“Intellectual Property”Schedule A, Section 1.2
“Interim Financial Statements”Section 4.8(a)
“Knowledge”Schedule A, Section 1.2
“Leased Real Property”Section 4.14(b)
“Legal Proceeding”Schedule A, Section 1.2
“Legal Requirements”Schedule A, Section 1.2
“Lien”Schedule A, Section 1.2
“Losses”Schedule A, Section 1.2
“LTIP”Recitals
“Material Current Government Contract”Section 4.7
“Merger”Recitals
“Merger Sub”Preamble
“Merger Sub Common Stock”Section 5.3(b)
“Nasdaq”Section 5.12
“OFAC”Schedule A, Section 1.2
“Order”Schedule A, Section 1.2
“Outside Date”Section 9.1(b)
“Owned Real Property”Section 4.14(a)
“Parent”Preamble
“Parent A&R Bylaws”Recitals
“Parent A&R Charter”Recitals
“Parent Business Combination”Section 7.10(b)
“Parent Cash”Schedule A, Section 1.2
“Parent Class A Stock”Section 5.3(a)
“Parent Class B Stock”Section 5.3(a)
“Parent Charter”Schedule A, Section 1.2
“Parent Disclosure Letter”Article V
“Parent Group”Section 11.15
“Parent Group”Section 11.15
“Parent Material Adverse Effect”Schedule A, Section 1.2
“Parent Material Contracts”Section 5.11
“Parent Option”Section 2.12(a)
“Parent Organizational Documents”Schedule A, Section 1.2
“Parent Privileged Communications”Section 11.15
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“Parent Recommendation”Recitals
“Parent SEC Reports”Section 5.7(a)
“Parent Shares”Section 5.3(a)
“Parent Stockholder Matters”Section 7.1(a)(i)
“Parent Stockholder Redemption”Section 7.1(a)(i)
“Parent Transaction Costs”Schedule A, Section 1.2
“Parent Units”Schedule A, Section 1.2
“Parent Waiving Parties”Section 11.15
“Parent Warrants”Section 5.3(a)
“Parties”Preamble
“Patent”Schedule A, Section 1.2
“PCAOB Financial Statements”Section 7.1(a)(ii)
“Permitted Lien”Schedule A, Section 1.2
“Person”Schedule A, Section 1.2
“Private Placement Warrants”Section 5.3(a)
“Proxy Clearance Date”Section 7.1(a)(i)
“Proxy Statement”Section 7.1(a)(i)
“Public Warrants”Section 5.3(a)
“Related Parties”Schedule A, Section 1.2
“Released Claims”Section 7.7(a)
“Remedies Exception”Section 4.4
“Representatives”Section 7.10(a)
“Restricted Cash”Schedule A, Section 1.2
“SEC”Schedule A, Section 1.2
“Securities Act”Schedule A, Section 1.2
“Special Meeting”Section 7.1(b)
“Specified Business Conduct Laws”Schedule A, Section 1.2
“Sponsor”Schedule A, Section 1.2
“Stockholder Consent and Joinder”Recitals
“Stockholder Group”Section 11.15
“Stockholder Privileged Communications”Section 11.15
“Subsidiary”Schedule A, Section 1.2
“Surrender Documentation”Section 2.8(d)
“Surviving Corporation”Recitals
“Tax Return”Schedule A, Section 1.2
“Tax/Taxes”Schedule A, Section 1.2
“Top Customer”Section 4.28
“Top Supplier”Section 4.28
“Total Consideration”Section 2.6(a)
“Transaction Agreements”Schedule A, Section 1.2
“Transaction Tax Benefits”Section 7.15(a)
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“Transaction Tax Deductions”Schedule A, Section 1.2
“Transactions”Schedule A, Section 1.2
“Trademarks”Schedule A, Section 1.2
“Trade Secrets”Schedule A, Section 1.2
“Treasury Regulations”Schedule A, Section 1.2
“Triggering Event I”Schedule A, Section 1.2
“Triggering Event II”Schedule A, Section 1.2
“Triggering Event III”Schedule A, Section 1.2
“Triggering Event IV”Schedule A, Section 1.2
“Triggering Events”Schedule A, Section 1.2
“Trust Agreement”Section 5.14(a)
“Trust Account”Section 5.14(a)
“Trust Termination Letter”Section 7.5
“Upper Band Amount”Schedule A, Section 1.2
“WARN”Section 4.13(e)
“Within the Band Amount”Schedule A, Section 1.2
Section 1.2. Additional Terms. For purposes of this Agreement, the following capitalized terms have the following meanings:
“Affiliate” shall mean, as applied to any Person, any other Person directly or indirectly controlling, controlled by or under direct or indirect common control with, such Person. For purposes of this definition, “control” (including with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contractContract, as a general partner, as a manager or otherwise. NotwithstandingFrom and after the foregoing,Effective Time, the Parties acknowledge and agree that neither ISMMS nor any other MSHS EntityCompany shall be deemed to beconsidered an Affiliate of a Group Company for any purpose in this Agreement.the Acquirer.
“Aggregate Company Share AmountAncillary Agreements” shall meanmeans the sum, without duplication,Certificates of (a)Merger, the aggregate number of shares of Company Common Stock that are issuedEscrow Agreement, the Shareholder Agreements, the Transition Services Agreement and outstanding immediately prioreach other agreement, document, instrument or certificate contemplated by this Agreement and executed or to be executed in connection with the Effective Time, (b) the aggregate number of shares of Company Common Stock that are issuable upon the exercise of Company Options or vesting of Company RSUs or other direct or indirect rights to acquire shares of Company Common Stock that are issued and outstanding immediately prior to the Effective Time (and in the case of Company SARs, the aggregate number of shares of Company Common Stock on which the value of such Company SARs is based), in each case calculated on a treasury stock basis and after giving effect to the conversion of the Class B Common Stock pursuant to the Mandatory Conversion Notice under the Company Organizational Documents, and (c) the aggregate number of shares of Company Common Stock that would be issuable upon the conversion all shares of Company Preferred Stock into shares of Company Common Stock pursuant to the Company Organizational Documents; provided that, for the avoidance of doubt, the Earnout RSUs shall be disregarded for the purpose of the Aggregate Company Share Amount.Transactions.
“Antitrust Laws” shall mean the HSR Act andmeans any federal, state, provincial, territorial and foreign statutes, rules, regulations, governmental orders, administrative and judicial doctrines and other applicable Laws that are designed or foreign law, regulation or decree designedintended to prohibit, restrict or regulate foreign investment or actions forhaving the purpose or effect of monopolization or restraint of trade or the significant impedimentlessening of effective competition includingthrough merger control procedures.or acquisition.
“Base ValueBayh-Dole Act” shall meanmeans the Patent and Trademark Law Amendments Act of 1980, codified at 35 U.S.C. sections 200-212, as amended, as well as any regulations promulgated pursuant thereto, including in 37 C.F.R. Part 401.
“Benefit Plan” means each benefit plan, program, policy, practice, trust, fund, Contract, agreement or arrangement (whether or not an amount equal“employee benefit plan” within the meaning of Section 3(3) of ERISA), including any pension, profit-sharing, 401(k) retirement, bonus, incentive compensation, deferred compensation, loan, vacation, sick pay, employee stock ownership, stock purchase, stock option or other equity based compensation plans, severance, employment, Contractor, unemployment, death, hospitalization, sickness, or other medical, dental, vision, life, or other insurance, long- or short-term disability, change of control, fringe benefit, cafeteria plan or any other employee or fringe benefit plan, program, policy, practice, trust, fund, Contract, agreement or arrangement that provides benefits to $2,000,000,000.00.current or former employees, directors, officers or independent contractors who are natural persons (or beneficiaries thereof).
“Business” means the business of the Company Group as currently conducted by the Company Group as of the date of this Agreement; provided, that, for purposes of, and subject to, Section 2.7 the “Business” means the business of the Company Group as conducted during the First Milestone Period and the Second Milestone Period, as applicable.
“Business Day” shall mean anymeans a day other than a Saturday, a Sunday or other day on which commercial banks in New York, New York are authorized or required by Legal Requirementsapplicable Law to close.remain closed.
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“Cash CapCARES Act” means the amount, if any, specified by such Company Stockholder in its Cash Election as the maximum amountCoronavirus Aid, Relief, and Economic Security Act of Closing Available Cash elected by such Company Stockholder; provided, however, that such amount shall not exceed such Company Stockholder’s Cash Pro Rata Share of $343,000,000.2020, Pub. L. No. 116-136, 131 Stat. 281.
“Cash ElectionConsideration” shall mean an affirmative election by a Company Stockholdermeans: (i) $150,000,000 in cash, plus (ii) the Closing Net Working Capital Surplus, if any, minus (iii) the Closing Net Working Capital Shortfall, if any, minus (iv) the amount of Closing Indebtedness, if any, minus (v) the aggregate amount of Transaction Expenses that have not been fully paid as of immediately prior to receive its Cash Pro Rata Sharethe Closing.
“Closing Indebtedness” means the aggregate amount of all Indebtedness of the Closing Available Cash and, if applicable, Cash Pro Rata Share Excess AmountCompany Group outstanding as of the Measurement Time (other than with respect to Taxes included in Indebtedness, which shall be calculated as of the end of the day on the Closing Available Excess Cash,Date after giving effect to the Transactions); provided that, the calculation of Closing Indebtedness shall exclude: (i) in a form acceptablethe event the Closing has not occurred within three months immediately following the Agreement Date, 100% of the portion of the Seller Debt attributable to the Company duly executed byGroup operations during the Company Stockholderfourth through sixth months immediately following the Agreement Date, up to a maximum amount of $15,000,000 and delivered(ii) in the event the Closing has not occurred within six months immediately following the Agreement Date, (A) the amounts excluded pursuant to clause (i) with respect to the Company on or beforefourth through the fifth (5sixth months thplus) Business Day prior (B) with respect to each month during the Effective Time. For clarity, a Company Stockholder’s Cash Election may be set forth in its duly executed Stockholder Consentperiod commencing with the seventh month immediately following the Agreement Date and Joinder, but may also be in such other form asending at the Company deems acceptable.
“Cash Pro Rata Share” shall mean, for each Company Stockholder that has submitted a Cash Election on or before the fifth (5th) Business Day prior to the Effective Date, a ratio, (a) the numerator of which is such Company Stockholder’s Total Stockholder Outstanding Shares and (b) the denominator of which is the Total Outstanding Company Shares. The Cash Pro Rata Share of each Company Stockholder that has not submitted a Cash Election and/or has confirmed in writing to the Company that it does not wish to make a Cash Election shall be deemed to be equal to zero (0).
“Cash Pro Rata Share Excess Amount” shall mean, for each Company Stockholder that has submitted a Cash Election to receiveMeasurement Time, a portion of the Closing Available Excess Cash on or before the fifth (5th) Business Day priorSeller Debt attributable to the Effective Date, a portion of such Closing Available Excess CashCompany Group operations equal to: (a) such Company’s Stockholder’s Cash Pro Rata Share Excess Percentage of the Closing Available Excess Cash or (b) if such Company Stockholder has specified a Cash Cap, the lesser of such Company’s Stockholder’s (i) Cash Pro Rata Share Excess Percentage of the Closing Available Excess Cash and (ii) such amount as would result in the Company Stockholder receiving a portion of all Closing Available Cash equal to such Company Stockholder’s Cash Cap. To the extent a Company Stockholder has specified a Cash Cap, the portion of the Closing Available Excess Cash that would otherwise be distributed to such Company Stockholder in the absence of such Cash Cap shall be treated as Closing Available Cash in computing the Cash Pro Rata Share Excess Amounts of Company Stockholders who have not specified a Cash Cap.
“Cash Pro Rata Share Excess Percentage” means the quotient, expressed as a percentage, obtained by dividing (a) the Cash Pro Rata Share of such Company Stockholder by (b) the aggregate Cash Pro Rata Shares of all Company Stockholders that have submitted a Cash Election to receive a Cash Pro Rata Share Excess Amount of the Closing Available Excess Cash on or before the fifth (5th) Business Day prior to the Effective Date.
“Change of Control” shall mean any transaction or series of transactions the result of which is: (a) the acquisition by any Person or “group” (as defined in the Exchange Act) of Persons of direct or indirect beneficial ownership of securities representing 50% or more of the combined voting power of the then outstanding securities of Parent; (b) a merger, consolidation, reorganization or other business combination, however effected, resulting in any Person or “group” (as defined in the Exchange Act) acquiring at least 50% of the combined voting power ofamount specified for the then outstanding securities of Parent or the surviving Person outstanding immediately after such combination; or (c) a sale of all or substantially all of the assets of Parent.
“Class A Common Stock” shall mean the shares of Class A Common Stock, par value $0.00001 per share, of the Company.
“Class B Common Stock” shall mean the shares of Class B Common Stock, par value $0.00001 per share, of the Company.
“Closing Available Cash” shall mean an amount equal to the excess of (a) the sum of (i) the funds containedapplicable month in the Trust Account asPre-Closing Budget (clause (i) and (ii), collectively, the “Assumed Seller Debt”). For the elimination of thedoubt, any current or other portion of Indebtedness shall be included in Closing Indebtedness and the Equity Financing Amount received at the Closing, following payment of the Trust Redemption Amount and payment of allnot included in Company Transaction Costs and Parent Transaction Costs and (ii) the Company Closing Cash over (b) $500,000,000; provided that in no event shall the Closing Cash Payment Amount exceed $343,000,000.Net Working Capital.
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“Closing Available Excess CashNet Working Capital Shortfall” means the excess,amount, if any, of (a)by which the Closing Available Cash over (b) the product of (i) the aggregate Cash Pro Rata Shares of allNet Working Capital Target exceeds Company Stockholders that have made a Cash Election multiplied by (ii) the Closing Available Cash.Net Working Capital.
“Closing Cash Payment AmountNet Working Capital Surplus” shall meanmeans the aggregate amount, ofif any, by which the Company Net Working Capital exceeds the Closing Available Cash payable to Company Stockholders that have made Cash Elections.Net Working Capital Target.
“Closing Merger ConsiderationNet Working Capital Target” shall mean an amount equal to the Base Value.
“Closing Number of Securities” shall mean the number of shares of Parent Class A Stock equal to the quotient of (a) the Closing Securities Payment Amount divided by (b) the Parent Stock Price.
“Closing Securities Payment Amount” shall mean an amount equal to: (a) the Closing Merger Consideration; minus (b) the Closing Cash Payment Amount.
means $22,000,000. “Code” shall meanmeans the U.S. Internal Revenue Code of 1986, as amended.1986.
“Common Share PriceCommercial Software” shall meanmeans any Software or Software as a service services that are commercially available and (i) are licensed or provided as a service to any member of the share price equalCompany Group pursuant to a nonexclusive Software license or Software services agreement for a one-time or annual fee of $100,000 or less, (ii) are not material to the volume weighted average closing sale priceconduct of one sharethe Business by the Company Group and (iii) have not been modified or customized for any member of Parent Class A Stock as reported on Nasdaq (or the exchange on which the shares of Parent Class A Stock are then listed) 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 (as adjusted as appropriate to reflect any stock splits, reverse stock splits, stock dividends (including any dividend or distribution of securities convertible into Parent Class A Stock), extraordinary cash dividend (which adjustment shall be subject to the reasonable mutual agreement of Parent and the Company), reorganization, recapitalization, reclassification, combination, exchange of shares or other like change or transaction with respect to Parent Class A Stock).Company Group.
“Company Closing CashData” shall meanmeans all data Processed in connection with the cash and cash equivalentsmarketing, or use of any Company Product or the conduct of the Company as of immediately prior to the Closing, determined in accordance with GAAP. The Company Closing Cash shall be decreased by (i) any restricted cash (as determined in accordance with GAAP)Business, including Company-Licensed Data, Company-Owned Data and any checks, drafts and wires issued as of such time that have not yet cleared; and increased by any deposits in transit as of such time that have not yet cleared and (ii) any amounts owing by the Company in respect of the Specified Obligations as of the Closing.Personal Data.
“Company Common StockData Agreement” shall meanmeans any Contract relating to or otherwise addressing the Class A Common Stock (after giving effectProcessing of Company Data by or on behalf of the Company Group or otherwise in connection with the conduct of the Business (including Contracts with third parties relating to the conversionProcessing of the Class B Common Stock pursuant to a Mandatory Conversion Notice under the Company Organizational Documents).
“Company Incentive Plan” shall mean the Company’s 2017 Stock Incentive Plan, as amended from time to time.
“Company IP Contract” shall mean any ContractData) to which any member of the Company Group, CompanySeller or its Affiliates is a party or by which they are bound, including the standard terms of service entered into by users of the Company Products (copies of which have been Delivered to Acquirer).
“Company Databases” means each distinct electronic or other repository or database containing (in whole or in part) Company Data maintained by or for any member of the Company Group at any time, which for clarity contain more than 300,000 exomes and 2.1 million phenotypes.
“Company is boundDisclosure Schedules” means the Disclosure Schedules delivered by the Seller and the Company Parties to Acquirer in connection with the execution of this Agreement.
“Company Employee” means each current and former officer or underemployee of any member of the Company Group.
“Company Fundamental Representations” means the representations and warranties contained in Section 3.1 (Organization of Seller and the Company Group), Section 3.2 (Subsidiaries), Section 3.3 (Authorization), Section 3.4 (Capitalization), Section 3.5(b) (Title to and Sufficiency of Real and Tangible Properties and Assets), Section 3.12 (Taxes), Section 3.19(b) and (p) (Sufficiency of Intangible Properties and Assets) and Section 3.23 (No Brokers).
“Company Group” means (x) the Company and its Subsidiaries as of the Agreement Date and (y) immediately following consummation of the Pre-Closing Restructuring, Holdco2 and its direct subsidiary, GeneDx Delaware LLC, together with the Subsidiaries of GeneDx Delaware LLC immediately following the Pre-Closing Restructuring.
“Company IP” means any Company Owned IP and any Company Licensed IP. “Company IP Contracts” means any and all Contracts concerning Intellectual Property to which any member of the Company Group Company has any obligationis a party or underbeneficiary or by which any member of the Company Group, or any of its or their properties or assets, may be bound, including all (i) licenses of Intellectual Property by the Company has any right or interest that (a) contains any assignment or licenseGroup to any third party, (ii) licenses of any material Owned Intellectual Property or any covenant not to assert or enforce, any material Owned Intellectual Property against any third party, in each case, except non-exclusive licenses or covenants not to assert or enforce any such Intellectual Property granted by any Group Company to any third parties (including customers, suppliers, consultants, and independent contractors) in the ordinary course of business, (b) contains a license to any Group Company under any Licensed Intellectual Property or (c) pursuant to which any material Owned Intellectual Property is or was developed by any third party forto any member of the Company Group, (iii) other Contracts between any member of the Company (in each case excluding (i) non-exclusive licenses to “off the shelf”Group and any third party computer software that is licensed on generally available, standard commercial termsrelating to the transfer, development, maintenance or use of Intellectual Property and (ii) licenses for open source software).(iv) consents, settlements, and Orders governing the use, validity or enforceability of Intellectual Property.
“Company IT SystemsAssets” shall meanmeans any and all computer systems, software, firmware, hardware, networks, interfaces, platforms, related systems, databases, websites and equipmentIT Assets used or held for use in connection with the operation of the Business that are owned outsourced or licensedcontrolled by any member of the Company Group, Company to process, store, maintain, backupSeller or operate data, information and functions that are used inits Affiliates.
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“Company-Licensed Data” means all data owned by third parties that are Processed by the Company Group or, otherwise, in connection with the businessmarketing or use of any Company Product or the conduct of the Business.
“Company Licensed IP” means any Intellectual Property that is licensed to the Company Group Companies, but excluding,from another Person, including for clarity any Intellectual Property in and to Company Products other than Company Owned IP.
“Company Net Working Capital” means, as of the Measurement Time: (i) the Company Group’s consolidated total current assets less (ii) the Company Group’s consolidated total current liabilities, in each case as specifically set forth in the Company Net Working Capital Schedule. For the elimination of doubt (A) the Company Group’s current assets shall exclude (I) accounts receivable that are aged longer than 150 days, (II) any deferred Tax assets and (III) any loans or indebtedness of the Company Group’s officers in favor of any member of the Company Group, (B) the Company Group’s current liabilities shall include, without duplication, all Liabilities for (I) accounts payable, (II) accrued expenses, (III) vacation and paid time off accrued by or for the Company Employees (iii) deferred revenue and customer deposits, and (iv) local non-income taxes payable and (C) the Company Group’s current assets and liabilities shall exclude all (I) operating lease assets and liabilities (including tenant improvement assets), (II) current income tax assets and liabilities (including current income tax assets, income tax receivable or recoverable, income taxes payable, valuation allowance for current income taxes), and (III) intercompany receivables and liabilities. For the avoidance of doubt, any computer systems, software, firmware, hardware, networks, interfaces, platforms, related systems, databases, websites and equipment owned, outsourced or licensed by customers of any Group Company.
“Company Material Adverse Effect”Net Working Capital shall mean any change, event, or occurrence,exclude (x) all Liabilities for Transaction Expenses that individually or when aggregated with other changes, events, or occurrences has had a materially adverse effect on the business, assets, financial condition or results of operationsare incurred but unpaid as of the Group Companies, takenClosing, (y) any Closing Indebtedness and (z) any Seller Debt. An example calculation of Company Net Working Capital as a whole; provided, however, that no change, event, occurrence or effect arising out of or related to any of the following, alone or in combination, shall be taken into account in determining whether a Company Material Adverse Effect has occurred: (i) acts of war, sabotage, civil unrest or terrorism, or any escalation or worsening of any such acts of war, sabotage, civil unrest or terrorism, or changes in global, national, regional, state or local political or social conditions; (ii) earthquakes, hurricanes, tornados, pandemics (including COVID-19), epidemics, disease outbreaks, or public health emergencies (as declared by the World Health Organization or the Health and Human Services Secretary of the United States) or other natural or man-made disasters, or any worsening thereof; (iii) changes attributable to the public announcement or pendency of the Transactions (including the impact thereof on relationships with customers, suppliers, employees or Governmental Entities); (iv) changes or proposed changes in Applicable Legal Requirements, regulations or interpretations thereof or decisions by courts or any Governmental Entity after the date of this Agreement (including Pandemic Measures); (v) changes or proposed changes in GAAP (or any interpretation thereof) after the date of this Agreement; (vi) any downturn in general economic conditions, including changesNovember 30, 2021 is included in the credit, debt, securities, financial, capital or reinsurance markets (including changes in interest or exchange rates, prices of any security or market index or commodity or any disruption of such markets), in each case, in the United States or anywhere else in the world; (vii) events or conditions generally affecting the industries and markets in which the Company operates; (viii) any failure to meet any projections, forecasts, guidance, estimates, milestones, budgets or financial or operating predictions of revenue, earnings, cash flow or cash position, provided that this clause (viii) shall not prevent a determination that any change, event, or occurrence underlying such failure has resulted in a Company Material Adverse Effect; or (ix) any actions required to be taken, or required not to be taken, pursuant to the terms of this Agreement; provided, however, that if a change or effect related to clauses (iv) through (vii) disproportionately adversely affects the Group Companies, taken as a whole, compared to other Persons operating in the same industry as the Group Companies, then such disproportionate impact may be taken into account in determining whether a Company Material Adverse Effect has occurred.Net Working Capital Schedule.
“Company OptionNet Working Capital Schedule” shall mean an option to purchase sharesmeans the example calculation, for illustrative purposes only, of Class A Common StockCompany Net Working Capital as of November 30, 2021 contained in Exhibit D.
“Company-Owned Data” means each element of data Processed that (a) is used or Class B Common Stock granted underheld for use in the Business that is not Personal Data or Company-Licensed Data and (b) the Company Incentive Plan.Group owns or purports to own.
“Company Organizational DocumentsOwned IP” shall meanmeans any Intellectual Property in which any member of the Sixth Amended and Restated Certificate of Incorporation of Company dated as of July 27, 2020 and the Bylaws of Company dated August 2, 2019 and anyGroup has or purports to have an ownership interest (whether solely or jointly with one or more other similar organization documents of Company, as each may be amended, modified or supplemented.persons).
“Company RSUParties” shall mean(and each, a restricted stock unit representing the opportunity to acquire shares of Class B Common Stock granted under“Company Party”) means (i) the Company Incentive Plan.and Holdco2 as of the Agreement Date until immediately prior to consummation of the Pre-Closing Restructuring and (ii) Holdco2 and GeneDx Delaware LLC following consummation of the Pre-Closing Restructuring.
“Company SARPrivacy Commitments” shall mean a stock appreciation right with respect to shares ofmeans, collectively: (A) the Company Common Stock grantedGroup’s obligations under the Company Incentive Plan.Privacy Policies, (B) providing adequate notice and obtaining any necessary consents from end users and other natural Persons, as applicable required for the Processing of Personal Data as conducted by or for the Company Group, (C) any notices, consents, authorizations and privacy choices (including opt-in and opt-out preferences, as required) of end users and other natural Persons relating to Personal Data and (D) industry self-regulatory principles and codes of conduct applicable to the protection or Processing of Personal Data, biometrics, internet of things, direct marketing, e-mails, text messages, robocalls, telemarketing or other electronic communications (including the Payment Card Industry Data Security Standards) to which any member of the Company Group is bound or otherwise represents compliance.
“Company StockholderPrivacy Policies” shall mean a holdermeans, collectively, any and all (A) of the Company Group’s currently applicable data privacy and security policies, procedures, and notices, whether applicable internally, or published on Company Websites or otherwise made available by the Company Group to any Person, and (B) public representations (including representations on Company Websites), made by or on behalf of the Company Group with regard to Personal Data.
“Company Product” means any product or service currently produced, marketed, licensed, sold, distributed or performed by the Company Group and any product or service that is being researched or under development for use in the Business, including those set forth in Section 3.15(b) of the Company Disclosure Schedule.
“Company Software” means all Software used or held for use in connection with the operation of the Business.
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“Company Websites” means all websites owned, operated or hosted by the Company Group or through which the Company Group conducts the Business, and the underlying platforms for such websites.
“Confidentiality Agreement” means the letter agreement between Seller, the Company and Acquirer, dated October 12, 2021.
“Consent” means any required consent, waiver or approval of a sharethird party for the consummation of the Transactions or to the Transfer, or amendment of a Contract.
“Continuing Employees” means all employees of any member of the Company Common Stock and Company Preferred Stock issued and outstandingGroup immediately prior to the Effective Time.
“Contract” means any agreement, understanding, contract, note, bond, deed, mortgage, lease, sublease, license, sublicense or instrument that is legally binding, whether written or oral.
“Controlled Group Liability” means any and all Liabilities (a) under Title IV of ERISA, (b) under Section 302 of ERISA, (c) under Section 412 and 4971 of the Code, and (d) as a result of a failure to comply with the continuation coverage requirements of Section 601 et seq. of ERISA and Section 4980B of the Code, other than such Liabilities that arise solely out of, or relate to, Company Transaction CostsBenefit Plans.
“Copyrights” means all copyrights, whether in published or unpublished works; databases, data collections and rights therein, mask work rights, Software, web site content; rights to compilations, collective works and derivative works of any of the foregoing and moral rights in any of the foregoing; registrations and applications for registration for any of the foregoing and any renewals or extensions thereof.
“COVID-19” means the novel coronavirus known as SARS-CoV-2 or COVID-19, and variant thereof.
“COVID-19 Response” means any quarantine, travel restriction, “stay-at-home” orders, social distancing measures or other safety measures, workforce reductions, workplace or worksite shutdowns or slowdowns, factory closures, “shelter in place”, “stay at home”, workforce reduction sequester safety or similar Law, directive or guidelines promulgated by any applicable Governmental Authority or other measures initiated to the extent reasonably necessary to, respond to, or mitigate the effects of, the COVID-19 pandemic, as recommended by any applicable Governmental Authority, including the Centers for Disease Control and Prevention or the World Health Organization, in each case, in connection with or in response to COVID-19, including the Coronavirus Aid, Relief and Economic Security Act, as may be amended, or the Families First Coronavirus Response Act, as may be amended or any other applicable Law.
“Data Room” means the virtual data room for the Transactions hosted at securevdr.com, to which Acquirer and its Representatives have access.
“Default” means (i) any actual breach, violation or default, (ii) the existence of circumstances or the occurrence of an event that, with the passage of time or the giving of notice or both, would constitute a breach, violation or default or (iii) the existence of circumstances or the occurrence of an event that, with or without the passage of time or the giving of notice or both, would give rise to a right of cancellation, termination, modification renegotiation or acceleration.
“Deliver” means (i) providing to Acquirer a copy of any item required to be delivered to Acquirer directly or (ii) including any such item in the Data Room, in each case (clauses (i) and (ii)), not less than one Business Day prior to the Agreement Date (except if a particular date of Delivery is specified).
“Detect Genomix” shall mean all fees, costs and expensesDetect Genomix, LLC, a Florida limited liability company, with principal office at 1301 Concord Terrace, Sunrise, Florida 33323
“DGCL” means the General Corporation Law of the Group Companies, in each case, incurred priorState of Delaware.
“Dispute” means any dispute, controversy or claim (of any and every kind or type, whether based on contract, tort, statute, regulation, or otherwise) arising out of, relating to, and through the Closing Dateor in connection with the negotiation, preparation and execution of this Agreement, the other Transaction Agreements and the consummation of the Transactions, including: (a) all bonuses, change in control payments, retention or similar payments payable as a result of the consummation of the Transactions pursuant to arrangements (whether written or oral) entered into prior to the Closing Date whether payable before (to the extent unpaid), on or following the Closing Date (excluding any “double-trigger” payments), and the employer portion of payroll Taxes payable as a result of the foregoing amounts; (b) all severance payments,
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retirement paymentsnegotiation, execution or similar paymentsperformance of this Agreement (including any such dispute, controversy or success fees payable pursuantclaim based upon, arising out of or related to arrangements (whether writtenany representation or oral) entered into prior to the Closing Date and which are payablewarranty made in or in connection with the consummation ofthis Agreement or as an inducement to enter into this Agreement) or the Transactions, whether payable before (to the extent unpaid), on or following the Closing Date (excludingincluding any “double-trigger payments”), and the employer portion of payroll Taxes payabledispute as a result of the foregoing amounts; (c) all transaction, deal, brokerage, financial advisory or any similar fees payable in connection with the consummation of the Transactions; and (d) all costs, fees and expenses related to the D&O Tail; but excluding (i) any and all costs, fees and expenses incurred in connection with the preparation and filingconstruction, validity, interpretation, enforceability or breach of the Proxy Statement (and any registration statement filed with the SEC in connection therewith) and the review and/or approval thereof by the SEC, (ii) any and all costs, fees and expenses incurred in connection with the listing on Nasdaq of the shares of Parent Class A Stock issued in connection with the Transactions, (iii) any transfer, documentary, sales, use, stamp, registration, excise, recording, registration value added and other similar Taxes and fees (including any penalties or interest) payable in connection with the Transactions, and (iv) any other amounts payable by Parent hereunder. For the avoidance of doubt, Company Transaction Costs shall exclude any amounts owing by the Company in respect of any Company SARs that are deemed exercised in connection with the Closing.this Agreement.
“Company’s Required FundsDomain Names” shall meanmeans Internet electronic addresses, uniform resource locators and alphanumeric designations associated therewith registered with or assigned by any domain name registrar, domain name registry or other domain name registration authority as part of an amount equal to $300,000,000.electronic address on the Internet and all applications for any of the foregoing.
“Confidentiality Agreement” shall mean that certain Confidentiality Agreement, dated April 9, 2020, by and between the Company and Casdin Capital LLC, as amended and joined from time to time.
“Contract” shall mean any contract, subcontract, agreement, indenture, note, bond, loan or credit agreement, instrument, installment obligation, lease, mortgage, deed of trust, license, sublicense, commitment, power of attorney, guaranty or other legally binding commitment, arrangement, understanding or obligation, whether written or oral, in each case, as amended and supplemented from time to time and including all schedules, annexes and exhibits thereto.
“COVID-19” shall mean the novel coronavirus, SARS-CoV-2 or COVID-19 or any mutation of the same, including any resulting epidemics, pandemics, disease outbreaks or public health emergencies.
“Current Government Contract” shall mean any Government Contract the period of performance of which has not yet expired or been terminated.
“Earn-Out Period” shall mean the time period beginning upon the expiration of the Founder Shares Lock-Up Period (as such term is defined in and pursuant to the terms of that certain Letter Agreement, dated September 1, 2020, entered into by and among Parent, Sponsor and certain of the Parent’s current and former officers and directors) and ending on the 2-year anniversary of the Closing Date.
“Earn-Out Pro Rata Share” shall mean for each Company Stockholder and Earn-Out Service Provider, such amount determined in accordance with Schedule 2.7 of the Company Disclosure Letter.
“Earn-Out RSU” shall mean the award of restricted stock units in respect of the Earn-Out Shares granted to the Earn-Out Service Providers pursuant to the Earn-Out Award Agreement.
“Earn-Out Service Provider” shall mean each (a) holder of a Company Option, Company RSU, Company SAR, other than any holder of a Company Option, Company RSU or Company SAR who is not employed by or providing services to the Company as of the Effective Time, and (b) each other employee or individual service provider of the Company, in each case whom the board of directors of the Company designates as an Earn-Out Service Provider prior to the Closing and who enters into an Earn-Out Award Agreement.
“Earn-Out Total Outstanding SharesEMA” means the aggregate numberEuropean Medicines Agency and any successor agency(ies) or authority having substantially the same function.
“Encumbrance” means any charge, claim, mortgage, lien, option, pledge, security interest, right of sharesfirst refusal, easement, deed of Parent Class A Stock to which all Company Stockholders would be entitled pursuant to trust or encumbrance.Section 2.7(a)(ii) if no Company Stockholder made a Cash Election and the Closing Cash Payment Amount was $0.00.
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“Environmental Law” shall mean any andmeans all applicable Legal Requirements relatingLaws which relate to pollution, Hazardous Materials, or the protection of the environment, natural resources or human health and safety.safety, including any Laws which relate to (i) the protection, preservation or restoration of the environment (including air, water vapor, surface water, groundwater, drinking water supply, surface land, subsurface land, plant and animal life or any other natural resource), or (ii) the exposure to, or the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of Hazardous Substances.
“ERISA” shall meanmeans the Employee Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate” shall meanmeans any tradePerson which is (or at any relevant time was or business (whetherwill be) a member of a “controlled group of corporations” with, under “common control” with, or not incorporated) that, togethera member of an “affiliate service group” with the Company Group as such terms are defined in Sections 414(b), (c), (m) or any of its Subsidiaries is treated as a single employer under Section 414(o) of the Code.
“Exchange ActEscrow Account” means the escrow account established by the Escrow Agent to hold the Escrow Amount in trust.
“Escrow Amount” means $13,470,000 in cash and 8,314,815 shares of Acquirer Stock. “Escrow Expiration Date” shall mean the United States12-month anniversary of the Closing Date. “Estimated Cash Consideration” means the Company’s good faith estimate of the Cash Consideration set forth in the Estimated Closing Statement.
“Estimated Closing Statement” means a statement, setting forth, Seller’s and the Company Parties’ good faith estimates of: (a) the Company Net Working Capital (including (i) the Company Group’s balance sheet as of the Closing Date prepared in accordance with the Accounting Standards, (ii) an itemized list of the Company Group’s consolidated total current assets (in each case as set forth in the Company Net Working Capital Schedule), (iii) an itemized list of the Company Group’s consolidated total current liabilities (in each case as set forth in the Company Net Working Capital Schedule) and (iv) the calculation of the Closing Net Working Capital Shortfall or Closing Net Working Capital Surplus, as applicable); (b) the amount of the Closing Indebtedness (including an itemized list of each item of Company Indebtedness with a description of the nature of such Company Indebtedness and the Person to whom such Company Indebtedness is owed) and the aggregate amount of Seller Debt (including itemized detail reflecting the amount attributable to each month of Company Group operations during the Pre-Closing Period); (c) unpaid Transaction Expenses (including an itemized list of each Transaction Expense with a description of the nature of such expense and the Person to whom such expense is owed); and (d) based on such amounts, the calculation of the Cash Consideration.
“European Union” means the economic, scientific and political organization of member states as it may be constituted from time to time, which as of the Agreement Date consists of Austria, Belgium, Bulgaria, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and that certain portion of Cyprus included in such organization.
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“Exchange Act” means the Securities Exchange Act of 1934, as amended,amended. “FCPA” means the United States Foreign Corrupt Practices Act.
“FDA” means the United States Food and Drug Administration and any successor agency thereto.
“FDCA” means the rulesUnited States Federal Food, Drug, and regulations promulgated thereunder.Cosmetic Act, 21 U.S.C. § 301 et seq.
“Fraud” means common law fraud with the element of scienter, as interpreted under the Laws of the State of Delaware and, for the avoidance of doubt, excluding claims based on negligence or recklessness.
“Fundamental Representations” shall mean: (a) inmeans the case ofAcquirer Fundamental Representations and the Company the representations and warranties contained in Section 4.1 (Organization and Qualification); Section 4.3 (Capitalization); Section 4.4 (Due Authorization); and Section 4.17 (Brokers; Third Party Expenses); and (b) in the case of Parent, the representations and warranties contained in Section 5.1 (Organization and Qualification); Section 5.2 (Parent Subsidiaries); Section 5.3 (Capitalization); Section 5.4 (Authority Relative to this Agreement); and Section 5.10 (Business Activities).Fundamental Representations, as applicable.
“GAAPGoverning Documents” shall mean United States generally accepted accounting principles, consistently applied.means the legal document(s) by which any Person (other than an individual) establishes its legal existence or other organizational documents of such Person. For example, the “Governing Documents” of a corporation are its certificate or articles of incorporation and by-laws and the “Governing Documents” of a limited liability company are its operating or limited liability company agreement and certificate of formation.
“Government ContractGovernmental Authority” shall meanmeans any prime contract, subcontract, purchase order, task order, delivery order, basic ordering agreement, pricing agreement, letter contract(a) nation, state, commonwealth, province, territory, county, municipality, district or other similar written arrangementjurisdiction of any kind,nature; (b) international, multinational, supra-national, federal, state, local, municipal, foreign or other government, agency or authority; (c) governmental or quasi-governmental authority of any nature (including any governmental division, department, agency, commission, securities exchange or instrumentality and any court or other tribunal) or (d) any bureau, instrumentality or commission or any court, tribunal, judicial or arbitral body, industry or trade or private body exercising any regulatory or quasi regulatory power or authority, including the FDA, European Commission and EMA, and any Institutional Review Board or Ethics Committee.
“Governmental Program” means all amendments, modifications“federal health care programs” (as defined by 42
U.S.C. § 1320a–7b(f)), including Medicare, Medicaid, TRICARE, Maternal and options thereunderChild Health Service Block Grant, Children’s Health Insurance Program, and any other similar or relating thereto between the Companysuccessor federal, state or a Company Subsidiary, on the one hand, and: (a)local healthcare payment programs with, or sponsored in whole or in part by, any Governmental Entity; (b)Authority or any primeagent or contractor of a Governmental Entity in its capacity as a prime contractor; or (c) any subcontractor at any tier performing work that is directly charged to any contract of a type described in clauses (a) or (b) above, on the other hand. A purchase, task or delivery order, or any other ordering agreement, under a Government Contract shall not constitute a separate Government Contract, for purposes of this definition, but shall be part of the Government Contract to which it relates.
“Governmental Entity” shall mean any federal, state, provincial, municipal, local or foreign government, governmental authority, regulatory or administrative agency, governmental commission, department, board, bureau, agency or instrumentality, court or tribunal.
“Group Companies” shall mean the Company and all of its direct and indirect Subsidiaries.Authority.
“Hazardous MaterialSubstances” shall meanmeans any pollutant, chemical, substance and any toxic, infectious, carcinogenic, reactive, corrosive, ignitable or flammable chemical, chemical compound, hazardous substance, material or waste, whether solid, liquid or gas, that is listed, classified, defined, characterizedsubject to regulation, control or otherwise regulated by a Governmental Entity as a “toxic substance,” “hazardous substance,” “hazardous material” or words of similar meaning or effect,remediation under any Environmental Laws, including any quantity of petroleum product or byproduct, solvent, flammable or explosive material, radioactive materials.material, asbestos, lead paint, polychlorinated biphenyls (or PCBs), dioxins, dibenzofurans, heavy metals, radon gas, mold, mold spores, and mycotoxins.
“HIPAAHealth Care Laws” shall meanmeans any applicable Law regarding health care products and services applicable to the Company Group or Company Products, including any applicable Law the purpose of which is to ensure the safety, efficacy and quality of genetic testing and diagnostic and similar products by regulating the research, development, manufacturing and distribution of such products, including applicable Law relating to CLIA requirements, record keeping and filing of required reports, and relating to promotion and sales of health care products to providers and facilities that bill or submit claims under government healthcare programs, including (i) CLIA, the PHSA, and applicable FDA Emergency Use Authorization (“EUA” ) requirements(ii) the federal Anti-kickback Statute (42 U.S.C. § 1320a-7b(b)); the Anti-Inducement Law (42 U.S.C. § 1320a-7a(a)(5)); the Stark Law (42 U.S.C. §1395nn et seq); the civil False Claims Act (31 U.S.C. §§ 3729 et seq.); the administrative False Claims Law (42 U.S.C. § 1320a- 7b(a)); the Exclusion Laws and the Civil Monetary Penalties Law (42 U.S.C. § 1320a-7 and 1320a-7a); the Medicare statute (Title XVIII of the Social Security Act), including Social Security Act §§ 1860D-1 to 1860D-43 (relating to Medicare Part D and the Medicare Part D Coverage Gap Program); the Medicaid statute (Title XIX of the Social Security Act); the Physician Payments Sunshine Act (42 U.S.C. § 1320a- 7h), and any other similar applicable Law, whether of the United StateStates or any other applicable jurisdiction, (iii) the Clinical Laboratory
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Improvement Amendments of 1988, (iv) the Program Fraud Civil Remedies Act (31 U.S.C. §§ 3801-3812), (v) the Prohibition on Inducement of Beneficiaries Statute (42 U.S.C. § 1320a-7a(a)(5)), (vi) the Federal Health Care Fraud Law (18 U.S.C. § 1347), (vii) the Health Insurance Portability and Accountability Act of 1996, (42 U.S.C. §§ 1320d through 1329d-8), as amended by the Health Information Technology for Economic and Clinical Health Act (Pub. L. No. 111-5)of 2009 (codified at 42 U.S.C. § 300gg and 29 U.S.C. § 1181 et seq. and 42 USC 1320d et seq.), (viii) Medicare (Title XVIII of the Social Security Act), (ix) Medicaid (Title XIX of the Social Security Act) and (x) all applicable implementingstate privacy and confidentiality laws, and state laws, including those related to insurance, balance billing, out-of-network services and the waiver of deductibles, copayments or cost-sharing.
“Holdco2 Common Stock” means the common stock, par value $0.0001 per share, of Holdco2.
“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations including its implementing regulations codified at 45 C.F.R. Parts 160, 162, and 164.promulgated thereunder.
“Indebtedness” shall meanmeans (without duplication), as to any Person: (a) all obligations for the payment of principal, interest, penalties, fees or other Liabilities for borrowed money (including notes payable), incurred or assumed (including pursuant to the Paycheck Protection Program of the following: (a) any indebtednessCARES Act to the extent not forgiven or subject to forgiveness under the CARES Act), including in the case of the Company Group, the Seller Debt, (b) all obligations for borrowed money; (b) any obligations evidenced by bonds, debentures, notes or other similar instruments; (c) any obligations to pay the deferred purchase price of property or services exceptincluding pursuant to any earn-out or similar obligation (other than current trade accounts payable andpayables or short-term accruals incurred in the Ordinary Course of Business), (c) any obligations for amounts drawn under any letter of credit, surety bond, debenture, promissory note, performance bond or other current liabilities;similar instrument, (d) anyall obligations as lessee under capitalized leases;leases that are required to be recorded as capital or finance leases under the Accounting Standards (including leases excluded from the balance sheet due to duration of term), (e) any(i) all obligations contingent or otherwise, under acceptance, lettersthat certain Amended and Restated Credit Agreement, dated August 30, 2021, by and among BioReference Laboratories, Inc., certain of credit or similar facilitiesits subsidiaries, including the Company, and JPMorgan Chase Bank, N.A., only to the extent drawn;the Company Group and its assets have not been fully and irrevocably released from all obligations thereunder and any corresponding security interest arising thereunder has not been terminated prior to the Closing and (ii) all indebtedness of Third Parties secured by an Encumbrance on any asset or property owned or acquired by such Person (if recourse for such security interest is limited to such asset or property, in an amount equal to the lesser of (x) such indebtedness and (y) the fair market value of such asset or property), (f) any guarantyobligation that is required to be reflected as debt on the balance sheet of such Person under the Accounting Standards, (g) all obligations in respect of interest rate and currency swaps, protection agreements, hedges, caps or collar agreements or similar arrangements either generally or under specific contingencies, (h) all obligations in respect of deferred compensation or unfunded or underfunded pension obligations, including any Controlled Group Liability, but excluding accrued but unpaid 401(k) plan employer match contributions under the Seller 401(k) Plan for the portion of the plan year ending on the Closing Date (the “Accrued 2022 401(k) Match” ) (i) any unpaid executive sign-on bonuses or bonuses related to COVID-19, unpaid discretionary annual bonuses for the period ending December 31, 2021 as determined in Seller’s sole discretion and unpaid pro-rated discretionary annual bonuses for the year-ended December 31, 2022 based on actual performance through the Closing Date) (and the employer portion of any payroll Taxes of such member of the Company Group or Acquirer arising from the payment of any such bonuses or payments), (j) any Repayment Obligations, (k) any Pre- Closing Taxes and any other Liabilities of the Company Group for Taxes as of the Closing, whether or not such Liabilities for Taxes would then be due and payable (including, for the avoidance of doubt, employer payroll taxes or other Taxes arising in connection with any payment required pursuant to, or arising as a result of, this Agreement or the Transactions, and including any such taxes that have been deferred pursuant to the CARES Act, and taking into account Transaction Tax Deductions to the extent permitted by applicable Law on a “more likely than not” basis), and (l) all indebtedness of others referred to in clauses (a) through (l) above guaranteed directly or indirectly in any manner by such Person.
“Intellectual Property” means all worldwide intellectual property or industrial property rights protected, created, arising under or recognized by any Laws or Governmental Authority, including (i) Patents; (ii) Trademarks; (iii) Copyrights; (iv) Trade Secrets; (v) all rights to sue and recover damages for past, present and future infringement, misappropriation, dilution or other violation of any of the foregoing; (g) any accrued interest, fees, and charges in respect of(vi) all other rights similar or pertaining to any of the foregoing; and (h) any prepayment premiums and penalties actually due and payable, and any other fees, expenses, indemnities and other amounts actually payable as a resultforegoing in anywhere in the world.
“IRS” means the Internal Revenue Service of the prepayment or discharge of any of the foregoing.United States.
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“Intellectual PropertyIT Assets” shall mean all worldwide rights, title and interest in or relating to intellectual property, whether protected, created or arising under the laws of the United States or any other jurisdiction, including: (a) all patents and patent applications, including provisional patent applications and similar filings and anymeans Software, databases, systems, servers, computers, hardware, firmware, middleware, storage media (e.g., backup tapes), networks, data communications lines, routers, hubs, switches, network devices and all substitutions, divisions, continuations, continuations-in-part, divisions, reissues, renewals, extensions, reexaminations, patents of addition, supplementary protection certificates, utility models, inventors’ certificates, or the likeother information technology equipment, and any foreign equivalents of the foregoing (including certificates of invention and any applications therefor) (collectively, “Patents”); (b) all trademarks, business marks, service marks, brand names, trade dress rights, logos, corporate names, and trade names, and other source or business identifiers and general intangibles of a like nature, together with the goodwill associated with any of the foregoing, along with all applications, registrations, intent-to-use registrations or similar reservations of marks, renewals and extensions thereof (collectively, “Trademarks”); (c) all registered and unregistered copyrights and applications for registration of copyright (collectively, “Copyrights”); (d) all internet domain names; (e) trade secrets, know-how, technology, discoveries and improvements, know-how, proprietary rights, formulae, confidential and proprietary information, technical information, techniques, inventions (including conceptions and/or reductions to practice), designs, drawings, procedures, processes, models, formulations, manuals and systems, whether or not patentable or copyrightable (collectively “Trade Secrets”); (f) databases; and (g) all other intellectual property, intellectual property rights, proprietary information and proprietary rights.documentation.
“ISMMSKey Employee” shall mean the Icahn School of Medicine at Mount Sinai, an education corporation formed under the New York Education Law.means Katherine Stueland, Kevin Feeley and Jennifer Brendel.
“Knowledge” shall mean the actual knowledge or awareness as to a specified fact or event of: (a)means: (i) with respect to the Company, the individualsactual knowledge of the persons listed on Schedule 1.2-A in Section 1.1 of the Company Disclosure Letter;Schedules, including such knowledge that would be acquired by such persons through their reasonable inquiry and (b)(ii) with respect to Parent or Merger Sub,Acquirer, the individualsactual knowledge of the persons listed on Schedule 1.2Section 1.1 of the ParentAcquirer Disclosure Letter.Schedules, including such knowledge that would be acquired by such persons through their reasonable inquiry.
“Legal ProceedingLaw” shall meanmeans any action, suit, hearing, claim, charge, audit, lawsuit, litigation, investigation (formal or informal), inquiry, arbitration or proceeding (in each case, whether civil, criminal or administrative or at law or in equity) by or before a Governmental Entity.
“Legal Requirements” shall mean anyapplicable federal, state, local municipal, foreign or other domestic or foreign law (including common law), statute, constitution, treaty, principle of common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling, injunction, judgment, order, assessment,Order, writ, or other legal requirement, administrative policy or guidance, or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Entity.Authority.
“Licensed Intellectual PropertyLiability” shall meanmeans any direct or indirect liability, indebtedness, obligation, commitment, expense, claim, deficiency, guaranty or endorsement of or by any Person of any type, known or unknown, and whether accrued, absolute, contingent, matured, unmatured or other.
“Material Adverse Effect” means any event, change, condition, circumstance, effect, development, occurrence or state of facts (“Effect”) that, individually or in the aggregate with all Intellectual Property exclusively licensedother Effects, has, or would reasonably be expected to have, a material adverse effect on (i) the condition (financial or otherwise), business, results of operations or assets of the Company Group (taken as a whole) or (ii) the ability of Seller or the Company Parties to perform their respective obligations under this Agreement; provided that no Effect attributable to any of the Group Companies.
“Lien”following shall meanbe taken into account in determining the existence of a Material Adverse Effect solely for purposes of clause (i) above: (A) conditions affecting the industry, financial markets or securities markets in, or the economy as a whole of, the United States, (B) changes in Law or Accounting Standards (or, in each case, any mortgage, pledge, security interest, encumbrance, lien, restrictioninterpretation thereof) after the Closing Date, (C) earthquakes, hostilities, acts of war, sabotage or charge ofterrorism or military actions, epidemic, public health event or pandemic (including COVID-19 and any kindworsening thereof (including any conditional saleCOVID-19 Response)), (D) any actions required under this Agreement or otherwise negotiated separately to obtain any approval or authorization under applicable antitrust or competition Laws for the consummation of the transactions contemplated hereby, (E) the announcement or pendency of this Agreement and the consummation of the transactions contemplated hereby (including the effects of such announcement and pendency on relationships with customers, suppliers, Governmental Authorities, employees or other title retention agreementthird-party relationships), (F) any actions taken (or omitted to be taken) by or leaseat the written request of the Acquirer or as required by this Agreement, or (G) any failure, in and of itself, of the Company Group to meet any internal or published projections, forecasts or revenue or earnings predictions for any period (it being understood that the underlying causes of the facts or occurrences giving rise to such failure may be taken into account in determining whether a Material Adverse Effect has occurred), except, in the nature thereof, any agreementcase of the forgoing clauses (A), (B) and (C), to give any security interest and any restriction relatingthe extent such conditions, changes or events disproportionately affect the Company Group relative to use, quiet enjoyment, voting, transfer, receipt of incomesimilarly situated industry participants (in which case the incremental disproportionate impact or exercise of any other attribute of ownership)impacts may be taken into account in determining whether there has been a Material Adverse Effect).
“LossesMeasurement Time” shall mean any and all deficiencies, judgments, settlements, losses, damages, interest, fines, penalties, Taxes, costs and expenses (including reasonable legal, accounting and other costs and expenses of professionals incurred in connection with investigating, defending, settling or satisfying any and all demands, claims, actions, causes of action, suits, proceedings, assessments, judgments or appeals, and in seeking indemnification, compensation or reimbursement therefor).means 11:59 p.m., Eastern Time, on the date immediately preceding the Closing Date.
“MSHS EntityMerger Consideration” shall mean any New York not-for-profit corporation or limited liability company of which Mount Sinai Health System is, directly or indirectly,means the sole member.Cash Consideration plus the Stock Consideration.
“OFACMost Recent Balance Sheet” shall meanmeans the U.S. Treasury Department Officebalance sheet of Foreign Assets Control.the Company as of September 30, 2021.
“Nasdaq” means the Nasdaq Global Select Market.
“Order” means any writ, judgment, injunction, determination, consent, order, decree, stipulation, award or executive order of or by any Governmental Authority.
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“Option Exchange RatioOrdinary Course of Business” shall mean:
(a)Inmeans the caseordinary course of abusiness of the Company Option to purchase Class A Common Stock, the quotient, rounded to the nearest one ten-thousandth, of (i) the Per Share Amount divided by (ii) the Parent Stock Price; and
(b)In the case of a Company Option to purchase Class B Common Stock, the quotient, rounded to the nearest one ten-thousandth, of (i) the quotient obtained by dividing (A) the Per Share Amount by (B) one hundred (100) (which, for clarity, is intended to account for the conversion of Class B Common Stock into Class A Common Stock contemplated by Section 2.7(a)) divided by (ii) the Parent Stock Price.Group, consistent with past practice.
“OrderParent” shall mean any award, injunction, judgment, regulatory or supervisory mandate, order, writ, decree or ruling entered, issued, made, or rendered by any Governmental Entity that possesses competent jurisdiction.
“Owned Intellectual Property” shall mean all Intellectual Property which any of the Group Companies has (or purports to have) an ownership interest.
“Pandemic Measures” shall mean any quarantine, isolation, “shelter in place,” “stay at home,” workforce reduction, social distancing, shut down, closure, sequester or any other Legal Requirement, decree, judgment, injunction or other order, directive, guidelines or recommendations by any Governmental Entity or industry group in connection with or in response to COVID-19, including, the Coronavirus Aid, Relief, and Economic Security Act (CARES)means OPKO Health Inc., or any other pandemic, epidemic, public health emergency or disease outbreak.a Delaware corporation.
“Parent CashGroup” shall mean, asmeans any consolidated, combined, unitary or other aggregate group of entities for Tax purposes (including Code Section 1504 and similar provisions of state and local Laws) in which Parent is the date of determination: (a) all amounts in the Trust Account; plus (b) the Equity Financing Amount.common parent entity.
“Parent Material Adverse EffectPatents” shall meanmeans any change, event,and all patents, industrial and utility models, industrial designs, petty patents, design patents, patents of importation, patents of addition, certificates of invention, and other indicia of invention ownership issued or occurrence, that, individuallygranted by any Governmental Authority; applications for any of the foregoing, including provisional, utility, design, priority, divisional, and continuation (in whole or when aggregated within part) applications, and all other changes, events,pre-grant forms of any of the foregoing; extensions, reissues, re- examinations, renewals, or occurrences has had a materially adverse effect onother post-grant forms of any of the business, assets, financial conditionforegoing; equivalent or resultssimilar rights in inventions and discoveries anywhere in the world; counterparts of operationsany of Parentthe foregoing anywhere in the world; and Merger Sub, taken as a whole; provided, however, that no change or effect relatedother forms of government issued rights substantially similar to any of the following, aloneforegoing.
“Payor Parties” (and each, a “Payor Party”) means any payors administering Governmental Program benefits or any other healthcare service plan, any health maintenance organizations, any health insurers and any other private and commercial payors.
“Permits” means all licenses and operating licenses, permits, concessions, franchises, approvals, clearances, registrations, certificates, rights, grants, exceptions, exemptions, qualifications, privileges, exemptions, authorizations (including marketing and testing authorizations), easements, variances, permissions, consents or Orders of, any Governmental Authority, including any marketing authorizations, and any approvals or filings relating to any pre-clinical or clinical development, together with all applications therefor and all renewals, extensions, or modifications thereof and additions thereto.
“Permitted Encumbrances” means (i) Encumbrances for Taxes not yet due and payable and that are reserved for in full on the Most Recent Balance Sheet in accordance with the Accounting Standards, (ii) statutory, mechanics’, laborers’ and materialmen liens arising in the Ordinary Course of Business for sums not yet due and payable and not otherwise in default (or for which the validity or amount of which is being contested in good faith), (iii) zoning, entitlement, conservation restriction and other land use and environmental regulations promulgated by Governmental Authorities, (iv) Encumbrances granted to any lender at the Closing in connection with any financing by the Acquirer, (v) any right, interest, lien, title or other Encumbrance of a lessor or sublessor under any lease or other similar agreement or in combination, shall be taken into account in determining whether a Parent Material Adverse Effect has occurred: (i) changes or proposed changes in Applicable Legal Requirements, regulations or interpretations thereof or decisions by courts or any Governmental Entity after the dateproperty (other than Intellectual Property) being leased, (vi) restrictions on the transfer of this Agreement; (ii) changes or proposed changes in GAAP (or any interpretation thereof) after the datesecurities arising under federal and state securities laws, (viii) non-exclusive licenses of this Agreement; or (iii) any downturn in general economic conditions, including changesIntellectual Property granted in the credit, debt, securities, financial, capitalOrdinary Course of Business (A) for the use of results generated by Company Products from a patient sample solely for the clinical care of the patient from which such sample was collected, or reinsurance markets (including changes in interest(B) for incidental use of trademarks by payors, customers or exchange rates, pricesservice providers solely to identify Company Group as the provider of Company Products ((A) and (B) collectively, “Ordinary Course Licenses”) and (ix) Encumbrances listed on Schedule 1.1(b) of the Company Disclosure Schedules.
“Person” means any securityperson or market indexentity, whether an individual, sole proprietorship, general partnership, limited partnership, limited liability partnership, corporation, limited liability company, limited liability limited partnership, business trust, joint stock company, trust, unincorporated association, joint venture, estate, Governmental Authority or commodityother entity or organization.
“Personal Data” means all data or information that constitutes personal data, protected health information, individually identifiable health information or personal information under any disruption of such markets), in each case, inapplicable Law.
“PHSA” means the United States or anywhere else in the world.Public Health Service Act.
“Parent Organizational DocumentsPIPE Investment Amount” shall meanmeans the Second Amended and Restated Certificate of Incorporation of Parent, dated as of September 1, 2020 (the “Parent Charter”) and the Bylaws of Parent (the “Parent Bylaws”) any other similar organization documents of Parent, as each may be amended, modified or supplemented.
“Parent Stock Price” shall mean $10.00.
“Parent Transaction Costs” shall mean: (a) all fees, costs and expenses of Parent incurredaggregate gross purchase price received by Acquirer prior to and throughor substantially concurrently with Closing for the Closing Date in connection with the negotiation, preparation and execution of this Agreement, the other Transaction Agreements and the consummation of the Transactions, whether paid or unpaid prior to the Closing, including any and all professional or transaction related costs, fees and expenses of legal, accounting and financial advisors, consultants, auditors, accountants and brokers, including any deferred underwriting commissions being heldshares in the Trust Account; and (b) any Indebtedness of Parent or its Subsidiaries owed to its Affiliates or stockholders.PIPE Investment.
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“Parent UnitsPIPE Investors” shall mean equity securities of Parent each consisting of one share of Parent Class A Stock and one-third of one Public Warrant.means those certain investors participating in the PIPE Investment pursuant to the Subscription Agreements.
“Permitted LienPost-Closing Tax Period” shall mean: (a) Liens for currentmeans any Tax period Taxes not yet delinquent or for Taxesbeginning after the Closing Date and that are being contested in good faith by appropriate proceedings and in each case that are sufficiently reserved for on the Financial Statements in accordance with GAAP; (b) statutory and contractual Liens of landlords with respect to leased real property; (c) Liens of carriers, warehousemen, mechanics, materialmen and repairmen incurred in the ordinary course and: (i) not yet delinquent; or (ii) that are being contested in good faith through appropriate proceedings; (d) in the case of leased real property, zoning, building, or other restrictions, variances, covenants, rights of way, encumbrances, easements and other irregularities in title, none of which, individually or in the aggregate, interfere in any material respect with the present use of or occupancy of the affected parcel by any of the Group Companies; (e) Liens securing the Indebtednessportion of any ofStraddle Period beginning after the Group Companies; (f) in the case of Intellectual Property, non-exclusive licenses granted to third parties in the ordinary course; (g) Liens incurred in connection with capital lease obligations of any of the Group Companies; and (h) all exceptions, restrictions, easements, imperfections of title (including gaps in the chain of title evident from the records of the relevant Governmental Entity maintaining such records), charges, rights-of-way and other Liens of record that do not materially interfere with the present use of the assets of the Group Companies, taken as a whole.Closing Date.
“Per Share AmountPPP Loan” shall meanmeans (i) any covered loan under paragraph (36) of Section 7(a) of the quotient, roundedSmall Business Act (15 U.S.C. 636(a)), as added by Section 1102 of the CARES Act, or (ii) any loan that is an extension or expansion of, or is similar to, the nearest one-tenth of a cent, obtained by dividing (a) the Base Value by (b) the Aggregate Company Share Amount.any covered loan described in clause (i).
“PersonPre-Closing Budget” shall mean any individual, corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any limited liability company or joint stock company), firm or other enterprise, association, organization, entity or Governmental Entity.means the budget set forth on Schedule C.
“Personal InformationPre-Closing Restructuring” shall mean,has the meaning set forth in additionthe Recitals, as further described on Schedule D.
“Pre-Closing Tax Period” means any Tax period ending on or before the Closing Date and that portion of any Straddle Period ending on and including the Closing Date.
“Pre-Closing Taxes” means (i) any Liability for any Tax of or owed by the Company Group in respect of any Pre-Closing Tax Period, (ii) any Liability for any Taxes of Seller, (iii) all Taxes imposed in respect of a Pre-Closing Tax Period the payment of which Taxes is deferred to a taxable period (or portion thereof) beginning after the Closing Date, (iv) all Taxes of any member of an affiliated group of corporations, within the meaning of Section 1504 of the Code (or any predecessor provision or comparable provision of state, local or foreign Law) of which any member of the Company Group (or any predecessor of any such member) is or was a member on or prior to the Closing Date, including pursuant to Treasury Regulations Section 1.1502-6 or any analogous or similar U.S. state or local, or non-U.S. Law, (v) Taxes of Seller arising from the Transactions, (vi) any Transfer Taxes for which Seller is liable pursuant to this Agreement or under applicable Law, and (vii) any Taxes of any Person imposed on any member of the Company Group as a transferee or successor, by Contract or pursuant to any definition for any similar term (e.g., “personally identifiable information” or “PII”) provided by Applicable Legal Requirement, all information that identifies, could be used to identify or is otherwise associated with an individual person or device, whether or not such information is associated with an identifiable individual. Personal Information mayLaw, which Taxes relate to any individual, including a current, prospective,an event or former customer, end usertransaction occurring before the Closing. Notwithstanding the foregoing, Pre-Closing Taxes shall not include Taxes otherwise included in the calculation of the amount of Company Net Working Capital, Closing Indebtedness or employeethe Merger Consideration, Taxes attributable to transactions occurring after the Closing on the Closing Date outside the Ordinary Course of any Person.Business, or Taxes attributable to breaches by the Acquirer of its agreements, representations, warrants or covenants under this Agreement.
“Privacy Laws” shall mean anymeans (i) each U.S. federal or state Law applicable to the Company Group with respect to protection or Processing or both of Personal Data, and all Applicable Legal Requirements (includingincludes, but is not limited to (A) the Health Insurance Portability and Accountability Act of any applicable foreign jurisdiction)1996 as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 as otherwise amended from time to time, and the rules and regulations promulgated thereunder, including the Privacy Standards (45 C.F.R. Parts 160 and 164), the Electronic Transactions Standards (45 C.F.R. Parts 160 and 162), and the Security Standards (45 C.F.R. Parts 160, 162 and 164) (“HIPAA”), and (B) law, regulations and/or rules relating to the receipt, collection, compilation, use, storage, transmission, transfer (including cross-border transfers), processing, privacy, sharing, safeguarding, security (both technicalProcessing of biometric data, direct marketing, e-mails, text messages, robocalls, telemarketing or other electronic commercial messages and physical), disposal, destruction, disclosure(ii) binding guidance issued by a Governmental Authority that pertains to one of the laws, rules or transfer (including cross-border) of Personal Information, including, but not limited to, HIPAA, and the California Consumer Privacy Act (CCPA), and any and all Applicable Legal Requirements relating to breach notificationregulations outlined in connection with Personal Information.clause (i).
“Related PartiesProceeding” shall mean,means any suit, litigation, arbitration, mediation, alternative dispute resolution procedure, claim, action, complaint, proceeding, hearing, or investigation (whether civil or criminal, administrative or judicial, and whether public or private), in each case to, from, by or before any Governmental Authority.
“Process” or “Processing” or “Processed” means, with respect to a Person,data, the use, collection, processing, storage, recording, organization, adaption, alteration, transfer, retrieval, consultation, disclosure, dissemination or combination of such Person’s former, current and future direct or indirect equityholders, controlling Persons, shareholders, optionholders, members, general or limited partners, Affiliates, Representatives, and each of their respective Affiliates, successors and assigns.data.
“Restricted CashPublic Official” shall mean restricted cash as determined in accordance with GAAP.
“RSU Exchange Ratio” shall mean the quotient, rounded to the nearest one ten-thousandth,means (a) any Representative of (i) the Per Share Amount dividedany Governmental Authority, (b) any Representative of any commercial enterprise that is wholly owned or controlled by (ii) the Parent Stock Price;a Governmental Authority, including any state-owned or controlled medical facility, and
“SAR Exchange Ratio” shall mean the quotient, rounded to the nearest one ten-thousandth, of (i) the Per Share Amount divided by (ii) the Parent Stock Price.
“SEC” shall mean the United States Securities and Exchange Commission. (c) any political party, party official or candidate for political office.
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“Public Software” means any Software that is distributed as freeware, shareware, open source Software (e.g., Linux) or similar licensing or distribution models. For the avoidance of doubt, “Public Software” includes Software licensed, distributed under or otherwise subject to any of the following licenses or distribution models (or licenses or distribution models similar thereto): (A) GNU’s General Public License (GPL) or Lesser/Library GPL (LGPL); (B) the GNU Affero GPL license; (C) the Artistic License (e.g., PERL); (D) the Mozilla Public License; (E) the Netscape Public License; (F) the Sun Community Source License (SCSL); (G) the Sun Industry Standards License (SISL); (H) the BSD License; (I) Red Hat Linux; (J) the Apache License; and (K) any other license or distribution model described by the Open Source Initiative as set forth on www.opensource.org, and any other free, open-source, or “copy left” license or terms that requires as a condition of use, modification or distribution that such software or other software combined or distributed with it be (i) disclosed or distributed in source code form; (ii) licensed for the purpose of making derivative works; (iii) redistributable at no charge; or (iv) licensed subject to a patent non-assert or royalty-free patent license.
“Registered Company IP” means all Registered IP included in the Company Owned IP. “Registered IP” means all Intellectual Property that is registered, issued, granted by any Governmental Authority (including the United States Patent and Trademark Office or United States Copyright Office), and all applications, registrations and grants for any of the foregoing.
“Regulatory Approval” means, with respect to a Company Product in a country, any and all approvals, licenses, registrations or authorizations of any Governmental Authority necessary to commercially distribute, sell or market such Company Product in such country, including, where applicable, pricing or reimbursement approval in such country and (ii) pre- and post-approval marketing authorizations (including any prerequisite manufacturing approval or authorization related thereto).
“Regulatory Authority” means any applicable Governmental Authority that regulates or otherwise exercises authority with respect to the Exploitation of any Company Product or administers Health Care Laws.
“Regulatory Documentation” means all (i) Regulatory Approvals and Regulatory Permits; correspondence and reports submitted to or received from Regulatory Authorities (including minutes and official contact reports relating to any communications with any Regulatory Authority) and all supporting documents with respect thereto, including all adverse event files and complaint files; and (iii) pre-clinical, clinical and other data contained or relied upon in any of the foregoing; in each case (clauses (i), (ii) and (iii)) relating to the Company Products.
“Regulatory Permit” means governmental licenses, franchises, permits, certificates, consents, approvals, registrations, concessions or other authorizations required to have been obtained from, or filings required to have been made with, Governmental Authorities pursuant to a Health Care Law in order to allow the conduct of a regulated activity.
“Related Party” means: (i) Seller; (ii) each Person who is, or who was at the time of the entry into this Agreement or the creation of the interest in question an officer or director of any member of the Company Group or Seller, or who, beneficially or of record, held shares or other equity interests in any member of the Company Group, or who served as a an officer or officer of a Person who, beneficially or of record, owned shares or other equity interests in any member of the Company Group; and (iii) each member of the immediate family of each of the Persons referred to in clause (i) or (ii) above. For purposes of this definition, the “immediate family” of an individual means (x) the individual’s spouse and (y) the individual’s parents, brothers, sisters and children.
“Repayment Obligations” means any repayment obligations of the Company Group arising from or related to services rendered prior to the Closing which are ultimately not paid, or where reimbursement is subsequently refunded to or recouped, in each case in whole or in part, by the applicable Payor Party due to actual or alleged errors or omissions, including improper coding, lack of coverage, lack of medical necessity or non-compliance with other applicable Payor Party requirements.
“Representative” means, with respect to any Person, any officer, director, principal, attorney, agent, employee or other representative of such Person.
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“Required Financial Statements” means such financial statements of the Company Group as are required by Regulation S-X to be included in the Proxy Statement or Closing 8-K.
“SEC” means the U.S. Securities and Exchange Commission. “Securities Act” means the Securities Act of 1933.
“Seller Debt” means the financing provided by Seller to the Company Group during the Pre-Closing Period in order to fund the Company Group’s operations in accordance with the Pre-Closing Budget and evidenced by an inter-company note bearing interest at the statutory applicable federal annual mid-term rate.
“Share Value” means $4.86.
“Software” means all (i) computer programs, applications, systems and code, including software implementations of algorithms, models and methodologies, and source code and object code, (ii) Internet and intranet websites, databases and compilations, including data and collections of data, whether machine-readable or otherwise, (iii) software development and design tools, library functions and compilers, (iv) technology supporting websites, and the contents and audiovisual displays of websites and (v) documentation, other works of authorship and media, including user manuals and training materials, relating to or embodying any of the foregoing or on which any of the foregoing is recorded.
“SPAC Merger Agreement” means that certain Agreement and Plan of Merger, dated February 9, 2021, entered into by and among CM Life Sciences, Inc., S-IV Sub, Inc. and Legacy Sema4, as amended.
“Specified Designees” means (i) one (1) individual designated by the Company and (ii) one (1) one individual designated by Seller who is independent from Seller and the Company Group, in each case as mutually agreed with Acquirer.
“Stock Consideration” means 80,000,000 shares of Acquirer Stock, as adjusted for any stock split, stock dividend, recapitalization, merger, consolidation or similar event occurring after the Agreement Date.
“Straddle Period” means any Tax period beginning on or before the Closing Date and ending after the Closing Date.
“Stueland Employment Agreement” means that certain Employment Agreement, dated as of June 7, 2021, by and among Katherine Stueland, Seller and the Company.
“Stueland Employment Agreement Obligations” means the sum of (i) the aggregate amount of the Sign On Bonus (within the meaning of the Stueland Employment Agreement) that has not been paid to Katherine Stueland as of the Closing Date, plus (ii) the aggregate fair market value of the Initial Option (within the meaning of the Stueland Employment Agreement), regardless of whether or not the Initial Option is outstanding as of the Closing Date or will remain outstanding as of immediately following the Closing but subject to clause (C) below, and the Additional Option (within the meaning of the Stueland Employment Agreement), with such aggregate fair market value determined based on the closing price of Seller’s common stock as of the trading day immediately preceding the Closing Date minus the applicable exercise price per share (for the avoidance of doubt, if such closing price equals or exceeds the exercise price per share of the Initial Option or the Additional Option, the fair market value of the Initial Option or Additional Option, as applicable, for purposes of this clause (ii) shall be zero); provided that: (A) if the Closing occurs prior to June 21, 2022 or Katherine Stueland waives her right to receive the Additional Option prior to or in connection with the Closing, then the Additional Option shall be deemed to have a fair market value of $0, (B) if the Closing occurs on or following June 21, 2022, the Additional Option has not been granted as of the trading day immediately preceding the Closing Date, and Katherine Stueland does not waive her right to receive the Additional Option prior to or in connection with the Closing, then the per share exercise price of the Additional Option shall be deemed to equal the closing price of Seller’s common stock as of June 21, 2022 (or if June 21, 2022 is not a trading day, the closing price of Seller’s common stock as of the immediately preceding trading day), and (C) if Katherine Stueland’s employment terminates for any reason prior to the Closing, then (i) any portion of the Initial Option that is forfeited in connection with such termination of employment and (ii) any portion
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of the Initial Option that is not forfeited in connection with such termination of employment and is exercised prior to the Closing, shall in each case be deemed to have a fair market value of $0.
“Subscription Agreements” means the subscription agreements pursuant to which the PIPE Investment will be consummated.
“Subsidiary” means, when used with respect to any Person, including the Company, any entity, corporation or other organization, whether incorporated or unincorporated, for which at least a majority of the securities or other interests having ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such entity, corporation or other organization is directly or indirectly owned or controlled by such Person or by any one or more of its Subsidiaries.
“Tax” means any and all federal, state, local or non-U.S. taxes and duties and similar governmental charges, assessments, levies, imposts or withholdings, including net income, gross income, capital gains, alternative minimum, base erosion anti-abuse, diverted profits, digital services, value added, goods and services, gross margin, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, unemployment, social security, disability, excise, severance, environmental, stamp, occupation, premium, property, unclaimed property, escheat, windfall profits, customs, duties or other actual or estimated taxes, together with any interest, fines, penalties, surcharges and charges in respect of Taxes (including as a result of any failure to timely file a Tax Return) and any additions to tax or additional amounts with respect thereto.
“Tax Authority” means any Governmental Authority responsible for the determination, assessment, collection or administration of Taxes.
“Tax Return” means any return, declaration, report, statement, claim for refund, information statement or other document filed or required to be filed with a Tax Authority in connection with the determination, assessment, collection or administration of Taxes, as well as any schedule, attachment thereto or amendment thereof.
“Third Party” means any Person other than the Company Parties, the Acquirer Parties, Seller and their respective Affiliates (including their respective Subsidiaries).
“Total Merger Consideration” means the Merger Consideration plus the Milestone Payments, if and to the extent such amounts become payable pursuant to Section 2.7.
“Trade Secrets” means unpublished inventions (whether patentable or not and whether or not reduced to practice), industrial designs, discoveries, improvements, ideas, designs, models, chemical and biological materials, compounds, formulae, recipes, patterns, compilations, results, data (including pre- clinical and clinical data), databases, data collections and compilations, analyses, diagrams, drawings, blueprints, mask works, devices, methods, compositions, algorithms, techniques, patterns, processes, know- how and other forms of technology (whether or not embodied in any tangible form and including all tangible embodiments of the foregoing, such as laboratory notebooks, studies and summaries), proprietary rights in confidential information of any kind, instructions, configurations, prototypes, samples, formulations, specifications, analytic models, customer lists, source code, development tools,, in each case, to the extent constituting a trade secret as defined under the Uniform Trade Secrets Act or other applicable Laws.
“Trademarks” means trademarks, service marks, trade names, service names, brand names, trade dress, logos, as well as Internet domain names, corporate and other business names, other like source or business identifiers and other proprietary rights to any words, names, slogans, symbols, logos, devices or combinations thereof to the extent that they are used and function to identify, distinguish and indicate the source or origin of goods or services, together with the goodwill associated with any of the foregoing; and all registrations and renewals, applications for registration, equivalents or counterparts thereof; and all statutory, federal, common law, and rights provided by international treaties or conventions, in any of the foregoing.
“Transaction Certificates” means all certificates contemplated by this Agreement to be delivered at Closing by the Parties pursuant to this Agreement.
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“Transaction Documents” means this Agreement and the Ancillary Agreements. “Transaction Expenses” means (a) any out-of-pocket fees, costs, payments and expenses of the Company Group, including legal and accounting fees, valuation services, investment banking fees, and related disbursements, in each case in connection with (i) the participation in or response to the investigation, review and inquiry conducted by Acquirer and its Representatives with respect to the business of the Company Group (and the furnishing of information to Acquirer and its Representatives in connection with such investigation and review), (ii) the negotiation, preparation, drafting, review, execution, delivery or performance of this Agreement or any Ancillary Agreement or any other document delivered or to be delivered in connection with the Transactions, (iii) the obtaining of any consent, waiver or approval required to be obtained in connection with any of the Transactions; (b) 50% of the out-of-pocket fees, costs, payments and expenses incurred in connection with the preparation and submission of any regulatory filing or notice required to be made or given in connection with any of the Transactions, including pursuant to HSR; (c) any sale bonuses, change in control bonuses, payments in respect of equity awards, retention payments or similar amounts that become payable by any member of the Company Group by reason of, or in connection with, the Closing, other than any such bonus or payment (i) payable pursuant to a Contract entered into by or at the request of the Acquirer or (ii) to the extent that the amount thereof is increased pursuant to the amendment to a Contract undertaken at the request of Acquirer; provided that an amount equal to the Stueland Employment Agreement Obligations shall be treated as a “Transaction Expense,” (d) any severance or similar termination payments payable by any member of the Company Group to any current or former employee, or any current or former director, officer or contractor of any member of the Company Group, by reason of, or in connection with, the Closing, other than any such payment (i) payable pursuant to a Contract entered into at the request of the Acquirer, (ii) to the extent that the amount thereof is increased pursuant to the amendment to a Contract undertaken at the request of Acquirer or (iii) triggered by any action of Acquirer or the Company Group after the Closing; and (e) the employer portion of any payroll Taxes of any member of the Company Group or Acquirer arising from the payment of any amounts described in clauses (c) and (d), in each case ((a) through (e)), to the extent unpaid.
“Transaction Tax Deductions” means the aggregate amount of any Tax deductions relating to: (A) the payment prior to the Effective Time of any other costs or expenses incurred by any member of the Company Group in connection with the transactions contemplated hereby (including, for the avoidance of doubt, any amounts that would be Transaction Expenses but for the fact that they are not unpaid as of the Effective Time); and (B) any other items deductible for Tax purposes by any member of the Company Group and/or any of Subsidiaries of the Company Group attributable to the transactions contemplated hereby that are economically borne by the Seller; provided, that, with respect to success- based fees, seventy percent (70%) of success fees shall be treated as deductible in accordance with Revenue Procedure 2011-29, to the extent applicable.
“Transactions” means the transactions contemplated by the Transaction Documents, including the Pre-Closing Restructuring and the Mergers.
“Transfer” means to sell, convey, transfer, assign, novate, deliver, split or add or remove a party thereto.
“Transition Services Agreement” means the Transition Services Agreement to be entered into at the Closing, as may be mutually agreed upon in writing between the Parties pursuant to Section 5.14(a).
Index of Defined Terms.
Accounting Standards3Acquirer Indemnified Parties80
Accounts Receivable38Acquirer Party3
Accrued 2022 401(k) Match10Acquirer Stock3
Acquirer1Acquirer Stockholder Approval3
Acquirer 401(k) Plan75Acquirer Stockholders’ Meeting66
Acquirer Board3Acquisition Proposal3
Acquirer Disclosure Schedules3Affiliate3
Acquirer Fundamental Representations3Agreement1
Agreement Date1Company Privacy Commitments6
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Ancillary Agreements4Company Privacy Policies6
Antitrust Condition77Company Product6
Antitrust Laws4Company Software6
Applicable Withholding Law29Company Websites7
Assumed Seller Debt4Company-Licensed Data6
Author51Company-Owned Data6
Available Insurance Policies73Confidential Information51
Bayh-Dole Act4Confidentiality Agreement7
Benefit Plan4Consent7
BioReference1Continuing Claim84
Business4Continuing Employees7
Business Day4Contract7
Bylaws22Controlled Group Liability7
CARES Act4Copyrights7
Cash Consideration4COVID-197
Certificate of Incorporation22COVID-19 Response7
Claim Notice81D&O Indemnified Person73
CLIA43Damages80
Closing22De Minimis Claims83
Closing 8-K65Deductible116
Closing Date22Default7
Closing Indebtedness4Defense Notice81
Closing Net Working Capital Shortfall5Deliver7
Closing Net Working Capital Surplus5DGCL7
Closing Net Working Capital Target5Dispute7
Closing Statement25Dispute Notice30
CMS43Disputed Item25
COBRA47DOJ68
Code5Domain Names8
Commercial Software5Effect11
Company1Effective Time4
Company Balance Sheet38EMA8
Company Balance Sheet Date38Encumbrance8
Company Benefit Plan46Enforceability Exceptions32
Company Contracts36Environmental Law8
Company Data5ERISA8
Company Data Agreement5ERISA Affiliate8
Company Databases5Escrow Account8
Company Disclosure Schedules5Escrow Agent25
Company Employee5Escrow Agreement25
Company Fundamental Representations5Escrow Amount8
Company Group5Escrow Expiration Date8
Company Group Revenue27Estimated Cash Consideration8
Company IP5Estimated Closing Statement8
Company IP Contracts5EUA9
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Company IT Assets5European Union8
Company Licensed IP6Excess Amount27
Company Net Working Capital6Exchange Act4
Company Owned IP6Excluded Shares23
Company Parties6FCPA9
FDA9Merger Consideration5
FDCA9Merger Sub5
Final Cash Consideration27Merger Sub II5
Financial Statements37Merger Subs5
First Certificate of Merger21Mergers5
First Merger1Milestone Event28
First Milestone Period28Milestone Payment2
Fraud9Milestone Payment Date28
FTC68Milestone Unresolved Items30
Fundamental Claims84Most Recent Balance Sheet11
Fundamental Representations9Nasdaq11
FY2022 Company Group Revenue28New Litigation Claim70
FY2023 Company Group Revenue28Notice of Objection25
General Claims83Objection Period25
Governing Documents9Order11
Government Contract36Ordinary Course of Business12
Governmental Authority9Parent12
Governmental Program9Parent Group12
Hazardous Substances9Parties1
Health Care Laws9Party1
HHS Grants44Patents12
Holdco21Payor Parties14
Holdco2 Board2Permits12
Holdco2 Board Approval32Permitted Encumbrances12
Holdco2 Common Stock10Person12
Holdco2 Stockholder Approval33Personal Data12
HSR Act10PHSA12
HSR Filings68PIPE Investment2
Indebtedness10PIPE Investment Amount12
Indemnified Parties81PIPE Investors2
Indemnifying Party81Post-Closing Tax Period13
Indemnity Agreement73PPP Loan13
Independent Expert26Pre-Closing Budget13
In-Scope Employees44Pre-Closing Period61
Intellectual Property10Pre-Closing Restructuring1
Interim Financial Statements70Pre-Closing Tax Period13
IP Dispute49Pre-Closing Taxes13
IRS10Privacy Laws13
IT Assets11Proceeding13
Key Employee11Process13
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Knowledge11Processed13
Law11Processing13
Leased Property33Proxy Statement65
Leases34Public Official13
Liability11Public Software14
Lock-Up Agreement2Registered Company IP14
Lock-Up Holders2Registered IP14
Material Adverse Effect11Regulatory Approval14
Measurement Time11Regulatory Authority14
Medicare Advance Payment Program44Regulatory Documentation14
Medicare Advance Payments44Regulatory Permit14
Related Party14Stueland Employment Agreement15
Released Party24Subscription Agreements2
Releasing Party24Subsidiary16
Reorganization2Subsidiary Ownership Interests32
Representative14Surviving Corporation21
Required Closing Contracts69Surviving Entity22
Required Financial Statements15Tax16
Resale Registration Documents65Tax Authority16
Resolution Period26Tax Proceeding71
Sales Taxes39Tax Return16
SEC6Termination Date79
Second Merger1Third Party16
Second Merger Effective Time22Third Party Claim81
Second Milestone Period28Top Customers55
Securities Act6Top Payors54
Seller1Top Suppliers55
Seller 401(k) Plan75Total Merger Consideration16
Seller Benefit Plan46Trade Secrets16
Seller Benefit Plans46Trademarks16
Seller Board2Transaction Certificates16
Seller Board Approval32Transaction Documents17
Seller Contracts33Transaction Expenses17
Seller Debt15Transaction Tax Deductions17
Seller Indemnified Parties81Transactions2
Seller Revenue Contracts33Transfer2
Share Value15Transfer Taxes71
Shortfall Amount27Transition Services Agreement17
Software15Unresolved Escrow Amount84
Specified Designees15Unresolved Items26
Stock Consideration2Valid Pre-Closing Claims73
Straddle Period15Written Consent2

1.2Interpretation. Except where expressly stated otherwise in this Agreement, references: (a) to the Recitals, Articles, Sections, Exhibits or Schedules are to a Recital, Article or Section of, or Exhibit or Schedule to, this
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Agreement; (b) to any agreement (including this Agreement) or Contract are to the agreement or Contract as amended, modified, supplemented or replaced from time to time in accordance with the terms thereof (provided, that this clause (b) shall not apply with respect to the representations and warranties of the Company set forth in Section 3.8(a)); (c) to any statute, rule or regulation shall be deemed to refer to such statute, rule or regulation as amended from time to time and to any rules or regulations promulgated thereunder; provided that for purposes of any representations and warranties contained in this Agreement that are made as of a specific date or dates, references to any statute, rule or regulation shall be deemed to refer to such statute, rule or regulation, as amended (and, in the case of statutes, any rules and regulations promulgated under such statutes), in each case, as of such date; (d) to any Person include any successor to that Person or permitted assigns of that Person; and (e) to this Agreement are to this Agreement and the Exhibits and Schedules to it, taken as a whole. The table of contents and headings contained herein are for reference purposes only and do not limit or otherwise affect any of the provisions of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” Whenever the words “herein” or “hereunder” or “hereof” and similar words are used in this Agreement, they shall be deemed to refer to this Agreement as a whole and not to any specific Section, unless otherwise indicated. The word “or” is used in the inclusive sense (and/or). The use of “extent” in the phrase “to the extent” means the degree to which a subject or other thing extends, and such phrase does not mean simply “if.” The terms herein defined in the singular shall have a comparable meaning when used in the plural, and vice versa. References to “day” or “days” refer to calendar days. The masculine, feminine and neuter genders used herein shall include each other gender. The terms “dollars” and “$” means dollars of the United States Securitiesof America. Any reference to “beneficial ownership”, including “beneficial owner” and “beneficially owns,” shall be determined in accordance with Section 13(d) of the Exchange Act of 1933, as amended, and the rules and regulations promulgated thereunder.
ARTICLE 2
THE MERGERS
“2.1Specified Business Conduct LawsThe Mergers.
(a)”At the Effective Time, Merger Sub I shall mean: (a)merge with and into Holdco2. Following the U.S. Foreign Corrupt Practices ActEffective Time, the separate existence of 1977,Merger Sub I shall cease and Holdco2 shall continue as the UK Bribery Act,surviving corporation of the First Merger (the “Surviving Corporation”).
(b)At the Closing, the Parties shall cause the Certificate of Merger in the form of Exhibit C-1 (the “First Certificate of Merger”) to be properly executed and filed with the Secretary of State of the State of Delaware and shall make all other Applicable Legal Requirements relatingfilings or recordings required under the DGCL in order to bribery or corruption; (b) all Legal Requirements imposing trade sanctionsgive effect to the First Merger. The First Merger shall become effective on any Person, including, all Legal Requirements administered by OFAC, all sanctions laws or embargos imposed or administeredthe date and time at which the First Certificate of Merger is accepted for filing by the U.S. DepartmentSecretary of State of the United Nations Security Council, Her Majesty’s TreasuryState of Delaware on the Closing Date or at such later date or time as is agreed by Acquirer and Holdco2 and specified in the European UnionFirst Certificate of Merger (the time the First Merger becomes effective being referred to herein as the “Effective Time”).
(c)The First Merger shall have the effects set forth in Section 251 of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all of the assets, properties, rights, privileges, powers and franchises Holdco2 and Merger Sub I shall vest in the Surviving Corporation and all anti-boycottLiabilities, obligations and duties of each of Holdco2 and Merger Sub I shall become the Liabilities, obligations and duties of the Surviving Corporation, in each case, in accordance with the DGCL.
(d)At the Effective Time:
(i)the Governing Documents of Merger Sub I shall be the Governing Documents of the Surviving Corporation, in each case, until thereafter changed or anti-embargo laws; (c) all Legal Requirements relatingamended as provided therein or by applicable Law; and
(ii)the directors and officers of Merger Sub I immediately prior to the import, export, re-export, transferEffective Time shall be the initial directors and officers of information, data, goods,the Surviving Corporation, each to hold office in accordance with the Governing Documents of the Surviving Corporation until such director’s or officer’s successor is duly elected or appointed and technology, includingqualified, or until the Export Administration Regulations (“earlier of their death, resignation or removal.
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(e)EARImmediately following the First Merger, the Surviving Corporation shall be merged with and into Merger Sub II in accordance with the provisions of the DGCL and the Delaware Limited Liability Company Act. Merger Sub II shall be the surviving company resulting from the Second Merger (the “Surviving Entity”) and shall continue its existence as a limited liability company under the laws of Delaware and succeed to and assume all the rights and obligations of the Surviving Corporation in accordance with the DGCL and the Delaware Limited Liability Company Act. Upon the consummation of the Second Merger, the separate corporate existence of the Surviving Corporation shall terminate. The Second Merger shall (i) be consummated pursuant to the terms of this Agreement and (ii) become effective as of the date and time at which the Certificate of Merger attached hereto as Exhibit C-2 (the “Second Certificate of Merger”) is accepted for filing by the Secretary of State of the State of Delaware on the Closing Date or at such later date or time specified in the Second Certificate of Merger (the time the Second Merger becomes effective being referred to herein as the “Second Merger Effective Time”).
(f)At the Second Merger Effective Time, the Governing Documents of Merger Sub II shall be the Governing Documents of the Surviving Entity, in each case, until thereafter changed or amended as provided therein or by applicable Law.
2.2Closing. The consummation of the Mergers (the “Closing”) administeredshall take place remotely by the U.S. Departmentelectronic exchange of Commercedocuments and signatures at a date and time to be agreed by Acquirer and the International TrafficCompany, which date shall, unless otherwise agreed by Acquirer and the Company, be no later than the third Business Day following the date on which all of the conditions set forth in Arms Regulations administeredArticle 6 have been satisfied or waived (other than those conditions that, by their terms, are intended to be satisfied at the U.S. DepartmentClosing, but subject to the satisfaction or waiver of State; and (d)those conditions. The date on which the Money Laundering Control Act,Closing occurs is sometimes referred to herein as the Currency and Foreign Transactions Reporting Act, The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, and other Applicable Legal Requirements relating to money laundering.“Closing Date.”
“2.3Sponsor” shall mean CMLS Holdings LLC, a Delaware limited liability company.Closing Deliveries.
“(a)Sponsor Support AgreementCertain Deliverables. Not less than five days prior to the Closing Date, the Company shall deliver to Acquirer the Estimated Closing Statement, including supporting calculations and documentation for the estimates set forth therein.
(b)”Company Group Closing Deliveries. At the Closing, the Company Group and Seller, as applicable, shall mean that certain Support Agreement,deliver or cause to be delivered to Acquirer each of the following:
(i)a certificate, dated as of the date hereof,Closing Date and executed on behalf of Holdco2 by its Chief Executive Officer, to the effect that each of the conditions set forth in Section 6.3(a) and Section 6.3(d) have been satisfied;
(ii)a certificate, dated as of the Closing Date and executed on behalf of Holdco2 by its Secretary, certifying (A) the certificate of incorporation of Holdco2 (the “Certificate of Incorporation”) in effect as of the Closing, (B) the bylaws of Holdco2 (the “Bylaws”) in effect as of the Closing, and (C) the resolutions of the Holdco2 Board reflecting the Holdco2 Board Approval;
(iii)payoff letters or similar instruments in form and substance reasonably satisfactory to Acquirer with respect to all Closing Indebtedness for borrowed money (including, for the avoidance of doubt, under that certain Amended and Restated Credit Agreement, dated August 30, 2021, by and among BioReference Laboratories, Inc., certain of its subsidiaries, including the Sponsor, ParentCompany, and JPMorgan Chase Bank, N.A., only to the extent the Company Group and its assets have not been fully and irrevocably released from all obligations thereunder and any corresponding security interest arising thereunder has not been terminated prior to the Closing), which letters provide for the release of all Encumbrances relating to such Closing Indebtedness following satisfaction of the terms contained in such payoff letters (including the payment in full and discharge of all principal and accrued but unpaid interest and any premiums or other fees payable in connection with such Closing Indebtedness);
(iv)invoices from each Person that is entitled to any Transaction Expenses at Closing reflecting the total amount of Transaction Expenses that has been incurred and remains payable to such Person as of the Closing;
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(v)the Written Consent and Shareholder Agreement, in each case executed by Seller;
(vi)the Shareholder Agreement executed by each of the Lock-Up Holders;
(vii)the Escrow Agreement, executed by Seller;
(viii)unless Acquirer provides written notice to Holdco2 no later than three Business Days prior to the Closing Date to the contrary, a resignation letter reasonably satisfactory to Acquirer executed by each director and officer of each member of the Company Group in office immediately prior to the Closing, in each case, effective as of, and contingent upon, the Effective Time;
(ix)a certificate from the Secretary of State of the States of Delaware and each other state or other jurisdiction in which any member of the Company Group is organized, dated within three Business Days prior to the Closing Date, certifying that such member of the Company Group is in good standing and that all applicable franchise and similar Taxes and fees of the Company and each applicable Subsidiary of the Company through and including the Closing Date have been paid;
(x)an IRS Form W-9 (Request for Taxpayer Number and Certification), duly executed by Seller (provided, that, if Seller to provide such form, Acquirer’s only recourse shall be to withhold applicable Taxes with respect to Seller’s proceeds in accordance with Section 2.8;
(xi)the First Certificate of Merger, executed by Holdco2;
(xii)evidence reasonably satisfactory to Acquirer of receipt of all consents, approvals, novations, amendments and terminations set forth on Schedule 2.3(b)(xiv); and
(xiii)a USB drive (or similar device) containing a copy of the contents of the Data Room.
(c)Acquirer Closing Deliveries. At the Closing, Acquirer shall deliver or cause to be delivered to Seller each of the following:
(i)a certificate, dated as of the Closing Date and executed on behalf of Acquirer by its Chief Executive Officer, to the effect that each of the conditions set forth in Section 6.2(a) and Section 6.2(c) have been satisfied;
(ii)a certificate, dated as of the Closing Date and executed on behalf of Acquirer by its Secretary, certifying (A) the certificate of incorporation of Acquirer in effect as of the Closing, (B) the bylaws of Acquirer in effect as of the Closing, and (C) the resolutions of the Acquirer Board approving the Transactions;
(iii)each Ancillary Agreement to which any Acquirer Party is a party that has not previously been delivered to the Holdco2 and Seller, executed and delivered by each Acquirer Party that is a party thereto; and
(iv)the Merger Consideration, as set forth in and in accordance with Section
2.5(a)(i).
2.4Effect on Holdco2 Common Stock.
(a)Treatment of Holdco2 Common Stock. Upon the terms and subject to the conditions set forth herein, including Section 2.5(b), Section 2.6, Section 2.7, Section 2.8 and Article 8, at the Effective Time, by virtue of the First Merger and without any action on the part of any Party or any other Person, the shares of Holdco2 Common Stock issued and outstanding immediately prior to the Effective Time (other than Excluded Shares) shall be automatically converted into the right of Seller to receive: (A) the Merger Consideration and (B) if and only to the extent payable pursuant to Section 2.7, the Milestone Payments.
(b)Treasury Shares. At the Effective Time, all shares of Holdco2 Common Stock that are owned by the Company as treasury stock immediately prior to the Effective Time (“Excluded Shares”) shall be cancelled and
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extinguished without any conversion thereof or payment of any cash or other property or consideration therefor and shall cease to exist.
(c)Treatment of Merger Sub I Capital Stock. At the Effective Time, by virtue of the First Merger and without any action on the part of Acquirer, Merger Sub I or any other Person, each share of capital stock of Merger Sub I that is issued and outstanding immediately prior to the Effective Time shall be converted into and become one share of common stock of the Surviving Corporation (and the shares of the Surviving Corporation into which the shares of Merger Sub I capital stock are so converted shall be the only shares of the Surviving Corporation’s capital stock that are issued and outstanding immediately after the Effective Time). From and after the Effective Time, each certificate evidencing ownership of a number of shares of Merger Sub I capital stock will evidence ownership of such number of shares of common stock of the Surviving Corporation.
(d)Treatment of Merger Sub II Membership Interests. At the Second Merger Effective Time, by virtue of the Second Merger and without any action on the part of Acquirer, Merger Sub II or any other Person, each share of common stock of the Surviving Corporation that is issued and outstanding immediately prior to the Second Merger Effective Time shall be cancelled and extinguished without any conversion thereof. At the Second Merger Effective Time, each membership interest of Merger Sub II that is issued and outstanding immediately prior to the Second Merger Effective Time will constitute a membership interest of the Surviving Entity (and the membership interests of the Surviving Entity shall be the only membership interests of the Surviving Entity issued and outstanding immediately after the Second Merger Effective Time).
(e)Adjustments. In the event of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into capital stock), reorganization, reclassification, combination, recapitalization or other like change with respect to the Holdco2 Common Stock occurring after the Agreement Date and prior to the Effective Time, all references herein to specified numbers of shares of any class or series affected thereby, and all calculations provided for that are based upon numbers of shares of any class or series (or trading prices therefor) affected thereby, shall be equitably adjusted to the extent necessary to provide the parties the same economic effect as contemplated by this Agreement prior to such stock split, reverse stock split, stock dividend, reorganization, reclassification, combination, recapitalization or other like change.
(f)Fractional Shares. No fraction of a share of Acquirer Stock will be issued in connection with the Transactions and in lieu thereof Seller will receive from Acquirer, an amount of cash equal to the product (rounded upwards to the nearest whole cent) of such fraction of a share Seller would otherwise receive and the Share Value.
(g)No Interest. Notwithstanding anything to the contrary contained herein, no interest shall accumulate on any cash payable in connection with the consummation of the Transactions.
2.5Payment Procedures.
(a)Payment; Release of Claims.
(i)On the Closing Date, Acquirer shall pay and issue, as applicable, the Merger Consideration to Seller, in accordance with the wire and delivery instructions delivered in writing to Acquirer by Seller no less than three (3) Business Days prior to the Closing, less the Escrow Amount. Notwithstanding anything herein to the contrary, (A) all cash payments made under this Agreement in respect of the Total Merger Consideration shall be made in U.S. dollars and (B) any shares of Acquirer Stock issued by Acquirer in respect of the Total Merger Consideration shall be issued in the name of Seller.
(ii)Effective upon and only upon the consummation of the Closing, notwithstanding anything contained herein to the contrary, in consideration of the execution, delivery and performance by Acquirer, Merger Sub I and Merger Sub II of this Agreement, as of the Closing, Seller, on behalf of itself and its Affiliates (each, a “Releasing Party”) hereby RELEASES, WAIVES, ACQUITS AND FOREVER DISCHARGES the Company Parties (each, a “Released Party”), from any and all Damages, liabilities, costs, expenses, claims, damages, actions, causes of action, or suits in law or equity, of whatever kind or nature that any Releasing Party ever had or may now have against any Released Party relating to the Company or its business and that have accrued or arisen prior to the Closing, including those based on any fact or circumstance arising from Seller’s past or current
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ownership or alleged ownership, as applicable, of any Holdco2 Common Stock (including any claims relating to actual or alleged breaches of fiduciary or other duties by the Company’s directors, officers or stockholders), whether based on Contract or any applicable Law (including tort, statute, local ordinance, regulation or any comparable law) in any jurisdiction, including under California Civil Code Section 1542, which provides that “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.”; provided that nothing in the foregoing release shall or be deemed to release any rights or obligations of any Released Party or Releasing Party (i) for indemnification or contribution, in any Releasing Party’s capacity as an officer or director of the Company, under the DGCL, Section 5.12(b) any indemnification agreements to which the Releasing Party and the Company are parties that have been Delivered to Acquirer prior to the Agreement Date or the Company’s Governing Documents; (ii) for amounts owed pursuant to, or other rights and obligations set forth in, this Agreement and any Ancillary Agreement; or (iii) any claim based on fraud or any other matter that cannot be released as amendeda matter of law.
(b)Escrow Account. Notwithstanding anything to the contrary in the other provisions of this Article 2, at Closing, Acquirer shall withhold the Escrow Amount from the Merger Consideration payable to Seller pursuant to Section 2.4(a) and Section 2.5. On the Closing Date, Acquirer shall deposit the Escrow Amount with PNC Bank, National Association, a national banking association (or, if PNC Bank is unable or modified from timeunwilling to time.act, another comparable escrow agent (the “Escrow Agent”), to be held in the Escrow Account, which shall be governed by this Agreement and the escrow agreement in customary form to be mutually agreed by the Parties acting reasonably prior to the Closing (the “Escrow Agreement”). Neither the Escrow Account (including any portion thereof) nor any beneficial interest therein may be pledged, subjected to any Encumbrance, sold, assigned or transferred by Seller or be taken or reached by any legal or equitable process in satisfaction of any debt or other Liability of Seller, in each case prior to the distribution of the Escrow Account to Seller in accordance with the applicable terms of this Agreement, except that Seller shall be entitled to assign Seller’s rights to amounts held in the Escrow Account by operation of law.
“2.6SubsidiaryPost-Closing Adjustment.
(a)”Within 90 days after the Closing Date, Acquirer shall mean,prepare and deliver, or cause to be prepared and delivered, to Seller a statement (the “Closing Statement”), setting forth its determination of the amount of Company Net Working Capital, prepared in accordance with the Company Net Working Capital Schedule (and any corresponding Closing Net Working Capital Shortfall or Closing Net Working Capital Surplus), Closing Indebtedness and Transaction Expenses that remained unpaid as of immediately prior to the Closing, and, based on the foregoing, its determination of the Cash Consideration, and the adjustment (if any) necessary to reconcile the amounts set forth in the Estimated Closing Statement to the Closing Statement in accordance with the terms and conditions of this Agreement. The Closing Statement shall be prepared in accordance with (i) the Accounting Standards and (ii) shall be based exclusively on the facts and circumstances as they shall have existed at the Measurement Time and shall exclude the effects of any event, act, information, decision, change in circumstances or similar development arising or occurring on (except with respect to Transaction Expenses) or after the Closing Date. The post-Closing purchase price adjustment as set forth in this Section 2.6 is not intended to permit the introduction of different accounting methods, policies, practices, procedures, conventions, categorizations, definitions, principles, judgments, assumptions, techniques or estimation methods with respect to financial statements, their classification or presentation or otherwise (including with respect to the nature of accounts, level of reserves or level of accruals) from the Accounting Standards.
(b)Unless Seller notifies Acquirer in writing (a “Notice of Objection”) within 45 days after Acquirer’s delivery of the Closing Statement (such 45-day period, the “Objection Period”) that Seller disagrees with the Closing Statement, specifying the nature and amount of any Person,dispute as to Company Net Working Capital (and any corresponding Closing Net Working Capital Shortfall or Closing Net Working Capital Surplus), Closing Indebtedness and Transaction Expenses that remained unpaid as of immediately prior to the Closing, in each case as set forth in the Closing Statement (each, a “Disputed Item”), the Closing Statement and the determinations set forth therein shall be final, binding and conclusive on the Parties. Following the delivery of the Closing Statement and for purposes of Seller’s review of the Closing Statement and preparation of any Notice of Objection, Acquirer shall
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afford Seller and its Representatives with reasonable access, during normal business hours and upon reasonable prior notice, to the personnel, properties, books and records of Acquirer and the Surviving Entity and to any other information reasonably requested for purposes of preparing and reviewing the calculations contemplated by this Section 2.6. Acquirer shall authorize its and the Surviving Entity’s outside accountants to disclose to Seller and its Representatives work papers generated by such accountants in connection with preparing and reviewing the calculations specified in this Section 2.6; provided, that such accountants shall not be obligated to make any work papers available except in accordance with such accountants’ disclosure procedures. Any Notice of Objection shall specify the basis for the objections set forth therein. Seller shall be deemed to have agreed with those items and amounts contained in the Closing Statement not disputed by Seller in a Notice of Objection.
(c)If Seller provides the Notice of Objection to Acquirer within the Objection Period, Seller and Acquirer shall, during the 30-day period following Acquirer’s receipt of the Notice of Objection (such 30-day period, the “Resolution Period”), attempt in good faith to resolve each Disputed Item. During the Resolution Period, Seller shall afford Acquirer and its Representatives with reasonable access, during normal business hours and upon reasonable prior notice, to the personnel, properties, books and records of Seller and to any other information reasonably requested for purposes of preparing and reviewing the calculations contemplated by this Section 2.6. Seller shall authorize its outside accountants to disclose to Acquirer and its Representatives work papers generated by such accountants in connection with preparing and reviewing the calculations specified in this Section 2.6; provided, that such accountants shall not be obligated to make any work papers available except in accordance with such accountants’ disclosure procedures. If Seller and Acquirer are unable to resolve all of the Disputed Items within the Resolution Period (the “Unresolved Items”), the Unresolved Items shall be submitted to a nationally recognized independent valuation, accounting or specialty firm to be mutually agreed upon by Seller and Acquirer, which accounting firm shall not have worked with Seller, the Company or Acquirer or any of their respective Affiliates in the preceding 12 months (such agreed firm being the “Independent Expert”). The Independent Expert shall be engaged pursuant to an engagement letter among Seller, Acquirer and the Independent Expert on terms and conditions consistent with this Section 2.6(c). The Independent Expert shall be instructed, pursuant to such engagement letter, to act as an expert and not as an arbitrator and to resolve only the Unresolved Items and not to otherwise investigate any matter independently. Seller and Acquirer each agree to furnish to the Independent Expert reasonable access to such individuals and such information, books and records as may be reasonably required by the Independent Expert to make its final determination (and any such information, books and records shall be provided to the other such Party prior to its submission or presentation to the Independent Expert). Seller and Acquirer shall also instruct the Independent Expert to render its reasoned written decision as promptly as practicable but in no event later than thirty (30) days from the date that information related to the unresolved objections is presented to the Independent Expert by Seller and Acquirer. With respect to each Unresolved Item, such decision shall be made based on the terms and conditions of this Agreement and shall not be in excess of the higher, nor less than the lower, of the amounts advocated by Acquirer in the Closing Statement or Seller in the Notice of Objection with respect to such Unresolved Item. Except as Seller and Acquirer may otherwise agree, all communications between Seller and Acquirer or any of their respective Representatives, on the one hand, and the Independent Expert, on the other hand, shall be in writing with copies simultaneously delivered to the other such Party. The resolution of Unresolved Items by the Independent Expert shall be final, binding and conclusive on the Parties (absent manifest error). All fees and expenses of the Independent Expert shall be borne on a proportionate basis by Acquirer, on the one hand, and Seller, on the other, based on the percentage which the portion of the contested amount not awarded in favor of Acquirer or Seller bears to the amount actually contested by such Person. For example, if Acquirer’s calculations would have resulted in a $1,000,000 net payment to Acquirer, and Seller’s calculations would have resulted in a $1,000,000 net payment to Seller and the Independent Expert’s final determination as adopted pursuant to this Section 2.6(c) results in an aggregate net payment of $500,000 to Seller, then Acquirer, on the one hand, and Seller, on the other hand, shall pay 75% and 25%, respectively, of such fees and expenses.
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(d)After the Cash Consideration has been finally determined in accordance with this Section 2.6 (the Cash Consideration as so determined being referred to herein as the “Final Cash Consideration”), the following payments shall be made on or prior to the third (3rd) Business Day immediately following such determination:
(i)If the Final Cash Consideration exceeds the Estimated Cash Consideration (the “Excess Amount”), then Acquirer shall pay, or cause to be paid, an amount in cash equal to the Excess Amount to Seller by wire transfer of immediately available funds to an account specified in writing by Seller; or
(ii)If the Estimated Cash Consideration exceeds the Final Cash Consideration (such excess, the “Shortfall Amount”), then Acquirer and Seller shall deliver joint written instructions to the Escrow Agent instructing the Escrow Agent to disburse to Acquirer, from the Escrow Account an amount in cash equal to the Shortfall Amount; provided, that, if the Shortfall Amount exceeds $2,500,000, then Acquirer may elect in writing to require that Seller pay, or cause to be paid, an amount in cash equal to the Shortfall Amount to Acquirer.
(e)For Tax purposes, any payments under this Section 2.6 shall be treated as an adjustment to the Merger Consideration.
2.7Milestone Payments.
(a)Definitions.
(i)“Acquirer Capital Stock” means any and all shares, interests (including partnership limited liability company, corporationinterests), rights to purchase, warrants, options, participations or other business entityequivalents of which: (a) if a corporation, a majorityor interest in (however designated) equity of Acquirer, including Acquirer Stock and any preferred stock.
(ii)“Acquirer Change in Control” means the occurrence of any of the following events:
(i)any “person” (as such term is used in Sections 13(d)(3) of the Exchange Act), becomes the “beneficial owner” (as defined in Rules 13d 3 and 13d 5 under the Exchange Act), directly or indirectly, of more than 50% of the total voting power of sharesthe Acquirer Voting Stock ; provided that the consummation of capital stockany such transaction resulting in such person owning more than 50% of the total voting power of the Acquirer Voting Stock shall not be considered a Change of Control if (a) the Company becomes a direct or indirect wholly owned subsidiary of a holding company and (b) immediately following such transaction, (x) the direct or indirect holders of the Acquirer Voting Stock of the holding company are substantially the same as the holders of the Acquirer Voting Stock immediately prior to such transaction or (y) no person is the beneficial owner, directly or indirectly, of more than 50% of the Voting Stock of such holding company;
(ii)the adoption by the Board of Directors of a plan relating to the liquidation or dissolution of Acquirer; or
(iii)the merger or consolidation of Acquirer with or into another Person or the merger of another Person with or into Acquirer, or the sale of all or substantially all the assets of Acquirer (determined on a consolidated basis) to another Person other than a transaction following which beneficial owners of securities that represented 100% of the Acquirer Voting Stock immediately prior to such transaction (or other securities into which such securities are converted as part of such merger or consolidation transaction) beneficially own directly or indirectly at least a majority of the voting power of the Voting Stock of the surviving Person or any direct or indirect parent company of the surviving Person in such merger or consolidation transaction immediately after such transaction.
(iii)“Acquirer Voting Stock” means all classes of Acquirer Capital Stock then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof; (b) if a partnership, limited liability company or other business entity, a majority of the partnership or other similar ownership interests thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof; or (c) in any case, such Person controls the management thereof.
“(iv)Tax”“Company Group Revenue” means the Business’ recorded net revenue related to laboratory services performed or “Taxes” shall mean: (a) anytest results reported in the applicable period (including international and all federal, state, local and foreign taxes, including, without limitation, gross receipts, income, profits, license, sales, use, estimated, occupation, value added, ad valorem, transfer, franchise, withholding, payroll, recapture,decentralized net worth, employment, escheat and unclaimed property obligations, excise and property taxes, assessments, stamp, environmental, registration, governmental charges, duties, levies and other similar charges, in each case, imposed by a Governmental Entity, (whether disputed or not) together with all interest, penalties and additions imposed by a Governmental Entity with respect to any such amounts; and (b) any liability in respect of any items described in clause (a) payable by reason of Contract transferee liability, operation of law or Treasury Regulation Section 1.1502-6(a) (or any predecessor or successor thereof of any analogous or similar provision under law) or otherwise.
“Tax Return” shall mean any return, declaration, report, claim for refund, or information return or statement relating to Taxes that is filed or required to be filed with a Governmental Entity, including any schedule or attachment thereto and any amendment thereof.
“Total Outstanding Company Shares” shall meanrevenue), plus the sum, without duplication, of (a) the aggregate number of shares of Company Common Stock that are issued and outstanding immediately prior to the Effective Time and (b) the aggregate number of shares of Company Common Stock that would be issuable upon the conversion all shares of Company Preferred Stock that are issued and outstanding immediately prior to the Effective Time into shares of Company Common Stock pursuant toBusiness’ recorded net biopharma revenue generated from the Company Organizational Documents.
“Total Stockholder Outstanding Shares” shall mean,Databases, calculated in accordance with respect to a Company Stockholder, the sum of (a)Accounting Standards utilized in the aggregate number of shares of Company Common Stock held by such Company Stockholder immediately prior to the Effective Time plus (b) the aggregate number of shares of Company Common Stock that would be issuable upon the conversion all shares of Company Preferred Stock held by such Company Stockholder immediately prior to the Effective Time into shares of Company Common Stock pursuant to the Company Organizational Documents.Financial Statements (consistently
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applied throughout the applicable period) and as set forth on the Milestone Financial Statements for such period, provided that Company Group Revenue shall be subject to adjustment based on information available following the expiration of the applicable period through the delivery of a Milestone Event Notice for the applicable period, including as applicable to the reconciliation of cash collected to revenue recognized.
(v)“Transaction Agreements” shall mean this Agreement,First Milestone Period” means the A&R Registration Rights Agreement, the Equity Financing Agreements, the Confidentiality Agreement, the Parent A&R Charter, the Sponsor Support Agreementperiod of time commencing on January 1, 2022 and all the agreements documents, instruments and certificates entered into in connection herewith or therewith and any and all exhibits and schedules thereto.ending at 11:59 p.m. Eastern time on December 31, 2022.
“(vi)Transactions” shall mean“FY2022 Company Group Revenue” means the transactions contemplated pursuant to this Agreement, includingCompany Group Revenue for the Merger.First Milestone Period.
“(vii)Treasury Regulations“FY2023 Company Group Revenue” means the Company Group Revenue for the Second Milestone Period.
(viii)”“Milestone Financial Statements” means a report prepared by Acquirer reflecting the Company Group Revenue during the First Milestone Period and the Second Milestone Period, as applicable.
(ix)“Second Milestone Period” means the period of time commencing on January 1, 2023 and ending at 11:59 p.m. Eastern time on December 31, 2023.
(b)Milestone Events. With respect to each milestone event set forth in the table below (each, a “Milestone Event”), Acquirer shall meanpay the regulations promulgatedcorresponding milestone payment set forth in the table below (each, a “Milestone Payment”) following the first achievement of such milestone event by the U.S. Department of the Treasury pursuant to andBusiness, in respect of provisions of the Code.
“Triggering Event I” shall occur if, within the Earn-Out Period, the Common Share Price of Parent Class A Stock is greater than or equal to $13.00 per share.
“Triggering Event II” shall occur if, within the Earn-Out Period, the Common Share Price of Parent Class A Stock is greater than or equal to $15.00 per share.
“Triggering Event III” shall occur if, within the Earn-Out Period, the Common Share Price of Parent Class A Stock is greater than or equal to $18.00 per share.
“Triggering Events” shall mean Triggering Event I, Triggering Event II and Triggering Event III, collectively.
“Trust Redemption Amount” shall mean all amounts payable from the Trust Account as of the Closing, including all amounts payable: (a) to stockholders who elect to have their Parent Class A Stock converted to cash in accordance with the provisions of Parent’s Charter Documents in respect of Parent Stockholder Redemptions; (b) for income tax or other tax obligations of Parent prior to Closing; and (c) as repayment of loans and reimbursement of expenses to directors, officers and stockholders of Parent (for clarity, excluding, any amounts payable in respect of Parent Transaction Costs or Company Transaction Costs).
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EXHIBIT A
Form of Parent Amended and Restated Charter
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[CM LIFE SCIENCES, INC.]
THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
[CM Life Sciences, Inc.], a Delaware corporation, hereby certifies as follows:
1.    The name of this corporation is “[CM Life Sciences, Inc.]” The date of the filing of its original Certificate of Incorporation with the Secretary of State of the State of Delaware was July 10, 2020 (the “Original Certificate”), the First Amendment and Restatementeach case subject to the Original Certificate was filed with the Secretary of State of the State of Delaware on July 13, 2020 (the “First Amended Certificate”),terms and Second Amended and Restated Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on September 1, 2020 (the “Second Amended Certificate”).
2.    This Third Amended and Restated Certificate of Incorporation of the corporation attached hereto as Exhibit A, which is incorporated herein byconditions set forth in this reference, and which restates, integrates and further amends the provisions of the Certificate of Incorporation of this corporation as previously amended and/or restated, has been duly adopted by this corporation’s Board of Directors and by the stockholders in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware, with the approval of this corporation’s stockholders having been given by written consent without a meeting in accordance with Section 228 of the General Corporation Law of the State of Delaware.2.7:
IN WITNESS WHEREOF, this corporation has caused this Restated Certificate of Incorporation to be signed by its duly authorized officer and the foregoing facts stated herein are true and correct.
Dated: [●], 2021# [CM LIFE SCIENCES, INC.]Milestone EventMilestone Payment
1.FY2022 Company Group Revenue equal to or above $163 million$112.5 million
2.FY2023 Company Group Revenue equal to or above $219 million
By:
Name:
Title:$37.5 million
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EXHIBIT A
[COMPANY NAME]
THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
ARTICLE I: NAME
The nameNotwithstanding anything herein to the contrary, 80% of the corporation is [Company Name] (the “Corporation”).
ARTICLE II: AGENT FOR SERVICE OF PROCESS
The addressMilestone Payment for the First Milestone Period or the Second Milestone Period, as applicable, shall become payable in respect of such period if the Company Group achieves 90% of the registered office of this Corporationapplicable Milestone Event revenue target for such period set forth in the Statetable above, which amount will scale on a linear basis up to 100% of Delaware is 1209 Orange Street,the applicable Milestone Payment at 100% of the applicable revenue target set forth in the Citytable above. Solely for purposes of Wilmington, Countyillustration: if the Business achieves Company Group Revenue of New Castle 19801, and$154.85 million for the nameFirst Milestone Period (i.e. 95% of target), then Acquirer shall pay to Seller a Milestone Payment equal to $101.25 million (i.e. 90% of the target Milestone Payment).
(c)Payment of Milestone Payments. On or prior to the later of (x) the thirtieth (30th) day immediately following Acquirer’s receipt of its executed audit report from its independent registered agentpublic company accounting firm (or, if Acquirer is then not subject to the reporting requirements under Section 13(a) or 15(d) of the Exchange Act, its independent auditor) and (y) April 30th, for each of the fiscal years ending December 31, 2022 and December 31, 2023, Acquirer shall deliver to Seller a notice (a “Milestone Event Notice”), containing (i) the Milestone Financial Statements for the applicable period, (ii) a statement whether and to what extent a Milestone Event was achieved during such fiscal year, (iii) if greater than zero but less than the full amount of the Milestone Payment is payable in respect of the applicable period, Acquirer’s calculation (in accordance with this CorporationAgreement) of the Milestone Payment due, (iv) the payment date for the applicable Milestone Payment, which will be within five (5) days of the date of such Milestone Event Notice (such date, the “Milestone Payment Date”) and (v) the specific amounts of cash and shares of Acquirer Stock to be paid and issued, respectively, to Seller (in each case in accordance with the immediately succeeding sentence). Each Milestone Payment shall be satisfied through the payment and issuance of a combination of cash and shares of Acquirer Stock (valued at the Share Value), with such mix to be determined in Acquirer’s sole discretion; provided that such allocation shall be determined such that the aggregate amount of cash included in the StateTotal Merger Consideration remains consistent with the Intended Tax Treatment. The maximum aggregate amount of Delaware at such address is The Corporation Trust Company.
ARTICLE III: PURPOSE
The purpose of the Corporation is to engage in any lawful act or activity for which corporationsMilestone Payments that may be organized under the General Corporation Law of the State of Delaware (the “General Corporation Law”).
ARTICLE IV: AUTHORIZED STOCK
1.    Total Authorized.   The total number of shares of all classes of stock that the Corporation has authority to issue is [●] shares, consisting of two classes: [●] shares of Class A Common Stock, $0.0001 par value per share (the “Common Stock”);become due and [●] shares of Preferred Stock, $0.0001 par value per share (“Preferred Stock”).
2.    Designation of Additional Series.
2.1.    The Board of Directors of the Corporation (the “Board”) is authorized, subject to any limitations prescribedpayable by the law of the State of Delaware, to provide for the issuance of the shares of Preferred Stock in one or more series, and, by filing a Certificate of DesignationAcquirer pursuant to the applicable law of the State of Delaware (“Certificate of Designation”), to establish from time to time the number of shares to be includedthis Section 2.7 will in each such series, to fix the designation, vesting, powers (including voting powers), preferences and relative, participating, optional or other special rights, if any, of the shares of each such series and any qualifications, limitations or restrictions thereof, and, except where otherwise provided in the applicable Certificate of Designation, to thereafter increase (but not above the total number of authorized shares of the Preferred Stock) or decrease (but not below the number of shares of such series then outstanding) the number of shares of any such series. The number of authorized shares of Preferred Stock may also be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of two-thirds of the voting power of all then-outstanding shares of capital stock of the Corporation entitled to vote thereon, voting together as a single class, without a separate vote of the holders of the Preferred Stock, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law, unless a separate vote of the holders of one or more series is required pursuant to the terms of any Certificate of Designation; provided, however, that if two-thirds of the Whole Board (as defined below) has approved such increase or decrease of the number of authorized shares of Preferred Stock, then only the affirmative vote of the holders of a majority of the voting power of all then-outstanding shares of the capital stock of the Corporation entitled to vote thereon, voting together as a single class, without a separate vote of the holders of the Preferred Stock, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law, unless a separate vote of the holders of one or more series is required pursuant to the terms of any Certificate of Designation, shall be required to effect such increase or decrease. For purposes of this Third Amended and Restated Certificate of Incorporation (as the same may be amended and/or restated from time to time, including pursuant to the terms of any Certificate of Designation designating a series of Preferred Stock, this “Certificate of Incorporation”), the termno event exceed $150,000,000.
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“(d)Whole Board”Acknowledgments. Seller acknowledges and agrees that the Company Group Revenue levels for the Milestone Events shall meannot be construed as representing an estimate or projection of anticipated results or sales of any Company Products and that such Milestone Events are merely intended to define Acquirer’s Milestone Payment obligations if such revenue levels are achieved. Seller further acknowledges and agrees that (i) nothing in this Section 2.7(d) is intended, or shall be construed, to require Acquirer to develop, commercialize or otherwise exploit a specific Company Product and (ii) nothing in this Section 2.7(d) is intended, or shall be construed, as restricting such business or imposing on Acquirer the total numberduty to develop, commercialize or otherwise exploit any Company Product for which Milestone Payments are payable hereunder to the exclusion of, authorized directors whether or in preference to, any other product or in any way other than in accordance with its normal commercial practices; provided that Acquirer will not, there existand cause its Subsidiaries not to, take any vacanciesaction in previously authorized directorships.
2.2.bad faith the purpose of which is to reduce or avoid payment of any Milestone Payment. Except as otherwise expressly providedset forth in any Certificate of Designation designating any series of Preferred Stock pursuantthis Section 2.7(d), Acquirer shall have no other diligence obligations, express or implied, with respect to the foregoingCompany Products.
(e)Milestone Payments Not a Security. The Parties acknowledge and agree, and acknowledge and agree, that (i) the right to receive any Milestone Payments is solely a contractual right and does not, in and of itself, constitute an equity ownership interest in Acquirer or any other Person, (ii) Seller has no rights as a security holder of Acquirer or any other Person merely as a result of their right to receive the Milestone Payments and (iii) no interest is payable as additional consideration with respect to any Milestone Payment.
(f)Acknowledgment. Each of the Company Parties and Seller acknowledges that the Milestone Payments are subject to numerous factors outside the control of Acquirer, (ii) there is no assurance that any Milestone Event will be achieved, (iii) neither Acquirer nor its Affiliates owe, by virtue of their obligations under this Section 2.7, a fiduciary duty or any implied duties to Seller and (iv) the parties intend that the express provisions of this Agreement shall set forth the only obligations that apply to their relationship with respect to the Milestone Payments.
(g)Operation of the Company Group Following Closing Date. Following the Closing Date and through the end of the Second Milestone Period, Acquirer shall use its Commercially Reasonable Efforts to operate the Business in the Ordinary Course of Business and otherwise in accordance with the business plan and presumptions underlying the Pre-Closing Budget and provide the Business with capital to continue operations in the Ordinary Course of Business in order to achieve the Milestone Events. Acquirer shall not take any action in bad faith the purpose of which is to reduce or avoid payment of any Milestone Payment. As used in this Section 2.7(g), “Commercially Reasonable Efforts” means carrying out those obligations and tasks that comprise a commercially reasonable level of effort and expenditure of capital and resources (including appropriate allocation of resources) that Acquirer in good faith in the exercise of its reasonable business judgment.
(h)Acceleration of Milestone Payment. Notwithstanding anything to the contrary contained herein: if both (x) an Acquirer Change in Control shall have occurred at any time on or prior to the end of the Second Milestone Period and (y) FY2022 Company Group Revenue is equal to or above $163 million, such that the full $112.5 million Milestone Payment is earned in respect of Milestone Event #1, then Milestone Event #2 shall automatically be deemed to have been achieved and Acquirer shall pay, or shall cause to be paid, to Seller the full $37.5 million Milestone Payment owing in respect of Milestone Event #2 on or prior to the later of (A) the third (3rd) Business Day immediately following such Acquirer Change in Control and (B) the Milestone Payment Date for Milestone Event #1. Upon such accelerated payment of the $37.5 million Milestone Payment owing in respect of Milestone Event #2 in accordance with this Section 2.7(h), Acquirer shall have no further obligations under this Section 2.7.
2.8Withholding Rights. Notwithstanding anything herein to the contrary, each of Acquirer, Holdco2, the Company, the Surviving Entity and their respective agents shall be entitled to deduct and withhold from any consideration otherwise payable pursuant to this Agreement any amounts required to be deducted and withheld therefrom under applicable Law on account of Taxes (“Applicable Withholding Law”). Notwithstanding the foregoing, if a party paying consideration determines that an amount is required to be deducted and withheld with respect to any amounts payable, at least five (5) days prior to the date the applicable payment is scheduled to be made, the party making the payment shall provide the recipient with written notice of its intent to deduct and withhold, which notice shall include a copy of the calculation of the amount to be deducted and withheld and a
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reference to the applicable provision of Law pursuant to which such deduction and withholding is required, and the party making the payment shall reasonably cooperate with the recipient to eliminate or reduce the basis for and amount of such deduction or withholding (including providing the recipient with a reasonable opportunity to provide forms or other evidence that would exempt such amounts. from withholding). Amounts so deducted or withheld shall be treated for all purposes of this Agreement as having been paid hereunder to the Person in respect of which such withholding was made. Acquirer, Holdco2, the Company, the Surviving Entity or their respective paying agent, as applicable, shall timely remit any amounts withheld or deducted pursuant to this Section to the applicable Tax Authority.
2.9Dispute Resolution.
(a)In the event that Seller disputes (i) the purported occurrence or non-occurrence of any Milestone Event, (ii) the payment of any Milestone Payment, or (iii) any indemnification claim or setoff under Article IV,8 then Seller shall provide written notice to Acquirer (the “Dispute Notice”) specifying the amount disputed and the basis for the dispute. Acquirer and Seller shall thereafter attempt to resolve the dispute as set forth in this Section 2.9(a).
(b)Seller and Acquirer shall attempt to resolve any new seriesdispute set forth in a Dispute Notice promptly by negotiation in good faith between an officer of Preferred StockSeller, on the one hand, and an officer of Acquirer, on the other, in each case who has authority to settle the dispute (subject to any limitations set by the board of directors or other governing body to which such officer reports). Each Party shall give the other Party involved written notice of any dispute not so resolved within thirty (30) days following Seller’s delivery of the Dispute Notice. Within ten (10) Business Days following delivery of such notice, the Party receiving notice shall submit to the other a written response thereto. The notice and the response shall include: (i) a statement of each Party’s position(s) regarding the matter(s) in dispute, and (ii) the name and title of the officer who will represent Seller and Acquirer and any other Person who will accompany that officer.
(c)Within ten (10) Business Days following delivery of a Dispute Notice, the designated officers of Acquirer and Seller shall meet at a mutually agreed time and place, and thereafter, as often as they reasonably deem necessary, to attempt to resolve the dispute. All negotiations conducted pursuant to this Section 2.9(a) (and any of the Parties’ submissions in contemplation hereof) shall be kept confidential by the Parties and shall be treated by the Parties and their representatives as compromise and settlement negotiations under the Federal Rules of Evidence and any similar state rules.
(d)If Seller and Acquirer are unable to resolve any dispute arising out of this Agreement in accordance with provisions (a), (b) and (c) of this Section 2.9 within thirty (30) days after delivery of any Dispute Notice, then, subject to Section 2.9(e), Acquirer and Seller shall be entitled to submit such dispute for final adjudication to the applicable court sitting in the State of Delaware in accordance with Section 9.4.
(e)Notwithstanding Section 2.9(d), any dispute with respect to (i) the purported occurrence or non-occurrence of any Milestone Event or (ii) the payment of any Milestone Payment that shall not have been resolved by Seller and Acquirer in accordance with provisions (a), (b) and (c) of this Section 2.9 within thirty (30) days after delivery of any Dispute Notice shall be submitted to the Independent Expert. The Independent Expert shall be engaged pursuant to an engagement letter among Seller, Acquirer and the Independent Expert on terms and conditions consistent with this Section 2.9(e). The Independent Expert shall be instructed, pursuant to such engagement letter, to act as an expert and not as an arbitrator and to resolve only the items contained in the applicable Dispute Notice that shall not have been resolved between Seller and the Acquirer (the “Milestone Unresolved Items”) and not to otherwise investigate any matter independently. Seller and Acquirer each agree to furnish to the Independent Expert reasonable access to such individuals and such information, books and records as may be designated, fixed and determined as provided hereinreasonably required by the Independent Expert to make its final determination (and any such information, books and records shall be provided to the other such Party prior to its submission or presentation to the Independent Expert). Seller and Acquirer shall also instruct the Independent Expert to render its reasoned written decision as promptly as practicable but in no event later than thirty (30) days from the date that information related to the unresolved objections is presented to the Independent Expert by Seller and Acquirer. With respect to each Milestone Unresolved Item, such decision shall be made based on the terms and conditions of this Agreement and shall not be in excess of the higher, nor less than the lower, of the amounts advocated by Acquirer in the Milestone Event Notice
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or Seller in the Dispute Notice with respect to such Milestone Unresolved Item. Except as Seller and Acquirer may otherwise agree, all communications between Seller and Acquirer or any of their respective Representatives, on the one hand, and the Independent Expert, on the other hand, shall be in writing with copies simultaneously delivered to the other such Party. The resolution of Milestone Unresolved Items by the Independent Expert shall be final, binding and conclusive on the Parties (absent manifest error). All fees and expenses of the Independent Expert shall be borne on a proportionate basis by Acquirer, on the one hand, and Seller, on the other, based on the percentage which the portion of the contested amount not awarded in favor of Acquirer or Seller bears to the amount actually contested by such Person.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY PARTIES AND SELLER
Each of the Company Parties and Seller hereby represents and warrants to the Acquirer Parties as follows, with each such representation and warranty subject to the exceptions set forth in the Company Disclosure Schedules (it being understood that the Company Disclosure Schedules shall be arranged in sections corresponding to the sections and subsections contained in this Article 3, and no disclosure made in any particular section of the Company Disclosure Schedules shall be deemed to be made in any other section of the Company Disclosure Schedules unless expressly made therein (by cross- reference or otherwise) or to the extent it is reasonably apparent from a reading of the text of the disclosure that such disclosure is applicable to such other sections and subsections of the Company Disclosure Schedules).
3.1Organization of Seller and the Company Group.
(a)Each Company Party is an entity duly organized and validly existing and in good standing under the Laws of the jurisdiction of its incorporation or formation with the requisite corporate power and corporate authority to conduct its business as it is presently being conducted, to own, lease or operate, as applicable, its assets and properties, and to perform all of its obligations under its Contracts. Each of the Company Parties is duly qualified to do business as a foreign entity and is duly qualified to do business and in good standing (if such concept is applicable in the relevant jurisdiction) in each jurisdiction where the character of its assets and properties owned, leased or operated or the nature of its activities make such qualification necessary, except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. Other than in connection with the Pre-Closing Restructuring, neither Seller nor any of the Company Parties has ever approved or commenced any Proceeding or made any election contemplating the dissolution or liquidation of any of the Company Parties or the winding up or cessation of the business or affairs of any of the Company Parties. Other than in connection with the Pre-Closing Restructuring, there are no entities that have been merged into or that otherwise are predecessors to any of the Company Parties. True, complete and correct copies of the Governing Documents of each of the Company Parties, as amended and in effect as of the Agreement Date, have been Delivered to Acquirer. No Company Party is in violation of its Governing Documents.
(b)Holdco2 has been organized solely for the purpose of entering into the Transaction Documents and the Ancillary Agreements to which it is a party and consummating the Pre-Closing Restructuring, the Mergers and the other Transactions, and has not engaged in any activities or business, other than those incident or related to or incurred in connection with its formation, the Pre-Closing Restructuring or the negotiation, preparation or execution of the Transaction Documents, the performance of its covenants or agreements in the Transaction Documents to which it is a party or any Ancillary Agreement or the consummation of the Transactions.
3.2Subsidiaries.
(a)Each Subsidiary of Holdco2 and the Company is either a corporation or limited liability company duly organized and validly existing and in good standing under the Laws of the jurisdiction of its incorporation or formation with the requisite corporate power and corporate authority to conduct its business as it is presently being conducted, to own, lease or operate, as applicable, its assets and properties, and to perform all of its obligations under its Contracts. Each Subsidiary of Holdco2 and the Company is duly qualified to do business as a foreign corporation and is duly qualified to do business and in good standing (if such concept is applicable in the relevant jurisdiction) in each jurisdiction where the character of its assets and properties owned, leased or operated or the
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nature of its activities make such qualification necessary, except where the failure to be so qualified or in good standing would not have a Material Adverse Effect.
(b)Section 3.2(b) of the Company Disclosure Schedule accurately lists the equity interests, whether direct or indirect, held by each of Holdco2 and the Company in each of its Subsidiaries, including such ownership after giving effect to the Pre-Closing Restructuring (collectively, the “Subsidiary Ownership Interests”), as well as the names of any other Persons who hold equity interests in such Subsidiaries and the ownership interests held by any such Persons, including such ownership after giving effect to the Pre-Closing Restructuring. The Subsidiary Ownership Interests are (or will be at Closing) duly authorized, validly issued, fully paid and non-assessable and are free of any Encumbrances, outstanding subscriptions, preemptive rights or “put” or “call” rights created by statute, the Governing Documents of any Subsidiary of Holdco2 or the Company or any Contract to which any Subsidiary of Holdco2 or the Company is a party or by which such Subsidiary or any of its assets is bound. Other than the Subsidiary Ownership Interests, there are no options, warrants or rights of any kind to acquire securities or other ownership interests in any of the Subsidiaries of Holdco2 or the Company, or any interest convertible into or exchangeable or exercisable for, any equity or similar interest in, any of the Subsidiaries of Holdco2 or the Company.
(c)True, complete and correct copies of the Governing Documents of each Subsidiary of Holdco2 and the Company (as of the Agreement Date), as amended and in effect as of the Agreement Date, have been Delivered to Acquirer. No such Subsidiary of Holdco2 or the Company is in violation of its Governing Documents.
(d)Section 3.2(d) of the Company Disclosure Schedule sets forth a true and complete list of all Contracts (x) to which Detect Genomix, Seller or any member of the Company Group is a party or by which any such party, or any of their respective assets, is bound and (y) that pertain to Detect Genomix and the operation of its business. Detect Genomix has not engaged in any activities or business, other than those incident or related to or incurred in connection with its formation or the negotiation, preparation or execution of the Contracts set forth on Section 3.2(c) of the Company Disclosure Schedule.
3.3Authorization.
(a)Each of the Company Parties and Seller has all requisite corporate power and authority, and has taken all corporate action necessary, to execute, deliver and perform its obligations under the Transaction Documents and to consummate the Transactions. Each of the Seller Board withoutand the Holdco2 Board, at a meeting duly called and held at which all directors were present, duly and unanimously adopted resolutions (i) approving and declaring advisable this Agreement, the Ancillary Agreements, the Mergers and the other transactions contemplated hereby and thereby, (ii) determining that the Merger Consideration is fair to the sole stockholder of Holdco2 and declaring that this Agreement, the Ancillary Agreements, the Merger and the other Transactions are in the best interests of Holdco2’s stockholder, (iii) adopting this Agreement and the Ancillary Agreements, (iv) authorizing Seller and Holdco2 to enter into this Agreement and to consummate the Mergers and the other Transactions, on the terms and subject to the conditions set forth in this Agreement and the Ancillary Agreements, (v) in the case of the Holdco2 Board, (A) directing that the Mergers and this Agreement and the Ancillary Agreements be submitted to the stockholder of Holdco2 for a vote for adopting this Agreement and the Ancillary Agreements and approving the Mergers and (B) recommending that the Holdco2 stockholder votes to approve and adopt this Agreement and the Ancillary Agreements and approve the Merger and (vi) in the case of the Seller Board, authorizing Seller as the sole stockholder of Holdco2 to vote for the adoption of this Agreement and the Ancillary Agreements and approval of the Mergers (the “Holdco2 Board Approval” and the “Seller Board Approval”). No Takeover Statute or similar statute or regulation applies or purports to apply to the Company with respect to the Mergers, this Agreement or any other Transaction. This Agreement and the Ancillary Agreements to which the Company Parties or Seller is a party have been duly executed and delivered by the Company Parties and Seller, as applicable, and, assuming the due authorization, execution and delivery hereof and thereof by the other parties hereto and thereto, constitute the legal, valid and binding obligations of the Company Parties and Seller, as applicable, enforceable against the Company Parties and Seller, as applicable, in accordance with their respective terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting creditors’ rights generally and by general principles of equity, regardless of whether enforcement is sought in a Proceeding at law or in equity (the “Enforceability Exceptions”).
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(b)The only vote of holders of Common Stock or the holders of Preferred Stock, or any series thereof, and any such new series may have powers, preferences and rights, including, without limitation, voting powers, dividend rights, liquidation rights, redemption rights and conversion rights, senior to, junior to or pari passu with the rights of the Common Stock, any series of Preferred Stock or any future class or series of capital stock of the Corporation.
2.3.    Each outstanding share ofHoldco2 Common Stock shall entitleor other equity securities necessary to approve and adopt this Agreement, the holder thereof to oneAncillary Agreements, the Merger and the other transactions contemplated hereby and thereby is the affirmative vote on each matter properly submitted to the stockholders of the Corporation for their vote; provided, that, except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Certificate of Incorporation (including any Certificate of Designation relating to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more other such series, to vote thereon pursuant to this Certificate of Incorporation (including any Certificate of Designation relating to any series of Preferred Stock).
ARTICLE V: AMENDMENT OF BYLAWS
The Board shall have the power to adopt, amend or repeal the Bylaws of the Corporation (as the same may be amended and/or restated from time to time, the “Bylaws”Seller (the “Holdco2 Stockholder Approval”). Any adoption, amendment or repeal of the Bylaws by the Board shall require the approval of a majority of the Whole Board. The stockholders shall also have power to adopt, amend or repeal the Bylaws; provided, that, notwithstanding any other provision of this Certificate of Incorporation or any provision of law that might otherwise permit a lesser or no vote, but in addition to anyNo vote of the holders of any class or series of capital stock of Seller is necessary to approve and adopt this Agreement, the Ancillary Agreements, the Merger and the other Transactions.
3.4Capitalization.
(a)The total number of authorized, issued and outstanding shares of capital stock of Holdco2 consists of 1,000 shares of Holdco2 Common Stock, all of which are issued and outstanding as of the Agreement Date. The total number of authorized, issued and outstanding shares of capital stock of the Corporation required by applicable law or by this CertificateCompany consists of Incorporation (including any Preferred Stock issued pursuant to a Certificate100 shares of Designation), the affirmative votecommon stock, par value $0.01, of the holdersCompany, all of at least two-thirdswhich are issued and outstanding as of the voting powerAgreement Date. As of the Agreement Date, BioReference owns all right, title and interest in and to, all of the shares of outstanding capital stock of the Company free and clear of all then-outstandingEncumbrances. As of the Closing, Holdco2 will own all right, title and interest in and to, all of the shares of outstanding capital stock or other equity interests of the Company free and clear of all Encumbrances. There are no other issued and outstanding shares of capital stock or other securities of Holdco2 and no outstanding commitments or Contracts to issue any shares of capital stock or other securities of Holdco2.
(b)(i) There are no preemptive or other outstanding rights, options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, Contracts or securities under which Seller or Holdco2 is or may become obligated to issue or sell, or giving any Person a right to subscribe for or acquire any shares of the capital stock or other voting securities of Holdco2 or the Company and (ii) the outstanding capital stock or other voting securities of each of Holdco2 and the Company is not subject to any voting trust agreement or other Contract restricting the voting, dividend rights or disposition of such capital stock or other voting securities of Holdco2 or the Company, as applicable, except in each case as set forth in this Agreement.
3.5Title to and Sufficiency of Real and Tangible Properties and Assets.
(a)Each member of the CorporationCompany Group has good, valid and marketable title to or, in the case of leased tangible property assets and tangible properties or assets held under license, a good and valid leasehold or license interest in, all of their respective material tangible properties and assets. Each member of the Company Group holds title to all material tangible property and assets which it purports to own, free and clear of any Encumbrances other than Permitted Encumbrances. The tangible assets and personal property owned or leased by the Company Group and currently being used in the Business are, in all material respects, in good operating condition and repair, normal wear and tear excepted, and are useable in the Ordinary Course of Business.
(b)The tangible assets and properties owned by or licenses entered into by the Company Group for same constitute all of the tangible assets and properties that are necessary to conduct and operate the Business as currently conducted by the Company Group as of the Agreement Date, without the material breach or violation of any Contracts. Except as set forth on Section 3.5(b) of the Company Disclosure Schedules, neither Seller nor its Affiliates (but excluding the members of the Company Group) own or license to the Company Group any tangible property that are necessary for the Company Group to conduct, operate or continue the conduct and operation of the Business. Except as set forth on Section 3.5(b) of the Company Disclosure Schedules, there are no Contracts to which members of the Company Group are not the sole counterparties (other than Third Parties) (i) from which the Business or any member of the Company Group generates any revenue, (ii) that are material to the Business, or (iii) that are primarily used by the Company Group or in the conduct of the Business (the Contracts under clause (i), “Seller Revenue Contracts” and the Contracts under clauses (i), (ii) or (iii), collectively, “Seller Contracts”).
(c)Except as set forth in Section 3.5 of the Company Disclosure Schedules, no member of the Company Group owns or has ever owned, any real property or interest in real property. Section 3.5 of the Company Disclosure Schedules lists all interests in real property leased, subleased or otherwise used or occupied by a member of the Company Group (each, a “Leased Property”), including the address of the property and the name and address of the landlord. Holdco2 has Delivered complete copies of all documents in Holdco2’s possession relating to the use or occupancy of such Leased Property, including all leases, subleases, offers to lease or agreements to lease, lease
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guarantees, tenant estoppels, subordinations, non-disturbance, operating agreements and attornment agreements (with any amendments or modifications related thereto, collectively, the “Leases”). With respect to the Leased Property, the applicable member of the Company Group has a valid leasehold interest in the leasehold estate relating thereto, free and clear of any Encumbrance, easement, covenant or other restriction applicable to such Leased Property which would reasonably be expected to materially impair the current uses or the occupancy by the applicable member of the Company Group of such Leased Property. No member of the Company Group has received written notice that it is in default of any of the Leases, nor has any member of the Company Group sent written notice to any other party to any of the Leases that such other party is in default thereof, in each case, except as would not reasonably be likely to result in material liability to such member of the Company Group.
3.6Environmental Laws and Regulations. The Company Group and all facilities or real property currently owned, leased or operated by the Company Group, are now and, since such time as the Company Group has owned, leased or operated the facilities or real property, have been in compliance in all material respects with all applicable Environmental Laws. No member of the Company Group has, since the Company Group has owned, leased or operated the facilities or real property, received from any Governmental Authority any notice or demand letter alleging that any member of the Company Group is in violation of any Environmental Law, and no member of the Company Group is subject to any Order of any Governmental Authority imposing liability or obligations relating to any Environmental Law. There has been no release by any member of the Company Group, or for which any member of the Company Group would reasonably be expected to be liable by Contract or by operation of Law, of any Hazardous Substance at, under, from or to any facility or real property currently or formerly owned, leased or operated by any member of the Company Group. No member of the Company Group has assumed, undertaken or otherwise become subject to any liability of another Person relating to Environmental Laws.
3.7Absence of Certain Activities or Changes. Since June 30, 2021, (a) the Company Group has conducted its operations in the Ordinary Course of Business (except as required by any COVID-19 Response), (b) there has been no Material Adverse Effect, and (c) no member of the Company Group has taken any action which would require the consent of Acquirer pursuant to Section 5.1 if taken during the Pre-Closing Period.
3.8Company Contracts.
(a)Section 3.8(a) of the Company Disclosure Schedules sets forth, as of the Agreement Date, a complete and correct list of each of the following Contracts: (x) which are Seller Contracts, (y) to which any member of the Company Group is a party or (z) by which any member of the Company Group’s properties or assets are bound as of the Agreement Date:
(i)any customer, supplier or payor Contract under which a member of the Company Group has made or received payments in any calendar year period since January 1, 2019 that are material in amount, which for purposes of this subsection shall be supplier Contracts in an amount of $500,000 or more per year, customer Contracts in an amount of $400,000 or more per year or payer Contracts in an amount of $100,000 or more per year, which shall include the contracts identified in Section 3.8(a)(ii);
(ii)any Contract with a (A) Top Customer, (B) Top Supplier or (C) Top Payor;
(iii)any distributor, referral or similar agreement;
(iv)(A) any joint venture, partnership or limited liability company Contract, (B) any Contract that involves a sharing of revenues, profits, cash flows, expenses or losses with other Persons, (C) any Contract that involves the payment by any member of the Company Group of royalties to any other Person and (D) any Contracts providing for payment of amounts calculated based upon the revenues or income of any member of the Company Group, earnouts, milestones, royalties or contingent payments (I) by or (II) to any member of the Company Group;
(v)all material Contracts that relate to research, development, manufacturing and/or commercialization of Company Products other than Contracts with suppliers, payers, customers and distributors or referral or similar agreements;
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(vi)any agreement or Contract providing for the payment of compensation or benefits (including any accelerated vesting) upon any termination of employment or service, or in connection with the Transactions, with any current or former employees under which any member of the Company Group has any actual or potential Liability;
(vii)any Contract (A) pursuant to which any other Person is granted exclusive rights or that requires any member of the Company Group to deal exclusively with any Persons, (B) containing a “most-favored-party,” best pricing or other term or provision by which any Person is, or could become, entitled to vote generallyany benefit, right or privilege which, under the terms of such Contract, must be at least as favorable to such Person as those offered to another Person, (C) that limits or would limit the freedom of any member of the Company Group or any of their successors or assigns or their respective Affiliates (including Acquirer, the Surviving Entity and their respective Affiliates after Closing) to engage or participate, or compete with any other Person, in any line of business, market or geographic area, or to make use of any Intellectual Property, (D) containing any “take or pay,” minimum commitments or similar provisions or provisions to purchase goods or services from a sole source other than reagent agreements entered into in the electionOrdinary Course of directors, voting togetherBusiness that include minimum purchase obligations solely as a single class, shallcondition to maintaining preferential pricing conditions for such reagent, (E) in which the any member of the Company Group grants rights of first refusal or first offer, right of negotiation or similar preferential rights to, any Person, or (F) that would, by its terms apply, or purport to apply, to the business of any acquirer of any member of the Company Group or the business of Acquirer following the Closing;
(viii)all Company IP Contracts (other than employee invention assignments on Company’s form, Contracts that are Company IP Contracts solely because they contain licenses of Commercial Software, confidentiality obligations, licenses for feedback or incidental non-exclusive trademark licenses limited solely for the purpose of identifying the Company, any of its Subsidiaries or any counterparty as a participant in a health insurance program, a participating health insurer or service provider);
(ix)any and all Seller Contracts concerning Intellectual Property or IT Assets to which a member of the Company Group is a beneficiary or by which such member, or any of its properties or assets, may be bound, including, as applicable, all (i) licenses of Intellectual Property to any third party, licenses of Intellectual Property by any third party, (iii) other Seller Contracts relating to the transfer, development, maintenance or use of Intellectual Property, including data, or IT Assets and (iv) consents, settlements, and Orders governing the use, validity or enforceability of Intellectual Property or IT Assets (“Seller IP Contracts”), other than Contracts that are Seller IP Contracts solely because they contain licenses of Commercial Software, confidentiality obligations, licenses for feedback, incidental non- exclusive trademark licenses solely for the purpose of identifying a member of the Company Group or any counterparty as a participant in a health insurance program, a participating health insurer or service provider;
(x)any Contract providing for the development of any software, technology or Intellectual Property, independently or jointly, either by or for a member of the Company Group (other than employee invention assignment agreements with employees of a member of the Company Group on the Company’s or any Subsidiary of the Company’s respective standard form of agreement, copies of which have been Delivered to Acquirer);
(xi)any confidentiality, secrecy or non-disclosure Contract other than any such Contract entered into by a member of the Company Group in the Ordinary Course of Business;
(xii)(A) any settlement agreement with respect to any Proceeding, (B) any settlement or similar Contract restricting in any respect the operations or conduct of the Business, as currently conducted or as proposed to be conducted, of a member of the Company Group (or the Acquirer or its Affiliates after the Closing), and (C) any settlement or similar Contract with a Governmental Authority;
(xiii)any Contract to which a member of the Company Group is a party or by which it or any of its properties or assets is bound as of the Agreement Date with any labor union or any collective bargaining agreement or similar Contract with its employees;
(xiv)any Contract related to Indebtedness;
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(xv)any Contract to which a member of the Company Group is a party or by which it or any of its properties or assets is bound as of the Agreement Date for capital expenditures in excess of $150,000 individually or in the aggregate;
(xvi)any Contract pursuant to which a member of the Company Group is a lessor or lessee of any machinery, equipment, motor vehicles, office furniture, fixtures or other personal property involving expenditures in excess of $500,000 in any calendar year;
(xvii)any Contract pursuant to which a member of the Company Group has acquired a business or entity, or substantially all of the assets of a business or entity, whether by way of merger, consolidation, purchase of stock, purchase of assets, license or otherwise, or any Contract pursuant to which it has any equity or equity-linked interest or other material ownership interest in any other Person;
(xviii)all Contracts (i) that would require consent, (ii) that would require or permit a member of the Company Group (or any successor) or an acquirer of any member of the Company Group to make any payment to another Person, (iii) that would be subject to modification or termination that contain any clause that would trigger adverse consequences for Acquirer, (v) pursuant to which rights of any third party would be triggered or become exercisable, (vi) under which any other consequence, result or effect arises, in each case, by virtue of the change in control resulting from the completion of the Transactions, including the Pre-Closing Restructuring, or in connection with or as a result of the execution of this Agreement or the consummation of the Transactions, including the Pre-Closing Restructuring, either alone or in combination with any other event;
(xix)(A) any Contract to which a member of the Company Group is a party or by which it or any of its properties or assets is bound as of the Agreement Date with a Related Party, (B) any Contract for or relating to the employment or service of any member of the Company Group’s employees with the title of Senior Director or any more senior title which is not terminable by the Company Group on less than 30 days’ notice and without severance and (C) any other type of Contract with any member of the Company Group’s employees with the title of Senior Director or any more senior title, except for Company Benefit Plans or Seller Benefit Plans applicable to Company Group employees;
(xx)any Contract providing for indemnification to any director, officer, member, manager, employee, trustee or fiduciary of the Company Group;
(xxi)any Contract with any Governmental Authority, including any Contract relating to the grant, incentive, benefit, qualification or subsidy from any Governmental Authority, any Permit that is required for the stockholders to adopt, amend or repeal any provisionconduct of the Bylaws; Business as currently conducted and as proposed to be conducted, or for a member of the Company Group holding of its assets, or any Contract with a government prime contractor, or higher-tier government subcontractor, including any indefinite delivery/indefinite quantity contract, firm-fixed-price contract, schedule contract, blanket purchase agreement, or task or delivery order (a “Government Contract”);
(xxii)providedany Contract between any member of the Company Group on the one side and any of Seller or its Affiliates on the other side;
(xxiii)all Contracts with non-employee health care professionals who provide services to or on behalf of a member of the Company Group; and
(xxiv)all Company Data Agreements.
(b)All Contracts required to be listed in Section 3.8(a) of the Company Disclosure Schedules are referred to as the “Company Contracts.” True, complete and correct copies of all written Company Contracts and summaries of all material oral Contracts that constitute Company Contracts, in each case, including all amendments thereto and waivers thereunder, have been Delivered to Acquirer.
(c)Each Company Contract is existing, in full force and effect and is legal, valid, binding and enforceable against the applicable member of the Company Group and, to the Knowledge of the Company, each other party thereto, in accordance with their respective terms except as enforcement may be limited by the
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Enforceability Exceptions. No member of the Company Group, and in the case of Seller Contracts, neither the Seller nor any of its Affiliates, shall be, as a result of the execution and delivery or effectiveness of this Agreement or the performance of Holdco2’s obligations under this Agreement (including the Merger), and Company Group, in the case of Seller Contracts, Seller and its Affiliates, and, to the Knowledge of the Company, no other party is, in material Default under any Company Contract. No written notice of any claim of material Default under, or termination of, a Company Contract has been made or received by a member of the Company Group, Seller or Seller Affiliate. No member of the Company Group, and in the case of Seller Contracts, neither the Seller nor any of its Affiliates, have waived any of its material rights under any Company Contract.
3.9furtherNoncontravention; Restrictions on Business.
(a)The execution, delivery and performance by the Company of and the Company’s compliance with this Agreement and consummation by the Company of the Transactions do not and will not (i) violate the Governing Documents of any member of the Company Group, (ii) assuming any consents and approvals referred to in Section 3.9(b) are duly obtained, conflict with or constitute a material Default under any Laws, Orders or Permits applicable to a member of the Company Group or (iii) conflict with, give rise to or result in a material Default under any material Company Contract, other than those Contracts listed in Section 3.9(a) of the Company Disclosure Schedules, or result in the creation of any Encumbrance (other than a Permitted Encumbrance) on any of the properties, assets, Holdco2 Common Stock or other equity securities of the Company.
(b)Other than (x) the filing of the First Certificate of Merger and Second Certificate of Merger and (y) such filings and notifications as may be required to be made by the Company Group in connection with the Transactions under the HSR Act and other applicable Antitrust Laws and the expiration or early termination of the applicable waiting period under the HSR Act and other applicable Antitrust Laws, no consent, approval, Order or authorization of, or registration, declaration or filing with, any Governmental Authority or any other Person (including any Institutional Review Board, Privacy Board or Ethics Committee for any clinical trial being conducted by or on behalf of a member of the Company Group) is required to be made, obtained or given by a member of the Company Group in connection with the execution, delivery and performance by the Company of this Agreement or the consummation by the Company of the Transactions.
3.10Financial Statements and Operating Budget.
(a)Seller has Delivered to Acquirer the unaudited consolidated financial statements of the Company for the fiscal years ended December 31, 2019 and 2020 (including, in each case, consolidated balance sheets, statements of operations and statements of cash flows, collectively, the “Financial Statements”), that,which are included on Section 3.10(a) of the Company Disclosure Schedules. The Financial Statements (i) are derived from and in accordance with the books and records of the Company, (ii) fairly present, in all material respects, the consolidated financial condition of the Company at the dates therein indicated and the consolidated results of operations and cash flows of the Company for the periods therein specified, and (iii) were prepared in accordance with the Accounting Standards applied on a consistent basis throughout the periods involved. When delivered to Acquirer, the Required Financial Statements (i) will be derived from and in accordance with the books and records of the Company, (ii) fairly present, in all material respects, the consolidated financial condition of the Company at the dates therein indicated and the consolidated results of operations and cash flows of the Company for the periods therein specified, and (iii) will be prepared in accordance with the Accounting Standards applied on a consistent basis throughout the periods involved, except, in the case of any proposed adoption, amendmentunaudited interim financial statements, for the omission of footnotes and normal, immaterial year-end adjustments.
(b)Except as set forth in Section 3.10(b) of the Company Disclosure Schedules, no member of the Company Group has applied for or repealaccepted any loan or other benefit made available by the CARES Act.
(c)Section 3.10(c) of the Company Disclosure Schedules sets forth a true, correct and complete list of all Indebtedness for borrowed money of the Company Group as of the Agreement Date, including, for each such item, the Contract governing such item and the interest rate, maturity date, any assets securing such instrument and any prepayment or other penalties payable in connection with the repayment of such instrument at the Closing.
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(d)The Company Group has established and maintain a system of internal accounting controls sufficient to provide reasonable assurances (i) that transactions, receipts and expenditures of the Company Group are being executed and made only in accordance with appropriate authorizations of management and the applicable board of directors and (ii) that transactions are recorded as necessary to permit preparation of financial statements in conformity with the Accounting Standards. No member of the Company Group or, to the Knowledge of the Company, its independent auditors or any current employee, consultant or director of a member of the Company Group has identified or been made aware of any fraud, whether or not material, that involves a member of the Company Group’s management or other current or former employees, consultants or directors of any member of the Company Group who have a role in the preparation of financial statements or the internal accounting controls utilized by the Company Group, or any claim or allegation regarding any of the foregoing. No member of the Company Group has received and the Company has no Knowledge of any material written complaint, allegation, assertion or claim, in each case, regarding deficient accounting or auditing practices, procedures, methodologies or methods of the Company Group or its internal accounting controls or any material inaccuracy in the financial statements of the Company Group. There are no significant deficiencies or material weaknesses in the design or operation of the Company Group’s internal controls that would reasonably be expected to adversely affect the Company Group’s ability to record, process, summarize and report financial data. There has been no change in the Company Group’s accounting policies since January 1, 2017, except as described in the Financial Statements.
(e)Except as set forth in Section 3.10(e) of the Company Disclosure Schedules, the accounts receivable of the Company Group (collectively, the “Accounts Receivable”) as reflected on the Company Balance Sheet and as will be reflected in the Estimated Closing Statement arose in the Ordinary Course of Business and represent bona fide claims against debtors for sales and other charges, and have been collected or are collectible in the book amounts thereof within one-hundred and fifty (150) days following the applicable invoice date, less an amount not in excess of the allowance for doubtful accounts provided for in the Company Balance Sheet or in the Estimated Closing Statement, as the case may be. Allowances for doubtful accounts have been prepared in accordance with Accounting Standards consistently applied. To the Knowledge of the Company, none of the Accounts Receivable is subject to any claim of offset, recoupment, set-off or counter-claim. Except as set forth in Section 3.10(e) of the Company Disclosure Schedules, no Person has any Encumbrance on any Accounts Receivable, and no agreement for deduction or discount has been made with respect to any such Accounts Receivable. Section 3.10(e) of the Company Disclosure Schedule sets forth, as of the Agreement Date, an aging of the Accounts Receivable in the aggregate.
3.11Liabilities. The Company Group does not have any Liabilities of any nature other than (a) those set forth or adequately provided for in the balance sheet included in the Financial Statements as of September 30, 2021 (such date, the “Company Balance Sheet Date” and such balance sheet, the “Company Balance Sheet”), (b) those incurred in the conduct of the Company’s business since the Company Balance Sheet Date in the Ordinary Course of Business and do not result from any material breach of Contract or violation of Law and (c) those incurred by the Company Group in connection with the execution of this Agreement. Except for Liabilities reflected in the Financial Statements, no member of the Company Group has any material off-balance sheet Liability of any nature to any Third Parties or entities, the purpose or effect of which is to defer, postpone, reduce or otherwise avoid or adjust the recording of expenses incurred by the Company Group. All reserves that are set forth in or reflected in the Company Balance Sheet have been established in accordance with the Accounting Standards consistently applied. Without limiting the generality of the foregoing, no member of the Company Group currently guarantees any debt or other obligation of any other Person.
3.12Taxes. Except as provided in Section 3.12 of the Company Disclosure Schedules:
(a)Each member of the Company Group, and any consolidated, combined, unitary or aggregate group composed of members of the Company Group for Tax purposes, has timely filed all federal income Tax Returns and other material Tax Returns it is required to have filed. All Tax Returns filed by or with respect to any member of the Company Group are accurate, complete and correct in all material respects.
(b)Each member of the Company Group has paid in full all material Taxes required to have been paid. All Taxes due in connection with the operations of each member of the Company Group until the Closing Date have been paid in full. No member of the Company Group has any Liability for Taxes in excess of the amounts so
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paid, except for Taxes which are not yet due and payable or Taxes of other members of the Parent Group which shall be paid by other members of the Parent Group.
(c)The Company Balance Sheet reflects all Liabilities for unpaid Taxes of the Company Group for periods (or portions of periods) through the Company Balance Sheet Date, except for Taxes of other members of the Parent Group which shall be paid by other members of the Parent Group. The Company Group does not have any Liability for unpaid Taxes accruing after the Company Balance Sheet Date except for Taxes arising in the Ordinary Course of Business subsequent to the Company Balance Sheet Date and Taxes of other members of the Parent Group which shall be paid by other members of the Parent Group. The Company Group has no Liability for Pre-Closing Taxes that is not included in the calculation of Closing Indebtedness except for Taxes of other members of the Parent Group which shall be paid by other members of the Parent Group.
(d)Within the last five (5) years, no claim has been made by any Governmental Authority in any jurisdiction where a member of the Company Group does not file Tax Returns that such member is or may be subject to Tax by that jurisdiction.
(e)Section 3.12(e) of the Company Disclosure Schedules sets forth a complete and accurate listing of (i) all types of Taxes paid, and all types of Tax Returns filed, by or on behalf of each member of the Company Group and (ii) all of the jurisdictions in which each member of the Company Group files such Tax Returns.
(f)No extensions or waivers of statutes of limitations with respect to the Tax Returns have been given by or requested from the Company or any of its Subsidiaries (except for extensions to file Tax Returns that are granted automatically under applicable Law).
(g)There is (i) no past or pending audit of, or Tax controversy associated with, any Tax Return of a member of the Company Group that has been or is being conducted by a Tax Authority which has not been fully settled or resolved and (ii) no other procedure, proceeding or contest of any refund or deficiency in respect of Taxes pending or on appeal with any Governmental Authority.
(h)All deficiencies asserted or assessments made against any member of the Company Group as a result of any examinations by any Tax Authority have been fully paid.
(i)There are no Encumbrances for Taxes upon the assets of any member of the Company Group other than Encumbrances arising by operation of Law for Taxes not yet due and payable.
(j)The Company Group has collected and remitted all sales, use, value added, ad valorem, personal property and similar Taxes (“Sales Taxes”) with respect to sales made or services provided and, for all sales or provision of services that are exempt from Sales Taxes and that were made without charging or remitting Sales Taxes, the Company Group has received and retained any required Tax exemption certificates or other documentation qualifying such sale or provision of services as exempt.
(k)Except as provided in Section 3.12(k) of the Company Disclosure Schedules, no member of the Company Group is party to or bound by any Tax indemnity, Tax sharing, Tax allocation or similar agreement, and no member of the Company Group has any Liability or potential Liability to any Third Party under any such agreement.
(l)No member of the Company Group is party to and has not requested any closing agreement (as described in Section 7121 of the Code or any corresponding, analogous, or similar provision under any state, local or foreign Law related to Taxes), offer in compromise, technical advice memoranda, private letter ruling or other similar agreement with any Tax Authority.
(m)No member of the Company Group has ever entered into any “listed transaction” as defined in Treasury Regulations Section 1.6011-4(b) or any similar provision under state, local or foreign law. Each member of the Company Group has disclosed on its U.S. federal income Tax Returns all positions taken therein that could give rise to a “substantial understatement of income tax” within the meaning of Section 6662 of the Code (or any comparable, analogous or similar provision under any state, local or foreign Law related to Taxes).
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(n)HoldCo has (i) at all times since its formation been a “C corporation” within the meaning of Section 1361(a)(2) of the Code; (ii) except for being a member of the Parent Group, never been a member of an affiliated group of corporations, within the meaning of Section 1504 of the Code (or any predecessor provision or comparable provision of state, local or foreign Law), or a member of a combined, consolidated or unitary group for state, local or foreign Tax purposes; and (iii) except for Taxes of other members of the Parent Group which shall be paid by other members of the Parent Group, no Liability for Taxes of any Person under Treasury Regulations Section 1.1502-6 (or any corresponding provision of state, local or foreign Law related to income Taxes), as transferee or successor, by Contract or otherwise.
(o)No member of the Company Group has ever been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code.
(p)No member of the Company Group is a party to any joint venture, partnership or other arrangement or Contract that could reasonably be expected to be treated as a partnership for Tax purposes.
(q)Except as provided in Section 3.12(p) of the Company Disclosure Schedules, no member of the Company Group is a “United States shareholder” within the meaning of Section 951(b) of the Code with respect to any “controlled foreign corporation” within the meaning of Section 957(a) of the Code or “deferred foreign income corporation” within the meaning of Section 965(d)(1) of the Code. No member of the Company Group is subject to Tax in any jurisdiction other than the jurisdiction in which it is formed or organized by virtue of having employees, a permanent establishment or any other place of business in such jurisdiction.
(r)No member of the Company Group owns any equity interest in an entity that is or, at any time when the Company Group owned such interest, was treated as a passive foreign investment company within the meaning of Section 1297(a) of the Code with respect to such member of the Company Group.
(s)No member of the Company Group has ever been a “distributing corporation” or a “controlled corporation” in connection with a distribution described in Section 355 of the Code.
(t)Each member of the Company Group has withheld and paid all material Taxes required to be withheld in connection with any amounts paid or owing to any employee, creditor, independent contractor or other Third Party.
(u)No member of the Company Group (i) has agreed, or is required, to make any adjustment under Section 481(a) of the Code by reason of a change in accounting method or otherwise for a Pre-Closing Tax Period; (ii) has made an election, or is required, to treat any of its assets as owned by another Person pursuant to the provisions of former Section 168(f) of the Code or as tax-exempt bond financed property or tax-exempt use property within the meaning of Section 168 of the Code; (iii) has acquired, or owns, any assets that directly or indirectly secure any debt the interest on which is tax exempt under Section 103(a) of the Code; or (iv) has made any of the foregoing elections, or is required to apply any of the foregoing rules, under any comparable state or local Law related to Taxes.
(v)No member of the Company Group will be required to include in a Post-Closing Tax Period taxable income attributable to income that accrued (for purposes of financial statements) in a Pre-Closing Tax Period but was not recognized for Tax purposes in any Pre-Closing Tax Period as a result of (i) the installment method of accounting, the completed contract method of accounting, the long-term contract method of accounting, or the cash method of accounting, (ii) any prepaid amount received or paid in a Pre-Closing Tax Period, (iii) any deferred intercompany transaction in a Pre-Closing Tax Period or excess loss account, (iv) a change in method of accounting or Section 481 of the Code in a Pre-Closing Tax Period, (v) except with respect to MGT Canada, any inclusion under Section 951(a) or Section 951A of the Code, (vi) any gain recognition agreement entered into in a Pre-Closing Tax Period, (vii) any transaction under which previously utilized Tax losses or credits may be recaptured (including a dual consolidated loss or an excess loss account), (viii) Section 1400Z-2(a)(1)(A) of the Code, or (ix) any comparable provisions of state or local Tax law, domestic or foreign, or for any other reason. The Company Group has not made an election pursuant to Section 965(h) of the Code to pay the net tax liability under Section 965 of the Code in installments.
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(w)No member of the Company Group has applied for and not yet received a ruling or determination from a Tax Authority regarding a past or prospective transaction.
(x)Each member of the Company Group has (i) to the extent deferred, properly complied in all respects with applicable Law in order to defer the amount of the employer’s share of any “applicable employment taxes” under Section 2302 of the CARES Act, and (ii) to the extent applicable, eligible, and claimed, properly complied in all material respects with applicable Law and duly accounted for any available Tax credits under Sections 7001 through 7004 of the Families First Coronavirus Response Act and Section 2301 of the CARES Act, and (iii) not deferred any payroll Tax obligations (including those imposed by Sections 3101(a) and 3201 of the Code) (for example, by a failure to timely withhold, deposit or remit such amounts in accordance with the applicable provisions of the BylawsCode and the Treasury Regulations) pursuant to or in connection with any U.S. presidential memorandum or executive order, and (iv) not sought a PPP Loan.
(y)No event has occurred with respect to a Company Benefit Plan that would be treated by Section 409A(b) of the Code as a transfer of property for purposes of Section 83 of the Code. No member of the Company Group is under any obligation to gross up any Taxes under Section 409A of the Code.
(z)Except as set forth on Section 3.12(z) of the Company Disclosure Schedule, there is no agreement, plan, arrangement or other Contract covering any current or former employee or other service provider of a member of the Company Group to which a member of the Company Group or any of their ERISA Affiliate is a party or by which a member of the Company Group or any of its ERISA Affiliates or their assets are bound that, considered individually or considered collectively with any other such agreements, plans, arrangements or other Contracts, will, or would reasonably be expected to, as a result of the Transactions (whether alone or upon the occurrence of any additional or subsequent events), give rise directly or indirectly to the payment of any amount that would reasonably be expected to be non-deductible under Section 162 of the Code (or any corresponding or similar provision of state, local or foreign Tax law) or, disregarding any arrangements implemented by or at the direction of Acquirer, be characterized as a “parachute payment” within the meaning of Section 280G of the Code (or any corresponding or similar provision of state, local or foreign Tax law).
(aa) Notwithstanding anything to the contrary in this Agreement, (x) this Section 3.12 and Section 3.18 set forth the sole and exclusive representations and warranties regarding Tax matters of the Company Group, (y) Seller, members of the Company Group and their Affiliates are not making, and shall not be construed to have made, any representation or warranty as to the amount of, or Acquirer’s or any other Person’s ability to utilize, any net operating loss, tax credit, tax basis or other Tax attribute in any taxable period (or portion thereof) beginning after the Closing Date and (z) none of the representations in this Section 3.12 (except for subsections (l), (n), (t), (u) and (w) of this Section 3.12) may be relied upon or form a basis to claim indemnification for or relating to Taxes for any taxable period (or portion thereof) beginning after the Closing Date.
3.13Compliance with Law.
(a)The operation of the business of each member of the Company Group has been conducted in material compliance with all Laws and Orders applicable to such member or its business and all Permits required for the operation of its business, properties and assets. Except as set forth in Section 3.13(a) of the Company Disclosure Schedule, no member of the Company Group has received any written notice to the effect that, or otherwise been advised in writing that it is not in material compliance with any such Laws, Orders or Permits.
(b)No member of the Company Group, nor any of the officers or directors of a member of the Company Group has, directly or indirectly, (i) taken any action in violation of any Law relating to anticorruption matters, including the FCPA, or (ii) offered, paid, given, promised to pay or give, or authorized the payment or gift of anything of value, directly or indirectly, to any Public Official, for purposes of (A) influencing any act or decision of any Public Official in his or her official capacity, (B) inducing such Public Official to do or fail to do any act in violation of his or her lawful duty, (C) securing any improper advantage or (D) inducing such Public Official to use his or her influence with a Governmental Authority, or commercial enterprise owned or controlled by any Governmental Authority (including state-owned or controlled veterinary or medical facilities), in order to assist the Company or any Person related to the Company, in obtaining or retaining business. None of the Representatives of
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the Company or any of its Subsidiaries are themselves Public Officials. There have been no false or fictitious entries made in the books or records of the Company or any of its Subsidiaries relating to any payment that the FCPA prohibits, and neither the Company nor any of its Subsidiaries has established or maintained a secret or unrecorded fund for use in making any such payments.
(c)No member of the Company Group, nor any of the officers or directors of a member of the Company Group has, directly or indirectly, taken any action in violation of any Law relating to export control, trade or economic sanctions, or antiboycott, in the U.S. or any other jurisdiction, including: the Arms Export Control Act (22 U.S.C.A. § 2278), the Export Administration Act (50 U.S.C. App. §§ 2401-2420), the International Traffic in Arms Regulations (22 C.F.R. 120-130), the Export Administration Regulations (15 C.F.R. 730 et seq.), the Office of Foreign Assets Control Regulations (31 C.F.R. Chapter V), the Customs Laws of the United States (19 U.S.C. § 1 et seq.), the International Emergency Economic Powers Act (50 U.S.C. § 1701-1706), the U.S. Commerce Department antiboycott regulations (15 C.F.R. 560), the U.S. Treasury Department antiboycott requirements (26 U.S.C. § 999), any other export control regulations issued by the agencies listed in Part 730 of the Export Administration Regulations, or any Law outside of the United States of a similar nature. No member of the Company Group or any of their respective Representatives is listed on the U.S. Office of Foreign Assets Control “Specifically Designated Nationals and Blocked Persons” or any other similar list.
3.14Permits. Section 3.14 of the Company Disclosure Schedules sets forth a complete and correct list of all material Permits used by the Company Group in the operation of the Business, all of which are valid and in full force and effect. Complete and correct copies of such Permits have been Delivered to Acquirer. Each member of the Company Group has all Permits required in the operation of the Business, and such Permits are in full force and effect and are owned by the applicable member of the Company Group free and clear of all Encumbrances except Permitted Encumbrances, except for such Permits which the failure to hold would not be reasonably likely to be material to the applicable member of the Company Group. No member of the Company Group is in material Default, or has received any written notice of any claim of material Default, with respect to any such Permit. No suspension or cancellation of any such Permits is pending or, to the Company’s Knowledge, threatened.
3.15Regulatory Matters.
(a)Except as set forth in Section 3.15(a) of the Company Disclosure Schedules, each member of the Company Group is, and since inception each member of the Company Group has been, in material compliance with all applicable Health Care Laws. Except as set forth in Section 3.15(a) of the Company Disclosure Schedules, no member of the Company Group has received any notice or other communication from any Governmental Authority alleging any violation of any Health Care Law with respect to such activities. Except as set forth in Section 3.15(a) of the Company Disclosure Schedules, no member of the Company Group has received any notice or other written communication from any applicable Governmental Authority alleging any violation of any Health Care Law.
(b)Section 3.15(b) of the Company Disclosure Schedules sets forth a complete and correct list of all products that are being researched or under development by or on behalf of any member of the Company Group as of the Agreement Date. All Company Products are in material compliance with all applicable requirements under the Health Care Laws, including all requirements relating to research, storing, testing, record-keeping, reporting, import and export. Except as set forth in Section 3.15(b) of the Company Disclosure Schedules, no member of the Company Group has received any notice or other communication from the FDA or any other Governmental Authority alleging any violation of such requirements.
(c)All studies performed in connection with or as the basis for any Regulatory Permit or Regulatory Approval required for any Company Product either (i) have been conducted in accordance, in all material respects, with applicable requirements or (ii) have employed in all material respects the procedures and controls generally used by qualified experts. No member of the Company Group has received any notice or other written communication from an applicable Governmental Authority requiring the termination or suspension or material modification of any study with respect to any Company Products. No member of the Company Group collected, maintained, altered, or reported data from any study performed in connection with or as the basis for any Regulatory Permit, Regulatory Approval required for the Company Products in a manner that, if such data were reported to the
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FDA or another Regulatory Authority, would be or would result in an untrue statement of material fact or fraudulent statement to the FDA or any other Regulatory Authority.
(d)All clinical trials conducted by or on behalf of any member of the Company Group have been conducted in compliance in all material respects with all applicable Laws. No clinical trial conducted by or on behalf of any member of the Company Group has been terminated or suspended prior to completion primarily for safety reasons. No applicable Governmental Authority, clinical investigator who has participated or is participating in, or Institutional Review Board that has or has had jurisdiction over, a clinical trial conducted by or on behalf of any member of the Company Group has commenced, or threatened to initiate, any action to place a clinical hold order on, or otherwise terminate, delay or suspend, any ongoing clinical investigation conducted by or on behalf of any member of the Company Group.
(e)Holdco2 has Delivered to Acquirer true, complete and correct copies of all material Regulatory Documentation in its possession or control related to the Company Products. Each applicable member of the Company Group has filed with the applicable Regulatory Authority all required filings. All such filings were in material compliance with all applicable Laws when filed, and no deficiencies have been asserted in writing by any applicable Regulatory Authority with respect to any such filings.
(f)The Company has no Knowledge of any fact that would reasonably be expected to materially impact, limit, or alter any existing Regulatory Permit or Regulatory Approval for any Company Product in any applicable jurisdiction.
(g)No member of the Company Group is a party to any corporate integrity agreement, deferred prosecution agreement, consent decree, settlement order or similar agreement with or imposed by any Governmental Authority, and no such action is pending as of the date hereof. No member of the Company Group is subject to any material enforcement, regulatory or administrative proceedings against or affecting the Company or any of its Subsidiaries relating to or arising under any Health Care Law and no such enforcement, regulatory or administrative proceeding has been threatened. No member of the Company Group has made and is not in the process of making any voluntary self-disclosure to any Governmental Program or Governmental Authority, including any voluntary self-disclosures to the Centers for Medicare & Medicaid Services (“CMS”).
(h)All applications, information and other data and conclusions derived therefrom provided to an applicable Regulatory Authority with respect to the Company Products, when submitted by the applicable member of the Company Group, and to the Knowledge of the Company to a Regulatory Authority with respect to the Company Products, were true, complete, and correct in all material respects as of the date of submission by or on behalf of such member of the Company Group. No member of the Company Group: (i) has (A) been placed under or otherwise made subject to or (B) committed an act, made a statement, or failed to make a statement that, at the time such disclosure was made, would reasonably be expected to provide a basis for an applicable Governmental Authority to invoke its Application Integrity Policy “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities,” set forth in 56 Fed. Reg. 46191 (September 10, 1991) or any similar policy; (ii) has been charged with or convicted of any criminal offense relating to the delivery of an item or service under any Governmental Program; (iii) has been subject to, or convicted of any crime or engaged in any conduct that would reasonably be expected to result in, disqualification, debarment, deregistration, exclusion, or suspension from participation in any Governmental Program, or otherwise under 42 U.S.C. Section 1320a-7b(f), 21 U.S.C. Section 335a or any similar Law; (iv) has had a civil monetary penalty assessed against it, him or her under Section 1128A of the Social Security Act, codified at Title 42, Chapter 7, of the United States Code; (v) is currently listed on the United States General Services Administration published list of parties excluded from federal procurement programs and non-procurement programs; or (vi) to the Knowledge of the Company, is the target or subject of any current or potential investigation relating to any Governmental Program-related offense.
(i)Each member of the Company Group has operated and currently are in material compliance with the Clinical Laboratory Improvement Amendments of 1998 (“CLIA”), all applicable rules and regulations of all Governmental Authorities engaged in regulation of clinical laboratories or biohazardous materials, and all Regulatory Permits. No member of the Company Group has received written notice from any such governmental agencies or bodies requiring the termination, suspension, clinical hold or material modification of any tests, studies
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or trials conducted by or on behalf of any member of the Company Group. No suspension, revocation, termination, sanction, corrective action or limitation of any currently existing CLIA certification or accreditation of any member of the Company Group is pending or threatened. Section 3.15(i) of the Company Disclosure Schedules sets forth a complete and correct list of (i) all Regulatory Permits and Regulatory Approvals used in the operation of the Company Group’s business or otherwise held by any member of the Company Group and (ii) all laboratory developed tests developed or offered by or on behalf of any member of the Company Group.
(j)(x) Each member of the Company Group has in effect all Regulatory Permits required by any applicable Regulatory Authority to permit the conduct of its business as currently conducted, (y) all of such Regulatory Permits and Regulatory Approvals are in full force and effect and (z) each member of the Company Group is in compliance with, and is not in default under, any such Regulatory Permit or Regulatory Authorization.
(k)Except as set forth on Section 3.15(k) of the Company Disclosure Schedules, no member of the Company Group has (i) received advance payments (“Medicare Advance Payments”) from CMS pursuant to the Accelerated and Advance Payment Program (the “Medicare Advance Payment Program”) or (ii) received proceeds from funds appropriated in the Public Health and Social Services Emergency Fund for relief under Division B of Public Law 116-127 (“HHS Grants”). Each member of the Company Group has deployed any such proceeds in compliance in all material respects with all applicable Laws governing the HHS Grants and have maintained accounting records associated with the HHS Grants in material compliance with all the terms and conditions of all applicable CARES Act relief programs.
3.16Litigation. Except as set forth in Section 3.16 of the Company Disclosure Schedules, there is no, and since January 1, 2019 there has not been any, Proceeding (a) pending or, to the Company’s Knowledge, threatened against or affecting any member of the Company Group or their business, (b) pending or, to the Company’s Knowledge, threatened against any Person whose Liability any member of the Company Group has retained or assumed, either contractually or by operation of Law, or (c) pending or, to the Company’s Knowledge, threatened against any stockholder, officer, director or employee of any member of the Company Group in connection with such stockholder’s, officer’s, director’s or employee’s relationship with, or actions taken on behalf of, such member of the Company Group. No member of the Company Group is a party to or named in, and none of its properties or assets are subject to, any Order.
3.17Employment Matters.
(a)Section 3.17(a) of the Company Disclosure Schedules contains a complete and correct list of each employee of each member of the Company Group and each employee of Seller or any of its Subsidiaries who, as of the Agreement Date, is expected to become an employee of a member of the Company Group prior to the Closing Date (collectively, the “In-Scope Employees”), including for each such employee: name, job title, date of hire, work location and employee entity. As soon as practicable following the Agreement Date, the Company shall provide to Acquirer each In-Scope Employee’s classification status under the Fair Labor Standards Act, full time or part time status and immigration status. Seller has provided to counsel to Acquirer, on an outside counsel only basis, a true and correct list of the following for each In-Scope Employee: annual base salary or wage, annual target incentive or bonus compensation for the current fiscal year and the prior fiscal year, and accrued paid time off. To the Company’s Knowledge, no Key Employee is a party to, or is otherwise bound by, any agreement or arrangement with any Third Party, including any confidentiality or non-competition agreement, that adversely affects or restricts the performance of such employee’s duties for the applicable member of the Company Group. To the Company’s Knowledge, no In-Scope Employee has provided written notice to terminate his or her relationship with his or her employing member of the Company Group. To the Company’s Knowledge, each employee of each member of the Company Group is (i) a citizen or lawful permanent resident of the jurisdiction in which such employee resides, or (ii) an alien authorized to work in the jurisdiction in which such employee resides either specifically for the Company or for any other employer in such jurisdiction. Except as set forth in Section 3.17(a) of the Company Disclosure Schedules, each member of the Company Group has completed a Form I-9 (Employment Eligibility Verification) for each of their employees. No employee of any member of the Company Group has a principal place of employment outside the United States or is subject to the labor and employment laws of any country other than the United States. Except as set forth in Section 3.17(a) of the Company Disclosure Schedules, the employment of each of the employees of each member of the Company Group is “at will” and no member of the Company Group
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has any obligation to provide any particular form or period of notice prior to terminating the employment of any of its employees. As of the Agreement Date, no member of the Company Group has (i) entered into any Contract that obligates or purports to obligate Acquirer to make an offer of employment to any present or former employee or consultant of any member of the Company Group or (ii) promised or otherwise provided any assurances (contingent or otherwise) to any present or former employee or consultant of any member of the Company Group of any terms or conditions of employment with Acquirer following the Effective Time.
(b)No member of the Company Group has, and no member of the Company Group would reasonably be expected to have, any Liability with respect to any Taxes (or the withholding thereof) in connection with any independent contractor, consultant or other non-employee service provider of the Company Group (or who served in such capacity since January 1, 2017 (collectively, “Contractors”)). To the Company’s Knowledge, no Contractor is a party to, or is otherwise bound by, any agreement or arrangement with any Third Party, including any confidentiality or non-competition agreement, that in any way adversely affects or restricts the performance of such Contractor’s duties for any member of the Company Group. No current Contractor used by any member of the Company Group has provided written notice to terminate his, her or its relationship with any member of the Company Group. Each member of the Company Group has properly classified each Contractor ever retained by the Company as an “independent contractor” pursuant to the Code and other applicable Laws.
(c)No member of the Company Group has, at any time, been a party to or had any obligations under a collective bargaining, works council or similar agreement, in each case in respect of the Business. No member of the Company Group has experienced at any time, nor to the Company’s Knowledge, is there now threatened, any walkout, union activity, work stoppage, any effort to organize or other similar occurrence or any attempt to organize or represent the labor force of such member of the Company Group or strike. No union or other collective bargaining unit or employee organizing entity has been certified or recognized by a member of the Company Group as representing any of its employees.
(d)All members of the Company Group are in compliance in all material respects with all Laws relating to labor and employment, including with respect to employment practices, worker classification, wages and hours, duration of work, overtime, collective bargaining, discrimination, leaves of absence, immigration, civil rights, safety and health, workers’ compensation, pay equity, the collection and payment of withholding and social security Taxes, and other employment-related Taxes. Each member of the Company Group has, or will have no later than the Closing Date, paid all accrued salaries, bonuses, commissions, wages, severance and accrued vacation pay of the employees due to be paid through the Closing Date. No member of the Company Group has committed any unfair labor practice in connection with the conduct of the Business. There are no Proceedings pending or, to the Company’s Knowledge, threatened between any member of the Company Group, on the one hand, and any of such member’s current employees or independent contractors or former employees or independent contractors, on the other. No review, complaint or Proceeding by any Governmental Authority or current or former employee or Contractor with respect to any member of the Company Group in relation to the employment or engagement of any individual is pending or, to the Company’s Knowledge, threatened, nor has any member of the Company Group received any notice from any Governmental Authority indicating an intention to conduct the same in the future. No member of the Company Group is liable for any payment to any trust or other fund or to any Governmental Authority, with respect to unemployment compensation benefits, social security or other benefits or obligations for employees (other than routine payments to be made in the normal course of business and consistently with past practice). No member of the Company Group has any obligations under COBRA with respect to any former employees or qualifying beneficiaries thereunder.
(e)The Company has Delivered to Acquirer true and correct copies of each of the following with respect to each member of the Company Group, in each case that are currently used in the Business and solely if the Company or such member of the Company Group has a standard form: (i) all forms of offer letters, (ii) all forms of employment agreements and severance agreements, (iii) all forms of services agreements and agreements with current consultants and/or advisory board members and (iv) all forms of confidentiality, non-competition or inventions agreements between current and former employees/consultants and the Company Group.
(f)In the past two years, (i) no member of the Company Group has effectuated a “plant closing” (as defined in the Worker Adjustment Retraining Notification Act of 1988, as amended (the “WARN Act”)), or any
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similar state or local law, affecting any site of employment or one or more facilities or operating units within any site of employment or facility of its business, (ii) there has not occurred a “mass layoff” (as defined in the WARN Act) affecting any site of employment or facility of the Company or any of its Subsidiaries and (iii) no member of the Company Group has been affected by any transaction or engaged in layoffs or employment terminations sufficient in number to trigger application of any similar state, local or foreign law or regulation.
(g)No allegations of sexual harassment or sexual misconduct have been made to any member of the Company Group against any director, officer or other employee of any member of the Company Group and, to the Company’s Knowledge, there have not been any such allegations. There are no disciplinary actions pending against any of the employees of any member of the Company Group.
3.18Employee Benefit Plans.
(a)Section 3.18(a) of the Company Disclosure Schedules contains a complete and correct list, as of the date hereof, of each Benefit Plan maintained or sponsored by any member of the Company Group (each, a “Company Benefit Plan”) and each Benefit Plan contributed to or required to be contributed to by a member of the Company Group, but which is not sponsored by a member of the Company Group (each, a “ Seller Benefit Plan” and collectively, the “Seller Benefit Plans”); provided, that Company Benefit Plans that are independent contractor agreements with independent contractors whose annual compensation is less than $100,000 are not required to be listed in Section 3.18(a) of the Company Disclosure Schedules. No Company Benefit Plan is subject to any Laws other than those of the United States or any state, county or municipality in the United States. No member of the Company Group has or would reasonably be expected to have any Liability under any Benefit Plan maintained, contributed to or required to be contributed to by any ERISA Affiliate of the Company or any of its Subsidiaries other than the Seller Benefit Plans.
(b)With respect to each Company Benefit Plan, the Company has Delivered to Acquirer an accurate and complete copy of: (i) the current plan document, as amended through the Agreement Date, or a written summary of any unwritten Company Benefit Plan, (ii) the current summary plan description (if required) and any material modifications thereto, (iii) any annual reports on Forms 5500 to the extent applicable, (iv) material contracts including trust agreements, insurance contracts, and administrative services agreements, (v) the most recent determination or opinion letters for any plan intended to be qualified under Section 401(a) of the Code and (vi) any material correspondence with the Department of Labor, Internal Revenue Service or any other Governmental Authority regarding the plan in the past twelve (12) months.
(c)On or prior to the Closing Date, each applicable member of the Company Group shall have made all contributions required to be made to or with respect to each Company Benefit Plan and each Seller Benefit Plan by the Company Group on or prior to the Closing Date or accrued any such amounts in accordance with the past custom and practice of each member of the Company Group. No Company Benefit Plan is intended to include a Code Section 401(k) arrangement.
(d)There has been no amendment to, written interpretation or announcement (whether or not written) by the any member of the Company Group or any ERISA Affiliate relating to, or change in participation or coverage under, any Company Benefit Plan that would materially increase the expense of maintaining such Company Benefit Plan above the level of expense incurred with respect to such Company Benefit Plan for the most recent full fiscal year included in the Financial Statements.
(e)Each Company Benefit Plan has been, since January 1, 2017, in all material respects, established, maintained and administered in accordance with its terms and with all provisions of ERISA, the Code and other applicable Laws. No actions, investigations, suits or claims with respect to any Company Benefit Plan or, to the extent relating to the Company Group or any of their current and former employees, Seller Benefit Plan are pending or, to the Company’s Knowledge, threatened, in each case excluding routine claims for benefits. No employee of any member of the Company Group is a “leased employee” within the meaning of Section 414(n) of the Code. The Company Group is in compliance in all material respects with the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010. With respect to each Company Benefit Plan in the past three (3) years, (i) no lien has been imposed under the Code, ERISA or any other applicable law, and (ii) no member
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of the Company Group has made any filing in respect of such Company Benefit Plan under the Employee Plans Compliance Resolution System, the Department of Labor Delinquent Filer Program or any other voluntary correction program. No Company Benefit Plan is sponsored by a human resources and benefits outsourcing entity or professional employer organization.
(f)Each Company Benefit Plan and Seller Benefit Plan that is approvedintended to be qualified within the meaning of Section 401(a) of the Code is so qualified and has received a favorable determination letter from the IRS (or, if such plan is a prototype or volume submitter plan document, such prototype or volume submitter plan document has received a favorable opinion from the IRS that the form meets the tax qualification requirements and the applicable member of the Company Group or Parent Group is entitled to rely on such favorable opinion) to the effect that such Company Benefit Plan or Seller Benefit Plan satisfies the requirements of Section 401(a) of the Code in form and that its related trust is exempt from taxation under Section 501(a) of the Code.
(g)No member of the Company Group has any obligation to provide post-retirement or post-termination medical or life insurance benefits to any current or former employee, officer, Contractor, or director, or any dependent or beneficiary thereof, other than as required under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) or similar state law for which the covered individual pays the full cost of coverage. There has been no “prohibited transaction” (within the meaning of Section 406 of ERISA and Section 4975 of the Code and not exempt under Section 408 of ERISA and regulatory guidance thereunder) with respect to any Company Benefit Plan. No member of the Company Group or any ERISA Affiliate is subject to Liability or penalty under Sections 4967 through 4980 of the Code or Title I of ERISA with respect to any Company Benefit Plans. No member of the Company Group or any of its ERISA Affiliates sponsors, maintains or contributes or is obligated to contribute to, or has incurred any liability with respect to any plan subject to Title IV of ERISA or Section 412 of the Code. No Company Benefit Plan is (i) any “multiemployer plan” within the meaning of Section 4001(a)(3) or 3(37) of ERISA, (ii) any “multiple employer plan” within the meaning of Section 4063 or 4064 of ERISA, (iii) any “multiple employer welfare arrangement” within the meaning of Section 3(40) of ERISA or (iv) any health or other welfare arrangement that is self-insured. No Company Benefit Plan is or has ever been, or currently funds or has ever been funded by, a “voluntary employees’ beneficiary association” within the meaning of Section 501(c)(9) of the Code or other funding arrangement for the provision of welfare benefits. Each Company Benefit Plan that provides health, life or other welfare or welfare-type benefits is fully insured by a third-party insurance company. No member of the Company Group sponsors or maintains any self-funded employee benefit plans providing for health or welfare benefits, including any plan to which a stop-loss policy applies.
(h)Neither the execution and delivery of this Agreement nor the consummation of the Transactions will (either alone or in combination with another event): (i) result in any payment becoming due, or increase the amount of any compensation due, to any current or former employee or Contractor of a member of the Company Group; (ii) increase any benefits otherwise payable under any Company Benefit Plan; (iii) result in the acceleration of the time of payment or vesting of any such compensation or benefits; (iv) result in the triggering or imposition of any restrictions or limitations on the rights of the Company or any of its Subsidiaries to amend or terminate any Company Benefit Plan; or (v) entitle the recipient of any payment or benefit to receive a “gross up” payment for any income or other taxes that might be owed with respect to such payment or benefit.
3.19Intellectual Property.
(a)Section 3.19(a) of the Company Disclosure Schedules accurately and completely sets forth as of the Agreement Date: all (i) Registered Company IP, (ii) material unregistered Trademarks included in the Company Owned IP, (iii) material Software included in the Company Owned IP, (v) other Company Owned IP that is material to the Company Group or its business as currently conducted other than Trade Secrets, and (v) Company IP that is licensed exclusively to a member of the Company Group. For each item of Registered Company IP, Section 3.19(a) of the Company Disclosure Schedules indicates, as applicable, the legal (and record) owner(s) thereof and, if jointly-owned, all joint-owners of such Intellectual Property, the countries and jurisdictions in which such Intellectual Property is registered or in which an application for the same has been filed, the registration or application number, the filing, registration, and expiration dates thereof (as applicable), in the case of unregistered Trademarks, countries of use and approximate dates of first use. All Registered Company IP is subsisting and in full force and effect and, except as set forth in Section 3.19(a) of the Company Disclosure Schedules, to the Knowledge of the Company, the
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registrations forming part of the Registered Company IP are valid and enforceable. The Company Group does not own any patents or patent applications and Seller and its Affiliates do not own or control any patents or patent applications relating to the Business. Section 3.19(a) of the Company Disclosure Schedules also accurately and completely sets forth as of the Agreement Date all Domain Names registered by or used or held for use for the Business by any member of the Company Group, Seller or any Seller Affiliate, including the applicable registrar and expiration date. All of the Domain Names listed in Section 3.19(a) of the Company Disclosure Schedules are registered solely by the Boardapplicable member of the Company Group and submittedare active and all registration fees, renewals or other actions necessary on or before the Agreement Date to maintain such registrations active have been paid, filed and taken. All use of such Domain Names complies with and has complied in all material respects with all terms and conditions, terms of use, terms of service and other Contracts with the applicable registrar for such Domain Names.
(b)To the Knowledge of the Company, the Company Group has sufficient rights to use the Company IP and the Company IT Assets in the manner used by the Company Group in connection with the operation of its Business as currently conducted. The Company IP and Company IT Assets includes all material Intellectual Property and IT Assets, respectively, used or held for use in connection with the operation of the Business as currently conducted, and, to the stockholders for adoption thereby, if two-thirdsKnowledge of the Whole BoardCompany, there are no other items of Intellectual Property or IT Assets that are material to or necessary for the operation of the Company Group’s Business as currently conducted, or for the continued operation of the Company Group’s Business immediately after the Closing in substantially the same manner as currently conducted. Except as set forth in Section 3.19(b) of the Company Disclosure Schedules, the Company Group is the sole and exclusive owner of all right, title and interest in and to each item of Company Owned IP and each IT Asset owned or purported to be owned by the Company Group, free and clear of all Encumbrances and licenses other than Permitted Encumbrances, or any obligation to grant any of the foregoing. The Company Group has approveda license to use the Company Licensed IP in connection with the operation of its Business as currently conducted and proposed to be conducted, subject only to the terms of the applicable Company IP Contracts, and, to the Knowledge of the Company, such adoption, amendmentlicenses are valid.
(c)Except as set forth on Section 3.19(c) of the Company Disclosure Schedules, no member of the Company Group has assigned, transferred, conveyed, or repealgranted any license with respect to (other than licenses granted to Company Group customers in the Ordinary Course of Business), or authorized the retention of any provisionsrights in or joint ownership of, any Company Owned IP or any IT Asset owned or purported to be owned by the Company Group or other Intellectual Property that would have been Company Owned IP or IT Asset owned by the Company Group but for such assignment, transfer, conveyance to third parties or, caused or permitted any Encumbrance to attach to any Company Owned IP or IT Asset owned by the Company Group. Except as set forth on Section 3.19(c) of the Bylaws, then only the affirmative voteCompany Disclosure Schedule, no Person other than a member of the holdersCompany Group has any proprietary, commercial, joint ownership, royalty or other interest in the Company Owned IP or the goodwill, if any, associated therewith.
(d)No member of the Company Group has entered into any Contracts with any other Person (i) that materially limit or restrict use or require any payments for use of the Company Owned IP, the Company Licensed IP (other than the obligations or restrictions expressly contained in the agreement granting such member of the Company Group a license under such Intellectual Property) or Company Products by a member of the Company Group, (ii) pursuant to which any Person other than a member of the Company Group has been granted or retains the right to bring any infringement or other enforcement actions with respect to, or otherwise to enforce, any of the Company Owned IP, (iii) pursuant to which any Person has been granted or retains the right to defend any claim of infringement, misappropriation or other violation arising from the practice or other Exploitation of any of the Company Owned IP or pursuant to which any member of the Company Group expressly agrees to indemnify any Person against any such claim or pursuant to which any member of the Company Group has assumed any existing or potential Liability of another Person for any infringement, misappropriation or other violation of Intellectual Property or similar claim (other than indemnification obligations under Contracts with customers and service providers of the Company Group and Company IP Contracts entered into in the Ordinary Course of Business), or (iv) pursuant to which any Person has been granted or retains the right to control the prosecution of any applications or registrations for Company Owned IP.
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(e)Except as set forth on Section 3.19(e) of the Company Disclosure Schedules, all necessary registration, maintenance and renewal fees and other payments that have become due in connection with the Registered Company IP have been timely paid in full, with the understanding that “timely” includes payment during a grace period, extension period, further processing period, reinstatement period, or any other time period, payment during which will not allow such Registered Company IP to lapse, be cancelled or otherwise be deemed abandoned or lost. All necessary documents, recordations, certificates and other materials in connection with Registered Company IP required to be filed on or before the Agreement Date have been timely filed with the relevant patent, copyright, trademark or other authorities in the United States or foreign jurisdictions, as the case may be, for the purposes of maintaining such Registered Company IP registered in such jurisdiction. Except as set forth on Section 3.19(e) of the Company Disclosure Schedules, there are no actions that must be taken by any member of the Company Group within ninety (90) days of the Agreement Date that, if not taken, will result in the loss or delay of any Registered Company IP, including the payment of any registration, maintenance or renewal fees or the filing of any responses to U.S. Patent and Trademark Office (or equivalent authority) actions, documents, applications or certificates for the purposes of obtaining, maintaining, perfecting or preserving or renewing any Registered Company IP.
(f)Except as set forth on Section 3.19(f) of the Company Disclosure Schedules, since January 1, 2017, no member of the Company Group is, or has been, subject to any proceeding or outstanding decree, Order, judgment, injunction, settlement, action, investigation, opposition, interference, reexamination, cancellation, lawsuit, hearing, investigation, complaint, arbitration, mediation, demand, inquiries or requests for documents or any other Intellectual Property dispute, disagreement, or claim, whether brought by a third party or by a member of the Company Group (including, with respect to Trademarks, invalidity, nullity, opposition, cancelation, concurrent use or similar proceeding), whether by subpoena or informal letter, or any Order restricting the any member of the Company Group’s rights in, to and under any Company IP or Company Product, or the validity, enforceability, use, right to use, ownership, registration, right to register, priority, duration, scope or effectiveness of any Company IP or triggering any additional payment obligations with respect to any such Company IP (collectively, “IP Dispute”), nor has any IP Dispute been threatened against any member of the Company Group challenging the legality, validity, enforceability or ownership of any Company IP or Company Product. To the Knowledge of the Company, no circumstances or grounds exist that would give rise to an IP Dispute. Except as set forth on Section 3.19(f) of the Company Disclosure Schedules, no member of the Company Group has sent any notice of any IP Dispute.
(g)None of the Company Owned IP, or to the Knowledge of the Company, any Company Licensed IP, has been adjudged invalid or unenforceable, in whole or in part, and, except as set forth on Section 3.19(g) of the Company Disclosure Schedules, to the Knowledge of the Company, no facts or circumstances exist that would render any registrations forming part of the Registered Company IP invalid or unenforceable.
(h)Except as set forth in Section 3.19(h) of the Company Disclosure Schedules, in each case in which a member of the Company Group has acquired any material Intellectual Property that it purports to own from any Third Party (including any contractor or consultant) other than, in the case of Copyrights, by operation of law, such member of the Company Group obtained a written assignment, which, to the Knowledge of the Company, is valid and enforceable and sufficient to irrevocably transfer all of such Third Party’s rights in such Intellectual Property to the member of the Company Group and, to the maximum extent provided for by, and in accordance with, applicable laws, for each registration or registration application for Intellectual Property assigned by a Third Party to a member of the Company Group, the applicable member of the Company Group has recorded each such assignment with the relevant Governmental Authority, including, as applicable, the U.S. Patent and Trademark Office, the U.S. Copyright Office, or their respective equivalents in any relevant foreign jurisdiction, as the case may be.
(i)The Company IT Assets perform in a manner that is sufficient for the Company Group to conduct its Business as currently conducted. The Company IT Assets have not materially malfunctioned or failed since January 1, 2017 and do not, to the Knowledge of the Company, contain any viruses, worms, trojan horses, bugs, faults or other devices, errors, contaminants or effects that (i) significantly disrupt or adversely affect the functionality of any Company IT Asset, except as disclosed in their documentation or (ii) enable or assist any Person to access without authorization any Company IT Asset. The Company Group has implemented commercially reasonable backup, security and disaster recovery technology consistent with current industry practices for comparable businesses and have taken commercially reasonable actions consistent with current industry practices
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for comparable businesses to protect the confidentiality, integrity and security of the Company IT Assets and all information and transactions stored or contained on Company IT Assets. To the Knowledge of the Company, no Person has gained unauthorized access to any Company IT Asset. Section 3.19(i) of the Company Disclosure Schedules sets forth an accurate and complete list and description of all material Company IT Assets other than licenses for Commercial Software. All Company IT Assets are (A) owned by a member of the Company Group, or (B) currently in the public domain or otherwise available to the Company Group without the approval or consent of any Person or (C) to the Knowledge of the Company, licensed or otherwise used by the Company Group pursuant to terms of valid, binding written agreements with third parties, or are provided by Seller or its Affiliates for use by the Company Group under a Seller IP Contract.
(j)Except as set forth in Section 3.19(j) of the Company Disclosure Schedules, no Public Software forms part of, is incorporated into or has been distributed, used or compiled with, in whole or in part, any Company Software or any Software included in the Company IT Assets that are distributed by the Company Group to Third Parties.
(k)Each member of the Company Group is in material compliance with the terms and conditions of all licenses for the Public Software that such member of the Company Group has licensed from a Third Party that forms part of, has been used in connection with the development of, is incorporated into used or compiled with, in whole or in part, any Company Software and any Software included in the Company IT Assets. Except as set forth in Section 3.19(k) of the Company Disclosure Schedules, the Company Group does not use, incorporate or distribute Public Software in a manner that, (A) requires or purports to require the licensing, disclosure or distribution of any source code (other than source code that is a part of such Public Software) of any Company Software or any Software included in the Company IT Assets or of Company Owned IP, to licensees or any other Person, (B) prohibits or limits the receipt of consideration in connection with licensing, sublicensing or distributing any Company Software or other Software included in the Company IT Assets, (C) except as specifically permitted by Law, allows any Person to decompile, disassemble or otherwise reverse-engineer any Company Software other Software included in the Company IT Assets or (D) requires the licensing of Company Software or any other Software included in the Company IT Assets to any other Person for the purpose of making derivative works.
(l)Each member of the Company Group, the Company Products, the operation of the Company’s Business as currently conducted, and the use of the Company IP and Company IT Assets in connection the conduct of the Business as currently conducted, has not infringed, misappropriated or otherwise violated and will not infringe, misappropriate, or otherwise violate the Intellectual Property rights of any Third Party, Seller or its Affiliates, provided that the foregoing representation is made to the Knowledge of the Company with respect to Third Party Patents. There is no Proceeding pending, asserted or threatened against any member of the Company Group concerning any of the foregoing, nor, except as set forth in Section 3.19(l) of the Company Disclosure Schedules, has any member of the Company Group and, to the Knowledge of the Company, any licensor of any Company Licensed IP, since January 1, 2017, received any notification (including any invitation to take a license) that a license under any other Person’s Intellectual Property is or may be required or alleging that the Company Group or such licensor (solely with respect to such Company Licensed IP) has infringed, misappropriated or otherwise violated any Person’s Intellectual Property rights. The Company Group, Seller and its Affiliates are not aware of any facts or circumstances which could lead or give rise to any such claim or assertion of infringement, misappropriation or other violation of Intellectual Property. No Person is, to the Knowledge of the Company, engaging, or, except as set forth in Section 3.19(l) of the Company Disclosure Schedules, has engaged, in any activity that infringes, misappropriates or otherwise violates any Company IP, and there is no Proceeding pending, asserted or threatened by a member of the Company Group against any other Person concerning any of the foregoing. No member of the Company Group has received or requested any opinion of counsel, verbal or written, regarding the validity or enforceability of Company IP or any Intellectual Property of a majorityThird Party or regarding the infringement of any Intellectual Property of any Third Party.
(m)To the Knowledge of the votingCompany, no current or former Company Employee, consultant, advisor or independent contractor of any member of the Company Group is in default or breach of any term of any employment agreement, non-disclosure agreement, assignment of invention agreement or similar agreement relating to the protection, ownership, development, use or transfer of Company IP or any other Intellectual Property. Except as set forth in Section 3.19(m) of the Company Disclosure Schedules, the Company Group has obtained from all
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current and former Company Employees, consultants, advisors and independent contractors practice, creation or development of any Company Owned IP (any such Person, an “Author” ), through a written assignment, unencumbered and unrestricted exclusive ownership of all right, title and interest in and to such Company Owned IP and the Company Group has obtained the waiver of all non-assignable rights from such Authors. To the Knowledge of the Company, none of the current or former Company Employees, consultants, advisors and independent contractors is or was, at the time services were provided to the Company Group party to any Contract with any Person other than a member of the Company Group which requires such Company Employee, consultant, advisor or independent contractor to (i) assign any interest in any Intellectual Property that is used or held for use in the conduct of the business of the Company Group as it is currently conducted or proposed to be conducted by the Company Group, to any Person other than a member of the Company Group, or (ii) keep confidential any Trade Secrets of any Person other than a member of the Company Group.
(n)The Company Group has taken commercially reasonable steps to maintain the confidentiality and otherwise protect its rights in all Trade Secrets and other confidential or non-public information or data used or held for use in connection with the operation of the Business(“Confidential Information”). To the Knowledge of the Company, all disclosure of Confidential Information by or on behalf of a member of the Company Group to any Third Party, including any Company Employee or other Person, has been subject to a binding obligation of confidentiality on the part of such Third Party and to the Knowledge of the Company, no such Third Party has breached such obligation. All use, disclosure or appropriation by or on behalf of a member of the Company Group of Confidential Information not owned a member of the Company Group has been in compliance with any applicable legal obligations of the Company Group to the owner of such Confidential Information. To the Knowledge of the Company: (i) no former or current Company Employee, consultant, advisor, independent contractor or agent of any member of the Company Group has misappropriated any Trade Secrets of any other Person in the course of performance as a former or current Company Employee, consultant, advisor, independent contractor or agent of any member of the Company Group and (ii) no Company Employee, independent contractor or agent of any member of the Company Group, is in default or breach of any term of any Contract relating in any way to the protection, ownership, development, use or transfer of the Company IP or any other Intellectual Property.
(o)There are no Contracts pursuant to which (i) any member of the Company Group grants any Third Party, Seller or its Affiliates exclusive rights under any Company IP or (ii) any member of the Company Group grants to a Third Party, Seller or its Affiliates a right to grant sublicenses to Third Parties with respect to any Company Owned IP.
(p)Immediately following the Closing, the Company Group (including, as applicable, the Surviving Entity) will have all of the rights of the Company Group under the Company IP and the Company IP Contracts, and to use the Company IT Assets, to the same extent the applicable member of the Company Group would have had immediately prior to the Closing if the Transactions had not occurred, and without the payment of any additional amounts or consideration other than ongoing fees, royalties or payments that the Company would otherwise be required to pay. Except as set forth in Section 3.19(p) of the Company Disclosure Schedules, there are no royalties, honoraria, fees, milestone or other payments payable by any member of the Company Group to any Person (other than salaries payable to Company Employees not contingent on or related to use of their work product and fees payable under licenses for Commercial Software) as a result of the ownership, use, possession, license-in, license-out, sale, marketing, advertising or disposition of any Company IP by a member of the Company Group, and the execution and delivery of this Agreement and consummation of the Transactions will not result in any such royalties, honoraria, fees or other payments being payable by Acquirer, provided, however, that no representation is made with respect to any such payments becoming payable by Acquirer or its Affiliates based on the respective Contracts of Acquirer and its Affiliates (other than the Company Group) or other obligations or any acts or omissions to act by Acquirer or its Affiliates (other than the Company Group), and provided further that the foregoing representations are made to the Knowledge of the Company with respect to any payments required based on infringement of Third Party Patents. None of the execution and delivery of this Agreement, the consummation of the Transactions, or the performance by the Company Parties of their respective obligations hereunder will result in (i) any increase in or acceleration of royalties or other payments payable by a member of the Company Group, Acquirer or its Affiliates in respect of any Company IP; (ii) reduction of any royalties or other payments the Company Group, or Acquirer or any of its Affiliates would otherwise be entitled to in respect of any Company IP;
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(iii) the creation of any Encumbrance on any Company Owned IP or Intellectual Property that is owned by or licensed to the Acquirer or any of its Affiliates prior to the Closing; (iv) Acquirer or any of its Affiliates being bound by or subject to any non- compete or licensing obligation, covenant not to sue or other restriction on the operation or scope of its business, or in the grant or obligation to grant by Acquirer, any of its Affiliates or the Company Group to any Person of any rights with respect to any Intellectual Property, which Acquirer or its Affiliates were not bound by or subject to prior to the Closing; (v) the modification, cancellation, termination, or suspension of any Company IP Contract; or (vi) the creation or enhancement of the right to do or cause any of the foregoing for any non-Company Group party to any such Contracts, except in each case arising from any Contract or other obligation or any acts or omissions to act of Acquirer or any of its Affiliates (other than the Company Group) and except, in each case, as may occur with respect to the modification or termination of a Seller Contract that is replaced by a new Company IP Contract entered into by the Company to replace a Seller Contract in accordance with Section 5.7(b),
(q)Except as set forth in Section 3.19(q) of the Company Disclosure Schedules, none of the Company Owned IP was developed by or on behalf of, or using grants or any other subsidies of, any Governmental Authority or any university, and no government funding, facilities, faculty or students of a university, college, other educational institution or research center was used in the development of Company Owned IP that has resulted in any such Governmental Authority or any university, faculty or students of a university, college, other educational institution or research center, or any other third party, to acquire or to have a right to acquire any right, title or interest in such Company Owned IP. To the Knowledge of the Company, no current or former Company Employee, consultant, advisor or independent contractor of a member of the Company Group, who was involved in, or who contributed to, the creation or development of any Company Owned IP, has performed services for a Governmental Authority, university, college, or other educational institution or research center during a period of time during which such employee, consultant or contractor was also performing services with respect to development of such Company Owned IP for the applicable member of the Company Group.
3.20Privacy, Data and Data Security.
(a)The Company Group’s data, privacy and security practices conform, and at all times have conformed, to all of the Company Privacy Commitments, Privacy Laws and Company Data Agreements in all material respects. The execution, delivery and performance of this Agreement will not cause, constitute, or result in a breach or violation of any Privacy Laws, Company Privacy Commitments, or any Company Data Agreements by the members of the Company Group, provided, however, that no representation is made with respect to any acts or omissions by Acquirer or its Affiliates (other than the Company Group) with respect to any Company Data. Copies of all current Company Privacy Policies have been Delivered to Acquirer and such copies are true, correct and complete. To the Knowledge of the Company, the Company Group has, and, except as may be affected by notices, consents, waivers or new Contracts described in Section 5.7, the Company Group will have, all rights and consents necessary to collect and Process all Company Data and confidential information collected and Processed by them in the Business of the Company Group. The Company Group is not subject to the European Union General Data Protection Regulation.
(b)The Company Group has established and maintains commercially reasonable technical, physical and organizational controls, policies, procedures, safeguards, measures and security systems, plans and technologies with respect to Processing and security of Personal Data required under applicable data security requirements under applicable Privacy Laws, Company Data Agreements and Company Privacy Commitments. The Company Group and, to the Knowledge of the Company, its data processors have taken commercially reasonable steps to ensure that all employees or other Persons with the right to access Company Data are under obligations of confidentiality with respect to such data.
(c)Except as set forth in Section 3.20(c) of the Company Disclosure Schedules, no member of the Company Group has received or become subject to and, to the Knowledge of the Company, there is no circumstance (including any circumstance arising as the result of an audit or inspection carried out by any Governmental Authority) that would reasonably be expected to give rise to, any Proceeding, Order, notice, communication, warrant, regulatory opinion, settlement, audit result or allegation from a Governmental Authority or any other Person: (i) alleging or confirming non-compliance with or breach of a relevant requirement of Privacy Laws or Company Privacy Commitments, (ii) requiring or requesting any member of the Company Group to amend, rectify,
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cease Processing, de-combine, permanently anonymize, block or delete any Company Data (other than pursuant to a valid data subject request in the ordinary course of business), (iii) permitting or mandating relevant Governmental Authorities to investigate, requisition information from, or enter the premises of, a member of the Company Group or (iv) claiming compensation from the Company Group based on a violation of Privacy Laws or Company Privacy Commitments or relating to the Company Group’s Processing of Personal Data.
(d)Where any member of the Company Group uses a data processor other than Seller or its Affiliates to Process Personal Data, there is in existence a written Contract between the Company and each such data processor that complies with the requirements of all Privacy Laws and Company Privacy Commitments. To the Knowledge of the Company, the data processors of the Company Group are in material compliance with Privacy Laws and Company Privacy Commitments with respect to their Processing activities on behalf of the Company Group. To the Knowledge of the Company, such data processors have not breached any such Company Data Agreements pertaining to Personal Data Processed by such Persons on behalf of any member of the Company Group. True, correct and complete copies of all material Company Data Agreements have been Delivered to Acquirer. To the Knowledge of the Company, no member of the Company Group is under investigation by any Governmental Authority for a violation of HIPAA or applicable HIPAA regulations. Each applicable member of the Company Group has entered into “business associate contracts” whether as a “covered entity” or as a “business associate” (as described in 45 C.F.R. § 164.504(e)) to the extent required pursuant to HIPAA and in compliance with all applicable Privacy Laws and is not in breach of any business associate contract.
(e)Except as set forth in Section 3.20(e) of the Company Disclosure Schedules, to the Knowledge of the Company, no material breach (including as defined under 45 C.F.R. § 164.402), security incident (including as defined under 45 C.F.R. § 164.304), unauthorized access or violation of any data security policy in relation to Company Data, Company Databases, or Confidential Information has occurred or is threatened, and there has been no actual or threatened unauthorized or illegal Processing of, or accidental or unlawful destruction, loss or alteration of, any Company Data. To the Knowledge of the Company, no circumstance has arisen in which: (A) applicable Laws (including Privacy Laws) would require the Company or any of its Subsidiaries to notify a Governmental Authority of a data security breach or security incident or (B) applicable guidance or codes of practice promulgated under applicable Laws (including Privacy Laws) would recommend any member of the Company Group to notify a Governmental Authority of a data security breach.
(f)To the Knowledge of the Company, the Company Group has valid and subsisting contractual rights to Process or have Processed for the Company Group all Company-Licensed Data and all Personal Data Processed by or for the Company Group in connection with the conduct of the Business in the manner that it is currently Processed.
(g)To the Knowledge of the Company, any Third Party who has provided Personal Data to a member of the Company Group has done so in compliance with applicable Privacy Laws, including providing notice and obtaining consent required under such applicable Privacy Laws.
(h)The Company Group owns all right, title and interest in and to each element of Company-Owned Data and Company Databases or otherwise has all rights, permissions, consents and authorizations required to Process such Company-Owned Data and the data in Company Databases in the Business in the manner currently Processed by the Company Group, all of which rights shall survive unchanged, and without any change in the terms and conditions under which the Company Group has such rights, following the execution and delivery of this Agreement and the consummation of the Transactions except as may be affected by notices, consents, waivers or new Contracts described in Section 5.7.
(i)Section 3.20(e) of the Company Disclosure Schedules sets forth a true, correct and complete list and description of Company Databases.
3.21Transactions with Certain Persons. Except as set forth in Section 3.21(a)of the Company Disclosure Schedules, no Related Party has or has had at any time since January 1, 2019, either directly or indirectly, any material interest, financial or otherwise, in: (a) any Person which purchases from or sells, provides, licenses or furnishes to any member of the Company Group any goods, services property, technology, Intellectual Property or
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other property rights or (b) any Contract to which a member of the Company Group is a party. To the Company’s Knowledge, no event has occurred that has resulted in, or would reasonably be expected to result in, any claim by any employee, officer, director, stockholder or agent of any member of the Company Group for indemnification or advancement of expenses related thereto pursuant to (i) the terms of the Governing Documents of any member of the Company Group, (ii) any indemnification agreement or other Contract between a member of the Company Group and any such employee, officer, director, stockholder or agent or (iii) any applicable Laws. No amounts are owed to or by a member of the Company Group to or from any Related Party except for compensation and reimbursement of expenses.
3.22Insurance. Section 3.22 of the Company Disclosure Schedules sets forth a complete and correct list of all material insurance policies of the Company Group currently in force and effect. True, complete and correct copies of such insurance policies have been Delivered to Acquirer. Except as set forth in Section 3.22 of the Company Disclosure Schedules, there is no material claim pending under any such policies. All such insurance policies insure the applicable member of the Company Group in reasonably sufficient amounts against normal risks usually insured against by Persons operating similar businesses or properties of similar size in the localities where such businesses or properties are located, and are sufficient for compliance in all material respects with applicable Law and for compliance with applicable obligations under any material Contract of such member of the Company Group. No member of the Company Group has any self-insurance or co-insurance programs. All premiums due and payable under all such policies have been paid and no member of the Company Group is in material Default under any provision of any such insurance policy and no member of the Company Group has received any written notice of threatened termination, cancellation or nonrenewal of any such insurance.
3.23No Brokers. Except as set forth in Section 3.23 of the Company Disclosure Schedules, no member of the Company Group or any of its Representatives has entered into any Contract with any broker, finder or similar agent or any Person which will result in an obligation of Acquirer, any member of the Company Group, or any of their respective Affiliates to pay any finder’s fee, brokerage fees or commission or similar payment in connection with the Transactions.
3.24Books and Records. The Company Group has made and kept true, complete and correct copies of its books and records and accounts, which set forth in reasonable detail and accurately and fairly reflect the activities of each member of the Company Group. The books, records and accounts of each member of the Company Group have been maintained in accordance with reasonable business practices on a basis consistent with prior years.
3.25Bank Accounts. Section 3.25 of the Company Disclosure Schedules contains a complete and correct list of all bank accounts maintained by the Company Group, including each account number and the name and address of each bank and the name of each Person who has signature power with respect to each such account or power of all then-outstanding sharesattorney to act on behalf of any member of the capital stockCompany Group. Holdco2 has Delivered to Acquirer true, complete and correct copies of all statements with respect to such bank accounts received by a member of the Corporation entitledCompany Group.
3.26Customers, Suppliers and Third Party Payors.
(a)Section 3.26(a) of the Company Disclosure Schedules sets forth a list of Payor Parties that generated in excess of $100,000 of revenue for the Business during the 12-month period ended December 31, 2021 (such parties, “Top Payors”), together with the revenue amount derived from each such Top Payor for such 12-month period. Except as set forth in Section 3.26(a) of the Company Disclosure Schedules, no member of the Company Group or Seller currently has or has since January 1, 2017 had any material disputes with any Payor Party related to vote generallythe Business. Except as set forth in Section 3.26(a) of the Company Disclosure Schedules, no member of the Company Group or Seller has received written notice from any Payor Party that such Payor Party shall not continue its relationship with the Company Group or, to the extent applicable to the Business, Seller, after the Closing or that such Top Payor intends to terminate or materially modify an existing Contract with any member of the Company Group or Seller, as applicable. For purposes of this Section 3.26(a), a “material dispute” means any alleged overpayments, erroneous payments or underpayments, which, individually or in the electionaggregate, exceed 10% of directors, votingannual payor revenue or $150,000, whichever is less.
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(b)Section 3.26(b)of the Company Disclosure Schedules sets forth a list of customers (other than Payor Parties) that generated in excess of $400,000 of revenue for the Business during the 12- month period ended December 31, 2021 (the “Top Customers”), together with the revenue amount derived from each such Top Customer for such 12-month period. No member of the Company Group has outstanding material disputes with any Top Customer. No member of the Company Group or Seller has received written notice from any Top Customer that such Top Customer shall not continue as a single class (in additioncustomer of the Company Group after the Closing or that such Top Customer intends to terminate or materially modify an existing Contract with the applicable member of the Company Group.
(c)Section 3.26(a) of the Company Disclosure Schedules sets forth a a list of suppliers or providers of services to the Company Group that generated in excess of $500,000 in expenditures by the Business during the 12-month period ending on December 31, 2021 (the “Top Suppliers”), together with the amount paid to each such Top Supplier for such 12-month period. No member of the Company Group has outstanding material disputes with any Top Supplier. No member or the Company Group or Seller has received written notice from any Top Supplier that such Top Supplier shall not continue as a supplier or service provider of the Company Group after the Closing or that such Top Supplier intends to terminate or materially modify an existing Contract with it’s the applicable member of the Company Group.
3.27Inventory. The inventories shown on the Company Balance Sheet (net of any reserve on the Company Balance Sheet) or thereafter acquired by the Company Group, consisted of items of a quantity and quality usable or salable in the Ordinary Course of. Business. Since the Company Balance Sheet Date, the Company Group has continued to maintain inventories in the Ordinary Course of. Business. No member of the Company Group has received written, or to the Knowledge of the Company, oral notice that it will experience in the foreseeable future any difficulty in obtaining, in the desired quantity and quality and at a reasonable price and upon reasonable terms and conditions, the raw materials, supplies or component products required for the manufacture, assembly or production of its products.
3.28No Additional Representations. THE COMPANY ACKNOWLEDGES AND AGREES THAT, EXCEPT AS EXPRESSLY SET FORTH IN ARTICLE 4, NO ACQUIRER PARTY, NO REPRESENTATIVE OF ANY ACQUIRER PARTY OR ANY OTHER PERSON MAKES ANY REPRESENTATION OR WARRANTY, EXPRESSED OR IMPLIED, AT LAW OR IN EQUITY, WITH RESPECT TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING THE MERGERS, THE ACQUIRER PARTIES (OR ANY OF THEM), OR ANY INFORMATION PROVIDED OR MADE AVAILABLE TO THE COMPANY OR ITS REPRESENTATIVES IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY (INCLUDING ANY FORECASTS, PROJECTIONS, ESTIMATES OR BUSINESS PLANS), AND ALL OTHER SUCH REPRESENTATIONS OR WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE ACQUIRER PARTIES
The Acquirer Parties hereby represent and warrant to Seller as follows, with each such representation and warranty subject to (x) the exceptions set forth in the Acquirer Disclosure Schedules (it being understood that the Acquirer Disclosure Schedules shall be arranged in sections corresponding to the sections and subsections contained in this Article 4, and no disclosure made in any particular section of the Acquirer Disclosure Schedules shall be deemed to be made in any other section of the Acquirer Disclosure Schedules unless expressly made therein (by cross-reference or otherwise) or to the extent it is reasonably apparent from a reading of the text of the disclosure that such disclosure is applicable to such other sections and subsections of the Acquirer Disclosure Schedules) and (y) matters disclosed in the SEC Reports filed with the SEC prior to the Agreement Date (to the extent the qualifying nature of the matters disclosed and the disclosure thereof is readily apparent from the disclosure thereof in such SEC Reports), excluding disclosures contained in sections entitled “Forward-Looking Statements” and “Risk Factors” (and any similarly titled sections) and any other disclosures contained in the SEC Reports to the extent they are of a predictive or cautionary nature or related to forward-looking statements; provided, that, none of the qualifications contained in clauses (x) and (y) of the immediately preceding sentence shall apply to the representations and warranties contained in Section 4.3.
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4.1Organization of Acquirer Parties. Each Acquirer Party is either a corporation or limited liability company duly organized and validly existing and in good standing under the Laws of the jurisdiction of its incorporation or formation, with the requisite corporate or limited liability company power and authority to conduct its business as it is presently being conducted, to own, lease or operate, as applicable, its assets and properties, and to perform all of its obligations under its Contracts.
4.2Authorization.
(a)Each Acquirer Party has all requisite corporate or limited liability company power and authority, and, except for the Acquirer Stockholder Approval, has taken all corporate or limited liability company action necessary, to execute, deliver and perform its obligations under this Agreement and the Ancillary Agreements and to consummate the transactions contemplated to be consummated by it hereby and thereby. This Agreement and the Ancillary Agreements to which an Acquirer Party is a party have been duly executed and delivered by each Acquirer Party thereto and, assuming the due authorization, execution and delivery hereof and thereof by the other parties hereto and thereto, constitute the legal, valid and binding obligation of each Acquirer Party thereto, enforceable against such Acquirer Party in accordance with their respective terms, except as enforcement may be limited by the Enforceability Exceptions.
(b)The Acquirer Stockholder Approval is the only vote of the holders of any class or seriesvoting securities of Acquirer under any Law, the rules and regulations of Nasdaq, and Acquirer’s certificate of incorporation and bylaws necessary to approve the Transactions.
4.3Capitalization.
(a)The authorized capital stock of Acquirer consists of 380,000,000 shares of common stock, par value of $0.0001 per share and 1,000,000 shares of preferred stock, par value of $0.0001 per share. As of December 31, 2021, 242,578,824 shares of Acquirer common stock were issued and outstanding, and no shares of Acquirer’s preferred stock were issued and outstanding. As of December 31, 2021, Acquirer had reserved 33,354,727 shares of Acquirer’s common stock for issuance upon the Corporation required by applicable lawexercise of outstanding common stock options, 12,600,859 shares of Acquirer’s common stock for issuance upon the vesting of restricted stock units, 21,994,972 shares of Acquirer’s common stock for issuance upon conversion of Acquirer’s outstanding warrants, and 15,434,321 shares of Acquirer’s common stock were available for issuance under Acquirer’s 2021 Equity Incentive Plan. There are no options, warrants, convertible securities or by this Certificate of Incorporation (including any Preferred Stock issuedother rights or Contracts pursuant to which Acquirer is obligated to issue or sell any of its securities, other than this Agreement, the Ancillary Documents, Acquirer’s employee stock purchase plan, Acquirer’s equity incentive plans and awards thereunder, inducement awards granted by Acquirer and Acquirer’s outstanding warrants, the SPAC Merger Agreement and Acquirer is not a Certificateparty to any Contract pursuant to which it is obligated to register any of Designation)), shall be required to adopt, amend or repeal any provision of the Bylaws.
ARTICLE VI: MATTERS RELATING TO THE BOARD OF DIRECTORS
1.Director Powers. Except as otherwise provided by the General Corporation Law, the Bylaws of the Corporation or this Certificate of Incorporation, the business and affairs of the Corporation shall be managed by orits securities under the directionSecurities Act (other than the Ancillary Documents, the SPAC Merger Agreement and the registration rights agreement and subscription agreements entered into with investors in connection with the SPAC Merger Agreement) or with respect to the voting of the Board.any securities issued by Acquirer.
2.    (b)NumberThe shares of DirectorsAcquirer Stock to be issued in accordance with this Agreement will, upon such issuance, be duly authorized, validly issued, fully paid and non-assessable, free of statutory or contractual pre-emptive rights and free of any Encumbrances (other than this Agreement and restrictions on transfer under the Securities Act and applicable U.S. state securities laws). Subject to the special rightsaccuracy of Seller’s representations set forth herein and in the Ancillary Agreements, the offer, sale and issuance of the holdersshares of any series of PreferredAcquirer Stock to elect additional directors under specified circumstances,as contemplated by this Agreement are exempt from the total number of directors constituting the Whole Board shall be fixed from time to time exclusively by resolution adopted by a majorityregistration requirements of the Whole Board.Securities Act.
3.    (c)Classified Board. Subject to the special rightsThe equity securities of the holderseach of one or more series of Preferred Stock to elect additional directors under specified circumstances, the directors shall be divided, with respect to the time for which they severally hold office, into three classes designated as ClassMerger Sub I Classand Merger Sub II and Class III, respectively (the “Classified Board”). The Board may assign members of the Board already in office to the Classified Board, which assignments shall become effective at the same time that the Classified Board becomes effective. Directors shall be assigned to each class in accordance with a resolution or resolutions adopted by the Board. The number of directors
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in each class shall be divided as nearly equal as is practicable. The initial term of office of the Class I directors shall expire at the Corporation’s first annual meeting of stockholders following the effectiveness of this Certificate of Incorporation, the initial term of office of the Class II directors shall expire at the Corporation’s second annual meeting of stockholders following the effectiveness of this Certificate of Incorporation and the initial term of office of the Class III directors shall expire at the Corporation’s third annual meeting of stockholders following the effectiveness of this Certificate of Incorporation. At each annual meeting of stockholders following the effectiveness of this Certificate of Incorporation, directors elected to succeed those directors of the class whose terms then expire shall be elected for a term of office expiring at the third succeeding annual meeting of stockholders after their election.
4.    Term and Removal. Each director shall hold office until the annual meeting at which such director’s term expires and until such director’s successor is duly elected and qualified, or until such director’s earlier death, resignation, disqualification or removal. Any director may resign at any time by delivering a resignation in writing or by electronic transmission to the Corporation at its principal office or to the Chairperson of the Board, the Chief Executive Officer, or the Secretary. Subject to the special rights of the holders of any series of Preferred Stock, no director may be removed from the Board except for cause and only by the affirmative vote of the holders of at least two-thirds of the voting power of the then-outstanding shares of capital stock of the Corporation entitled to vote thereon, voting together as a single class. In the event of any increase or decrease in the authorized number of directors, (a) each director then serving as such shall nevertheless continue as a director of the class of which he or she is a member and (b) the newly created or eliminated directorships resulting from such increase or decrease shall be apportioned by the Board among the classes of directors so as to make all classes as nearly equal in number as is practicable, provided that no decrease in the number of directors constituting the Board shall shorten the term of any director.
5.    Board Vacancies and Newly Created Directorships. Subject to the special rights of the holders of any series of Preferred Stock, any vacancy occurring in the Board for any cause, and any newly created directorship resulting from any increase in the authorized number of directors, shall, unless (a) the Board determines by resolution that any such vacancies or newly created directorships shall be filled by the stockholders or (b) as otherwise provided by law, be filled only by the affirmative vote of a majority of the directors then in office, even if less than a quorum, or by a sole remaining director, and shall not be filled by the stockholders. Any director elected in accordance with the preceding sentence shall hold office for a term expiring at the annual meeting of stockholders at which the term of office of the class to which the director has been assigned expires and until such director’s successor shall(i) have been duly electedauthorized and qualified,validly issued and are fully paid and nonassessable, (ii) were issued in compliance in all material respects with applicable Law, and (iii) were not issued in breach or until such director’s earlier death, resignation, disqualificationviolation of any preemptive rights or removal.
6.    Vote by Ballot. Election of directors need not be by written ballot unless the Bylaws shall so provide.
ARTICLE VII: DIRECTOR LIABILITY
1.    Limitation of Liability. To the fullest extent permitted by law, no directorContract to which Acquirer is a party or bound. All of the Corporation shall be personally liable for monetary damages for breachoutstanding equity securities of fiduciary duty as a director. Without limitingMerger Sub I and Merger Sub II are owned by Acquirer free of any Encumbrances (other than this Agreement and restrictions on transfer under the effect of the preceding sentence, if the General Corporation Law is hereafter amended to authorize the further elimination or limitation of the liability of a director, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law, as so amended.
2.    Change in RightsSecurities Act and applicable U.S. state securities laws). Neither Merger Sub I nor Merger Sub II has any amendment nor repeal of this Article VII, nor the adoption ofSubsidiaries or owns, directly or indirectly, any provision of this Certificate of Incorporation inconsistent with this Article VII, shall eliminate, reduce or otherwise adversely affectequity securities in any limitation on the personal liability of a director of the Corporation existing at the time of such amendment, repeal or adoption of such an inconsistent provision.
ARTICLE VIII: MATTERS RELATING TO STOCKHOLDERS
1.    No Action by Written Consent of Stockholders. Subject to the rights of any series of Preferred Stock then outstanding, no action shall be taken by the stockholders of the Corporation except at a duly called annual or special meeting of stockholders and no action shall be taken by the stockholders of the Corporation by written consent in lieu of a meeting.Person.
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2.    4.4Special Meeting of StockholdersNoncontravention.
(a). Special meetingsThe execution, delivery and performance by each Acquirer Party and each Acquirer Party’s compliance with this Agreement and consummation by each Acquirer Party of the stockholdersTransactions do not and will not (i) violate the Governing Documents of Acquirer, Merger Sub, (ii) violate any loan or credit agreement, guarantee, note, bond, mortgage, indenture, lease or other agreement, permit, franchise or license to which, as of the Corporationdate of this Agreement, Acquirer is a party or by which Acquirer’s properties or assets are bound, (iii) violate any statute or any judgment, order, rule or regulation of any court or governmental agency, taxing authority or regulatory body, domestic or foreign, having jurisdiction over Acquirer or any of its properties or (iv) assuming any consents and approvals referred to in Section 4.4(b) are duly obtained, conflict with or constitute a Default under any Laws, Orders or Permits applicable to the Acquirer Parties, except, in the case of clauses (i) and (iv) for any such violation or Default which would not materially affect the Acquirer Parties’ ability to perform any of their respective obligations hereunder or consummate the Transactions, and, in the case of clauses (ii) and (iii), for Defaults or violations that have not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
(b)Other than the filing of the Certificate of Merger for the Merger, filings with the SEC and Nasdaq and such filings and notifications as may be called onlyrequired to be made by Acquirer in connection with the ChairpersonTransactions under the HSR Act or other applicable Antitrust Laws and the expiration or early termination of the Board,applicable waiting period under the Chief Executive Officer, the Lead Independent Director (as defined in the Bylaws), the President,HSR Act or the Board acting pursuant to a resolution adopted by a majorityother applicable Antitrust Laws, no consent, approval, Order or authorization of, the Whole Board and may not be called by the stockholdersor registration, declaration, or filing with, any Governmental Authority or any other personPerson is required to be made, obtained or persons.given by any Acquirer Party in connection with the execution, delivery and performance by each Acquirer Party of this Agreement or the consummation by each Acquirer Party of the Transactions.
3.    4.5Advance Notice of Stockholder Nominations and Business Transacted at Special MeetingsCompliance with Laws. Advance noticeEach Acquirer Party is in compliance with all applicable laws and has not received any written communication from a governmental entity that alleges that Acquirer is not in compliance with or is in default or violation of stockholder nominationsany applicable law, except where such non-compliance, default or violation would not, individually or in the aggregate, be reasonably likely to have a Material Adverse Effect.
4.6Securities Law Matters.
(a)The issued and outstanding shares of Acquirer Stock are registered pursuant to Section 12(b) of the Exchange Act, and are listed for trading on Nasdaq under the symbol “SMFR”. There is no suit, action, proceeding or investigation pending or, to the Knowledge of Acquirer, threatened against Acquirer by Nasdaq or the SEC with respect to any intention by such entity to deregister the Acquirer Stock or prohibit or terminate the listing of the Acquirer Stock on Nasdaq, excluding, for the electionpurposes of directorsclarity, the customary ongoing review by Nasdaq of the CorporationAcquirer’s listing of additional shares application in connection with the Transactions. Acquirer has taken no action that is designed to terminate or is reasonably expected to result in the termination of the registration of the Acquirer Stock under the Exchange Act or the listing of the Acquirer Stock on Nasdaq and is in compliance in all material respects with the listing requirements of businessNasdaq.
(b)Each report, statement and form (including exhibits and other information incorporated therein) filed by Acquirer with the SEC under Sections 13(a), 14(a) or 15(d) of the Exchange Act or filed pursuant to the Securities Act since July 22, 2021 (the “SEC Reports”) when filed complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the SEC promulgated thereunder. None of the SEC Reports filed under the Exchange Act (except to the extent that information contained in any SEC Report has been superseded by a later timely filed SEC Report) contained, when filed, any untrue statement of a material fact or omitted to state a material fact required to be brought by stockholders beforestated therein or necessary to make the statements therein not misleading, in the case of any meetingSEC Report that is a registration statement, or included, when filed, any untrue statement of stockholdersa material fact or omitted to state a material fact necessary in order to make the statements therein, in light of the Corporation shall be givencircumstances under which they were made, not misleading, in the manner providedcase of all other SEC Reports. Acquirer has timely filed each SEC Report that Acquirer was required to file with the SEC since July 22, 2021. There are no material outstanding or unresolved comments in comment letters from the SEC staff with respect to any of Acquirer’s SEC Reports. In addition, Acquirer has made available to Seller (including via the SEC’s EDGAR system) a copy of the SEC Reports since July 22, 2021. Except as disclosed in the Bylaws. Business transacted at special meetings of stockholders shall be limited to the purpose or purposes stated in the notice of meeting.SEC Reports,
ARTICLE IX: CHOICE OF FORUM
Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for: (a) any derivative action or proceeding brought on behalf of the Corporation; (b) any action asserting a claim of breach of a fiduciary duty owed by, or other wrongdoing by, any director, officer, stockholder, employee or agent of the Corporation to the Corporation or the Corporation’s stockholders; (c) any action asserting a claim against the Corporation or any director, officer, stockholder, employee or agent of the Corporation arising pursuant to any provision of the General Corporation Law, this Certificate of Incorporation or the Bylaws or as to which the General Corporation Law confers jurisdiction on the Court of Chancery of the State of Delaware; (d) any action to interpret, apply, enforce or determine the validity of this Certificate of Incorporation or the Bylaws; or (e) any action asserting a claim against the Corporation or any director, officer, stockholder, employee or agent of the Corporation governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be deemed to have notice of and to have consented to the provisions of this Article IX.
ARTICLE X: AMENDMENT OF CERTIFICATE OF INCORPORATION
If any provision of this Certificate of Incorporation shall be held to be invalid, illegal, or unenforceable, then such provision shall nonetheless be enforced to the maximum extent possible consistent with such holding and the remaining provisions of this Certificate of Incorporation (including, without limitation, all portions of any section of this Certificate of Incorporation containing any such provision held to be invalid, illegal, or unenforceable, which is not invalid, illegal, or unenforceable) shall remain in full force and effect.
The Corporation reserves the right to amend or repeal any provision contained in this Certificate of Incorporation in the manner prescribed by the laws of the State of Delaware and all rights conferred upon stockholders are granted subject to this reservation; provided, however, that, notwithstanding any other provision of this Certificate of Incorporation or any provision of law that might otherwise permit a lesser vote or no vote (but subject to the rights of any series of Preferred Stock set forth in any Certificate of Designation), but in addition to any vote of the holders of any class or series of the stock of the Corporation required by law or by this Certificate of Incorporation, the affirmative vote of the holders of at least two-thirds of the voting power of all then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend or repeal this Article X or Article V, Article VI, Article VII or Article VIII; provided, further, that if two-thirds of the Whole Board has approved such amendment or repeal of any provisions of this Certificate of Incorporation, then only the affirmative vote of the holders of a majority of the voting power of all then-outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class (in addition to any other vote of the holders of any class or series of stock of the Corporation required by law or by this Certificate of Incorporation or any Certificate of Designation), shall be required to amend or repeal such provisions of this Certificate of Incorporation.
* * * * * * * * * * *
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EXHIBIT B
Form of Parent Amended and Restated Bylaws
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EXHIBIT B-1
[COMPANY NAME]
(a Delaware corporation)
RESTATED BYLAWS
As Adopted [●], 2021 and
As Effective [●], 2021
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[COMPANY NAME]
(a Delaware corporation)
RESTATED BYLAWS
TABLE OF CONTENTS
Page
Article I: STOCKHOLDERS
89
Section 1.1:Annual Meetings89
Section 1.2:Special Meetings89
Section 1.3:Notice of Meetings89
Section 1.4:Adjournments89
Section 1.5:Quorum90
Section 1.6:Organization90
Section 1.7:Voting; Proxies90
Section 1.8:Fixing Date for Determination of Stockholders of Record90
Section 1.9:List of Stockholders Entitled to Vote91
Section 1.10:Inspectors of Elections.91
Section 1.11:Conduct of Meetings92
Section 1.12:Notice of Stockholder Business; Nominations.92
Article II: BOARD OF DIRECTORS
98
Section 2.1:Number; Qualifications98
Section 2.2:Election; Resignation; Removal; Vacancies98
Section 2.3:Regular Meetings99
Section 2.4:Special Meetings99
Section 2.5:Remote Meetings Permitted99
Section 2.6:Quorum; Vote Required for Action99
Section 2.7:Organization99
Section 2.8:Unanimous Action by Directors in Lieu of a Meeting99
Section 2.9:Powers99
Section 2.10:Compensation of Directors99
Section 2.11:Confidentiality100
Article III: COMMITTEES
100
Section 3.1:Committees100
Section 3.2:Committee Rules100
Article IV: OFFICERS; CHAIRPERSON; LEAD INDEPENDENT DIRECTOR
100
Section 4.1:Generally100
Section 4.2:Chief Executive Officer101
Section 4.3:Chairperson of the Board101
Section 4.4:Lead Independent Director101
Section 4.5:President101
Section 4.6:Chief Financial Officer101
Section 4.7:Treasurer102
Section 4.8:Vice President102
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Section 4.9:Secretary102
Section 4.10:Delegation of Authority102
Section 4.11:Removal102
Article V: STOCK
102
Section 5.1:Certificates; Uncertificated Shares102
Section 5.2:Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates or Uncertificated Shares102
Section 5.3:Other Regulations103
Article VI: INDEMNIFICATION
103
Section 6.1:Indemnification of Officers and Directors103
Section 6.2:Advancement of Expenses103
Section 6.3:Non-Exclusivity of Rights103
Section 6.4:Indemnification Contracts103
Section 6.5:Right of Indemnitee to Bring Suit104
Section 6.6:Nature of Rights104
Section 6.7:Amendment or Repeal104
Section 6.8:Insurance104
Article VII: NOTICES
104
Section 7.1:Notice.104
Section 7.2:Waiver of Notice105
Article VIII: INTERESTED DIRECTORS
105
Section 8.1:Interested Directors105
Section 8.2:Quorum105
Article IX: MISCELLANEOUS
105
Section 9.1:Fiscal Year105
Section 9.2:Seal106
Section 9.3:Form of Records106
Section 9.4:Reliance Upon Books and Records106
Section 9.5:Certificate of Incorporation Governs106
Section 9.6:Severability106
Section 9.7:Time Periods106
Article X: AMENDMENT
106
Article XI: EXCLUSIVE FORUM
106
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[COMPANY NAME]
(each of the Sema4 Financial Statements (including, in each case, any notes thereto) contained in the SEC Reports was prepared in accordance with U.S. generally accepted accounting principles applied on a Delaware corporation)
RESTATED BYLAWS
As Adopted [●], 2021 and
As Effective [●], 2021
ARTICLE: STOCKHOLDERS
Section 1.1:    Annual Meetings. An annual meeting of stockholders shall be held forconsistent basis throughout the election of directors at such date and timeperiods indicated (except as the Board of Directors (the “Board”) of [Company Name] (the “Corporation”) shall each year fix. Annual meetings may be held either at a place, withinindicated in the notes thereto or, withoutin the Statecase of Delawareunaudited statements, as permitted by the General Corporation LawForm 10-Q of the StateSEC), each complied in all material respects with the rules and regulations of Delaware (the “DGCL”), or by means of remote communicationthe SEC with respect thereto as the Board in its sole discretion may determine. Any proper business may be transactedeffect at the annual meeting. The Board may postpone, rescheduletime of filing and each fairly presents, in all material respects, the financial position, results of operations and cash flows of Acquirer or cancelMount Sinai Genomics, Inc. d/b/a Sema4 (“Legacy Sema4”), as applicable, as at the respective dates thereof and for the respective periods indicated therein. For purposes of this Section 4.6(b), the “Sema4 Financial Statements” means, to the extent contained in the SEC Reports, (i) the audited balance sheets of Legacy Sema4 as of December 31, 2020 and 2019, the related statements of operations and comprehensive loss, redeemable convertible preferred stock and stockholders’ deficit and cash flows for each of the three years in the period ended December 31, 2020, and the related notes, (ii) the unaudited condensed financial statements of Legacy Sema4 as of March 31, 2021 and for the three months ended March 31, 2021 and 2020 and the related notes, (iii) the unaudited condensed financial statements of Legacy Sema4 as of June 30, 2021 and for the three and six months ended June 30, 2021 and 2020 and the related notes, and (iv) the unaudited condensed consolidated financial statements of Acquirer as of September 30, 2021 and for the three months and nine months ended September 30, 2021 and 2020 and the related notes.
4.7No Proceedings. Except for such matters as have not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, there is no (i) investigation, action, suit, claim or other proceeding, in each case by or before any previously scheduled annual meetingGovernmental Authority pending, or, to the Knowledge of stockholders.Acquirer, threatened against any Acquirer Party or (ii) judgment, decree, injunction, ruling or order of any governmental entity outstanding against any Acquirer Party.
Section 1.2:    4.8Special MeetingsNo Brokers. Special meetingsNo Acquirer Party has entered into any Contract with any broker, finder or similar agent or any Person which will result in Seller being obligated to pay any finder’s fee, brokerage fees or commission or similar payment in connection with the Transactions.
4.9No Insolvency Proceedings. Neither Acquirer nor any of stockholdersits subsidiaries has taken any steps to seek protection pursuant to any law or statute relating to bankruptcy, insolvency, reorganization, receivership, liquidation, administration or winding up or failed to pay its debts when due, nor does Acquirer or any subsidiary have any knowledge or reason to believe that any of their respective creditors intend to initiate involuntary bankruptcy proceedings or seek to commence an administration.
4.10Not an Investment Company. Acquirer is not, and immediately after the consummation of the Transactions, will not be, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
4.11Anti-Corruption Laws. There has been no action taken by Acquirer, or, to the Knowledge of Acquirer, any officer, director, equityholder, manager, employee, agent or representative of Acquirer, in each case, acting on behalf of Acquirer, in violation of any applicable Anti-Corruption Laws (as herein defined), (i) Acquirer has not been convicted of violating any Anti-Corruption Laws or subjected to any investigation by a Governmental Authority for violation of any applicable Anti-Corruption Laws, (ii) Acquirer has not conducted or initiated any internal investigation or made a voluntary, directed, or involuntary disclosure to any Governmental Authority regarding any alleged act or omission arising under or relating to any noncompliance with any Anti-Corruption Laws and (iii) Acquirer has not received any written notice or citation from a Governmental Authority for any purposeactual or purposes shall be calledpotential noncompliance with any applicable Anti-Corruption Laws. As used herein, “Anti-Corruption Laws” means any applicable laws relating to corruption and bribery, including the U.S. Foreign Corrupt Practices Act of 1977 (as amended), the UK Bribery Act 2010, and any similar law that prohibits bribery or corruption.
4.12Taxes. Except as provided in the manner set forth in the Certificate of IncorporationSection 4.12 of the Corporation (as the same may be amended and/or restated from time to time, the “Acquirer Disclosure Schedules:
(a)Certificate of Incorporation”). Special meetings may be held either at a place, within or without the State of Delaware, or by means of remote communication as the Board in its sole discretion may determine. Business transacted at any special meeting of stockholders shall be limited to matters relating to the purpose or purposes stated in the noticeEach member of the meeting. The Board may postpone, rescheduleAcquirer Group, and any consolidated, combined, unitary or cancel any previously scheduled special meetingaggregate group composed of stockholders.
Section 1.3:    Notice of Meetings. Notice of all meetings of stockholders shall be given in writing or by electronic transmission in the manner provided by applicable law (including, without limitation, as set forth in Section 7.1.1 of these Bylaws) stating the date, time and place, if any,members of the meeting, the means of remote communication, if any, by which stockholdersAcquirer Group for Tax purposes, has timely filed all federal income Tax Returns and proxy holders may be deemed to be present in person and vote at such meeting, and the record date for determining the stockholders entitled to vote at the meeting (if such date is different from the record date for determining stockholders entitled to notice of the meeting). In the case of a special meeting, such notice shall also set forth the purpose or purposes for which the meeting is called. Unless otherwise required by applicable law or the Certificate of Incorporation, notice of any meeting of stockholders shall be given not less than ten (10), nor more than sixty (60), days before the date of the meeting to each stockholder of record entitled to vote at such meeting as of the record date for determining the stockholders entitled to notice of the meeting.
Section 1.4:    Adjournments. Notwithstanding Section 1.5 of these Bylaws, the chairperson of the meeting shall have the power to adjourn the meeting to another time, date and place (if any), regardless of whether a quorum is present, at any time and for any reason. Any meeting of stockholders, annual or special, may be adjourned from time to time, and notice need not be given of any such adjourned meeting if the time, date and place (if any) thereof and the means of remote communication (if any) by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken; provided, however, that if the adjournment is for more than thirty (30)days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If, after the adjournment, a new record date for determination of stockholders entitled to vote is fixed for the adjourned meeting, the Board shall fix as the record date for determining stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote at the adjourned meeting, and shall give notice of the adjourned meeting to each stockholder of record as of the record date so fixed for notice of such adjourned meeting. At the adjourned meeting, the Corporation may transact any business that might have been transacted at the original meeting. If a quorum is present at the original meeting, it shall also be deemed present at the adjourned meeting. To the fullest extent permitted by law, the Board may postpone,
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reschedule or cancel at any time and for any reason any previously scheduled special or annual meeting of stockholders beforeother material Tax Returns it is required to be held, regardless of whether any noticehave filed. All Tax Returns filed by or public disclosure with respect to any such meeting has been sent or made pursuant to Section 1.3 hereof or otherwise, in which case notice shall be provided to the stockholdersmember of the new date, timeAcquirer Group are accurate, complete and place, if any, of the meeting as providedcorrect in Section 1.3 above.
Section 1.5:    Quorum. Except as otherwise provided by applicable law, the Certificate of Incorporation or these Bylaws, at each meeting of stockholders the holders of a majority of the voting power of the shares of stock issued and outstanding and entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of business; provided, however, that where a separate vote by a class or classes or series of stock is required by applicable law or the Certificate of Incorporation, the holders of a majority of the voting power of the shares of such class or classes or series of the stock issued and outstanding and entitled to vote on such matter, present in person or represented by proxy at the meeting, shall constitute a quorum entitled to take action with respect to the vote on such matter. If a quorum shall fail to attend any meeting, the chairperson of the meeting or, if directed to be voted on by the chairperson of the meeting, the holders of a majority of the voting power of the shares entitled to vote who are present in person or represented by proxy at the meeting may adjourn the meeting. Shares of the Corporation’s stock belonging to the Corporation (or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation are held, directly or indirectly, by the Corporation), shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation or any other corporation to vote any shares of the Corporation’s stock held by it in a fiduciary capacity and to count such shares for purposes of determining a quorum. A quorum, once established at a meeting, shall not be broken by the withdrawal of enough votes to leave less than a quorum.
Section 1.6:    Organization. Meetings of stockholders shall be presided over by (a) such person as the Board may designate, or (b) in the absence of such a person, the Chairperson of the Board, or (c) in the absence of such person, the Lead Independent Director, or, (d) in the absence of such person, the Chief Executive Officer of the Corporation, or (e) in the absence of such person, the President of the Corporation, or (f) in the absence of such person, by a Vice President of the Corporation. The Secretary of the Corporation shall act as secretary of the meeting, but in such person’s absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.
Section 1.7:    Voting; Proxies. Each stockholder of record entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy. Such a proxy may be prepared, transmitted and delivered in any manner permitted by applicable law. Except as may be required in the Certificate of Incorporation, directors shall be elected by a plurality of the votes cast by the holders of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. At all meetings of stockholders at which a quorum is present, unless a different or minimum vote is required by applicable law, rule or regulation applicable to the Corporation or its securities, the rules or regulations of any stock exchange applicable to the Corporation, the Certificate of Incorporation or these Bylaws, in which case such different or minimum vote shall be the applicable vote on the matter, every matter other than the election of directors shall be decided by the affirmative vote of the holders of a majority of the voting power of the shares of stock entitled to vote on such matter that are present in person or represented by proxy at the meeting and are voted for or against the matter (or if there are two or more classes or series of stock entitled to vote as separate classes, then in the case of each class or series, the holders of a majority of the voting power of the shares of stock of that class or series present in person or represented by proxy at the meeting voting for or against such matter).
Section 1.8:    Fixing Date for Determination of Stockholders of Record. In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall, unless otherwise required by law, not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If the Board so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at 5:00 p.m. Eastern Time on the day next preceding the day on which notice is given, or, if notice is waived, at 5:00 p.m. Eastern Time on the daymaterial respects.
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next preceding(b)Each member of the day onAcquirer Group has paid in full all material Taxes required to have been paid. All Taxes due in connection with the operations of each member of the Acquirer Group until the Closing Date have been paid in full. No member of the Acquirer Group has any Liability for Taxes in excess of the amounts so paid, except for Taxes which are not yet due and payable.
(c)The balance sheet of Acquirer dated September 30, 2021 set forth in the meetingSEC Documents included reflects all Liabilities for unpaid Taxes of the Acquirer Group for periods (or portions of periods) through such date. The Acquirer Group does not have any Liability for unpaid Taxes accruing after such date except for Taxes arising in the Ordinary Course of Business subsequent to such date.
(d)Within the last five (5) years, no claim has been made by any Governmental Authority in any jurisdiction where a member of the Acquirer Group does not file Tax Returns that such member is held. A determinationor may be subject to Tax by that jurisdiction.
(e)No extensions or waivers of stockholdersstatutes of record entitledlimitations with respect to noticethe Tax Returns have been given by or requested from the Acquirer Group (except for extensions to file Tax Returns that are granted automatically under applicable Law).
(f)There is (i) no past or pending audit of, or to vote atTax controversy associated with, any Tax Return of a meeting of stockholders shall apply to any adjournmentmember of the meeting; provided, however,Acquirer Group that the Board may fixhas been or is being conducted by a new record date for determination of stockholders entitled to vote at the adjourned meeting,Tax Authority which has not been fully settled or resolved and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same(ii) no other procedure, proceeding or an earlier date as that fixed for determination of stockholders entitled to vote in accordance herewith at the adjourned meeting.
In order that the Corporation may determine the stockholders entitled to receive paymentcontest of any dividendrefund or other distribution or allotment of any rights, or entitled to exercise any rightsdeficiency in respect of Taxes pending or on appeal with any change, conversionGovernmental Authority.
(g)All deficiencies asserted or exchangeassessments made against any member of stock or for the purposeAcquirer Group as a result of any examinations by any Tax Authority have been fully paid.
(h)There are no Encumbrances for Taxes upon the assets of any member of the Acquirer Group other lawful action,than Encumbrances arising by operation of Law for Taxes not yet due and payable.
(i)The Acquirer Group has collected and remitted all Sales Taxes with respect to sales made or services provided and, for all sales or provision of services that are exempt from Sales Taxes and that were made without charging or remitting Sales Taxes, the Board may fix, in advance, a record date, which shall not precedeAcquirer Group has received and retained any required Tax exemption certificates or other documentation qualifying such sale or provision of services as exempt.
(j)No member of the date upon whichAcquirer Group is party to or bound by any Tax indemnity, Tax sharing, Tax allocation or similar agreement, and no member of the resolution fixing the record date is adopted by the Board and which shall not be more than sixty (60) days priorAcquirer Group has any Liability or potential Liability to such action. If no such record date is fixed by the Board, then the record date for determining stockholders forany Third Party under any such purpose shall be at 5:00 p.m. Eastern Time on the day on which the Board adopts the resolution relating thereto.agreement.
Section 1.9:    (k)List of Stockholders Entitled to Vote. The Corporation shall prepare, at least ten (10) days before every meeting of stockholders, a complete list of stockholders entitled to vote at the meeting (provided, however, if the record date for determining the stockholders entitled to vote is less than ten (10) days before the dateNo member of the meeting, the list shall reflect the stockholders entitledAcquirer Group is party to vote asand has not requested any closing agreement (as described in Section 7121 of the tenth (10th) day beforeCode or any corresponding, analogous, or similar provision under any state, local or foreign Law related to Taxes), offer in compromise, technical advice memoranda, private letter ruling or other similar agreement with any Tax Authority.
(l)No member of the meeting date)Acquirer Group has ever entered into any “listed transaction” as defined in Treasury Regulations Section 1.6011 4(b) or any similar provision under state, local or foreign law. Each member of the Acquirer Group has disclosed on its U.S. federal income Tax Returns all positions taken therein that could give rise to a “substantial understatement of income tax” within the meaning of Section 6662 of the Code (or any comparable, analogous or similar provision under any state, local or foreign Law related to Taxes).
(m)Acquirer has (i) except for being a member of the Acquirer Group, never been a member of an affiliated group of corporations, within the meaning of Section 1504 of the Code (or any predecessor provision or comparable provision of state, local or foreign Law), arranged in alphabetical orderor a member of a combined, consolidated or unitary group for state, local or foreign Tax purposes; and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination(ii) no Liability for Taxes of any stockholder, forPerson under Treasury Regulations Section 1.1502-6 (or any purpose germanecorresponding provision of state, local or foreign Law related to the meeting, for a period of at least ten (10) days prior to the meeting, either (a) on a reasonably accessible electronic networkincome Taxes), as permittedtransferee or successor, by applicable law (providedthat the information required to gain access to the list is provided with the notice of the meeting),Contract or (b) during ordinary business hours, at the principal place of business of the Corporation. If the meeting is held at a location where stockholders may attend in person, a list of stockholders entitled to vote at the meeting shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present at the meeting. If the meeting is held solely by means of remote communication, then the list shall be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access the list shall be provided with the notice of the meeting. Except as otherwise provided by law, the stock ledger shall be the only evidence as to who are the stockholders entitled to examine the list of stockholders required by this Section 1.9 or to vote in person or by proxy at any meeting of stockholders.
Section 1.10:    Inspectors of Elections.
1.10.1    Applicability. Unless otherwise required by the Certificate of Incorporation or by applicable law, the following provisions of this Section 1.10 shall apply only if and when the Corporation has a class of voting stock that is: (a) listed on a national securities exchange; (b) authorized for quotation on an interdealer quotation system of a registered national securities association; or (c) held of record by more than two thousand (2,000) stockholders. In all other cases, observance of the provisions of this Section 1.10 shall be optional, and at the discretion of the Board.
1.10.2    Appointment. The Corporation shall, in advance of any meeting of stockholders, appoint one or more inspectors of election to act at the meeting and make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting.
1.10.3    Inspector’s Oath. Each inspector of election, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such inspector’s ability.
1.10.4    Duties of Inspectors. At a meeting of stockholders, the inspectors of election shall (a) ascertain the number of shares outstanding and the voting power of each share, (b) determine the shares represented at a meeting and the validity of proxies and ballots, (c) count all votes and ballots, (d) determine and retain for a reasonableotherwise.
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period of time a record of the disposition of any challenges made to any determination by the inspectors, and (e) certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of the inspectors.
1.10.5    Opening and Closing of Polls. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced by the chairperson of the meeting at the meeting. No ballot, proxies or votes, nor any revocations thereof or changes thereto, shall be accepted by the inspectors after the closing of the polls unless the Court of Chancery upon application by a stockholder shall determine otherwise.
1.10.6    Determinations. In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted with those proxies, any information provided in connection with proxies pursuant to Section 211(a)(2)b.(i) of the DGCL, or in accordance with Sections 211(e) or 212(c)(2) of the DGCL, ballots and the regular books and records of the Corporation, except that the inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspectors consider other reliable information for the limited purpose permitted herein, the inspectors at the time they make their certification of their determinations pursuant to this Section 1.10 shall specify the precise information considered by them, including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the inspectors’ belief that such information is accurate and reliable.
Section 1.11:    Conduct of Meetings. The Board may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board, the person presiding over any meeting of stockholders shall have the right and authority to convene and (for any or no reason) to recess and/or adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such presiding person, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board or prescribed by the presiding person of the meeting, may include, without limitation, the following: (a) the establishment of an agenda or order of business for the meeting; (b) rules and procedures for maintaining order at the meeting and the safety of those present; (c) limitations on attendance at or participation in the meeting to stockholders entitled to vote at the meeting, their duly authorized and constituted proxies or such other persons as the presiding person of the meeting shall determine; (d) restrictions on entry to the meeting after the time fixed for the commencement thereof; (e) limitations on the time allotted to questions or comments by participants; (f) restricting the use of audio/video recording devices and cell phones; and (g) complying with any state and local laws and regulations concerning safety and security. The presiding person at any meeting of stockholders, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall, if the facts warrant, determine and declare to the meeting that a matter or business was not properly brought before the meeting and if such presiding person should so determine, such presiding person shall so declare to the meeting and any such matter or business not properly brought before the meeting shall not be transacted or considered. Unless and to the extent determined by the Board or the person presiding over the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.
Section 1.12:    Notice of Stockholder Business; Nominations.
1.12.1    Annual Meeting of Stockholders.
(a)    Nominations of persons for election to the Board and the proposal of other business to be considered by the stockholders may be made at an annual meeting of stockholders only: (i) pursuant to the Corporation’s notice of such meeting (or any supplement thereto), (ii) by or at the direction of the Board or any committee thereof or (iii) by any stockholder of the Corporation who was a stockholder of record at the time of giving of the notice provided for in this Section 1.12 (the “Record Stockholder”), who is entitled to vote at such meeting and who complies with the notice and other procedures set forth in this Section 1.12 in all applicable respects. For the avoidance of doubt,
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(n)No member of the Acquirer Group is subject to Tax in any jurisdiction other than the jurisdiction in which it is formed or organized by virtue of having employees, a permanent establishment or any other place of business in such jurisdiction.
(o)No member of the Acquirer Group has ever been a “distributing corporation” or a “controlled corporation” in connection with a distribution described in Section 355 of the Code.
(p)Each member of the Acquirer Group has withheld and paid all material Taxes required to be withheld in connection with any amounts paid or owing to any employee, creditor, independent contractor or other Third Party.
(q)No member of the Acquirer Group (i) has agreed, or is required, to make any adjustment under Section 481(a) of the Code by reason of a change in accounting method or otherwise for a Pre-Closing Tax Period; (ii) has made an election, or is required, to treat any of its assets as owned by another Person pursuant to the provisions of former Section 168(f) of the Code or as tax-exempt bond financed property or tax-exempt use property within the meaning of Section 168 of the Code; (iii) has acquired, or owns, any assets that directly or indirectly secure any debt the interest on which is tax exempt under Section 103(a) of the Code; or (iv) has made any of the foregoing clauseelections, or is required to apply any of the foregoing rules, under any comparable state or local Law related to Taxes.
(r)No member of the Acquirer Group will be required to include in a Post-Closing Tax Period taxable income attributable to income that accrued (for purposes of financial statements) in a Pre-Closing Tax Period but was not recognized for Tax purposes in any Pre-Closing Tax Period as a result of (i) the installment method of accounting, the completed contract method of accounting, the long-term contract method of accounting, or the cash method of accounting, (ii) any prepaid amount received or paid in a Pre-Closing Tax Period, (iii) any deferred intercompany transaction in a Pre-Closing Tax Period or excess loss account, (iv) a change in method of accounting or Section 481 of the Code in a Pre-Closing Tax Period, (v) any inclusion under Section 951(a) or Section 951A of the Code, (vi) any gain recognition agreement entered into in a Pre-Closing Tax Period, (vii) any transaction under which previously utilized Tax losses or credits may be recaptured (including a dual consolidated loss or an excess loss account), (viii) Section 1400Z-2(a)(1)(A) of the Code, or (ix) any comparable provisions of state or local Tax law, domestic or foreign, or for any other reason. The Acquirer Group has not made an election pursuant to Section 965(h) of the Code to pay the net tax liability under Section 965 of the Code in installments.
(s)No member of the Acquirer Group has applied for and not yet received a ruling or determination from a Tax Authority regarding a past or prospective transaction.
(t)(x) Each member of the Acquirer Group has (i) to the extent deferred, properly complied in all respects with applicable Law in order to defer the amount of the employer’s share of any “applicable employment taxes” under Section 2302 of the CARES Act, and (ii) to the extent applicable, eligible, and claimed, properly complied in all material respects with applicable Law and duly accounted for any available Tax credits under Sections 7001 through 7004 of the Families First Coronavirus Response Act and Section 2301 of the CARES Act, and (iii) not deferred any payroll Tax obligations (including those imposed by Sections 3101(a) and 3201 of the Code) (for example, by a failure to timely withhold, deposit or remit such amounts in accordance with the applicable provisions of the Code and the Treasury Regulations) pursuant to or in connection with any U.S. presidential memorandum or executive order, and (iv) not sought a PPP Loan.
(u)Each such nonqualified deferred compensation plan to which the Company or any of its Subsidiaries is a party complies with the requirements of paragraphs (2), (3) and (4) of Section 409A(a) of the Code by its terms and has been operated in accordance with such requirements. No event has occurred that would be treated by Section 409A(b) of the Code as a transfer of property for purposes of Section 83 of the Code. No member of the Acquirer Group is under any obligation to gross up any Taxes under Section 409A of the Code or otherwise.
4.13Environmental Laws and Regulations. Acquirer and all facilities or real property currently owned, leased or operated by Acquirer, are now and, since such time as Acquirer has owned, leased or operated the facilities or real property, have been in compliance in all material respects with all applicable Environmental Laws. Acquirer has not, since Acquirer has owned, leased or operated the facilities or real property, received from any Governmental
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Authority any notice or demand letter alleging that Acquirer is in violation of any Environmental Law, and Acquirer is not subject to any Order of any Governmental Authority imposing liability or obligations relating to any Environmental Law, in each case except as is not, and would not reasonably be expected to be, material to Acquirer and its Subsidiaries, taken as a whole. There has been no release by Acquirer, or for which Acquirer would reasonably be expected to be liable by Contract or by operation of Law, of any Hazardous Substance at, under, from or to any facility or real property currently or formerly owned, leased or operated by Acquirer, in each case except as is not, and would not reasonably be expected to be, material to Acquirer and its Subsidiaries, taken as a whole. Acquirer has not assumed, undertaken or otherwise become subject to any liability of another Person relating to Environmental Laws, except as is not, and would not reasonably be expected to be, material to Acquirer and its Subsidiaries, taken as a whole.
4.14Litigation. Except as set forth in Section 4.13 of the Acquirer Disclosure Schedules or as is not, and would not reasonably be expected to be, material to Acquirer and its Subsidiaries, taken as a whole, there is no, and since July 22, 2021 there has not been any, Proceeding (a) pending or, to the Acquirer’s Knowledge, threatened against or affecting Acquirer, (b) pending or, to the Acquirer’s Knowledge, threatened against any Person whose Liability either Acquirer has retained or assumed, either contractually or by operation of Law, or (c) pending or, to the Acquirer’s Knowledge, threatened against any stockholder, officer, director or employee of Acquirer in connection with such stockholder’s, officer’s, director’s or employee’s relationship with, or actions taken on behalf of, Acquirer. Acquirer is not a party to or named in, and none of its properties or assets are subject to, any Order that is material to Acquirer and its Subsidiaries, taken as a whole.
4.15Merger Sub Activities. Merger Sub I and Merger Sub II were organized solely for the purpose of entering into this Agreement and the Ancillary Agreements and consummating the Merger and the other Transactions and thereby, and have not engaged in any activities or business, other than those incident or related to or incurred in connection with its formation or the negotiation, preparation or execution of this Agreement or any Ancillary Agreements, the performance of its covenants or agreements in this Agreement or any Ancillary Agreement or the consummation of the transactions contemplated hereby or thereby.
4.16Additional Representations. EACH ACQUIRER PARTY ACKNOWLEDGES AND AGREES THAT, EXCEPT AS EXPRESSLY SET FORTH IN Article 3, NONE OF THE COMPANY, ANY REPRESENTATIVE OF THE COMPANY, SELLER OR ANY OTHER PERSON MAKES ANY REPRESENTATION OR WARRANTY, EXPRESSED OR IMPLIED, AT LAW OR IN EQUITY, WITH RESPECT TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING THE MERGER, THE COMPANY, OR ANY INFORMATION PROVIDED OR MADE AVAILABLE TO THE ACQUIRER PARTIES OR THEIR REPRESENTATIVES IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY (INCLUDING ANY FORECASTS, PROJECTIONS, ESTIMATES, BUDGETS OR BUSINESS PLANS), AND ALL OTHER SUCH REPRESENTATIONS OR WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED.
ARTICLE 5
COVENANTS AND OTHER AGREEMENTS
5.1Conduct of Business of the Company Group. During the period from the Agreement Date through the earlier of (x) the termination of this Agreement in accordance with its terms and (y) the Effective Time (the “Pre-Closing Period”), except (i) as set forth on Section 5.1 of the Company Disclosure Schedule or in the Pre-Closing Budget, (ii) to the extent necessary to comply with the Company Parties’ obligations under this Agreement, including completion of the Pre-Closing Restructuring, (iii) as required by applicable Law, or (iv) with the prior written consent of Acquirer (such consent not to be unreasonably withheld, conditioned or delayed), (A) Seller and Holdco2 shall cause each member of the Company Group to, and each of the Company Parties shall, carry on its business in the Ordinary Course of Business and in compliance in all material respects with applicable Law and the Pre-Closing Budget, pay its debts and Taxes when due (subject to good faith disputes regarding such debts and Taxes), pay or perform other material obligations when due and use its commercially reasonable efforts to preserve intact its present business organizations, keep available the services of its present officers and key employees and preserve its present relationships with customers, suppliers, distributors, licensors and licensees and (B) neither
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Seller or Holdco2 shall and each shall cause each member of the Company Group not to, and the Company Parties shall not:
(a)amend the Governing Documents of any member of the Company Group;
(b)acquire (by merger, consolidation or combination, or acquisition of stock or assets) any Person or division or assets (other than in the Ordinary Course of Business) thereof, or otherwise effect any merger, consolidation or reorganization of any member of the Company Group, or effect any conversion or restructuring of any equity or equity-linked interest, purchase any securities of, voting interests in or any assets of any Person, other than acquiring or purchasing equipment or supplies in the Ordinary Course of Business;
(c)split, combine or reclassify the outstanding shares of Holdco2 Common Stock nor enter into any agreement with respect to voting of any of Holdco2 Common Stock;
(d)declare, set aside or pay any dividend or other distribution, payable in cash, stock, property or otherwise, in respect of any Holdco2 Common Stock;
(e)purchase, redeem or otherwise acquire any shares of Holdco2 Common Stock or any securities convertible or exchangeable or exercisable for any shares of Holdco2 Common Stock;
(f)transfer, lease, license, guarantee, sell, mortgage, pledge, dispose of or encumber any material asset, except for (i) the incurrence of Permitted Encumbrances, (ii) non-exclusive licenses of the Company IP in the Ordinary Course of Business, (iii) sales or other dispositions of inventory and other assets in the Ordinary Course of Business, (iv) sales of obsolete or written off assets and (v) sales or dispositions for an amount less than $500,000 in the aggregate;
(g)incur any Indebtedness or issue any debt securities or warrants or other rights to acquire debt securities of any member of the Company Group or assume, guarantee or endorse, as an accommodation or otherwise, the obligations of any other person for Indebtedness or capital obligations, in the case of any of the foregoing, other than (i) incurrences of Indebtedness under the Pre-Closing Budget and (ii) the incurrence of Seller Debt;
(h)issue, sell, pledge, dispose of or encumber any shares of, or securities convertible into or exchangeable or exercisable for, or options, warrants, calls, commitments or rights of any kind to acquire, any shares of Holdco2 Common Stock;
(i)make any change in accounting methods, principles or practices (including for Tax purposes), except as required by the Accounting Standards or by applicable Law or a Governmental Authority;
(j)revalue any of its material assets except as required by the Accounting Standards;
(k)other than in the Ordinary Course of Business, enter into any Contract that would constitute a Company Contract if it had been in existence on the Agreement Date, or amend, modify or consent to the termination of any Company Contract or the applicable member of the Company Group’s rights thereunder, or waive, release or assign any rights or claims thereunder;
(l)enter into, modify, amend or terminate any Contract, or waive, release, assign or fail to exercise or pursue any material rights or claims thereunder, other than in the Ordinary Course of Business, which if so entered into, modified, amended, terminated, waived, released, assigned, or not exercised or pursued would reasonably be expected to (i) adversely affect in any material respect any member of the Company Group; (ii) impair in any material respect the ability of any of the Company Parties or Seller to perform its obligations under this Agreement; or (iii) prevent or materially delay the consummation of the Mergers;
(m)make any loan, advance, capital contribution to, or investment in, any Person other than business expense advances to employees of any member of the Company Group in the Ordinary Course of Business;
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(n)enter into any Contract to the extent consummation of the Transactions or compliance with the provisions of this Agreement would reasonably be expected to conflict with, or result in a violation or breach of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of, or result in, termination, cancellation or acceleration of any obligation or to the loss of a benefit under, or result in the creation of any Encumbrance (other than Permitted Encumbrances) in or upon any of the properties or other assets (including Intellectual Property) of the any member of the Company Group under, or require Acquirer to license or transfer any Company IP or other material assets (other than Permitted Encumbrances) under such Contract;
(o)(i) abandon, disclaim, allow to lapse, dedicate to the public, sell, assign (in whole or in part), transfer, license, covenant not to sue, otherwise encumber or grant any right or interest (other than Permitted Encumbrances, but including any security interest) in, to or under any Company IP or Company IP Contract, including failing to perform or cause to be performed all applicable filings, recordings and other acts, or to pay or cause to be paid all required fees and Taxes, to maintain and protect its interest in the Company IP and Company IP Contracts, in each case other than Permitted Encumbrances; (ii) grant to any Third Party any license with respect to any Company IP, other than Permitted Encumbrances; (iii) disclose any confidential Company IP or Confidential Information to any Person, other than employees of the Company or any of its Subsidiaries, or in the Ordinary Course of Business, collaboration partners, that are subject to a confidentiality or non-disclosure covenant protecting against further disclosure thereof; (iv) fail to notify Acquirer promptly of any infringement, misappropriation or other violation of or conflict with any Company IP of which any member of the Company Group becomes aware, or fail to consult with Acquirer regarding and take such actions as Acquirer may reasonably request to protect such Company IP; or (v) fail to diligently prosecute any Company IP in the U.S. or in any non- U.S. jurisdiction material to the Company’s business, or fail to exercise a right of renewal or extension under or with respect to any Company IP;
(p)enter into any Contract with any Related Parties;
(q)(i) adopt, enter into, terminate or amend any Company Benefit Plan (other than offer letters and independent contractor agreements in the Ordinary Course of Business to the extent not in contravention of Section 5.1(q)(iv)), or collective bargaining agreement, (ii) increase the compensation, bonus or fringe or other benefits provided by the Company Group to any Company Employee or independent contractor who is a natural person, other than (A) increases in base compensation in the Ordinary Course of Business and in accordance with the Company’s third-party market study which do not total more than $3,000,000 of aggregate annual base compensation and which do not represent an increase of more than 4% for any Company Employee who has either annual base compensation of more than $250,000 or a title at or above the level of Senior Director, and (B) increases in base compensation in the Ordinary Course of Business for independent contractors who are natural persons whose annual compensation is less than $50,000, (iii) grant or pay any special bonus or special remuneration (cash, equity or otherwise) to any Company Employee or independent contractor who is a natural person, other than pursuant to an existing Company Benefit Plan in accordance with its terms as in effect as of the Agreement Date, (iv) hire any employee or engage or terminate (other than for cause) any (A) Company Employee who has either annual base compensation in excess of $250,000 or a title at or above the level of Senior Director or (B) independent contractor who is a natural person who has annual base compensation in excess of $100,000; provided that no such newly hired employee or newly engaged Contractor shall be provided with severance or termination pay, a sign-on bonus or special remuneration, or receive a commitment regarding equity-based incentive compensation without the exclusive meansprior written consent of Acquirer, or (v) transfer the employment of an In-Scope Employee from a member of the Company Group to Seller or any of its subsidiaries (other than a member of the Company Group), or transfer the employment of any individual who is not an In-Scope Employee from Seller or any of its subsidiaries (other than a member of the Company Group) to a member of the Company Group;
(r)grant any severance or termination pay (cash, equity or otherwise) to any Company Employee or Contractor or adopt any new severance plan, or amend or modify or alter in any material respect any severance plan, agreement or arrangement existing on the Agreement Date;
(s)(i) make or change any material Tax election, except to the extent required by applicable Law or in furtherance of the Pre-Closing Restructuring, (ii) adopt or change any Tax accounting method, (iii) agree or settle any material claim or assessment in respect of Taxes, (iv) file any material amendment to any material Tax Return,
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(v) enter into any Tax allocation agreement, Tax sharing agreement, Tax indemnity agreement or closing agreement relating to any Tax, (vi) surrender any right to claim a material Tax refund or extend or waive the limitation period applicable to any claim or assessment in respect of Taxes, or (vii) take any other similar action relating to the filing of any Tax Return or the payment of any Tax; in the case of each of the immediately preceding clauses (i) through (vii), if such action would have the effect of increasing the Tax liability of Acquirer or its Affiliates for any period ending after the Closing Date or decreasing any Tax attribute of Holdco2 or the Company existing on the Closing Date;
(t)commence any material Proceeding;
(u)except for Proceedings with respect to which an insurer has the right to control the decision to settle, waive, release, assign, or compromise any claim, litigation, complaint, investigation or Proceeding, waive, release, assign, settle, pay, discharge or satisfy any Proceeding other than in the Ordinary Course of Business;
(v)make any capital expenditures or commitments, capital additions or capital improvements in excess of such amounts specified in the Pre-Closing Budget;
(w)fail to keep or cause to be kept the material existing insurance policies (or substantial equivalents) of any member of the Company Group as in force on the Agreement Date;
(x)employ or use any contractor or consultant that, to the Company’s Knowledge, employs any Person that is: (A) debarred by the FDA, or excluded from participation in government programs (or subject to any similar sanction of any other applicable Governmental Authority); or (B) who is the subject of an FDA debarment investigation or Proceeding (or similar Proceeding of any other applicable Governmental Authority); or
(y)authorize, agree or enter into an agreement to do any of the foregoing. Notwithstanding anything to the contrary in this Section 5.1, Acquirer, Seller and the Company Parties acknowledge and agree that (x) nothing in this Agreement shall give Acquirer, directly or indirectly, the right to control or direct the Company’s operations for purposes of the HSR Act prior to the expiration or termination of any applicable waiting period pursuant to the HSR Act, (y) no consent of Acquirer shall be required with respect to any matter set forth in this Agreement to the extent the requirement of such consent would violate any Antitrust Law, and (z) nothing in this Agreement shall prevent or limit the Pre-Closing Restructuring or the transactions contemplated thereby.
5.2Acquisition Proposals.
(a)No Solicitation. Each of Seller and the Company Parties agrees that neither it nor any of its officers and directors shall, and that it shall use its reasonable best efforts to cause its employees, equityholders, controlled Affiliates, agents and Representatives (including any investment banker, attorney or accountant retained by it) not to (and shall not authorize any of them to) directly or indirectly: (i) solicit, initiate, encourage, facilitate, entertain, discuss or negotiate any offer or proposal for an Acquisition Proposal, or any of the foregoing which would be reasonably expected to lead to an Acquisition Proposal; (ii) engage in discussions with any Person with respect to any Acquisition Proposal, furnish to any Person any non-public information with respect to any Acquisition Proposal or take any other action relating to (or which would reasonably be expected to be used for the purpose of formulating an offer or proposal with respect to), or otherwise assist, cooperate with, facilitate or encourage any effort or attempt by any such Person with regard to, any Acquisition Proposal; (iii) approve, agree to, accept, endorse or recommend any Acquisition Proposal; (iv) enter into any letter of intent or similar document or any Contract, agreement or commitment contemplating or otherwise relating to any Acquisition Proposal; or (v) submit any Acquisition Proposal to the vote of the stockholder of any Company Party. Each of Seller and each Company Party will immediately (x) cease any and all existing activities, discussions or negotiations with any Third Parties conducted heretofore with respect to any Acquisition Proposal and (y) revoke or withdraw access of any Person (other than Acquirer, its Affiliates, agents and Representatives) to any data room (virtual or actual) containing any non-public information with respect to the Company Parties in connection with an Acquisition Proposal and request from each such Person the prompt return or destruction of all non-public information with respect to the Company Parties previously provided to such Person in connection with an Acquisition Proposal; provided, however, that nothing in this Section 5.2(a) shall preclude Seller or its Representatives from contacting any Person solely for the purpose of complying with the provisions of the first clause of this sentence.
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(b)Notification of Unsolicited Acquisition Proposals. As promptly as practicable (and in any event within one Business Day) after receipt of any offer or proposal (formal or informal) relating to, or that would reasonably be expected to lead to, an Acquisition Proposal or any request for nonpublic information or inquiry related to or which would reasonably be expected to lead to an Acquisition Proposal, each of Seller, Holdco2 and the Company, as applicable, shall, provide Acquirer with written notice and the material details thereof, including the identity of the Person or group (within the meaning of Section 13(d)(3) of the Exchange Act) making any such Acquisition Proposal, request, inquiry or contact as well as a stockholdercopy of any such Acquisition Proposal, indication, inquiry or request (or, where given orally to Seller, Holdco2 or the Company, a description of such Acquisition Proposal) and will keep Acquirer reasonably informed on a current basis of the status and details of any such offer or proposal and of any modifications to the terms thereof, provided, however, that this provision will not in any way be deemed to limit the obligations of Seller, Holdco2 or the Company and its respective Representatives set forth in Section 5.2(a).
(c)Acknowledgement. Each of Seller, the Company Parties and Acquirer acknowledge that this Section 5.2 was a significant inducement for Acquirer to enter into this Agreement.
5.3Proxy Statement and Other SEC Filings; Acquirer Stockholder Meeting.
(a)As promptly as reasonably practicable following the date hereof (but in no event later than the 60th day immediately following the date hereof), Acquirer shall prepare (and Seller and the Company Parties shall provide reasonable assistance in connection therewith), and Acquirer shall file with the SEC, a proxy statement relating to the Acquirer Stockholder Approval and the nomination and appointment of the Specified Designees to the Acquirer Board for terms that expire no earlier than the end of the Second Milestone Period (the “Proxy Statement”). Acquirer shall use its reasonable best efforts to ensure that the Proxy Statement complies in all material respects with the applicable provisions of the Exchange Act. Acquirer shall use its reasonable best efforts to cause the Proxy Statement to be mailed to the holders of Acquirer Stock as promptly as practicable following the date on which Acquirer files with the SEC the Proxy Statement in definitive form, following confirmation from the staff of the SEC (whether orally or in writing) that the comment process with respect to the Proxy Statement, if any, has concluded. Acquirer shall promptly (and in any event within one Business Day) notify Seller upon the receipt of any comments from the SEC or any request from the SEC for amendments or supplements to the Proxy Statement, and shall, as promptly as practicable after receipt thereof, provide Seller with copies of all correspondences between it and its Representatives, on the one hand, and the SEC, on the other hand, and all written comments with respect to the Proxy Statement received from the SEC and advise Seller of any oral comments with respect to the Proxy Statement received from the SEC. Acquirer shall use its reasonable best efforts to respond as promptly as practicable to any comments received from the SEC with respect to the Proxy Statement. Notwithstanding the foregoing, prior to mailing in definitive form the Proxy Statement (or any amendment or supplement thereto), or responding to any comments received from the SEC with respect thereto, Acquirer shall provide Seller a reasonable opportunity to review and comment on such document or response (including the proposed final version of such document or response). Seller and the Company Parties shall reasonably cooperate to prepare appropriate responses thereto (and will provide each other with copies of any such responses given to the SEC) and make such modifications to the Proxy Statement as shall be reasonably appropriate.
(b)The Parties shall reasonably cooperate in preparing and filing with the SEC the Proxy Statement and any necessary amendments or supplements thereto. Seller and the Company Parties shall furnish all information concerning Seller, the Company Group and the Business (including any audited and unaudited financial statements of the Company Group that may be required under Regulation S-X), as required under applicable securities laws in connection with (i) the preparation, filing and distribution of the Proxy Statement and any necessary amendments or supplements thereto, (ii) the preparation and filing of a Current Report on Form 8-K reporting the Closing and any necessary amendments thereto (the “Closing 8-K”) and (iii) the preparation, filing and distribution of any registration statement and related prospectus registering the resale of the shares of Acquirer Stock issued as the Stock Consideration and any necessary amendment or supplements thereto (the “Resale Registration Documents” and, together with the Proxy Statement and the Closing 8-K, the “Applicable SEC Filings”). Seller shall use its reasonable best efforts to obtain any necessary written consent of the auditor of the audited financial statements of the Company Group for the inclusion of its audit report on such audited financial statements in the Applicable SEC Filings for which such consent is required in order for such audit report to be included in such filing. Acquirer shall
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not file or mail the Proxy Statement or any amendment or supplement thereto to stockholders without the written consent of Seller (such consent not to be unreasonably withheld, conditioned or delayed).
(c)The Proxy Statement shall state that the Acquirer Board has approved this Agreement and the Transactions, approved and declared advisable the issuance of shares of Acquirer Stock contemplated by this Agreement and include (i) the recommendation of the Acquirer Board to vote in favor thereof and (ii) the recommendation of the Acquirer Board to vote in favor of the appointment of the Specified Designees to the Acquirer Board for terms that expire no earlier than the end of the Second Milestone Period (the Acquirer Board recommendations described in this clause (ii) and the immediately preceding clause (i), collectively, the “Acquirer Board Recommendation”) and (iii) any other proposal that the Acquirer Board reasonably deems necessary or advisable to consummate the Transactions. None of the Acquirer Board or any duly authorized committee thereof shall (i) fail to include in the Proxy Statement the Acquirer Board Recommendation or fail to make nominationsthe Acquirer Board Recommendation; (ii) change, modify, withhold, qualify or withdraw, or resolve or propose business (other than business includedpublicly to change, modify, withhold, qualify or withdraw, in each case, in a manner adverse to Seller or the Company Parties, the Acquirer Board Recommendation; or (iii) fail to publicly reaffirm the Acquirer Board Recommendation, in each case, within 10 Business Days after any written request of Seller to do so.
(d)Acquirer shall advise Seller promptly after receiving oral or written notice of (i) any requirement that Acquirer supplement or amend the Proxy Statement (whether to correct a misstatement or omission to state a material fact or otherwise) or (ii) any oral or written request by the SEC for amendment of the Proxy Statement or SEC comments thereon or requests by the SEC for additional information. Acquirer shall promptly provide Seller with copies of any written communication from the SEC with respect to the Proxy Statement and Acquirer, Seller and the Company Parties shall cooperate to prepare appropriate responses thereto (and will provide each other with copies of any such responses given to the SEC) and make such modifications to the Proxy Statement as shall be reasonably appropriate.
(e)If, at any time prior to the Effective Time, any event or circumstance shall be discovered by a Party that should be set forth in an amendment or a supplement to the Proxy Statement so that any such document would not include any misstatement of a material fact or fail to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, such Party shall promptly inform the other parties hereto and the Parties shall cause an appropriate amendment or supplement describing such information to be promptly filed with the SEC and, in the Corporation’s proxycase of Acquirer to the extent required by Law, disseminated to stockholders.
(f)Each of Seller, the Company Parties and Acquirer shall use its reasonable best efforts to (i) cooperate with the other party to prepare pro forma financial statements that comply with the rules and regulations of the SEC to the extent required for the Applicable SEC Filings, including the requirements of Regulation S-X, and (ii) provide and make reasonably available upon reasonable notice the senior management employees of the other party to discuss the materials prepared and delivered pursuant to this Section 5.3(f).
(g)Acquirer shall take all lawful action to call, give notice of, convene and hold a meeting of its stockholders (the “Acquirer Stockholders’ Meeting”) as promptly as practicable following the date on which the SEC clears (whether orally or in writing) the Proxy Statement for the purpose of obtaining the Acquirer Stockholder Approval and approving the appointment of the Specified Designees to the Acquirer Board, which meeting shall be held not later than 35 days following the date on which the Proxy Statement is first mailed (or made available in accordance with Rule 14a-814a-16 under the Exchange Act) to Acquirer’s stockholders. Acquirer shall include in the Proxy Statement the Acquirer Board Recommendation and solicit and use its reasonable best efforts to obtain the Acquirer Stockholder Approval. If, on a date for which the Acquirer Stockholders’ Meeting is scheduled, Acquirer shall have not received proxies representing a sufficient number of shares of outstanding Acquirer Stock to obtain the Acquirer Stockholder Approval, or if necessary to make or modify any disclosure contained in the Proxy Statement in order to comply with applicable Law (as determined in good faith by the Acquirer Board, after consultation with its outside legal counsel), irrespective of whether a quorum is present, Acquirer shall have the right to announce one or more successive postponements or adjournments of the Acquirer Stockholders’ Meeting; provided that the Acquirer Stockholders’ Meeting is not postponed or adjourned, in the aggregate, to a date that is
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more than thirty (30) days after the date for which the Acquirer Stockholders’ Meeting initially was scheduled (excluding, however, any adjournments or postponements required by applicable Law).
5.4Confidentiality; Public Disclosure. The Parties acknowledge that Seller and Acquirer have previously executed the Confidentiality Agreement and that, effective as of the Closing, the Confidentiality Agreement shall terminate and shall be of no further force or effect with no surviving obligations. No Company Party or Seller, on the one hand, or any Acquirer Party, on the other hand, in each case, directly or indirectly through their respective Representatives or any other Person shall issue any press release or other public statement or announcement regarding this Agreement, the Ancillary Agreements or the Transactions without, in the case of a press release or statement by any Company Party or Seller, the consent (not to be unreasonably withheld, conditioned or delayed) of Acquirer, or, in the case of a press release or statement by any Acquirer Party, the consent (not to be unreasonably withheld, conditioned or delayed) of Seller. Notwithstanding anything to the contrary in the foregoing, a Party shall be permitted to disclose any and all terms to its financial, tax and legal advisors (each of whom is subject to a similar obligation of confidentiality), and to any Governmental Authority or administrative agency to the extent necessary or advisable in compliance with applicable Law and the rules of a national stock exchange on which such Party’s capital stock is traded.
5.5Access; Copy of VDR.
(a)Subject to applicable Law and upon reasonable notice, each of Seller and the Company Parties shall afford Acquirer and its employees, attorneys, accountants, consultants, Representatives and other advisors and agents reasonable access, during normal business hours during the Pre-Closing Period, to the Company Group’s properties, books, contracts and records and appropriate individuals as Acquirer may reasonably request (including employees, attorneys, accountants, consultants and other professionals, in each case subject to applicable privilege), in each case concerning the business, properties and personnel of the Company Group, and during the Pre-Closing Period, each of Seller and the Company Parties shall reasonably promptly furnish to Acquirer such information concerning the business, properties and personnel of the Company Group as Acquirer may reasonably request; provided that each of Seller and the Company Parties may restrict the foregoing access to the extent that (i) any applicable Law requires such Party or its Subsidiaries to restrict or prohibit access to any such properties or information to Acquirer, (ii) such access would give rise to a risk of waiving any attorney-client privilege, work product doctrine or other applicable privilege applicable to such documents or information or (iii) such access would be in breach of any confidentiality obligation, commitment or provision by which Seller or any member of the Company Group, as applicable, is bound or affected as of the Agreement Date, which confidentiality obligation, commitment or provision shall be disclosed to Acquirer; provided, that Seller and the applicable Company Party: (x) will be entitled to withhold only such information that may not be provided without causing such waiver; and (y) at the request of Acquirer, will reasonably cooperate with Acquirer and use its commercially reasonable efforts to obtain the consent or waiver of any third party to the disclosure in full of all such information to Acquirer. With respect to the furnishing by Seller or the Company Parties of competitively sensitive information, outside antitrust counsel will be consulted prior to the exchange of such information, and such information shall not be exchanged to the extent such counsel to Seller or the applicable Company Party reasonably advises against such exchange. In addition, any information obtained from Seller or the Company Parties pursuant to the access contemplated by this Section 5.5 shall be subject to the Confidentiality Agreement. Any access to any of Seller’s, or any member of the Company Group’s facilities shall be subject to, as applicable, Seller’s, or such member of the Company Group’s reasonable security and health-related measures and the requirements of the applicable Leases, and shall not include the right to perform any invasive testing or soil, air and groundwater sampling, including, any environmental assessment.
(b)After the Closing, Seller agrees to provide, or cause to be provided, to Acquirer, the Surviving Entity or their designated Affiliate, as soon as reasonably practicable after written request therefor, reasonable access during normal business hours, to its and its Affiliates’ employees (without unreasonable disruption of employment) and to such books, records, documents and files in the possession or under the control of the Seller or its Affiliates to Acquirer, the Surviving Entity or their designated Affiliate to the extent reasonably required by Acquirer or the Surviving Entity (i) in order to comply with reporting, disclosure, filing or other similar requirements imposed on Acquirer, the Surviving Entity or their respective Affiliates under applicable Laws or (ii) in connection with any Proceeding related to the Business; provided that Seller shall not be required to provide access to or disclose
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information where such access or disclosure would violate any Law or agreement, or waive any attorney client or other similar privilege, and may redact information regarding itself or its Subsidiaries or otherwise not relating to Business, and, in the event such provision of information could reasonably be expected to violate any Law or agreement or waive any attorney client or other similar privilege, the Parties shall take all reasonable measures to permit the compliance with such obligations in a manner that avoids any such harm or consequence.
5.6Regulatory Approval; Reasonable Best Efforts.
(a)Each of the Parties shall coordinate and cooperate with one another and shall each use reasonable best efforts to comply with, and shall each refrain from taking any action that would impede compliance with, applicable Laws, and as soon as reasonably practicable and advisable after the Agreement Date, each of the Parties shall make all filings, notices, petitions, statements, registrations, submissions of information, applications or submissions of other documents required by any Governmental Authority in connection with the Mergers and the other Transactions, including (i) Notification and Report Forms with the United States Federal Trade Commission (the “FTC”) and the Antitrust Division of the United States Department of Justice (“DOJ”) as required by the HSR Act (the “HSR Filings”), and (ii) any filings required under the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, (such act,any applicable state or securities or “blue sky” laws and the rulessecurities laws of any foreign country, or any other applicable Law relating to the Mergers. Each Party will cause all documents that such Party is responsible for filing with any Governmental Authority under this Section 5.6 to comply in all material respects with all applicable Law.
(b)Acquirer agrees to use reasonable best efforts to promptly take any and regulations promulgated thereunder,all steps necessary to avoid or eliminate each and every impediment under the “ExchangeHSR Act”)), at an annual meeting and any other applicable Antitrust Law that may be asserted by any Governmental Authority or any other Person so as to enable the Parties to expeditiously close the Transactions. For the avoidance of stockholders,doubt and such stockholder must fully comply with the notice and other procedures set forthnotwithstanding anything else in this Section 1.12agreement, Acquirer shall not be required to make such nominations(i) propose, negotiate, commit to or propose business before an annual meeting.
(b)    For nominationseffect, by consent decree, hold, separate order, or other businessotherwise, the sale, the divestiture or disposition of any of its assets, properties or businesses, including those of Affiliates, or of the assets, properties or businesses to be properly brought before an annual meetingacquired by it pursuant to this Agreement, and (ii) otherwise taking or committing to take actions that after the Closing Date would limit Acquirer’s or its Affiliates’ freedom of action with respect to, or its or their ability to retain, one or more of the businesses, product lines or assets of the Company (the foregoing actions individual and in the aggregate being “Remedial Actions”), in each case, as may be required in order to avoid the entry of, or to effect the dissolution of, any preliminary or permanent injunction, in any Proceeding under the HSR Act or any other Antitrust Law, which would otherwise have the effect of preventing or delaying the Closing, unless such Remedial Actions would not, individually or in the aggregate, reasonably be expected to be materially detrimental to the benefits to be derived by Acquirer and its Affiliates as a Record Stockholderresult of the Mergers and the other Transactions. Further, Acquirer and its Affiliates shall not be obligated to contest, administratively or in court, any litigated Proceeding under the HSR Act or any other Antitrust Law seeking to enjoin the Mergers and the other Transactions, or to impose any Remedial Actions upon the Acquirer, Seller or the Company and their respective Affiliates.
(c)Each of the Parties shall work together and promptly supply the other with any information which may be required and reasonable assistance as the other may request in order to effectuate any filings or applications pursuant to Section 1.12.1(a) of these Bylaws:
(i)    the Record Stockholder must have given timely notice thereof in writing5.6. Except where prohibited by applicable Antitrust Laws relating to the Secretaryexchange of information, and subject to the Confidentiality Agreement, each of Seller and the Company Parties, on one hand, and Acquirer, on the other, shall use commercially reasonable efforts to (i) consult with the other party prior to taking a position with respect to any such filing, (ii) permit the other party to review and discuss in advance, and consider in good faith, the views of the Corporationother in connection with any analyses, appearances, presentations, memoranda, briefs, white papers, arguments, opinions and provideproposals before making or submitting any updates or supplements to such notice at the times and in the forms required by this Section 1.12;
(ii)    such other business (other than the nomination of persons for election to the Board) must otherwise be a proper matter for stockholder action;
(iii)    if the Proposing Person (as defined below) has provided the Corporation with a Solicitation Notice (as defined below), such Proposing Person must, in the case of a proposal other than the nomination of persons for election to the Board, have delivered a proxy statement and form of proxy to holders of at least the percentage of the Corporation’s voting shares requiredforegoing to any Governmental Authority in connection with any investigations or Proceedings in connection with this Agreement or the Transactions (including under any antitrust or fair trade applicable law to carryLaw), (iii) coordinate with the other Party in preparing and exchanging such information and (iv) promptly provide the other party (and its counsel) with copies of all filings, presentations or submissions (and a summary of any such proposal, or, in the case of a nomination or nominations, have delivered a proxy statement and form of proxy to holders of a percentage of the Corporation’s voting shares reasonably believedoral presentations) made by such Proposing Person toparty with any Governmental Authority in connection with this Agreement or the Transactions (though sensitive negotiation and deal valuation materials may be sufficient to elect the nominee or nominees proposed to be nominated by such Record Stockholder, and must, in either case, have included in such materials the Solicitation Notice; and
(iv)    if no Solicitation Notice relating thereto has been timelyredacted); provided pursuant to this Section 1.12, the Proposing Person proposing such business or nomination must not have solicited a number of proxies sufficient to have required the delivery of such a Solicitation Notice under this Section 1.12.
To be timely, a Record Stockholder’s notice must be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation not later than 5:00 p.m. Eastern Time on the seventy-fifth (75th) day nor earlier than 5:00 p.m. Eastern Time on the one hundred and fifth (105th) day prior to the first anniversary of the preceding year’s annual meeting (except in the case of the Corporation’s first annual meeting following the date of these Bylaws, for which such notice shall be timely if delivered in the same time period as if such meeting were a special meeting governed by Section 1.12.3 of these Bylaws); provided,however, that in the event that the date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after such anniversary date, notice by the Record Stockholder to be timely must be so delivered (A) no earlier than 5:00 p.m. Eastern Time on the one hundred and fifth (105th) day prior to such annual meeting and (B) no later than 5:00 p.m. Eastern Time on the later of the ninetieth (90th) day prior to such annual meeting or 5:00 p.m. Eastern Time on the tenth (10th) day following the day on which Public Announcement (as defined below) of the date of such meeting is first made by the Corporation. In no event shall an adjournment or postponement of an annual meeting commence a new time period (or extend any time period) for providing the Record Stockholder’s notice.
(c)    As to each person whom the Record Stockholder proposes to nominate for election or reelectionfinal determination as a director, in addition to the matters set forth in paragraph (e) below, such Record Stockholder’s notice shall set forth:
(i)    the name, age, business address and residence address of such person;
(ii)    the principal occupation or employment of such nominee;
(iii)    the class, series and number of any shares of stock of the Corporation that are beneficially owned or owned of record by such person or any Associated Person (as defined in Section 1.12.4(c));
(iv)    the date or dates such shares were acquired and the investment intent of such acquisition;
(v)    all other information relating to such person that would be required to be disclosed in solicitations of proxies for election of directors in an election contest (even if an election contest is not
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involved),strategy for dealing with the FTC, the DOJ or wouldany other applicable Governmental Authority shall be otherwise required,made by Acquirer.
(d)Further, neither Party shall participate in each caseany meeting or material discussion with any Governmental Authorities with respect to any such filings, applications, investigation, or other inquiry without giving the other party prior notice of the meeting or discussion and, to the extent permitted by the relevant Governmental Authority, the opportunity to attend and participate in such meeting or discussion (which, at the request of either Party, shall be limited to outside antitrust counsel only).
(e)Each of Acquirer and Seller shall equally split (i) all filing fees and local counsel fees payable in connection with the filings described in this Section, and (ii) all fees of economists and any other expert fees deemed advisable or necessary by counsel for the Parties in connection with compliance with a “second request” issued by the FTC or DOJ pursuant to the HSR Act, or to respond to any investigation of the agreements contemplated herein by a Governmental Authority prior to Closing. (with Holdco2’s portion of such fees being included in Transaction Expenses).
5.7Third-Party Consents; Notices; Seller Contracts.
(a)Promptly after the Agreement Date, following consultation with Acquirer, Seller or the applicable Company Party will send each notice and in accordance with Section 14(a) (or any successor provision) underwill use their respective commercially reasonable efforts to obtain all consents, waivers and approvals from all Persons that are necessary for the Exchange Actexecution and delivery of, and the rules and regulations thereunder;
(vi)    such person’s written consent to being named in the Corporation’s proxy statement as a nominee, to the public disclosureperformance of information regarding or related to such person provided to the Corporation by such person or otherwiseits obligations pursuant to, this Section 1.12Agreement and to serving as a director if elected;
(vii)    whether such person meets the independence requirementsAncillary Agreements, including under any Permit or Contract whereby the consummation of the stock exchange uponTransactions would, in the absence of the Consent of a third party, constitute or give rise to (A) a breach of applicable Law or such Contract; (B) loss of any material rights or benefits under such Contract; or (C) an entitlement to accelerate, terminate, forfeit or dispose of such Contract. Such notices, consents, waivers and approvals will be in a form reasonably acceptable to Acquirer.
(b)With respect to the Seller Contracts, prior to the Closing Date, the Company shall use its commercially reasonable efforts to enter into new Contracts on substantially similar terms as the Seller Contracts with the respective Third Parties thereto, including such new Contracts with respect to the Seller Contracts to which Top Customers, Top Suppliers and Top Payors are parties (such new Contracts with Top Customers, Top Suppliers and Top Payors, “Required Closing Contracts” ). If any Seller Contract is not Transferred on or prior to the Corporation’s Common Stock is primarily traded;Closing Date, Seller hereby agrees to use commercially reasonable efforts in cooperation with Acquirer to (i) implement arrangements (including subleasing, sublicensing or subcontracting) (A) to provide the underlying rights and benefits of the Company to Acquirer, the Surviving Entity and their designated Affiliates and (B) for the Surviving Entity or Acquirer or their designated Affiliate to assume all Company obligations thereunder and (ii) obtain any requisite Consent, substitution, novation, or amendment required to Transfer the portion of the Seller Contract attributable to the Business to Acquirer, the Surviving Entity, or their designated Affiliate.
(viii)    a description5.8Notice of all direct and indirect compensation and other material monetary agreements, arrangements and understandings duringDevelopments.
(a)During the past three (3) years, and any other material relationships, between or among such Proposing Person or anyPre-Closing Period:
(i)Each of its respective affiliates and associates,Acquirer, on the one hand, and each proposed nominee,Seller and his or her respective affiliates and associates,the Company Parties, on the other, hand, including all informationwill promptly advise the other Party in writing of any event or circumstance that would reasonably be requiredexpected to be disclosed pursuantresult in any representation or warranty made by it in this Agreement becoming untrue or inaccurate in any material respect so as to Rule 404 promulgated under Regulation S-K ifcause the Proposing Person or any of its respective affiliates and associates were the “registrant” for purposes of such rule and the nominee were a director or executive officer of such registrant; and
(ix)    a completed and signed questionnaire, representation and agreement required by Section 1.12.2 of these Bylaws.
(d)    As to any business other than the nomination of a director or directors that the Record Stockholder proposes to bring before the meeting, in addition to the mattersClosing conditions set forth in paragraph (e) below, such Record Stockholder’s notice shall set forth:
(i)    a brief description of the business desiredSection 6.1 or in Section 6.2 or Section 6.3, respectively, to fail to be brought before the meeting, the textsatisfied.
(ii)Each of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the Bylaws, the text of the proposed amendment), the reasons for conducting such business at the meeting and any material interest in such business of such Proposing Person, including any anticipated benefit to any Proposing Person therefrom; and
(ii)    a description of all agreements, arrangements and understandings between or among any such Proposing Person and any of its respective affiliates or associates,Acquirer, on the one hand, and any other person or persons,Seller and the Company Parties, on the other, hand, (including their names)will promptly advise the other Party in connection with the proposal of such business by such Proposing Person.
(e)    As to each Proposing Person giving the notice, such Record Stockholder’s notice shall set forth:
(i)    the current name and address of such Proposing Person, including, if applicable, their name and address as they appear on the Corporation’s stock ledger, if different;
(ii)    the class or series and number of shares of stock of the Corporation that are directly or indirectly owned of record or beneficially owned by such Proposing Person, including any shareswriting of any classevent or series ofcircumstance that would reasonably be expected to result in the Corporationfailure by it to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it under this Agreement prior to the Effective Time in any respect so as to which such Proposing Person has a right to acquire beneficial ownership at any timecause the Closing conditions set forth in the future;
(iii)    whether and the extent to which any derivative interest in the Corporation’s equity securities (including without limitation any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Corporation or with a value derived in wholeSection 6.1 or in part from the value of any classSection 6.2 or series of shares of the Corporation, whether or not such instrument or right shallSection 6.3, respectively, to fail to be subject to settlement in the underlying class or series of shares of the Corporation or otherwise, and any cash-settled equity swap, total return swap, synthetic equity position or similar derivative arrangement (any of the foregoing, a “Derivative Instrument”), as well as any rights to dividends on the shares of any class or series of shares of the Corporation that are separated or separable from the underlying shares of the Corporation) or any short interest in any security of the Corporation (for purposes of this Bylaw a person shall be deemed to have a short interest in asatisfied.
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security if such person directly(iii)Seller or indirectly, throughHoldco2, as applicable, will promptly advise Acquirer in writing of any contract, arrangement, understanding, relationshipchange or otherwise, has the opportunity to profitevent having, or share in any profit derived from any increase or decrease in the value of the subject security, including through performance-related fees) is held directly or indirectly by or for the benefit of such Proposing Person, including without limitation whether and the extent to which any ongoing hedging or other transaction or series of transactions has been entered into by or on behalf of, or any other agreement, arrangement or understanding (including without limitation any short position or any borrowing or lending of shares) has been made, the effect or intent of which is reasonably likely to mitigate loss tohave, alone or manage riskin combination with other changes or benefit of share price changes for, or to increase or decrease the voting power of, such Proposing Personevents, a Material Adverse Effect with respect to the Company Group.
(iv)Seller or Holdco2, as applicable, will promptly advise Acquirer in writing of any share of stockProceeding initiated by or against any member of the Corporation (anyCompany Group or, to the Company’s Knowledge, any Proceeding threatened against any member of the foregoing, a “Short Interest”);
(iv)Company Group, or brought or threatened against any proportionate interest in sharesdirector, officer, or equityholder of any member of the CorporationCompany Group, in each case in its capacity as such (a “New Litigation Claim”), and notify Acquirer of ongoing material developments in any New Litigation Claim and consult in good faith with Acquirer regarding the conduct of the defense of any New Litigation Claim.
(v)Seller or Derivative Instruments held, directlyHoldco2, as applicable, will promptly advise Acquirer in writing of any written notice from any Person (from which Acquirer and Seller shall have not previously determined to obtain consent), alleging that the consent of such Person is or indirectly, by a generalmay be required in connection with the Mergers.
(vi)Seller or limited partnershipHoldco2, as applicable, will deliver to Acquirer as soon as practicable, but in which such Proposing Personany event within three Business Days, of applicable Governmental Authority contact, copies of any associated correspondence. Neither the Seller, Holdco2 or any member of its respective affiliatesthe Company Group shall have any further communication with such Applicable Government Authority without prior written notice to Acquirer.
(b)No notification pursuant to this Section 5.8 will be deemed to prevent or associates is a general partnercure any breach of, or directlyinaccuracy in, amend or indirectly, beneficially ownssupplement any Section of the Company Disclosure Schedules or the Acquirer Disclosure Schedules, or otherwise disclose an interest in a general partner of such generalexception to, or limited partnership;
(v)    any direct or indirect material interestaffect in any material contractmanner, the representations, warranties, covenants or agreement with the Corporation, any affiliateagreements of the CorporationParties (or remedies with respect thereto) or the conditions to the obligations of the parties under this Agreement or the Ancillary Agreements.
5.9Regulatory Matters. During the Pre-Closing Period, the Seller and the Company Parties shall use and shall cause their respective Affiliates to use commercially reasonable efforts to make available to Acquirer and its Representatives, as and to the extent requested by Acquirer, complete and accurate copies of all written correspondence between any Competitor (as defined below) (including, in any such case, any employment agreement, collective bargaining agreement or consulting agreement);
(vi)    any significant equity interests or any Derivative Instruments or Short Interests in any Competitor held by such Proposing Person and/or anymember of its respective affiliates or associates;(vii) any other material relationship between such Proposing Person,the Company Group, on the one hand, and the Corporation, any affiliate of the Corporation or any Competitor,applicable Regulatory Authorities, on the other, hand;
(viii)    all informationother than routine, non-material communications in the Ordinary Course of Business, that would be requiredis or comes into the Seller’s, its Affiliates’ or the Company Group’s possession or control during the Pre-Closing Period promptly after Seller or the Company Parties obtain such possession or control thereof, except to be set forth in a Schedule 13D filed pursuantthe extent any such material is immaterial to Rule 13d-1(a) or an amendment pursuantthe Company Group. The Company Parties shall, and shall cause their respective Representatives to Rule 13d-2(a) if such a statement were requiredconsult and reasonably cooperate with Acquirer, as and to be filed under the Exchange Actextent reasonably requested by Acquirer, and take into good faith consideration the rules and regulations promulgated thereunder by such Proposing Person and/or anyviews of its respective affiliates or associates;
(ix)    any other information relating to such Proposing Person that would be required to be disclosed in a proxy statement or other filing required to be madeAcquirer in connection with solicitations of proxies or consents by such Proposing Person in support of the business proposed to be brought before the meeting pursuant to Section 14(a) (or any successor provision) under the Exchange Actclinical and the rules and regulations thereunder;
(x)     such Proposing Person’s written consent to the public disclosure of information provided to the Corporation pursuant to this Section 1.12;
(xi)    a complete written description of any agreement, arrangement or understanding (whether oral or in writing) (including any knowledge that another person or entity is Acting in Concert (as defined in Section 1.12.4(c)) with such Proposing Person) between or among such Proposing Person, any of its respective affiliates or associatespreclinical trials and any other person Acting in Concertregulatory filings, and any communications with any of the foregoing persons;
(xii)    a representation that the Record Stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appearRegulatory Authority, in person or by proxy at the meeting to propose such business or nomination;
(xiii)    a representation whether such Proposing Person intends (or is part of a group that intends) to deliver a proxy statement or form of proxy to holders of, in theeach case of a proposal, at least the percentage of the Corporation’s voting shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the Corporation’s voting shares to elect such nominee or nominees (an affirmative statement of such intent being a “Solicitation Notice”); and
(xiv)    any proxy, contract, arrangement, or relationship pursuant to which the Proposing Person has a right to vote, directly or indirectly, any shares of any security of the Corporation.
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The disclosures to be made pursuant to the foregoing clauses (ii), (iii), (iv) and (vi) shall not include any information with respect to the ordinary course business activitiesCompany Group, during the Pre-Closing Period.
5.10Delivery of any broker, dealer, commercial bank, trust companyFinancial Statements. During the Pre-Closing Period, Seller or other nominee who is a Proposing Person solelyHoldco2 will deliver to Acquirer, (a) not later than eight Business Days after the end of each calendar month, an unaudited consolidated balance sheet as a result of being the stockholder directed to prepareend of such month and submit the notice required by these Bylaws on behalfunaudited consolidated statements of a beneficial owner.
(f)    A stockholder providing written notice required by this Section 1.12 shall updateoperations and cash flows for such notice in writing, if necessary, somonth; provided that the cash flow statements need only be included on a quarterly basis; and (b) on or before the fifth (5th) Business Day prior to the Closing, audited consolidated financial statements, including consolidated balance sheets and consolidated statements of income, changes in stockholder equity, and cash flows, of the Company Group for the twelve (12) months ended December 31, 2021 prepared in accordance with the Accounting Standards (the “Interim Financial Statements”), and provide such additional supporting or related information provided or required toas may be providedreasonably requested by Acquirer in respect of such notice is trueInterim Financial Statements. Holdco2 covenants and correctagrees that such financial statements and the notes thereto, if any, will fairly present in all material respects as of (i) the record date for determining the stockholders entitled to noticefinancial condition of the meeting and (ii) 5:00 p.m. Eastern Time on the tenth (10th) business day prior to the meeting or any adjournment or postponement thereof. In the case of an update pursuant to clause (i) of the foregoing sentence, such update shall be received by the Secretary of the CorporationCompany Group at the principal executive officerespective dates thereof and the results of the Corporation not later than five (5) business days after the record date for determining the stockholders entitled to notice of the meeting, and in the case of an update and supplement pursuant to clause (ii) of the foregoing sentence, such update and supplement shall be received by the Secretary of the Corporation at the principal executive office of the Corporation not later than eight (8) business days prior to the dateits operations for the meeting and, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned or postponed). For the avoidance of doubt, the obligation to update as set forth in this paragraph shall not limit the Corporation’s rights with respect to any deficiencies in any notice provided by a stockholder, extend any applicable deadlines hereunder or enable or be deemed to permit a stockholder who has previously submitted notice hereunder to amend or update any proposal or nomination or to submit any new proposal, including by changing or adding nominees, matters, business and/or resolutions proposed to be brought before a meeting of the stockholders.
(g)    Notwithstanding anything in Section 1.12 or any other provision of these Bylaws to the contrary, any person who has been determined by a majority of the Whole Board to have violated Section 2.11 of these Bylaws or a Board Confidentiality Policy (as defined below) while serving as a director of the Corporation in the preceding five (5) years shall be ineligible to be nominated or be qualified to serve as a member of the Board, absent a prior waiver for such nomination or qualification approved by two-thirds of the Whole Board.
1.12.2    Submission of Questionnaire, Representation and Agreement. To be eligible to be a nominee of any stockholder for election or reelection as a director of the Corporation, the person proposed to be nominated must deliver (in accordance with the time periods prescribed for delivery of notice under Section 1.12 of these Bylaws) to the Secretary of the Corporation at the principal executive offices of the Corporation a completed and signed questionnaire in the form required by the Corporation (which form the stockholder shall request in writing from the Secretary of the Corporation and which the Secretary shall provide to such stockholder within ten days of receiving such request) with respect to the background and qualification of such person to serve as a director of the Corporation and the background of any other person or entity on whose behalf, directly or indirectly, the nomination is being made and a signed representation and agreement (in the form available from the Secretary upon written request) that such person: (a) is notrespective months then ended, and will not become a party to (i) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation or (ii) any Voting Commitment that could limit or interfere with such person’s ability to comply, if elected as a director of the Corporation, with such person’s fiduciary duties under applicable law, (b) is not and will not become a party to any Compensation Arrangement (as defined below) that has not been disclosed therein, (c) if elected as a director of the Corporation, will comply with all informational and similar requirements of applicable insurance policies and laws and regulations in connection with service or action as a director of the Corporation, (d) if elected as a director of the Corporation, will comply with all corporate governance, conflict of interest, stock ownership requirements, confidentiality and trading policies and guidelines of the Corporation publicly disclosed from time to time, (e) if elected as a director of the Corporation, will act in the best interests of the Corporation and its stockholders and not in the interests of individual constituencies, (f) consents to being named as a nominee in the Corporation’s proxy statement pursuant to Rule 14a-4(d) under the Exchange Act and any associated proxy card of the Corporation and agrees to serve if elected as a director and (g) intends to serve as a director for the full term for which such individual is to stand for election.
1.12.3    Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of such meeting.
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Nominations of persons for election to the Board may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of such meeting (a) by or at the direction of the Board or any committee thereof or (b) provided that the Board has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice of the special meeting, who shall be entitled to vote at the meeting and who complies with the notice and other procedures set forth in this Section 1.12 in all applicable respects. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board, any such stockholder may nominate a person or persons (as the case may be), for election to such position(s) as specified in the Corporation’s notice of meeting, if the stockholder’s notice required by Section 1.12.1(b) of these Bylaws shall be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation (i) no earlier than the one hundred and fifth (105th) day prior to such special meeting and (ii) no later than 5:00 p.m. Eastern Time on the later of the seventy-fifth (75th) day prior to such special meeting or the tenth (10th) day following the day on which Public Announcement is first made of the date of the special meeting and of the nominees proposed by the Board to be elected at such meeting. In no event shall an adjournment or postponement of a special meeting commence a new time period (or extend any time period) for providing such notice.
1.12.4    General.
(a)    Except as otherwise expressly provided in any applicable rule or regulation promulgated under the Exchange Act, only such persons who are nominatedprepared in accordance with the procedures set forthbooks and records of the Company Group in this Section 1.12 shall be eligible to be elected at a meeting of stockholders and serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordanceconformity with the procedures set forth in this Section 1.12. Except as otherwise provided by law or these Bylaws, the chairperson of the meeting shall have the power and duty to determine whether a nomination or any other business proposed to be brought before the meeting was made or proposed, as the case may be, in accordanceAccounting Standards, consistently applied with the procedures set forth in this Section 1.12Financial Statements, except for the omission of footnotes and if any proposed nomination or business is not in compliance herewith, to declare that such defective proposal or nomination shall be disregarded. Notwithstanding the foregoing provisions of this Section 1.12, unless otherwise required by law, if the stockholder (or a Qualified Representative of the stockholder (as defined below)) does not appear at the annual or special meeting of stockholders of the Corporation to present a nomination or proposed business, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation.
(b)    Notwithstanding the foregoing provisions of this Section 1.12, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth herein. Nothing in this Section 1.12 shall be deemed to affect any rights of (a) stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act or (b) the holders of any series of the Corporation’s Preferred Stock to elect directors pursuant to any applicable provisions of the Certificate of Incorporation.
(c)    For purposes of these Bylaws the following definitions shall apply:
(A)    a person shall be deemed to be “Acting in Concert” with another person if such person knowingly acts (whether or not pursuant to an express agreement, arrangement or understanding) in concert with, or toward a common goal relating to the management, governance or control of the Corporation in substantial parallel with, such other person where (1) each person is conscious of the other person’s conduct or intent and this awareness is an element in their decision-making processes and (2) at least one additional factor suggests that such persons intend to act in concert or in substantial parallel, which such additional factors may include, without limitation, exchanging information (whether publicly or privately), attending meetings, conducting discussions or making or soliciting invitations to act in concert or in substantial parallel; provided that a person shall not be deemed to be Acting in Concert with any other person solely as a result of the solicitation or receipt of revocable proxies or consents from such other person in response to a solicitation made pursuant to, and in accordance with, Section 14(a) (or any successor provision) of the Exchange Act by way of a proxy or consent solicitation statement filed on Schedule 14A. A person Acting in Concertnormal, immaterial year-end adjustments.
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with another person shall be deemed to be Acting in Concert with any third party who is also Acting in Concert with such other person;
(B)    “affiliate” and “associate” shall have the meanings ascribed thereto in Rule 405 under the Securities Act of 1933, as amended (the “Securities Act”); provided, however, that the term “partner” as used in the definition of “associate” shall not include any limited partner that is not involved in the management of the relevant partnership;
(C)    “Associated Person” shall mean with respect to any subject stockholder or other person (including any proposed nominee) (1) any person directly or indirectly controlling, controlled by or under common control with such stockholder or other person, (2) any beneficial owner of shares of stock of the Corporation owned of record or beneficially by such stockholder or other person, (3) any associate of such stockholder or other person, and (4) any person directly or indirectly controlling, controlled by or under common control or Acting in Concert with any such Associated Person;
(D)    “Compensation Arrangement” shall mean any direct or indirect compensatory payment or other financial agreement, arrangement or understanding with any person or entity other than the Corporation, including any agreement, arrangement or understanding with respect to any direct or indirect compensation, reimbursement or indemnification in connection with candidacy, nomination, service or action as a nominee or as a director of the Corporation;
(E)    “Competitor” shall mean any entity that provides products or services that compete with or are alternatives to the principal products produced or services provided by the Corporation or its affiliates;
(F)    “Proposing Person” shall mean (1) the Record Stockholder providing the notice of business proposed to be brought before an annual meeting or nomination of persons for election to the Board at a stockholder meeting, (2) the beneficial owner or beneficial owners, if different, on whose behalf the notice of business proposed to be brought before the annual meeting or nomination of persons for election to the Board at a stockholder meeting is made, and (3) any Associated Person on whose behalf the notice of business proposed to be brought before the annual meeting or nomination of persons for election to the Board at a stockholder meeting is made;
(G)    “Public Announcement” shall mean disclosure in a press release reported by a national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act; and
(H)     to be considered a “Qualified Representative” of a stockholder, a person must be a duly authorized officer, manager, trustee or partner of such stockholder or must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as a proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction thereof, at the meeting. The Secretary of the Corporation, or any other person who shall be appointed to serve as secretary of the meeting, may require, on behalf of the Corporation, reasonable and appropriate documentation to verify the status of a person purporting to be a “Qualified Representative” for purposes hereof.
ARTICLE II: BOARD OF DIRECTORS
Section 2.1:Number; Qualifications. The total number of directors constituting the Whole Board shall be fixed from time to time in the manner set forth in the Certificate of Incorporation and the term “Whole Board” shall have the meaning specified in the Certificate of Incorporation. No decrease in the authorized number of directors constituting the Whole Board shall shorten the term of any incumbent director. Directors need not be stockholders of the Corporation.
Section 2.2:Election; Resignation; Removal; Vacancies. Election of directors need not be by written ballot. Each director shall hold office until the annual meeting at which such director’s term expires and until such
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director’s successor is elected and qualified or until such director’s earlier death, resignation, disqualification or removal. Any director may resign by delivering a resignation in writing or by electronic transmission to the Corporation at its principal office or to the Chairperson of the Board, the Chief Executive Officer, or the Secretary. Such resignation shall be effective upon delivery unless it is specified to be effective at a later time or upon the happening of an event. Subject to the special rights of holders of any series of the Corporation’s Preferred Stock to elect directors, directors may be removed only as provided by the Certificate of Incorporation and applicable law. All vacancies occurring in the Board and any newly created directorships resulting from any increase in the authorized number of directors shall be filled in the manner set forth in the Certificate of Incorporation.
Section 2.3:    Regular Meetings. Regular meetings of the Board may be held at such places, within or without the State of Delaware, and at such times as the Board may from time to time determine. Notice of regular meetings need not be given if the date, times and places thereof are fixed by resolution of the Board.
Section 2.4:    Special Meetings. Special meetings of the Board may be called by the Chairperson of the Board, the Chief Executive Officer, the Lead Independent Director or a majority of the members of the Board then in office and may be held at any time, date or place, within or without the State of Delaware, as the person or persons calling the meeting shall fix. Notice of the time, date and place of such meeting shall be given, orally, in writing or by electronic transmission (including electronic mail), by the person or persons calling the meeting to all directors at least four (4) days before the meeting if the notice is mailed, or at least twenty-four (24) hours before the meeting if such notice is given by telephone, hand delivery, telegram, telex, mailgram, facsimile, electronic mail or other means of electronic transmission; provided, however, that if, under the circumstances, the Chairperson of the Board, the Lead Independent Director or the Chief Executive Officer calling a special meeting deems that more immediate action is necessary or appropriate, notice may be delivered on the day of such special meeting. Unless otherwise indicated in the notice, any and all business may be transacted at a special meeting.
Section 2.5:    Remote Meetings Permitted. Members of the Board, or any committee of the Board, may participate in a meeting of the Board or such committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to conference telephone or other communications equipment shall constitute presence in person at such meeting.
Section 2.6:    Quorum; Vote Required for Action. At all meetings of the Board, a majority of the Whole Board shall constitute a quorum for the transaction of business. If a quorum shall fail to attend any meeting, a majority of those present may adjourn the meeting to another place, date or time. Except as otherwise provided herein or in the Certificate of Incorporation, or required by law, the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board.
Section 2.7:    Organization. Meetings of the Board shall be presided over by (a) the Chairperson of the Board, or (b) in the absence of such person, the Lead Independent Director, or (c) in such person’s absence, by the Chief Executive Officer, or (d) in such person’s absence, by a chairperson chosen by the Board at the meeting. The Secretary of the Corporation shall act as secretary of the meeting, but in such person’s absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.
Section 2.8:    Unanimous Action by Directors in Lieu of a Meeting. Any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if all members of the Board or such committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee, as applicable. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.
Section 2.9:    Powers. Except as otherwise provided by the Certificate of Incorporation or the DGCL, the business and affairs of the Corporation shall be managed by or under the direction of the Board.
Section 2.10:    Compensation of Directors. Members of the Board, as such, may receive, pursuant to a resolution of the Board, fees and other compensation for their services as directors, including without limitation their services as members of committees of the Board.
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Section 2.11:    5.11Tax Matters.
(a)Confidentiality. Each director shall maintain the confidentiality of, and shall not share withCooperation. Without limiting any third party person or entity (including third parties that originally sponsored, nominated or designated such director (the “Sponsoring Party”)), any non-public information learned in their capacities as directors, including communications among Board members in their capacities as directors; provided that directors that are originally nominated or designated by a Sponsoring Party may disclose such information to the Sponsoring Party (or the management company of the Sponsoring Party) if the Sponsoring Party (or the management company of the Sponsoring Party) has applicable confidentiality restrictions in place. The Board may adopt a board confidentiality policy further implementing and interpreting this Section 2.11 (a “Board Confidentiality Policy”). Other than as provided in the first sectionother provisions of this Section 2.11, all directors are required5.11, the Parties shall cooperate fully, as and to complythe extent reasonably requested by any of them, in connection with this Section 2.11the filing of Tax Returns and any Board Confidentiality Policy unless such directoraudit, litigation or the Sponsoring Party for such director has entered into a specific written agreement with the Corporation, in either case as approved by the Board, providing otherwiseother Proceeding with respect to such confidential information.
ARTICLE III: COMMITTEES
Section 3.1:    Committees. The Board may designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.Taxes. In the absence or disqualification of a member of the committee, the member or members thereof present at any meeting of such committee who are not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in place of any such absent or disqualified member. Any such committee, to the extent provided in a resolution of the Board,this regard, Acquirer shall have and may exerciseretain all the powers and authority of the Board in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority in reference to the following matters: (a) approving, adopting, or recommending to the stockholders any action or matter (other than the election or removal of members of the Board) expressly required by the DGCL to be submitted to stockholders for approval or (b) adopting, amending or repealing any bylaw of the Corporation.
Section 3.2:    Committee Rules. Each committee shall keep records of its proceedings and make such reports as the Board may from time to time request. Unless the Board otherwise provides, each committee designated by the Board may make, alter and repeal rules for the conduct of its business. In the absence of such rules, each committee shall conduct its business in the same manner as the Board conducts its business pursuant to Article II of these Bylaws. Except as otherwise provided in the Certificate of Incorporation, these Bylaws or the resolution of the Board designating the committee, any committee may create one or more subcommittees, each subcommittee to consist of one or more members of the committee, and may delegate to any such subcommittee any or all of the powers and authority of the committee.
ARTICLE IV: OFFICERS; CHAIRPERSON; LEAD INDEPENDENT DIRECTOR
Section 4.1:    Generally. The officers of the Corporation shall consist of a Chief Executive Officer (who may be the Chairperson of the Board or the President), a President, a Secretary and a Treasurer and may consist of such other officers, including, without limitation, a Chief Financial Officer, and one or more Vice Presidents, as may from time to time be appointed by the Board. All officers shall be elected by the Board; provided, however, that the Board may empower the Chief Executive Officer of the Corporation to appoint any officer other than the Chief Executive Officer, the President, the Chief Financial Officer or the Treasurer. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, each officer shall hold office until such officer’s successor is duly elected and qualified or until such officer’s earlier resignation, death, disqualification or removal. Any number of offices may be held by the same person. Any officer may resign by delivering a resignation in writing or by electronic transmission to the Corporation at its principal office or to the Chairperson of the Board, the Chief Executive Officer, or the Secretary. Such resignation shall be effective upon delivery unless it is specified to be effective at some later time or upon the happening of some later event. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled by the Board and the Board may, in its discretion, leave unfilled, for such period as it may determine, any offices. Each such successor shall
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hold office for the unexpired term of such officer’s predecessor and until a successor is duly elected and qualified or until such officer’s earlier resignation, death, disqualification or removal.
Section 4.2:    Chief Executive Officer. Subject to the control of the Board and such supervisory powers, if any, as may be given by the Board, the powers and duties of the Chief Executive Officer of the Corporation are:
(a)    to act as the general manager and, subject to the control of the Board, to have general supervision, direction and control of the business and affairs of the Corporation;
(b)    subject to Section 1.6 of these Bylaws, to preside at all meetings of the stockholders;
(c)    subject to Section 1.2 of these Bylaws, to call special meetings of the stockholders to be held at such times and, subject to the limitations prescribed by law or by these Bylaws, at such places as he or she shall deem proper; and
(d)    to affix the signature of the Corporation to all deeds, conveyances, mortgages, guarantees, leases, obligations, bonds, certificates and other papers and instruments in writing which have been authorized by the Board or which, in the judgment of the Chief Executive Officer, should be executed on behalf of the Corporation; to sign certificates for shares of stock of the Corporation (if any); and, subject to the direction of the Board, to have general charge of the property of the Corporation and to supervise and control all officers, agents and employees of the Corporation.
The person holding the office of President shall be the Chief Executive Officer of the Corporation unless the Board shall designate another officer to be the Chief Executive Officer.
Section 4.3:    Chairperson of the Board. Subject to the provisions of Section 2.7 of these Bylaws, the Chairperson of the Board shall have the power to preside at all meetings of the Board and shall have such other powers and duties as provided in these Bylaws and as the Board may from time to time prescribe. The Chairperson of the Board may or may not be an officer of the Corporation.
Section 4.4:    Lead Independent Director. The Board may, in its discretion, elect a lead independent director from among its members that are Independent Directors (as defined below) (such director, the “Lead Independent Director”). The Lead Independent Director shall preside at all meetings at which the Chairperson of the Board is not present and shall exercise such other powers and duties as may from time to time be assigned to him or her by the Board or as prescribed by these Bylaws. For purposes of these Bylaws, “Independent Director” has the meaning ascribed to such term under the rules of the exchange upon which the Corporation’s Common Stock is primarily traded.
Section 4.5:    President. The person holding the office of Chief Executive Officer shall be the President of the Corporation unless the Board shall have designated one individual as the President and a different individual as the Chief Executive Officer of the Corporation. Subject to the provisions of these Bylaws and to the direction of the Board, and subject to the supervisory powers of the Chief Executive Officer (if the Chief Executive Officer is an officer other than the President), and subject to such supervisory powers and authority as may be given by the Board to the Chairperson of the Board, and/or to any other officer, the President shall have the responsibility for the general management and control of the business and affairs of the Corporation and the general supervision and direction of all of the officers, employees and agents of the Corporation (other than the Chief Executive Officer, if the Chief Executive Officer is an officer other than the President) and shall perform all duties and have all powers that are commonly incident to the office of President or that are delegated to the President by the Board.
Section 4.6:    Chief Financial Officer. The person holding the office of Chief Financial Officer shall be the Treasurer of the Corporation unless the Board shall have designated another officer as the Treasurer of the Corporation. Subject to the direction of the Board and the Chief Executive Officer, the Chief Financial Officer shall perform all duties and have all powers that are commonly incident to the office of Chief Financial Officer, or as the Board or the Chief Executive Officer may from time to time prescribe.
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Section 4.7:    Treasurer. The person holding the office of Treasurer shall be the Chief Financial Officer of the Corporation unless the Board shall have designated another officer as the Chief Financial Officer of the Corporation. The Treasurer shall have custody of all monies and securities of the Corporation. The Treasurer shall make such disbursements of the funds of the Corporation as are authorized and shall render from time to time an account of all such transactions. The Treasurer shall also perform such other duties and have such other powers as are commonly incident to the office of Treasurer, or as the Board or the Chief Executive Officer may from time to time prescribe.
Section 4.8:    Vice President. Each Vice President shall have all such powers and duties as are commonly incident to the office of Vice President or that are delegated to him or her by the Board or the Chief Executive Officer. A Vice President may be designated by the Board to perform the duties and exercise the powers of the Chief Executive Officer or President in the event of the Chief Executive Officer’s or President’s absence or disability.
Section 4.9:    Secretary. The Secretary shall issue or cause to be issued all authorized notices for, and shall keep, or cause to be kept, minutes of all meetings of the stockholders and the Board. The Secretary shall have charge of the corporate minute books and similar records and shall perform such other duties and have such other powers as are commonly incident to the office of Secretary, or as the Board or the Chief Executive Officer may from time to time prescribe.
Section 4.10:    Delegation of Authority. The Board may from time to time delegate the powers or duties of any officer of the Corporation to any other officers or agents of the Corporation, notwithstanding any provision hereof.
Section 4.11:    Removal. Any officer of the Corporation shall serve at the pleasure of the Board and may be removed at any time, with or without cause, by the Board; provided that if the Board has empowered the Chief Executive Officer to appoint any officer of the Corporation, then such officer may also be removed by the Chief Executive Officer. Such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation.
ARTICLE V:STOCK
Section 5.1:    Certificates; Uncertificated Shares. The shares of capital stock of the Corporation shall be uncertificated shares; provided, however, that the resolution of the Board that the shares of capital stock of the Corporation shall be uncertificated shares shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation (or the transfer agent or registrar, as the case may be). Notwithstanding the foregoing, the Board may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be certificated shares. Every holder of stock represented by certificates shall be entitled to have a certificate signed by, or in the name of the Corporation, by any two authorized officers of the Corporation (it being understood that each of the Chairperson of the Board, the Vice-Chairperson of the Board, the Chief Executive Officer, the President, any Vice President, the Treasurer, any Assistant Treasurer, the Secretary and any Assistant Secretary shall be an authorized officer for such purpose), representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were an officer, transfer agent or registrar at the date of issue.
Section 5.2:    Lost, Stolen or Destroyed Stock Certificates; Issuance of NewCertificates or Uncertificated Shares. The Corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate previously issued by it, alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to agree to indemnify the Corporation and/or to give the Corporation a bond sufficient to indemnify it, against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.
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Section 5.3:    Other Regulations. Subject to applicable law, the Certificate of Incorporation and these Bylaws, the issue, transfer, conversion and registration of shares represented by certificates and of uncertificated shares shall be governed by such other regulations as the Board may establish.
ARTICLE VI: INDEMNIFICATION
Section 6.1:    Indemnification of Officers and Directors. Each person who was or is made a party to, or is threatened to be made a party to, or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, legislative, investigative or any other type whatsoever, preliminary, informal or formal, including any arbitration or other alternative dispute resolution (including but not limited to giving testimony or responding to a subpoena) and including any appeal of any of the foregoing (a “Proceeding”), by reason of the fact that such person (or a person of whom such person is the legal representative), is or was a director or officer of the Corporation or a Reincorporated Predecessor (as defined below) or, while serving as a director or officer of the Corporation or a Reincorporated Predecessor, is or was serving at the request of the Corporation as a director, officer, employee, agent or trustee of another corporation, or of a partnership, joint venture, trust or other enterprise or non-profit entity, including service with respect to employee benefit plans (for purposesTax matters of this Article VI, an “Indemnitee”), shall be indemnified and held harmless by the Corporation to the fullest extent permitted by the DGCL as the same existsCompany Group which are or may hereafter be amended (but, inpertinent to any Tax period beginning before the case of any such amendment, only toClosing Date until the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment), against all expenses, costs, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes and penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such Indemnitee in connection therewith. Such indemnification shall continue as to an Indemnitee who has ceased to be a director or officerexpiration of the Corporation or a Reincorporated Predecessor (as defined below) or, while serving as a director or officerapplicable statute of the Corporation or a Reincorporated Predecessor, is or was serving at the request of the Corporation as a director, officer, employee, agent or trustee of another corporation, or of a partnership, joint venture, trust or other enterprise or non-profit entity, including service with respect to employee benefit planslimitations and shall inuremake them available to the benefit of such Indemnitees’ heirs, executors and administrators. Notwithstanding the foregoing, subject to Section 6.5 of this Article VI, the Corporation shall indemnify any such Indemnitee seeking indemnity in connection with a Proceeding (or part thereof) initiated by such Indemnitee only if such Proceeding (or part thereof) was authorized by the Board or such indemnification is authorized by an agreement approved by the Board. As used herein, the term the “Reincorporated Predecessor” means a corporation that is merged with and into the Corporation in a statutory merger where (a) the Corporation is the surviving corporation of such merger; or (b) the primary purpose of such merger is to change the corporate domicile of the Reincorporated Predecessor to Delaware.
Section 6.2:    Advancement of Expenses. Notwithstanding any other provision of these Bylaws, the Corporation shall pay all reasonable expenses (including attorneys’ fees) incurred by an Indemnitee in defending any Proceeding in advance of its final disposition; provided, however, that if the DGCL then so requires, the advancement of such expenses (i.e., payment of such expenses as incurred or otherwise in advance of the final disposition of the Proceeding) shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such Indemnitee, to repay such amounts if it shall ultimately be determined by a court of competent jurisdiction in a final judgment not subject to appeal that such Indemnitee is not entitled to be indemnified under this Article VI or otherwise. Any advances of expenses or undertakings to repay pursuant to this Section 6.2 shall be unsecured, interest free and without regard to Indemnitee’s ability to pay.
Section 6.3:    Non-Exclusivity of Rights. The rights conferred on any person in this Article VI shall not be exclusive of any other right that such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, Bylaws, agreement, vote or consent of stockholders or disinterested directors, or otherwise. Additionally, nothing in this Article VI shall limit the ability of the Corporation, in its discretion, to indemnify or advance expenses to persons whom the Corporation is not obligated to indemnify or advance expenses pursuant to this Article VI.
Section 6.4:    Indemnification Contracts. The Board is authorized to cause the Corporation to enter into indemnification contracts with any director, officer, employee or agent of the Corporation, or any person serving at the request of the Corporation as a director, officer, employee, agent or trustee of another corporation,
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partnership, joint venture, trust or other enterprise or non-profit entity, including employee benefit plans, providing indemnification or advancement rights to such person. Such rights may be greater than those provided in this Article VI.
Section 6.5:    Right of Indemnitee to Bring Suit.
6.5.1    Right to Bring Suit. If a claim under Section 6.1 or 6.2 of this Article VI is not paid in full by the Corporation within sixty (60) days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty (20) days, the Indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If the Indemnitee is successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Indemnitee also shall be entitled to be paid, to the fullest extent permitted by law, the expense of prosecuting or defending such suit.
6.5.2    Effect of Determination. Neither the absence of a determination prior to the commencement of such suit that indemnification of or the providing of advancement to the Indemnitee is proper in the circumstances because the Indemnitee has met the applicable standard of conduct set forth in applicable law, nor an actual determination that the Indemnitee has not met such applicable standard of conduct, shall create a presumption that the Indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the Indemnitee, be a defense to such suit.
6.5.3    Burden of Proof. In any suit brought by the Indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the Indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article VI, or otherwise, shall be on the Corporation.
Section 6.6:    Nature of Rights. The rights conferred upon Indemnitees in this Article VI shall be contract rights and such rights shall continue as to an Indemnitee who has ceased to be a director or officer and shall inure to the benefit of the Indemnitee’s heirs, executors and administrators.
Section 6.7:    Amendment or Repeal. Any amendment, repeal or modification of any provision of this Article VI that adversely affects any right of an Indemnitee or an Indemnitee’s successors shall be prospective only, and shall not adversely affect any right or protection conferred on a person pursuant to this Article VI and existing at the time of such amendment, repeal or modification.
Section 6.8:    Insurance. The Corporation may purchase and maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise or non-profit entity against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL.
ARTICLE VII:NOTICES
Section 7.1:    Notice.
7.1.1    Form and Delivery. Except as otherwise specifically required in these Bylaws (including, without limitation, Section 7.1.2 of these Bylaws) or by applicable law, all notices required to be given pursuant to these Bylaws may (a) in every instanceSeller in connection with any delivery to a member of the Board, be effectively given by hand delivery (including use of a delivery service), by depositing such notice in the mail, postage prepaid, or by sending such notice by overnight express courier, facsimile, electronic mailaudit, litigation or other form of electronic transmission and (b) be effectively delivered to a stockholder when given by hand delivery, by depositing such notice in the mail, postage prepaid or, if specifically consented to by the stockholder as described in Section 7.1.2 of these Bylaws, by sending such notice by facsimile, electronic mail or other form of electronic transmission. Any such notice shall be addressed to the person to whom notice is to be given at such person’s address as it appears on the records of the Corporation. The notice shall be deemed given (a) in the case of hand delivery, when received by the person to whom notice is to be given or by any person accepting such notice on behalf of such person, (b) in the
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case of delivery by mail, upon deposit in the mail, (c) in the case of delivery by overnight express courier, when dispatched, and (d) in the case of delivery via facsimile, electronic mail or other form of electronic transmission, at the time provided in Section 7.1.2 of these Bylaws.
7.1.2    Electronic Transmission. Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Corporation under any provision of the DGCL, the Certificate of Incorporation, or these Bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given in accordance with Section 232 of the DGCL. Any such consent shall be revocable by the stockholder by written notice to the Corporation. Any such consent shall be deemed revoked if (a) the Corporation is unable to deliver by electronic transmission two consecutive notices given by the Corporation in accordance with such consent and (b) such inability becomes known to the Secretary or an Assistant Secretary of the Corporation or to the transfer agent, or other person responsible for the giving of notice; provided, however, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action. Notice given pursuant to this Section 7.1.2 shall be deemed given: (i) if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice; (ii) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (iii) if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of such posting and the giving of such separate notice; and (iv) if by any other form of electronic transmission, when directed to the stockholder.
7.1.3    Affidavit of Giving Notice. An affidavit of the Secretary or an Assistant Secretary or of the transfer agent or other agent of the Corporation that the notice has been given in writing or by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
Section 7.2:    Waiver of Notice. Whenever notice is required to be given under any provision of the DGCL, the Certificate of Incorporation or these Bylaws, a written waiver of notice, signed by the person entitled to notice, or waiver by electronic transmission by such person, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors or members of a committee of directors need be specified in any waiver of notice
ARTICLE VIII: INTERESTED DIRECTORS
Section 8.1:    Interested Directors. No contract or transaction between the Corporation and one or more of its members of the Board or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are members of the board of directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof that authorizes the contract or transaction, or solely because his, her or their votes are counted for such purpose, if: (a) the material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; (b) the material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (c) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board, a committee thereof, or the stockholders.
Section 8.2:    Quorum. Interested directors may be counted in determining the presence of a quorum at a meeting of the Board or of a committee which authorizes the contract or transaction.
ARTICLE IX: MISCELLANEOUS
Section 9.1:    Fiscal Year. The fiscal year of the Corporation shall be determined by resolution of the Board.
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Section 9.2:    Seal. The Board may provide for a corporate seal, which may have the name of the Corporation inscribed thereon and shall otherwise be in such form as may be approved from time to time by the Board.
Section 9.3:    Form of Records. Any records administered by or on behalf of the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on or by means of, or be in the form of, any other information storage device, method or one or more electronic networks or databases (including one or more distributed electronic networks or databases), electronic or otherwise, provided that the records so kept can be converted into clearly legible paper form within a reasonable time and otherwise comply with the DGCL. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect such records pursuant to any provision of the DGCL.
Section 9.4:    Reliance Upon Books and Records. A member of the Board, or a member of any committee designated by the Board shall, in the performance of such person’s duties, be fully protected in relying in good faith upon the books and records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of the Corporation’s officers or employees, or committees of the Board, or by any other person as to matters the member reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation
Section 9.5:    Certificate of Incorporation Governs. In the event of any conflict between the provisions of the Certificate of Incorporation and these Bylaws, the provisions of the Certificate of Incorporation shall govern.
Section 9.6:    Severability. If any provision of these Bylaws shall be held to be invalid, illegal, unenforceable or in conflict with the provisions of the Certificate of Incorporation, then such provision shall nonetheless be enforced to the maximum extent possible consistent with such holding and the remaining provisions of these Bylaws (including without limitation, all portions of any section of these Bylaws containing any such provision held to be invalid, illegal, unenforceable or in conflict with the Certificate of Incorporation, that are not themselves invalid, illegal, unenforceable or in conflict with the Certificate of Incorporation) shall remain in full force and effect.
Section 9.7:    Time Periods.In applying any provision of these Bylaws which requires that an act be done or not be done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to an event, calendar days shall be used, the day of the doing of the act shall be excluded, and the day of the event shall be included.
ARTICLE X: AMENDMENT
Notwithstanding any other provision of these Bylaws, any alteration, amendment or repeal of these Bylaws, and any adoption of new Bylaws, shall require the approval of the Board or the stockholders of the Corporation as expressly provided in the Certificate of Incorporation.
ARTICLE XI: EXCLUSIVE FORUM
Unless the Corporation consents in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Any person or entity purchasing or otherwise acquiring or holding any interest in any security of the Corporation shall be deemed to have notice of and consented to the provisions of this Article XI.
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CERTIFICATION OF RESTATED BYLAWS
OF
[COMPANY NAME]
a Delaware Corporation
I, [          ], certify that I am Secretary of [Company Name], a Delaware corporation (the “Corporation”), that I am duly authorized to make and deliver this certification, that the attached Bylaws are a true and complete copy of the Restated Bylaws of the Corporation in effect as of the date of this certificate.
Dated: [__], 2021
[_____], Secretary
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EXHIBIT C
Form of LTIP
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EXHIBIT C-1
[PUBCO]
2021 EQUITY INCENTIVE PLAN
(Adopted [_____], 2021)
1.    PURPOSE. The purpose of this Plan is to provide incentives to attract, retain and motivate eligible persons whose present and potential contributions are important to the success of the Company, and any Parents, Subsidiaries and Affiliates that exist now or in the future, by offering them an opportunity to participate in the Company’s future performance through the grant of Awards. Capitalized terms not defined elsewhere in the text are defined in Section 28.
2.    SHARES SUBJECT TO THE PLAN.
2.1.    Number of Shares Available. Subject to Sections 2.6 and 21 and any other applicable provisions hereof, the total number of Shares reserved and available for grant and issuance pursuant to this Plan as of the date of adoption of the Plan by the Board is [[l] ([l])] Shares plus (a) any reserved shares not issued or subject to outstanding grants under the Company’s 2017 Stock Incentive Plan (the “Prior Plan”) on the Effective Date, plus (b) shares that are subject to stock options or other awards granted under the Prior Plan, that cease to be subject to such stock options or other awards, by forfeiture or otherwise, after the Effective Date, (c) shares issued under the Prior Plan before or after the Effective Date pursuant to the exercise of stock options that are forfeited after the Effective Date, (d) shares issued under the Prior Plan that are repurchased by the Company at the original issue price or are otherwise forfeited and (e) shares that are subject to stock options or other awards under the Prior Plan that are used to pay the Exercise Price of an option or withheld to satisfy the tax withholding obligations related to any award.
2.2.    Lapsed, Returned Awards. Shares subject to Awards, and Shares issued under the Plan under any Award, will again be available for grant and issuance in connection with subsequent Awards under this Plan to the extent such Shares: (a) are subject to issuance upon exercise of an Option or SAR granted under this Plan but which cease to be subject to the Option or SAR for any reason other than exercise of the Option or SAR; (b) are subject to Awards granted under this Plan that are forfeited or are repurchased by the Company at the original issue price; (c) are subject to Awards granted under this Plan that otherwise terminate without such Shares being issued; or (d) are surrendered pursuant to an Exchange Program. To the extent an Award under the Plan is paid out in cash or other property rather than Shares, such cash payment will not result in reducing the number of Shares available for issuance under the Plan. Shares used to pay the Exercise Price of an Award or withheld to satisfy the tax withholding obligations related to an Award will become available for future grant or issuance in connection with subsequent Awards under the Plan. For the avoidance of doubt, Shares that otherwise become available for grant and issuance because of the provisions of this Section 2.2 shall not include Shares subject to Awards that initially became available because of the substitution clause in Section 21.2 hereof.
2.3.    Minimum Share Reserve. At all times the Company shall reserve and keep available a sufficient number of Shares as shall be required to satisfy the requirements of all outstanding Awards granted under this Plan.
2.4.    Automatic Share Reserve Increase. The number of Shares available for grant and issuance under the Plan shall be increased on January 1 of each of 2022 through 2031, by the lesser of (a) [[l] ([l]%)]of the total number of shares of all classes of the Company’s common stock issued and outstanding on the immediately preceding December 31 (rounded down to the nearest whole share), or (b) such lesser number of shares determined by the Board.
2.5.    ISO Limitation. No more than [[l] ([l])] Shares shall be issued pursuant to the exercise of ISOs.
2.6.    Adjustment of Shares. If the number or class of outstanding Shares are changed by a stock dividend, extraordinary dividend or distribution (whether in cash, shares or other property, other than a regular cash dividend), spin-off, recapitalization, stock split, reverse stock split, subdivision, combination, consolidation, reclassification or similar change in the capital structure of the Company, without consideration, then (a) the number and class of
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Shares reserved for issuance and future grant under the Plan set forth in Section 2.1, including Shares reserved under sub-clauses (a)-(e) of Section 2.1, (b) the Exercise Prices of and number and class of Shares subject to outstanding Options and SARs, (c) the number and class of Shares subject to other outstanding Awards, and (d) the maximum number and class of Shares that may be issued as ISOs set forth in Section 2.5, shall be proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and in compliance with applicable securities or other laws; provided that fractions of a Share will not be issued. If, by reason of an adjustment pursuant to this Section 2.6, a Participant’s Award Agreement or other agreement related to any Award or the Shares subject to such Award covers additional or different shares of stock or securities, then such additional or different shares, and the Award Agreement or such other agreement in respect thereof, shall be subject to all of the terms, conditions and restrictions which were applicable to the Award or the Shares subject to such Award prior to such adjustment.
3.    ELIGIBILITY. ISOs may be granted only to Employees. All other Awards may be granted to Employees, Consultants, Directors and Non-Employee Directors; provided such Consultants, Directors and Non-Employee Directors render bona fide services not in connection with the offer and sale of securities in a capital-raising transaction. Nothing in this Plan creates an entitlement or right of any Employee, Consultant, Director or Non-Employee Director to any Award unless and until such Award is granted as provided in the Plan.
4.    ADMINISTRATION.
4.1.    Committee Composition; Authority. This Plan will be administered by the Committee or by the Board acting as the Committee. Subject to the general purposes, terms and conditions of this Plan, and to the direction of the Board, the Committee will have full power to implement and carry out this Plan, except, however, the Board shall establish the terms for the grant of an Award to Non-Employee Directors. The Committee will have the authority to:
(a)    construe and interpret this Plan, any Award Agreement and any other agreement or document executed pursuant to this Plan;
(b)     prescribe, amend and rescind rules and regulations relating to this Plan or any Award;
(c)    select persons to receive Awards;
(d)    determine the form and terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder. Such terms and conditions include, but are not limited to, the Exercise Price, the time or times when Awards may vest (which may be based on performance criteria) and be exercised or settled, any vesting acceleration or waiver of forfeiture restrictions, the method to satisfy tax withholding obligations or any other tax liability legally due and any restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such factors as the Committee will determine;
(e)    determine the number of Shares or other consideration subject to Awards;
(f)    determine the Fair Market Value in good faith and interpret the applicable provisions of this Plan and the definition of Fair Market Value in connection with circumstances that impact the Fair Market Value, if necessary;
(g)    determine whether Awards will be granted singly, in combination with, in tandem with, in replacement of, or as alternatives to, other Awards under this Plan or any other incentive or compensation plan of the Company or any Parent, Subsidiary or Affiliate;
(h)    grant waivers of Plan or Award conditions;
(i)    determine the vesting, exercisability and payment of Awards;
(j)    correct any defect, supply any omission or reconcile any inconsistency in this Plan, any Award or any Award Agreement;
(k)    determine whether an Award has been earned or has vested;
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(l)    determine the terms and conditions of any, and to institute any Exchange Program;
(m)    reduce or modify any criteria with respect to Performance Factors;
(n)    adjust Performance Factors to take into account changes in law and accounting or tax rules as the Committee deems necessary or appropriate to reflect the impact of extraordinary or unusual items, events or circumstances to avoid windfalls or hardships;
(o)    adopt rules and/or procedures (including the adoption of any subplan under this Plan)Proceeding relating to the operation and administration of the Plan to accommodate requirements of local law and procedures outside of the United StatesCompany Group or qualify Awards for special tax treatment under laws of jurisdictions other than the United States;
(p)    exercise discretion with respect to Performance Awards;
(q)    make all other determinations necessary or advisable for the administration of this Plan; and
(r)    delegate any of the foregoing to a subcommittee or to one or more officers pursuant to a specific delegation as permitted by applicable law, including Section 157(c) of the Delaware General Corporation Law.
4.2    Committee Interpretation and Discretion. Any determination made by the Committee with respect to any Award shall be made in its sole discretion at the time of grant of the Award or, unless in contravention of any express term of the Plan or Award, at any later time, and such determination shall be final and binding on the Company and all persons having an interest in any Award under the Plan. Any dispute regarding the interpretation of the Plan or any Award Agreement shall be submitted by the Participant or Company to the Committee for review. The resolution of such a dispute by the Committee shall be final and binding on the Company and the Participant. The Committee may delegate to one or more executive officers the authority to review and resolve disputes with respect to Awards held by Participants who are not Insiders, and such resolution shall be final and binding on the Company and the Participant.
4.3.    Section 16 of the Exchange Act. Awards granted to Participants who are subject to Section 16 of the Exchange Act must be approved by two or more “non-employee directors” (as defined in the regulations promulgated under Section 16 of the Exchange Act).
4.4.    Documentation. The Award Agreement for a given Award, the Plan and any other documents may be delivered to, and accepted by, a Participant or any other person in any manner (including electronic distribution or posting) that meets applicable legal requirements.
4.5.    Foreign Award Recipients. Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws and practices in other countries in which the Company and its Subsidiaries and Affiliates operate or have employees or other persons eligible for Awards, the Committee, in its sole discretion, shall have the power and authority to: (a) determine which Subsidiaries and Affiliates shall be covered by the Plan; (b) determine which individuals outside the United States are eligible to participate in the Plan, which may include individuals who provide services to the Company, Subsidiary or Affiliate under an agreement with a foreign nation or agency; (c) modify the terms and conditions of any Award granted to individuals outside the United States or foreign nationals to comply with applicable foreign laws, policies, customs and practices; (d) establish subplans and modify exercise procedures, vesting conditions, and other terms and procedures, to the extent the Committee determines such actions to be necessary or advisable (and such subplans and/or modifications shall be attached to this Plan as appendices, if necessary); and (e) take any action, before or after an Award is made, that the Committee determines to be necessary or advisable to obtain approval or comply with any local governmental regulatory exemptions or approvals; provided, however, that no action taken under this Section 4.5 shall increase the share limitations contained in Section 2.1 or Section 2.5 hereof. Notwithstanding the foregoing, the Committee may not take any actions hereunder, and no Awards shall be granted, that would violate the Exchange Act or any other applicable United States securities law, the Code, or any other applicable United States governing statute or law.
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5.    OPTIONS. An Option is the right but not the obligation to purchase a Share, subject to certain conditions. The Committee may grant Options to eligible Employees, Consultants and Directors and will determine whether such Options will be Incentive Stock Options within the meaning of the Code (“ISOs”) or Nonqualified Stock Options (“NSOs”), the number of Shares subject to the Option, the Exercise Price of the Option, the period during which the Option may vest and be exercised, and all other terms and conditions of the Option, subject to the following terms of this section.
5.1.    Option Grant. Each Option granted under this Plan will identify the Option as an ISO or an NSO. An Option may be, but need not be, awarded upon satisfaction of such Performance Factors during any Performance Period as are set out in advance in the Participant’s individual Award Agreement. If the Option is being earned upon the satisfaction of Performance Factors, then the Committee will: (a) determine the nature, length and starting date of any Performance Period for each Option; and (b) select from among the Performance Factors to be used to measure the performance, if any. Performance Periods may overlap and Participants may participate simultaneously with respect to Options that are subject to different performance goals and other criteria.
5.2.    Date of Grant. The date of grant of an Option will be the date on which the Committee makes the determination to grant such Option, or a specified future date. The Award Agreement will be delivered to the Participant within a reasonable time after the granting of the Option.
5.3.    Exercise Period. Options may be vested and exercisable within the times or upon the conditions as set forth in the Award Agreement governing such Option; provided, however, that no Option will be exercisable after the expiration of ten (10) years from the date the Option is granted; and provided further that no ISO granted to a person who, at the time the ISO is granted, directly or by attribution owns more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any Parent or Subsidiary (“Ten Percent Stockholder”), will be exercisable after the expiration of five (5) years from the date the ISO is granted. The Committee also may provide for Options to become exercisable at one time or from time to time, periodically or otherwise, in such number of Shares or percentage of Shares as the Committee determines.
5.4.    Exercise Price. The Exercise Price of each Option will be determined by the Committee when the Option is granted; provided that: (a) the Exercise Price of an Option will be not less than one hundred percent (100%) of the Fair Market Value of the Shares subject to the Option on the date of grant and (b) the Exercise Price of any ISO granted to a Ten Percent Stockholder will not be less than one hundred ten percent (110%) of the Fair Market Value of the Shares subject to the ISO on the date of grant. Payment for the Shares purchased may be made in accordance with Section 11 and the Award Agreement and in accordance with any procedures established by the Company.
5.5.    Method of Exercise. Any Option granted hereunder will be vested and exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Committee and set forth in the Award Agreement. An Option may not be exercised for a fraction of a Share. An Option will be deemed exercised when the Company receives: (a) notice of exercise (in such form as the Committee may specify from time to time) from the person entitled to exercise the Option (and/or via electronic execution through an authorized third-party administrator) and (b) full payment for the Shares with respect to which the OptionCompany Group is exercised togetherrelevant.
(b)Transfer Taxes. All transfer, documentary, sales, use, stamp, registration and other such Taxes, and any conveyance fees, recording charges and other fees and charges (including any penalties and interest) incurred in connection with applicable withholding taxes. Full payment may consist of any consideration and method of payment authorized by the Committee and permitted by the Award Agreement and the Plan. Shares issued upon exercise of an Option will be issued in the nameconsummation of the Participant. Until the Shares are issued (as evidencedTransactions (“Transfer Taxes”), if any, shall be borne and paid fifty percent (50%) by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends orSeller and fifty percent (50%) by Acquirer; provided that any other rightsTransfer Taxes incurred as a stockholder will existresult of or in connection with respect to the Shares, notwithstandingPre-Closing Restructuring shall be borne and paid 100% by, and be the exercisesole responsibility of, the Option. The Company will issueSeller. Seller or Acquirer (as required by applicable Law) shall prepare and timely file (or cause to be issued)prepared and timely filed) at its own expense all Tax Returns required to be filed in respect of any such Shares promptly afterTaxes, provided, however, that Taxes relating to such Tax Returns shall be borne and paid by the Option is exercised. No adjustment will be made for any dividend or other right for which the record date is prior to the date the Shares are issued, exceptSeller and Acquirer as provided in Section 2.6the preceding sentence.
(c)Straddle Periods. For purposes of determining the liability for Taxes (as well as any refund or credit with respect thereto) of or in respect of, or payable by, Holdco2 or the Company Group in respect of any Straddle Period, (i) the amount of any such Taxes based on or measured by income, sales, use, receipts, or other similar items of the Plan. ExercisingCompany Group that constitute a Tax in respect of a Pre-Closing Tax Period shall be determined based on an Option in any manner will decrease the number of Shares thereafter available, both for purposesinterim closing of the Plan and for sale under the Option, by the number of Sharesbooks as to which the Option is exercised.
5.6.    Termination of Service. If a Participant’s Service terminates for any reason other than for Cause or because of the Participant’s death, Disability, or retirement, then the Participant may exercise his or her Options only
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to the extent that such Options would have been exercisable by the Participantclose of business on the dateClosing Date and (ii) the Participant’s Service terminates no later than three (3) months afteramount of any other Taxes of the date the Participant’s Service terminates (or such shorter or longer time period as mayCompany Group for a Straddle Period that relate to and constitute a Tax in respect of a Pre-Closing Tax Period shall be determined by the Committee, with any exercise of an ISO beyond three (3) months after the date Participant’s employment terminates deemed to be the exercise of an NSO), but in any event no later than the expiration date of the Options, except as required by applicable law.
(a)    Death. If a Participant’s Service terminates because of the Participant’s death (or the Participant dies within three (3) months after the Participant’s Service terminates other than for Cause or because of the Participant’s Disability), then the Participant’s Options may be exercised only to the extent that such Options would have been exercisable by the Participant on the date the Participant’s Service terminates and must be exercised by the Participant’s legal representative, or authorized assignee, no later than twelve (12) months after the date the Participant’s Service terminates (or such shorter or longer time period as may be determined by the Committee), but in any event no later than the expiration date of the Options, except as required by applicable law.
(b)    Disability. If a Participant’s Service terminates because of the Participant’s Disability, then the Participant’s Options may be exercised only to the extent that such Options would have been exercisable by the Participant on the date the Participant’s Service terminates and must be exercised by the Participant (or the Participant’s legal representative or authorized assignee) no later than twelve (12) months after the date the Participant���s Service terminates (or such shorter or longer time period as may be determined by the Committee, with any exercise of an ISO beyond (a) three (3) months after the date the Participant’s employment terminates when the termination of Service is for a Disability that is not a “permanent and total disability” as defined in Section 22(e)(3) of the Code, or (b) twelve (12) months after the date the Participant’s employment terminates when the termination of Service is for a Disability that is a “permanent and total disability” as defined in Section 22(e)(3) of the Code, deemed to be exercise of an NSO), but in any event no later than the expiration date of the Options.
(c)    Retirement. If a Participant’s Service terminates becauseamount of such Participant’s retirement (consistent with the Company’s policies regarding retirement), then the Participant may exercise his or her Options only to the extent that such Options would have been exercisable by the Participant on the date the Participant’s Service terminates no later than twenty-four (24) months after the date the Participant’s Service terminates (with any exercise of an ISO beyond three (3) months after the date Participant’s employment terminates deemed to be the exercise of an NSO), but in any event no later than the expiration date of the Options, except as required by applicable law.
(d)    Cause. If a Participant’s Service is terminated for Cause, then the Participant’s Options shall expire on the Participant’s date of termination of Service if the Committee has reasonably determined in good faith that such cessation of Services has resulted in connection with an act or failure to act constituting Cause (or such Participant’s Service could have been terminated for Cause (without regard to the lapsing of any required notice or cure periods in connection therewith) at the time such Participant terminated Service), or at such later time and on such conditions as are determined by the Committee, but in any event no later than the expiration date of the Options. Unless otherwise provided in an employment agreement, the Award Agreement or other applicable agreement between the Participant and the Company or any Parent or Subsidiary, Cause shall have the meaning set forth in the Plan.
5.7.Limitations on ISOs. With respect to Awards granted as ISOs, to the extent that the aggregate Fair Market Value of the Shares with respect to which such ISOs are exercisableTax for the first time by the Participant during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds one hundred thousand dollars ($100,000), such Options will be treated as NSOs. For purposes of this Section 5.7, ISOs will be taken into account in the order in which they were granted. The Fair Market Value of the Shares will be determined as of the time the Option with respect to such Shares is granted. In the event that the Code or the regulations promulgated thereunder are amended after the Effective Date to provide for a different limit on the Fair Market Value of Shares permitted to be subject to ISOs, such different limit will be automatically incorporated herein and will apply to any Options granted after the effective date of such amendment.
5.8.    Modification, Extension or Renewal. The Committee may modify, extend or renew outstanding Options and authorize the grant of new Options in substitution therefor, provided that any such action may not,
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without the written consent of a Participant, impair any of such Participant’s rights under any Option previously granted, unless for the purpose of complying with applicable laws and regulations. Any outstanding ISO that is modified, extended, renewed or otherwise altered will be treated in accordance with Section 424(h) of the Code. Subject to Section 18 of this Plan, by written notice to affected Participants, the Committee may reduce the Exercise Price of outstanding Options without the consent of such Participants; provided, however, that the Exercise Price may not be reduced below the minimum Exercise Price that would be permitted under Section 5.4 for Options granted on the date the action is taken to reduce the Exercise Price.
5.9.    No Disqualification. Notwithstanding any other provision in this Plan, no term of this Plan relating to ISOs will be interpreted, amended or altered, nor will any discretion or authority granted under this Plan be exercised, so as to disqualify this Plan under Section 422 of the Code or, without the consent of the Participant, to disqualify any Participant’s ISO under Section 422 of the Code.
6.    RESTRICTED STOCK AWARDS. A Restricted Stock Award is an offer by the Company to sell to an eligible Employee, Consultant or Director Shares that are subject to restrictions (“Restricted Stock”). The Committee will determine to whom an offer will be made, the number of Shares the Participant may purchase, the Purchase Price, the restrictions under which the Shares will be subject and all other terms and conditions of the Restricted Stock Award, subject to the Plan.
6.1.    Restricted Stock Purchase Agreement. All purchases under a Restricted Stock Award will be evidenced by an Award Agreement. Except as may otherwise be provided in an Award Agreement, a Participant accepts a Restricted Stock Award by signing and delivering to the Company an Award Agreement with full payment of the Purchase Price, within thirty (30) days from the date the Award Agreement was delivered to the Participant. If the Participant does not accept such Award within thirty (30) days, then the offer to purchase such Restricted Stock Award will terminate, unless the Committee determines otherwise.
6.2.    Purchase Price. The Purchase Price for Shares issued pursuant to a Restricted Stock Award will be determined by the Committee on the date the Restricted Stock Award is granted and, if permitted by law, no cash consideration will be required in connection with the payment for the Purchase Price where the Committee provides that payment shall be in the form of services rendered. Payment of the Purchase Price must be made in accordance with Section 11 of the Plan, the Award Agreement and any procedures established by the Company.
6.3.    Terms of Restricted Stock Awards. Restricted Stock Awards will be subject to such restrictions as the Committee may impose or are required by law. These restrictions may be based on completion of a specified number of years of service with the Company or upon completion of Performance Factors, if any, during any Performanceentire Straddle Period as set out in advance in the Participant’s Award Agreement. Prior to the grant of a Restricted Stock Award, the Committee shall: (a) determine the nature, length and starting date of any Performance Period for the Restricted Stock Award; (b) select from among the Performance Factors to be used to measure performance goals, if any; and (c) determine the number of Shares that may be awarded to the Participant. Performance Periods may overlap and a Participant may participate simultaneously with respect to Restricted Stock Awards that are subject to different Performance Periods and having different performance goals and other criteria.
6.4.    Termination of Service. Except as may be set forth in any Participant’s Award Agreement, vesting ceases on the date the Participant’s Service terminates (unless determined otherwise by the Committee).
7.    STOCK BONUS AWARDS. A Stock Bonus Award is an award to an eligible Employee, Consultant, or Director of Shares for Services to be rendered or for past Services already rendered to the Company or any Parent, Subsidiary or Affiliate. All Stock Bonus Awards shall be made pursuant to an Award Agreement. No payment from the Participant will be required for Shares awarded pursuant to a Stock Bonus Award.
7.1.    Terms of Stock Bonus Awards. The Committee will determine the number of Shares to be awarded to the Participant under a Stock Bonus Award and any restrictions thereon. These restrictions may be based upon completion of a specified number of years of service with the Company or upon satisfaction of performance goals based on Performance Factors during any Performance Period as set out in advance in the Participant’s Stock Bonus Agreement. Prior to the grant of any Stock Bonus Award the Committee shall: (a) determine the restrictions to which the Stock Bonus Award is subject, including the nature, length and starting date of any Performance Period
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for the Stock Bonus Award; (b) select from among the Performance Factors, if any, to be used to measure performance goals; and (c) determine the number of Shares that may be awarded to the Participant. Performance Periods may overlap and a Participant may participate simultaneously with respect to Stock Bonus Awards that are subject to different Performance Periods and different performance goals and other criteria.
7.2.    Form of Payment to Participant. Payment may be made in the form of cash, whole Shares, or a combination thereof, based on the Fair Market Value of the Shares earned under a Stock Bonus Award on the date of payment, as determined in the sole discretion of the Committee.
7.3.    Termination of Service. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on the date the Participant’s Service terminates (unless determined otherwise by the Committee).
8.    STOCK APPRECIATION RIGHTS. A Stock Appreciation Right (“SAR”) is an award to an eligible Employee, Consultant, or Director that may be settled in cash, or Shares (which may consist of Restricted Stock), having a value equal to (a) the difference between the Fair Market Value on the date of exercise over the Exercise Price multiplied by (b) the number of Shares with respect to which the SAR is being settled (subject to any maximum number of Shares that may be issuable as specified in an Award Agreement). All SARs shall be made pursuant to an Award Agreement.
8.1.    Terms of SARs. The Committee will determine the terms of each SAR including, without limitation: (a) the number of Shares subject to the SAR; (b) the Exercise Price and the time or times during which the SAR may be exercised and settled; (c) the consideration to be distributed on settlement of the SAR; and (d) the effect of the Participant’s termination of Service on each SAR. The Exercise Price of the SAR will be determined by the Committee when the SAR is granted, and may not be less than Fair Market Value of the Shares subject to the SAR on the date of grant. A SAR may be subject to satisfaction of Performance Factors, if any, during any Performance Period as are set out in advance in the Participant’s individual Award Agreement. If the SAR is being earned upon the satisfaction of Performance Factors, then the Committee will: (i) determine the nature, length and starting date of any Performance Period for each SAR; and (ii) select from among the Performance Factors to be used to measure the performance, if any. Performance Periods may overlap and Participants may participate simultaneously with respect to SARs that are subject to different Performance Factors and other criteria.
8.2.    Exercise Period and Expiration Date. A SAR will be exercisable within the times or upon the occurrence of events determined by the Committee and set forth in the Award Agreement governing such SAR. The SAR Agreement shall set forth the expiration date; provided that no SAR will be exercisable after the expiration of ten (10) years from the date the SAR is granted. The Committee may also provide for SARs to become exercisable at one time or from time to time, periodically or otherwise (including, without limitation, upon the attainment during a Performance Period of performance goals based on Performance Factors), in such number of Shares or percentage of the Shares subject to the SAR as the Committee determines. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on the date Participant’s Service terminates (unless determined otherwise by the Committee). Notwithstanding the foregoing, the rules of Section 5.6 also will apply to SARs.
8.3.    Form of Settlement. Upon exercise of a SAR, a Participant will be entitled to receive payment from the Company in an amount determined by multiplying (a) the difference between the Fair Market Value of a Share on the date of exercise over the Exercise Price; times (b) the number of Shares with respect to which the SAR is exercised. At the discretion of the Committee, the payment from the Company for the SAR exercise may be in cash, in Shares of equivalent value, or in some combination thereof. The portion of a SAR being settled may be paid currently or on a deferred basis with such interest, if any, as the Committee determines, provided that the terms of the SAR and any deferral satisfy the requirements of Section 409A of the Code to the extent applicable.
8.4.    Termination of Service. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on the date the Participant’s Service terminates (unless determined otherwise by the Committee).
9.    RESTRICTED STOCK UNITS. A Restricted Stock Unit (“RSU”) is an award to an eligible Employee, Consultant, or Director covering a number of Shares that may be settled in cash or by issuance of those
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Shares (which may consist of Restricted Stock). No Purchase Price shall apply to an RSU settled in Shares. All RSUs shall be made pursuant to an Award Agreement.
9.1.    Terms of RSUs. The Committee will determine the terms of an RSU including, without limitation: (a) the number of Shares subject to the RSU; (b) the time or times during which the RSU may be vested and settled; (c) the consideration to be distributed on settlement; and (d) the effect of the Participant’s termination of Service on each RSU; provided that no RSU shall have a term longer than ten (10) years. An RSU may be subject to satisfaction of such performance goals based on Performance Factors during any Performance Period as are set out in advance in the Participant’s Award Agreement. If the RSU is being earned upon satisfaction of Performance Factors, then the Committee will: (i) determine the nature, length and starting date of any Performance Period for the RSU; (ii) select from among the Performance Factors to be used to measure the performance, if any; and (iii) determine the number of Shares deemed subject to the RSU. Performance Periods may overlap and Participants may participate simultaneously with respect to RSUs that are subject to different Performance Periods and different performance goals and other criteria.
9.2.    Form and Timing of Settlement. Payment of earned RSUs shall be made as soon as practicable after the date(s) determined by the Committee and set forth in the Award Agreement. The Committee, in its sole discretion, may settle earned RSUs in cash, Shares or a combination of both. The Committee may also permit a Participant to defer payment under a RSU to a date or dates after the RSU is earned provided that the terms of the RSU and any deferral satisfy the requirements of Section 409A of the Code to the extent applicable.
9.3.    Termination of Service. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on the date the Participant’s Service terminates (unless determined otherwise by the Committee).
9.4.    Dividend Equivalent Payments. The Committee may permit Participants holding RSUs to receive dividend equivalent payments on outstanding RSUs if and when dividends are paid to stockholders on Shares. In the discretion of the Committee, such dividend equivalent payments may be paid in cash or Shares and they may be either paid at the same time as dividend payments are made to stockholders or delayed until Shares are issued pursuant to the RSU grants and may be subject to the same vesting or performance requirements as the RSUs. If the Committee permits dividend equivalent payments to be made on RSUs, the terms and conditions for such dividend equivalent payments will be set forth in the RSU Agreement.
10.    PERFORMANCE AWARDS. A Performance Award is an award to an eligible Employee, Consultant or Director that is based upon the attainment of performance goals, as established by the Committee, and other terms and conditions specified by the Committee, and may be settled in cash, Shares (which may consist of, without limitation, Restricted Stock), other property or any combination thereof. Grants of Performance Awards shall be made pursuant to an Award Agreement that cites Section 10 of the Plan.
10.1.    Types of Performance Awards. Performance Awards shall include Performance Shares, Performance Units and cash-based Awards as set forth in Sections 10.1(a), 10.1(b) and 10.1(c) below.
(a)    Performance Shares. The Committee may grant Awards of Performance Shares, designate the Participants to whom Performance Shares are to be awarded and determine the number of Performance Shares and the terms and conditions of each such Award.
(b)    Performance Units. The Committee may grant Awards of Performance Units, designate the Participants to whom Performance Units are to be awarded and determine the number of Performance Units and the terms and conditions of each such Award.
(c)    Cash-Settled Performance Awards. The Committee may also grant cash-settled Performance Awards to Participants under the terms of this Plan.
The amount to be paid under any Performance Award may be adjusted on the basis of such further consideration as the Committee shall determine in its sole discretion.
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10.2.Terms of Performance Awards. Performance Awards will be based on the attainment of performance goals using the Performance Factors within this Plan that are established by the Committee for the relevant Performance Period. The Committee will determine, and each Award Agreement shall set forth, the terms of each Performance Award including, without limitation: (a) the amount of any cash bonus, (b) the number of Shares deemed subject to an award of Performance Shares; (c) the Performance Factors and Performance Period that shall determine the time and extent to which each award of Performance Shares shall be settled; (d) the consideration to be distributed on settlement, and (e) the effect of the Participant’s termination of Service on each Performance Award. In establishing Performance Factors and the Performance Period the Committee will: (i) determine the nature, length and starting date of any Performance Period; (ii) select from among the Performance Factors to be used; and (z) determine the number of Shares deemed subject to the award of Performance Shares. Each Performance Share will have an initial value equal to the Fair Market Value of a Share on the date of grant. Prior to settlement the Committee shall determine the extent to which Performance Awards have been earned. Performance Periods may overlap and Participants may participate simultaneously with respect to Performance Awards that are subject to different Performance Periods and different performance goals and other criteria.
10.3.    Termination of Service. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on the date the Participant’s Service terminates (unless determined otherwise by the Committee).
11.    PAYMENT FOR SHARE PURCHASES. Payment from a Participant for Shares acquired pursuant to this Plan may be made in cash or cash equivalents or, where expressly approved for the Participant by the Committee and where permitted by law (and to the extent not otherwise set forth in the applicable Award Agreement):
(a)    by cancellation of indebtedness of the Company owed to the Participant;
(b)    by surrender of shares of the Company’s common stock held by the Participant that are clear of all liens, claims, encumbrances or security interests that have a Fair Market Value on the date of surrender equal to the aggregate Exercise Price of the Shares as to which the Award will be exercised or settled;
(c)    by waiver of compensation due or accrued to the Participant for services rendered or to be rendered to the Company or a Parent, Subsidiary or Affiliate;
(d)    by consideration received by the Company pursuant to a broker-assisted or other form of cashless exercise program implemented by the Company in connection with the Plan;
(e)    by any combination of the foregoing; or
(f)    by any other method of payment as is permitted by applicable law.
The Committee may limit the availability of any method of payment, to the extent the Committee determines, in its discretion, that such limitation is necessary or advisable to comply with applicable law or facilitate the administration of the Plan.
12.    GRANTS TO NON-EMPLOYEE DIRECTORS. Non-Employee Directors are eligible to receive any type of Award offered under this Plan except ISOs. Awards pursuant to this Section 12 may be automatically made pursuant to policy adopted by the Board, or made from time to time as determined in the discretion of the Board. No Non-Employee Director may receive Awards under the Plan with an aggregate grant date fair value that, when combined with cash compensation received for service as a Non-Employee Director, exceeds $[●] in a calendar year. Grant date fair value for purposes of Awards to Non-Employee Directors under the Plan will be determined as follows: (a) for Options and SARs, grant date fair value will be calculated using the Company’s regular valuation methodology for determining the grant date fair value of such Options or SARs for reporting purposes and (b) for all other Awards, grant date fair value will be determined by either (i) calculating the product of the Fair Market Value per Share on the date of grant and the aggregate number of Shares subject to the Award or (ii) calculating the product using an average of the Fair Market Value over a number of trading days and the aggregate number of Shares subject to the Award as determined by the Committee. Awards granted to an individual while he
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or she was serving in the capacity as an Employee or while he or she was a Consultant but not a Non-Employee Director will not count for purposes of the limitations set forth in this Section 12.
12.1.    Eligibility. Awards pursuant to this Section 12 shall be granted only to Non-Employee Directors. A Non-Employee Director who is elected or re-elected as a member of the Board will be eligible to receive an Award under this Section 12.
12.2.    Vesting, Exercisability and Settlement. Except as set forth in Section 21, Awards shall vest, become exercisable and be settled as determined by the Board. With respect to Options and SARs, the exercise price for such Awards granted to Non-Employee Directors will not be less than the Fair Market Value of the Shares at the time that such Option or SAR is granted.
12.3.    Election to Receive Awards in Lieu of Cash. A Non-Employee Director may elect to receive his or her annual retainer payments and/or meeting fees from the Company in the form of cash or Awards or a combination thereof, if permitted, and as determined, by the Committee. Such Awards will be issued under the Plan. An election under this Section 12.3 will be filed with the Company on the form prescribed by the Company.
13.    WITHHOLDING TAXES.
13.1.    Withholding Generally. Prior to any relevant taxable or tax withholding events in connection with the Awards under this Plan, the Company or the Parent, Subsidiary, or Affiliate, as applicable, employing the Participant, may require the Participant to pay or make adequate arrangements satisfactory to the Company with respect to any or all applicable U.S. federal, state, local, and international income tax, social insurance, payroll tax, fringe benefits tax, payment on account and other tax-related items related to the Participant’s participation in this Plan and legally applicable to the Participant (collectively, “Tax-Related Obligations”) prior to the delivery of Shares pursuant to exercise or settlement of any Award. Whenever payments in satisfaction of Awards granted under this Plan are to be made in cash, such payment will be net of an amount sufficient to satisfy applicable withholding obligations for Tax-Related Obligations. Unless otherwise determined by the Committee, the Fair Market Value of the Shares will be determined as of the date that the taxes are required to be withheld.
13.2.    Stock Withholding. The Committee, or its delegate(s), as permitted by applicable law, may, in its sole discretion and pursuant to such procedures as it may specify from time to time, require or permit a Participant to satisfy withholding obligations for such Tax-Related Obligations, in whole or in part by (without limitation) (a) paying cash, (b) having the Company withhold otherwise deliverable cash or Shares having a Fair Market Value equal to the Tax-Related Obligations to be withheld, (c) delivering to the Company already-owned Shares having a Fair Market Value equal to the Tax-Related Obligations to be withheld, or (d) withholding from proceeds of the sale of Shares issued pursuant to an Award either through a voluntary sale or through a mandatory sale arranged by the Company, providedthat, in all instances, the satisfaction of the Tax-Related Obligations will not result in any adverse accounting consequence to the Company, as the Committee may determine in its sole discretion. The Company may withhold or account for these Tax-Related Obligations by considering applicable statutory withholding rates or other applicable withholding rates, including maximum rates for the applicable tax jurisdiction to the extent consistent with applicable laws. Unless otherwise determined by the Committee, the Fair Market Value of the Shares will be determined as of the date that the taxes are required to be withheld and such Shares shall be valued based on the value of the actual trade or, if there is none, the Fair Market Value of the Shares as of the previous trading day.
14.    TRANSFERABILITY.
14.1.    Transfer Generally. Unless determined otherwise by the Committee or pursuant to Section 15.2, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution. If the Committee makes an Award transferable, including, without limitation, by instrument to an inter vivos or testamentary trust in which the Awards are to be passed to beneficiaries upon the death of the trustor (settlor) or by gift or by domestic relations order to a Permitted Transferee, such Award will contain such additional terms and conditions as the Committee deems appropriate and such transfer will be for no consideration. All Awards shall be exercisable: (a) during the Participant’s lifetime only by (i) the Participant,
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or (ii) the Participant’s guardian or legal representative; (b) after the Participant’s death, by the legal representative of the Participant’s heirs or legatees; and (c) in the case of all awards except ISOs, by a Permitted Transferee.
15.    PRIVILEGES OF STOCK OWNERSHIP; RESTRICTIONS ON SHARES.
15.1.    Voting and Dividends. No Participant will have any of the rights of a stockholder with respect to any Shares until the Shares are issued to the Participant, except for any Dividend Equivalent Rights permitted by an applicable Award Agreement. Any Dividend Equivalent Rights will be subject to the same vesting or performance conditions as the underlying Award. In addition, the Committee may provide that any Dividend Equivalent Rights permitted by an applicable Award Agreement shall be deemed to have been reinvested in additional Shares or otherwise reinvested. After Shares are issued to the Participant, the Participant will be a stockholder and have all the rights of a stockholder with respect to such Shares, including the right to vote and receive all dividends or other distributions made or paid with respect to such Shares; provided, that if such Shares are Restricted Stock, then any new, additional or different securities the Participant may become entitled to receive with respect to such Shares by virtue of a stock dividend, stock split or any other change in the corporate or capital structure of the Company will be subject to the same restrictions as the Restricted Stock; provided, further, that the Participant will have no right to retain or receive such Dividend Equivalent Rights with respect to Unvested Shares, and any such dividends or stock distributions will be accrued and paid only at such time, if any, as such Unvested Shares become vested Shares. However, the Committee, in its discretion, may provide in the Award Agreement evidencing any Award that the Participant shall be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on Shares underlying an Award during the period beginning on the date the Award is granted and ending, with respect to each Share subject to the Award, on the earlier of the date on which the Award is exercised or settled or the date on which it is forfeited provided, that no Dividend Equivalent Right will be paid with respect to Unvested Shares, and such dividends or stock distributions will be accrued and paid only at such time, if any, as such Unvested Shares become vested Shares. Such Dividend Equivalent Rights, if any, shall be credited to the Participant in the form of additional whole Shares as of the date of payment of such cash dividends on Shares. Notwithstanding the foregoing, in no event shall Dividend Equivalent Rights be paid with respect to Options or SARs.
15.2.    Restrictions on Shares. At the discretion of the Committee, the Company may reserve to itself and/or its assignee(s) a right to repurchase (a “Right of Repurchase”) a portion of any or all Unvested Shares held by a Participant following such Participant’s termination of Service at any time within ninety (90) days (or such longer or shorter time determined by the Committee) after the later of the date Participant’s Service terminates and the date the Participant purchases Shares under this Plan, for cash and/or cancellation of purchase money indebtedness, at the Participant’s Purchase Price or Exercise Price, as the case may be.
16.    CERTIFICATES. All Shares or other securities whether or not certificated, delivered under this Plan will be subject to such stock transfer orders, legends and other restrictions as the Committee may deem necessary or advisable, including restrictions under any applicable U.S. federal, state or foreign securities law, or any rules, regulations and other requirements of the SEC or any stock exchange or automated quotation system upon which the Shares may be listed or quoted and any non-U.S. exchange controls or securities law restrictions to which the Shares are subject.
17.    ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a Participant’s Shares, the Committee may require the Participant to deposit all written or electronic certificate(s) representing Shares, together with stock powers or other instruments of transfer approved by the Committee, appropriately endorsed in blank, with the Company or an agent designated by the Company to hold in escrow until such restrictions have lapsed or terminated, and the Committee may cause a legend or legends referencing such restrictions to be placed on the certificate(s). Any Participant who is permitted to execute a promissory note as partial or full consideration for the purchase of Shares under this Plan will be required to pledge and deposit with the Company all or part of the Shares so purchased as collateral to secure the payment of Participant’s obligation to the Company under the promissory note; provided, however, that the Committee may require or accept other or additional forms of collateral to secure the payment of such obligation and, in any event, the Company will have full recourse against the Participant under the promissory note notwithstanding any pledge of the Participant’s Shares or other collateral. In connection with any pledge of the Shares, Participant will be required to execute and deliver a written pledge agreement in such form
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as the Committee will from time to time approve. The Shares purchased with the promissory note may be released from the pledge on a pro rata basis as the promissory note is paid.
18.    REPRICING; EXCHANGE AND BUYOUT OF AWARDS. Without prior stockholder approval, the Committee may (a) reprice Options or SARs (and where such repricing is a reduction in the Exercise Price of outstanding Options or SARs, the consent of the affected Participants is not required provided written notice is provided to them, notwithstanding any adverse tax consequences to them arising from the repricing), and (b) with the consent of the respective Participants (unless not required pursuant to Section 5.8 of the Plan), pay cash or issue new Awards in exchange for the surrender and cancellation of any, or all, outstanding Awards.
19.    SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not be effective unless such Award is in compliance with all applicable U.S. and foreign federal and state securities and exchange control and other laws, rules and regulations of any governmental body, and the requirements of any stock exchange or automated quotation system upon which the Shares may then be listed or quoted, as they are in effect on the date of grant of the Award and also on the date of exercise or other issuance. Notwithstanding any other provision in this Plan, the Company will have no obligation to issue or deliver written or electronic certificates for Shares under this Plan prior to: (a) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and/or (b) completion of any registration or other qualification of such Shares under any state or federal or foreign law or ruling of any governmental body that the Company determines to be necessary or advisable. The Company will be under no obligation to register the Shares with the SEC or to effect compliance with the registration, qualification or listing requirements of any foreign, national or state securities laws, exchange control laws, stock exchange or automated quotation system, and the Company will have no liability for any inability or failure to do so.
20.    NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted under this Plan will confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or any Parent, Subsidiary or Affiliate or limit in any way the right of the Company or any Parent, Subsidiary or Affiliate to terminate Participant’s employment or other relationship at any time.
21.    CORPORATE TRANSACTIONS.
21.1.    Assumption or Replacement of Awards by Successor. In the event that the Company is subject to a Corporate Transaction, outstanding Awards acquired under the Plan shall be subject to the agreement evidencing the Corporate Transaction, which need not treat all outstanding Awards in an identical manner. Such agreement, without the Participant’s consent, shall provide for one or more of the following with respect to all outstanding Awards as of the effective date of such Corporate Transaction:
(a)    The continuation of an outstanding Award by the Company (if the Company is the successor entity).
(b)    The assumption of an outstanding Award by the successor or acquiring entity (if any) of such Corporate Transaction (or by its parents, if any), which assumption, will be binding on all selected Participants; provided that the Exercise Price and the number and nature of shares issuable upon exercise of any such Option or SAR, or any award that is subject to Section 409A of the Code, will be adjusted appropriately pursuant to Section 424(a) of the Code and/or Section 409A of the Code, as applicable.
(c)    The substitution by the successor or acquiring entity in such Corporate Transaction (or by its parents, if any) of equivalent awards with substantially the same terms for such outstanding Awards (except that the Exercise Price and the number and nature of shares issuable upon exercise of any such Option or SAR, or any award that is subject to Section 409A of the Code, will be adjusted appropriately pursuant to Section 424(a) of the Code and/or Section 409A of the Code, as applicable).
(d)    The full or partial acceleration of exercisability or vesting and accelerated expiration of an outstanding Award and lapse of the Company’s right to repurchase or re-acquire shares acquired under an Award or lapse of forfeiture rights with respect to shares acquired under an Award.
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(e)    The settlement of the full value of such outstanding Award (whether or not then vested or exercisable) in cash, cash equivalents, or securities of the successor entity (or its parent, if any) with a Fair Market Value equal to the required amount, followed by the cancellation of such Awards; provided however, that such Award may be cancelled if such Award has no value, as determined by the Committee, in its discretion. Subject to Section 409A of the Code, such payment may be made in installments and may be deferred until the date or dates the Award would have become exercisable or vested. Such payment may be subject to vesting based on the Participant’s continued service, provided that the vesting schedule shall not be less favorable to the Participant than the schedule under which the Award would have become vested or exercisable. For purposes of this Section 21.1(e), the Fair Market Value of any security shall be determined without regard to any vesting conditions that may apply to such security.
(f)    The cancellation of outstanding Awards in exchange for no consideration.
The Board shall have full power and authority to assign the Company’s right to repurchase or re- acquire or forfeiture rights to such successor or acquiring entity. In addition, in the event such successor or acquiring entity (if any) refuses to assume, convert, replace or substitute Awards, as provided above, pursuant to a Corporate Transaction, the Committee will notify the Participant in writing or electronically that such Award will, if exercisable, be exercisable for a period of time determined by the Committee in its sole discretion, and such Award will terminate upon the expiration of such period. Awards need not be treated similarly in a Corporate Transaction and treatment may vary from Award to Award and/or from Participant to Participant.
21.2.    Assumption of Awards by the Company. The Company, from time to time, also may substitute or assume outstanding awards granted by another company, whether in connection with an acquisition of such other company or otherwise, by either; (a) granting an Award under this Plan in substitution of such other company’s award; or (b) assuming such award as if it had been granted under this Plan if the terms of such assumed award could be applied to an Award granted under this Plan. Such substitution or assumption will be permissible if the holder of the substituted or assumed award would have been eligible to be granted an Award under this Plan if the other company had applied the rules of this Plan to such grant. In the event the Company assumes an award granted by another company, the terms and conditions of such award will remain unchanged (except that the Purchase Price or the Exercise Price, as the case may be, and the number and nature of Shares issuable upon exercise or settlement of any such Award will be adjusted appropriately pursuant to Section 424(a) of the Code and/or Section 409A of the Code, as applicable). In the event the Company elects to grant a new Option in substitution rather than assuming an existing option, such new Option may be granted with a similarly adjusted Exercise Price. Substitute Awards shall not be deducted from the number of Shares authorized for grant under the Plan or authorized for grant to a Participant in a calendar year.
21.3.    Non-Employee Directors’ Awards. Notwithstanding any provision to the contrary herein, in the event of a Corporate Transaction, the vesting of all Awards granted to Non-Employee Directors shall accelerate and such Awards shall become exercisable (as applicable) in full prior to the consummation of such event at such times and on such conditions as the Committee determines.
22.    ADOPTION AND STOCKHOLDER APPROVAL. This Plan shall be submitted for the approval of the Company’s stockholders, consistent with applicable laws, within twelve (12) months before or after the date this Plan is adopted by the Board.
23.    TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided herein, this Plan will become effective on the Effective Date and will terminate ten (10) years from the date this Plan is adopted by the Board. This Plan and all Awards granted hereunder shall be governed by and construed in accordance with the laws of the State of Delaware (excluding its conflict of law rules).
24.    AMENDMENT OR TERMINATION OF PLAN. The Board may at any time terminate or amend this Plan in any respect, including, without limitation, amendment of any form of Award Agreement or instrument to be executed pursuant to this Plan; provided, however, that the Board will not, without the approval of the stockholders of the Company, amend this Plan in any manner that requires such stockholder approval; provided further, that a Participant’s Award shall be governed by the version of this Plan then in effect at the time such Award
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was granted. No termination or amendment of the Plan shall affect any then-outstanding Award unless expressly provided by the Committee; in any event, no termination or amendment of the Plan or any outstanding Award may materially adversely affect any then outstanding Award without the consent of the Participant, unless such termination or amendment is necessary to comply with applicable law, regulation or rule.
25.    NON-EXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by the Board, the submission of this Plan to the stockholders of the Company for approval, nor any provision of this Plan will be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including, without limitation, the granting of stock options and other equity awards and bonuses otherwise than under this Plan, and such arrangements may be either generally applicable or applicable only in specific cases.
26.    INSIDER TRADING POLICY. Each Participant who receives an Award shall comply with any policy adopted by the Company from time to time covering transactions in the Company’s securities by Employees, officers and/or directors of the Company, as well as with any applicable insider trading or market abuse laws to which the Participant may be subject.
27.    ALL AWARDS SUBJECT TO COMPANY CLAWBACK OR RECOUPMENT POLICY. All Awards shall, subject to applicable law, be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or the Committee or required by law during the term of Participant’s employment or other service with the Company that is applicable to executive officers, employees, directors or other service providers of the Company, and in addition to any other remedies available under such policy and applicable law, may require the cancelation of outstanding Awards and the recoupment of any gains realized with respect to Awards.
28.    DEFINITIONS. As used in this Plan, and except as elsewhere defined herein, the following terms will have the following meanings:
28.1.    “Affiliate” means (a) any entity that, directly or indirectly, is controlled by, controls, or is under common control with, the Company, and (b) any entity in which the Company has a significant equity interest, in either case as determined by the Committee, whether now or hereafter existing.
28.2.    “Award” means any award under the Plan, including any Option, Performance Award, Restricted Stock, Stock Bonus, Stock Appreciation Right, or Restricted Stock Unit.
28.3.    “Award Agreement” means, with respect to each Award, the written or electronic agreement between the Company and the Participant setting forth the terms and conditions of the Award, and country-specific appendix thereto for grants to non-U.S. Participants, which shall be in substantially a form (which need not be the same for each Participant) that the Committee (or in the case of Award agreements that are not used for Insiders, the Committee's delegate(s)) has from time to time approved, and will comply with and be subject to the terms and conditions of this Plan.
28.4.    “Board” means the Board of Directors of the Company.
28.5.    “Business Combination” means the business combination effected pursuant to the Business Combination Agreement.
28.6.    “Business Combination Agreement” means the Agreement and Plan of Merger, by and among CM Life Sciences, Inc., the Company and certain other parties thereto.
28.7.    “Cause” means [Participant’s (a) willful failure substantially to perform his or her duties and responsibilities to the Company or deliberate violation of a Company policy or code of conduct; (b) commission of, or plea of guilty or no contest to, a felony or other crime involving dishonesty or moral turpitude or commission of any act of fraud, embezzlement, dishonesty or any other willful misconduct or breach of fiduciary duty that has caused or is reasonably expected to result in material injury to the Company; (c) unauthorized use or disclosure of any proprietary information or trade secrets of the Company or any other party to whom the Participant owes an
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obligation of nondisclosure as a result of his or her relationship with the Company; (d) misappropriation of a business opportunity of the Company; (e) provision of material aid to a competitor of the Company; or (f) willful breach of any of his or her obligations under any written agreement or covenant with the Company, including with respect to any restrictive covenants. The determination as to whether a Participant’s Service is being terminated for Cause shall be made in good faith by the Company and shall be final and binding on the Participant. The foregoing definition does not in any way limit the Company’s ability to terminate a Participant’s employment or consulting relationship at any time as provided in Section 20 above, and the term “Company” will be interpreted to include any Subsidiary or Parent, as appropriate. Notwithstanding the foregoing, the definition of “Cause” may, in part or in whole, be modified or replaced in each individual employment agreement, Award Agreement or other applicable agreement with any Participant, provided that such document supersedes the definition provided in this Section 28.7].
28.8.    “Code” means the United States Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.
28.9.    “Committee” means the Compensation Committee of the Board or those persons to whom administration of the Plan, or part of the Plan, has been delegated as permitted by law.
28.10.    “Company” means [PubCo] or any successor corporation.
28.11.    “Consultant” means any natural person, including an advisor or independent contractor, engaged by the Company or a Parent, Subsidiary or Affiliate to render services to such entity.
28.12.    “Corporate Transaction” means the occurrence of any of the following events:
(a)    any “Person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total voting power represented by the Company’s then-outstanding voting securities; provided, however, that for purposes of this subclause (a) the acquisition of additional securities by any one Person who is considered to own more than fifty percent (50%) of the total voting power of the securities of the Company will not be considered a Corporate Transaction;
(b)    the consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets;
(c)    the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation;
(d)    any other transaction which qualifies as a “corporate transaction” under Section 424(a) of the Code wherein the stockholders of the Company give up all of their equity interest in the Company (except for the acquisition, sale or transfer of all or substantially all of the outstanding shares of the capital stock of the Company) or
(e)    a change in the effective control of the Company that occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by members of the Board whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. For purpose of this subclause (e), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Corporate Transaction.
For purposes of this definition, Persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction
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with the Company. Notwithstanding the foregoing, to the extent that any amount constituting deferred compensation (as defined in Section 409A of the Code) would become payable under this Plan by reason of a Corporate Transaction, such amount shall become payable only if the event constituting a Corporate Transaction would also qualify as a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company, each as defined within the meaning of Code Section 409A, as it has been and may be amended from time to time, and any proposed or final Treasury Regulations and IRS guidance that has been promulgated or may be promulgated thereunder from time to time. Notwithstanding the foregoing, the foregoing definition of “Corporate Transaction” may, in part or in whole, be modified or replaced in each individual employment agreement, Award Agreement, or other applicable agreement with any Participant provided that such document specifically references this definition.
28.13.    “Director” means a member of the Board.
28.14.    “Disability” means in the case of ISOs, total and permanent disability as defined in Section 22(e)(3) of the Code and in the case of other Awards, that the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.
28.15.    “Dividend Equivalent Right” means the right of a Participant, granted at the discretion of the Committee or as otherwise provided by the Plan, to receive a credit for the account of such Participant in an amount equal to the cash, stock or other property dividends for each Share represented by an Award held by such Participant.
28.16.    “Effective Date” shall mean the closing date of the Business Combination, subject to approval of the Plan by the Company’s stockholders.
28.17.    “Employee” means any person, including Officers and Directors, employed by the Company or any Parent, Subsidiary or Affiliate. For the avoidance of doubt, neither service as a Director nor payment of a director’s fee by the Company will be sufficient to constitute “employment” by the Company and the definition of “Employee” herein shall not include Non-Employee Directors.
28.18.    “Exchange Act” means the United States Securities Exchange Act of 1934, as amended.
28.19.    “Exchange Program” means a program pursuant to which (a) outstanding Awards are surrendered, cancelled or exchanged for cash, the same type of Award or a different Award (or combination thereof) or (b) the Exercise Price of an outstanding Award is increased or reduced.
28.20.    “Exercise Price” means, with respect to an Option, the price at which a holder may purchase the Shares issuable upon exercise of an Option and with respect to a SAR, the price at which the SAR is granted to the holder thereof.
28.21.    “Fair Market Value” means, as of any date, the value of a share of the Company’s common stock determined as follows:
(a)    if such common stock is publicly traded and is then listed on a national securities exchange, its closing price on the date of determination on the principal national securities exchange on which the common stock is listed or admitted to trading as reported in The Wall Street Journal or such other source as the Committee may determine;
(b)    if such common stock is publicly traded but is neither listed nor admitted to trading on a national securities exchange, the average of the closing bid and asked prices on the date of determination as reported in The Wall Street Journal or such other source as the Committee deems reliable; or
(c)    if none of the foregoing is applicable, by the Board or the Committee in good faith.
28.22.    “Insider” means an officer or director of the Company or any other person whose transactions in the Company’s common stock are subject to Section 16 of the Exchange Act.
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28.23.    “IRS” means the United States Internal Revenue Service.
28.24.    “Non-Employee Director” means a Director who is not an Employee of the Company or any Parent, Subsidiary or Affiliate.
28.25.    “Option” means an award of an option to purchase Shares pursuant to Section 5 or Section 12.
28.26.    “Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if each of such corporations other than the Company owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
28.27.    “Participant” means a person who holds an Award under this Plan.
28.28.    “Performance Award” means an award covering cash, Shares or other property granted pursuant to Section 10 or Section 12 of the Plan.
28.29.    “Performance Factors” means any of the factors selected by the Committee and specified in an Award Agreement, from among the following objective measures, either individually, alternatively or in any combination, applied to the Company as a whole or any business unit or Subsidiary, either individually, alternatively, or in any combination, on a GAAP or non-GAAP basis, and measured, to the extent applicable on an absolute basis or relative to a pre-established target, to determine whether the performance goals established by the Committee with respect to applicable Awards have been satisfied:
(a)    profit before tax;
(b)    billings;
(c)    revenue;
(d)    net revenue;
(e)    earnings (which may include earnings before interest and taxes, earnings before taxes, net earnings, stock-based compensation expenses, depreciation, and amortization);
(f)    operating income;
(g)    operating margin;
(h)    operating profit;
(i)    controllable operating profit or net operating profit;
(j)    net profit;
(k)    gross margin;
(l)    operating expenses or operating expenses as a percentage of revenue;
(m)    net income;
(n)    earnings per share;
(o)    total stockholder return;
(p)    market share;
(q)    return on assets or net assets;
(r)    the Company’s stock price;
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(s)    growth in stockholder value relative to a pre-determined index;
(t)    return on equity;
(u)    return on invested capital;
(v)    cash flow (including free cash flow or operating cash flows);
(w)    cash conversion cycle;
(x)    economic value added;
(y)    individual confidential business objectives;
(z)    contract awards or backlog;
(aa)    overhead or other expense reduction;
(bb)    credit rating;
(cc)    strategic plan development and implementation;
(dd)    succession plan development and implementation;
(ee)    improvement in workforce diversity;
(ff)    customer indicators and/or satisfaction;
(gg)    new product invention or innovation;
(hh)    attainment of research and development milestones;
(ii)    improvements in productivity;
(jj)    bookings;
(kk)    attainment of objective operating goals and employee metrics;
(ll)    sales;
(mm)    expenses;
(nn)    balance of cash, cash equivalents, and marketable securities;
(oo)    completion of an identified special project;
(pp)    completion of a joint venture or other corporate transaction;
(qq)    employee satisfaction and/or retention;
(rr)    research and development expenses;
(ss)    working capital targets and changes in working capital; and
(tt)    any other metric that is capable of measurement as determined by the Committee.
The Committee may provide for one or more equitable adjustments to the Performance Factors to preserve the Committee’s original intent regarding the Performance Factors at the time of the initial award grant, such as, but not limited to, in recognition of unusual or non-recurring items such as acquisition-related activities or changes in applicable accounting rules. It is within the sole discretion of the Committee to make or not make any such equitable adjustments.
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28.30.    “Performance Period” means one or more periods of time, which may be of varying and overlapping durations, as the Committee may select, over which the attainment of one or more Performance Factors will be measured for the purpose of determining a Participant’s right to, and the payment of, a Performance Award.
28.31.    “Performance Share” means an Award granted pursuant to Section 10 of the Plan, consisting of a unit valued by reference to a designated number of Shares, the value of which may be paid to the Participant by delivery of Shares or, if set forth in the instrument evidencing the Award, of such property as the Committee shall determine, including, without limitation, cash, other property, or any combination thereof, upon the attainment of performance goals, as established by the Committee, and other terms and conditions specified by the Committee.
28.32.    “Performance Unit” means an Award granted pursuant to Section 10 of the Plan, consisting of a unit valued by reference to a designated amount of property other than Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including, without limitation, cash, Shares, other property, or any combination thereof, upon the attainment of performance goals, as established by the Committee, and other terms and conditions specified by the Committee.
28.33.    “Permitted Transferee” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law (including adoptive relationships) of the Employee, any person sharing the Employee’s household (other than a tenant or employee), a trust in which these persons (or the Employee) have more than 50% of the beneficial interest, a foundation in which these persons (or the Employee) control the management of assets, and any other entity in which these persons (or the Employee) own more than 50% of the voting interests.
28.34.    “Plan” means this [PubCo] 2021 Equity Incentive Plan.
28.35.    “Purchase Price” means the price to be paid for Shares acquired under the Plan, other than Shares acquired upon exercise of an Option or SAR.
28.36.    “Restricted Stock Award” means an award of Shares pursuant to Section 6 or Section 12 of the Plan, or issued pursuant to the early exercise of an Option.
28.37.    “Restricted Stock Unit” means an Award granted pursuant to Section 9 or Section 12 of the Plan.
28.38.    “SEC” means the United States Securities and Exchange Commission.
28.39.    “Securities Act” means the United States Securities Act of 1933, as amended.
28.40.    “Service” shall mean service as an Employee, Consultant, Director or Non-Employee Director, subject to such further limitations as may be set forth in the Plan or the applicable Award Agreement. An Employee will not be deemed to have ceased to provide Service in the case of any leave of absence approved by the Company. In the case of any Employee on an approved leave of absence or a reduction in hours worked (for illustrative purposes only, a change in schedule from that of full-time to part-time), the Committee may make such provisions respecting suspension of or modification to vesting of the Award while on leave from the employ of the Company or a Parent, Subsidiary or Affiliate or during such change in working hours as it may deem appropriate, except that in no event may an Award be exercised after the expiration of the term set forth in the applicable Award Agreement. In the event of military or other protected leave, if required by applicable laws, vesting shall continue for the longest period that vesting continues under any other statutory or Company approved leave of absence and, upon a Participant’s returning from such leave, he or she shall be given vesting credit with respect to Awards to the same extent as would have applied had the Participant continued to provide Service to the Company throughout the leave on the same terms as he or she was providing Service immediately prior to such leave. An employee shall have terminated employment as of the date he or she ceases to provide Service (regardless of whether the termination is in breach of local employment laws or is later found to be invalid) and employment shall not be extended by any notice period or garden leave mandated by local law, provided, however, that a change in status between an Employee, Consultant, Director or Non- Employee Director shall not terminate the service provider’s Service, unless determined by the Committee, in its discretion or to the extent set forth in the applicable Award Agreement. The Committee will
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have sole discretion to determine whether a Participant has ceased to provide Service and the effective date on which the Participant ceased to provide Service.
28.41.    “Shares” means shares of the common stock of the Company and the common stock of any successor entity.
28.42.    “Stock Appreciation Right” means an Award granted pursuant to Section 8 of the Plan.
28.43.    “Stock Bonus” means an Award granted pursuant to Section 7 of the Plan.
28.44.    “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
28.45.    “Treasury Regulations” means regulations promulgated by the United States Treasury Department.
28.46.    “Unvested Shares” means Shares that have not yet vested or are subject to a right of repurchase in favor of the Company (or any successor thereto).
29.    CODE SECTION 409A. This Plan and Awards granted hereunder are intended to comply with Section 409A of the Code and the regulations and guidance promulgated thereunder (collectively, “Section 409A”) to the extent subject thereto, or otherwise be exempt from Section 409A, and, accordingly, to the maximum extent permitted, the Plan shall be interpreted and administered to be in compliance therewith. Any payments described in the Plan that are due within the “short-term deferral period” as defined in Section 409A shall not be treated as deferred compensation unless required by applicable law. Notwithstanding anything to the contrary in the Plan, to the extent required to avoid accelerated taxation and tax penalties under Section 409A, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to the Plan or any Award Agreement granted pursuant hereto during the six-month period immediately following the Participant’s termination of Service (the “Deferred Amounts”) shall instead be paid on the first payroll date after the earlier of (i) the six-month anniversary of the Participant’s “separation from service” (as defined in Section 409A) or (ii) the Participant’s death (such date, the “Section 409A Payment Date”), with any portion of the Deferred Amounts that would otherwise be payable prior to the Section 409A Payment Date aggregated and paid in a lump sum without interest on the Section 409A Payment Date. Notwithstanding the foregoing, none of the Company, the Committee or any of their respective affiliates shall have any obligation to take any action to prevent the assessment of any additional tax or penalty on any Participant under Section 409A and, by accepting an Award granted hereunder, the Participant acknowledges and agrees that none of the Company, the Committee or any of their respective affiliates will have any liability to the Participant for any such tax or penalty.
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EXHIBIT D
Form of Employee Stock Purchase Plan
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EXHIBIT D-1
[PUBCO]
2021 EMPLOYEE STOCK PURCHASE PLAN
1.    PURPOSE. [PubCo] adopted the Plan effective as of the Effective Date. The purpose of this Plan is to provide eligible employees of the Company and the Participating Corporations with a means of acquiring an equity interest in the Company, to enhance such employees’ sense of participation in the affairs of the Company. Capitalized terms not defined elsewhere in the text are defined in Section 28.
2.    ESTABLISHMENT OF PLAN. The Company proposes to grant rights to purchase shares of Common Stock to eligible employees of the Company and its Participating Corporations pursuant to this Plan. The Company intends this Plan to qualify as an “employee stock purchase plan” under Section 423 of the Code (including any amendments to or replacements of such Section), and this Plan shall be so construed, although the Company makes no undertaking or representation to maintain such qualification. Any term not expressly defined in this Plan but defined for purposes of Section 423 of the Code shall have the same definition herein. In addition, with regard to offers of options to purchase shares of Common Stock under the Plan to employees working for a Subsidiary or an Affiliate outside the United States, this Plan authorizes the grant of options under a Non-Section 423 Component that is not intended to meet Section 423 requirements, provided, to the extent necessary under Section 423 of the Code, the other terms and conditions of the Plan are met.
Subject to Section 14, a total of [[l] ([l])] shares of Common Stock are reserved for issuance under this Plan. In addition, on each January 1 of each of [2022 through 2031], the aggregate number of shares of Common Stock reserved for issuance under the Plan shall be increased automatically by the number of shares equal to [one] percent [(1%)] of the total number of shares of all classes of Common Stock issued and outstanding on the immediately preceding December 31 (rounded down to the nearest whole share); provided, that the Board or the Committee may in its sole discretion reduce the amount of the increase in any particular year. Subject to Section 14, no more than [[l] ([l])] shares of Common Stock may be issued over the term of this Plan. The number of shares initially reserved for issuance under this Plan and the maximum number of shares that may be issued under this Plan shall be subject to adjustments effected in accordance with Section 14. Any or all such shares may be granted under the Section 423 Component.
3.    ADMINISTRATION. The Plan will be administered by the Committee. Subject to the provisions of this Plan and the limitations of Section 423 of the Code or any successor provision in the Code, all questions of interpretation or application of this Plan shall be determined by the Committee and its decisions shall be final and binding upon all eligible employees and Participants. The Committee will have full and exclusive discretionary authority to construe, interpret and apply the terms of the Plan, to determine eligibility, to designate the Participating Corporations, to determine whether Participating Corporations shall participate in the Section 423 Component or Non-Section 423 Component and to decide upon any and all claims filed under the Plan. Every finding, decision and determination made by the Committee will, to the full extent permitted by law, be final and binding upon all parties. Notwithstanding any provision to the contrary in this Plan, the Committee may adopt rules, sub-plans, and/or procedures relating to the operation and administration of the Plan designed to comply with local laws, regulations or customs or to achieve tax, securities law or other objectives for eligible employees outside of the United States. The Committee will have the authority to determine the Fair Market Value of the Common Stock (which determination shall be final, binding and conclusive for all purposes) in accordance with Section 8 below and to interpret Section 8 of the Plan in connection with circumstances that impact the Fair Market Value. Members of the Committee shall receive no compensation for their services in connection with the administration of this Plan, other than standard fees as established from time to time by the Board for services rendered by Board members serving on Board committees. All expenses incurred in connection with the administration of this Plan shall be paid by the Company. For purposes of this Plan, the Committee may designate separate offerings under the Plan (the terms of which need not be identical) in which eligible employees of one or more Participating Corporations will participate, and the provisions of the Plan will separately apply to each such separate offering even if the dates of the applicable Offering Periods of each such offering are identical. To the extent permitted by Section 423 of the Code, the terms of each separate offering under the Plan need not be identical, provided that the rights and privileges established with respect to a particular offering are applied in an identical manner to all employees of every
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Participating Corporation whose employees are granted options under that particular offering. The Committee may establish rules to govern the terms of the Plan and the offering that will apply to Participants who transfer employment between the Company and Participating Corporations or between Participating Corporations, in accordance with requirements under Section 423 of the Code to the extent applicable.
4.    ELIGIBILITY.
(a)    Any employee of the Company or the Participating Corporations is eligible to participate in an Offering Period under this Plan, except that one or more of the following categories of employees may be excluded from coverage under the Plan by the Committee (other than where such exclusion is prohibited by applicable law):
(b)    employees who do not meet eligibility requirements that the Committee may choose to impose (within the limits permitted by the Code);
(c)    employees who are not employed by the Company or a Participating Corporation prior to the beginning of such Offering Period or prior to such other time period as specified by the Committee;
(d)    employees who are customarily employed for twenty (20) or less hours per week;
(e)    employees who are customarily employed for five (5) months or less in a calendar year;
(f)    (i) employees who are “highly compensated employees” of the Company or any Participating Corporation (within the meaning of Section 414(q) of the Code), or (ii) any employees who are “highly compensated employees” with compensation above a specified level, who is an officer and/or is subject to the disclosure requirements of Section 16(a) of the Exchange Act;
(g)    employees who are citizens or residents of a foreign jurisdiction (without regard to whether they are also a citizen of the United States or a resident alien (within the meaning of Section 7701(b)(1)(A) of the Code)) if either (i) such employee’s participation is prohibited under the laws of the jurisdiction governing such employee, or (ii) compliance with the laws of the foreign jurisdiction would violate the requirements of Section 423 of the Code; and
(h)    individuals who provide services to the Company or any of its Participating Corporations who are reclassified as common law employees for any reason except for federal income and employment tax purposes.
The foregoing notwithstanding, an individual shall not be eligible if his or her participation in the Plan is prohibited by the law of any country that has jurisdiction over him or her, if complying with the laws of the applicable country would cause the Plan to violate Section 423 of the Code, or if he or she is subject to a collective bargaining agreement that does not provide for participation in the Plan.
(i)    No employee who, together with any other person whose stock would be attributed to such employee pursuant to Section 424(d) of the Code, owns stock or holds options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or its Parent or Subsidiary or who, as a result of being granted an option under this Plan with respect to such Offering Period, would own stock or hold options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or its Parent or Subsidiary shall be granted an option to purchase Common Stock under the Plan. Notwithstanding the foregoing, the rules of Section 424(d) of the Code shall apply in determining share ownership and the extent to which shares held under outstanding equity awards are to be treated as owned by the employee.
5.    OFFERING DATES.
(a)    Each Offering Period of this Plan may be of up to twenty-seven (27) months duration and shall commence and end at the times designated by the Committee. Each Offering Period shall consist of one or more Purchase Periods during which Contributions made by Participants are accumulated under this Plan.
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6.    PARTICIPATION IN THIS PLAN.
(a)    Any employee who is an eligible employee determined in accordance with Section 4 will be eligible to participate in this Plan, subject to the requirement of Section 6(b) hereof and the other terms and provisions of this Plan.
(b)    A Participant may elect to participate in this Plan by submitting an enrollment agreement prior to the commencement of the Offering Period (on such date as the Committee may determine) to which such agreement relates.
(c)    Once an employee becomes a Participant in an Offering Period, then such Participant will automatically participate in each subsequent Offering Period commencing immediately following the last day of the prior Offering Period unless the Participant withdraws or is deemed to withdraw from this Plan or terminates further participation in an Offering Period as set forth in Section 11 below. A Participant who is continuing participation pursuant to the preceding sentence is not required to file any additional enrollment agreement in order to continue participation in this Plan. A Participant who is not continuing participation pursuant to the preceding sentence is required to file an enrollment agreement prior to the commencement of the Offering Period (or such earlier date as the Committee may determine) to which such agreement relates.
7.    GRANT OF OPTION ON ENROLLMENT. Becoming a Participant with respect to an Offering Period will constitute the grant (as of the Offering Date) by the Company to such Participant of an option to purchase on the Purchase Date up to that number of shares of Common Stock determined by a fraction the numerator of which is the amount accumulatednumber of days in such Participant’s Contribution account during such Purchasethe portion of the Straddle Period ending on the Closing Date and the denominator of which is the lower of (i) eighty-five percent (85%) of the Fair Market Value of a share of Common Stock on the Offering Date (but in no event less than the par value of a share of the Common Stock), or (ii) eighty-five percent (85%) of the Fair Market Value of a share of the Common Stock on the Purchase Date; provided,however, that the number of shares of Common Stock subject to any option granted pursuant to this Plan shall not exceeddays in the lesser of (x) the maximum number of shares set by the Committee pursuant to Section 10(b) below with respect to the applicable Purchase Date, or (y) the maximum number of shares which may be purchased pursuant to Section 10(a) below with respect to the applicable Purchase Date.
8.    PURCHASE PRICE. The Purchase Price per share at which a share of Common Stock will be sold in any Offering Period shall be eighty-five percent (85%) of the lesser of:
(a)    The Fair Market Value on the Offering Date; or
(b)    The Fair Market Value on the Purchase Date.
9.    PAYMENT OF PURCHASE PRICE; CONTRIBUTION CHANGES; SHARE ISSUANCES.
(a)    The Purchase Price shall be accumulated by regular payroll deductions made during each Offering Period, unless the Committee determines that contributions may be made in another form (including but not limited to with respect to categories of Participants outside the United States that Contributions may be made in another form due to local legal requirements). The Contributions are made as a percentage of the Participant’s Compensation in one percent (1%) increments not less than one percent (1%), nor greater than fifteen percent (15%) or such lower limit set by the Committee. “Compensation” shall mean base salary or regular hourly wages; however, the Committee shall have discretion to adopt a definition of Compensation from time to time of all cash compensation reported on the employee's Form W-2 or corresponding local country tax return, including without limitation base salary or regular hourly wages, bonuses, incentive compensation, commissions, overtime, shift premiums, pay during leaves of absence, and draws against commissions (or in foreign jurisdictions, equivalent cash compensation).entire Straddle Period. For purposes of determining the amount of Taxes attributable to the pre-Closing portion of any Straddle Periods under this Agreement, all applicable Transaction Tax Deductions shall be allocated to and deducted in the pre-Closing portion of any Straddle Period to the extent permitted by applicable Law on a Participant’s Compensation,“more likely than not” basis.
(d)Tax Returns. At the cost and expense of Seller, Seller or Parent shall prepare and file (or cause to be prepared and filed) all Tax Returns of or relating to the Company Group for any electionPre- Closing Tax Period that are due after the Closing. Seller shall provide a copy of such Tax Return to Acquirer at least fifteen (15) days before the due date for filing such Tax Return (or as soon as reasonably practicable, if such due date is less than fifteen (15) days after the Closing Date) for Acquirer’s review. Seller or Parent, as applicable, shall consider in good faith all reasonable written comments made by Acquirer with respect to such ParticipantTax Returns within five Business Days prior to reduce histhe due date for filing such Tax Return. All such Tax Returns shall be timely filed as finally prepared by Seller. Tax Returns for any Pre-Closing Tax Periods and Straddle Periods shall include therein as deductions all Transaction Tax Deductions to the extent permitted by applicable Law on a “more likely than not” basis. Notwithstanding anything to the contrary in this Agreement, Seller, Parent and Subsidiaries of Parent shall not be required to provide any Person with any Tax Return or her regular cash remuneration under Sections 125copy of any Tax Return of (i) Parent or 401(k)any Subsidiary of Parent, or (ii) a consolidated, combined, affiliated or unitary group that includes Parent or any Subsidiary of Parent.
(e)Tax Proceedings. Acquirer shall inform Seller of the Code (or in foreign jurisdictions, equivalent deductions) shall be treated as ifreceipt by Acquirer or its Affiliates (including the Participant did not make such election. Contributions shall commence onSurviving Entity after the first payday following the beginningClosing) of notice of any Offering Period anddeficiency, proposed adjustment, adjustment, assessment, audit, claim, inquiry, examination, suit, dispute or other proceeding relating to Taxes with respect to which Acquirer intends to seek indemnification under Article 8 (a “Tax Proceeding”). Seller shall continuenot be relieved of its indemnification obligations hereunder if such notice is not delivered promptly except to the endextent Seller is materially prejudiced thereby. Seller or Parent shall have the exclusive right to control, conduct and settle any Tax Proceeding. Seller or Parent shall keep Acquirer reasonably informed of all material developments of such Tax Proceeding. Notwithstanding anything in Article 8 to the Offering Period unless sooner altered or terminated as provided incontrary, this Plan. NotwithstandingSection 5.11(d), and not Section 8.3, shall govern the foregoing, the termsconduct of any sub-plan may permit matching shares without the payment of any purchase price.Tax Proceedings.
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(b)    A Participant may decrease(f)Tax Free Reorganization Matters. The Parties intend that, for United States federal income tax purposes, the rateMergers will qualify as a Reorganization to which each of Contributions during an Offering Period by filing with the Company orParties are to be parties under Section 368(b) of the Code and this Agreement is intended to be, and is adopted as, a third party designatedplan of reorganization for purposes of Sections 354, 361 and 368 of the Code and within the meaning of Treasury Regulations Section 1.368-2(g) (the “Intended Tax Treatment”). The Mergers shall be reported by the Company a new authorizationParties for Contributions, with the new rate to become effective no later than the second payroll period commencing after the Company’s receipt of the authorizationall Tax and continuing for the remainder of the Offering Period unless changed as described below. A decrease in the rate of Contributions may be made once during an Offering Period or more frequently under rules determined by the Committee. A Participant may increase or decrease the rate of Contributions for any subsequent Offering Period by filing with the Company or a third party designated by the Company a new authorization for Contributions prior to the beginning of such Offering Period, or such other time period as specified by the Committee.
(c)    A Participant may reduce his or her Contribution percentage to zero during an Offering Period by filing with the Company or a third party designated by the Company a request for cessation of Contributions. Such reduction shall be effective beginning no later than the second payroll period after the Company’s receipt of the request and no further Contributions will be made for the duration of the Offering Period. Contributions credited to the Participant’s account prior to the effective date of the request shall be used to purchase shares of Common Stockpurposes in accordance with Subsection (e) below. A reductionthe foregoing and will not take any position inconsistent with the Intended Tax Treatment, unless otherwise required by a Governmental Authority as a result of a “determination” within the meaning of Section 1313(a) of the Contribution percentage to zeroCode. Notwithstanding any other provisions of this Agreement, the composition of payments under this Agreement shall be treated as such Participant’s withdrawal from such Offering Period andconsistent with the Plan, effective asqualification of the day aftertransactions contemplated hereby as a Reorganization, including the next Purchase Date following the filing daterequirements of Treasury Regulations Section 1.368-1(e) and a minimum proprietary interest under such request with the Company.
(d)    All Contributionsregulations of at least forty percent (40%), and adjustments shall be made for a Participant are credited to his or her book account under this Plan and are deposited with the general funds of the Company, except to the extent local legal restrictions outside the United States require segregationcomposition of such Contributions. No interest accrues on the Contributions, except to the extent required due to local legal requirements. All Contributions received or held by the Company may be used by the Company forpayments and satisfaction of indemnity claims as between Acquirer Stock, cash and any corporate purpose, and the Company shall not be obligated to segregate such Contributions, exceptother items to the extent necessary to comply with local legal requirements outside the United States.
(e)    Onforegoing. The Parties shall consult and cooperate with each Purchaseother in good faith for purposes of making any such adjustments. The parties covenant and agree that they will not take any actions before or after the Closing that would be reasonably expected to adversely affect the status of the Mergers as a Reorganization. The Parties shall cooperate with each other and their respective counsel to document and support the Tax treatment of transactions contemplated by this Agreement consistently with the Intended Tax Treatment, including providing factual support letters and customary tax representations to counsel for purposes of rendering any Tax opinions that may be provided by counsel. Each Party shall promptly notify the other Party in writing if, before the Closing Date, so long as this Plan remains in effect and providedsuch Party knows or has reason to believe that the Participant hastransactions contemplated by this Agreement may not submitted a signed and completed withdrawal form before that date which notifiesqualify for the Intended Tax Treatment.
(g)Tax Refunds. All refunds of Taxes of any member of the Company Group for any Pre-Closing Tax Period (or portion of a Straddle Period ending on the Closing Date as determined in accordance with the same principles provided for in Section 5.11(c)) (whether in the form of cash received or a credit or offset against Taxes otherwise payable) shall be for the benefit of the Seller. To the extent that the Participant wishes to withdraw fromAcquirer, any member of the Company Group, or any of their Affiliates receives a Tax refund that Offering Period under this Plan and have all Contributions accumulatedis for the benefit of the Sellers that was not included in the account maintained on behalfcalculation of Company Net Working Capital, the Participant as of that date returnedAcquirer shall pay to the Participant,Seller the Company shall applyamount of such Tax refund (and interest received from the funds then in the Participant’s account to the purchase of whole shares of Common Stock reserved under the option granted to such ParticipantGovernmental Authority with respect to the Offering Periodsuch refund), net of out-of-pocket Taxes and reasonable professional fees and expenses incurred to obtain such. Tax refund. The amount due to the extentSeller shall be payable ten (10) days after receipt of the refund from the applicable Governmental Authority (or, if the Tax refund is in the form of a credit or offset, ten (10) days after the due date of the Tax Return claiming such credit. or offset). The Acquirer shall, and shall cause the members of the Company Group, to take all reasonable actions necessary, or requested by the Seller, to timely claim any Tax refunds that will give rise to a payment under this Section 5.11(g). Notwithstanding the foregoing, in the event it is subsequently determined that any Tax refund or Tax credit for which the Acquirer made a payment hereunder was improperly obtained or otherwise disallowed, the Seller shall pay to the Acquirer an amount equal to the amount such option is exercisableTax refund or Tax credit so disallowed (not exceeding the amount of the applicable Tax refund or Tax credit for which Acquirer made a payment to the Seller Representative under this Section 5.11(g)) within ten (10) days after delivery of a written notice to the Seller of such determination or disallowance. Payments under this paragraph (g) shall be treated as adjustments to the Merger Consideration.
(h)Post-Closing Actions. Acquirer shall not permit the Company or any of its Affiliates to take any action on the Purchase Date. The Purchase Price per shareClosing Date that could increase Seller’s liability for Taxes or reduce the amount of any Tax refund or Tax credit of Seller. None of the Acquirer, the Company Group nor any of their respective Affiliates shall be as specified(or shall cause or permit any members of the Company Group or their Subsidiaries) to (i) file, amend, re-file or otherwise modify any Tax Return relating in Section 8 of this Plan. Any fractional share, as calculated under this Subsection (e), shall be rounded downwhole or in part to the next lower whole share, unless the Committee determinesCompany or any of its Subsidiaries, with respect to all Participants that any fractional share shall be credited as a fractional share. Any amount remaining in a Participant’s account on a Purchase Date which is less than the amount necessaryPre-Closing Tax Period, (ii) make any Tax election pursuant to purchase a full shareSections 336 or 338 of the Common Stock shall be carried forward without interest into the next Purchase Period; however, the Committee may from time to time provide that such amounts shall be refunded without interest (except to the extent necessary to comply with local legal requirements outside the United States). In the event that this Plan has been oversubscribed, all funds not used to purchase shares on the Purchase Date shall be returned to the Participant, without interest (except to the extent required due to local legal requirements outside the United States). No Common Stock shall be purchased on a Purchase Date on behalf of any employee whose participation in this Plan has terminated prior to such Purchase Date, except to the extent required due to local legal requirements outside the United States.
(f)    As promptly as practicable after the Purchase Date, the Company shall issue shares for the Participant’s benefit representing the shares purchased upon exercise of his or her option.
(g)    During a Participant’s lifetime, his or her option to purchase shares hereunder is exercisable only by him or her. The Participant will have no interest or voting right in shares covered by his or her option until such option has been exercised.
(h)    To the extent required by applicable federal, state, local or foreign law, a Participant shall make arrangements satisfactory to the Company and the Participating Corporation employing the Participant for the satisfaction of any withholding tax obligations that ariseCode in connection with the Plan. Thetransactions contemplated hereby, or any other election that has retroactive effect to any Pre-Closing Tax Period of any member of the Company Group or their Subsidiaries or Affiliates, (iii) file any ruling or request with any taxing authority that relates to Taxes or Tax Returns of the Company or any of its Subsidiaries or their Affiliates for a Pre-Closing Tax Period, or (iv) enter into any voluntary disclosure with any taxing authority regarding any Tax or Tax Returns of the Company or any of its Subsidiaries for a Pre-Closing Tax Period (including any voluntary disclosure with a taxing authority with respect to filing Tax Returns or paying Taxes for any Pre-Closing Tax Period
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in a jurisdiction that the Company did not previously file a Tax Return or pay Taxes), in each case, without the prior written consent of the Seller, which shall not be unreasonably withheld, delayed or conditioned.
5.12Insurance; Indemnification of Directors and Officers.
(a)_________Insurance.
(i)_________Following the Closing and for the duration of the term of the Transition Services Agreement, with respect to claims for events or Damages related to the Company Products with respect to pre-Closing occurrences that are covered by Seller’s occurrence-based third-party liability insurance policies (the “Available Insurance Policies”), subject in all cases to the terms and limitations of such policies (such claims, the “Valid Pre-Closing Claims”), (A) Acquirer may promptly notify Seller in writing of any Subsidiarymatter that is reasonably expected to give rise to a Valid Pre-Closing Claim under any such Available Insurance Policy (provided that the failure to promptly notify Seller shall not relieve Seller from its obligations under clause (B), except to the extent that such failure invalidates the validity of any purportedly Valid Pre-Closing Claim), and (B) Seller shall, and shall cause its Affiliates to, (1) make Valid Pre-Closing Claims and reasonably pursue and seek to recover on such claims under the terms of the applicable Available Insurance Policies and (2) reasonably promptly deliver to Acquirer any insurance proceeds received with respect thereto (calculated net of reasonable expenses incurred in procuring such recovery and any increase in premiums or Affiliate, as applicable, may withhold,retroactive premium adjustments or chargebacks paid by or on behalf of Seller to the extent resulting from such claims, and taking into account the available coverage under each Available Insurance Policy, it being understood that such coverage shall first be available to satisfy other claims of Seller or its Affiliates that are pending under such policy at the time the claim for the benefit of Acquirer is made); provided that, unless otherwise deducted from the proceeds received by Acquirer, Acquirer shall pay (or reimburse Seller for), without duplication, any method permissibledeductibles, retentions, loss-sensitive, self-insurance amounts or other costs, in each case, to the extent resulting from any Valid Pre-Closing Claim made by Seller or its Affiliates on behalf of any of Acquirer or the Company Group under such policies for Valid Pre-Closing Claims. For the avoidance of doubt, Acquirer shall be liable for all uninsured, uncovered, unavailable or uncollectible Damages associated with any such Valid Pre-Closing Claim. Following the Closing, if permitted under the applicable law,Available Insurance Policy, Seller hereby authorizes Acquirer and its Subsidiaries, under the amount necessarydirection and control of Seller, to notify, make and pursue Valid Pre-Closing Claims as contemplated by this Section 5.12(a)(i) under the Available Insurance Policies, subject to the payment and reimbursement provisions set forth in the prior sentence. Notwithstanding anything to the contrary herein, Seller shall not have any Liability or obligation to bring any Proceedings to obtain any insurance coverage for any Valid Pre-Closing Claim.
(ii)In connection with the pursuit of any Valid Pre-Closing Claim, Acquirer shall, and shall cause the Company Group to, fully cooperate with Seller in pursuing coverage for any Valid Pre-Closing Claim. If Acquirer or Subsidiaryany of its Affiliates breach, or Affiliate, as applicable,cause any member of Seller to meet applicable withholding obligations, includingbreach, any withholding requiredterms or conditions of any Available Insurance Policies with respect to make availableany Valid Pre-Closing Claim, Acquirer shall be solely responsible for, and shall bear the risk of any loss of coverage cause by such breach (and, in all events, the Acquirer shall bear the risk of any lack of coverage under the Available Insurance Policies). Acquirer shall, and shall cause the Company Group to, use commercially reasonable efforts to pursue rights of recovery against third parties with respect to claims7, Liabilities, occurrences, accidents, events, matters, Proceedings or Damages for which the Company Group has the ability to mitigate via contract or tort and shall cooperate with Seller with respect to the Company or Subsidiary or Affiliate, as applicable, any tax deductions or benefits attributable to the sale or early dispositionpursuit of shares of Common Stock by a Participant. The Company shall not be required to issue any shares of Common Stock under the Plan until such obligations are satisfied.
10.    LIMITATIONS ON SHARES TO BE PURCHASED.
(a)    Any other provision of the Plan notwithstanding, no Participant shall purchase Common Stock with a Fair Market Value in excess of the following limit:
(i)    In the case of Common Stock purchased during an Offering Period that commenced in the current calendar year, the limit shall be equal to (A) $25,000 minus (B) the Fair Market Value of the Common Stock that the Participant previously purchased in the current calendar year (under this Plan and all other employee stock purchase plans of the Company or any Parent or Subsidiary).
(ii)    In the case of Common Stock purchased during an Offering Period that commenced in the immediately preceding calendar year, the limit shall be equal to (A) $50,000 minus (B) the Fair Market Value of the Common Stock that the Participant previously purchased (under this Plan and all other employee stock purchase plans of the Company or any Parent or Subsidiary) in the current calendar year and in the immediately preceding calendar year.
For purposes of this Subsection (a), the Fair Market Value of Common Stock shall be determined in each case as of the beginning of the Offering Period in which such Common Stock is purchased. Employee stock purchase plans not described in Section 423 of the Code shall be disregarded. If a Participant is precluded by this Subsection (a) from purchasing additional Common Stock under the Plan, then his or her Contributions shall automatically be discontinued and shall automatically resume at the beginning of the earliest Purchase Period that will end in the next calendar year (if he or she then is an eligible employee), provided that when the Company automatically resumes such Contributions, the Company must apply the rate in effect immediately prior to such suspension.rights.
(b)    In no event shall a Participant be permittedIndemnification of Directors and Officers.
(i)Each of Acquirer, Seller and Holdco2 agree that all rights to purchase more than [l] shares on any one Purchase Dateindemnification, advancement of expenses and exculpation from liability for or such lesser number as the Committee shall determine. If a lower limit is set under this Subsection (b), then all Participants will be notified of such limit prior to the commencement of the next Offering Period for which it is to be effective.
(c)    If the number of shares to be purchased on a Purchase Date by all Participants exceeds the number of shares then available for issuance under this Plan, then the Company will make a pro rata allocation of the remaining shares in as uniform a manner as shall be reasonably practicable and as the Committee shall determine to be equitable. In such event, the Company will give notice of such reduction of the number of shares to be purchased under a Participant’s option to each Participant affected.
(d)    Any Contributions accumulated in a Participant’s account which are not used to purchase stock due to the limitations in this Section 10, and not covered by Section 9(e), shall be returned to the Participant as soon as practicable after the end of the applicable Purchase Period, without interest (except to the extent required due to local legal requirements outside the United States).
11.    WITHDRAWAL.
(a)    Each Participant may withdraw from an Offering Period under this Plan pursuant to a method specified for such purpose by the Company. Such withdrawal may be electedconnection with acts or omissions occurring at any time prior to or on the endClosing Date (including in connection with this Agreement and the Transactions), that now exist in favor of an Offering Period,any Person who prior to or suchon the Closing Date is or was a current or former director, manager, officer or employee of any member of the Company Group, or who at the request of Seller, Holdco2 or any of their respective Affiliates served prior to or on the Closing Date as a director, officer, member, manager, employee, trustee or fiduciary of any other time periodentity of any type (each a “D&O Indemnified Person”), including as specified byprovided in the Committee.
(b)    Upon withdrawal from this Plan,Governing Documents of any member of the accumulated Contributions shall be returned toCompany Group (an “Indemnity Agreement”), will survive the withdrawn Participant, without interest (except to the extent required due to local legal requirements outside the United States), and his or her interest in this Plan shall terminate. In the event a Participant voluntarily elects toClosing
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withdrawand will continue in full force and effect following the Closing Date. In furtherance (and not in limitation of) the foregoing, for the six (6) year period following the Closing Date, Acquirer will cause the Company Group to, and the Company Group will maintain in the Governing Documents of each applicable member of the Company Group provisions with respect to indemnification, advancement of expenses and exculpation from liability that in each such respect are at least as favorable to each D&O Indemnified Person as those contained in such member’s Governing Documents as in effect on the date hereof, which provisions will not be amended, repealed or otherwise modified in any manner that would adversely affect the rights thereunder of any D&O Indemnified Person. Each Indemnity Agreement shall continue without termination, revocation, amendment or other modification that would adversely affect the rights thereunder of any D&O Indemnified Person, in each case in accordance with its terms.
(ii)If Acquirer or any member of the Company Group (or any of its successors or assigns) (A) consolidates with or merges into any other Person and is not the continuing or surviving corporation or entity of such consolidation or merger or (B) transfers all or substantially all of its properties and assets to any other Person (including by dissolution, liquidation, assignment for the benefit of creditors or similar action), then, and in each such case, proper provision will be made so that such other Person fully assumes the obligations set forth in this Plan, he or she may not resumeSection 5.12(b).
(iii)The provisions of this Section 5.12(b) shall survive the Closing. This Section 5.12(b) shall be for the irrevocable benefit of, and will be enforceable by, each D&O Indemnified Person and his or her participation in this Plan during the same Offering Period, but he or she may participate in any Offering Period under this Plan which commences on a date subsequent torespective heirs, executors, administrators, estates, successors and assigns, and each such withdrawal by filing a new authorization for Contributions in the same manner as set forth in Section 6 above for initial participation in this Plan.
(c)    [To the extent applicable, if the Fair Market Value on the first day of the current Offering Period in which a participant is enrolled is higher than the Fair Market Value on the first day of any subsequent Offering Period, the Company will automatically enroll such participant in the subsequent Offering Period. Any funds accumulated in a Participant’s account prior to the first day of such subsequent Offering PeriodPerson will be applied toan express intended third party beneficiary of this Agreement for such purposes. Acquirer will pay, or will cause the purchase of shares on the Purchase Date immediately prior to the first day of such subsequent Offering Period, if any].
12.    TERMINATION OF EMPLOYMENT. Termination of a Participant’s employment for any reason, including retirement, death, disability, or the failure of a Participant to remain an eligible employeeapplicable member of the Company or of a Participating Corporation,Group, as and when incurred by any Person referred to in the immediately terminates his or her participationpreceding sentence, all fees, costs, charges and expenses (including attorneys’ fees and expenses) incurred by such Person in enforcing such Person’s rights under this Section 5.12(b). Notwithstanding anything in this Plan (except as required due to local legal requirements outside the United States). In such event, accumulated Contributions creditedAgreement to the Participant’s accountcontrary, the obligations under this Section 5.12(b) will not be returnedterminated, revoked, modified or amended in any way so as to him or her or,adversely affect any Person referred to in the case of his or her death, to his or her legal representative, without interest (except to the extent required due to local legal requirements outside the United States). For purposessecond sentence of this Section 12, an employee will not be deemed5.12(b)(iii) without the written consent of such Person. With respect to have terminated employmentany right to indemnification or failedadvancement for actual or claimed acts or omissions occurring prior to remainor on the Closing Date (including in connection with this Agreement and the continuous employTransactions), the applicable member of the Company Group will be the indemnitor of first resort, responsible for all such indemnification and advancement that any D&O Indemnified Person may otherwise have from any direct or of a Participating Corporation in the case of sick leave, military leave,indirect stockholder or any other leave of absence approved by the Company; provided that such leave is for a period of not more than ninety (90) days or reemployment upon the expiration of such leave is guaranteed by contract or statute. The Company will have sole discretion to determine whether a Participant has terminated employment and the effective date on which the Participant terminated employment, regardless of any notice period or garden leave required under local law.
13.    RETURN OF CONTRIBUTIONS. In the event a Participant’s interest in this Plan is terminated by withdrawal, termination of employment or otherwise, or in the event this Plan is terminated by the Board, the Company shall deliver to the Participant all accumulated Contributions credited to such Participant’s account. No interest shall accrue on the Contributions of a Participant in this Plan (except to the extent required due to local legal requirements outside the United States).
14.    CAPITAL CHANGES. If the number or class of outstanding shares is changed by a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company, without consideration, then the Committee shall adjust the number and class of Common Stock that may be delivered under the Plan, the Purchase Price per share and the number of shares of Common Stock covered by each option under the Plan which has not yet been exercised, and the numerical limits of Section 2 shall be proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and in compliance with the applicable securities laws; provided that fractions of a share will not be issued.
15.    NONASSIGNABILITY. Neither Contributions credited to a Participant’s account nor any rights with regard to the exercise of an option or to receive shares under this Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or as provided in Section 22 below) by the Participant. Any such attempt at assignment, transfer, pledge or other disposition shall be void and without effect.
16.    USE OF PARTICIPANT FUNDS AND REPORTS. The Company may use all Contributions received or held by it under the Plan for any corporate purpose, and the Company will not be required to segregate Participant Contributions (except to the extent required due to local legal requirements outside the United States). Until shares are issued, Participants will only have the rights of an unsecured creditor unless otherwise required under local law. Each Participant shall receive, or have access to, promptly after the end of each Purchase Period a report of his or her account setting forth the total Contributions accumulated, the number of shares purchased, the per share price thereof and the remaining cash balance, if any, carried forward to the next Purchase Period or Offering Period, as the case may be.
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17.    NOTICE OF DISPOSITION. Each U.S. taxpayer Participant shall notify the Company in writing if the Participant disposesequity holder of any of the shares purchasedmembers of the Company Group (or any Affiliate of such stockholder or equity holder).
(iv)Notwithstanding anything to the contrary contained in this Section 5.12(b), Seller’s directors and officers insurance policies, in each case as in effect as of the Closing Date, shall be the first and primary recourse for any Offering Period pursuantindemnification to which any D&O Indemnified Person may be entitled under this Plan ifSection 5.12(b). For the six (6) year period following the Closing Date, Seller agrees to treat any such disposition occurs within two (2) years fromclaim for indemnification against its directors and officers insurance policies as a Valid Pre-Closing Claim in accordance with Section 5.1(a).
5.13Employee Matters.
(a)All Continuing Employees shall continue as employees of the Offering Date or withinCompany Group as of and immediately following the Closing. For a period of at least one (1) year fromfollowing the PurchaseClosing Date, on whichAcquirer shall cause to be provided to the Continuing Employees (i) base salary or wages, as applicable, and cash bonus opportunities (and excluding, for the avoidance of doubt, equity or equity-based bonus opportunities), in each case no less favorable than those provided to such shares were purchased (the “Continuing Employees as of the Agreement Date and (ii) employee benefits that are no less favorable in the aggregate than those provided to the Continuing Employees as of the Agreement Date.
(b)Notice Period”). The Company may, at any time duringAs of the Notice Period, place a legend or legends on any certificate representing shares acquired pursuant to this Plan requesting the Company’s transfer agent to notifyClosing Date, the Company Group shall cease to be participating employers in the Seller Benefit Plans that provide retirement, health or welfare benefits. With respect to each benefit plan, program, practice, policy or arrangement maintained by the Acquirer or any of its Affiliates (including the Company) following the Closing Date and in which any transfer of the shares. The obligationContinuing Employees participate (the “Acquirer Plans”), each Continuing Employee shall be credited with the same amount of the Participant to provide such notice shall continue notwithstanding the placement of any such legend on the certificates.
18.    NO RIGHTS TO CONTINUED EMPLOYMENT. Neither this Plan nor the grant of any option hereunder shall confer any right on any employee to remain in the employ of the Company or any Participating Corporation or restrict the right of the Company or any Participating Corporation to terminate such employee’s employment.
19.    EQUAL RIGHTS AND PRIVILEGES. All eligible employees granted an option under the Section 423 Component of this Plan shall have equal rights and privileges with respect to this Plan or within any separate offering under the Plan so that this Plan qualifiesservice as an “employee stock purchase plan” within the meaning of Section 423 or any successor provision of the Code and the related regulations. Any provision of this Plan which is inconsistent with Section 423 or any successor provision of the Code, without further act or amendmentwas credited by the Company the Committee or the Board, shall be reformed to comply with the requirements of Section 423. This Section 19 shall take precedence over all other provisions in this Plan.
20.    NOTICES. All notices or other communications by a Participant to the Company under or in connection with this Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.
21.    TERM; STOCKHOLDER APPROVAL. This Plan will become effective on the Effective Date. This Plan shall be approved by the stockholders of the Company, in any manner permitted by applicable corporate law, within twelve (12) months before or after the date this Plan is adopted by the Board. No purchase of shares that are subject to such stockholder approval before becoming available under this Plan shall occur prior to stockholder approval of such shares and the Board or Committee may delay any Purchase Date and postpone the commencement of any Offering Period subsequent to such Purchase DateGroup as deemed necessary or desirable to obtain such approval (provided that if a Purchase Date would occur more than six (6) months after commencement of the Offering Period to which it relates, then such Purchase Date shall not occur and instead such Offering Period shall terminate without the purchase of such shares and Participants in such Offering Period shall be refunded their Contributions without interest). This Plan shall continue until the earlier to occur of (a) termination of this Plan by the Board (which termination may be effected by the Board at any time pursuant to Section 25 below), (b) issuance of all of the shares of Common Stock reserved for issuance under this Plan, or (c) the tenth anniversary of the Effective Date.
22.    DESIGNATION OF BENEFICIARY.
(a)    If authorized by the Committee, a Participant may file a written designation of a beneficiary who is to receive any cash from the Participant’s account under this Plan in the event of such Participant’s death prior to a Purchase Date. Such form shall be valid only if it was filed with the Company at the prescribed location before the Participant’s death.
(b)    If authorized by the Company, such designation of beneficiary may be changed by the Participant at any time by written notice filed with the Company at the prescribed location before the Participant’s death. If no such beneficiary has been designated (to the knowledge of the Company), then, in the event of the death of a Participant the Company, in its discretion, may deliver such cash to the Participant’s estate or legal heirs, or if no such estate or legal heirs are known to the Company, then to the Participant’s spouse or, if no estate, legal heir, or spouse is known to the Company, then to any one or more dependents or relatives of the Participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.
23.    CONDITIONS UPON ISSUANCE OF SHARES; LIMITATION ON SALE OF SHARES. Shares shall not be issued with respect to an option unless the exercise of such option and the issuance and delivery
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of the Closing under similar or comparable Company Benefit Plans (including for purposes of eligibility to participate, vesting, benefit accrual and eligibility to receive benefits), except to the extent such shares pursuant theretoservice credit would result in any duplication of benefits. Acquirer shall comply with alluse commercially reasonable efforts to cause each applicable provisionsAcquirer Plan to waive, to the extent permitted by applicable Law, eligibility waiting periods, evidence of law, domestic or foreign, including, without limitation,insurability requirements and pre-existing condition limitations. To the U.S. Securities Act of 1933, as amended,extent permitted by applicable Law and to the Exchange Act,extent applicable in the rules and regulations promulgated thereunder, andplan year that contains the requirements of any stock exchange or automated quotation system uponClosing Date, Acquirer shall use commercially reasonable efforts to give the Continuing Employees credit under the applicable Acquirer Plan for amounts paid prior to the Closing Date during the calendar year in which the shares may thenClosing Date occurs under a corresponding benefit plan for purposes of applying deductibles, co-payments and out of pocket maximums, as though such amounts had been paid in accordance with the terms and conditions of the Acquirer Plan.
(c)Acquirer shall cause an Acquirer Plan that is intended to be listed, exchange control restrictions and/or securities law restrictions outsidetax qualified under Section 401(a) of the United States,Code (“Acquirer 401(k) Plan” ) to permit Continuing Employees with account balances in a Seller Benefit Plan intended to be qualified under Section 401(a) of the Code (“Seller 401(k) Plan” ) to roll over their account balances, and shall be further subjectuse commercially reasonable efforts to include any loans, to such Acquirer 401(k) Plan. Seller shall provide a matching contribution under the approval of counsel for the CompanySeller 401(k) Plan with respect to such compliance. Shares may be held in trust or subject to further restrictionseach Continuing Employee’s accrued matching contribution under the Seller 401(k) Plan as permitted by any subplan.
24.    APPLICABLE LAW. The Plan shall be governed by the substantive laws (excluding the conflict of laws rules) of the StateClosing Date for the portion of [Delaware].the plan year that includes the Closing Date for compensation earned prior to the Closing Date by contributing the Accrued 2022 401(k) Match to the Seller 401(k) Plan.
25.    AMENDMENT OR TERMINATION.(d) The Committee,Prior to the Closing, the Company Group shall pay discretionary annual bonuses for the performance period ended December 31, 2021, as determined in Seller’s sole discretion, and any commissions or other cash incentives with respect to performance periods ending on or before the Closing Date to the extent payable prior to the Closing in the Ordinary Course of Business. With respect to any other commissions or other cash incentives for performance periods ending on or after January 1, 2022 and on or before the Closing Date, Acquirer shall cause the Company Group to pay out the incentives thereunder in accordance with the terms thereof and consistent with past practice. With respect to performance periods in progress as of the Closing Date for any annual cash bonuses, commissions or other cash incentives, Acquirer shall cause the Company Group to maintain the terms of such programs in effect for the remainder of such performance periods and to pay out the incentives thereunder in accordance with such terms and consistent with past practice.
(e)Prior to the Closing, Seller may in its sole discretion may amend, suspend or terminateaccelerate the Plan, or any part thereof, at any timevesting of equity and for any reason. Unless otherwise requiredequity based incentive awards held by applicable law, if the Plan is terminated, the Committee, in its discretion,Company Employees under Seller’s equity incentive plans, and may elect to terminate all outstanding Offering Periods either immediately or upon completion of the purchase of shares of Common Stock on the next Purchase Date (which may be sooner than originally scheduled, if determined by the Committee in its discretion), or may elect to permit Offering Periods to expire in accordance with their terms (and subject to any adjustment pursuant to Section 14). If an Offering Period is terminated prior to its previously-scheduled expiration, all amounts then credited to Participants’ accounts for such Offering Period, which have not been used to purchase shares of Common Stock, shall be returned to those Participants (without interest thereon, except as otherwise required under local laws) as soon as administratively practicable. Further, the Committee will be entitled to change the Purchase Periods and Offering Periods, limit the frequency and/or number of changes in the amount contributed during an Offering Period, establish the exchange ratio applicable to amounts contributed in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a Participant in order to adjust for delays or mistakes in the administration of the Plan, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each Participant properly correspond with amounts contributed from the Participant’s base salary and other eligible compensation, and establish such other limitations or procedures as the Committee determines in its sole discretion advisable which are consistentextend the exercise period of stock options held by Company Employees under Seller’s equity incentive plans to the one (1) year anniversary of the Closing Date.
(f)Acquirer shall provide COBRA continuation coverage to each Continuing Employee who is an “M&A qualified beneficiary” (within the meaning of Treasury Regulation Section 54.4980B-9) in connection with the Plan. Such actions willTransactions. Seller shall provide COBRA continuation coverage to each individual who is an M&A qualified beneficiary in connection with the Transactions and is not a Continuing Employee.
(g)As soon as practicable following the Agreement Date, Acquirer and the Company’s Chief Executive Officer shall mutually consult regarding the terms of an equity and cash retention pool for the benefit of certain Company Employees.
(h)Prior to the Closing, the Company shall use its commercially reasonable efforts (which for the avoidance of doubt shall not require stockholder approvalthe Company to pay any consideration) to obtain executed confirmatory assignments of Intellectual Property, in form and substance reasonably satisfactory to Acquirer, from any Authors that have not previously executed such agreements.
(i)Nothing contained in this Section 5.13 shall, or the consent of any Participants. However, no amendment shall be made without approvalconstrued so as to,
(j)prevent or restrict in any way the right of Acquirer to terminate reassign, promote or demote any employee, consultant, director or other service provider (or to cause any of the stockholdersforegoing actions) at any time following the Closing, or to change (or cause the change of) the title, powers, duties, responsibilities, functions, locations, or conditions of the Company (obtained in accordance with Section 21 above) within twelve (12) months of the adoption of such amendment (or earlier if required by Section 21) if such amendment would: (a) increase the number of shares that may be issued under this Plan;employment or (b) change the designation of the employees (or class of employees) eligible for participation in this Plan. In addition, in the event the Board or Committee determines that the ongoing operation of the Plan may result in unfavorable financial accounting consequences, the Board or Committee may, in its discretion and,service, to the extent necessary or desirable, modify, amend or terminate the Plan to reduce or eliminate such accounting consequences including, but not limited to: (i) amending the definition of compensation, including with respect to an Offering Period underway at the time; (ii) altering the Purchase Price for any Offering Period including an Offering Period underway at the time of the change in Purchase Price; (iii) shortening any Offering Periodcovered by setting a Purchase Date, including an Offering Period underway at the time of the Committee’s action; (iv) reducing the maximum percentage of Compensation a participant may elect to set aside as Contributions; and (v) reducing the maximum number of shares a Participant may purchase during any Offering Period. Such modifications or amendments will not require approval of the stockholders of the Company or the consentthis Section 5.13, of any Participants.such
26.    CORPORATE TRANSACTIONS. In the event of a Corporate Transaction, the Offering Period for each outstanding right to purchase Common Stock will be shortened by setting a new Purchase Date and will end on the new Purchase Date. The new Purchase Date shall occur on or prior to the consummation of the Corporate Transaction, as determined by the Board or Committee, and the Plan shall terminate on the consummation of the Corporate Transaction.
27.    CODE SECTION 409A; TAX QUALIFICATION.
(a)    Options granted under the Plan generally are exempt from the application of Section 409A of the Code. However, options granted to U.S. taxpayers which are not intended to meet the Code Section 423 requirements are intended to be exempt from the application of Section 409A of the Code under the short-term deferral exception and any ambiguities shall be construed and interpreted in accordance with such intent. Subject to
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Subsection (b), options grantedemployee, consultant, director or other service provider at any time following the Closing, (ii) constitute an amendment or modification of any Company Benefit Plan or other employee benefit plan, (iii) create any third-party rights in any such current or former employee, consultant, director or other service provider (including any beneficiary or dependent thereof) or (iv) except as set forth in Section 5.13(c)obligate Acquirer or any of its Affiliates to U.S. taxpayers outsideadopt or maintain any particular plan or program or other compensatory or benefits arrangement at any time or prevent Acquirer or any of its Affiliates from modifying or terminating any such plan, program or other compensatory or benefits arrangement at any time.
5.14Transition Services Agreement and Accounts Receivable.
(a)During the Pre-Closing Period, the Parties shall cooperate with each other and promptly negotiate and finalize the Transition Services Agreement covering the provision of certain transition services from Seller and its relevant Affiliates to the Company Group, acting reasonably and in good faith. In connection with the foregoing, Seller and Acquirer will take any other actions reasonably required to identify and define the services provided by Seller and its relevant Affiliates to the Company Group prior to Closing that are material to or reasonably necessary for the conduct of the Code Section 423 requirementsBusiness following the Closing. The Transition Services Agreement shall cover transition services permitted under applicable Law and reasonably necessary for the conduct of Business by the Company Group following the Closing and provision that relate to the matters set forth in Schedule 5.14(a). All such transition services will be provided at Seller’s cost, without markup or margin, in accordance with applicable Laws and at the same or better standard of service as such services were provided to the Company Group prior to Closing. Individual Transition Services Agreements shall be subject to such terms and conditions that will permit such options to satisfy the requirements of the short-term deferral exception available under Section 409A of the Code, including the requirement that the shares of Common Stock subject to an option be delivered within the short-term deferral period. Subject to Subsection (b), in the case of a Participant who would otherwise be subject to Section 409A of the Code, to the extent the Committee determines that an option or the exercise, payment, settlement or deferral thereof is subject to Section 409A of the Code, the option shall be granted, exercised, paid, settled or deferred in a manner that will comply with Section 409A of the Code, including Treasury regulations andestablished for each jurisdiction other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Effective Date. Notwithstanding the foregoing, the Company shall have no liability to a Participant or any other party if the option that is intended to be exempt from or compliant with Section 409A of the Code is not so exempt or compliant or for any action taken by the Committee with respect thereto.
(b)    Although the Company may endeavor to (i) qualify an option for favorable tax treatment under the laws ofthan the United States in which the applicable Business, service recipients or jurisdictions outsideservice providers are located or are organized, as mutually agreed by Seller and Acquirer, in substantially the form of the United StatesTransition Services Agreement.
(b)If, following the Closing, Seller or (ii) avoid adverse tax treatment (e.g., under Section 409Aany of its Affiliates receive payment of a receivable that should have been paid to Company Group, Seller shall notify Acquirer and deliver such payment to Acquirer or its designee promptly following the Code), the Company makes no representationreceipt thereof. Acquirer may direct all relevant trade debtors to that effect and expressly disavows any covenantmake payment on such receivables to maintain favorable Acquirer’s specified address and/or avoid unfavorable tax treatment, notwithstanding anything to the contrary in this Plan, including Subsection (a). The Company shall be unconstrained in its corporate activities without regard to the potential negative tax impact on Participants under the Plan.account.
28.    DEFINITIONS.5.15Prohibited Activities.
(a)    “Affiliate” meansSeller shall not, and shall not permit or cause any entity, other than a Subsidiary or Parent, (i) that,of its controlled Affiliates to, at any time prior to four (4) years from the Closing, directly or indirectly, is(i) solicit the employment or services (whether as an employee, consultant, independent contractor or otherwise) of any employee of the Company Group as of Closing or any Person who had been an employee of the Company Group within the twelve (12) month period immediately preceding the Closing, without Acquirer’s prior written consent, or (ii) hire in any capacity (whether as an employee, consultant, independent contractor or otherwise) any Key Employee, unless such Person has been terminated by Acquirer or any of its Affiliates subsequent to the Closing and who has not been employed or engaged by the Company Group for a period of at least six (6) months prior to the date of such hire, without Acquirer’s prior written consent. For purposes of this Section 5.15(a), the terms “solicit the employment or services” shall be deemed not to include generalized searches for employees through media advertisements of general circulation, employment search firms, open job fairs or otherwise.
(b)Seller shall not, and shall not permit, cause or encourage any of its controlled by, controlsAffiliates to, for a period of four (4) years following the Closing, directly or isindirectly, for Seller or on behalf of or in conjunction with any other Person (other than Acquirer and its Affiliates, including the Company Group) engage in the Business anywhere in the world.
5.16Subsidiary Compliance. Acquirer shall cause each Merger Sub to comply with all of such Merger Sub’s obligations under common control with,or relating to this Agreement and, prior to the Closing, each of Seller, the Company and (ii) in whichHoldco2 shall cause the Company has a significant equity interest, in either case as determined by the Committee, whether now or hereafter existing.
(b)    “Board” shall mean the Board of Directors of the Company.
(c)    “Business Combination” means the business combination effected pursuantGroup to the Business Combination Agreement.
(d)    “Business Combination Agreement” means the means the Agreement and Plan of Merger, by and among CM Life Sciences, Inc., Mount Sinai Genomics, Inc., and certain other parties thereto.
(e)    “Code” shall mean the U.S. Internal Revenue Code of 1986, as amended.
(f)    “Committee” shall mean the Compensation Committee of the Board that consists exclusively of one or more members of the Board appointed by the Board.
(g)    “Common Stock” shall mean the common stock of the Company.
(h)    “Company” shall mean [PubCo]
(i)    “Contributions” means payroll deductions taken from a Participant's Compensation and used to purchase shares of Common Stock under the Plan and, to the extent payroll deductions are not permitted by applicable laws (as determined by the Committee in its sole discretion) contributions by other means, provided, however, that allowing such other contributions does not jeopardize the qualification of the Plan as an “employee stock purchase plan” under Section 423 of the Plan.
(j)    “Corporate Transaction” means the occurrence of any of the following events: (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securitiescomply with all of the Company representing fifty percent (50%)Group’s obligations under or more of the total voting power represented by the Company’s then outstanding voting securities; or (ii) the consummation of the sale or disposition byrelating to this Agreement.
5.17Pre-Closing Restructuring. Seller and the Company of all or substantially all ofParties shall use their respective reasonable best efforts to, as soon as reasonably practicable following the Company’s assets; or (iii)Agreement Date, complete the consummation of a merger or consolidation ofPre-Closing Restructuring in accordance with the Company with any other corporation, other than a merger or consolidation which would result insteps set forth on Schedule D and obtain and deliver to Acquirer written confirmation from the voting securities of the Company outstanding immediately prior
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thereto continuingIRS (or other evidence reasonably satisfactory to represent (either by remaining outstanding or by being converted into voting securitiesAcquirer) stating that the Company will retain its EIN following completion of the surviving entityTransactions.
ARTICLE 6
CONDITIONS TO THE MERGERS
6.1Conditions to Obligations of Each Party to Effect the Merger. The respective obligations of each Party to consummate the Transactions shall be subject to the satisfaction or its parent)waiver in writing at least fifty percent (50%)or prior to the Closing of each of the total voting power representedfollowing conditions:
(a)Stockholder Approval. The Holdco2 Stockholder Approval shall have been duly and validly obtained and the Acquirer Stockholder Approval shall have been duly and validly obtained.
(b)Illegality. No Order issued by any court of competent jurisdiction preventing the consummation of the Mergers shall be in effect, and no action shall have been taken by any Governmental Authority seeking the foregoing, and no Law or Order shall have been enacted or entered that makes the consummation of the Mergers illegal.
(c)Governmental Approvals. All filings with and approvals of any Governmental Authority required to be made or obtained prior to the Closing and in connection with the Mergers shall have been made or obtained and shall be in full force and effect, and the applicable waiting period under the HSR Act, including any extensions thereof agreed to by the voting securitiesparties and the relevant Governmental Authority, shall have expired or early termination of such waiting period shall have been granted by the applicable Governmental Authority (the “Antitrust Condition”).
6.2Additional Conditions to Obligations of Seller and the Company Group. The obligations of Seller and the Company Parties to consummate the Transactions shall be subject to the satisfaction or waiver at or prior to the Closing of each of the following conditions (it being understood and agreed that each such condition is solely for the benefit of Seller and the Company Parties and may be waived only by Seller (on behalf of itself and/or the Company Parties) in writing in its sole discretion without notice or Liability to any Person):
(a)Representations, Warranties and Covenants. The representations and warranties made by Acquirer herein shall be true and correct in all material respects (except for such representations and warranties that are qualified by their terms by a reference to materiality or Material Adverse Effect, which representations and warranties as so qualified shall be true and correct in all respects) on and as of the Agreement Date and on and as of the Closing Date as though such representations and warranties were made on and as of such dates (except for representations and warranties that address matters only as to a specified date or dates, which representations and warranties shall be true and correct with respect to such specified date or dates). Acquirer shall have performed and complied in all material respects with all covenants, agreements and obligations herein required to be performed and complied with by Acquirer at or prior to the Closing.
(b)Receipt of Closing Deliveries. Seller, the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation.
(k)    “Effective Date”Holdco2 shall mean the closing datehave received each of the Business Combination.
(l)    “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.
(m)    “Fair Market Value” shall mean, as of any date, the value of a share of Common Stock determined as follows:
i.    if such Common Stock is then quoted on the Nasdaq Global Select Market, the Nasdaq Global Market or the Nasdaq Capital Market (collectively, the “Nasdaq Market”), its closing price on the Nasdaq Market on the date of determination, or if there are no sales for such date, then the last preceding business day on which there were sales, as reported in The Wall Street Journal or suchagreements, instruments, certificates and other source as the Board or the Committee deems reliable;
ii.    if such Common Stock is publicly traded and is then listed on a national securities exchange, its closing price on the date of determination on the principal national securities exchange on which the Common Stock is listed or admitted to trading as reported in The Wall Street Journal or such other source as the Board or the Committee deems reliable;
iii.    if such Common Stock is publicly traded but is neither quoted on the Nasdaq Market nor listed or admitted to trading on a national securities exchange, the average of the closing bid and asked prices on the date of determination as reported in The Wall Street Journal or such other source as the Board or the Committee deems reliable; or
iv.     if none of the foregoing is applicable, by the Board or the Committee in good faith.
(n)    “Non-Section 423 Component” means the part of the Plan which is not intended to meet the requirementsdocuments set forth in Section 423 of the Code.2.3(c) (other than clause (iv) thereof, which shall be delivered upon Closing as set forth in and in accordance with Section 2.5(a)(i)).
(o)     “(c)Notice Period”No Material Adverse Effect. There shall mean within two (2) years fromnot have occurred a Material Adverse Effect (substituting, in each case, “the Acquirer” for references to the Offering DateCompany Group or within one (1) year from the Purchase Date on which such shares were purchased.
(p)    “Offering Date” shall mean the first business day of each Offering Period.
(q)    “Offering Period” shall mean a periodCompany Parties) with respect to which the rightAcquirer and its Subsidiaries (taken as a whole) that is continuing.
(d)Nasdaq Listing. The Stock Consideration issuable pursuant to purchase Common Stock may be granted underthis Agreement in connection with the Plan, as determined by the CommitteeMergers (including pursuant to Section 5(a).2.7) shall have been approved for listing on Nasdaq (or any successor national securities exchange thereto), subject to official notice of issuance.
(r)    “6.3ParentAdditional Conditions to the Obligations of Acquirer”. The obligations of Acquirer and the Merger Subs to consummate the Transactions shall havebe subject to the same meaning as “parent corporation” in Sections 424(e) and 424(f)satisfaction or waiver at or prior to the Closing of each of the Code.
(s)    “Participant” shall mean an eligible employee who meetsfollowing conditions (it being understood and agreed that each such condition is solely for the eligibility requirements set forth in Section 4 and who elects to participate in this Plan pursuant to Section 6(b).
(t)    “Participating Corporation” shall mean any Parent, Subsidiary or Affiliate that the Committee designates from time to time as eligible to participate in this Plan. For purposesbenefit of the Section 423 Component, only the Parent and Subsidiaries may be Participating Corporations, provided, however, that at any given time a Parent or Subsidiary that is a Participating Corporation under the Section 423 Component shall not be a Participating Corporation under the Non-Section 423 Component. The Committee may provide that any Participating Corporation shall only be eligible to participate in the Non-Section 423 Component.
(u)    “Plan” shall mean this [PubCo] 2021 Employee Stock Purchase Plan, as may be amended from time to time.
(v)    “Purchase Date” shall mean the last business day of each Purchase Period.Acquirer
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(w)    “Purchase Period” shall mean a period during which Contributionsand the Merger Subs and may be waived by Acquirer (on behalf of itself and/or Merger Sub) in writing in its sole discretion without notice or Liability to any Person):
(a)Representations, Warranties and Covenants. (i) The Company Fundamental Representations (other than those representations and warranties contained in Section 3.12 (Taxes)) shall be true and correct in all respects on and as of the Agreement Date and on and as of the Closing Date as though such representations and warranties were made toward the purchaseon and as of Common Stock under the Plan,such dates (except for representations and warranties that address matters only as determinedto a specified date or dates, which representations and warranties shall be true and correct with respect to such specified date or dates); (ii) all other representations and warranties (including those contained in Section 3.12 (Taxes)) made by the Committee pursuantCompany Parties and Seller herein shall be true and correct in all material respects (except for such representations and warranties that are qualified by their terms by a reference to Section 5(b).materiality or Material Adverse Effect, which representations and warranties as so qualified shall be true and correct in all respects) on and as of the Agreement Date and on and as of the Closing Date as though such representations and warranties were made on and as of such dates (except for representations and warranties that address matters only as to a specified date or dates, which representations and warranties shall be true and correct with respect to such specified date or dates); and (iii) each of Seller and the Company Parties shall have performed and complied in all material respects with all covenants, agreements and obligations herein required to be performed and complied with by Seller and the Company Parties, respectively, at or prior to the Closing.
(x)    “(b)Purchase Price”Receipt of Closing Deliveries. Acquirer shall mean the price at which Participants may purchase shares of Common Stock under the Plan, as determined pursuant to Section 8.
(y)    “Section 423 Component” means the parthave received each of the Plan, which excludes the Non- Section 423 Component, pursuant to which options to purchase shares of Common Stock under the Plan that satisfy the requirements for “employee stock purchase plans”agreements, instruments, certificates and other documents set forth in Section 4232.3(b).
(c)Injunctions or Restraints on Conduct of Business. No Order issued by any court of competent jurisdiction or other legal or regulatory restraint or prohibition materially limiting or restricting Acquirer’s ownership, conduct or operation of the Code mayBusiness following the Closing shall be granted to eligible employees.in effect, and no Proceeding seeking any of the foregoing shall be pending or threatened.
(z)    “(d)Subsidiary”No Material Adverse Effect. There shall not have the same meaning as “subsidiary corporation” in Sections 424(e) and 424(f) of the Code.
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EXHIBIT E
Form of Amended and Restated Registration Rights Agreement
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Execution Version
EXHIBIT E-1
FORM OF AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of [__], 2021, is made and entered into by and among CM Life Sciences, Inc.,occurred a Delaware corporation (the “Company”), CMLS Holdings LLC, a Delaware limited liability company (the “Sponsor”), the undersigned parties listed on the signature page hereto under “Existing Holders” (the “Existing Holders”), the undersigned parties listed on the signature page hereto as “New Holders” (the “New Holders” and, together with the Existing Holders and any person or entity who hereafter becomes a party to this Agreement pursuant to Section 5.2 of this Agreement, a “Holder” and collectively, the “Holders”).
RECITALS
WHEREAS, on September 1, 2020, the Company and the Sponsor entered into that certain Registration Rights Agreement (the “Existing Registration Rights Agreement”), pursuant to which the Company granted the Existing Holders certain registration rightsMaterial Adverse Effect with respect to certain securitiesthe Company Group (taken as a whole) that is continuing.
(e)Financial Statements. Holdco2 shall have delivered to Acquirer, on or prior to five days prior to the Closing, the Required Financial Statements; provided that, the financial statements required by Item 9.01(a) and (b) of Form 8-K shall not be a condition to the Closing if the 71-day grace period provided by Item 9.01(a)(3) of Form 8-K shall then be available to Acquirer.
(f)Completion of the Company;Pre-Closing Restructuring. Prior to the Closing, Seller and the Company Parties shall have completed the Pre-Closing Restructuring in accordance with the steps set forth on Schedule D and Holdco2 shall have delivered to Acquirer written confirmation from the IRS (or other evidence reasonably satisfactory to Acquirer) stating that the Company will retain its EIN following completion of the Transactions (the “Pre-Closing Restructuring Condition”).
WHEREAS(g),Key Employee. Katherine Stueland shall have remained continuously employed on a full-time basis with the Company has entered into that certainthrough the Closing, Ms. Stueland’s Key Employment Agreement shall continue to be in full force and Plan of Merger (the “Merger Agreement”), datedeffect and no action shall have been taken by Ms. Stueland to repudiate or rescind such agreement and Ms. Stueland shall, as of February 9, 2021, bythe Closing, be ready, willing and amongable to perform the Company, S-IV Sub, Inc., a Delaware corporation, and Mount Sinai Genomics D/B/A Sema4, a Delaware corporation (“Target”);
WHEREAS, upon the closing of the transactionsduties contemplated by the MergerKey Employment Agreement and subject tofollowing the terms and conditions set forth therein, the Existing Holders and New Holders will hold shares of ClassClosing.
(h)Required Closing Contracts. A common stock, par value $0.0001 per share,member of the Company (“Class A Common Stock”), in each case, in such amountsGroup and subjectthe applicable Third Parties shall have entered into the Required Closing Contracts and delivered copies thereof to such terms and conditions asAcquirer (together with the condition set forth in the Merger Agreement;
WHEREAS, in connection with the transactions contemplated by the Merger Agreement, the Company is conducting a private placement of its Class A Common Stock (the “PIPE Investment”) pursuant to the terms of one or more Subscription Agreements, and certain Holders may purchase additional shares of Class A Common Stock pursuant thereto (the “PIPE Shares”);
WHEREAS, certain New Holders may receive additional shares of Class A Common Stock (the “Earnout Shares”) pursuant to certain provisions in the Merger Agreement;
WHEREAS, pursuant to Section 5.5 of the Existing Registration Rights Agreement, the provisions, covenants and conditions set forth therein may be amended or modified upon the written consent of the Company and the holders of a majority-in-interest of the “Registrable Securities” (as such term is defined in the Existing Registration Rights Agreement) at the time in question;
WHEREAS2.3(b)(xii), the Target and certain of the signatories hereto are parties to that certain Second Amended and Restated Stockholders Agreement, among Mount Sinai Genomics, Inc. d/b/a Sema4 and the Stockholders named therein, dated as of July 27, 2020 (the “Stockholders’ Agreement”“Required Consent Condition”) and that certain Registration Rights Agreement, by and between Icahn School of Medicine at Mount Sinai and Mount Sinai Genomics, Inc., dated as of March 28, 2016 (the “ISMMS Registration Rights Agreement”);
WHEREAS, as inducement for the Company, the Target and Merger Sub to enter into the Merger Agreement, the Target and the New Holders will agree that, effective at the Closing Date, the Stockholders’ Agreement, the ISMMS Registration Rights Agreement and certain other agreements with the Target will terminate and be of no further force and effect; and
WHEREAS, the Company and Sponsor desire to amend and restate the Existing Registration Rights Agreement in its entirety in order to provide the Existing Holders and the New Holders certain registration rights with respect to certain securities of the Company, as set forth in this Agreement..
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NOW, THEREFORE, in consideration of the representations, covenants and agreements contained herein, and certain other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I7
DEFINITIONS
Section 1.1Definitions.Defined Terms The. As used herein, the terms below shall have the following meanings. Other terms may be defined elsewhere in this Article I shall, for all purposesthe text of this Agreement and, unless otherwise indicated, shall have the respective meanings set forth below:such meaning indicated throughout this Agreement.
“Agreed Disclosure ProcessAccounting Standards” shall havemeans accounting principles generally accepted in the meaning givenUnited States, consistently applied for the applicable periods presented.
“Acquirer Board” means the board of directors of Acquirer.
“Acquirer Disclosure Schedules” means the Disclosure Schedules delivered by Acquirer to the Company in connection with the execution of this Agreement.
“Acquirer Fundamental Representations” means the representations and warranties contained in subsection 3.5.4Section 3.1 (Organization of the Acquirer Parties), Section 4.2 (Authorization), Section 4.3 (Capitalization) and Section 4.8 (No Brokers).
“Adverse DisclosureAcquirer Group” means any consolidated, combined, unitary or other aggregate group of entities for Tax purposes (including Code Section 1504 and similar provisions of state and local Laws) in which Acquirer is the common parent entity.
“Acquirer Party” means Acquirer, Merger Sub I and Merger Sub II.
“Acquirer Stock” means shares of Class A common stock, par value $0.0001 per share, of Acquirer.
“Acquirer Stockholder Approval” means the approval of: (i) the issuance of the Stock Consideration pursuant to this Agreement by the affirmative vote of holders of shares of Acquirer Stock having a majority in voting power of the votes cast by the holders of all of the shares of Acquirer Stock present or represented at the Acquirer Stockholders’ Meeting and voting affirmatively or negatively and (ii) the approval of an amendment to Acquirer’s current Third Amended and Restated Certificate of Incorporation to increase the authorized shares of Acquirer Stock as the Acquirer Board deems necessary or advisable in connection with the consummation of the Transactions (but in no event to a number greater than 1.0 billion) by the affirmative vote of holders of shares of Acquirer Stock having a majority of the shares of Acquirer Stock outstanding as of the applicable record date (and, for the elimination of doubt, abstentions and broker non-votes may be counted to determine the presence of a quorum at the Acquirer Stockholders’ Meeting but shall meannot be counted as votes cast for or against any public disclosureproposal).
“Acquisition Proposal” means any proposal or offer from any Person relating to any direct or indirect acquisition or purchase of a material non-public informationportion of the disclosure of which, in the good-faith determinationassets, net revenues or net income of the Company, after consultation with counsel toor 50% or more of the aggregate equity interests of the Company, (i)any tender offer or exchange offer that if consummated would be required to be maderesult in any Registration StatementPerson beneficially owning 50% or Prospectus in order formore of the applicable Registration Statement or Prospectus not to contain any Misstatement, (ii) would not be required to be made at such time if the Registration Statement were not being filed, and (iii) whichaggregate equity interests of the Company, has a bona fideany merger, consolidation, business purpose forcombination, recapitalization, liquidation, dissolution or similar transaction involving the acquisition of 50% or more of the aggregate equity interests or assets of the Company, in each case, other than the Transactions, any material joint venture or other strategic investment in or involving the Company, including any third party financing, investment in or recapitalization of the Company. For the elimination of doubt, the PIPE Investment is not making public.an Acquisition Proposal.
“Affiliate” means, with respect to any Person, any other Person who,which directly or indirectly controls, is controlled by or is under direct or indirect common control with such Person, and, in the case of an individual, also includes any member of such individual’s Immediate Family; provided that the Company and its subsidiaries will not be deemed to be Affiliates of any holder of Registrable Securities.first Person. As used in this definition, “control,“control” (including, with its correlative meanings, “controlling,” “controlled by” and “under common control”) shall meanmeans (a) the ownership of more than 50% of the voting securities or other voting interest of any Person, or (b) the possession,
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directly or indirectly, of the power to direct or cause the direction of the management and policies of asuch Person, directly or indirectly, whether through ownership of voting securities, by Contract, as a general partner, as a manager or otherwise. From and after the Effective Time, the Company shall be considered an Affiliate of the Acquirer.
“Ancillary Agreements” means the Certificates of Merger, the Escrow Agreement, the Shareholder Agreements, the Transition Services Agreement and each other agreement, document, instrument or certificate contemplated by this Agreement and executed or to be executed in connection with the Transactions.
“Antitrust Laws” means any federal, state, provincial, territorial and foreign statutes, rules, regulations, governmental orders, administrative and judicial doctrines and other applicable Laws that are designed or intended to prohibit, restrict or regulate foreign investment or actions having the purpose or effect of monopolization or restraint of trade or lessening of competition through merger or acquisition.
“Bayh-Dole Act” means the Patent and Trademark Law Amendments Act of 1980, codified at 35 U.S.C. sections 200-212, as amended, as well as any regulations promulgated pursuant thereto, including in 37 C.F.R. Part 401.
“Benefit Plan” means each benefit plan, program, policy, practice, trust, fund, Contract, agreement or arrangement (whether or not an “employee benefit plan” within the meaning of Section 3(3) of ERISA), including any pension, profit-sharing, 401(k) retirement, bonus, incentive compensation, deferred compensation, loan, vacation, sick pay, employee stock ownership, stock purchase, stock option or other equity based compensation plans, severance, employment, Contractor, unemployment, death, hospitalization, sickness, or other medical, dental, vision, life, or other insurance, long- or short-term disability, change of control, fringe benefit, cafeteria plan or any other employee or fringe benefit plan, program, policy, practice, trust, fund, Contract, agreement or arrangement that provides benefits to current or former employees, directors, officers or independent contractors who are natural persons (or beneficiaries thereof).
“Business” means the business of the Company Group as currently conducted by the Company Group as of the date of this Agreement; provided, that, for purposes of, and subject to, Section 2.7 the “Business” means the business of the Company Group as conducted during the First Milestone Period and the Second Milestone Period, as applicable.
“Business Day” means a day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by applicable Law to remain closed.
“CARES Act” means the Coronavirus Aid, Relief, and Economic Security Act of 2020, Pub. L. No. 116-136, 131 Stat. 281.
“Cash Consideration” means: (i) $150,000,000 in cash, plus (ii) the Closing Net Working Capital Surplus, if any, minus (iii) the Closing Net Working Capital Shortfall, if any, minus (iv) the amount of Closing Indebtedness, if any, minus (v) the aggregate amount of Transaction Expenses that have not been fully paid as of immediately prior to the Closing.
“Closing Indebtedness” means the aggregate amount of all Indebtedness of the Company Group outstanding as of the Measurement Time (other than with respect to Taxes included in Indebtedness, which shall be calculated as of the end of the day on the Closing Date after giving effect to the Transactions); provided that, the calculation of Closing Indebtedness shall exclude: (i) in the event the Closing has not occurred within three months immediately following the Agreement Date, 100% of the portion of the Seller Debt attributable to the Company Group operations during the fourth through sixth months immediately following the Agreement Date, up to a maximum amount of $15,000,000 and (ii) in the event the Closing has not occurred within six months immediately following the Agreement Date, (A) the amounts excluded pursuant to clause (i) with respect to the fourth through the sixth months plus (B) with respect to each month during the period commencing with the seventh month immediately following the Agreement Date and ending at the Measurement Time, a portion of the Seller Debt attributable to the Company Group operations equal to 50% of the amount specified for the applicable month in the Pre-Closing Budget (clause (i) and (ii), collectively, the “Assumed Seller Debt”). For the elimination of doubt, any current or other portion of Indebtedness shall be included in Closing Indebtedness and not included in Company Net Working Capital.
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“Closing Net Working Capital Shortfall” means the amount, if any, by which the Closing Net Working Capital Target exceeds Company Net Working Capital.
“Closing Net Working Capital Surplus” means the amount, if any, by which the Company Net Working Capital exceeds the Closing Net Working Capital Target.
“Closing Net Working Capital Target” means $22,000,000. “Code” means the U.S. Internal Revenue Code of 1986.
“Commercial Software” means any Software or Software as a service services that are commercially available and (i) are licensed or provided as a service to any member of the Company Group pursuant to a nonexclusive Software license or Software services agreement for a one-time or annual fee of $100,000 or less, (ii) are not material to the conduct of the Business by the Company Group and (iii) have not been modified or customized for any member of the Company Group.
“Company Data” means all data Processed in connection with the marketing, or use of any Company Product or the conduct of the Business, including Company-Licensed Data, Company-Owned Data and Personal Data.
“Company Data Agreement” means any Contract relating to or otherwise addressing the Processing of Company Data by or on behalf of the Company Group or otherwise in connection with the conduct of the Business (including Contracts with third parties relating to the Processing of Company Data) to which any member of the Company Group, Seller or its Affiliates is a party or by which they are bound, including the standard terms of service entered into by users of the Company Products (copies of which have been Delivered to Acquirer).
“Company Databases” means each distinct electronic or other repository or database containing (in whole or in part) Company Data maintained by or for any member of the Company Group at any time, which for clarity contain more than 300,000 exomes and 2.1 million phenotypes.
“Company Disclosure Schedules” means the Disclosure Schedules delivered by the Seller and the Company Parties to Acquirer in connection with the execution of this Agreement.
“Company Employee” means each current and former officer or employee of any member of the Company Group.
“Company Fundamental Representations” means the representations and warranties contained in Section 3.1 (Organization of Seller and the Company Group), Section 3.2 (Subsidiaries), Section 3.3 (Authorization), Section 3.4 (Capitalization), Section 3.5(b) (Title to and Sufficiency of Real and Tangible Properties and Assets), Section 3.12 (Taxes), Section 3.19(b) and (p) (Sufficiency of Intangible Properties and Assets) and Section 3.23 (No Brokers).
“Company Group” means (x) the Company and its Subsidiaries as of the Agreement Date and (y) immediately following consummation of the Pre-Closing Restructuring, Holdco2 and its direct subsidiary, GeneDx Delaware LLC, together with the Subsidiaries of GeneDx Delaware LLC immediately following the Pre-Closing Restructuring.
“Company IP” means any Company Owned IP and any Company Licensed IP. “Company IP Contracts” means any and all Contracts concerning Intellectual Property to which any member of the Company Group is a party or beneficiary or by which any member of the Company Group, or any of its or their properties or assets, may be bound, including all (i) licenses of Intellectual Property by the Company Group to any third party, (ii) licenses of Intellectual Property by any third party to any member of the Company Group, (iii) other Contracts between any member of the Company Group and any third party relating to the transfer, development, maintenance or use of Intellectual Property and (iv) consents, settlements, and Orders governing the use, validity or enforceability of Intellectual Property.
“Company IT Assets” means any and all IT Assets used or held for use in connection with the operation of the Business that are owned or controlled by any member of the Company Group, Seller or its Affiliates.
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“Company-Licensed Data” means all data owned by third parties that are Processed by the Company Group or, otherwise, in connection with the marketing or use of any Company Product or the conduct of the Business.
“Company Licensed IP” means any Intellectual Property that is licensed to the Company Group from another Person, including for clarity any Intellectual Property in and to Company Products other than Company Owned IP.
“Company Net Working Capital” means, as of the Measurement Time: (i) the Company Group’s consolidated total current assets less (ii) the Company Group’s consolidated total current liabilities, in each case as specifically set forth in the Company Net Working Capital Schedule. For the elimination of doubt (A) the Company Group’s current assets shall exclude (I) accounts receivable that are aged longer than 150 days, (II) any deferred Tax assets and (III) any loans or indebtedness of the Company Group’s officers in favor of any member of the Company Group, (B) the Company Group’s current liabilities shall include, without duplication, all Liabilities for (I) accounts payable, (II) accrued expenses, (III) vacation and paid time off accrued by or for the Company Employees (iii) deferred revenue and customer deposits, and (iv) local non-income taxes payable and (C) the Company Group’s current assets and liabilities shall exclude all (I) operating lease assets and liabilities (including tenant improvement assets), (II) current income tax assets and liabilities (including current income tax assets, income tax receivable or recoverable, income taxes payable, valuation allowance for current income taxes), and (III) intercompany receivables and liabilities. For the avoidance of doubt, Company Net Working Capital shall exclude (x) all Liabilities for Transaction Expenses that are incurred but unpaid as of the Closing, (y) any Closing Indebtedness and (z) any Seller Debt. An example calculation of Company Net Working Capital as of November 30, 2021 is included in the Company Net Working Capital Schedule.
“Company Net Working Capital Schedule” means the example calculation, for illustrative purposes only, of Company Net Working Capital as of November 30, 2021 contained in Exhibit D.
“Company-Owned Data” means each element of data Processed that (a) is used or held for use in the Business that is not Personal Data or Company-Licensed Data and (b) the Company Group owns or purports to own.
“Company Owned IP” means any Intellectual Property in which any member of the Company Group has or purports to have an ownership interest (whether solely or jointly with one or more other persons).
“Company Parties” (and each, a “Company Party”) means (i) the Company and Holdco2 as of the Agreement Date until immediately prior to consummation of the Pre-Closing Restructuring and (ii) Holdco2 and GeneDx Delaware LLC following consummation of the Pre-Closing Restructuring.
“Company Privacy Commitments” means, collectively: (A) the Company Group’s obligations under the Company Privacy Policies, (B) providing adequate notice and obtaining any necessary consents from end users and other natural Persons, as applicable required for the Processing of Personal Data as conducted by or for the Company Group, (C) any notices, consents, authorizations and privacy choices (including opt-in and opt-out preferences, as required) of end users and other natural Persons relating to Personal Data and (D) industry self-regulatory principles and codes of conduct applicable to the protection or Processing of Personal Data, biometrics, internet of things, direct marketing, e-mails, text messages, robocalls, telemarketing or other electronic communications (including the Payment Card Industry Data Security Standards) to which any member of the Company Group is bound or otherwise represents compliance.
“Company Privacy Policies” means, collectively, any and all (A) of the Company Group’s currently applicable data privacy and security policies, procedures, and notices, whether applicable internally, or published on Company Websites or otherwise made available by the Company Group to any Person, and (B) public representations (including representations on Company Websites), made by or on behalf of the Company Group with regard to Personal Data.
“Company Product” means any product or service currently produced, marketed, licensed, sold, distributed or performed by the Company Group and any product or service that is being researched or under development for use in the Business, including those set forth in Section 3.15(b) of the Company Disclosure Schedule.
“Company Software” means all Software used or held for use in connection with the operation of the Business.
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“Company Websites” means all websites owned, operated or hosted by the Company Group or through which the Company Group conducts the Business, and the underlying platforms for such websites.
“Confidentiality Agreement” means the letter agreement between Seller, the Company and Acquirer, dated October 12, 2021.
“Consent” means any required consent, waiver or approval of a third party for the consummation of the Transactions or to the Transfer, or amendment of a Contract.
“Continuing Employees” means all employees of any member of the Company Group immediately prior to the Effective Time.
“Contract” means any agreement, understanding, contract, note, bond, deed, mortgage, lease, sublease, license, sublicense or instrument that is legally binding, whether written or oral.
“Controlled Group Liability” means any and all Liabilities (a) under Title IV of ERISA, (b) under Section 302 of ERISA, (c) under Section 412 and 4971 of the Code, and (d) as a result of a failure to comply with the continuation coverage requirements of Section 601 et seq. of ERISA and Section 4980B of the Code, other than such Liabilities that arise solely out of, or relate to, Company Benefit Plans.
“Copyrights” means all copyrights, whether in published or unpublished works; databases, data collections and rights therein, mask work rights, Software, web site content; rights to compilations, collective works and derivative works of any of the foregoing and moral rights in any of the foregoing; registrations and applications for registration for any of the foregoing and any renewals or extensions thereof.
“COVID-19” means the novel coronavirus known as SARS-CoV-2 or COVID-19, and variant thereof.
“COVID-19 Response” means any quarantine, travel restriction, “stay-at-home” orders, social distancing measures or other safety measures, workforce reductions, workplace or worksite shutdowns or slowdowns, factory closures, “shelter in place”, “stay at home”, workforce reduction sequester safety or similar Law, directive or guidelines promulgated by any applicable Governmental Authority or other measures initiated to the extent reasonably necessary to, respond to, or mitigate the effects of, the COVID-19 pandemic, as recommended by any applicable Governmental Authority, including the Centers for Disease Control and Prevention or the World Health Organization, in each case, in connection with or in response to COVID-19, including the Coronavirus Aid, Relief and Economic Security Act, as may be amended, or the Families First Coronavirus Response Act, as may be amended or any other applicable Law.
“Data Room” means the virtual data room for the Transactions hosted at securevdr.com, to which Acquirer and its Representatives have access.
“Default” means (i) any actual breach, violation or default, (ii) the existence of circumstances or the occurrence of an event that, with the passage of time or the giving of notice or both, would constitute a breach, violation or default or (iii) the existence of circumstances or the occurrence of an event that, with or without the passage of time or the giving of notice or both, would give rise to a right of cancellation, termination, modification renegotiation or acceleration.
“Deliver” means (i) providing to Acquirer a copy of any item required to be delivered to Acquirer directly or (ii) including any such item in the Data Room, in each case (clauses (i) and (ii)), not less than one Business Day prior to the Agreement Date (except if a particular date of Delivery is specified).
“Detect Genomix” shall mean Detect Genomix, LLC, a Florida limited liability company, with principal office at 1301 Concord Terrace, Sunrise, Florida 33323
“DGCL” means the General Corporation Law of the State of Delaware.
“Dispute” means any dispute, controversy or claim (of any and every kind or type, whether based on contract, tort, statute, regulation, or otherwise) arising out of, relating to, or in connection with this Agreement, the
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negotiation, execution or performance of this Agreement (including any such dispute, controversy or claim based upon, arising out of or related to any representation or warranty made in or in connection with this Agreement or as an inducement to enter into this Agreement) or the Transactions, including any dispute as to the construction, validity, interpretation, enforceability or breach of this Agreement.
“Domain Names” means Internet electronic addresses, uniform resource locators and alphanumeric designations associated therewith registered with or assigned by any domain name registrar, domain name registry or other domain name registration authority as part of an electronic address on the Internet and all applications for any of the foregoing.
“EMA” means the European Medicines Agency and any successor agency(ies) or authority having substantially the same function.
“Encumbrance” means any charge, claim, mortgage, lien, option, pledge, security interest, right of first refusal, easement, deed of trust or encumbrance.
“Environmental Law” means all applicable Laws which relate to pollution, the environment, natural resources or human health and safety, including any Laws which relate to (i) the protection, preservation or restoration of the environment (including air, water vapor, surface water, groundwater, drinking water supply, surface land, subsurface land, plant and animal life or any other natural resource), or (ii) the exposure to, or the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of Hazardous Substances.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended. “ERISA Affiliate” means any Person which is (or at any relevant time was or will be) a member of a “controlled group of corporations” with, under “common control” with, or a member of an “affiliate service group” with the Company Group as such terms are defined in Sections 414(b), (c), (m) or (o) of the Code.
“Escrow Account” means the escrow account established by the Escrow Agent to hold the Escrow Amount in trust.
“Escrow Amount” means $13,470,000 in cash and 8,314,815 shares of Acquirer Stock. “Escrow Expiration Date” shall mean the 12-month anniversary of the Closing Date. “Estimated Cash Consideration” means the Company’s good faith estimate of the Cash Consideration set forth in the Estimated Closing Statement.
“Estimated Closing Statement” means a statement, setting forth, Seller’s and the Company Parties’ good faith estimates of: (a) the Company Net Working Capital (including (i) the Company Group’s balance sheet as of the Closing Date prepared in accordance with the Accounting Standards, (ii) an itemized list of the Company Group’s consolidated total current assets (in each case as set forth in the Company Net Working Capital Schedule), (iii) an itemized list of the Company Group’s consolidated total current liabilities (in each case as set forth in the Company Net Working Capital Schedule) and (iv) the calculation of the Closing Net Working Capital Shortfall or Closing Net Working Capital Surplus, as applicable); (b) the amount of the Closing Indebtedness (including an itemized list of each item of Company Indebtedness with a description of the nature of such Company Indebtedness and the Person to whom such Company Indebtedness is owed) and the aggregate amount of Seller Debt (including itemized detail reflecting the amount attributable to each month of Company Group operations during the Pre-Closing Period); (c) unpaid Transaction Expenses (including an itemized list of each Transaction Expense with a description of the nature of such expense and the Person to whom such expense is owed); and (d) based on such amounts, the calculation of the Cash Consideration.
“European Union” means the economic, scientific and political organization of member states as it may be constituted from time to time, which as of the Agreement Date consists of Austria, Belgium, Bulgaria, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and that certain portion of Cyprus included in such organization.
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“Exchange Act” means the Securities Exchange Act of 1934, as amended. “FCPA” means the United States Foreign Corrupt Practices Act.
“FDA” means the United States Food and Drug Administration and any successor agency thereto.
“FDCA” means the United States Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 301 et seq.
“Fraud” means common law fraud with the element of scienter, as interpreted under the Laws of the State of Delaware and, for the avoidance of doubt, excluding claims based on negligence or recklessness.
“Fundamental Representations” means the Acquirer Fundamental Representations and the Company Fundamental Representations, as applicable.
“Governing Documents” means the legal document(s) by which any Person (other than an individual) establishes its legal existence or other organizational documents of such Person. For example, the “Governing Documents” of a corporation are its certificate or articles of incorporation and by-laws and the “Governing Documents” of a limited liability company are its operating or limited liability company agreement and certificate of formation.
“Governmental Authority” means any (a) nation, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (b) international, multinational, supra-national, federal, state, local, municipal, foreign or other government, agency or authority; (c) governmental or quasi-governmental authority of any nature (including any governmental division, department, agency, commission, securities exchange or instrumentality and any court or other tribunal) or (d) any bureau, instrumentality or commission or any court, tribunal, judicial or arbitral body, industry or trade or private body exercising any regulatory or quasi regulatory power or authority, including the FDA, European Commission and EMA, and any Institutional Review Board or Ethics Committee.
“Governmental Program” means all “federal health care programs” (as defined by 42
U.S.C. § 1320a–7b(f)), including Medicare, Medicaid, TRICARE, Maternal and Child Health Service Block Grant, Children’s Health Insurance Program, and any other similar or successor federal, state or local healthcare payment programs with, or sponsored in whole or in part by, any Governmental Authority or any agent or contractor of a Governmental Authority.
“Hazardous Substances” means any pollutant, chemical, substance and any toxic, infectious, carcinogenic, reactive, corrosive, ignitable or flammable chemical, chemical compound, hazardous substance, material or waste, whether solid, liquid or gas, that is subject to regulation, control or remediation under any Environmental Laws, including any quantity of petroleum product or byproduct, solvent, flammable or explosive material, radioactive material, asbestos, lead paint, polychlorinated biphenyls (or PCBs), dioxins, dibenzofurans, heavy metals, radon gas, mold, mold spores, and mycotoxins.
“Health Care Laws” means any applicable Law regarding health care products and services applicable to the Company Group or Company Products, including any applicable Law the purpose of which is to ensure the safety, efficacy and quality of genetic testing and diagnostic and similar products by regulating the research, development, manufacturing and distribution of such products, including applicable Law relating to CLIA requirements, record keeping and filing of required reports, and relating to promotion and sales of health care products to providers and facilities that bill or submit claims under government healthcare programs, including (i) CLIA, the PHSA, and applicable FDA Emergency Use Authorization (“EUA” ) requirements(ii) the federal Anti-kickback Statute (42 U.S.C. § 1320a-7b(b)); the Anti-Inducement Law (42 U.S.C. § 1320a-7a(a)(5)); the Stark Law (42 U.S.C. §1395nn et seq); the civil False Claims Act (31 U.S.C. §§ 3729 et seq.); the administrative False Claims Law (42 U.S.C. § 1320a- 7b(a)); the Exclusion Laws and the Civil Monetary Penalties Law (42 U.S.C. § 1320a-7 and 1320a-7a); the Medicare statute (Title XVIII of the Social Security Act), including Social Security Act §§ 1860D-1 to 1860D-43 (relating to Medicare Part D and the Medicare Part D Coverage Gap Program); the Medicaid statute (Title XIX of the Social Security Act); the Physician Payments Sunshine Act (42 U.S.C. § 1320a- 7h), and any other similar applicable Law, whether of the United States or any other applicable jurisdiction, (iii) the Clinical Laboratory
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Improvement Amendments of 1988, (iv) the Program Fraud Civil Remedies Act (31 U.S.C. §§ 3801-3812), (v) the Prohibition on Inducement of Beneficiaries Statute (42 U.S.C. § 1320a-7a(a)(5)), (vi) the Federal Health Care Fraud Law (18 U.S.C. § 1347), (vii) the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (codified at 42 U.S.C. § 300gg and 29 U.S.C. § 1181 et seq. and 42 USC 1320d et seq.), (viii) Medicare (Title XVIII of the Social Security Act), (ix) Medicaid (Title XIX of the Social Security Act) and (x) all applicable state privacy and confidentiality laws, and state laws, including those related to insurance, balance billing, out-of-network services and the waiver of deductibles, copayments or cost-sharing.
“Holdco2 Common Stock” means the common stock, par value $0.0001 per share, of Holdco2.
“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.
“Indebtedness” means (without duplication), as to any Person: (a) all obligations for the payment of principal, interest, penalties, fees or other Liabilities for borrowed money (including notes payable), incurred or assumed (including pursuant to the Paycheck Protection Program of the CARES Act to the extent not forgiven or subject to forgiveness under the CARES Act), including in the case of the Company Group, the Seller Debt, (b) all obligations for the deferred purchase price of property or services including pursuant to any earn-out or similar obligation (other than current trade payables or short-term accruals incurred in the Ordinary Course of Business), (c) any obligations for amounts drawn under any letter of credit, surety bond, debenture, promissory note, performance bond or other similar instrument, (d) all obligations as lessee under leases that are required to be recorded as capital or finance leases under the Accounting Standards (including leases excluded from the balance sheet due to duration of term), (e) (i) all obligations under that certain Amended and Restated Credit Agreement, dated August 30, 2021, by and among BioReference Laboratories, Inc., certain of its subsidiaries, including the Company, and JPMorgan Chase Bank, N.A., only to the extent the Company Group and its assets have not been fully and irrevocably released from all obligations thereunder and any corresponding security interest arising thereunder has not been terminated prior to the Closing and (ii) all indebtedness of Third Parties secured by an Encumbrance on any asset or property owned or acquired by such Person (if recourse for such security interest is limited to such asset or property, in an amount equal to the lesser of (x) such indebtedness and (y) the fair market value of such asset or property), (f) any obligation that is required to be reflected as debt on the balance sheet of such Person under the Accounting Standards, (g) all obligations in respect of interest rate and currency swaps, protection agreements, hedges, caps or collar agreements or similar arrangements either generally or under specific contingencies, (h) all obligations in respect of deferred compensation or unfunded or underfunded pension obligations, including any Controlled Group Liability, but excluding accrued but unpaid 401(k) plan employer match contributions under the Seller 401(k) Plan for the portion of the plan year ending on the Closing Date (the “Accrued 2022 401(k) Match” ) (i) any unpaid executive sign-on bonuses or bonuses related to COVID-19, unpaid discretionary annual bonuses for the period ending December 31, 2021 as determined in Seller’s sole discretion and unpaid pro-rated discretionary annual bonuses for the year-ended December 31, 2022 based on actual performance through the Closing Date) (and the employer portion of any payroll Taxes of such member of the Company Group or Acquirer arising from the payment of any such bonuses or payments), (j) any Repayment Obligations, (k) any Pre- Closing Taxes and any other Liabilities of the Company Group for Taxes as of the Closing, whether or not such Liabilities for Taxes would then be due and payable (including, for the avoidance of doubt, employer payroll taxes or other Taxes arising in connection with any payment required pursuant to, or arising as a result of, this Agreement or the Transactions, and including any such taxes that have been deferred pursuant to the CARES Act, and taking into account Transaction Tax Deductions to the extent permitted by applicable Law on a “more likely than not” basis), and (l) all indebtedness of others referred to in clauses (a) through (l) above guaranteed directly or indirectly in any manner by such Person.
“Intellectual Property” means all worldwide intellectual property or industrial property rights protected, created, arising under or recognized by any Laws or Governmental Authority, including (i) Patents; (ii) Trademarks; (iii) Copyrights; (iv) Trade Secrets; (v) all rights to sue and recover damages for past, present and future infringement, misappropriation, dilution or other violation of any of the foregoing;, and (vi) all other rights similar or pertaining to any of the foregoing in anywhere in the world.
“IRS” means the Internal Revenue Service of the United States.
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“IT Assets” means Software, databases, systems, servers, computers, hardware, firmware, middleware, storage media (e.g., backup tapes), networks, data communications lines, routers, hubs, switches, network devices and all other information technology equipment, and all associated documentation.
“Key Employee” means Katherine Stueland, Kevin Feeley and Jennifer Brendel.
“Knowledge” means: (i) with respect to the Company, the actual knowledge of the persons listed in Section 1.1 of the Company Disclosure Schedules, including such knowledge that would be acquired by such persons through their reasonable inquiry and (ii) with respect to Acquirer, the actual knowledge of the persons listed on Section 1.1 of the Acquirer Disclosure Schedules, including such knowledge that would be acquired by such persons through their reasonable inquiry.
“Law” means any applicable federal, state, local or other domestic or foreign law (including common law), statute, ordinance, rule, regulation, Order, writ, or other requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Authority.
“Liability” means any direct or indirect liability, indebtedness, obligation, commitment, expense, claim, deficiency, guaranty or endorsement of or by any Person of any type, known or unknown, and whether accrued, absolute, contingent, matured, unmatured or other.
“Material Adverse Effect” means any event, change, condition, circumstance, effect, development, occurrence or state of facts (“Effect”) that, individually or in the aggregate with all other Effects, has, or would reasonably be expected to have, a material adverse effect on (i) the condition (financial or otherwise), business, results of operations or assets of the Company Group (taken as a whole) or (ii) the ability of Seller or the Company Parties to perform their respective obligations under this Agreement; provided that no Effect attributable to any of the following shall be taken into account in determining the existence of a Material Adverse Effect solely for purposes of clause (i) above: (A) conditions affecting the industry, financial markets or securities markets in, or the economy as a whole of, the United States, (B) changes in Law or Accounting Standards (or, in each case, any interpretation thereof) after the Closing Date, (C) earthquakes, hostilities, acts of war, sabotage or terrorism or military actions, epidemic, public health event or pandemic (including COVID-19 and any worsening thereof (including any COVID-19 Response)), (D) any actions required under this Agreement or otherwise negotiated separately to obtain any approval or authorization under applicable antitrust or competition Laws for the consummation of the transactions contemplated hereby, (E) the announcement or pendency of this Agreement and the consummation of the transactions contemplated hereby (including the effects of such announcement and pendency on relationships with customers, suppliers, Governmental Authorities, employees or other third-party relationships), (F) any actions taken (or omitted to be taken) by or at the written request of the Acquirer or as required by this Agreement, or (G) any failure, in and of itself, of the Company Group to meet any internal or published projections, forecasts or revenue or earnings predictions for any period (it being understood that the underlying causes of the facts or occurrences giving rise to such failure may be taken into account in determining whether a Material Adverse Effect has occurred), except, in the case of the forgoing clauses (A), (B) and (C), to the extent such conditions, changes or events disproportionately affect the Company Group relative to similarly situated industry participants (in which case the incremental disproportionate impact or impacts may be taken into account in determining whether there has been a Material Adverse Effect).
“Measurement Time” means 11:59 p.m., Eastern Time, on the date immediately preceding the Closing Date.
“Merger Consideration” means the Cash Consideration plus the Stock Consideration.
“Most Recent Balance Sheet” means the balance sheet of the Company as of September 30, 2021.
“Nasdaq” means the Nasdaq Global Select Market.
“Order” means any writ, judgment, injunction, determination, consent, order, decree, stipulation, award or executive order of or by any Governmental Authority.
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“Ordinary Course of Business” means the ordinary course of business of the Company Group, consistent with past practice.
“Parent” means OPKO Health Inc., a Delaware corporation.
“Parent Group” means any consolidated, combined, unitary or other aggregate group of entities for Tax purposes (including Code Section 1504 and similar provisions of state and local Laws) in which Parent is the common parent entity.
“Patents” means any and all patents, industrial and utility models, industrial designs, petty patents, design patents, patents of importation, patents of addition, certificates of invention, and other indicia of invention ownership issued or granted by any Governmental Authority; applications for any of the foregoing, including provisional, utility, design, priority, divisional, and continuation (in whole or in part) applications, and all other pre-grant forms of any of the foregoing; extensions, reissues, re- examinations, renewals, or other post-grant forms of any of the foregoing; equivalent or similar rights in inventions and discoveries anywhere in the world; counterparts of any of the foregoing anywhere in the world; and other forms of government issued rights substantially similar to any of the foregoing.
“Payor Parties” (and each, a “Payor Party”) means any payors administering Governmental Program benefits or any other healthcare service plan, any health maintenance organizations, any health insurers and any other private and commercial payors.
“Permits” means all licenses and operating licenses, permits, concessions, franchises, approvals, clearances, registrations, certificates, rights, grants, exceptions, exemptions, qualifications, privileges, exemptions, authorizations (including marketing and testing authorizations), easements, variances, permissions, consents or Orders of, any Governmental Authority, including any marketing authorizations, and any approvals or filings relating to any pre-clinical or clinical development, together with all applications therefor and all renewals, extensions, or modifications thereof and additions thereto.
“Permitted Encumbrances” means (i) Encumbrances for Taxes not yet due and payable and that are reserved for in full on the Most Recent Balance Sheet in accordance with the Accounting Standards, (ii) statutory, mechanics’, laborers’ and materialmen liens arising in the Ordinary Course of Business for sums not yet due and payable and not otherwise in default (or for which the validity or amount of which is being contested in good faith), (iii) zoning, entitlement, conservation restriction and other land use and environmental regulations promulgated by Governmental Authorities, (iv) Encumbrances granted to any lender at the Closing in connection with any financing by the Acquirer, (v) any right, interest, lien, title or other Encumbrance of a lessor or sublessor under any lease or other similar agreement or in the property (other than Intellectual Property) being leased, (vi) restrictions on the transfer of securities arising under federal and state securities laws, (viii) non-exclusive licenses of Intellectual Property granted in the Ordinary Course of Business (A) for the use of results generated by Company Products from a patient sample solely for the clinical care of the patient from which such sample was collected, or (B) for incidental use of trademarks by payors, customers or service providers solely to identify Company Group as the provider of Company Products ((A) and (B) collectively, “Ordinary Course Licenses”) and (ix) Encumbrances listed on Schedule 1.1(b) of the Company Disclosure Schedules.
“Person” means any person or entity, whether an individual, sole proprietorship, general partnership, limited partnership, limited liability partnership, corporation, limited liability company, limited liability limited partnership, business trust, joint stock company, trust, unincorporated association, joint venture, estate, Governmental Authority or other entity or organization.
“Personal Data” means all data or information that constitutes personal data, protected health information, individually identifiable health information or personal information under any applicable Law.
“PHSA” means the United States Public Health Service Act.
“PIPE Investment Amount” means the aggregate gross purchase price received by Acquirer prior to or substantially concurrently with Closing for the shares in the PIPE Investment.
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“PIPE Investors” means those certain investors participating in the PIPE Investment pursuant to the Subscription Agreements.
“Post-Closing Tax Period” means any Tax period beginning after the Closing Date and that portion of any Straddle Period beginning after the Closing Date.
“PPP Loan” means (i) any covered loan under paragraph (36) of Section 7(a) of the Small Business Act (15 U.S.C. 636(a)), as added by Section 1102 of the CARES Act, or (ii) any loan that is an extension or expansion of, or is similar to, any covered loan described in clause (i).
“Pre-Closing Budget” means the budget set forth on Schedule C.
“Pre-Closing Restructuring” has the meaning set forth in the Recitals, as further described on Schedule D.
“Pre-Closing Tax Period” means any Tax period ending on or before the Closing Date and that portion of any Straddle Period ending on and including the Closing Date.
“Pre-Closing Taxes” means (i) any Liability for any Tax of or owed by the Company Group in respect of any Pre-Closing Tax Period, (ii) any Liability for any Taxes of Seller, (iii) all Taxes imposed in respect of a Pre-Closing Tax Period the payment of which Taxes is deferred to a taxable period (or portion thereof) beginning after the Closing Date, (iv) all Taxes of any member of an affiliated group of corporations, within the meaning of Section 1504 of the Code (or any predecessor provision or comparable provision of state, local or foreign Law) of which any member of the Company Group (or any predecessor of any such member) is or was a member on or prior to the Closing Date, including pursuant to Treasury Regulations Section 1.1502-6 or any analogous or similar U.S. state or local, or non-U.S. Law, (v) Taxes of Seller arising from the Transactions, (vi) any Transfer Taxes for which Seller is liable pursuant to this Agreement or under applicable Law, and (vii) any Taxes of any Person imposed on any member of the Company Group as a transferee or successor, by Contract or pursuant to any Law, which Taxes relate to an event or transaction occurring before the Closing. Notwithstanding the foregoing, Pre-Closing Taxes shall not include Taxes otherwise included in the calculation of the amount of Company Net Working Capital, Closing Indebtedness or the Merger Consideration, Taxes attributable to transactions occurring after the Closing on the Closing Date outside the Ordinary Course of Business, or Taxes attributable to breaches by the Acquirer of its agreements, representations, warrants or covenants under this Agreement.
“Privacy Laws” means (i) each U.S. federal or state Law applicable to the Company Group with respect to protection or Processing or both of Personal Data, and includes, but is not limited to (A) the Health Insurance Portability and Accountability Act of 1996 as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 as otherwise amended from time to time, and the rules and regulations promulgated thereunder, including the Privacy Standards (45 C.F.R. Parts 160 and 164), the Electronic Transactions Standards (45 C.F.R. Parts 160 and 162), and the Security Standards (45 C.F.R. Parts 160, 162 and 164) (“HIPAA”), and (B) law, regulations and/or rules relating to the Processing of biometric data, direct marketing, e-mails, text messages, robocalls, telemarketing or other electronic commercial messages and (ii) binding guidance issued by a Governmental Authority that pertains to one of the laws, rules or regulations outlined in clause (i).
“Proceeding” means any suit, litigation, arbitration, mediation, alternative dispute resolution procedure, claim, action, complaint, proceeding, hearing, or investigation (whether civil or criminal, administrative or judicial, and whether public or private), in each case to, from, by or before any Governmental Authority.
“Process” or “Processing” or “Processed” means, with respect to data, the use, collection, processing, storage, recording, organization, adaption, alteration, transfer, retrieval, consultation, disclosure, dissemination or combination of such data.
“Public Official” means (a) any Representative of any Governmental Authority, (b) any Representative of any commercial enterprise that is wholly owned or controlled by a Governmental Authority, including any state-owned or controlled medical facility, and (c) any political party, party official or candidate for political office.
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“Public Software” means any Software that is distributed as freeware, shareware, open source Software (e.g., Linux) or similar licensing or distribution models. For the avoidance of doubt, “Public Software” includes Software licensed, distributed under or otherwise subject to any of the following licenses or distribution models (or licenses or distribution models similar thereto): (A) GNU’s General Public License (GPL) or Lesser/Library GPL (LGPL); (B) the GNU Affero GPL license; (C) the Artistic License (e.g., PERL); (D) the Mozilla Public License; (E) the Netscape Public License; (F) the Sun Community Source License (SCSL); (G) the Sun Industry Standards License (SISL); (H) the BSD License; (I) Red Hat Linux; (J) the Apache License; and (K) any other license or distribution model described by the Open Source Initiative as set forth on www.opensource.org, and any other free, open-source, or “copy left” license or terms that requires as a condition of use, modification or distribution that such software or other software combined or distributed with it be (i) disclosed or distributed in source code form; (ii) licensed for the purpose of making derivative works; (iii) redistributable at no charge; or (iv) licensed subject to a patent non-assert or royalty-free patent license.
“Registered Company IP” means all Registered IP included in the Company Owned IP. “Registered IP” means all Intellectual Property that is registered, issued, granted by any Governmental Authority (including the United States Patent and Trademark Office or United States Copyright Office), and all applications, registrations and grants for any of the foregoing.
“Regulatory Approval” means, with respect to a Company Product in a country, any and all approvals, licenses, registrations or authorizations of any Governmental Authority necessary to commercially distribute, sell or market such Company Product in such country, including, where applicable, pricing or reimbursement approval in such country and (ii) pre- and post-approval marketing authorizations (including any prerequisite manufacturing approval or authorization related thereto).
“Regulatory Authority” means any applicable Governmental Authority that regulates or otherwise exercises authority with respect to the Exploitation of any Company Product or administers Health Care Laws.
“Regulatory Documentation” means all (i) Regulatory Approvals and Regulatory Permits; correspondence and reports submitted to or received from Regulatory Authorities (including minutes and official contact reports relating to any communications with any Regulatory Authority) and all supporting documents with respect thereto, including all adverse event files and complaint files; and (iii) pre-clinical, clinical and other data contained or relied upon in any of the foregoing; in each case (clauses (i), (ii) and (iii)) relating to the Company Products.
“Regulatory Permit” means governmental licenses, franchises, permits, certificates, consents, approvals, registrations, concessions or other authorizations required to have been obtained from, or filings required to have been made with, Governmental Authorities pursuant to a Health Care Law in order to allow the conduct of a regulated activity.
“Related Party” means: (i) Seller; (ii) each Person who is, or who was at the time of the entry into this Agreement or the creation of the interest in question an officer or director of any member of the Company Group or Seller, or who, beneficially or of record, held shares or other equity interests in any member of the Company Group, or who served as a an officer or officer of a Person who, beneficially or of record, owned shares or other equity interests in any member of the Company Group; and (iii) each member of the immediate family of each of the Persons referred to in clause (i) or (ii) above. For purposes of this definition, the “immediate family” of an individual means (x) the individual’s spouse and (y) the individual’s parents, brothers, sisters and children.
“Repayment Obligations” means any repayment obligations of the Company Group arising from or related to services rendered prior to the Closing which are ultimately not paid, or where reimbursement is subsequently refunded to or recouped, in each case in whole or in part, by the applicable Payor Party due to actual or alleged errors or omissions, including improper coding, lack of coverage, lack of medical necessity or non-compliance with other applicable Payor Party requirements.
“Representative” means, with respect to any Person, any officer, director, principal, attorney, agent, employee or other representative of such Person.
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“Required Financial Statements” means such financial statements of the Company Group as are required by Regulation S-X to be included in the Proxy Statement or Closing 8-K.
“SEC” means the U.S. Securities and Exchange Commission. “Securities Act” means the Securities Act of 1933.
“Seller Debt” means the financing provided by Seller to the Company Group during the Pre-Closing Period in order to fund the Company Group’s operations in accordance with the Pre-Closing Budget and evidenced by an inter-company note bearing interest at the statutory applicable federal annual mid-term rate.
“Share Value” means $4.86.
“Software” means all (i) computer programs, applications, systems and code, including software implementations of algorithms, models and methodologies, and source code and object code, (ii) Internet and intranet websites, databases and compilations, including data and collections of data, whether machine-readable or otherwise, (iii) software development and design tools, library functions and compilers, (iv) technology supporting websites, and the contents and audiovisual displays of websites and (v) documentation, other works of authorship and media, including user manuals and training materials, relating to or embodying any of the foregoing or on which any of the foregoing is recorded.
“SPAC Merger Agreement” means that certain Agreement and Plan of Merger, dated February 9, 2021, entered into by and among CM Life Sciences, Inc., S-IV Sub, Inc. and Legacy Sema4, as amended.
“Specified Designees” means (i) one (1) individual designated by the Company and (ii) one (1) one individual designated by Seller who is independent from Seller and the Company Group, in each case as mutually agreed with Acquirer.
“Stock Consideration” means 80,000,000 shares of Acquirer Stock, as adjusted for any stock split, stock dividend, recapitalization, merger, consolidation or similar event occurring after the Agreement Date.
“Straddle Period” means any Tax period beginning on or before the Closing Date and ending after the Closing Date.
“Stueland Employment Agreement” means that certain Employment Agreement, dated as of June 7, 2021, by and among Katherine Stueland, Seller and the Company.
“Stueland Employment Agreement Obligations” means the sum of (i) the aggregate amount of the Sign On Bonus (within the meaning of the Stueland Employment Agreement) that has not been paid to Katherine Stueland as of the Closing Date, plus (ii) the aggregate fair market value of the Initial Option (within the meaning of the Stueland Employment Agreement), regardless of whether or not the Initial Option is outstanding as of the Closing Date or will remain outstanding as of immediately following the Closing but subject to clause (C) below, and the Additional Option (within the meaning of the Stueland Employment Agreement), with such aggregate fair market value determined based on the closing price of Seller’s common stock as of the trading day immediately preceding the Closing Date minus the applicable exercise price per share (for the avoidance of doubt, if such closing price equals or exceeds the exercise price per share of the Initial Option or the Additional Option, the fair market value of the Initial Option or Additional Option, as applicable, for purposes of this clause (ii) shall be zero); provided that: (A) if the Closing occurs prior to June 21, 2022 or Katherine Stueland waives her right to receive the Additional Option prior to or in connection with the Closing, then the Additional Option shall be deemed to have a fair market value of $0, (B) if the Closing occurs on or following June 21, 2022, the Additional Option has not been granted as of the trading day immediately preceding the Closing Date, and Katherine Stueland does not waive her right to receive the Additional Option prior to or in connection with the Closing, then the per share exercise price of the Additional Option shall be deemed to equal the closing price of Seller’s common stock as of June 21, 2022 (or if June 21, 2022 is not a trading day, the closing price of Seller’s common stock as of the immediately preceding trading day), and (C) if Katherine Stueland’s employment terminates for any reason prior to the Closing, then (i) any portion of the Initial Option that is forfeited in connection with such termination of employment and (ii) any portion
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of the Initial Option that is not forfeited in connection with such termination of employment and is exercised prior to the Closing, shall in each case be deemed to have a fair market value of $0.
“Subscription Agreements” means the subscription agreements pursuant to which the PIPE Investment will be consummated.
“Subsidiary” means, when used with respect to any Person, including the Company, any entity, corporation or other organization, whether incorporated or unincorporated, for which at least a majority of the securities or other interests having ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such entity, corporation or other organization is directly or indirectly owned or controlled by such Person or by any one or more of its Subsidiaries.
“Tax” means any and all federal, state, local or non-U.S. taxes and duties and similar governmental charges, assessments, levies, imposts or withholdings, including net income, gross income, capital gains, alternative minimum, base erosion anti-abuse, diverted profits, digital services, value added, goods and services, gross margin, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, unemployment, social security, disability, excise, severance, environmental, stamp, occupation, premium, property, unclaimed property, escheat, windfall profits, customs, duties or other actual or estimated taxes, together with any interest, fines, penalties, surcharges and charges in respect of Taxes (including as a result of any failure to timely file a Tax Return) and any additions to tax or additional amounts with respect thereto.
“Tax Authority” means any Governmental Authority responsible for the determination, assessment, collection or administration of Taxes.
“Tax Return” means any return, declaration, report, statement, claim for refund, information statement or other document filed or required to be filed with a Tax Authority in connection with the determination, assessment, collection or administration of Taxes, as well as any schedule, attachment thereto or amendment thereof.
“Third Party” means any Person other than the Company Parties, the Acquirer Parties, Seller and their respective Affiliates (including their respective Subsidiaries).
“Total Merger Consideration” means the Merger Consideration plus the Milestone Payments, if and to the extent such amounts become payable pursuant to Section 2.7.
“Trade Secrets” means unpublished inventions (whether patentable or not and whether or not reduced to practice), industrial designs, discoveries, improvements, ideas, designs, models, chemical and biological materials, compounds, formulae, recipes, patterns, compilations, results, data (including pre- clinical and clinical data), databases, data collections and compilations, analyses, diagrams, drawings, blueprints, mask works, devices, methods, compositions, algorithms, techniques, patterns, processes, know- how and other forms of technology (whether or not embodied in any tangible form and including all tangible embodiments of the foregoing, such as laboratory notebooks, studies and summaries), proprietary rights in confidential information of any kind, instructions, configurations, prototypes, samples, formulations, specifications, analytic models, customer lists, source code, development tools,, in each case, to the extent constituting a trade secret as defined under the Uniform Trade Secrets Act or other applicable Laws.
“Trademarks” means trademarks, service marks, trade names, service names, brand names, trade dress, logos, as well as Internet domain names, corporate and other business names, other like source or business identifiers and other proprietary rights to any words, names, slogans, symbols, logos, devices or combinations thereof to the extent that they are used and function to identify, distinguish and indicate the source or origin of goods or services, together with the goodwill associated with any of the foregoing; and all registrations and renewals, applications for registration, equivalents or counterparts thereof; and all statutory, federal, common law, and rights provided by international treaties or conventions, in any of the foregoing.
“Transaction Certificates” means all certificates contemplated by this Agreement to be delivered at Closing by the Parties pursuant to this Agreement.
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“Transaction Documents” means this Agreement and the Ancillary Agreements. “Transaction Expenses” means (a) any out-of-pocket fees, costs, payments and expenses of the Company Group, including legal and accounting fees, valuation services, investment banking fees, and related disbursements, in each case in connection with (i) the participation in or response to the investigation, review and inquiry conducted by Acquirer and its Representatives with respect to the business of the Company Group (and the furnishing of information to Acquirer and its Representatives in connection with such investigation and review), (ii) the negotiation, preparation, drafting, review, execution, delivery or performance of this Agreement or any Ancillary Agreement or any other document delivered or to be delivered in connection with the Transactions, (iii) the obtaining of any consent, waiver or approval required to be obtained in connection with any of the Transactions; (b) 50% of the out-of-pocket fees, costs, payments and expenses incurred in connection with the preparation and submission of any regulatory filing or notice required to be made or given in connection with any of the Transactions, including pursuant to HSR; (c) any sale bonuses, change in control bonuses, payments in respect of equity awards, retention payments or similar amounts that become payable by any member of the Company Group by reason of, or in connection with, the Closing, other than any such bonus or payment (i) payable pursuant to a Contract entered into by or at the request of the Acquirer or (ii) to the extent that the amount thereof is increased pursuant to the amendment to a Contract undertaken at the request of Acquirer; provided that an amount equal to the Stueland Employment Agreement Obligations shall be treated as a “Transaction Expense,” (d) any severance or similar termination payments payable by any member of the Company Group to any current or former employee, or any current or former director, officer or contractor of any member of the Company Group, by reason of, or in connection with, the Closing, other than any such payment (i) payable pursuant to a Contract entered into at the request of the Acquirer, (ii) to the extent that the amount thereof is increased pursuant to the amendment to a Contract undertaken at the request of Acquirer or (iii) triggered by any action of Acquirer or the Company Group after the Closing; and (e) the employer portion of any payroll Taxes of any member of the Company Group or Acquirer arising from the payment of any amounts described in clauses (c) and (d), in each case ((a) through (e)), to the extent unpaid.
“Transaction Tax Deductions” means the aggregate amount of any Tax deductions relating to: (A) the payment prior to the Effective Time of any other costs or expenses incurred by any member of the Company Group in connection with the transactions contemplated hereby (including, for the avoidance of doubt, any amounts that would be Transaction Expenses but for the fact that they are not unpaid as of the Effective Time); and (B) any other items deductible for Tax purposes by any member of the Company Group and/or any of Subsidiaries of the Company Group attributable to the transactions contemplated hereby that are economically borne by the Seller; provided, that, with respect to success- based fees, seventy percent (70%) of success fees shall be treated as deductible in accordance with Revenue Procedure 2011-29, to the extent applicable.
“Transactions” means the transactions contemplated by the Transaction Documents, including the Pre-Closing Restructuring and the Mergers.
“Transfer” means to sell, convey, transfer, assign, novate, deliver, split or add or remove a party thereto.
“Transition Services Agreement” means the Transition Services Agreement to be entered into at the Closing, as may be mutually agreed upon in writing between the Parties pursuant to Section 5.14(a).
Index of Defined Terms.
Accounting Standards3Acquirer Indemnified Parties80
Accounts Receivable38Acquirer Party3
Accrued 2022 401(k) Match10Acquirer Stock3
Acquirer1Acquirer Stockholder Approval3
Acquirer 401(k) Plan75Acquirer Stockholders’ Meeting66
Acquirer Board3Acquisition Proposal3
Acquirer Disclosure Schedules3Affiliate3
Acquirer Fundamental Representations3Agreement1
Agreement Date1Company Privacy Commitments6
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Ancillary Agreements4Company Privacy Policies6
Antitrust Condition77Company Product6
Antitrust Laws4Company Software6
Applicable Withholding Law29Company Websites7
Assumed Seller Debt4Company-Licensed Data6
Author51Company-Owned Data6
Available Insurance Policies73Confidential Information51
Bayh-Dole Act4Confidentiality Agreement7
Benefit Plan4Consent7
BioReference1Continuing Claim84
Business4Continuing Employees7
Business Day4Contract7
Bylaws22Controlled Group Liability7
CARES Act4Copyrights7
Cash Consideration4COVID-197
Certificate of Incorporation22COVID-19 Response7
Claim Notice81D&O Indemnified Person73
CLIA43Damages80
Closing22De Minimis Claims83
Closing 8-K65Deductible116
Closing Date22Default7
Closing Indebtedness4Defense Notice81
Closing Net Working Capital Shortfall5Deliver7
Closing Net Working Capital Surplus5DGCL7
Closing Net Working Capital Target5Dispute7
Closing Statement25Dispute Notice30
CMS43Disputed Item25
COBRA47DOJ68
Code5Domain Names8
Commercial Software5Effect11
Company1Effective Time4
Company Balance Sheet38EMA8
Company Balance Sheet Date38Encumbrance8
Company Benefit Plan46Enforceability Exceptions32
Company Contracts36Environmental Law8
Company Data5ERISA8
Company Data Agreement5ERISA Affiliate8
Company Databases5Escrow Account8
Company Disclosure Schedules5Escrow Agent25
Company Employee5Escrow Agreement25
Company Fundamental Representations5Escrow Amount8
Company Group5Escrow Expiration Date8
Company Group Revenue27Estimated Cash Consideration8
Company IP5Estimated Closing Statement8
Company IP Contracts5EUA9
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Company IT Assets5European Union8
Company Licensed IP6Excess Amount27
Company Net Working Capital6Exchange Act4
Company Owned IP6Excluded Shares23
Company Parties6FCPA9
FDA9Merger Consideration5
FDCA9Merger Sub5
Final Cash Consideration27Merger Sub II5
Financial Statements37Merger Subs5
First Certificate of Merger21Mergers5
First Merger1Milestone Event28
First Milestone Period28Milestone Payment2
Fraud9Milestone Payment Date28
FTC68Milestone Unresolved Items30
Fundamental Claims84Most Recent Balance Sheet11
Fundamental Representations9Nasdaq11
FY2022 Company Group Revenue28New Litigation Claim70
FY2023 Company Group Revenue28Notice of Objection25
General Claims83Objection Period25
Governing Documents9Order11
Government Contract36Ordinary Course of Business12
Governmental Authority9Parent12
Governmental Program9Parent Group12
Hazardous Substances9Parties1
Health Care Laws9Party1
HHS Grants44Patents12
Holdco21Payor Parties14
Holdco2 Board2Permits12
Holdco2 Board Approval32Permitted Encumbrances12
Holdco2 Common Stock10Person12
Holdco2 Stockholder Approval33Personal Data12
HSR Act10PHSA12
HSR Filings68PIPE Investment2
Indebtedness10PIPE Investment Amount12
Indemnified Parties81PIPE Investors2
Indemnifying Party81Post-Closing Tax Period13
Indemnity Agreement73PPP Loan13
Independent Expert26Pre-Closing Budget13
In-Scope Employees44Pre-Closing Period61
Intellectual Property10Pre-Closing Restructuring1
Interim Financial Statements70Pre-Closing Tax Period13
IP Dispute49Pre-Closing Taxes13
IRS10Privacy Laws13
IT Assets11Proceeding13
Key Employee11Process13
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Knowledge11Processed13
Law11Processing13
Leased Property33Proxy Statement65
Leases34Public Official13
Liability11Public Software14
Lock-Up Agreement2Registered Company IP14
Lock-Up Holders2Registered IP14
Material Adverse Effect11Regulatory Approval14
Measurement Time11Regulatory Authority14
Medicare Advance Payment Program44Regulatory Documentation14
Medicare Advance Payments44Regulatory Permit14
Related Party14Stueland Employment Agreement15
Released Party24Subscription Agreements2
Releasing Party24Subsidiary16
Reorganization2Subsidiary Ownership Interests32
Representative14Surviving Corporation21
Required Closing Contracts69Surviving Entity22
Required Financial Statements15Tax16
Resale Registration Documents65Tax Authority16
Resolution Period26Tax Proceeding71
Sales Taxes39Tax Return16
SEC6Termination Date79
Second Merger1Third Party16
Second Merger Effective Time22Third Party Claim81
Second Milestone Period28Top Customers55
Securities Act6Top Payors54
Seller1Top Suppliers55
Seller 401(k) Plan75Total Merger Consideration16
Seller Benefit Plan46Trade Secrets16
Seller Benefit Plans46Trademarks16
Seller Board2Transaction Certificates16
Seller Board Approval32Transaction Documents17
Seller Contracts33Transaction Expenses17
Seller Debt15Transaction Tax Deductions17
Seller Indemnified Parties81Transactions2
Seller Revenue Contracts33Transfer2
Share Value15Transfer Taxes71
Shortfall Amount27Transition Services Agreement17
Software15Unresolved Escrow Amount84
Specified Designees15Unresolved Items26
Stock Consideration2Valid Pre-Closing Claims73
Straddle Period15Written Consent2

1.2Interpretation. Except where expressly stated otherwise in this Agreement, references: (a) to the Recitals, Articles, Sections, Exhibits or Schedules are to a Recital, Article or Section of, or Exhibit or Schedule to, this
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Agreement; (b) to any agreement (including this Agreement) or Contract are to the agreement or Contract as amended, modified, supplemented or replaced from time to time in accordance with the terms thereof (provided, that this clause (b) shall not apply with respect to the representations and warranties of the Company set forth in Section 3.8(a)); (c) to any statute, rule or regulation shall be deemed to refer to such statute, rule or regulation as amended from time to time and to any rules or regulations promulgated thereunder; provided that for purposes of any representations and warranties contained in this Agreement that are made as of a specific date or dates, references to any statute, rule or regulation shall be deemed to refer to such statute, rule or regulation, as amended (and, in the case of statutes, any rules and regulations promulgated under such statutes), in each case, as of such date; (d) to any Person include any successor to that Person or permitted assigns of that Person; and (e) to this Agreement are to this Agreement and the Exhibits and Schedules to it, taken as a whole. The table of contents and headings contained herein are for reference purposes only and do not limit or otherwise affect any of the provisions of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” Whenever the words “herein” or “hereunder” or “hereof” and similar words are used in this Agreement, they shall be deemed to refer to this Agreement as a whole and not to any specific Section, unless otherwise indicated. The word “or” is used in the inclusive sense (and/or). The use of “extent” in the phrase “to the extent” means the degree to which a subject or other thing extends, and such phrase does not mean simply “if.” The terms herein defined in the singular shall have a comparable meaning when used in the plural, and vice versa. References to “day” or “days” refer to calendar days. The masculine, feminine and neuter genders used herein shall include each other gender. The terms “dollars” and “$” means dollars of the United States of America. Any reference to “beneficial ownership”, including “beneficial owner” and “beneficially owns,” shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.
ARTICLE 2
THE MERGERS
2.1The Mergers.
(a)At the Effective Time, Merger Sub I shall merge with and into Holdco2. Following the Effective Time, the separate existence of Merger Sub I shall cease and Holdco2 shall continue as the surviving corporation of the First Merger (the “Surviving Corporation”).
(b)At the Closing, the Parties shall cause the Certificate of Merger in the form of Exhibit C-1 (the “First Certificate of Merger”) to be properly executed and filed with the Secretary of State of the State of Delaware and shall make all other filings or recordings required under the DGCL in order to give effect to the First Merger. The First Merger shall become effective on the date and time at which the First Certificate of Merger is accepted for filing by the Secretary of State of the State of Delaware on the Closing Date or at such later date or time as is agreed by Acquirer and Holdco2 and specified in the First Certificate of Merger (the time the First Merger becomes effective being referred to herein as the “Effective Time”).
(c)The First Merger shall have the effects set forth in Section 251 of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all of the assets, properties, rights, privileges, powers and franchises Holdco2 and Merger Sub I shall vest in the Surviving Corporation and all Liabilities, obligations and duties of each of Holdco2 and Merger Sub I shall become the Liabilities, obligations and duties of the Surviving Corporation, in each case, in accordance with the DGCL.
(d)At the Effective Time:
(i)the Governing Documents of Merger Sub I shall be the Governing Documents of the Surviving Corporation, in each case, until thereafter changed or amended as provided therein or by applicable Law; and
(ii)the directors and officers of Merger Sub I immediately prior to the Effective Time shall be the initial directors and officers of the Surviving Corporation, each to hold office in accordance with the Governing Documents of the Surviving Corporation until such director’s or officer’s successor is duly elected or appointed and qualified, or until the earlier of their death, resignation or removal.
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(e)Immediately following the First Merger, the Surviving Corporation shall be merged with and into Merger Sub II in accordance with the provisions of the DGCL and the Delaware Limited Liability Company Act. Merger Sub II shall be the surviving company resulting from the Second Merger (the “Surviving Entity”) and shall continue its existence as a limited liability company under the laws of Delaware and succeed to and assume all the rights and obligations of the Surviving Corporation in accordance with the DGCL and the Delaware Limited Liability Company Act. Upon the consummation of the Second Merger, the separate corporate existence of the Surviving Corporation shall terminate. The Second Merger shall (i) be consummated pursuant to the terms of this Agreement and (ii) become effective as of the date and time at which the Certificate of Merger attached hereto as Exhibit C-2 (the “Second Certificate of Merger”) is accepted for filing by the Secretary of State of the State of Delaware on the Closing Date or at such later date or time specified in the Second Certificate of Merger (the time the Second Merger becomes effective being referred to herein as the “Second Merger Effective Time”).
(f)At the Second Merger Effective Time, the Governing Documents of Merger Sub II shall be the Governing Documents of the Surviving Entity, in each case, until thereafter changed or amended as provided therein or by applicable Law.
2.2Closing. The consummation of the Mergers (the “Closing”) shall take place remotely by electronic exchange of documents and signatures at a date and time to be agreed by Acquirer and the Company, which date shall, unless otherwise agreed by Acquirer and the Company, be no later than the third Business Day following the date on which all of the conditions set forth in Article 6 have been satisfied or waived (other than those conditions that, by their terms, are intended to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions. The date on which the Closing occurs is sometimes referred to herein as the “Closing Date.”
2.3Closing Deliveries.
(a)Certain Deliverables. Not less than five days prior to the Closing Date, the Company shall deliver to Acquirer the Estimated Closing Statement, including supporting calculations and documentation for the estimates set forth therein.
(b)Company Group Closing Deliveries. At the Closing, the Company Group and Seller, as applicable, shall deliver or cause to be delivered to Acquirer each of the following:
(i)a certificate, dated as of the Closing Date and executed on behalf of Holdco2 by its Chief Executive Officer, to the effect that each of the conditions set forth in Section 6.3(a) and Section 6.3(d) have been satisfied;
(ii)a certificate, dated as of the Closing Date and executed on behalf of Holdco2 by its Secretary, certifying (A) the certificate of incorporation of Holdco2 (the “Certificate of Incorporation”) in effect as of the Closing, (B) the bylaws of Holdco2 (the “Bylaws”) in effect as of the Closing, and (C) the resolutions of the Holdco2 Board reflecting the Holdco2 Board Approval;
(iii)payoff letters or similar instruments in form and substance reasonably satisfactory to Acquirer with respect to all Closing Indebtedness for borrowed money (including, for the avoidance of doubt, under that certain Amended and Restated Credit Agreement, dated August 30, 2021, by and among BioReference Laboratories, Inc., certain of its subsidiaries, including the Company, and JPMorgan Chase Bank, N.A., only to the extent the Company Group and its assets have not been fully and irrevocably released from all obligations thereunder and any corresponding security interest arising thereunder has not been terminated prior to the Closing), which letters provide for the release of all Encumbrances relating to such Closing Indebtedness following satisfaction of the terms contained in such payoff letters (including the payment in full and discharge of all principal and accrued but unpaid interest and any premiums or other fees payable in connection with such Closing Indebtedness);
(iv)invoices from each Person that is entitled to any Transaction Expenses at Closing reflecting the total amount of Transaction Expenses that has been incurred and remains payable to such Person as of the Closing;
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(v)the Written Consent and Shareholder Agreement, in each case executed by Seller;
(vi)the Shareholder Agreement executed by each of the Lock-Up Holders;
(vii)the Escrow Agreement, executed by Seller;
(viii)unless Acquirer provides written notice to Holdco2 no later than three Business Days prior to the Closing Date to the contrary, a resignation letter reasonably satisfactory to Acquirer executed by each director and officer of each member of the Company Group in office immediately prior to the Closing, in each case, effective as of, and contingent upon, the Effective Time;
(ix)a certificate from the Secretary of State of the States of Delaware and each other state or other jurisdiction in which any member of the Company Group is organized, dated within three Business Days prior to the Closing Date, certifying that such member of the Company Group is in good standing and that all applicable franchise and similar Taxes and fees of the Company and each applicable Subsidiary of the Company through and including the Closing Date have been paid;
(x)an IRS Form W-9 (Request for Taxpayer Number and Certification), duly executed by Seller (provided, that, if Seller to provide such form, Acquirer’s only recourse shall be to withhold applicable Taxes with respect to Seller’s proceeds in accordance with Section 2.8;
(xi)the First Certificate of Merger, executed by Holdco2;
(xii)evidence reasonably satisfactory to Acquirer of receipt of all consents, approvals, novations, amendments and terminations set forth on Schedule 2.3(b)(xiv); and
(xiii)a USB drive (or similar device) containing a copy of the contents of the Data Room.
(c)Acquirer Closing Deliveries. At the Closing, Acquirer shall deliver or cause to be delivered to Seller each of the following:
(i)a certificate, dated as of the Closing Date and executed on behalf of Acquirer by its Chief Executive Officer, to the effect that each of the conditions set forth in Section 6.2(a) and Section 6.2(c) have been satisfied;
(ii)a certificate, dated as of the Closing Date and executed on behalf of Acquirer by its Secretary, certifying (A) the certificate of incorporation of Acquirer in effect as of the Closing, (B) the bylaws of Acquirer in effect as of the Closing, and (C) the resolutions of the Acquirer Board approving the Transactions;
(iii)each Ancillary Agreement to which any Acquirer Party is a party that has not previously been delivered to the Holdco2 and Seller, executed and delivered by each Acquirer Party that is a party thereto; and
(iv)the Merger Consideration, as set forth in and in accordance with Section
2.5(a)(i).
2.4Effect on Holdco2 Common Stock.
(a)Treatment of Holdco2 Common Stock. Upon the terms and subject to the conditions set forth herein, including Section 2.5(b), Section 2.6, Section 2.7, Section 2.8 and Article 8, at the Effective Time, by virtue of the First Merger and without any action on the part of any Party or any other Person, the shares of Holdco2 Common Stock issued and outstanding immediately prior to the Effective Time (other than Excluded Shares) shall be automatically converted into the right of Seller to receive: (A) the Merger Consideration and (B) if and only to the extent payable pursuant to Section 2.7, the Milestone Payments.
(b)Treasury Shares. At the Effective Time, all shares of Holdco2 Common Stock that are owned by the Company as treasury stock immediately prior to the Effective Time (“Excluded Shares”) shall be cancelled and
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extinguished without any conversion thereof or payment of any cash or other property or consideration therefor and shall cease to exist.
(c)Treatment of Merger Sub I Capital Stock. At the Effective Time, by virtue of the First Merger and without any action on the part of Acquirer, Merger Sub I or any other Person, each share of capital stock of Merger Sub I that is issued and outstanding immediately prior to the Effective Time shall be converted into and become one share of common stock of the Surviving Corporation (and the shares of the Surviving Corporation into which the shares of Merger Sub I capital stock are so converted shall be the only shares of the Surviving Corporation’s capital stock that are issued and outstanding immediately after the Effective Time). From and after the Effective Time, each certificate evidencing ownership of a number of shares of Merger Sub I capital stock will evidence ownership of such number of shares of common stock of the Surviving Corporation.
(d)Treatment of Merger Sub II Membership Interests. At the Second Merger Effective Time, by virtue of the Second Merger and without any action on the part of Acquirer, Merger Sub II or any other Person, each share of common stock of the Surviving Corporation that is issued and outstanding immediately prior to the Second Merger Effective Time shall be cancelled and extinguished without any conversion thereof. At the Second Merger Effective Time, each membership interest of Merger Sub II that is issued and outstanding immediately prior to the Second Merger Effective Time will constitute a membership interest of the Surviving Entity (and the membership interests of the Surviving Entity shall be the only membership interests of the Surviving Entity issued and outstanding immediately after the Second Merger Effective Time).
(e)Adjustments. In the event of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into capital stock), reorganization, reclassification, combination, recapitalization or other like change with respect to the Holdco2 Common Stock occurring after the Agreement Date and prior to the Effective Time, all references herein to specified numbers of shares of any class or series affected thereby, and all calculations provided for that are based upon numbers of shares of any class or series (or trading prices therefor) affected thereby, shall be equitably adjusted to the extent necessary to provide the parties the same economic effect as contemplated by this Agreement prior to such stock split, reverse stock split, stock dividend, reorganization, reclassification, combination, recapitalization or other like change.
(f)Fractional Shares. No fraction of a share of Acquirer Stock will be issued in connection with the Transactions and in lieu thereof Seller will receive from Acquirer, an amount of cash equal to the product (rounded upwards to the nearest whole cent) of such fraction of a share Seller would otherwise receive and the Share Value.
(g)No Interest. Notwithstanding anything to the contrary contained herein, no interest shall accumulate on any cash payable in connection with the consummation of the Transactions.
2.5Payment Procedures.
(a)Payment; Release of Claims.
(i)On the Closing Date, Acquirer shall pay and issue, as applicable, the Merger Consideration to Seller, in accordance with the wire and delivery instructions delivered in writing to Acquirer by Seller no less than three (3) Business Days prior to the Closing, less the Escrow Amount. Notwithstanding anything herein to the contrary, (A) all cash payments made under this Agreement in respect of the Total Merger Consideration shall be made in U.S. dollars and (B) any shares of Acquirer Stock issued by Acquirer in respect of the Total Merger Consideration shall be issued in the name of Seller.
(ii)Effective upon and only upon the consummation of the Closing, notwithstanding anything contained herein to the contrary, in consideration of the execution, delivery and performance by Acquirer, Merger Sub I and Merger Sub II of this Agreement, as of the Closing, Seller, on behalf of itself and its Affiliates (each, a “Releasing Party”) hereby RELEASES, WAIVES, ACQUITS AND FOREVER DISCHARGES the Company Parties (each, a “Released Party”), from any and all Damages, liabilities, costs, expenses, claims, damages, actions, causes of action, or suits in law or equity, of whatever kind or nature that any Releasing Party ever had or may now have against any Released Party relating to the Company or its business and that have accrued or arisen prior to the Closing, including those based on any fact or circumstance arising from Seller’s past or current
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ownership or alleged ownership, as applicable, of any Holdco2 Common Stock (including any claims relating to actual or alleged breaches of fiduciary or other duties by the Company’s directors, officers or stockholders), whether based on Contract or any applicable Law (including tort, statute, local ordinance, regulation or any comparable law) in any jurisdiction, including under California Civil Code Section 1542, which provides that “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.”; provided that nothing in the foregoing release shall or be deemed to release any rights or obligations of any Released Party or Releasing Party (i) for indemnification or contribution, in any Releasing Party’s capacity as an officer or director of the Company, under the DGCL, Section 5.12(b) any indemnification agreements to which the Releasing Party and the Company are parties that have been Delivered to Acquirer prior to the Agreement Date or the Company’s Governing Documents; (ii) for amounts owed pursuant to, or other rights and obligations set forth in, this Agreement and any Ancillary Agreement; or (iii) any claim based on fraud or any other matter that cannot be released as a matter of law.
(b)Escrow Account. Notwithstanding anything to the contrary in the other provisions of this Article 2, at Closing, Acquirer shall withhold the Escrow Amount from the Merger Consideration payable to Seller pursuant to Section 2.4(a) and Section 2.5. On the Closing Date, Acquirer shall deposit the Escrow Amount with PNC Bank, National Association, a national banking association (or, if PNC Bank is unable or unwilling to act, another comparable escrow agent (the “Escrow Agent”), to be held in the Escrow Account, which shall be governed by this Agreement and the escrow agreement in customary form to be mutually agreed by the Parties acting reasonably prior to the Closing (the “Escrow Agreement”). Neither the Escrow Account (including any portion thereof) nor any beneficial interest therein may be pledged, subjected to any Encumbrance, sold, assigned or transferred by Seller or be taken or reached by any legal or equitable process in satisfaction of any debt or other Liability of Seller, in each case prior to the distribution of the Escrow Account to Seller in accordance with the applicable terms of this Agreement, except that Seller shall be entitled to assign Seller’s rights to amounts held in the Escrow Account by operation of law.
2.6Post-Closing Adjustment.
(a)Within 90 days after the Closing Date, Acquirer shall prepare and deliver, or cause to be prepared and delivered, to Seller a statement (the “Closing Statement”), setting forth its determination of the amount of Company Net Working Capital, prepared in accordance with the Company Net Working Capital Schedule (and any corresponding Closing Net Working Capital Shortfall or Closing Net Working Capital Surplus), Closing Indebtedness and Transaction Expenses that remained unpaid as of immediately prior to the Closing, and, based on the foregoing, its determination of the Cash Consideration, and the adjustment (if any) necessary to reconcile the amounts set forth in the Estimated Closing Statement to the Closing Statement in accordance with the terms and conditions of this Agreement. The Closing Statement shall be prepared in accordance with (i) the Accounting Standards and (ii) shall be based exclusively on the facts and circumstances as they shall have existed at the Measurement Time and shall exclude the effects of any event, act, information, decision, change in circumstances or similar development arising or occurring on (except with respect to Transaction Expenses) or after the Closing Date. The post-Closing purchase price adjustment as set forth in this Section 2.6 is not intended to permit the introduction of different accounting methods, policies, practices, procedures, conventions, categorizations, definitions, principles, judgments, assumptions, techniques or estimation methods with respect to financial statements, their classification or presentation or otherwise (including with respect to the nature of accounts, level of reserves or level of accruals) from the Accounting Standards.
(b)Unless Seller notifies Acquirer in writing (a “Notice of Objection”) within 45 days after Acquirer’s delivery of the Closing Statement (such 45-day period, the “Objection Period”) that Seller disagrees with the Closing Statement, specifying the nature and amount of any dispute as to Company Net Working Capital (and any corresponding Closing Net Working Capital Shortfall or Closing Net Working Capital Surplus), Closing Indebtedness and Transaction Expenses that remained unpaid as of immediately prior to the Closing, in each case as set forth in the Closing Statement (each, a “Disputed Item”), the Closing Statement and the determinations set forth therein shall be final, binding and conclusive on the Parties. Following the delivery of the Closing Statement and for purposes of Seller’s review of the Closing Statement and preparation of any Notice of Objection, Acquirer shall
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afford Seller and its Representatives with reasonable access, during normal business hours and upon reasonable prior notice, to the personnel, properties, books and records of Acquirer and the Surviving Entity and to any other information reasonably requested for purposes of preparing and reviewing the calculations contemplated by this Section 2.6. Acquirer shall authorize its and the Surviving Entity’s outside accountants to disclose to Seller and its Representatives work papers generated by such accountants in connection with preparing and reviewing the calculations specified in this Section 2.6; provided, that such accountants shall not be obligated to make any work papers available except in accordance with such accountants’ disclosure procedures. Any Notice of Objection shall specify the basis for the objections set forth therein. Seller shall be deemed to have agreed with those items and amounts contained in the Closing Statement not disputed by Seller in a Notice of Objection.
(c)If Seller provides the Notice of Objection to Acquirer within the Objection Period, Seller and Acquirer shall, during the 30-day period following Acquirer’s receipt of the Notice of Objection (such 30-day period, the “Resolution Period”), attempt in good faith to resolve each Disputed Item. During the Resolution Period, Seller shall afford Acquirer and its Representatives with reasonable access, during normal business hours and upon reasonable prior notice, to the personnel, properties, books and records of Seller and to any other information reasonably requested for purposes of preparing and reviewing the calculations contemplated by this Section 2.6. Seller shall authorize its outside accountants to disclose to Acquirer and its Representatives work papers generated by such accountants in connection with preparing and reviewing the calculations specified in this Section 2.6; provided, that such accountants shall not be obligated to make any work papers available except in accordance with such accountants’ disclosure procedures. If Seller and Acquirer are unable to resolve all of the Disputed Items within the Resolution Period (the “Unresolved Items”), the Unresolved Items shall be submitted to a nationally recognized independent valuation, accounting or specialty firm to be mutually agreed upon by Seller and Acquirer, which accounting firm shall not have worked with Seller, the Company or Acquirer or any of their respective Affiliates in the preceding 12 months (such agreed firm being the “Independent Expert”). The Independent Expert shall be engaged pursuant to an engagement letter among Seller, Acquirer and the Independent Expert on terms and conditions consistent with this Section 2.6(c). The Independent Expert shall be instructed, pursuant to such engagement letter, to act as an expert and not as an arbitrator and to resolve only the Unresolved Items and not to otherwise investigate any matter independently. Seller and Acquirer each agree to furnish to the Independent Expert reasonable access to such individuals and such information, books and records as may be reasonably required by the Independent Expert to make its final determination (and any such information, books and records shall be provided to the other such Party prior to its submission or presentation to the Independent Expert). Seller and Acquirer shall also instruct the Independent Expert to render its reasoned written decision as promptly as practicable but in no event later than thirty (30) days from the date that information related to the unresolved objections is presented to the Independent Expert by Seller and Acquirer. With respect to each Unresolved Item, such decision shall be made based on the terms and conditions of this Agreement and shall not be in excess of the higher, nor less than the lower, of the amounts advocated by Acquirer in the Closing Statement or Seller in the Notice of Objection with respect to such Unresolved Item. Except as Seller and Acquirer may otherwise agree, all communications between Seller and Acquirer or any of their respective Representatives, on the one hand, and the Independent Expert, on the other hand, shall be in writing with copies simultaneously delivered to the other such Party. The resolution of Unresolved Items by the Independent Expert shall be final, binding and conclusive on the Parties (absent manifest error). All fees and expenses of the Independent Expert shall be borne on a proportionate basis by Acquirer, on the one hand, and Seller, on the other, based on the percentage which the portion of the contested amount not awarded in favor of Acquirer or Seller bears to the amount actually contested by such Person. For example, if Acquirer’s calculations would have resulted in a $1,000,000 net payment to Acquirer, and Seller’s calculations would have resulted in a $1,000,000 net payment to Seller and the Independent Expert’s final determination as adopted pursuant to this Section 2.6(c) results in an aggregate net payment of $500,000 to Seller, then Acquirer, on the one hand, and Seller, on the other hand, shall pay 75% and 25%, respectively, of such fees and expenses.
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(d)After the Cash Consideration has been finally determined in accordance with this Section 2.6 (the Cash Consideration as so determined being referred to herein as the “Final Cash Consideration”), the following payments shall be made on or prior to the third (3rd) Business Day immediately following such determination:
(i)If the Final Cash Consideration exceeds the Estimated Cash Consideration (the “Excess Amount”), then Acquirer shall pay, or cause to be paid, an amount in cash equal to the Excess Amount to Seller by wire transfer of immediately available funds to an account specified in writing by Seller; or
(ii)If the Estimated Cash Consideration exceeds the Final Cash Consideration (such excess, the “Shortfall Amount”), then Acquirer and Seller shall deliver joint written instructions to the Escrow Agent instructing the Escrow Agent to disburse to Acquirer, from the Escrow Account an amount in cash equal to the Shortfall Amount; provided, that, if the Shortfall Amount exceeds $2,500,000, then Acquirer may elect in writing to require that Seller pay, or cause to be paid, an amount in cash equal to the Shortfall Amount to Acquirer.
(e)For Tax purposes, any payments under this Section 2.6 shall be treated as an adjustment to the Merger Consideration.
2.7Milestone Payments.
(a)Definitions.
(i)“Acquirer Capital Stock” means any and all shares, interests (including partnership interests), rights to purchase, warrants, options, participations or other equivalents of or interest in (however designated) equity of Acquirer, including Acquirer Stock and any preferred stock.
(ii)“Acquirer Change in Control” means the occurrence of any of the following events:
(i)any “person” (as such term is used in Sections 13(d)(3) of the Exchange Act), becomes the “beneficial owner” (as defined in Rules 13d 3 and 13d 5 under the Exchange Act), directly or indirectly, of more than 50% of the total voting power of the Acquirer Voting Stock ; provided that the consummation of any such transaction resulting in such person owning more than 50% of the total voting power of the Acquirer Voting Stock shall not be considered a Change of Control if (a) the Company becomes a direct or indirect wholly owned subsidiary of a holding company and (b) immediately following such transaction, (x) the direct or indirect holders of the Acquirer Voting Stock of the holding company are substantially the same as the holders of the Acquirer Voting Stock immediately prior to such transaction or (y) no person is the beneficial owner, directly or indirectly, of more than 50% of the Voting Stock of such holding company;
(ii)the adoption by the Board of Directors of a plan relating to the liquidation or dissolution of Acquirer; or
(iii)the merger or consolidation of Acquirer with or into another Person or the merger of another Person with or into Acquirer, or the sale of all or substantially all the assets of Acquirer (determined on a consolidated basis) to another Person other than a transaction following which beneficial owners of securities that represented 100% of the Acquirer Voting Stock immediately prior to such transaction (or other securities into which such securities are converted as part of such merger or consolidation transaction) beneficially own directly or indirectly at least a majority of the voting power of the Voting Stock of the surviving Person or any direct or indirect parent company of the surviving Person in such merger or consolidation transaction immediately after such transaction.
(iii)“Acquirer Voting Stock” means all classes of Acquirer Capital Stock then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof.
(iv)“Company Group Revenue” means the Business’ recorded net revenue related to laboratory services performed or test results reported in the applicable period (including international and decentralized net revenue), plus the Business’ recorded net biopharma revenue generated from the Company Databases, calculated in accordance with the Accounting Standards utilized in the Financial Statements (consistently
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applied throughout the applicable period) and as set forth on the Milestone Financial Statements for such period, provided that Company Group Revenue shall be subject to adjustment based on information available following the expiration of the applicable period through the delivery of a Milestone Event Notice for the applicable period, including as applicable to the reconciliation of cash collected to revenue recognized.
(v)“First Milestone Period” means the period of time commencing on January 1, 2022 and ending at 11:59 p.m. Eastern time on December 31, 2022.
(vi)“FY2022 Company Group Revenue” means the Company Group Revenue for the First Milestone Period.
(vii)“FY2023 Company Group Revenue” means the Company Group Revenue for the Second Milestone Period.
(viii)“Milestone Financial Statements” means a report prepared by Acquirer reflecting the Company Group Revenue during the First Milestone Period and the Second Milestone Period, as applicable.
(ix)“Second Milestone Period” means the period of time commencing on January 1, 2023 and ending at 11:59 p.m. Eastern time on December 31, 2023.
(b)Milestone Events. With respect to each milestone event set forth in the table below (each, a “Milestone Event”), Acquirer shall pay the corresponding milestone payment set forth in the table below (each, a “Milestone Payment”) following the first achievement of such milestone event by the Business, in each case subject to the terms and conditions set forth in this Section 2.7:
#Milestone EventMilestone Payment
1.FY2022 Company Group Revenue equal to or above $163 million$112.5 million
2.FY2023 Company Group Revenue equal to or above $219 million$37.5 million
Notwithstanding anything herein to the contrary, 80% of the Milestone Payment for the First Milestone Period or the Second Milestone Period, as applicable, shall become payable in respect of such period if the Company Group achieves 90% of the applicable Milestone Event revenue target for such period set forth in the table above, which amount will scale on a linear basis up to 100% of the applicable Milestone Payment at 100% of the applicable revenue target set forth in the table above. Solely for purposes of illustration: if the Business achieves Company Group Revenue of $154.85 million for the First Milestone Period (i.e. 95% of target), then Acquirer shall pay to Seller a Milestone Payment equal to $101.25 million (i.e. 90% of the target Milestone Payment).
(c)Payment of Milestone Payments. On or prior to the later of (x) the thirtieth (30th) day immediately following Acquirer’s receipt of its executed audit report from its independent registered public company accounting firm (or, if Acquirer is then not subject to the reporting requirements under Section 13(a) or 15(d) of the Exchange Act, its independent auditor) and (y) April 30th, for each of the fiscal years ending December 31, 2022 and December 31, 2023, Acquirer shall deliver to Seller a notice (a “Milestone Event Notice”), containing (i) the Milestone Financial Statements for the applicable period, (ii) a statement whether and to what extent a Milestone Event was achieved during such fiscal year, (iii) if greater than zero but less than the full amount of the Milestone Payment is payable in respect of the applicable period, Acquirer’s calculation (in accordance with this Agreement) of the Milestone Payment due, (iv) the payment date for the applicable Milestone Payment, which will be within five (5) days of the date of such Milestone Event Notice (such date, the “Milestone Payment Date”) and (v) the specific amounts of cash and shares of Acquirer Stock to be paid and issued, respectively, to Seller (in each case in accordance with the immediately succeeding sentence). Each Milestone Payment shall be satisfied through the payment and issuance of a combination of cash and shares of Acquirer Stock (valued at the Share Value), with such mix to be determined in Acquirer’s sole discretion; provided that such allocation shall be determined such that the aggregate amount of cash included in the Total Merger Consideration remains consistent with the Intended Tax Treatment. The maximum aggregate amount of Milestone Payments that may become due and payable by Acquirer pursuant to this Section 2.7 will in no event exceed $150,000,000.
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(d)Acknowledgments. Seller acknowledges and agrees that the Company Group Revenue levels for the Milestone Events shall not be construed as representing an estimate or projection of anticipated results or sales of any Company Products and that such Milestone Events are merely intended to define Acquirer’s Milestone Payment obligations if such revenue levels are achieved. Seller further acknowledges and agrees that (i) nothing in this Section 2.7(d) is intended, or shall be construed, to require Acquirer to develop, commercialize or otherwise exploit a specific Company Product and (ii) nothing in this Section 2.7(d) is intended, or shall be construed, as restricting such business or imposing on Acquirer the duty to develop, commercialize or otherwise exploit any Company Product for which Milestone Payments are payable hereunder to the exclusion of, or in preference to, any other product or in any way other than in accordance with its normal commercial practices; provided that Acquirer will not, and cause its Subsidiaries not to, take any action in bad faith the purpose of which is to reduce or avoid payment of any Milestone Payment. Except as set forth in this Section 2.7(d), Acquirer shall have no other diligence obligations, express or implied, with respect to the Company Products.
(e)Milestone Payments Not a Security. The Parties acknowledge and agree, and acknowledge and agree, that (i) the right to receive any Milestone Payments is solely a contractual right and does not, in and of itself, constitute an equity ownership interest in Acquirer or any other Person, (ii) Seller has no rights as a security holder of Acquirer or any other Person merely as a result of their right to receive the Milestone Payments and (iii) no interest is payable as additional consideration with respect to any Milestone Payment.
(f)Acknowledgment. Each of the Company Parties and Seller acknowledges that the Milestone Payments are subject to numerous factors outside the control of Acquirer, (ii) there is no assurance that any Milestone Event will be achieved, (iii) neither Acquirer nor its Affiliates owe, by virtue of their obligations under this Section 2.7, a fiduciary duty or any implied duties to Seller and (iv) the parties intend that the express provisions of this Agreement shall set forth the only obligations that apply to their relationship with respect to the Milestone Payments.
(g)Operation of the Company Group Following Closing Date. Following the Closing Date and through the end of the Second Milestone Period, Acquirer shall use its Commercially Reasonable Efforts to operate the Business in the Ordinary Course of Business and otherwise in accordance with the business plan and presumptions underlying the Pre-Closing Budget and provide the Business with capital to continue operations in the Ordinary Course of Business in order to achieve the Milestone Events. Acquirer shall not take any action in bad faith the purpose of which is to reduce or avoid payment of any Milestone Payment. As used in this Section 2.7(g), “Commercially Reasonable Efforts” means carrying out those obligations and tasks that comprise a commercially reasonable level of effort and expenditure of capital and resources (including appropriate allocation of resources) that Acquirer in good faith in the exercise of its reasonable business judgment.
(h)Acceleration of Milestone Payment. Notwithstanding anything to the contrary contained herein: if both (x) an Acquirer Change in Control shall have occurred at any time on or prior to the end of the Second Milestone Period and (y) FY2022 Company Group Revenue is equal to or above $163 million, such that the full $112.5 million Milestone Payment is earned in respect of Milestone Event #1, then Milestone Event #2 shall automatically be deemed to have been achieved and Acquirer shall pay, or shall cause to be paid, to Seller the full $37.5 million Milestone Payment owing in respect of Milestone Event #2 on or prior to the later of (A) the third (3rd) Business Day immediately following such Acquirer Change in Control and (B) the Milestone Payment Date for Milestone Event #1. Upon such accelerated payment of the $37.5 million Milestone Payment owing in respect of Milestone Event #2 in accordance with this Section 2.7(h), Acquirer shall have no further obligations under this Section 2.7.
2.8Withholding Rights. Notwithstanding anything herein to the contrary, each of Acquirer, Holdco2, the Company, the Surviving Entity and their respective agents shall be entitled to deduct and withhold from any consideration otherwise payable pursuant to this Agreement any amounts required to be deducted and withheld therefrom under applicable Law on account of Taxes (“Applicable Withholding Law”). Notwithstanding the foregoing, if a party paying consideration determines that an amount is required to be deducted and withheld with respect to any amounts payable, at least five (5) days prior to the date the applicable payment is scheduled to be made, the party making the payment shall provide the recipient with written notice of its intent to deduct and withhold, which notice shall include a copy of the calculation of the amount to be deducted and withheld and a
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reference to the applicable provision of Law pursuant to which such deduction and withholding is required, and the party making the payment shall reasonably cooperate with the recipient to eliminate or reduce the basis for and amount of such deduction or withholding (including providing the recipient with a reasonable opportunity to provide forms or other evidence that would exempt such amounts. from withholding). Amounts so deducted or withheld shall be treated for all purposes of this Agreement as having been paid hereunder to the Person in respect of which such withholding was made. Acquirer, Holdco2, the Company, the Surviving Entity or their respective paying agent, as applicable, shall timely remit any amounts withheld or deducted pursuant to this Section to the applicable Tax Authority.
2.9Dispute Resolution.
(a)In the event that Seller disputes (i) the purported occurrence or non-occurrence of any Milestone Event, (ii) the payment of any Milestone Payment, or (iii) any indemnification claim or setoff under Article 8 then Seller shall provide written notice to Acquirer (the “Dispute Notice”) specifying the amount disputed and the basis for the dispute. Acquirer and Seller shall thereafter attempt to resolve the dispute as set forth in this Section 2.9(a).
(b)Seller and Acquirer shall attempt to resolve any dispute set forth in a Dispute Notice promptly by negotiation in good faith between an officer of Seller, on the one hand, and an officer of Acquirer, on the other, in each case who has authority to settle the dispute (subject to any limitations set by the board of directors or other governing body to which such officer reports). Each Party shall give the other Party involved written notice of any dispute not so resolved within thirty (30) days following Seller’s delivery of the Dispute Notice. Within ten (10) Business Days following delivery of such notice, the Party receiving notice shall submit to the other a written response thereto. The notice and the response shall include: (i) a statement of each Party’s position(s) regarding the matter(s) in dispute, and (ii) the name and title of the officer who will represent Seller and Acquirer and any other Person who will accompany that officer.
(c)Within ten (10) Business Days following delivery of a Dispute Notice, the designated officers of Acquirer and Seller shall meet at a mutually agreed time and place, and thereafter, as often as they reasonably deem necessary, to attempt to resolve the dispute. All negotiations conducted pursuant to this Section 2.9(a) (and any of the Parties’ submissions in contemplation hereof) shall be kept confidential by the Parties and shall be treated by the Parties and their representatives as compromise and settlement negotiations under the Federal Rules of Evidence and any similar state rules.
(d)If Seller and Acquirer are unable to resolve any dispute arising out of this Agreement in accordance with provisions (a), (b) and (c) of this Section 2.9 within thirty (30) days after delivery of any Dispute Notice, then, subject to Section 2.9(e), Acquirer and Seller shall be entitled to submit such dispute for final adjudication to the applicable court sitting in the State of Delaware in accordance with Section 9.4.
(e)Notwithstanding Section 2.9(d), any dispute with respect to (i) the purported occurrence or non-occurrence of any Milestone Event or (ii) the payment of any Milestone Payment that shall not have been resolved by Seller and Acquirer in accordance with provisions (a), (b) and (c) of this Section 2.9 within thirty (30) days after delivery of any Dispute Notice shall be submitted to the Independent Expert. The Independent Expert shall be engaged pursuant to an engagement letter among Seller, Acquirer and the Independent Expert on terms and conditions consistent with this Section 2.9(e). The Independent Expert shall be instructed, pursuant to such engagement letter, to act as an expert and not as an arbitrator and to resolve only the items contained in the applicable Dispute Notice that shall not have been resolved between Seller and the Acquirer (the “Milestone Unresolved Items”) and not to otherwise investigate any matter independently. Seller and Acquirer each agree to furnish to the Independent Expert reasonable access to such individuals and such information, books and records as may be reasonably required by the Independent Expert to make its final determination (and any such information, books and records shall be provided to the other such Party prior to its submission or presentation to the Independent Expert). Seller and Acquirer shall also instruct the Independent Expert to render its reasoned written decision as promptly as practicable but in no event later than thirty (30) days from the date that information related to the unresolved objections is presented to the Independent Expert by Seller and Acquirer. With respect to each Milestone Unresolved Item, such decision shall be made based on the terms and conditions of this Agreement and shall not be in excess of the higher, nor less than the lower, of the amounts advocated by Acquirer in the Milestone Event Notice
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or Seller in the Dispute Notice with respect to such Milestone Unresolved Item. Except as Seller and Acquirer may otherwise agree, all communications between Seller and Acquirer or any of their respective Representatives, on the one hand, and the Independent Expert, on the other hand, shall be in writing with copies simultaneously delivered to the other such Party. The resolution of Milestone Unresolved Items by the Independent Expert shall be final, binding and conclusive on the Parties (absent manifest error). All fees and expenses of the Independent Expert shall be borne on a proportionate basis by Acquirer, on the one hand, and Seller, on the other, based on the percentage which the portion of the contested amount not awarded in favor of Acquirer or Seller bears to the amount actually contested by such Person.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY PARTIES AND SELLER
Each of the Company Parties and Seller hereby represents and warrants to the Acquirer Parties as follows, with each such representation and warranty subject to the exceptions set forth in the Company Disclosure Schedules (it being understood that the Company Disclosure Schedules shall be arranged in sections corresponding to the sections and subsections contained in this Article 3, and no disclosure made in any particular section of the Company Disclosure Schedules shall be deemed to be made in any other section of the Company Disclosure Schedules unless expressly made therein (by cross- reference or otherwise) or to the extent it is reasonably apparent from a reading of the text of the disclosure that such disclosure is applicable to such other sections and subsections of the Company Disclosure Schedules).
3.1Organization of Seller and the Company Group.
(a)Each Company Party is an entity duly organized and validly existing and in good standing under the Laws of the jurisdiction of its incorporation or formation with the requisite corporate power and corporate authority to conduct its business as it is presently being conducted, to own, lease or operate, as applicable, its assets and properties, and to perform all of its obligations under its Contracts. Each of the Company Parties is duly qualified to do business as a foreign entity and is duly qualified to do business and in good standing (if such concept is applicable in the relevant jurisdiction) in each jurisdiction where the character of its assets and properties owned, leased or operated or the nature of its activities make such qualification necessary, except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. Other than in connection with the Pre-Closing Restructuring, neither Seller nor any of the Company Parties has ever approved or commenced any Proceeding or made any election contemplating the dissolution or liquidation of any of the Company Parties or the winding up or cessation of the business or affairs of any of the Company Parties. Other than in connection with the Pre-Closing Restructuring, there are no entities that have been merged into or that otherwise are predecessors to any of the Company Parties. True, complete and correct copies of the Governing Documents of each of the Company Parties, as amended and in effect as of the Agreement Date, have been Delivered to Acquirer. No Company Party is in violation of its Governing Documents.
(b)Holdco2 has been organized solely for the purpose of entering into the Transaction Documents and the Ancillary Agreements to which it is a party and consummating the Pre-Closing Restructuring, the Mergers and the other Transactions, and has not engaged in any activities or business, other than those incident or related to or incurred in connection with its formation, the Pre-Closing Restructuring or the negotiation, preparation or execution of the Transaction Documents, the performance of its covenants or agreements in the Transaction Documents to which it is a party or any Ancillary Agreement or the consummation of the Transactions.
3.2Subsidiaries.
(a)Each Subsidiary of Holdco2 and the Company is either a corporation or limited liability company duly organized and validly existing and in good standing under the Laws of the jurisdiction of its incorporation or formation with the requisite corporate power and corporate authority to conduct its business as it is presently being conducted, to own, lease or operate, as applicable, its assets and properties, and to perform all of its obligations under its Contracts. Each Subsidiary of Holdco2 and the Company is duly qualified to do business as a foreign corporation and is duly qualified to do business and in good standing (if such concept is applicable in the relevant jurisdiction) in each jurisdiction where the character of its assets and properties owned, leased or operated or the
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nature of its activities make such qualification necessary, except where the failure to be so qualified or in good standing would not have a Material Adverse Effect.
(b)Section 3.2(b) of the Company Disclosure Schedule accurately lists the equity interests, whether direct or indirect, held by each of Holdco2 and the Company in each of its Subsidiaries, including such ownership after giving effect to the Pre-Closing Restructuring (collectively, the “Subsidiary Ownership Interests”), as well as the names of any other Persons who hold equity interests in such Subsidiaries and the ownership interests held by any such Persons, including such ownership after giving effect to the Pre-Closing Restructuring. The Subsidiary Ownership Interests are (or will be at Closing) duly authorized, validly issued, fully paid and non-assessable and are free of any Encumbrances, outstanding subscriptions, preemptive rights or “put” or “call” rights created by statute, the Governing Documents of any Subsidiary of Holdco2 or the Company or any Contract to which any Subsidiary of Holdco2 or the Company is a party or by which such Subsidiary or any of its assets is bound. Other than the Subsidiary Ownership Interests, there are no options, warrants or rights of any kind to acquire securities or other ownership interests in any of the Subsidiaries of Holdco2 or the Company, or any interest convertible into or exchangeable or exercisable for, any equity or similar interest in, any of the Subsidiaries of Holdco2 or the Company.
(c)True, complete and correct copies of the Governing Documents of each Subsidiary of Holdco2 and the Company (as of the Agreement Date), as amended and in effect as of the Agreement Date, have been Delivered to Acquirer. No such Subsidiary of Holdco2 or the Company is in violation of its Governing Documents.
(d)Section 3.2(d) of the Company Disclosure Schedule sets forth a true and complete list of all Contracts (x) to which Detect Genomix, Seller or any member of the Company Group is a party or by which any such party, or any of their respective assets, is bound and (y) that pertain to Detect Genomix and the operation of its business. Detect Genomix has not engaged in any activities or business, other than those incident or related to or incurred in connection with its formation or the negotiation, preparation or execution of the Contracts set forth on Section 3.2(c) of the Company Disclosure Schedule.
3.3Authorization.
(a)Each of the Company Parties and Seller has all requisite corporate power and authority, and has taken all corporate action necessary, to execute, deliver and perform its obligations under the Transaction Documents and to consummate the Transactions. Each of the Seller Board and the Holdco2 Board, at a meeting duly called and held at which all directors were present, duly and unanimously adopted resolutions (i) approving and declaring advisable this Agreement, the Ancillary Agreements, the Mergers and the other transactions contemplated hereby and thereby, (ii) determining that the Merger Consideration is fair to the sole stockholder of Holdco2 and declaring that this Agreement, the Ancillary Agreements, the Merger and the other Transactions are in the best interests of Holdco2’s stockholder, (iii) adopting this Agreement and the Ancillary Agreements, (iv) authorizing Seller and Holdco2 to enter into this Agreement and to consummate the Mergers and the other Transactions, on the terms and subject to the conditions set forth in this Agreement and the Ancillary Agreements, (v) in the case of the Holdco2 Board, (A) directing that the Mergers and this Agreement and the Ancillary Agreements be submitted to the stockholder of Holdco2 for a vote for adopting this Agreement and the Ancillary Agreements and approving the Mergers and (B) recommending that the Holdco2 stockholder votes to approve and adopt this Agreement and the Ancillary Agreements and approve the Merger and (vi) in the case of the Seller Board, authorizing Seller as the sole stockholder of Holdco2 to vote for the adoption of this Agreement and the Ancillary Agreements and approval of the Mergers (the “Holdco2 Board Approval” and the “Seller Board Approval”). No Takeover Statute or similar statute or regulation applies or purports to apply to the Company with respect to the Mergers, this Agreement or any other Transaction. This Agreement and the Ancillary Agreements to which the Company Parties or Seller is a party have been duly executed and delivered by the Company Parties and Seller, as applicable, and, assuming the due authorization, execution and delivery hereof and thereof by the other parties hereto and thereto, constitute the legal, valid and binding obligations of the Company Parties and Seller, as applicable, enforceable against the Company Parties and Seller, as applicable, in accordance with their respective terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting creditors’ rights generally and by general principles of equity, regardless of whether enforcement is sought in a Proceeding at law or in equity (the “Enforceability Exceptions”).
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(b)The only vote of holders of any class or series of Holdco2 Common Stock or other equity securities necessary to approve and adopt this Agreement, the Ancillary Agreements, the Merger and the other transactions contemplated hereby and thereby is the affirmative vote of Seller (the “Holdco2 Stockholder Approval”). No vote of the holders of any class or series of capital stock of Seller is necessary to approve and adopt this Agreement, the Ancillary Agreements, the Merger and the other Transactions.
3.4Capitalization.
(a)The total number of authorized, issued and outstanding shares of capital stock of Holdco2 consists of 1,000 shares of Holdco2 Common Stock, all of which are issued and outstanding as of the Agreement Date. The total number of authorized, issued and outstanding shares of capital stock of the Company consists of 100 shares of common stock, par value $0.01, of the Company, all of which are issued and outstanding as of the Agreement Date. As of the Agreement Date, BioReference owns all right, title and interest in and to, all of the shares of outstanding capital stock of the Company free and clear of all Encumbrances. As of the Closing, Holdco2 will own all right, title and interest in and to, all of the shares of outstanding capital stock or other equity interests of the Company free and clear of all Encumbrances. There are no other issued and outstanding shares of capital stock or other securities of Holdco2 and no outstanding commitments or Contracts to issue any shares of capital stock or other securities of Holdco2.
(b)(i) There are no preemptive or other outstanding rights, options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, Contracts or securities under which Seller or Holdco2 is or may become obligated to issue or sell, or giving any Person a right to subscribe for or acquire any shares of the capital stock or other voting securities of Holdco2 or the Company and (ii) the outstanding capital stock or other voting securities of each of Holdco2 and the Company is not subject to any voting trust agreement or other Contract restricting the voting, dividend rights or disposition of such capital stock or other voting securities of Holdco2 or the Company, as applicable, except in each case as set forth in this Agreement.
3.5Title to and Sufficiency of Real and Tangible Properties and Assets.
(a)Each member of the Company Group has good, valid and marketable title to or, in the case of leased tangible property assets and tangible properties or assets held under license, a good and valid leasehold or license interest in, all of their respective material tangible properties and assets. Each member of the Company Group holds title to all material tangible property and assets which it purports to own, free and clear of any Encumbrances other than Permitted Encumbrances. The tangible assets and personal property owned or leased by the Company Group and currently being used in the Business are, in all material respects, in good operating condition and repair, normal wear and tear excepted, and are useable in the Ordinary Course of Business.
(b)The tangible assets and properties owned by or licenses entered into by the Company Group for same constitute all of the tangible assets and properties that are necessary to conduct and operate the Business as currently conducted by the Company Group as of the Agreement Date, without the material breach or violation of any Contracts. Except as set forth on Section 3.5(b) of the Company Disclosure Schedules, neither Seller nor its Affiliates (but excluding the members of the Company Group) own or license to the Company Group any tangible property that are necessary for the Company Group to conduct, operate or continue the conduct and operation of the Business. Except as set forth on Section 3.5(b) of the Company Disclosure Schedules, there are no Contracts to which members of the Company Group are not the sole counterparties (other than Third Parties) (i) from which the Business or any member of the Company Group generates any revenue, (ii) that are material to the Business, or (iii) that are primarily used by the Company Group or in the conduct of the Business (the Contracts under clause (i), “Seller Revenue Contracts” and the Contracts under clauses (i), (ii) or (iii), collectively, “Seller Contracts”).
(c)Except as set forth in Section 3.5 of the Company Disclosure Schedules, no member of the Company Group owns or has ever owned, any real property or interest in real property. Section 3.5 of the Company Disclosure Schedules lists all interests in real property leased, subleased or otherwise used or occupied by a member of the Company Group (each, a “Leased Property”), including the address of the property and the name and address of the landlord. Holdco2 has Delivered complete copies of all documents in Holdco2’s possession relating to the use or occupancy of such Leased Property, including all leases, subleases, offers to lease or agreements to lease, lease
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guarantees, tenant estoppels, subordinations, non-disturbance, operating agreements and attornment agreements (with any amendments or modifications related thereto, collectively, the “Leases”). With respect to the Leased Property, the applicable member of the Company Group has a valid leasehold interest in the leasehold estate relating thereto, free and clear of any Encumbrance, easement, covenant or other restriction applicable to such Leased Property which would reasonably be expected to materially impair the current uses or the occupancy by the applicable member of the Company Group of such Leased Property. No member of the Company Group has received written notice that it is in default of any of the Leases, nor has any member of the Company Group sent written notice to any other party to any of the Leases that such other party is in default thereof, in each case, except as would not reasonably be likely to result in material liability to such member of the Company Group.
3.6Environmental Laws and Regulations. The Company Group and all facilities or real property currently owned, leased or operated by the Company Group, are now and, since such time as the Company Group has owned, leased or operated the facilities or real property, have been in compliance in all material respects with all applicable Environmental Laws. No member of the Company Group has, since the Company Group has owned, leased or operated the facilities or real property, received from any Governmental Authority any notice or demand letter alleging that any member of the Company Group is in violation of any Environmental Law, and no member of the Company Group is subject to any Order of any Governmental Authority imposing liability or obligations relating to any Environmental Law. There has been no release by any member of the Company Group, or for which any member of the Company Group would reasonably be expected to be liable by Contract or by operation of Law, of any Hazardous Substance at, under, from or to any facility or real property currently or formerly owned, leased or operated by any member of the Company Group. No member of the Company Group has assumed, undertaken or otherwise become subject to any liability of another Person relating to Environmental Laws.
3.7Absence of Certain Activities or Changes. Since June 30, 2021, (a) the Company Group has conducted its operations in the Ordinary Course of Business (except as required by any COVID-19 Response), (b) there has been no Material Adverse Effect, and (c) no member of the Company Group has taken any action which would require the consent of Acquirer pursuant to Section 5.1 if taken during the Pre-Closing Period.
3.8Company Contracts.
(a)Section 3.8(a) of the Company Disclosure Schedules sets forth, as of the Agreement Date, a complete and correct list of each of the following Contracts: (x) which are Seller Contracts, (y) to which any member of the Company Group is a party or (z) by which any member of the Company Group’s properties or assets are bound as of the Agreement Date:
(i)any customer, supplier or payor Contract under which a member of the Company Group has made or received payments in any calendar year period since January 1, 2019 that are material in amount, which for purposes of this subsection shall be supplier Contracts in an amount of $500,000 or more per year, customer Contracts in an amount of $400,000 or more per year or payer Contracts in an amount of $100,000 or more per year, which shall include the contracts identified in Section 3.8(a)(ii);
(ii)any Contract with a (A) Top Customer, (B) Top Supplier or (C) Top Payor;
(iii)any distributor, referral or similar agreement;
(iv)(A) any joint venture, partnership or limited liability company Contract, (B) any Contract that involves a sharing of revenues, profits, cash flows, expenses or losses with other Persons, (C) any Contract that involves the payment by any member of the Company Group of royalties to any other Person and (D) any Contracts providing for payment of amounts calculated based upon the revenues or income of any member of the Company Group, earnouts, milestones, royalties or contingent payments (I) by or (II) to any member of the Company Group;
(v)all material Contracts that relate to research, development, manufacturing and/or commercialization of Company Products other than Contracts with suppliers, payers, customers and distributors or referral or similar agreements;
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(vi)any agreement or Contract providing for the payment of compensation or benefits (including any accelerated vesting) upon any termination of employment or service, or in connection with the Transactions, with any current or former employees under which any member of the Company Group has any actual or potential Liability;
(vii)any Contract (A) pursuant to which any other Person is granted exclusive rights or that requires any member of the Company Group to deal exclusively with any Persons, (B) containing a “most-favored-party,” best pricing or other term or provision by which any Person is, or could become, entitled to any benefit, right or privilege which, under the terms of such Contract, must be at least as favorable to such Person as those offered to another Person, (C) that limits or would limit the freedom of any member of the Company Group or any of their successors or assigns or their respective Affiliates (including Acquirer, the Surviving Entity and their respective Affiliates after Closing) to engage or participate, or compete with any other Person, in any line of business, market or geographic area, or to make use of any Intellectual Property, (D) containing any “take or pay,” minimum commitments or similar provisions or provisions to purchase goods or services from a sole source other than reagent agreements entered into in the Ordinary Course of Business that include minimum purchase obligations solely as a condition to maintaining preferential pricing conditions for such reagent, (E) in which the any member of the Company Group grants rights of first refusal or first offer, right of negotiation or similar preferential rights to, any Person, or (F) that would, by its terms apply, or purport to apply, to the business of any acquirer of any member of the Company Group or the business of Acquirer following the Closing;
(viii)all Company IP Contracts (other than employee invention assignments on Company’s form, Contracts that are Company IP Contracts solely because they contain licenses of Commercial Software, confidentiality obligations, licenses for feedback or incidental non-exclusive trademark licenses limited solely for the purpose of identifying the Company, any of its Subsidiaries or any counterparty as a participant in a health insurance program, a participating health insurer or service provider);
(ix)any and all Seller Contracts concerning Intellectual Property or IT Assets to which a member of the Company Group is a beneficiary or by which such member, or any of its properties or assets, may be bound, including, as applicable, all (i) licenses of Intellectual Property to any third party, licenses of Intellectual Property by any third party, (iii) other Seller Contracts relating to the transfer, development, maintenance or use of Intellectual Property, including data, or IT Assets and (iv) consents, settlements, and Orders governing the use, validity or enforceability of Intellectual Property or IT Assets (“Seller IP Contracts”), other than Contracts that are Seller IP Contracts solely because they contain licenses of Commercial Software, confidentiality obligations, licenses for feedback, incidental non- exclusive trademark licenses solely for the purpose of identifying a member of the Company Group or any counterparty as a participant in a health insurance program, a participating health insurer or service provider;
(x)any Contract providing for the development of any software, technology or Intellectual Property, independently or jointly, either by or for a member of the Company Group (other than employee invention assignment agreements with employees of a member of the Company Group on the Company’s or any Subsidiary of the Company’s respective standard form of agreement, copies of which have been Delivered to Acquirer);
(xi)any confidentiality, secrecy or non-disclosure Contract other than any such Contract entered into by a member of the Company Group in the Ordinary Course of Business;
(xii)(A) any settlement agreement with respect to any Proceeding, (B) any settlement or similar Contract restricting in any respect the operations or conduct of the Business, as currently conducted or as proposed to be conducted, of a member of the Company Group (or the Acquirer or its Affiliates after the Closing), and (C) any settlement or similar Contract with a Governmental Authority;
(xiii)any Contract to which a member of the Company Group is a party or by which it or any of its properties or assets is bound as of the Agreement Date with any labor union or any collective bargaining agreement or similar Contract with its employees;
(xiv)any Contract related to Indebtedness;
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(xv)any Contract to which a member of the Company Group is a party or by which it or any of its properties or assets is bound as of the Agreement Date for capital expenditures in excess of $150,000 individually or in the aggregate;
(xvi)any Contract pursuant to which a member of the Company Group is a lessor or lessee of any machinery, equipment, motor vehicles, office furniture, fixtures or other personal property involving expenditures in excess of $500,000 in any calendar year;
(xvii)any Contract pursuant to which a member of the Company Group has acquired a business or entity, or substantially all of the assets of a business or entity, whether by way of merger, consolidation, purchase of stock, purchase of assets, license or otherwise, or any Contract pursuant to which it has any equity or equity-linked interest or other material ownership interest in any other Person;
(xviii)all Contracts (i) that would require consent, (ii) that would require or permit a member of the Company Group (or any successor) or an acquirer of any member of the Company Group to make any payment to another Person, (iii) that would be subject to modification or termination that contain any clause that would trigger adverse consequences for Acquirer, (v) pursuant to which rights of any third party would be triggered or become exercisable, (vi) under which any other consequence, result or effect arises, in each case, by virtue of the change in control resulting from the completion of the Transactions, including the Pre-Closing Restructuring, or in connection with or as a result of the execution of this Agreement or the consummation of the Transactions, including the Pre-Closing Restructuring, either alone or in combination with any other event;
(xix)(A) any Contract to which a member of the Company Group is a party or by which it or any of its properties or assets is bound as of the Agreement Date with a Related Party, (B) any Contract for or relating to the employment or service of any member of the Company Group’s employees with the title of Senior Director or any more senior title which is not terminable by the Company Group on less than 30 days’ notice and without severance and (C) any other type of Contract with any member of the Company Group’s employees with the title of Senior Director or any more senior title, except for Company Benefit Plans or Seller Benefit Plans applicable to Company Group employees;
(xx)any Contract providing for indemnification to any director, officer, member, manager, employee, trustee or fiduciary of the Company Group;
(xxi)any Contract with any Governmental Authority, including any Contract relating to the grant, incentive, benefit, qualification or subsidy from any Governmental Authority, any Permit that is required for the conduct of the Business as currently conducted and as proposed to be conducted, or for a member of the Company Group holding of its assets, or any Contract with a government prime contractor, or higher-tier government subcontractor, including any indefinite delivery/indefinite quantity contract, firm-fixed-price contract, schedule contract, blanket purchase agreement, or task or delivery order (a “Government Contract”);
(xxii)any Contract between any member of the Company Group on the one side and any of Seller or its Affiliates on the other side;
(xxiii)all Contracts with non-employee health care professionals who provide services to or on behalf of a member of the Company Group; and
(xxiv)all Company Data Agreements.
(b)All Contracts required to be listed in Section 3.8(a) of the Company Disclosure Schedules are referred to as the “Company Contracts.” True, complete and correct copies of all written Company Contracts and summaries of all material oral Contracts that constitute Company Contracts, in each case, including all amendments thereto and waivers thereunder, have been Delivered to Acquirer.
(c)Each Company Contract is existing, in full force and effect and is legal, valid, binding and enforceable against the applicable member of the Company Group and, to the Knowledge of the Company, each other party thereto, in accordance with their respective terms except as enforcement may be limited by the
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Enforceability Exceptions. No member of the Company Group, and in the case of Seller Contracts, neither the Seller nor any of its Affiliates, shall be, as a result of the execution and delivery or effectiveness of this Agreement or the performance of Holdco2’s obligations under this Agreement (including the Merger), and Company Group, in the case of Seller Contracts, Seller and its Affiliates, and, to the Knowledge of the Company, no other party is, in material Default under any Company Contract. No written notice of any claim of material Default under, or termination of, a Company Contract has been made or received by a member of the Company Group, Seller or Seller Affiliate. No member of the Company Group, and in the case of Seller Contracts, neither the Seller nor any of its Affiliates, have waived any of its material rights under any Company Contract.
3.9Noncontravention; Restrictions on Business.
(a)The execution, delivery and performance by the Company of and the Company’s compliance with this Agreement and consummation by the Company of the Transactions do not and will not (i) violate the Governing Documents of any member of the Company Group, (ii) assuming any consents and approvals referred to in Section 3.9(b) are duly obtained, conflict with or constitute a material Default under any Laws, Orders or Permits applicable to a member of the Company Group or (iii) conflict with, give rise to or result in a material Default under any material Company Contract, other than those Contracts listed in Section 3.9(a) of the Company Disclosure Schedules, or result in the creation of any Encumbrance (other than a Permitted Encumbrance) on any of the properties, assets, Holdco2 Common Stock or other equity securities of the Company.
(b)Other than (x) the filing of the First Certificate of Merger and Second Certificate of Merger and (y) such filings and notifications as may be required to be made by the Company Group in connection with the Transactions under the HSR Act and other applicable Antitrust Laws and the expiration or early termination of the applicable waiting period under the HSR Act and other applicable Antitrust Laws, no consent, approval, Order or authorization of, or registration, declaration or filing with, any Governmental Authority or any other Person (including any Institutional Review Board, Privacy Board or Ethics Committee for any clinical trial being conducted by or on behalf of a member of the Company Group) is required to be made, obtained or given by a member of the Company Group in connection with the execution, delivery and performance by the Company of this Agreement or the consummation by the Company of the Transactions.
3.10Financial Statements and Operating Budget.
(a)Seller has Delivered to Acquirer the unaudited consolidated financial statements of the Company for the fiscal years ended December 31, 2019 and 2020 (including, in each case, consolidated balance sheets, statements of operations and statements of cash flows, collectively, the “Financial Statements”), which are included on Section 3.10(a) of the Company Disclosure Schedules. The Financial Statements (i) are derived from and in accordance with the books and records of the Company, (ii) fairly present, in all material respects, the consolidated financial condition of the Company at the dates therein indicated and the consolidated results of operations and cash flows of the Company for the periods therein specified, and (iii) were prepared in accordance with the Accounting Standards applied on a consistent basis throughout the periods involved. When delivered to Acquirer, the Required Financial Statements (i) will be derived from and in accordance with the books and records of the Company, (ii) fairly present, in all material respects, the consolidated financial condition of the Company at the dates therein indicated and the consolidated results of operations and cash flows of the Company for the periods therein specified, and (iii) will be prepared in accordance with the Accounting Standards applied on a consistent basis throughout the periods involved, except, in the case of any unaudited interim financial statements, for the omission of footnotes and normal, immaterial year-end adjustments.
(b)Except as set forth in Section 3.10(b) of the Company Disclosure Schedules, no member of the Company Group has applied for or accepted any loan or other benefit made available by the CARES Act.
(c)Section 3.10(c) of the Company Disclosure Schedules sets forth a true, correct and complete list of all Indebtedness for borrowed money of the Company Group as of the Agreement Date, including, for each such item, the Contract governing such item and the interest rate, maturity date, any assets securing such instrument and any prepayment or other penalties payable in connection with the repayment of such instrument at the Closing.
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(d)The Company Group has established and maintain a system of internal accounting controls sufficient to provide reasonable assurances (i) that transactions, receipts and expenditures of the Company Group are being executed and made only in accordance with appropriate authorizations of management and the applicable board of directors and (ii) that transactions are recorded as necessary to permit preparation of financial statements in conformity with the Accounting Standards. No member of the Company Group or, to the Knowledge of the Company, its independent auditors or any current employee, consultant or director of a member of the Company Group has identified or been made aware of any fraud, whether or not material, that involves a member of the Company Group’s management or other current or former employees, consultants or directors of any member of the Company Group who have a role in the preparation of financial statements or the internal accounting controls utilized by the Company Group, or any claim or allegation regarding any of the foregoing. No member of the Company Group has received and the Company has no Knowledge of any material written complaint, allegation, assertion or claim, in each case, regarding deficient accounting or auditing practices, procedures, methodologies or methods of the Company Group or its internal accounting controls or any material inaccuracy in the financial statements of the Company Group. There are no significant deficiencies or material weaknesses in the design or operation of the Company Group’s internal controls that would reasonably be expected to adversely affect the Company Group’s ability to record, process, summarize and report financial data. There has been no change in the Company Group’s accounting policies since January 1, 2017, except as described in the Financial Statements.
(e)Except as set forth in Section 3.10(e) of the Company Disclosure Schedules, the accounts receivable of the Company Group (collectively, the “Accounts Receivable”) as reflected on the Company Balance Sheet and as will be reflected in the Estimated Closing Statement arose in the Ordinary Course of Business and represent bona fide claims against debtors for sales and other charges, and have been collected or are collectible in the book amounts thereof within one-hundred and fifty (150) days following the applicable invoice date, less an amount not in excess of the allowance for doubtful accounts provided for in the Company Balance Sheet or in the Estimated Closing Statement, as the case may be. Allowances for doubtful accounts have been prepared in accordance with Accounting Standards consistently applied. To the Knowledge of the Company, none of the Accounts Receivable is subject to any claim of offset, recoupment, set-off or counter-claim. Except as set forth in Section 3.10(e) of the Company Disclosure Schedules, no Person has any Encumbrance on any Accounts Receivable, and no agreement for deduction or discount has been made with respect to any such Accounts Receivable. Section 3.10(e) of the Company Disclosure Schedule sets forth, as of the Agreement Date, an aging of the Accounts Receivable in the aggregate.
3.11Liabilities. The Company Group does not have any Liabilities of any nature other than (a) those set forth or adequately provided for in the balance sheet included in the Financial Statements as of September 30, 2021 (such date, the “Company Balance Sheet Date” and such balance sheet, the “Company Balance Sheet”), (b) those incurred in the conduct of the Company’s business since the Company Balance Sheet Date in the Ordinary Course of Business and do not result from any material breach of Contract or violation of Law and (c) those incurred by the Company Group in connection with the execution of this Agreement. Except for Liabilities reflected in the Financial Statements, no member of the Company Group has any material off-balance sheet Liability of any nature to any Third Parties or entities, the purpose or effect of which is to defer, postpone, reduce or otherwise avoid or adjust the recording of expenses incurred by the Company Group. All reserves that are set forth in or reflected in the Company Balance Sheet have been established in accordance with the Accounting Standards consistently applied. Without limiting the generality of the foregoing, no member of the Company Group currently guarantees any debt or other obligation of any other Person.
3.12Taxes. Except as provided in Section 3.12 of the Company Disclosure Schedules:
(a)Each member of the Company Group, and any consolidated, combined, unitary or aggregate group composed of members of the Company Group for Tax purposes, has timely filed all federal income Tax Returns and other material Tax Returns it is required to have filed. All Tax Returns filed by or with respect to any member of the Company Group are accurate, complete and correct in all material respects.
(b)Each member of the Company Group has paid in full all material Taxes required to have been paid. All Taxes due in connection with the operations of each member of the Company Group until the Closing Date have been paid in full. No member of the Company Group has any Liability for Taxes in excess of the amounts so
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paid, except for Taxes which are not yet due and payable or Taxes of other members of the Parent Group which shall be paid by other members of the Parent Group.
(c)The Company Balance Sheet reflects all Liabilities for unpaid Taxes of the Company Group for periods (or portions of periods) through the Company Balance Sheet Date, except for Taxes of other members of the Parent Group which shall be paid by other members of the Parent Group. The Company Group does not have any Liability for unpaid Taxes accruing after the Company Balance Sheet Date except for Taxes arising in the Ordinary Course of Business subsequent to the Company Balance Sheet Date and Taxes of other members of the Parent Group which shall be paid by other members of the Parent Group. The Company Group has no Liability for Pre-Closing Taxes that is not included in the calculation of Closing Indebtedness except for Taxes of other members of the Parent Group which shall be paid by other members of the Parent Group.
(d)Within the last five (5) years, no claim has been made by any Governmental Authority in any jurisdiction where a member of the Company Group does not file Tax Returns that such member is or may be subject to Tax by that jurisdiction.
(e)Section 3.12(e) of the Company Disclosure Schedules sets forth a complete and accurate listing of (i) all types of Taxes paid, and all types of Tax Returns filed, by or on behalf of each member of the Company Group and (ii) all of the jurisdictions in which each member of the Company Group files such Tax Returns.
(f)No extensions or waivers of statutes of limitations with respect to the Tax Returns have been given by or requested from the Company or any of its Subsidiaries (except for extensions to file Tax Returns that are granted automatically under applicable Law).
(g)There is (i) no past or pending audit of, or Tax controversy associated with, any Tax Return of a member of the Company Group that has been or is being conducted by a Tax Authority which has not been fully settled or resolved and (ii) no other procedure, proceeding or contest of any refund or deficiency in respect of Taxes pending or on appeal with any Governmental Authority.
(h)All deficiencies asserted or assessments made against any member of the Company Group as a result of any examinations by any Tax Authority have been fully paid.
(i)There are no Encumbrances for Taxes upon the assets of any member of the Company Group other than Encumbrances arising by operation of Law for Taxes not yet due and payable.
(j)The Company Group has collected and remitted all sales, use, value added, ad valorem, personal property and similar Taxes (“Sales Taxes”) with respect to sales made or services provided and, for all sales or provision of services that are exempt from Sales Taxes and that were made without charging or remitting Sales Taxes, the Company Group has received and retained any required Tax exemption certificates or other documentation qualifying such sale or provision of services as exempt.
(k)Except as provided in Section 3.12(k) of the Company Disclosure Schedules, no member of the Company Group is party to or bound by any Tax indemnity, Tax sharing, Tax allocation or similar agreement, and no member of the Company Group has any Liability or potential Liability to any Third Party under any such agreement.
(l)No member of the Company Group is party to and has not requested any closing agreement (as described in Section 7121 of the Code or any corresponding, analogous, or similar provision under any state, local or foreign Law related to Taxes), offer in compromise, technical advice memoranda, private letter ruling or other similar agreement with any Tax Authority.
(m)No member of the Company Group has ever entered into any “listed transaction” as defined in Treasury Regulations Section 1.6011-4(b) or any similar provision under state, local or foreign law. Each member of the Company Group has disclosed on its U.S. federal income Tax Returns all positions taken therein that could give rise to a “substantial understatement of income tax” within the meaning of Section 6662 of the Code (or any comparable, analogous or similar provision under any state, local or foreign Law related to Taxes).
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(n)HoldCo has (i) at all times since its formation been a “C corporation” within the meaning of Section 1361(a)(2) of the Code; (ii) except for being a member of the Parent Group, never been a member of an affiliated group of corporations, within the meaning of Section 1504 of the Code (or any predecessor provision or comparable provision of state, local or foreign Law), or a member of a combined, consolidated or unitary group for state, local or foreign Tax purposes; and (iii) except for Taxes of other members of the Parent Group which shall be paid by other members of the Parent Group, no Liability for Taxes of any Person under Treasury Regulations Section 1.1502-6 (or any corresponding provision of state, local or foreign Law related to income Taxes), as transferee or successor, by Contract or otherwise.
(o)No member of the Company Group has ever been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code.
(p)No member of the Company Group is a party to any joint venture, partnership or other arrangement or Contract that could reasonably be expected to be treated as a partnership for Tax purposes.
(q)Except as provided in Section 3.12(p) of the Company Disclosure Schedules, no member of the Company Group is a “United States shareholder” within the meaning of Section 951(b) of the Code with respect to any “controlled foreign corporation” within the meaning of Section 957(a) of the Code or “deferred foreign income corporation” within the meaning of Section 965(d)(1) of the Code. No member of the Company Group is subject to Tax in any jurisdiction other than the jurisdiction in which it is formed or organized by virtue of having employees, a permanent establishment or any other place of business in such jurisdiction.
(r)No member of the Company Group owns any equity interest in an entity that is or, at any time when the Company Group owned such interest, was treated as a passive foreign investment company within the meaning of Section 1297(a) of the Code with respect to such member of the Company Group.
(s)No member of the Company Group has ever been a “distributing corporation” or a “controlled corporation” in connection with a distribution described in Section 355 of the Code.
(t)Each member of the Company Group has withheld and paid all material Taxes required to be withheld in connection with any amounts paid or owing to any employee, creditor, independent contractor or other Third Party.
(u)No member of the Company Group (i) has agreed, or is required, to make any adjustment under Section 481(a) of the Code by reason of a change in accounting method or otherwise for a Pre-Closing Tax Period; (ii) has made an election, or is required, to treat any of its assets as owned by another Person pursuant to the provisions of former Section 168(f) of the Code or as tax-exempt bond financed property or tax-exempt use property within the meaning of Section 168 of the Code; (iii) has acquired, or owns, any assets that directly or indirectly secure any debt the interest on which is tax exempt under Section 103(a) of the Code; or (iv) has made any of the foregoing elections, or is required to apply any of the foregoing rules, under any comparable state or local Law related to Taxes.
(v)No member of the Company Group will be required to include in a Post-Closing Tax Period taxable income attributable to income that accrued (for purposes of financial statements) in a Pre-Closing Tax Period but was not recognized for Tax purposes in any Pre-Closing Tax Period as a result of (i) the installment method of accounting, the completed contract method of accounting, the long-term contract method of accounting, or the cash method of accounting, (ii) any prepaid amount received or paid in a Pre-Closing Tax Period, (iii) any deferred intercompany transaction in a Pre-Closing Tax Period or excess loss account, (iv) a change in method of accounting or Section 481 of the Code in a Pre-Closing Tax Period, (v) except with respect to MGT Canada, any inclusion under Section 951(a) or Section 951A of the Code, (vi) any gain recognition agreement entered into in a Pre-Closing Tax Period, (vii) any transaction under which previously utilized Tax losses or credits may be recaptured (including a dual consolidated loss or an excess loss account), (viii) Section 1400Z-2(a)(1)(A) of the Code, or (ix) any comparable provisions of state or local Tax law, domestic or foreign, or for any other reason. The Company Group has not made an election pursuant to Section 965(h) of the Code to pay the net tax liability under Section 965 of the Code in installments.
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(w)No member of the Company Group has applied for and not yet received a ruling or determination from a Tax Authority regarding a past or prospective transaction.
(x)Each member of the Company Group has (i) to the extent deferred, properly complied in all respects with applicable Law in order to defer the amount of the employer’s share of any “applicable employment taxes” under Section 2302 of the CARES Act, and (ii) to the extent applicable, eligible, and claimed, properly complied in all material respects with applicable Law and duly accounted for any available Tax credits under Sections 7001 through 7004 of the Families First Coronavirus Response Act and Section 2301 of the CARES Act, and (iii) not deferred any payroll Tax obligations (including those imposed by Sections 3101(a) and 3201 of the Code) (for example, by a failure to timely withhold, deposit or remit such amounts in accordance with the applicable provisions of the Code and the Treasury Regulations) pursuant to or in connection with any U.S. presidential memorandum or executive order, and (iv) not sought a PPP Loan.
(y)No event has occurred with respect to a Company Benefit Plan that would be treated by Section 409A(b) of the Code as a transfer of property for purposes of Section 83 of the Code. No member of the Company Group is under any obligation to gross up any Taxes under Section 409A of the Code.
(z)Except as set forth on Section 3.12(z) of the Company Disclosure Schedule, there is no agreement, plan, arrangement or other Contract covering any current or former employee or other service provider of a member of the Company Group to which a member of the Company Group or any of their ERISA Affiliate is a party or by which a member of the Company Group or any of its ERISA Affiliates or their assets are bound that, considered individually or considered collectively with any other such agreements, plans, arrangements or other Contracts, will, or would reasonably be expected to, as a result of the Transactions (whether alone or upon the occurrence of any additional or subsequent events), give rise directly or indirectly to the payment of any amount that would reasonably be expected to be non-deductible under Section 162 of the Code (or any corresponding or similar provision of state, local or foreign Tax law) or, disregarding any arrangements implemented by or at the direction of Acquirer, be characterized as a “parachute payment” within the meaning of Section 280G of the Code (or any corresponding or similar provision of state, local or foreign Tax law).
(aa) Notwithstanding anything to the contrary in this Agreement, (x) this Section 3.12 and Section 3.18 set forth the sole and exclusive representations and warranties regarding Tax matters of the Company Group, (y) Seller, members of the Company Group and their Affiliates are not making, and shall not be construed to have made, any representation or warranty as to the amount of, or Acquirer’s or any other Person’s ability to utilize, any net operating loss, tax credit, tax basis or other Tax attribute in any taxable period (or portion thereof) beginning after the Closing Date and (z) none of the representations in this Section 3.12 (except for subsections (l), (n), (t), (u) and (w) of this Section 3.12) may be relied upon or form a basis to claim indemnification for or relating to Taxes for any taxable period (or portion thereof) beginning after the Closing Date.
3.13Compliance with Law.
(a)The operation of the business of each member of the Company Group has been conducted in material compliance with all Laws and Orders applicable to such member or its business and all Permits required for the operation of its business, properties and assets. Except as set forth in Section 3.13(a) of the Company Disclosure Schedule, no member of the Company Group has received any written notice to the effect that, or otherwise been advised in writing that it is not in material compliance with any such Laws, Orders or Permits.
(b)No member of the Company Group, nor any of the officers or directors of a member of the Company Group has, directly or indirectly, (i) taken any action in violation of any Law relating to anticorruption matters, including the FCPA, or (ii) offered, paid, given, promised to pay or give, or authorized the payment or gift of anything of value, directly or indirectly, to any Public Official, for purposes of (A) influencing any act or decision of any Public Official in his or her official capacity, (B) inducing such Public Official to do or fail to do any act in violation of his or her lawful duty, (C) securing any improper advantage or (D) inducing such Public Official to use his or her influence with a Governmental Authority, or commercial enterprise owned or controlled by any Governmental Authority (including state-owned or controlled veterinary or medical facilities), in order to assist the Company or any Person related to the Company, in obtaining or retaining business. None of the Representatives of
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the Company or any of its Subsidiaries are themselves Public Officials. There have been no false or fictitious entries made in the books or records of the Company or any of its Subsidiaries relating to any payment that the FCPA prohibits, and neither the Company nor any of its Subsidiaries has established or maintained a secret or unrecorded fund for use in making any such payments.
(c)No member of the Company Group, nor any of the officers or directors of a member of the Company Group has, directly or indirectly, taken any action in violation of any Law relating to export control, trade or economic sanctions, or antiboycott, in the U.S. or any other jurisdiction, including: the Arms Export Control Act (22 U.S.C.A. § 2278), the Export Administration Act (50 U.S.C. App. §§ 2401-2420), the International Traffic in Arms Regulations (22 C.F.R. 120-130), the Export Administration Regulations (15 C.F.R. 730 et seq.), the Office of Foreign Assets Control Regulations (31 C.F.R. Chapter V), the Customs Laws of the United States (19 U.S.C. § 1 et seq.), the International Emergency Economic Powers Act (50 U.S.C. § 1701-1706), the U.S. Commerce Department antiboycott regulations (15 C.F.R. 560), the U.S. Treasury Department antiboycott requirements (26 U.S.C. § 999), any other export control regulations issued by the agencies listed in Part 730 of the Export Administration Regulations, or any Law outside of the United States of a similar nature. No member of the Company Group or any of their respective Representatives is listed on the U.S. Office of Foreign Assets Control “Specifically Designated Nationals and Blocked Persons” or any other similar list.
3.14Permits. Section 3.14 of the Company Disclosure Schedules sets forth a complete and correct list of all material Permits used by the Company Group in the operation of the Business, all of which are valid and in full force and effect. Complete and correct copies of such Permits have been Delivered to Acquirer. Each member of the Company Group has all Permits required in the operation of the Business, and such Permits are in full force and effect and are owned by the applicable member of the Company Group free and clear of all Encumbrances except Permitted Encumbrances, except for such Permits which the failure to hold would not be reasonably likely to be material to the applicable member of the Company Group. No member of the Company Group is in material Default, or has received any written notice of any claim of material Default, with respect to any such Permit. No suspension or cancellation of any such Permits is pending or, to the Company’s Knowledge, threatened.
3.15Regulatory Matters.
(a)Except as set forth in Section 3.15(a) of the Company Disclosure Schedules, each member of the Company Group is, and since inception each member of the Company Group has been, in material compliance with all applicable Health Care Laws. Except as set forth in Section 3.15(a) of the Company Disclosure Schedules, no member of the Company Group has received any notice or other communication from any Governmental Authority alleging any violation of any Health Care Law with respect to such activities. Except as set forth in Section 3.15(a) of the Company Disclosure Schedules, no member of the Company Group has received any notice or other written communication from any applicable Governmental Authority alleging any violation of any Health Care Law.
(b)Section 3.15(b) of the Company Disclosure Schedules sets forth a complete and correct list of all products that are being researched or under development by or on behalf of any member of the Company Group as of the Agreement Date. All Company Products are in material compliance with all applicable requirements under the Health Care Laws, including all requirements relating to research, storing, testing, record-keeping, reporting, import and export. Except as set forth in Section 3.15(b) of the Company Disclosure Schedules, no member of the Company Group has received any notice or other communication from the FDA or any other Governmental Authority alleging any violation of such requirements.
(c)All studies performed in connection with or as the basis for any Regulatory Permit or Regulatory Approval required for any Company Product either (i) have been conducted in accordance, in all material respects, with applicable requirements or (ii) have employed in all material respects the procedures and controls generally used by qualified experts. No member of the Company Group has received any notice or other written communication from an applicable Governmental Authority requiring the termination or suspension or material modification of any study with respect to any Company Products. No member of the Company Group collected, maintained, altered, or reported data from any study performed in connection with or as the basis for any Regulatory Permit, Regulatory Approval required for the Company Products in a manner that, if such data were reported to the
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FDA or another Regulatory Authority, would be or would result in an untrue statement of material fact or fraudulent statement to the FDA or any other Regulatory Authority.
(d)All clinical trials conducted by or on behalf of any member of the Company Group have been conducted in compliance in all material respects with all applicable Laws. No clinical trial conducted by or on behalf of any member of the Company Group has been terminated or suspended prior to completion primarily for safety reasons. No applicable Governmental Authority, clinical investigator who has participated or is participating in, or Institutional Review Board that has or has had jurisdiction over, a clinical trial conducted by or on behalf of any member of the Company Group has commenced, or threatened to initiate, any action to place a clinical hold order on, or otherwise terminate, delay or suspend, any ongoing clinical investigation conducted by or on behalf of any member of the Company Group.
(e)Holdco2 has Delivered to Acquirer true, complete and correct copies of all material Regulatory Documentation in its possession or control related to the Company Products. Each applicable member of the Company Group has filed with the applicable Regulatory Authority all required filings. All such filings were in material compliance with all applicable Laws when filed, and no deficiencies have been asserted in writing by any applicable Regulatory Authority with respect to any such filings.
(f)The Company has no Knowledge of any fact that would reasonably be expected to materially impact, limit, or alter any existing Regulatory Permit or Regulatory Approval for any Company Product in any applicable jurisdiction.
(g)No member of the Company Group is a party to any corporate integrity agreement, deferred prosecution agreement, consent decree, settlement order or similar agreement with or imposed by any Governmental Authority, and no such action is pending as of the date hereof. No member of the Company Group is subject to any material enforcement, regulatory or administrative proceedings against or affecting the Company or any of its Subsidiaries relating to or arising under any Health Care Law and no such enforcement, regulatory or administrative proceeding has been threatened. No member of the Company Group has made and is not in the process of making any voluntary self-disclosure to any Governmental Program or Governmental Authority, including any voluntary self-disclosures to the Centers for Medicare & Medicaid Services (“CMS”).
(h)All applications, information and other data and conclusions derived therefrom provided to an applicable Regulatory Authority with respect to the Company Products, when submitted by the applicable member of the Company Group, and to the Knowledge of the Company to a Regulatory Authority with respect to the Company Products, were true, complete, and correct in all material respects as of the date of submission by or on behalf of such member of the Company Group. No member of the Company Group: (i) has (A) been placed under or otherwise made subject to or (B) committed an act, made a statement, or failed to make a statement that, at the time such disclosure was made, would reasonably be expected to provide a basis for an applicable Governmental Authority to invoke its Application Integrity Policy “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities,” set forth in 56 Fed. Reg. 46191 (September 10, 1991) or any similar policy; (ii) has been charged with or convicted of any criminal offense relating to the delivery of an item or service under any Governmental Program; (iii) has been subject to, or convicted of any crime or engaged in any conduct that would reasonably be expected to result in, disqualification, debarment, deregistration, exclusion, or suspension from participation in any Governmental Program, or otherwise under 42 U.S.C. Section 1320a-7b(f), 21 U.S.C. Section 335a or any similar Law; (iv) has had a civil monetary penalty assessed against it, him or her under Section 1128A of the Social Security Act, codified at Title 42, Chapter 7, of the United States Code; (v) is currently listed on the United States General Services Administration published list of parties excluded from federal procurement programs and non-procurement programs; or (vi) to the Knowledge of the Company, is the target or subject of any current or potential investigation relating to any Governmental Program-related offense.
(i)Each member of the Company Group has operated and currently are in material compliance with the Clinical Laboratory Improvement Amendments of 1998 (“CLIA”), all applicable rules and regulations of all Governmental Authorities engaged in regulation of clinical laboratories or biohazardous materials, and all Regulatory Permits. No member of the Company Group has received written notice from any such governmental agencies or bodies requiring the termination, suspension, clinical hold or material modification of any tests, studies
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or trials conducted by or on behalf of any member of the Company Group. No suspension, revocation, termination, sanction, corrective action or limitation of any currently existing CLIA certification or accreditation of any member of the Company Group is pending or threatened. Section 3.15(i) of the Company Disclosure Schedules sets forth a complete and correct list of (i) all Regulatory Permits and Regulatory Approvals used in the operation of the Company Group’s business or otherwise held by any member of the Company Group and (ii) all laboratory developed tests developed or offered by or on behalf of any member of the Company Group.
(j)(x) Each member of the Company Group has in effect all Regulatory Permits required by any applicable Regulatory Authority to permit the conduct of its business as currently conducted, (y) all of such Regulatory Permits and Regulatory Approvals are in full force and effect and (z) each member of the Company Group is in compliance with, and is not in default under, any such Regulatory Permit or Regulatory Authorization.
(k)Except as set forth on Section 3.15(k) of the Company Disclosure Schedules, no member of the Company Group has (i) received advance payments (“Medicare Advance Payments”) from CMS pursuant to the Accelerated and Advance Payment Program (the “Medicare Advance Payment Program”) or (ii) received proceeds from funds appropriated in the Public Health and Social Services Emergency Fund for relief under Division B of Public Law 116-127 (“HHS Grants”). Each member of the Company Group has deployed any such proceeds in compliance in all material respects with all applicable Laws governing the HHS Grants and have maintained accounting records associated with the HHS Grants in material compliance with all the terms and conditions of all applicable CARES Act relief programs.
3.16Litigation. Except as set forth in Section 3.16 of the Company Disclosure Schedules, there is no, and since January 1, 2019 there has not been any, Proceeding (a) pending or, to the Company’s Knowledge, threatened against or affecting any member of the Company Group or their business, (b) pending or, to the Company’s Knowledge, threatened against any Person whose Liability any member of the Company Group has retained or assumed, either contractually or by operation of Law, or (c) pending or, to the Company’s Knowledge, threatened against any stockholder, officer, director or employee of any member of the Company Group in connection with such stockholder’s, officer’s, director’s or employee’s relationship with, or actions taken on behalf of, such member of the Company Group. No member of the Company Group is a party to or named in, and none of its properties or assets are subject to, any Order.
3.17Employment Matters.
(a)Section 3.17(a) of the Company Disclosure Schedules contains a complete and correct list of each employee of each member of the Company Group and each employee of Seller or any of its Subsidiaries who, as of the Agreement Date, is expected to become an employee of a member of the Company Group prior to the Closing Date (collectively, the “In-Scope Employees”), including for each such employee: name, job title, date of hire, work location and employee entity. As soon as practicable following the Agreement Date, the Company shall provide to Acquirer each In-Scope Employee’s classification status under the Fair Labor Standards Act, full time or part time status and immigration status. Seller has provided to counsel to Acquirer, on an outside counsel only basis, a true and correct list of the following for each In-Scope Employee: annual base salary or wage, annual target incentive or bonus compensation for the current fiscal year and the prior fiscal year, and accrued paid time off. To the Company’s Knowledge, no Key Employee is a party to, or is otherwise bound by, any agreement or arrangement with any Third Party, including any confidentiality or non-competition agreement, that adversely affects or restricts the performance of such employee’s duties for the applicable member of the Company Group. To the Company’s Knowledge, no In-Scope Employee has provided written notice to terminate his or her relationship with his or her employing member of the Company Group. To the Company’s Knowledge, each employee of each member of the Company Group is (i) a citizen or lawful permanent resident of the jurisdiction in which such employee resides, or (ii) an alien authorized to work in the jurisdiction in which such employee resides either specifically for the Company or for any other employer in such jurisdiction. Except as set forth in Section 3.17(a) of the Company Disclosure Schedules, each member of the Company Group has completed a Form I-9 (Employment Eligibility Verification) for each of their employees. No employee of any member of the Company Group has a principal place of employment outside the United States or is subject to the labor and employment laws of any country other than the United States. Except as set forth in Section 3.17(a) of the Company Disclosure Schedules, the employment of each of the employees of each member of the Company Group is “at will” and no member of the Company Group
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has any obligation to provide any particular form or period of notice prior to terminating the employment of any of its employees. As of the Agreement Date, no member of the Company Group has (i) entered into any Contract that obligates or purports to obligate Acquirer to make an offer of employment to any present or former employee or consultant of any member of the Company Group or (ii) promised or otherwise provided any assurances (contingent or otherwise) to any present or former employee or consultant of any member of the Company Group of any terms or conditions of employment with Acquirer following the Effective Time.
(b)No member of the Company Group has, and no member of the Company Group would reasonably be expected to have, any Liability with respect to any Taxes (or the withholding thereof) in connection with any independent contractor, consultant or other non-employee service provider of the Company Group (or who served in such capacity since January 1, 2017 (collectively, “Contractors”)). To the Company’s Knowledge, no Contractor is a party to, or is otherwise bound by, any agreement or arrangement with any Third Party, including any confidentiality or non-competition agreement, that in any way adversely affects or restricts the performance of such Contractor’s duties for any member of the Company Group. No current Contractor used by any member of the Company Group has provided written notice to terminate his, her or its relationship with any member of the Company Group. Each member of the Company Group has properly classified each Contractor ever retained by the Company as an “independent contractor” pursuant to the Code and other applicable Laws.
(c)No member of the Company Group has, at any time, been a party to or had any obligations under a collective bargaining, works council or similar agreement, in each case in respect of the Business. No member of the Company Group has experienced at any time, nor to the Company’s Knowledge, is there now threatened, any walkout, union activity, work stoppage, any effort to organize or other similar occurrence or any attempt to organize or represent the labor force of such member of the Company Group or strike. No union or other collective bargaining unit or employee organizing entity has been certified or recognized by a member of the Company Group as representing any of its employees.
(d)All members of the Company Group are in compliance in all material respects with all Laws relating to labor and employment, including with respect to employment practices, worker classification, wages and hours, duration of work, overtime, collective bargaining, discrimination, leaves of absence, immigration, civil rights, safety and health, workers’ compensation, pay equity, the collection and payment of withholding and social security Taxes, and other employment-related Taxes. Each member of the Company Group has, or will have no later than the Closing Date, paid all accrued salaries, bonuses, commissions, wages, severance and accrued vacation pay of the employees due to be paid through the Closing Date. No member of the Company Group has committed any unfair labor practice in connection with the conduct of the Business. There are no Proceedings pending or, to the Company’s Knowledge, threatened between any member of the Company Group, on the one hand, and any of such member’s current employees or independent contractors or former employees or independent contractors, on the other. No review, complaint or Proceeding by any Governmental Authority or current or former employee or Contractor with respect to any member of the Company Group in relation to the employment or engagement of any individual is pending or, to the Company’s Knowledge, threatened, nor has any member of the Company Group received any notice from any Governmental Authority indicating an intention to conduct the same in the future. No member of the Company Group is liable for any payment to any trust or other fund or to any Governmental Authority, with respect to unemployment compensation benefits, social security or other benefits or obligations for employees (other than routine payments to be made in the normal course of business and consistently with past practice). No member of the Company Group has any obligations under COBRA with respect to any former employees or qualifying beneficiaries thereunder.
(e)The Company has Delivered to Acquirer true and correct copies of each of the following with respect to each member of the Company Group, in each case that are currently used in the Business and solely if the Company or such member of the Company Group has a standard form: (i) all forms of offer letters, (ii) all forms of employment agreements and severance agreements, (iii) all forms of services agreements and agreements with current consultants and/or advisory board members and (iv) all forms of confidentiality, non-competition or inventions agreements between current and former employees/consultants and the Company Group.
(f)In the past two years, (i) no member of the Company Group has effectuated a “plant closing” (as defined in the Worker Adjustment Retraining Notification Act of 1988, as amended (the “WARN Act”)), or any
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similar state or local law, affecting any site of employment or one or more facilities or operating units within any site of employment or facility of its business, (ii) there has not occurred a “mass layoff” (as defined in the WARN Act) affecting any site of employment or facility of the Company or any of its Subsidiaries and (iii) no member of the Company Group has been affected by any transaction or engaged in layoffs or employment terminations sufficient in number to trigger application of any similar state, local or foreign law or regulation.
(g)No allegations of sexual harassment or sexual misconduct have been made to any member of the Company Group against any director, officer or other employee of any member of the Company Group and, to the Company’s Knowledge, there have not been any such allegations. There are no disciplinary actions pending against any of the employees of any member of the Company Group.
3.18Employee Benefit Plans.
(a)Section 3.18(a) of the Company Disclosure Schedules contains a complete and correct list, as of the date hereof, of each Benefit Plan maintained or sponsored by any member of the Company Group (each, a “Company Benefit Plan”) and each Benefit Plan contributed to or required to be contributed to by a member of the Company Group, but which is not sponsored by a member of the Company Group (each, a “ Seller Benefit Plan” and collectively, the “Seller Benefit Plans”); provided, that Company Benefit Plans that are independent contractor agreements with independent contractors whose annual compensation is less than $100,000 are not required to be listed in Section 3.18(a) of the Company Disclosure Schedules. No Company Benefit Plan is subject to any Laws other than those of the United States or any state, county or municipality in the United States. No member of the Company Group has or would reasonably be expected to have any Liability under any Benefit Plan maintained, contributed to or required to be contributed to by any ERISA Affiliate of the Company or any of its Subsidiaries other than the Seller Benefit Plans.
(b)With respect to each Company Benefit Plan, the Company has Delivered to Acquirer an accurate and complete copy of: (i) the current plan document, as amended through the Agreement Date, or a written summary of any unwritten Company Benefit Plan, (ii) the current summary plan description (if required) and any material modifications thereto, (iii) any annual reports on Forms 5500 to the extent applicable, (iv) material contracts including trust agreements, insurance contracts, and administrative services agreements, (v) the most recent determination or opinion letters for any plan intended to be qualified under Section 401(a) of the Code and (vi) any material correspondence with the Department of Labor, Internal Revenue Service or any other Governmental Authority regarding the plan in the past twelve (12) months.
(c)On or prior to the Closing Date, each applicable member of the Company Group shall have made all contributions required to be made to or with respect to each Company Benefit Plan and each Seller Benefit Plan by the Company Group on or prior to the Closing Date or accrued any such amounts in accordance with the past custom and practice of each member of the Company Group. No Company Benefit Plan is intended to include a Code Section 401(k) arrangement.
(d)There has been no amendment to, written interpretation or announcement (whether or not written) by the any member of the Company Group or any ERISA Affiliate relating to, or change in participation or coverage under, any Company Benefit Plan that would materially increase the expense of maintaining such Company Benefit Plan above the level of expense incurred with respect to such Company Benefit Plan for the most recent full fiscal year included in the Financial Statements.
(e)Each Company Benefit Plan has been, since January 1, 2017, in all material respects, established, maintained and administered in accordance with its terms and with all provisions of ERISA, the Code and other applicable Laws. No actions, investigations, suits or claims with respect to any Company Benefit Plan or, to the extent relating to the Company Group or any of their current and former employees, Seller Benefit Plan are pending or, to the Company’s Knowledge, threatened, in each case excluding routine claims for benefits. No employee of any member of the Company Group is a “leased employee” within the meaning of Section 414(n) of the Code. The Company Group is in compliance in all material respects with the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010. With respect to each Company Benefit Plan in the past three (3) years, (i) no lien has been imposed under the Code, ERISA or any other applicable law, and (ii) no member
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of the Company Group has made any filing in respect of such Company Benefit Plan under the Employee Plans Compliance Resolution System, the Department of Labor Delinquent Filer Program or any other voluntary correction program. No Company Benefit Plan is sponsored by a human resources and benefits outsourcing entity or professional employer organization.
(f)Each Company Benefit Plan and Seller Benefit Plan that is intended to be qualified within the meaning of Section 401(a) of the Code is so qualified and has received a favorable determination letter from the IRS (or, if such plan is a prototype or volume submitter plan document, such prototype or volume submitter plan document has received a favorable opinion from the IRS that the form meets the tax qualification requirements and the applicable member of the Company Group or Parent Group is entitled to rely on such favorable opinion) to the effect that such Company Benefit Plan or Seller Benefit Plan satisfies the requirements of Section 401(a) of the Code in form and that its related trust is exempt from taxation under Section 501(a) of the Code.
(g)No member of the Company Group has any obligation to provide post-retirement or post-termination medical or life insurance benefits to any current or former employee, officer, Contractor, or director, or any dependent or beneficiary thereof, other than as required under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) or similar state law for which the covered individual pays the full cost of coverage. There has been no “prohibited transaction” (within the meaning of Section 406 of ERISA and Section 4975 of the Code and not exempt under Section 408 of ERISA and regulatory guidance thereunder) with respect to any Company Benefit Plan. No member of the Company Group or any ERISA Affiliate is subject to Liability or penalty under Sections 4967 through 4980 of the Code or Title I of ERISA with respect to any Company Benefit Plans. No member of the Company Group or any of its ERISA Affiliates sponsors, maintains or contributes or is obligated to contribute to, or has incurred any liability with respect to any plan subject to Title IV of ERISA or Section 412 of the Code. No Company Benefit Plan is (i) any “multiemployer plan” within the meaning of Section 4001(a)(3) or 3(37) of ERISA, (ii) any “multiple employer plan” within the meaning of Section 4063 or 4064 of ERISA, (iii) any “multiple employer welfare arrangement” within the meaning of Section 3(40) of ERISA or (iv) any health or other welfare arrangement that is self-insured. No Company Benefit Plan is or has ever been, or currently funds or has ever been funded by, a “voluntary employees’ beneficiary association” within the meaning of Section 501(c)(9) of the Code or other funding arrangement for the provision of welfare benefits. Each Company Benefit Plan that provides health, life or other welfare or welfare-type benefits is fully insured by a third-party insurance company. No member of the Company Group sponsors or maintains any self-funded employee benefit plans providing for health or welfare benefits, including any plan to which a stop-loss policy applies.
(h)Neither the execution and delivery of this Agreement nor the consummation of the Transactions will (either alone or in combination with another event): (i) result in any payment becoming due, or increase the amount of any compensation due, to any current or former employee or Contractor of a member of the Company Group; (ii) increase any benefits otherwise payable under any Company Benefit Plan; (iii) result in the acceleration of the time of payment or vesting of any such compensation or benefits; (iv) result in the triggering or imposition of any restrictions or limitations on the rights of the Company or any of its Subsidiaries to amend or terminate any Company Benefit Plan; or (v) entitle the recipient of any payment or benefit to receive a “gross up” payment for any income or other taxes that might be owed with respect to such payment or benefit.
3.19Intellectual Property.
(a)Section 3.19(a) of the Company Disclosure Schedules accurately and completely sets forth as of the Agreement Date: all (i) Registered Company IP, (ii) material unregistered Trademarks included in the Company Owned IP, (iii) material Software included in the Company Owned IP, (v) other Company Owned IP that is material to the Company Group or its business as currently conducted other than Trade Secrets, and (v) Company IP that is licensed exclusively to a member of the Company Group. For each item of Registered Company IP, Section 3.19(a) of the Company Disclosure Schedules indicates, as applicable, the legal (and record) owner(s) thereof and, if jointly-owned, all joint-owners of such Intellectual Property, the countries and jurisdictions in which such Intellectual Property is registered or in which an application for the same has been filed, the registration or application number, the filing, registration, and expiration dates thereof (as applicable), in the case of unregistered Trademarks, countries of use and approximate dates of first use. All Registered Company IP is subsisting and in full force and effect and, except as set forth in Section 3.19(a) of the Company Disclosure Schedules, to the Knowledge of the Company, the
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registrations forming part of the Registered Company IP are valid and enforceable. The Company Group does not own any patents or patent applications and Seller and its Affiliates do not own or control any patents or patent applications relating to the Business. Section 3.19(a) of the Company Disclosure Schedules also accurately and completely sets forth as of the Agreement Date all Domain Names registered by or used or held for use for the Business by any member of the Company Group, Seller or any Seller Affiliate, including the applicable registrar and expiration date. All of the Domain Names listed in Section 3.19(a) of the Company Disclosure Schedules are registered solely by the applicable member of the Company Group and are active and all registration fees, renewals or other actions necessary on or before the Agreement Date to maintain such registrations active have been paid, filed and taken. All use of such Domain Names complies with and has complied in all material respects with all terms and conditions, terms of use, terms of service and other Contracts with the applicable registrar for such Domain Names.
(b)To the Knowledge of the Company, the Company Group has sufficient rights to use the Company IP and the Company IT Assets in the manner used by the Company Group in connection with the operation of its Business as currently conducted. The Company IP and Company IT Assets includes all material Intellectual Property and IT Assets, respectively, used or held for use in connection with the operation of the Business as currently conducted, and, to the Knowledge of the Company, there are no other items of Intellectual Property or IT Assets that are material to or necessary for the operation of the Company Group’s Business as currently conducted, or for the continued operation of the Company Group’s Business immediately after the Closing in substantially the same manner as currently conducted. Except as set forth in Section 3.19(b) of the Company Disclosure Schedules, the Company Group is the sole and exclusive owner of all right, title and interest in and to each item of Company Owned IP and each IT Asset owned or purported to be owned by the Company Group, free and clear of all Encumbrances and licenses other than Permitted Encumbrances, or any obligation to grant any of the foregoing. The Company Group has a license to use the Company Licensed IP in connection with the operation of its Business as currently conducted and proposed to be conducted, subject only to the terms of the applicable Company IP Contracts, and, to the Knowledge of the Company, such licenses are valid.
(c)Except as set forth on Section 3.19(c) of the Company Disclosure Schedules, no member of the Company Group has assigned, transferred, conveyed, or granted any license with respect to (other than licenses granted to Company Group customers in the Ordinary Course of Business), or authorized the retention of any rights in or joint ownership of, any Company Owned IP or any IT Asset owned or purported to be owned by the Company Group or other Intellectual Property that would have been Company Owned IP or IT Asset owned by the Company Group but for such assignment, transfer, conveyance to third parties or, caused or permitted any Encumbrance to attach to any Company Owned IP or IT Asset owned by the Company Group. Except as set forth on Section 3.19(c) of the Company Disclosure Schedule, no Person other than a member of the Company Group has any proprietary, commercial, joint ownership, royalty or other interest in the Company Owned IP or the goodwill, if any, associated therewith.
(d)No member of the Company Group has entered into any Contracts with any other Person (i) that materially limit or restrict use or require any payments for use of the Company Owned IP, the Company Licensed IP (other than the obligations or restrictions expressly contained in the agreement granting such member of the Company Group a license under such Intellectual Property) or Company Products by a member of the Company Group, (ii) pursuant to which any Person other than a member of the Company Group has been granted or retains the right to bring any infringement or other enforcement actions with respect to, or otherwise to enforce, any of the Company Owned IP, (iii) pursuant to which any Person has been granted or retains the right to defend any claim of infringement, misappropriation or other violation arising from the practice or other Exploitation of any of the Company Owned IP or pursuant to which any member of the Company Group expressly agrees to indemnify any Person against any such claim or pursuant to which any member of the Company Group has assumed any existing or potential Liability of another Person for any infringement, misappropriation or other violation of Intellectual Property or similar claim (other than indemnification obligations under Contracts with customers and service providers of the Company Group and Company IP Contracts entered into in the Ordinary Course of Business), or (iv) pursuant to which any Person has been granted or retains the right to control the prosecution of any applications or registrations for Company Owned IP.
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(e)Except as set forth on Section 3.19(e) of the Company Disclosure Schedules, all necessary registration, maintenance and renewal fees and other payments that have become due in connection with the Registered Company IP have been timely paid in full, with the understanding that “timely” includes payment during a grace period, extension period, further processing period, reinstatement period, or any other time period, payment during which will not allow such Registered Company IP to lapse, be cancelled or otherwise be deemed abandoned or lost. All necessary documents, recordations, certificates and other materials in connection with Registered Company IP required to be filed on or before the Agreement Date have been timely filed with the relevant patent, copyright, trademark or other authorities in the United States or foreign jurisdictions, as the case may be, for the purposes of maintaining such Registered Company IP registered in such jurisdiction. Except as set forth on Section 3.19(e) of the Company Disclosure Schedules, there are no actions that must be taken by any member of the Company Group within ninety (90) days of the Agreement Date that, if not taken, will result in the loss or delay of any Registered Company IP, including the payment of any registration, maintenance or renewal fees or the filing of any responses to U.S. Patent and Trademark Office (or equivalent authority) actions, documents, applications or certificates for the purposes of obtaining, maintaining, perfecting or preserving or renewing any Registered Company IP.
(f)Except as set forth on Section 3.19(f) of the Company Disclosure Schedules, since January 1, 2017, no member of the Company Group is, or has been, subject to any proceeding or outstanding decree, Order, judgment, injunction, settlement, action, investigation, opposition, interference, reexamination, cancellation, lawsuit, hearing, investigation, complaint, arbitration, mediation, demand, inquiries or requests for documents or any other Intellectual Property dispute, disagreement, or claim, whether brought by a third party or by a member of the Company Group (including, with respect to Trademarks, invalidity, nullity, opposition, cancelation, concurrent use or similar proceeding), whether by subpoena or informal letter, or any Order restricting the any member of the Company Group’s rights in, to and under any Company IP or Company Product, or the validity, enforceability, use, right to use, ownership, registration, right to register, priority, duration, scope or effectiveness of any Company IP or triggering any additional payment obligations with respect to any such Company IP (collectively, “IP Dispute”), nor has any IP Dispute been threatened against any member of the Company Group challenging the legality, validity, enforceability or ownership of any Company IP or Company Product. To the Knowledge of the Company, no circumstances or grounds exist that would give rise to an IP Dispute. Except as set forth on Section 3.19(f) of the Company Disclosure Schedules, no member of the Company Group has sent any notice of any IP Dispute.
(g)None of the Company Owned IP, or to the Knowledge of the Company, any Company Licensed IP, has been adjudged invalid or unenforceable, in whole or in part, and, except as set forth on Section 3.19(g) of the Company Disclosure Schedules, to the Knowledge of the Company, no facts or circumstances exist that would render any registrations forming part of the Registered Company IP invalid or unenforceable.
(h)Except as set forth in Section 3.19(h) of the Company Disclosure Schedules, in each case in which a member of the Company Group has acquired any material Intellectual Property that it purports to own from any Third Party (including any contractor or consultant) other than, in the case of Copyrights, by operation of law, such member of the Company Group obtained a written assignment, which, to the Knowledge of the Company, is valid and enforceable and sufficient to irrevocably transfer all of such Third Party’s rights in such Intellectual Property to the member of the Company Group and, to the maximum extent provided for by, and in accordance with, applicable laws, for each registration or registration application for Intellectual Property assigned by a Third Party to a member of the Company Group, the applicable member of the Company Group has recorded each such assignment with the relevant Governmental Authority, including, as applicable, the U.S. Patent and Trademark Office, the U.S. Copyright Office, or their respective equivalents in any relevant foreign jurisdiction, as the case may be.
(i)The Company IT Assets perform in a manner that is sufficient for the Company Group to conduct its Business as currently conducted. The Company IT Assets have not materially malfunctioned or failed since January 1, 2017 and do not, to the Knowledge of the Company, contain any viruses, worms, trojan horses, bugs, faults or other devices, errors, contaminants or effects that (i) significantly disrupt or adversely affect the functionality of any Company IT Asset, except as disclosed in their documentation or (ii) enable or assist any Person to access without authorization any Company IT Asset. The Company Group has implemented commercially reasonable backup, security and disaster recovery technology consistent with current industry practices for comparable businesses and have taken commercially reasonable actions consistent with current industry practices
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for comparable businesses to protect the confidentiality, integrity and security of the Company IT Assets and all information and transactions stored or contained on Company IT Assets. To the Knowledge of the Company, no Person has gained unauthorized access to any Company IT Asset. Section 3.19(i) of the Company Disclosure Schedules sets forth an accurate and complete list and description of all material Company IT Assets other than licenses for Commercial Software. All Company IT Assets are (A) owned by a member of the Company Group, or (B) currently in the public domain or otherwise available to the Company Group without the approval or consent of any Person or (C) to the Knowledge of the Company, licensed or otherwise used by the Company Group pursuant to terms of valid, binding written agreements with third parties, or are provided by Seller or its Affiliates for use by the Company Group under a Seller IP Contract.
(j)Except as set forth in Section 3.19(j) of the Company Disclosure Schedules, no Public Software forms part of, is incorporated into or has been distributed, used or compiled with, in whole or in part, any Company Software or any Software included in the Company IT Assets that are distributed by the Company Group to Third Parties.
(k)Each member of the Company Group is in material compliance with the terms and conditions of all licenses for the Public Software that such member of the Company Group has licensed from a Third Party that forms part of, has been used in connection with the development of, is incorporated into used or compiled with, in whole or in part, any Company Software and any Software included in the Company IT Assets. Except as set forth in Section 3.19(k) of the Company Disclosure Schedules, the Company Group does not use, incorporate or distribute Public Software in a manner that, (A) requires or purports to require the licensing, disclosure or distribution of any source code (other than source code that is a part of such Public Software) of any Company Software or any Software included in the Company IT Assets or of Company Owned IP, to licensees or any other Person, (B) prohibits or limits the receipt of consideration in connection with licensing, sublicensing or distributing any Company Software or other Software included in the Company IT Assets, (C) except as specifically permitted by Law, allows any Person to decompile, disassemble or otherwise reverse-engineer any Company Software other Software included in the Company IT Assets or (D) requires the licensing of Company Software or any other Software included in the Company IT Assets to any other Person for the purpose of making derivative works.
(l)Each member of the Company Group, the Company Products, the operation of the Company’s Business as currently conducted, and the use of the Company IP and Company IT Assets in connection the conduct of the Business as currently conducted, has not infringed, misappropriated or otherwise violated and will not infringe, misappropriate, or otherwise violate the Intellectual Property rights of any Third Party, Seller or its Affiliates, provided that the foregoing representation is made to the Knowledge of the Company with respect to Third Party Patents. There is no Proceeding pending, asserted or threatened against any member of the Company Group concerning any of the foregoing, nor, except as set forth in Section 3.19(l) of the Company Disclosure Schedules, has any member of the Company Group and, to the Knowledge of the Company, any licensor of any Company Licensed IP, since January 1, 2017, received any notification (including any invitation to take a license) that a license under any other Person’s Intellectual Property is or may be required or alleging that the Company Group or such licensor (solely with respect to such Company Licensed IP) has infringed, misappropriated or otherwise violated any Person’s Intellectual Property rights. The Company Group, Seller and its Affiliates are not aware of any facts or circumstances which could lead or give rise to any such claim or assertion of infringement, misappropriation or other violation of Intellectual Property. No Person is, to the Knowledge of the Company, engaging, or, except as set forth in Section 3.19(l) of the Company Disclosure Schedules, has engaged, in any activity that infringes, misappropriates or otherwise violates any Company IP, and there is no Proceeding pending, asserted or threatened by a member of the Company Group against any other Person concerning any of the foregoing. No member of the Company Group has received or requested any opinion of counsel, verbal or written, regarding the validity or enforceability of Company IP or any Intellectual Property of a Third Party or regarding the infringement of any Intellectual Property of any Third Party.
(m)To the Knowledge of the Company, no current or former Company Employee, consultant, advisor or independent contractor of any member of the Company Group is in default or breach of any term of any employment agreement, non-disclosure agreement, assignment of invention agreement or similar agreement relating to the protection, ownership, development, use or transfer of Company IP or any other Intellectual Property. Except as set forth in Section 3.19(m) of the Company Disclosure Schedules, the Company Group has obtained from all
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current and former Company Employees, consultants, advisors and independent contractors practice, creation or development of any Company Owned IP (any such Person, an “Author” ), through a written assignment, unencumbered and unrestricted exclusive ownership of all right, title and interest in and to such Company Owned IP and the Company Group has obtained the waiver of all non-assignable rights from such Authors. To the Knowledge of the Company, none of the current or former Company Employees, consultants, advisors and independent contractors is or was, at the time services were provided to the Company Group party to any Contract with any Person other than a member of the Company Group which requires such Company Employee, consultant, advisor or independent contractor to (i) assign any interest in any Intellectual Property that is used or held for use in the conduct of the business of the Company Group as it is currently conducted or proposed to be conducted by the Company Group, to any Person other than a member of the Company Group, or (ii) keep confidential any Trade Secrets of any Person other than a member of the Company Group.
(n)The Company Group has taken commercially reasonable steps to maintain the confidentiality and otherwise protect its rights in all Trade Secrets and other confidential or non-public information or data used or held for use in connection with the operation of the Business(“Confidential Information”). To the Knowledge of the Company, all disclosure of Confidential Information by or on behalf of a member of the Company Group to any Third Party, including any Company Employee or other Person, has been subject to a binding obligation of confidentiality on the part of such Third Party and to the Knowledge of the Company, no such Third Party has breached such obligation. All use, disclosure or appropriation by or on behalf of a member of the Company Group of Confidential Information not owned a member of the Company Group has been in compliance with any applicable legal obligations of the Company Group to the owner of such Confidential Information. To the Knowledge of the Company: (i) no former or current Company Employee, consultant, advisor, independent contractor or agent of any member of the Company Group has misappropriated any Trade Secrets of any other Person in the course of performance as a former or current Company Employee, consultant, advisor, independent contractor or agent of any member of the Company Group and (ii) no Company Employee, independent contractor or agent of any member of the Company Group, is in default or breach of any term of any Contract relating in any way to the protection, ownership, development, use or transfer of the Company IP or any other Intellectual Property.
(o)There are no Contracts pursuant to which (i) any member of the Company Group grants any Third Party, Seller or its Affiliates exclusive rights under any Company IP or (ii) any member of the Company Group grants to a Third Party, Seller or its Affiliates a right to grant sublicenses to Third Parties with respect to any Company Owned IP.
(p)Immediately following the Closing, the Company Group (including, as applicable, the Surviving Entity) will have all of the rights of the Company Group under the Company IP and the Company IP Contracts, and to use the Company IT Assets, to the same extent the applicable member of the Company Group would have had immediately prior to the Closing if the Transactions had not occurred, and without the payment of any additional amounts or consideration other than ongoing fees, royalties or payments that the Company would otherwise be required to pay. Except as set forth in Section 3.19(p) of the Company Disclosure Schedules, there are no royalties, honoraria, fees, milestone or other payments payable by any member of the Company Group to any Person (other than salaries payable to Company Employees not contingent on or related to use of their work product and fees payable under licenses for Commercial Software) as a result of the ownership, use, possession, license-in, license-out, sale, marketing, advertising or disposition of any Company IP by a member of the Company Group, and the execution and delivery of this Agreement and consummation of the Transactions will not result in any such royalties, honoraria, fees or other payments being payable by Acquirer, provided, however, that no representation is made with respect to any such payments becoming payable by Acquirer or its Affiliates based on the respective Contracts of Acquirer and its Affiliates (other than the Company Group) or other obligations or any acts or omissions to act by Acquirer or its Affiliates (other than the Company Group), and provided further that the foregoing representations are made to the Knowledge of the Company with respect to any payments required based on infringement of Third Party Patents. None of the execution and delivery of this Agreement, the consummation of the Transactions, or the performance by the Company Parties of their respective obligations hereunder will result in (i) any increase in or acceleration of royalties or other payments payable by a member of the Company Group, Acquirer or its Affiliates in respect of any Company IP; (ii) reduction of any royalties or other payments the Company Group, or Acquirer or any of its Affiliates would otherwise be entitled to in respect of any Company IP;
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(iii) the creation of any Encumbrance on any Company Owned IP or Intellectual Property that is owned by or licensed to the Acquirer or any of its Affiliates prior to the Closing; (iv) Acquirer or any of its Affiliates being bound by or subject to any non- compete or licensing obligation, covenant not to sue or other restriction on the operation or scope of its business, or in the grant or obligation to grant by Acquirer, any of its Affiliates or the Company Group to any Person of any rights with respect to any Intellectual Property, which Acquirer or its Affiliates were not bound by or subject to prior to the Closing; (v) the modification, cancellation, termination, or suspension of any Company IP Contract; or (vi) the creation or enhancement of the right to do or cause any of the foregoing for any non-Company Group party to any such Contracts, except in each case arising from any Contract or other obligation or any acts or omissions to act of Acquirer or any of its Affiliates (other than the Company Group) and except, in each case, as may occur with respect to the modification or termination of a Seller Contract that is replaced by a new Company IP Contract entered into by the Company to replace a Seller Contract in accordance with Section 5.7(b),
(q)Except as set forth in Section 3.19(q) of the Company Disclosure Schedules, none of the Company Owned IP was developed by or on behalf of, or using grants or any other subsidies of, any Governmental Authority or any university, and no government funding, facilities, faculty or students of a university, college, other educational institution or research center was used in the development of Company Owned IP that has resulted in any such Governmental Authority or any university, faculty or students of a university, college, other educational institution or research center, or any other third party, to acquire or to have a right to acquire any right, title or interest in such Company Owned IP. To the Knowledge of the Company, no current or former Company Employee, consultant, advisor or independent contractor of a member of the Company Group, who was involved in, or who contributed to, the creation or development of any Company Owned IP, has performed services for a Governmental Authority, university, college, or other educational institution or research center during a period of time during which such employee, consultant or contractor was also performing services with respect to development of such Company Owned IP for the applicable member of the Company Group.
3.20Privacy, Data and Data Security.
(a)The Company Group’s data, privacy and security practices conform, and at all times have conformed, to all of the Company Privacy Commitments, Privacy Laws and Company Data Agreements in all material respects. The execution, delivery and performance of this Agreement will not cause, constitute, or result in a breach or violation of any Privacy Laws, Company Privacy Commitments, or any Company Data Agreements by the members of the Company Group, provided, however, that no representation is made with respect to any acts or omissions by Acquirer or its Affiliates (other than the Company Group) with respect to any Company Data. Copies of all current Company Privacy Policies have been Delivered to Acquirer and such copies are true, correct and complete. To the Knowledge of the Company, the Company Group has, and, except as may be affected by notices, consents, waivers or new Contracts described in Section 5.7, the Company Group will have, all rights and consents necessary to collect and Process all Company Data and confidential information collected and Processed by them in the Business of the Company Group. The Company Group is not subject to the European Union General Data Protection Regulation.
(b)The Company Group has established and maintains commercially reasonable technical, physical and organizational controls, policies, procedures, safeguards, measures and security systems, plans and technologies with respect to Processing and security of Personal Data required under applicable data security requirements under applicable Privacy Laws, Company Data Agreements and Company Privacy Commitments. The Company Group and, to the Knowledge of the Company, its data processors have taken commercially reasonable steps to ensure that all employees or other Persons with the right to access Company Data are under obligations of confidentiality with respect to such data.
(c)Except as set forth in Section 3.20(c) of the Company Disclosure Schedules, no member of the Company Group has received or become subject to and, to the Knowledge of the Company, there is no circumstance (including any circumstance arising as the result of an audit or inspection carried out by any Governmental Authority) that would reasonably be expected to give rise to, any Proceeding, Order, notice, communication, warrant, regulatory opinion, settlement, audit result or allegation from a Governmental Authority or any other Person: (i) alleging or confirming non-compliance with or breach of a relevant requirement of Privacy Laws or Company Privacy Commitments, (ii) requiring or requesting any member of the Company Group to amend, rectify,
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cease Processing, de-combine, permanently anonymize, block or delete any Company Data (other than pursuant to a valid data subject request in the ordinary course of business), (iii) permitting or mandating relevant Governmental Authorities to investigate, requisition information from, or enter the premises of, a member of the Company Group or (iv) claiming compensation from the Company Group based on a violation of Privacy Laws or Company Privacy Commitments or relating to the Company Group’s Processing of Personal Data.
(d)Where any member of the Company Group uses a data processor other than Seller or its Affiliates to Process Personal Data, there is in existence a written Contract between the Company and each such data processor that complies with the requirements of all Privacy Laws and Company Privacy Commitments. To the Knowledge of the Company, the data processors of the Company Group are in material compliance with Privacy Laws and Company Privacy Commitments with respect to their Processing activities on behalf of the Company Group. To the Knowledge of the Company, such data processors have not breached any such Company Data Agreements pertaining to Personal Data Processed by such Persons on behalf of any member of the Company Group. True, correct and complete copies of all material Company Data Agreements have been Delivered to Acquirer. To the Knowledge of the Company, no member of the Company Group is under investigation by any Governmental Authority for a violation of HIPAA or applicable HIPAA regulations. Each applicable member of the Company Group has entered into “business associate contracts” whether as a “covered entity” or as a “business associate” (as described in 45 C.F.R. § 164.504(e)) to the extent required pursuant to HIPAA and in compliance with all applicable Privacy Laws and is not in breach of any business associate contract.
(e)Except as set forth in Section 3.20(e) of the Company Disclosure Schedules, to the Knowledge of the Company, no material breach (including as defined under 45 C.F.R. § 164.402), security incident (including as defined under 45 C.F.R. § 164.304), unauthorized access or violation of any data security policy in relation to Company Data, Company Databases, or Confidential Information has occurred or is threatened, and there has been no actual or threatened unauthorized or illegal Processing of, or accidental or unlawful destruction, loss or alteration of, any Company Data. To the Knowledge of the Company, no circumstance has arisen in which: (A) applicable Laws (including Privacy Laws) would require the Company or any of its Subsidiaries to notify a Governmental Authority of a data security breach or security incident or (B) applicable guidance or codes of practice promulgated under applicable Laws (including Privacy Laws) would recommend any member of the Company Group to notify a Governmental Authority of a data security breach.
(f)To the Knowledge of the Company, the Company Group has valid and subsisting contractual rights to Process or have Processed for the Company Group all Company-Licensed Data and all Personal Data Processed by or for the Company Group in connection with the conduct of the Business in the manner that it is currently Processed.
(g)To the Knowledge of the Company, any Third Party who has provided Personal Data to a member of the Company Group has done so in compliance with applicable Privacy Laws, including providing notice and obtaining consent required under such applicable Privacy Laws.
(h)The Company Group owns all right, title and interest in and to each element of Company-Owned Data and Company Databases or otherwise has all rights, permissions, consents and authorizations required to Process such Company-Owned Data and the data in Company Databases in the Business in the manner currently Processed by the Company Group, all of which rights shall survive unchanged, and without any change in the terms and conditions under which the Company Group has such rights, following the execution and delivery of this Agreement and the consummation of the Transactions except as may be affected by notices, consents, waivers or new Contracts described in Section 5.7.
(i)Section 3.20(e) of the Company Disclosure Schedules sets forth a true, correct and complete list and description of Company Databases.
3.21Transactions with Certain Persons. Except as set forth in Section 3.21(a)of the Company Disclosure Schedules, no Related Party has or has had at any time since January 1, 2019, either directly or indirectly, any material interest, financial or otherwise, in: (a) any Person which purchases from or sells, provides, licenses or furnishes to any member of the Company Group any goods, services property, technology, Intellectual Property or
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other property rights or (b) any Contract to which a member of the Company Group is a party. To the Company’s Knowledge, no event has occurred that has resulted in, or would reasonably be expected to result in, any claim by any employee, officer, director, stockholder or agent of any member of the Company Group for indemnification or advancement of expenses related thereto pursuant to (i) the terms of the Governing Documents of any member of the Company Group, (ii) any indemnification agreement or other Contract between a member of the Company Group and any such employee, officer, director, stockholder or agent or (iii) any applicable Laws. No amounts are owed to or by a member of the Company Group to or from any Related Party except for compensation and reimbursement of expenses.
3.22Insurance. Section 3.22 of the Company Disclosure Schedules sets forth a complete and correct list of all material insurance policies of the Company Group currently in force and effect. True, complete and correct copies of such insurance policies have been Delivered to Acquirer. Except as set forth in Section 3.22 of the Company Disclosure Schedules, there is no material claim pending under any such policies. All such insurance policies insure the applicable member of the Company Group in reasonably sufficient amounts against normal risks usually insured against by Persons operating similar businesses or properties of similar size in the localities where such businesses or properties are located, and are sufficient for compliance in all material respects with applicable Law and for compliance with applicable obligations under any material Contract of such member of the Company Group. No member of the Company Group has any self-insurance or co-insurance programs. All premiums due and payable under all such policies have been paid and no member of the Company Group is in material Default under any provision of any such insurance policy and no member of the Company Group has received any written notice of threatened termination, cancellation or nonrenewal of any such insurance.
3.23No Brokers. Except as set forth in Section 3.23 of the Company Disclosure Schedules, no member of the Company Group or any of its Representatives has entered into any Contract with any broker, finder or similar agent or any Person which will result in an obligation of Acquirer, any member of the Company Group, or any of their respective Affiliates to pay any finder’s fee, brokerage fees or commission or similar payment in connection with the Transactions.
3.24Books and Records. The Company Group has made and kept true, complete and correct copies of its books and records and accounts, which set forth in reasonable detail and accurately and fairly reflect the activities of each member of the Company Group. The books, records and accounts of each member of the Company Group have been maintained in accordance with reasonable business practices on a basis consistent with prior years.
3.25Bank Accounts. Section 3.25 of the Company Disclosure Schedules contains a complete and correct list of all bank accounts maintained by the Company Group, including each account number and the name and address of each bank and the name of each Person who has signature power with respect to each such account or power of attorney to act on behalf of any member of the Company Group. Holdco2 has Delivered to Acquirer true, complete and correct copies of all statements with respect to such bank accounts received by a member of the Company Group.
3.26Customers, Suppliers and Third Party Payors.
(a)Section 3.26(a) of the Company Disclosure Schedules sets forth a list of Payor Parties that generated in excess of $100,000 of revenue for the Business during the 12-month period ended December 31, 2021 (such parties, “Top Payors”), together with the revenue amount derived from each such Top Payor for such 12-month period. Except as set forth in Section 3.26(a) of the Company Disclosure Schedules, no member of the Company Group or Seller currently has or has since January 1, 2017 had any material disputes with any Payor Party related to the Business. Except as set forth in Section 3.26(a) of the Company Disclosure Schedules, no member of the Company Group or Seller has received written notice from any Payor Party that such Payor Party shall not continue its relationship with the Company Group or, to the extent applicable to the Business, Seller, after the Closing or that such Top Payor intends to terminate or materially modify an existing Contract with any member of the Company Group or Seller, as applicable. For purposes of this Section 3.26(a), a “material dispute” means any alleged overpayments, erroneous payments or underpayments, which, individually or in the aggregate, exceed 10% of annual payor revenue or $150,000, whichever is less.
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(b)Section 3.26(b)of the Company Disclosure Schedules sets forth a list of customers (other than Payor Parties) that generated in excess of $400,000 of revenue for the Business during the 12- month period ended December 31, 2021 (the “Top Customers”), together with the revenue amount derived from each such Top Customer for such 12-month period. No member of the Company Group has outstanding material disputes with any Top Customer. No member of the Company Group or Seller has received written notice from any Top Customer that such Top Customer shall not continue as a customer of the Company Group after the Closing or that such Top Customer intends to terminate or materially modify an existing Contract with the applicable member of the Company Group.
(c)Section 3.26(a) of the Company Disclosure Schedules sets forth a a list of suppliers or providers of services to the Company Group that generated in excess of $500,000 in expenditures by the Business during the 12-month period ending on December 31, 2021 (the “Top Suppliers”), together with the amount paid to each such Top Supplier for such 12-month period. No member of the Company Group has outstanding material disputes with any Top Supplier. No member or the Company Group or Seller has received written notice from any Top Supplier that such Top Supplier shall not continue as a supplier or service provider of the Company Group after the Closing or that such Top Supplier intends to terminate or materially modify an existing Contract with it’s the applicable member of the Company Group.
3.27Inventory. The inventories shown on the Company Balance Sheet (net of any reserve on the Company Balance Sheet) or thereafter acquired by the Company Group, consisted of items of a quantity and quality usable or salable in the Ordinary Course of. Business. Since the Company Balance Sheet Date, the Company Group has continued to maintain inventories in the Ordinary Course of. Business. No member of the Company Group has received written, or to the Knowledge of the Company, oral notice that it will experience in the foreseeable future any difficulty in obtaining, in the desired quantity and quality and at a reasonable price and upon reasonable terms and conditions, the raw materials, supplies or component products required for the manufacture, assembly or production of its products.
3.28No Additional Representations. THE COMPANY ACKNOWLEDGES AND AGREES THAT, EXCEPT AS EXPRESSLY SET FORTH IN ARTICLE 4, NO ACQUIRER PARTY, NO REPRESENTATIVE OF ANY ACQUIRER PARTY OR ANY OTHER PERSON MAKES ANY REPRESENTATION OR WARRANTY, EXPRESSED OR IMPLIED, AT LAW OR IN EQUITY, WITH RESPECT TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING THE MERGERS, THE ACQUIRER PARTIES (OR ANY OF THEM), OR ANY INFORMATION PROVIDED OR MADE AVAILABLE TO THE COMPANY OR ITS REPRESENTATIVES IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY (INCLUDING ANY FORECASTS, PROJECTIONS, ESTIMATES OR BUSINESS PLANS), AND ALL OTHER SUCH REPRESENTATIONS OR WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE ACQUIRER PARTIES
The Acquirer Parties hereby represent and warrant to Seller as follows, with each such representation and warranty subject to (x) the exceptions set forth in the Acquirer Disclosure Schedules (it being understood that the Acquirer Disclosure Schedules shall be arranged in sections corresponding to the sections and subsections contained in this Article 4, and no disclosure made in any particular section of the Acquirer Disclosure Schedules shall be deemed to be made in any other section of the Acquirer Disclosure Schedules unless expressly made therein (by cross-reference or otherwise) or to the extent it is reasonably apparent from a reading of the text of the disclosure that such disclosure is applicable to such other sections and subsections of the Acquirer Disclosure Schedules) and (y) matters disclosed in the SEC Reports filed with the SEC prior to the Agreement Date (to the extent the qualifying nature of the matters disclosed and the disclosure thereof is readily apparent from the disclosure thereof in such SEC Reports), excluding disclosures contained in sections entitled “Forward-Looking Statements” and “Risk Factors” (and any similarly titled sections) and any other disclosures contained in the SEC Reports to the extent they are of a predictive or cautionary nature or related to forward-looking statements; provided, that, none of the qualifications contained in clauses (x) and (y) of the immediately preceding sentence shall apply to the representations and warranties contained in Section 4.3.
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4.1Organization of Acquirer Parties. Each Acquirer Party is either a corporation or limited liability company duly organized and validly existing and in good standing under the Laws of the jurisdiction of its incorporation or formation, with the requisite corporate or limited liability company power and authority to conduct its business as it is presently being conducted, to own, lease or operate, as applicable, its assets and properties, and to perform all of its obligations under its Contracts.
4.2Authorization.
(a)Each Acquirer Party has all requisite corporate or limited liability company power and authority, and, except for the Acquirer Stockholder Approval, has taken all corporate or limited liability company action necessary, to execute, deliver and perform its obligations under this Agreement and the Ancillary Agreements and to consummate the transactions contemplated to be consummated by it hereby and thereby. This Agreement and the Ancillary Agreements to which an Acquirer Party is a party have been duly executed and delivered by each Acquirer Party thereto and, assuming the due authorization, execution and delivery hereof and thereof by the other parties hereto and thereto, constitute the legal, valid and binding obligation of each Acquirer Party thereto, enforceable against such Acquirer Party in accordance with their respective terms, except as enforcement may be limited by the Enforceability Exceptions.
(b)The Acquirer Stockholder Approval is the only vote of the holders of any voting securities of Acquirer under any Law, the rules and regulations of Nasdaq, and Acquirer’s certificate of incorporation and bylaws necessary to approve the Transactions.
4.3Capitalization.
(a)The authorized capital stock of Acquirer consists of 380,000,000 shares of common stock, par value of $0.0001 per share and 1,000,000 shares of preferred stock, par value of $0.0001 per share. As of December 31, 2021, 242,578,824 shares of Acquirer common stock were issued and outstanding, and no shares of Acquirer’s preferred stock were issued and outstanding. As of December 31, 2021, Acquirer had reserved 33,354,727 shares of Acquirer’s common stock for issuance upon the exercise of outstanding common stock options, 12,600,859 shares of Acquirer’s common stock for issuance upon the vesting of restricted stock units, 21,994,972 shares of Acquirer’s common stock for issuance upon conversion of Acquirer’s outstanding warrants, and 15,434,321 shares of Acquirer’s common stock were available for issuance under Acquirer’s 2021 Equity Incentive Plan. There are no options, warrants, convertible securities or other rights or Contracts pursuant to which Acquirer is obligated to issue or sell any of its securities, other than this Agreement, the Ancillary Documents, Acquirer’s employee stock purchase plan, Acquirer’s equity incentive plans and awards thereunder, inducement awards granted by Acquirer and Acquirer’s outstanding warrants, the SPAC Merger Agreement and Acquirer is not a party to any Contract pursuant to which it is obligated to register any of its securities under the Securities Act (other than the Ancillary Documents, the SPAC Merger Agreement and the registration rights agreement and subscription agreements entered into with investors in connection with the SPAC Merger Agreement) or with respect to the voting of any securities issued by Acquirer.
(b)The shares of Acquirer Stock to be issued in accordance with this Agreement will, upon such issuance, be duly authorized, validly issued, fully paid and non-assessable, free of statutory or contractual pre-emptive rights and free of any Encumbrances (other than this Agreement and restrictions on transfer under the Securities Act and applicable U.S. state securities laws). Subject to the accuracy of Seller’s representations set forth herein and in the Ancillary Agreements, the offer, sale and issuance of the shares of Acquirer Stock as contemplated by this Agreement are exempt from the registration requirements of the Securities Act.
(c)The equity securities of each of Merger Sub I and Merger Sub II (i) have been duly authorized and validly issued and are fully paid and nonassessable, (ii) were issued in compliance in all material respects with applicable Law, and (iii) were not issued in breach or violation of any preemptive rights or Contract to which Acquirer is a party or bound. All of the outstanding equity securities of Merger Sub I and Merger Sub II are owned by Acquirer free of any Encumbrances (other than this Agreement and restrictions on transfer under the Securities Act and applicable U.S. state securities laws). Neither Merger Sub I nor Merger Sub II has any Subsidiaries or owns, directly or indirectly, any equity securities in any Person.
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4.4Noncontravention.
(a)The execution, delivery and performance by each Acquirer Party and each Acquirer Party’s compliance with this Agreement and consummation by each Acquirer Party of the Transactions do not and will not (i) violate the Governing Documents of Acquirer, Merger Sub, (ii) violate any loan or credit agreement, guarantee, note, bond, mortgage, indenture, lease or other agreement, permit, franchise or license to which, as of the date of this Agreement, Acquirer is a party or by which Acquirer’s properties or assets are bound, (iii) violate any statute or any judgment, order, rule or regulation of any court or governmental agency, taxing authority or regulatory body, domestic or foreign, having jurisdiction over Acquirer or any of its properties or (iv) assuming any consents and approvals referred to in Section 4.4(b) are duly obtained, conflict with or constitute a Default under any Laws, Orders or Permits applicable to the Acquirer Parties, except, in the case of clauses (i) and (iv) for any such violation or Default which would not materially affect the Acquirer Parties’ ability to perform any of their respective obligations hereunder or consummate the Transactions, and, in the case of clauses (ii) and (iii), for Defaults or violations that have not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
(b)Other than the filing of the Certificate of Merger for the Merger, filings with the SEC and Nasdaq and such filings and notifications as may be required to be made by Acquirer in connection with the Transactions under the HSR Act or other applicable Antitrust Laws and the expiration or early termination of the applicable waiting period under the HSR Act or other applicable Antitrust Laws, no consent, approval, Order or authorization of, or registration, declaration, or filing with, any Governmental Authority or any other Person is required to be made, obtained or given by any Acquirer Party in connection with the execution, delivery and performance by each Acquirer Party of this Agreement or the consummation by each Acquirer Party of the Transactions.
4.5Compliance with Laws. Each Acquirer Party is in compliance with all applicable laws and has not received any written communication from a governmental entity that alleges that Acquirer is not in compliance with or is in default or violation of any applicable law, except where such non-compliance, default or violation would not, individually or in the aggregate, be reasonably likely to have a Material Adverse Effect.
4.6Securities Law Matters.
(a)The issued and outstanding shares of Acquirer Stock are registered pursuant to Section 12(b) of the Exchange Act, and are listed for trading on Nasdaq under the symbol “SMFR”. There is no suit, action, proceeding or investigation pending or, to the Knowledge of Acquirer, threatened against Acquirer by Nasdaq or the SEC with respect to any intention by such entity to deregister the Acquirer Stock or prohibit or terminate the listing of the Acquirer Stock on Nasdaq, excluding, for the purposes of clarity, the customary ongoing review by Nasdaq of the Acquirer’s listing of additional shares application in connection with the Transactions. Acquirer has taken no action that is designed to terminate or is reasonably expected to result in the termination of the registration of the Acquirer Stock under the Exchange Act or the listing of the Acquirer Stock on Nasdaq and is in compliance in all material respects with the listing requirements of Nasdaq.
(b)Each report, statement and form (including exhibits and other information incorporated therein) filed by Acquirer with the SEC under Sections 13(a), 14(a) or 15(d) of the Exchange Act or filed pursuant to the Securities Act since July 22, 2021 (the “SEC Reports”) when filed complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the SEC promulgated thereunder. None of the SEC Reports filed under the Exchange Act (except to the extent that information contained in any SEC Report has been superseded by a later timely filed SEC Report) contained, when filed, any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, in the case of any SEC Report that is a registration statement, or included, when filed, any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, in the case of all other SEC Reports. Acquirer has timely filed each SEC Report that Acquirer was required to file with the SEC since July 22, 2021. There are no material outstanding or unresolved comments in comment letters from the SEC staff with respect to any of Acquirer’s SEC Reports. In addition, Acquirer has made available to Seller (including via the SEC’s EDGAR system) a copy of the SEC Reports since July 22, 2021. Except as disclosed in the SEC Reports,
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each of the Sema4 Financial Statements (including, in each case, any notes thereto) contained in the SEC Reports was prepared in accordance with U.S. generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC), each complied in all material respects with the rules and regulations of the SEC with respect thereto as in effect at the time of filing and each fairly presents, in all material respects, the financial position, results of operations and cash flows of Acquirer or Mount Sinai Genomics, Inc. d/b/a Sema4 (“Legacy Sema4”), as applicable, as at the respective dates thereof and for the respective periods indicated therein. For purposes of this Section 4.6(b), the “Sema4 Financial Statements” means, to the extent contained in the SEC Reports, (i) the audited balance sheets of Legacy Sema4 as of December 31, 2020 and 2019, the related statements of operations and comprehensive loss, redeemable convertible preferred stock and stockholders’ deficit and cash flows for each of the three years in the period ended December 31, 2020, and the related notes, (ii) the unaudited condensed financial statements of Legacy Sema4 as of March 31, 2021 and for the three months ended March 31, 2021 and 2020 and the related notes, (iii) the unaudited condensed financial statements of Legacy Sema4 as of June 30, 2021 and for the three and six months ended June 30, 2021 and 2020 and the related notes, and (iv) the unaudited condensed consolidated financial statements of Acquirer as of September 30, 2021 and for the three months and nine months ended September 30, 2021 and 2020 and the related notes.
4.7No Proceedings. Except for such matters as have not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, there is no (i) investigation, action, suit, claim or other proceeding, in each case by or before any Governmental Authority pending, or, to the Knowledge of Acquirer, threatened against any Acquirer Party or (ii) judgment, decree, injunction, ruling or order of any governmental entity outstanding against any Acquirer Party.
4.8No Brokers. No Acquirer Party has entered into any Contract with any broker, finder or similar agent or any Person which will result in Seller being obligated to pay any finder’s fee, brokerage fees or commission or similar payment in connection with the Transactions.
4.9No Insolvency Proceedings. Neither Acquirer nor any of its subsidiaries has taken any steps to seek protection pursuant to any law or statute relating to bankruptcy, insolvency, reorganization, receivership, liquidation, administration or winding up or failed to pay its debts when due, nor does Acquirer or any subsidiary have any knowledge or reason to believe that any of their respective creditors intend to initiate involuntary bankruptcy proceedings or seek to commence an administration.
4.10Not an Investment Company. Acquirer is not, and immediately after the consummation of the Transactions, will not be, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
4.11Anti-Corruption Laws. There has been no action taken by Acquirer, or, to the Knowledge of Acquirer, any officer, director, equityholder, manager, employee, agent or representative of Acquirer, in each case, acting on behalf of Acquirer, in violation of any applicable Anti-Corruption Laws (as herein defined), (i) Acquirer has not been convicted of violating any Anti-Corruption Laws or subjected to any investigation by a Governmental Authority for violation of any applicable Anti-Corruption Laws, (ii) Acquirer has not conducted or initiated any internal investigation or made a voluntary, directed, or involuntary disclosure to any Governmental Authority regarding any alleged act or omission arising under or relating to any noncompliance with any Anti-Corruption Laws and (iii) Acquirer has not received any written notice or citation from a Governmental Authority for any actual or potential noncompliance with any applicable Anti-Corruption Laws. As used herein, “Anti-Corruption Laws” means any applicable laws relating to corruption and bribery, including the U.S. Foreign Corrupt Practices Act of 1977 (as amended), the UK Bribery Act 2010, and any similar law that prohibits bribery or corruption.
4.12Taxes. Except as provided in Section 4.12 of the Acquirer Disclosure Schedules:
(a)Each member of the Acquirer Group, and any consolidated, combined, unitary or aggregate group composed of members of the Acquirer Group for Tax purposes, has timely filed all federal income Tax Returns and other material Tax Returns it is required to have filed. All Tax Returns filed by or with respect to any member of the Acquirer Group are accurate, complete and correct in all material respects.
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(b)Each member of the Acquirer Group has paid in full all material Taxes required to have been paid. All Taxes due in connection with the operations of each member of the Acquirer Group until the Closing Date have been paid in full. No member of the Acquirer Group has any Liability for Taxes in excess of the amounts so paid, except for Taxes which are not yet due and payable.
(c)The balance sheet of Acquirer dated September 30, 2021 set forth in the SEC Documents included reflects all Liabilities for unpaid Taxes of the Acquirer Group for periods (or portions of periods) through such date. The Acquirer Group does not have any Liability for unpaid Taxes accruing after such date except for Taxes arising in the Ordinary Course of Business subsequent to such date.
(d)Within the last five (5) years, no claim has been made by any Governmental Authority in any jurisdiction where a member of the Acquirer Group does not file Tax Returns that such member is or may be subject to Tax by that jurisdiction.
(e)No extensions or waivers of statutes of limitations with respect to the Tax Returns have been given by or requested from the Acquirer Group (except for extensions to file Tax Returns that are granted automatically under applicable Law).
(f)There is (i) no past or pending audit of, or Tax controversy associated with, any Tax Return of a member of the Acquirer Group that has been or is being conducted by a Tax Authority which has not been fully settled or resolved and (ii) no other procedure, proceeding or contest of any refund or deficiency in respect of Taxes pending or on appeal with any Governmental Authority.
(g)All deficiencies asserted or assessments made against any member of the Acquirer Group as a result of any examinations by any Tax Authority have been fully paid.
(h)There are no Encumbrances for Taxes upon the assets of any member of the Acquirer Group other than Encumbrances arising by operation of Law for Taxes not yet due and payable.
(i)The Acquirer Group has collected and remitted all Sales Taxes with respect to sales made or services provided and, for all sales or provision of services that are exempt from Sales Taxes and that were made without charging or remitting Sales Taxes, the Acquirer Group has received and retained any required Tax exemption certificates or other documentation qualifying such sale or provision of services as exempt.
(j)No member of the Acquirer Group is party to or bound by any Tax indemnity, Tax sharing, Tax allocation or similar agreement, and no member of the Acquirer Group has any Liability or potential Liability to any Third Party under any such agreement.
(k)No member of the Acquirer Group is party to and has not requested any closing agreement (as described in Section 7121 of the Code or any corresponding, analogous, or similar provision under any state, local or foreign Law related to Taxes), offer in compromise, technical advice memoranda, private letter ruling or other similar agreement with any Tax Authority.
(l)No member of the Acquirer Group has ever entered into any “listed transaction” as defined in Treasury Regulations Section 1.6011 4(b) or any similar provision under state, local or foreign law. Each member of the Acquirer Group has disclosed on its U.S. federal income Tax Returns all positions taken therein that could give rise to a “substantial understatement of income tax” within the meaning of Section 6662 of the Code (or any comparable, analogous or similar provision under any state, local or foreign Law related to Taxes).
(m)Acquirer has (i) except for being a member of the Acquirer Group, never been a member of an affiliated group of corporations, within the meaning of Section 1504 of the Code (or any predecessor provision or comparable provision of state, local or foreign Law), or a member of a combined, consolidated or unitary group for state, local or foreign Tax purposes; and (ii) no Liability for Taxes of any Person under Treasury Regulations Section 1.1502-6 (or any corresponding provision of state, local or foreign Law related to income Taxes), as transferee or successor, by Contract or otherwise.
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(n)No member of the Acquirer Group is subject to Tax in any jurisdiction other than the jurisdiction in which it is formed or organized by virtue of having employees, a permanent establishment or any other place of business in such jurisdiction.
(o)No member of the Acquirer Group has ever been a “distributing corporation” or a “controlled corporation” in connection with a distribution described in Section 355 of the Code.
(p)Each member of the Acquirer Group has withheld and paid all material Taxes required to be withheld in connection with any amounts paid or owing to any employee, creditor, independent contractor or other Third Party.
(q)No member of the Acquirer Group (i) has agreed, or is required, to make any adjustment under Section 481(a) of the Code by reason of a change in accounting method or otherwise for a Pre-Closing Tax Period; (ii) has made an election, or is required, to treat any of its assets as owned by another Person pursuant to the provisions of former Section 168(f) of the Code or as tax-exempt bond financed property or tax-exempt use property within the meaning of Section 168 of the Code; (iii) has acquired, or owns, any assets that directly or indirectly secure any debt the interest on which is tax exempt under Section 103(a) of the Code; or (iv) has made any of the foregoing elections, or is required to apply any of the foregoing rules, under any comparable state or local Law related to Taxes.
(r)No member of the Acquirer Group will be required to include in a Post-Closing Tax Period taxable income attributable to income that accrued (for purposes of financial statements) in a Pre-Closing Tax Period but was not recognized for Tax purposes in any Pre-Closing Tax Period as a result of (i) the installment method of accounting, the completed contract method of accounting, the long-term contract method of accounting, or the cash method of accounting, (ii) any prepaid amount received or paid in a Pre-Closing Tax Period, (iii) any deferred intercompany transaction in a Pre-Closing Tax Period or excess loss account, (iv) a change in method of accounting or Section 481 of the Code in a Pre-Closing Tax Period, (v) any inclusion under Section 951(a) or Section 951A of the Code, (vi) any gain recognition agreement entered into in a Pre-Closing Tax Period, (vii) any transaction under which previously utilized Tax losses or credits may be recaptured (including a dual consolidated loss or an excess loss account), (viii) Section 1400Z-2(a)(1)(A) of the Code, or (ix) any comparable provisions of state or local Tax law, domestic or foreign, or for any other reason. The Acquirer Group has not made an election pursuant to Section 965(h) of the Code to pay the net tax liability under Section 965 of the Code in installments.
(s)No member of the Acquirer Group has applied for and not yet received a ruling or determination from a Tax Authority regarding a past or prospective transaction.
(t)(x) Each member of the Acquirer Group has (i) to the extent deferred, properly complied in all respects with applicable Law in order to defer the amount of the employer’s share of any “applicable employment taxes” under Section 2302 of the CARES Act, and (ii) to the extent applicable, eligible, and claimed, properly complied in all material respects with applicable Law and duly accounted for any available Tax credits under Sections 7001 through 7004 of the Families First Coronavirus Response Act and Section 2301 of the CARES Act, and (iii) not deferred any payroll Tax obligations (including those imposed by Sections 3101(a) and 3201 of the Code) (for example, by a failure to timely withhold, deposit or remit such amounts in accordance with the applicable provisions of the Code and the Treasury Regulations) pursuant to or in connection with any U.S. presidential memorandum or executive order, and (iv) not sought a PPP Loan.
(u)Each such nonqualified deferred compensation plan to which the Company or any of its Subsidiaries is a party complies with the requirements of paragraphs (2), (3) and (4) of Section 409A(a) of the Code by its terms and has been operated in accordance with such requirements. No event has occurred that would be treated by Section 409A(b) of the Code as a transfer of property for purposes of Section 83 of the Code. No member of the Acquirer Group is under any obligation to gross up any Taxes under Section 409A of the Code or otherwise.
4.13Environmental Laws and Regulations. Acquirer and all facilities or real property currently owned, leased or operated by Acquirer, are now and, since such time as Acquirer has owned, leased or operated the facilities or real property, have been in compliance in all material respects with all applicable Environmental Laws. Acquirer has not, since Acquirer has owned, leased or operated the facilities or real property, received from any Governmental
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Authority any notice or demand letter alleging that Acquirer is in violation of any Environmental Law, and Acquirer is not subject to any Order of any Governmental Authority imposing liability or obligations relating to any Environmental Law, in each case except as is not, and would not reasonably be expected to be, material to Acquirer and its Subsidiaries, taken as a whole. There has been no release by Acquirer, or for which Acquirer would reasonably be expected to be liable by Contract or by operation of Law, of any Hazardous Substance at, under, from or to any facility or real property currently or formerly owned, leased or operated by Acquirer, in each case except as is not, and would not reasonably be expected to be, material to Acquirer and its Subsidiaries, taken as a whole. Acquirer has not assumed, undertaken or otherwise become subject to any liability of another Person relating to Environmental Laws, except as is not, and would not reasonably be expected to be, material to Acquirer and its Subsidiaries, taken as a whole.
4.14Litigation. Except as set forth in Section 4.13 of the Acquirer Disclosure Schedules or as is not, and would not reasonably be expected to be, material to Acquirer and its Subsidiaries, taken as a whole, there is no, and since July 22, 2021 there has not been any, Proceeding (a) pending or, to the Acquirer’s Knowledge, threatened against or affecting Acquirer, (b) pending or, to the Acquirer’s Knowledge, threatened against any Person whose Liability either Acquirer has retained or assumed, either contractually or by operation of Law, or (c) pending or, to the Acquirer’s Knowledge, threatened against any stockholder, officer, director or employee of Acquirer in connection with such stockholder’s, officer’s, director’s or employee’s relationship with, or actions taken on behalf of, Acquirer. Acquirer is not a party to or named in, and none of its properties or assets are subject to, any Order that is material to Acquirer and its Subsidiaries, taken as a whole.
4.15Merger Sub Activities. Merger Sub I and Merger Sub II were organized solely for the purpose of entering into this Agreement and the Ancillary Agreements and consummating the Merger and the other Transactions and thereby, and have not engaged in any activities or business, other than those incident or related to or incurred in connection with its formation or the negotiation, preparation or execution of this Agreement or any Ancillary Agreements, the performance of its covenants or agreements in this Agreement or any Ancillary Agreement or the consummation of the transactions contemplated hereby or thereby.
4.16Additional Representations. EACH ACQUIRER PARTY ACKNOWLEDGES AND AGREES THAT, EXCEPT AS EXPRESSLY SET FORTH IN Article 3, NONE OF THE COMPANY, ANY REPRESENTATIVE OF THE COMPANY, SELLER OR ANY OTHER PERSON MAKES ANY REPRESENTATION OR WARRANTY, EXPRESSED OR IMPLIED, AT LAW OR IN EQUITY, WITH RESPECT TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING THE MERGER, THE COMPANY, OR ANY INFORMATION PROVIDED OR MADE AVAILABLE TO THE ACQUIRER PARTIES OR THEIR REPRESENTATIVES IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY (INCLUDING ANY FORECASTS, PROJECTIONS, ESTIMATES, BUDGETS OR BUSINESS PLANS), AND ALL OTHER SUCH REPRESENTATIONS OR WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED.
ARTICLE 5
COVENANTS AND OTHER AGREEMENTS
5.1Conduct of Business of the Company Group. During the period from the Agreement Date through the earlier of (x) the termination of this Agreement in accordance with its terms and (y) the Effective Time (the “Pre-Closing Period”), except (i) as set forth on Section 5.1 of the Company Disclosure Schedule or in the Pre-Closing Budget, (ii) to the extent necessary to comply with the Company Parties’ obligations under this Agreement, including completion of the Pre-Closing Restructuring, (iii) as required by applicable Law, or (iv) with the prior written consent of Acquirer (such consent not to be unreasonably withheld, conditioned or delayed), (A) Seller and Holdco2 shall cause each member of the Company Group to, and each of the Company Parties shall, carry on its business in the Ordinary Course of Business and in compliance in all material respects with applicable Law and the Pre-Closing Budget, pay its debts and Taxes when due (subject to good faith disputes regarding such debts and Taxes), pay or perform other material obligations when due and use its commercially reasonable efforts to preserve intact its present business organizations, keep available the services of its present officers and key employees and preserve its present relationships with customers, suppliers, distributors, licensors and licensees and (B) neither
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Seller or Holdco2 shall and each shall cause each member of the Company Group not to, and the Company Parties shall not:
(a)amend the Governing Documents of any member of the Company Group;
(b)acquire (by merger, consolidation or combination, or acquisition of stock or assets) any Person or division or assets (other than in the Ordinary Course of Business) thereof, or otherwise effect any merger, consolidation or reorganization of any member of the Company Group, or effect any conversion or restructuring of any equity or equity-linked interest, purchase any securities of, voting interests in or any assets of any Person, other than acquiring or purchasing equipment or supplies in the Ordinary Course of Business;
(c)split, combine or reclassify the outstanding shares of Holdco2 Common Stock nor enter into any agreement with respect to voting of any of Holdco2 Common Stock;
(d)declare, set aside or pay any dividend or other distribution, payable in cash, stock, property or otherwise, in respect of any Holdco2 Common Stock;
(e)purchase, redeem or otherwise acquire any shares of Holdco2 Common Stock or any securities convertible or exchangeable or exercisable for any shares of Holdco2 Common Stock;
(f)transfer, lease, license, guarantee, sell, mortgage, pledge, dispose of or encumber any material asset, except for (i) the incurrence of Permitted Encumbrances, (ii) non-exclusive licenses of the Company IP in the Ordinary Course of Business, (iii) sales or other dispositions of inventory and other assets in the Ordinary Course of Business, (iv) sales of obsolete or written off assets and (v) sales or dispositions for an amount less than $500,000 in the aggregate;
(g)incur any Indebtedness or issue any debt securities or warrants or other rights to acquire debt securities of any member of the Company Group or assume, guarantee or endorse, as an accommodation or otherwise, the obligations of any other person for Indebtedness or capital obligations, in the case of any of the foregoing, other than (i) incurrences of Indebtedness under the Pre-Closing Budget and (ii) the incurrence of Seller Debt;
(h)issue, sell, pledge, dispose of or encumber any shares of, or securities convertible into or exchangeable or exercisable for, or options, warrants, calls, commitments or rights of any kind to acquire, any shares of Holdco2 Common Stock;
(i)make any change in accounting methods, principles or practices (including for Tax purposes), except as required by the Accounting Standards or by applicable Law or a Governmental Authority;
(j)revalue any of its material assets except as required by the Accounting Standards;
(k)other than in the Ordinary Course of Business, enter into any Contract that would constitute a Company Contract if it had been in existence on the Agreement Date, or amend, modify or consent to the termination of any Company Contract or the applicable member of the Company Group’s rights thereunder, or waive, release or assign any rights or claims thereunder;
(l)enter into, modify, amend or terminate any Contract, or waive, release, assign or fail to exercise or pursue any material rights or claims thereunder, other than in the Ordinary Course of Business, which if so entered into, modified, amended, terminated, waived, released, assigned, or not exercised or pursued would reasonably be expected to (i) adversely affect in any material respect any member of the Company Group; (ii) impair in any material respect the ability of any of the Company Parties or Seller to perform its obligations under this Agreement; or (iii) prevent or materially delay the consummation of the Mergers;
(m)make any loan, advance, capital contribution to, or investment in, any Person other than business expense advances to employees of any member of the Company Group in the Ordinary Course of Business;
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(n)enter into any Contract to the extent consummation of the Transactions or compliance with the provisions of this Agreement would reasonably be expected to conflict with, or result in a violation or breach of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of, or result in, termination, cancellation or acceleration of any obligation or to the loss of a benefit under, or result in the creation of any Encumbrance (other than Permitted Encumbrances) in or upon any of the properties or other assets (including Intellectual Property) of the any member of the Company Group under, or require Acquirer to license or transfer any Company IP or other material assets (other than Permitted Encumbrances) under such Contract;
(o)(i) abandon, disclaim, allow to lapse, dedicate to the public, sell, assign (in whole or in part), transfer, license, covenant not to sue, otherwise encumber or grant any right or interest (other than Permitted Encumbrances, but including any security interest) in, to or under any Company IP or Company IP Contract, including failing to perform or cause to be performed all applicable filings, recordings and other acts, or to pay or cause to be paid all required fees and Taxes, to maintain and protect its interest in the Company IP and Company IP Contracts, in each case other than Permitted Encumbrances; (ii) grant to any Third Party any license with respect to any Company IP, other than Permitted Encumbrances; (iii) disclose any confidential Company IP or Confidential Information to any Person, other than employees of the Company or any of its Subsidiaries, or in the Ordinary Course of Business, collaboration partners, that are subject to a confidentiality or non-disclosure covenant protecting against further disclosure thereof; (iv) fail to notify Acquirer promptly of any infringement, misappropriation or other violation of or conflict with any Company IP of which any member of the Company Group becomes aware, or fail to consult with Acquirer regarding and take such actions as Acquirer may reasonably request to protect such Company IP; or (v) fail to diligently prosecute any Company IP in the U.S. or in any non- U.S. jurisdiction material to the Company’s business, or fail to exercise a right of renewal or extension under or with respect to any Company IP;
(p)enter into any Contract with any Related Parties;
(q)(i) adopt, enter into, terminate or amend any Company Benefit Plan (other than offer letters and independent contractor agreements in the Ordinary Course of Business to the extent not in contravention of Section 5.1(q)(iv)), or collective bargaining agreement, (ii) increase the compensation, bonus or fringe or other benefits provided by the Company Group to any Company Employee or independent contractor who is a natural person, other than (A) increases in base compensation in the Ordinary Course of Business and in accordance with the Company’s third-party market study which do not total more than $3,000,000 of aggregate annual base compensation and which do not represent an increase of more than 4% for any Company Employee who has either annual base compensation of more than $250,000 or a title at or above the level of Senior Director, and (B) increases in base compensation in the Ordinary Course of Business for independent contractors who are natural persons whose annual compensation is less than $50,000, (iii) grant or pay any special bonus or special remuneration (cash, equity or otherwise) to any Company Employee or independent contractor who is a natural person, other than pursuant to an existing Company Benefit Plan in accordance with its terms as in effect as of the Agreement Date, (iv) hire any employee or engage or terminate (other than for cause) any (A) Company Employee who has either annual base compensation in excess of $250,000 or a title at or above the level of Senior Director or (B) independent contractor who is a natural person who has annual base compensation in excess of $100,000; provided that no such newly hired employee or newly engaged Contractor shall be provided with severance or termination pay, a sign-on bonus or special remuneration, or receive a commitment regarding equity-based incentive compensation without the prior written consent of Acquirer, or (v) transfer the employment of an In-Scope Employee from a member of the Company Group to Seller or any of its subsidiaries (other than a member of the Company Group), or transfer the employment of any individual who is not an In-Scope Employee from Seller or any of its subsidiaries (other than a member of the Company Group) to a member of the Company Group;
(r)grant any severance or termination pay (cash, equity or otherwise) to any Company Employee or Contractor or adopt any new severance plan, or amend or modify or alter in any material respect any severance plan, agreement or arrangement existing on the Agreement Date;
(s)(i) make or change any material Tax election, except to the extent required by applicable Law or in furtherance of the Pre-Closing Restructuring, (ii) adopt or change any Tax accounting method, (iii) agree or settle any material claim or assessment in respect of Taxes, (iv) file any material amendment to any material Tax Return,
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(v) enter into any Tax allocation agreement, Tax sharing agreement, Tax indemnity agreement or closing agreement relating to any Tax, (vi) surrender any right to claim a material Tax refund or extend or waive the limitation period applicable to any claim or assessment in respect of Taxes, or (vii) take any other similar action relating to the filing of any Tax Return or the payment of any Tax; in the case of each of the immediately preceding clauses (i) through (vii), if such action would have the effect of increasing the Tax liability of Acquirer or its Affiliates for any period ending after the Closing Date or decreasing any Tax attribute of Holdco2 or the Company existing on the Closing Date;
(t)commence any material Proceeding;
(u)except for Proceedings with respect to which an insurer has the right to control the decision to settle, waive, release, assign, or compromise any claim, litigation, complaint, investigation or Proceeding, waive, release, assign, settle, pay, discharge or satisfy any Proceeding other than in the Ordinary Course of Business;
(v)make any capital expenditures or commitments, capital additions or capital improvements in excess of such amounts specified in the Pre-Closing Budget;
(w)fail to keep or cause to be kept the material existing insurance policies (or substantial equivalents) of any member of the Company Group as in force on the Agreement Date;
(x)employ or use any contractor or consultant that, to the Company’s Knowledge, employs any Person that is: (A) debarred by the FDA, or excluded from participation in government programs (or subject to any similar sanction of any other applicable Governmental Authority); or (B) who is the subject of an FDA debarment investigation or Proceeding (or similar Proceeding of any other applicable Governmental Authority); or
(y)authorize, agree or enter into an agreement to do any of the foregoing. Notwithstanding anything to the contrary in this Section 5.1, Acquirer, Seller and the Company Parties acknowledge and agree that (x) nothing in this Agreement shall give Acquirer, directly or indirectly, the right to control or direct the Company’s operations for purposes of the HSR Act prior to the expiration or termination of any applicable waiting period pursuant to the HSR Act, (y) no consent of Acquirer shall be required with respect to any matter set forth in this Agreement to the extent the requirement of such consent would violate any Antitrust Law, and (z) nothing in this Agreement shall prevent or limit the Pre-Closing Restructuring or the transactions contemplated thereby.
5.2Acquisition Proposals.
(a)No Solicitation. Each of Seller and the Company Parties agrees that neither it nor any of its officers and directors shall, and that it shall use its reasonable best efforts to cause its employees, equityholders, controlled Affiliates, agents and Representatives (including any investment banker, attorney or accountant retained by it) not to (and shall not authorize any of them to) directly or indirectly: (i) solicit, initiate, encourage, facilitate, entertain, discuss or negotiate any offer or proposal for an Acquisition Proposal, or any of the foregoing which would be reasonably expected to lead to an Acquisition Proposal; (ii) engage in discussions with any Person with respect to any Acquisition Proposal, furnish to any Person any non-public information with respect to any Acquisition Proposal or take any other action relating to (or which would reasonably be expected to be used for the purpose of formulating an offer or proposal with respect to), or otherwise assist, cooperate with, facilitate or encourage any effort or attempt by any such Person with regard to, any Acquisition Proposal; (iii) approve, agree to, accept, endorse or recommend any Acquisition Proposal; (iv) enter into any letter of intent or similar document or any Contract, agreement or commitment contemplating or otherwise relating to any Acquisition Proposal; or (v) submit any Acquisition Proposal to the vote of the stockholder of any Company Party. Each of Seller and each Company Party will immediately (x) cease any and all existing activities, discussions or negotiations with any Third Parties conducted heretofore with respect to any Acquisition Proposal and (y) revoke or withdraw access of any Person (other than Acquirer, its Affiliates, agents and Representatives) to any data room (virtual or actual) containing any non-public information with respect to the Company Parties in connection with an Acquisition Proposal and request from each such Person the prompt return or destruction of all non-public information with respect to the Company Parties previously provided to such Person in connection with an Acquisition Proposal; provided, however, that nothing in this Section 5.2(a) shall preclude Seller or its Representatives from contacting any Person solely for the purpose of complying with the provisions of the first clause of this sentence.
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(b)Notification of Unsolicited Acquisition Proposals. As promptly as practicable (and in any event within one Business Day) after receipt of any offer or proposal (formal or informal) relating to, or that would reasonably be expected to lead to, an Acquisition Proposal or any request for nonpublic information or inquiry related to or which would reasonably be expected to lead to an Acquisition Proposal, each of Seller, Holdco2 and the Company, as applicable, shall, provide Acquirer with written notice and the material details thereof, including the identity of the Person or group (within the meaning of Section 13(d)(3) of the Exchange Act) making any such Acquisition Proposal, request, inquiry or contact as well as a copy of any such Acquisition Proposal, indication, inquiry or request (or, where given orally to Seller, Holdco2 or the Company, a description of such Acquisition Proposal) and will keep Acquirer reasonably informed on a current basis of the status and details of any such offer or proposal and of any modifications to the terms thereof, provided, however, that this provision will not in any way be deemed to limit the obligations of Seller, Holdco2 or the Company and its respective Representatives set forth in Section 5.2(a).
(c)Acknowledgement. Each of Seller, the Company Parties and Acquirer acknowledge that this Section 5.2 was a significant inducement for Acquirer to enter into this Agreement.
5.3Proxy Statement and Other SEC Filings; Acquirer Stockholder Meeting.
(a)As promptly as reasonably practicable following the date hereof (but in no event later than the 60th day immediately following the date hereof), Acquirer shall prepare (and Seller and the Company Parties shall provide reasonable assistance in connection therewith), and Acquirer shall file with the SEC, a proxy statement relating to the Acquirer Stockholder Approval and the nomination and appointment of the Specified Designees to the Acquirer Board for terms that expire no earlier than the end of the Second Milestone Period (the “Proxy Statement”). Acquirer shall use its reasonable best efforts to ensure that the Proxy Statement complies in all material respects with the applicable provisions of the Exchange Act. Acquirer shall use its reasonable best efforts to cause the Proxy Statement to be mailed to the holders of Acquirer Stock as promptly as practicable following the date on which Acquirer files with the SEC the Proxy Statement in definitive form, following confirmation from the staff of the SEC (whether orally or in writing) that the comment process with respect to the Proxy Statement, if any, has concluded. Acquirer shall promptly (and in any event within one Business Day) notify Seller upon the receipt of any comments from the SEC or any request from the SEC for amendments or supplements to the Proxy Statement, and shall, as promptly as practicable after receipt thereof, provide Seller with copies of all correspondences between it and its Representatives, on the one hand, and the SEC, on the other hand, and all written comments with respect to the Proxy Statement received from the SEC and advise Seller of any oral comments with respect to the Proxy Statement received from the SEC. Acquirer shall use its reasonable best efforts to respond as promptly as practicable to any comments received from the SEC with respect to the Proxy Statement. Notwithstanding the foregoing, prior to mailing in definitive form the Proxy Statement (or any amendment or supplement thereto), or responding to any comments received from the SEC with respect thereto, Acquirer shall provide Seller a reasonable opportunity to review and comment on such document or response (including the proposed final version of such document or response). Seller and the Company Parties shall reasonably cooperate to prepare appropriate responses thereto (and will provide each other with copies of any such responses given to the SEC) and make such modifications to the Proxy Statement as shall be reasonably appropriate.
(b)The Parties shall reasonably cooperate in preparing and filing with the SEC the Proxy Statement and any necessary amendments or supplements thereto. Seller and the Company Parties shall furnish all information concerning Seller, the Company Group and the Business (including any audited and unaudited financial statements of the Company Group that may be required under Regulation S-X), as required under applicable securities laws in connection with (i) the preparation, filing and distribution of the Proxy Statement and any necessary amendments or supplements thereto, (ii) the preparation and filing of a Current Report on Form 8-K reporting the Closing and any necessary amendments thereto (the “Closing 8-K”) and (iii) the preparation, filing and distribution of any registration statement and related prospectus registering the resale of the shares of Acquirer Stock issued as the Stock Consideration and any necessary amendment or supplements thereto (the “Resale Registration Documents” and, together with the Proxy Statement and the Closing 8-K, the “Applicable SEC Filings”). Seller shall use its reasonable best efforts to obtain any necessary written consent of the auditor of the audited financial statements of the Company Group for the inclusion of its audit report on such audited financial statements in the Applicable SEC Filings for which such consent is required in order for such audit report to be included in such filing. Acquirer shall
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not file or mail the Proxy Statement or any amendment or supplement thereto to stockholders without the written consent of Seller (such consent not to be unreasonably withheld, conditioned or delayed).
(c)The Proxy Statement shall state that the Acquirer Board has approved this Agreement and the Transactions, approved and declared advisable the issuance of shares of Acquirer Stock contemplated by this Agreement and include (i) the recommendation of the Acquirer Board to vote in favor thereof and (ii) the recommendation of the Acquirer Board to vote in favor of the appointment of the Specified Designees to the Acquirer Board for terms that expire no earlier than the end of the Second Milestone Period (the Acquirer Board recommendations described in this clause (ii) and the immediately preceding clause (i), collectively, the “Acquirer Board Recommendation”) and (iii) any other proposal that the Acquirer Board reasonably deems necessary or advisable to consummate the Transactions. None of the Acquirer Board or any duly authorized committee thereof shall (i) fail to include in the Proxy Statement the Acquirer Board Recommendation or fail to make the Acquirer Board Recommendation; (ii) change, modify, withhold, qualify or withdraw, or resolve or propose publicly to change, modify, withhold, qualify or withdraw, in each case, in a manner adverse to Seller or the Company Parties, the Acquirer Board Recommendation; or (iii) fail to publicly reaffirm the Acquirer Board Recommendation, in each case, within 10 Business Days after any written request of Seller to do so.
(d)Acquirer shall advise Seller promptly after receiving oral or written notice of (i) any requirement that Acquirer supplement or amend the Proxy Statement (whether to correct a misstatement or omission to state a material fact or otherwise) or (ii) any oral or written request by the SEC for amendment of the Proxy Statement or SEC comments thereon or requests by the SEC for additional information. Acquirer shall promptly provide Seller with copies of any written communication from the SEC with respect to the Proxy Statement and Acquirer, Seller and the Company Parties shall cooperate to prepare appropriate responses thereto (and will provide each other with copies of any such responses given to the SEC) and make such modifications to the Proxy Statement as shall be reasonably appropriate.
(e)If, at any time prior to the Effective Time, any event or circumstance shall be discovered by a Party that should be set forth in an amendment or a supplement to the Proxy Statement so that any such document would not include any misstatement of a material fact or fail to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, such Party shall promptly inform the other parties hereto and the Parties shall cause an appropriate amendment or supplement describing such information to be promptly filed with the SEC and, in the case of Acquirer to the extent required by Law, disseminated to stockholders.
(f)Each of Seller, the Company Parties and Acquirer shall use its reasonable best efforts to (i) cooperate with the other party to prepare pro forma financial statements that comply with the rules and regulations of the SEC to the extent required for the Applicable SEC Filings, including the requirements of Regulation S-X, and (ii) provide and make reasonably available upon reasonable notice the senior management employees of the other party to discuss the materials prepared and delivered pursuant to this Section 5.3(f).
(g)Acquirer shall take all lawful action to call, give notice of, convene and hold a meeting of its stockholders (the “Acquirer Stockholders’ Meeting”) as promptly as practicable following the date on which the SEC clears (whether orally or in writing) the Proxy Statement for the purpose of obtaining the Acquirer Stockholder Approval and approving the appointment of the Specified Designees to the Acquirer Board, which meeting shall be held not later than 35 days following the date on which the Proxy Statement is first mailed (or made available in accordance with Rule 14a-16 under the Exchange Act) to Acquirer’s stockholders. Acquirer shall include in the Proxy Statement the Acquirer Board Recommendation and solicit and use its reasonable best efforts to obtain the Acquirer Stockholder Approval. If, on a date for which the Acquirer Stockholders’ Meeting is scheduled, Acquirer shall have not received proxies representing a sufficient number of shares of outstanding Acquirer Stock to obtain the Acquirer Stockholder Approval, or if necessary to make or modify any disclosure contained in the Proxy Statement in order to comply with applicable Law (as determined in good faith by the Acquirer Board, after consultation with its outside legal counsel), irrespective of whether a quorum is present, Acquirer shall have the right to announce one or more successive postponements or adjournments of the Acquirer Stockholders’ Meeting; provided that the Acquirer Stockholders’ Meeting is not postponed or adjourned, in the aggregate, to a date that is
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more than thirty (30) days after the date for which the Acquirer Stockholders’ Meeting initially was scheduled (excluding, however, any adjournments or postponements required by applicable Law).
5.4Confidentiality; Public Disclosure. The Parties acknowledge that Seller and Acquirer have previously executed the Confidentiality Agreement and that, effective as of the Closing, the Confidentiality Agreement shall terminate and shall be of no further force or effect with no surviving obligations. No Company Party or Seller, on the one hand, or any Acquirer Party, on the other hand, in each case, directly or indirectly through their respective Representatives or any other Person shall issue any press release or other public statement or announcement regarding this Agreement, the Ancillary Agreements or the Transactions without, in the case of a press release or statement by any Company Party or Seller, the consent (not to be unreasonably withheld, conditioned or delayed) of Acquirer, or, in the case of a press release or statement by any Acquirer Party, the consent (not to be unreasonably withheld, conditioned or delayed) of Seller. Notwithstanding anything to the contrary in the foregoing, a Party shall be permitted to disclose any and all terms to its financial, tax and legal advisors (each of whom is subject to a similar obligation of confidentiality), and to any Governmental Authority or administrative agency to the extent necessary or advisable in compliance with applicable Law and the rules of a national stock exchange on which such Party’s capital stock is traded.
5.5Access; Copy of VDR.
(a)Subject to applicable Law and upon reasonable notice, each of Seller and the Company Parties shall afford Acquirer and its employees, attorneys, accountants, consultants, Representatives and other advisors and agents reasonable access, during normal business hours during the Pre-Closing Period, to the Company Group’s properties, books, contracts and records and appropriate individuals as Acquirer may reasonably request (including employees, attorneys, accountants, consultants and other professionals, in each case subject to applicable privilege), in each case concerning the business, properties and personnel of the Company Group, and during the Pre-Closing Period, each of Seller and the Company Parties shall reasonably promptly furnish to Acquirer such information concerning the business, properties and personnel of the Company Group as Acquirer may reasonably request; provided that each of Seller and the Company Parties may restrict the foregoing access to the extent that (i) any applicable Law requires such Party or its Subsidiaries to restrict or prohibit access to any such properties or information to Acquirer, (ii) such access would give rise to a risk of waiving any attorney-client privilege, work product doctrine or other applicable privilege applicable to such documents or information or (iii) such access would be in breach of any confidentiality obligation, commitment or provision by which Seller or any member of the Company Group, as applicable, is bound or affected as of the Agreement Date, which confidentiality obligation, commitment or provision shall be disclosed to Acquirer; provided, that Seller and the applicable Company Party: (x) will be entitled to withhold only such information that may not be provided without causing such waiver; and (y) at the request of Acquirer, will reasonably cooperate with Acquirer and use its commercially reasonable efforts to obtain the consent or waiver of any third party to the disclosure in full of all such information to Acquirer. With respect to the furnishing by Seller or the Company Parties of competitively sensitive information, outside antitrust counsel will be consulted prior to the exchange of such information, and such information shall not be exchanged to the extent such counsel to Seller or the applicable Company Party reasonably advises against such exchange. In addition, any information obtained from Seller or the Company Parties pursuant to the access contemplated by this Section 5.5 shall be subject to the Confidentiality Agreement. Any access to any of Seller’s, or any member of the Company Group’s facilities shall be subject to, as applicable, Seller’s, or such member of the Company Group’s reasonable security and health-related measures and the requirements of the applicable Leases, and shall not include the right to perform any invasive testing or soil, air and groundwater sampling, including, any environmental assessment.
(b)After the Closing, Seller agrees to provide, or cause to be provided, to Acquirer, the Surviving Entity or their designated Affiliate, as soon as reasonably practicable after written request therefor, reasonable access during normal business hours, to its and its Affiliates’ employees (without unreasonable disruption of employment) and to such books, records, documents and files in the possession or under the control of the Seller or its Affiliates to Acquirer, the Surviving Entity or their designated Affiliate to the extent reasonably required by Acquirer or the Surviving Entity (i) in order to comply with reporting, disclosure, filing or other similar requirements imposed on Acquirer, the Surviving Entity or their respective Affiliates under applicable Laws or (ii) in connection with any Proceeding related to the Business; provided that Seller shall not be required to provide access to or disclose
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information where such access or disclosure would violate any Law or agreement, or waive any attorney client or other similar privilege, and may redact information regarding itself or its Subsidiaries or otherwise not relating to Business, and, in the event such provision of information could reasonably be expected to violate any Law or agreement or waive any attorney client or other similar privilege, the Parties shall take all reasonable measures to permit the compliance with such obligations in a manner that avoids any such harm or consequence.
5.6Regulatory Approval; Reasonable Best Efforts.
(a)Each of the Parties shall coordinate and cooperate with one another and shall each use reasonable best efforts to comply with, and shall each refrain from taking any action that would impede compliance with, applicable Laws, and as soon as reasonably practicable and advisable after the Agreement Date, each of the Parties shall make all filings, notices, petitions, statements, registrations, submissions of information, applications or submissions of other documents required by any Governmental Authority in connection with the Mergers and the other Transactions, including (i) Notification and Report Forms with the United States Federal Trade Commission (the “FTC”) and the Antitrust Division of the United States Department of Justice (“DOJ”) as required by the HSR Act (the “HSR Filings”), and (ii) any filings required under the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, any applicable state or securities or “blue sky” laws and the securities laws of any foreign country, or any other applicable Law relating to the Mergers. Each Party will cause all documents that such Party is responsible for filing with any Governmental Authority under this Section 5.6 to comply in all material respects with all applicable Law.
(b)Acquirer agrees to use reasonable best efforts to promptly take any and all steps necessary to avoid or eliminate each and every impediment under the HSR Act and any other applicable Antitrust Law that may be asserted by any Governmental Authority or any other Person so as to enable the Parties to expeditiously close the Transactions. For the avoidance of doubt and notwithstanding anything else in this agreement, Acquirer shall not be required to (i) propose, negotiate, commit to or effect, by consent decree, hold, separate order, or otherwise, the sale, the divestiture or disposition of any of its assets, properties or businesses, including those of Affiliates, or of the assets, properties or businesses to be acquired by it pursuant to this Agreement, and (ii) otherwise taking or committing to take actions that after the Closing Date would limit Acquirer’s or its Affiliates’ freedom of action with respect to, or its or their ability to retain, one or more of the businesses, product lines or assets of the Company (the foregoing actions individual and in the aggregate being “Remedial Actions”), in each case, as may be required in order to avoid the entry of, or to effect the dissolution of, any preliminary or permanent injunction, in any Proceeding under the HSR Act or any other Antitrust Law, which would otherwise have the effect of preventing or delaying the Closing, unless such Remedial Actions would not, individually or in the aggregate, reasonably be expected to be materially detrimental to the benefits to be derived by Acquirer and its Affiliates as a result of the Mergers and the other Transactions. Further, Acquirer and its Affiliates shall not be obligated to contest, administratively or in court, any litigated Proceeding under the HSR Act or any other Antitrust Law seeking to enjoin the Mergers and the other Transactions, or to impose any Remedial Actions upon the Acquirer, Seller or the Company and their respective Affiliates.
(c)Each of the Parties shall work together and promptly supply the other with any information which may be required and reasonable assistance as the other may request in order to effectuate any filings or applications pursuant to Section 5.6. Except where prohibited by applicable Antitrust Laws relating to the exchange of information, and subject to the Confidentiality Agreement, each of Seller and the Company Parties, on one hand, and Acquirer, on the other, shall use commercially reasonable efforts to (i) consult with the other party prior to taking a position with respect to any such filing, (ii) permit the other party to review and discuss in advance, and consider in good faith, the views of the other in connection with any analyses, appearances, presentations, memoranda, briefs, white papers, arguments, opinions and proposals before making or submitting any of the foregoing to any Governmental Authority in connection with any investigations or Proceedings in connection with this Agreement or the Transactions (including under any antitrust or fair trade applicable Law), (iii) coordinate with the other Party in preparing and exchanging such information and (iv) promptly provide the other party (and its counsel) with copies of all filings, presentations or submissions (and a summary of any oral presentations) made by such party with any Governmental Authority in connection with this Agreement or the Transactions (though sensitive negotiation and deal valuation materials may be redacted); provided that the final determination as to the
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strategy for dealing with the FTC, the DOJ or any other applicable Governmental Authority shall be made by Acquirer.
(d)Further, neither Party shall participate in any meeting or material discussion with any Governmental Authorities with respect to any such filings, applications, investigation, or other inquiry without giving the other party prior notice of the meeting or discussion and, to the extent permitted by the relevant Governmental Authority, the opportunity to attend and participate in such meeting or discussion (which, at the request of either Party, shall be limited to outside antitrust counsel only).
(e)Each of Acquirer and Seller shall equally split (i) all filing fees and local counsel fees payable in connection with the filings described in this Section, and (ii) all fees of economists and any other expert fees deemed advisable or necessary by counsel for the Parties in connection with compliance with a “second request” issued by the FTC or DOJ pursuant to the HSR Act, or to respond to any investigation of the agreements contemplated herein by a Governmental Authority prior to Closing. (with Holdco2’s portion of such fees being included in Transaction Expenses).
5.7Third-Party Consents; Notices; Seller Contracts.
(a)Promptly after the Agreement Date, following consultation with Acquirer, Seller or the applicable Company Party will send each notice and will use their respective commercially reasonable efforts to obtain all consents, waivers and approvals from all Persons that are necessary for the execution and delivery of, and the performance of its obligations pursuant to, this Agreement and the Ancillary Agreements, including under any Permit or Contract whereby the consummation of the Transactions would, in the absence of the Consent of a third party, constitute or give rise to (A) a breach of applicable Law or such Contract; (B) loss of any material rights or benefits under such Contract; or (C) an entitlement to accelerate, terminate, forfeit or dispose of such Contract. Such notices, consents, waivers and approvals will be in a form reasonably acceptable to Acquirer.
(b)With respect to the Seller Contracts, prior to the Closing Date, the Company shall use its commercially reasonable efforts to enter into new Contracts on substantially similar terms as the Seller Contracts with the respective Third Parties thereto, including such new Contracts with respect to the Seller Contracts to which Top Customers, Top Suppliers and Top Payors are parties (such new Contracts with Top Customers, Top Suppliers and Top Payors, “Required Closing Contracts” ). If any Seller Contract is not Transferred on or prior to the Closing Date, Seller hereby agrees to use commercially reasonable efforts in cooperation with Acquirer to (i) implement arrangements (including subleasing, sublicensing or subcontracting) (A) to provide the underlying rights and benefits of the Company to Acquirer, the Surviving Entity and their designated Affiliates and (B) for the Surviving Entity or Acquirer or their designated Affiliate to assume all Company obligations thereunder and (ii) obtain any requisite Consent, substitution, novation, or amendment required to Transfer the portion of the Seller Contract attributable to the Business to Acquirer, the Surviving Entity, or their designated Affiliate.
5.8Notice of Developments.
(a)During the Pre-Closing Period:
(i)Each of Acquirer, on the one hand, and Seller and the Company Parties, on the other, will promptly advise the other Party in writing of any event or circumstance that would reasonably be expected to result in any representation or warranty made by it in this Agreement becoming untrue or inaccurate in any material respect so as to cause the Closing conditions set forth in Section 6.1 or in Section 6.2 or Section 6.3, respectively, to fail to be satisfied.
(ii)Each of Acquirer, on the one hand, and Seller and the Company Parties, on the other, will promptly advise the other Party in writing of any event or circumstance that would reasonably be expected to result in the failure by it to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it under this Agreement prior to the Effective Time in any respect so as to cause the Closing conditions set forth in Section 6.1 or in Section 6.2 or Section 6.3, respectively, to fail to be satisfied.
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(iii)Seller or Holdco2, as applicable, will promptly advise Acquirer in writing of any change or event having, or which is reasonably likely to have, alone or in combination with other changes or events, a Material Adverse Effect with respect to the Company Group.
(iv)Seller or Holdco2, as applicable, will promptly advise Acquirer in writing of any Proceeding initiated by or against any member of the Company Group or, to the Company’s Knowledge, any Proceeding threatened against any member of the Company Group, or brought or threatened against any director, officer, or equityholder of any member of the Company Group, in each case in its capacity as such (a “New Litigation Claim”), and notify Acquirer of ongoing material developments in any New Litigation Claim and consult in good faith with Acquirer regarding the conduct of the defense of any New Litigation Claim.
(v)Seller or Holdco2, as applicable, will promptly advise Acquirer in writing of any written notice from any Person (from which Acquirer and Seller shall have not previously determined to obtain consent), alleging that the consent of such Person is or may be required in connection with the Mergers.
(vi)Seller or Holdco2, as applicable, will deliver to Acquirer as soon as practicable, but in any event within three Business Days, of applicable Governmental Authority contact, copies of any associated correspondence. Neither the Seller, Holdco2 or any member of the Company Group shall have any further communication with such Applicable Government Authority without prior written notice to Acquirer.
(b)No notification pursuant to this Section 5.8 will be deemed to prevent or cure any breach of, or inaccuracy in, amend or supplement any Section of the Company Disclosure Schedules or the Acquirer Disclosure Schedules, or otherwise disclose an exception to, or affect in any manner, the representations, warranties, covenants or agreements of the Parties (or remedies with respect thereto) or the conditions to the obligations of the parties under this Agreement or the Ancillary Agreements.
5.9Regulatory Matters. During the Pre-Closing Period, the Seller and the Company Parties shall use and shall cause their respective Affiliates to use commercially reasonable efforts to make available to Acquirer and its Representatives, as and to the extent requested by Acquirer, complete and accurate copies of all written correspondence between any member of the Company Group, on the one hand, and the applicable Regulatory Authorities, on the other, other than routine, non-material communications in the Ordinary Course of Business, that is or comes into the Seller’s, its Affiliates’ or the Company Group’s possession or control during the Pre-Closing Period promptly after Seller or the Company Parties obtain such possession or control thereof, except to the extent any such material is immaterial to the Company Group. The Company Parties shall, and shall cause their respective Representatives to consult and reasonably cooperate with Acquirer, as and to the extent reasonably requested by Acquirer, and take into good faith consideration the views of Acquirer in connection with any clinical and preclinical trials and any regulatory filings, and any communications with any Regulatory Authority, in each case with respect to the Company Group, during the Pre-Closing Period.
5.10Delivery of Financial Statements. During the Pre-Closing Period, Seller or Holdco2 will deliver to Acquirer, (a) not later than eight Business Days after the end of each calendar month, an unaudited consolidated balance sheet as of the end of such month and unaudited consolidated statements of operations and cash flows for such month; provided that the cash flow statements need only be included on a quarterly basis; and (b) on or before the fifth (5th) Business Day prior to the Closing, audited consolidated financial statements, including consolidated balance sheets and consolidated statements of income, changes in stockholder equity, and cash flows, of the Company Group for the twelve (12) months ended December 31, 2021 prepared in accordance with the Accounting Standards (the “Interim Financial Statements”), and provide such additional supporting or related information as may be reasonably requested by Acquirer in respect of such Interim Financial Statements. Holdco2 covenants and agrees that such financial statements and the notes thereto, if any, will fairly present in all material respects the financial condition of the Company Group at the respective dates thereof and the results of its operations for the respective months then ended, and will be prepared in accordance with the books and records of the Company Group in conformity with the Accounting Standards, consistently applied with the Financial Statements, except for the omission of footnotes and normal, immaterial year-end adjustments.
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5.11Tax Matters.
(a)Cooperation. Without limiting any of the other provisions of this Section 5.11, the Parties shall cooperate fully, as and to the extent reasonably requested by any of them, in connection with the filing of Tax Returns and any audit, litigation or other Proceeding with respect to Taxes. In this regard, Acquirer shall retain all books and records with respect to Tax matters of the Company Group which are or may be pertinent to any Tax period beginning before the Closing Date until the expiration of the applicable statute of limitations and shall make them available to Seller in connection with any audit, litigation or other Proceeding relating to the Company Group or with respect to which the Company Group is relevant.
(b)Transfer Taxes. All transfer, documentary, sales, use, stamp, registration and other such Taxes, and any conveyance fees, recording charges and other fees and charges (including any penalties and interest) incurred in connection with consummation of the Transactions (“Transfer Taxes”), if any, shall be borne and paid fifty percent (50%) by Seller and fifty percent (50%) by Acquirer; provided that any Transfer Taxes incurred as a result of or in connection with the Pre-Closing Restructuring shall be borne and paid 100% by, and be the sole responsibility of, Seller. Seller or Acquirer (as required by applicable Law) shall prepare and timely file (or cause to be prepared and timely filed) at its own expense all Tax Returns required to be filed in respect of any such Taxes, provided, however, that Taxes relating to such Tax Returns shall be borne and paid by the Seller and Acquirer as provided in the preceding sentence.
(c)Straddle Periods. For purposes of determining the liability for Taxes (as well as any refund or credit with respect thereto) of or in respect of, or payable by, Holdco2 or the Company Group in respect of any Straddle Period, (i) the amount of any such Taxes based on or measured by income, sales, use, receipts, or other similar items of the Company Group that constitute a Tax in respect of a Pre-Closing Tax Period shall be determined based on an interim closing of the books as of the close of business on the Closing Date and (ii) the amount of any other Taxes of the Company Group for a Straddle Period that relate to and constitute a Tax in respect of a Pre-Closing Tax Period shall be deemed to be the amount of such Tax for the entire Straddle Period multiplied by a fraction the numerator of which is the number of days in the portion of the Straddle Period ending on the Closing Date and the denominator of which is the number of days in the entire Straddle Period. For purposes of determining the amount of Taxes attributable to the pre-Closing portion of any Straddle Periods under this Agreement, all applicable Transaction Tax Deductions shall be allocated to and deducted in the pre-Closing portion of any Straddle Period to the extent permitted by applicable Law on a “more likely than not” basis.
(d)Tax Returns. At the cost and expense of Seller, Seller or Parent shall prepare and file (or cause to be prepared and filed) all Tax Returns of or relating to the Company Group for any Pre- Closing Tax Period that are due after the Closing. Seller shall provide a copy of such Tax Return to Acquirer at least fifteen (15) days before the due date for filing such Tax Return (or as soon as reasonably practicable, if such due date is less than fifteen (15) days after the Closing Date) for Acquirer’s review. Seller or Parent, as applicable, shall consider in good faith all reasonable written comments made by Acquirer with respect to such Tax Returns within five Business Days prior to the due date for filing such Tax Return. All such Tax Returns shall be timely filed as finally prepared by Seller. Tax Returns for any Pre-Closing Tax Periods and Straddle Periods shall include therein as deductions all Transaction Tax Deductions to the extent permitted by applicable Law on a “more likely than not” basis. Notwithstanding anything to the contrary in this Agreement, Seller, Parent and Subsidiaries of Parent shall not be required to provide any Person with any Tax Return or copy of any Tax Return of (i) Parent or any Subsidiary of Parent, or (ii) a consolidated, combined, affiliated or unitary group that includes Parent or any Subsidiary of Parent.
(e)Tax Proceedings. Acquirer shall inform Seller of the receipt by Acquirer or its Affiliates (including the Surviving Entity after the Closing) of notice of any deficiency, proposed adjustment, adjustment, assessment, audit, claim, inquiry, examination, suit, dispute or other proceeding relating to Taxes with respect to which Acquirer intends to seek indemnification under Article 8 (a “Tax Proceeding”). Seller shall not be relieved of its indemnification obligations hereunder if such notice is not delivered promptly except to the extent Seller is materially prejudiced thereby. Seller or Parent shall have the exclusive right to control, conduct and settle any Tax Proceeding. Seller or Parent shall keep Acquirer reasonably informed of all material developments of such Tax Proceeding. Notwithstanding anything in Article 8 to the contrary, this Section 5.11(d), and not Section 8.3, shall govern the conduct of Tax Proceedings.
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(f)Tax Free Reorganization Matters. The Parties intend that, for United States federal income tax purposes, the Mergers will qualify as a Reorganization to which each of the Parties are to be parties under Section 368(b) of the Code and this Agreement is intended to be, and is adopted as, a plan of reorganization for purposes of Sections 354, 361 and 368 of the Code and within the meaning of Treasury Regulations Section 1.368-2(g) (the “Intended Tax Treatment”). The Mergers shall be reported by the Parties for all Tax and other purposes in accordance with the foregoing and will not take any position inconsistent with the Intended Tax Treatment, unless otherwise required by a Governmental Authority as a result of a “determination” within the meaning of Section 1313(a) of the Code. Notwithstanding any other provisions of this Agreement, the composition of payments under this Agreement shall be consistent with the qualification of the transactions contemplated hereby as a Reorganization, including the requirements of Treasury Regulations Section 1.368-1(e) and a minimum proprietary interest under such regulations of at least forty percent (40%), and adjustments shall be made to the composition of payments and satisfaction of indemnity claims as between Acquirer Stock, cash and any other items to the extent necessary to comply with the foregoing. The Parties shall consult and cooperate with each other in good faith for purposes of making any such adjustments. The parties covenant and agree that they will not take any actions before or after the Closing that would be reasonably expected to adversely affect the status of the Mergers as a Reorganization. The Parties shall cooperate with each other and their respective counsel to document and support the Tax treatment of transactions contemplated by this Agreement consistently with the Intended Tax Treatment, including providing factual support letters and customary tax representations to counsel for purposes of rendering any Tax opinions that may be provided by counsel. Each Party shall promptly notify the other Party in writing if, before the Closing Date, such Party knows or has reason to believe that the transactions contemplated by this Agreement may not qualify for the Intended Tax Treatment.
(g)Tax Refunds. All refunds of Taxes of any member of the Company Group for any Pre-Closing Tax Period (or portion of a Straddle Period ending on the Closing Date as determined in accordance with the same principles provided for in Section 5.11(c)) (whether in the form of cash received or a credit or offset against Taxes otherwise payable) shall be for the benefit of the Seller. To the extent that the Acquirer, any member of the Company Group, or any of their Affiliates receives a Tax refund that is for the benefit of the Sellers that was not included in the calculation of Company Net Working Capital, the Acquirer shall pay to the Seller the amount of such Tax refund (and interest received from the Governmental Authority with respect to such refund), net of out-of-pocket Taxes and reasonable professional fees and expenses incurred to obtain such. Tax refund. The amount due to the Seller shall be payable ten (10) days after receipt of the refund from the applicable Governmental Authority (or, if the Tax refund is in the form of a credit or offset, ten (10) days after the due date of the Tax Return claiming such credit. or offset). The Acquirer shall, and shall cause the members of the Company Group, to take all reasonable actions necessary, or requested by the Seller, to timely claim any Tax refunds that will give rise to a payment under this Section 5.11(g). Notwithstanding the foregoing, in the event it is subsequently determined that any Tax refund or Tax credit for which the Acquirer made a payment hereunder was improperly obtained or otherwise disallowed, the Seller shall pay to the Acquirer an amount equal to the amount such Tax refund or Tax credit so disallowed (not exceeding the amount of the applicable Tax refund or Tax credit for which Acquirer made a payment to the Seller Representative under this Section 5.11(g)) within ten (10) days after delivery of a written notice to the Seller of such determination or disallowance. Payments under this paragraph (g) shall be treated as adjustments to the Merger Consideration.
(h)Post-Closing Actions. Acquirer shall not permit the Company or any of its Affiliates to take any action on the Closing Date that could increase Seller’s liability for Taxes or reduce the amount of any Tax refund or Tax credit of Seller. None of the Acquirer, the Company Group nor any of their respective Affiliates shall (or shall cause or permit any members of the Company Group or their Subsidiaries) to (i) file, amend, re-file or otherwise modify any Tax Return relating in whole or in part to the Company or any of its Subsidiaries, with respect to any Pre-Closing Tax Period, (ii) make any Tax election pursuant to Sections 336 or 338 of the Code in connection with the transactions contemplated hereby, or any other election that has retroactive effect to any Pre-Closing Tax Period of any member of the Company Group or their Subsidiaries or Affiliates, (iii) file any ruling or request with any taxing authority that relates to Taxes or Tax Returns of the Company or any of its Subsidiaries or their Affiliates for a Pre-Closing Tax Period, or (iv) enter into any voluntary disclosure with any taxing authority regarding any Tax or Tax Returns of the Company or any of its Subsidiaries for a Pre-Closing Tax Period (including any voluntary disclosure with a taxing authority with respect to filing Tax Returns or paying Taxes for any Pre-Closing Tax Period
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in a jurisdiction that the Company did not previously file a Tax Return or pay Taxes), in each case, without the prior written consent of the Seller, which shall not be unreasonably withheld, delayed or conditioned.
5.12Insurance; Indemnification of Directors and Officers.
(a)_________Insurance.
(i)_________Following the Closing and for the duration of the term of the Transition Services Agreement, with respect to claims for events or Damages related to the Company Products with respect to pre-Closing occurrences that are covered by Seller’s occurrence-based third-party liability insurance policies (the “Available Insurance Policies”), subject in all cases to the terms and limitations of such policies (such claims, the “Valid Pre-Closing Claims”), (A) Acquirer may promptly notify Seller in writing of any matter that is reasonably expected to give rise to a Valid Pre-Closing Claim under any such Available Insurance Policy (provided that the failure to promptly notify Seller shall not relieve Seller from its obligations under clause (B), except to the extent that such failure invalidates the validity of any purportedly Valid Pre-Closing Claim), and (B) Seller shall, and shall cause its Affiliates to, (1) make Valid Pre-Closing Claims and reasonably pursue and seek to recover on such claims under the terms of the applicable Available Insurance Policies and (2) reasonably promptly deliver to Acquirer any insurance proceeds received with respect thereto (calculated net of reasonable expenses incurred in procuring such recovery and any increase in premiums or retroactive premium adjustments or chargebacks paid by or on behalf of Seller to the extent resulting from such claims, and taking into account the available coverage under each Available Insurance Policy, it being understood that such coverage shall first be available to satisfy other claims of Seller or its Affiliates that are pending under such policy at the time the claim for the benefit of Acquirer is made); provided that, unless otherwise deducted from the proceeds received by Acquirer, Acquirer shall pay (or reimburse Seller for), without duplication, any deductibles, retentions, loss-sensitive, self-insurance amounts or other costs, in each case, to the extent resulting from any Valid Pre-Closing Claim made by Seller or its Affiliates on behalf of any of Acquirer or the Company Group under such policies for Valid Pre-Closing Claims. For the avoidance of doubt, Acquirer shall be liable for all uninsured, uncovered, unavailable or uncollectible Damages associated with any such Valid Pre-Closing Claim. Following the Closing, if permitted under the applicable Available Insurance Policy, Seller hereby authorizes Acquirer and its Subsidiaries, under the direction and control of Seller, to notify, make and pursue Valid Pre-Closing Claims as contemplated by this Section 5.12(a)(i) under the Available Insurance Policies, subject to the payment and reimbursement provisions set forth in the prior sentence. Notwithstanding anything to the contrary herein, Seller shall not have any Liability or obligation to bring any Proceedings to obtain any insurance coverage for any Valid Pre-Closing Claim.
(ii)In connection with the pursuit of any Valid Pre-Closing Claim, Acquirer shall, and shall cause the Company Group to, fully cooperate with Seller in pursuing coverage for any Valid Pre-Closing Claim. If Acquirer or any of its Affiliates breach, or cause any member of Seller to breach, any terms or conditions of any Available Insurance Policies with respect to any Valid Pre-Closing Claim, Acquirer shall be solely responsible for, and shall bear the risk of any loss of coverage cause by such breach (and, in all events, the Acquirer shall bear the risk of any lack of coverage under the Available Insurance Policies). Acquirer shall, and shall cause the Company Group to, use commercially reasonable efforts to pursue rights of recovery against third parties with respect to claims7, Liabilities, occurrences, accidents, events, matters, Proceedings or Damages for which the Company Group has the ability to mitigate via contract or tort and shall cooperate with Seller with respect to the pursuit of such rights.
(b)Indemnification of Directors and Officers.
(i)Each of Acquirer, Seller and Holdco2 agree that all rights to indemnification, advancement of expenses and exculpation from liability for or in connection with acts or omissions occurring at any time prior to or on the Closing Date (including in connection with this Agreement and the Transactions), that now exist in favor of any Person who prior to or on the Closing Date is or was a current or former director, manager, officer or employee of any member of the Company Group, or who at the request of Seller, Holdco2 or any of their respective Affiliates served prior to or on the Closing Date as a director, officer, member, manager, employee, trustee or fiduciary of any other entity of any type (each a “D&O Indemnified Person”), including as provided in the Governing Documents of any member of the Company Group (an “Indemnity Agreement”), will survive the Closing
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and will continue in full force and effect following the Closing Date. In furtherance (and not in limitation of) the foregoing, for the six (6) year period following the Closing Date, Acquirer will cause the Company Group to, and the Company Group will maintain in the Governing Documents of each applicable member of the Company Group provisions with respect to indemnification, advancement of expenses and exculpation from liability that in each such respect are at least as favorable to each D&O Indemnified Person as those contained in such member’s Governing Documents as in effect on the date hereof, which provisions will not be amended, repealed or otherwise modified in any manner that would adversely affect the rights thereunder of any D&O Indemnified Person. Each Indemnity Agreement shall continue without termination, revocation, amendment or other modification that would adversely affect the rights thereunder of any D&O Indemnified Person, in each case in accordance with its terms.
(ii)If Acquirer or any member of the Company Group (or any of its successors or assigns) (A) consolidates with or merges into any other Person and is not the continuing or surviving corporation or entity of such consolidation or merger or (B) transfers all or substantially all of its properties and assets to any other Person (including by dissolution, liquidation, assignment for the benefit of creditors or similar action), then, and in each such case, proper provision will be made so that such other Person fully assumes the obligations set forth in this Section 5.12(b).
(iii)The provisions of this Section 5.12(b) shall survive the Closing. This Section 5.12(b) shall be for the irrevocable benefit of, and will be enforceable by, each D&O Indemnified Person and his or her respective heirs, executors, administrators, estates, successors and assigns, and each such Person will be an express intended third party beneficiary of this Agreement for such purposes. Acquirer will pay, or will cause the applicable member of the Company Group, as and when incurred by any Person referred to in the immediately preceding sentence, all fees, costs, charges and expenses (including attorneys’ fees and expenses) incurred by such Person in enforcing such Person’s rights under this Section 5.12(b). Notwithstanding anything in this Agreement to the contrary, the obligations under this Section 5.12(b) will not be terminated, revoked, modified or amended in any way so as to adversely affect any Person referred to in the second sentence of this Section 5.12(b)(iii) without the written consent of such Person. With respect to any right to indemnification or advancement for actual or claimed acts or omissions occurring prior to or on the Closing Date (including in connection with this Agreement and the Transactions), the applicable member of the Company Group will be the indemnitor of first resort, responsible for all such indemnification and advancement that any D&O Indemnified Person may otherwise have from any direct or indirect stockholder or equity holder of any of the members of the Company Group (or any Affiliate of such stockholder or equity holder).
(iv)Notwithstanding anything to the contrary contained in this Section 5.12(b), Seller’s directors and officers insurance policies, in each case as in effect as of the Closing Date, shall be the first and primary recourse for any indemnification to which any D&O Indemnified Person may be entitled under this Section 5.12(b). For the six (6) year period following the Closing Date, Seller agrees to treat any such claim for indemnification against its directors and officers insurance policies as a Valid Pre-Closing Claim in accordance with Section 5.1(a).
5.13Employee Matters.
(a)All Continuing Employees shall continue as employees of the Company Group as of and immediately following the Closing. For a period of at least one (1) year following the Closing Date, Acquirer shall cause to be provided to the Continuing Employees (i) base salary or wages, as applicable, and cash bonus opportunities (and excluding, for the avoidance of doubt, equity or equity-based bonus opportunities), in each case no less favorable than those provided to such Continuing Employees as of the Agreement Date and (ii) employee benefits that are no less favorable in the aggregate than those provided to the Continuing Employees as of the Agreement Date.
(b)As of the Closing Date, the Company Group shall cease to be participating employers in the Seller Benefit Plans that provide retirement, health or welfare benefits. With respect to each benefit plan, program, practice, policy or arrangement maintained by the Acquirer or any of its Affiliates (including the Company) following the Closing Date and in which any of the Continuing Employees participate (the “Acquirer Plans”), each Continuing Employee shall be credited with the same amount of service as was credited by the Company Group as
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of the Closing under similar or comparable Company Benefit Plans (including for purposes of eligibility to participate, vesting, benefit accrual and eligibility to receive benefits), except to the extent such service credit would result in any duplication of benefits. Acquirer shall use commercially reasonable efforts to cause each applicable Acquirer Plan to waive, to the extent permitted by applicable Law, eligibility waiting periods, evidence of insurability requirements and pre-existing condition limitations. To the extent permitted by applicable Law and to the extent applicable in the plan year that contains the Closing Date, Acquirer shall use commercially reasonable efforts to give the Continuing Employees credit under the applicable Acquirer Plan for amounts paid prior to the Closing Date during the calendar year in which the Closing Date occurs under a corresponding benefit plan for purposes of applying deductibles, co-payments and out of pocket maximums, as though such amounts had been paid in accordance with the terms and conditions of the Acquirer Plan.
(c)Acquirer shall cause an Acquirer Plan that is intended to be tax qualified under Section 401(a) of the Code (“Acquirer 401(k) Plan” ) to permit Continuing Employees with account balances in a Seller Benefit Plan intended to be qualified under Section 401(a) of the Code (“Seller 401(k) Plan” ) to roll over their account balances, and shall use commercially reasonable efforts to include any loans, to such Acquirer 401(k) Plan. Seller shall provide a matching contribution under the Seller 401(k) Plan with respect to each Continuing Employee’s accrued matching contribution under the Seller 401(k) Plan as of the Closing Date for the portion of the plan year that includes the Closing Date for compensation earned prior to the Closing Date by contributing the Accrued 2022 401(k) Match to the Seller 401(k) Plan.
(d)Prior to the Closing, the Company Group shall pay discretionary annual bonuses for the performance period ended December 31, 2021, as determined in Seller’s sole discretion, and any commissions or other cash incentives with respect to performance periods ending on or before the Closing Date to the extent payable prior to the Closing in the Ordinary Course of Business. With respect to any other commissions or other cash incentives for performance periods ending on or after January 1, 2022 and on or before the Closing Date, Acquirer shall cause the Company Group to pay out the incentives thereunder in accordance with the terms thereof and consistent with past practice. With respect to performance periods in progress as of the Closing Date for any annual cash bonuses, commissions or other cash incentives, Acquirer shall cause the Company Group to maintain the terms of such programs in effect for the remainder of such performance periods and to pay out the incentives thereunder in accordance with such terms and consistent with past practice.
(e)Prior to the Closing, Seller may in its sole discretion accelerate the vesting of equity and equity based incentive awards held by Company Employees under Seller’s equity incentive plans, and may in its sole discretion extend the exercise period of stock options held by Company Employees under Seller’s equity incentive plans to the one (1) year anniversary of the Closing Date.
(f)Acquirer shall provide COBRA continuation coverage to each Continuing Employee who is an “M&A qualified beneficiary” (within the meaning of Treasury Regulation Section 54.4980B-9) in connection with the Transactions. Seller shall provide COBRA continuation coverage to each individual who is an M&A qualified beneficiary in connection with the Transactions and is not a Continuing Employee.
(g)As soon as practicable following the Agreement Date, Acquirer and the Company’s Chief Executive Officer shall mutually consult regarding the terms of an equity and cash retention pool for the benefit of certain Company Employees.
(h)Prior to the Closing, the Company shall use its commercially reasonable efforts (which for the avoidance of doubt shall not require the Company to pay any consideration) to obtain executed confirmatory assignments of Intellectual Property, in form and substance reasonably satisfactory to Acquirer, from any Authors that have not previously executed such agreements.
(i)Nothing contained in this Section 5.13 shall, or shall be construed so as to,
(j)prevent or restrict in any way the right of Acquirer to terminate reassign, promote or demote any employee, consultant, director or other service provider (or to cause any of the foregoing actions) at any time following the Closing, or to change (or cause the change of) the title, powers, duties, responsibilities, functions, locations, or conditions of employment or service, to the extent not covered by this Section 5.13, of any such
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employee, consultant, director or other service provider at any time following the Closing, (ii) constitute an amendment or modification of any Company Benefit Plan or other employee benefit plan, (iii) create any third-party rights in any such current or former employee, consultant, director or other service provider (including any beneficiary or dependent thereof) or (iv) except as set forth in Section 5.13(c)obligate Acquirer or any of its Affiliates to adopt or maintain any particular plan or program or other compensatory or benefits arrangement at any time or prevent Acquirer or any of its Affiliates from modifying or terminating any such plan, program or other compensatory or benefits arrangement at any time.
5.14Transition Services Agreement and Accounts Receivable.
(a)During the Pre-Closing Period, the Parties shall cooperate with each other and promptly negotiate and finalize the Transition Services Agreement covering the provision of certain transition services from Seller and its relevant Affiliates to the Company Group, acting reasonably and in good faith. In connection with the foregoing, Seller and Acquirer will take any other actions reasonably required to identify and define the services provided by Seller and its relevant Affiliates to the Company Group prior to Closing that are material to or reasonably necessary for the conduct of the Business following the Closing. The Transition Services Agreement shall cover transition services permitted under applicable Law and reasonably necessary for the conduct of Business by the Company Group following the Closing and provision that relate to the matters set forth in Schedule 5.14(a). All such transition services will be provided at Seller’s cost, without markup or margin, in accordance with applicable Laws and at the same or better standard of service as such services were provided to the Company Group prior to Closing. Individual Transition Services Agreements shall be established for each jurisdiction other than the United States in which the applicable Business, service recipients or service providers are located or are organized, as mutually agreed by Seller and Acquirer, in substantially the form of the Transition Services Agreement.
(b)If, following the Closing, Seller or any of its Affiliates receive payment of a receivable that should have been paid to Company Group, Seller shall notify Acquirer and deliver such payment to Acquirer or its designee promptly following the receipt thereof. Acquirer may direct all relevant trade debtors to make payment on such receivables to Acquirer’s specified address and/or account.
5.15Prohibited Activities.
(a)Seller shall not, and shall not permit or cause any of its controlled Affiliates to, at any time prior to four (4) years from the Closing, directly or indirectly, (i) solicit the employment or services (whether as an employee, consultant, independent contractor or otherwise) of any employee of the Company Group as of Closing or any Person who had been an employee of the Company Group within the twelve (12) month period immediately preceding the Closing, without Acquirer’s prior written consent, or (ii) hire in any capacity (whether as an employee, consultant, independent contractor or otherwise) any Key Employee, unless such Person has been terminated by Acquirer or any of its Affiliates subsequent to the Closing and who has not been employed or engaged by the Company Group for a period of at least six (6) months prior to the date of such hire, without Acquirer’s prior written consent. For purposes of this Section 5.15(a), the terms “solicit the employment or services” shall be deemed not to include generalized searches for employees through media advertisements of general circulation, employment search firms, open job fairs or otherwise.
(b)Seller shall not, and shall not permit, cause or encourage any of its controlled Affiliates to, for a period of four (4) years following the Closing, directly or indirectly, for Seller or on behalf of or in conjunction with any other Person (other than Acquirer and its Affiliates, including the Company Group) engage in the Business anywhere in the world.
5.16Subsidiary Compliance. Acquirer shall cause each Merger Sub to comply with all of such Merger Sub’s obligations under or relating to this Agreement and, prior to the Closing, each of Seller, the Company and Holdco2 shall cause the Company Group to comply with all of the Company Group’s obligations under or relating to this Agreement.
5.17Pre-Closing Restructuring. Seller and the Company Parties shall use their respective reasonable best efforts to, as soon as reasonably practicable following the Agreement Date, complete the Pre-Closing Restructuring in accordance with the steps set forth on Schedule D and obtain and deliver to Acquirer written confirmation from the
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IRS (or other evidence reasonably satisfactory to Acquirer) stating that the Company will retain its EIN following completion of the Transactions.
ARTICLE 6
CONDITIONS TO THE MERGERS
6.1Conditions to Obligations of Each Party to Effect the Merger. The respective obligations of each Party to consummate the Transactions shall be subject to the satisfaction or waiver in writing at or prior to the Closing of each of the following conditions:
(a)Stockholder Approval. The Holdco2 Stockholder Approval shall have been duly and validly obtained and the Acquirer Stockholder Approval shall have been duly and validly obtained.
(b)Illegality. No Order issued by any court of competent jurisdiction preventing the consummation of the Mergers shall be in effect, and no action shall have been taken by any Governmental Authority seeking the foregoing, and no Law or Order shall have been enacted or entered that makes the consummation of the Mergers illegal.
(c)Governmental Approvals. All filings with and approvals of any Governmental Authority required to be made or obtained prior to the Closing and in connection with the Mergers shall have been made or obtained and shall be in full force and effect, and the applicable waiting period under the HSR Act, including any extensions thereof agreed to by the parties and the relevant Governmental Authority, shall have expired or early termination of such waiting period shall have been granted by the applicable Governmental Authority (the “Antitrust Condition”).
6.2Additional Conditions to Obligations of Seller and the Company Group. The obligations of Seller and the Company Parties to consummate the Transactions shall be subject to the satisfaction or waiver at or prior to the Closing of each of the following conditions (it being understood and agreed that each such condition is solely for the benefit of Seller and the Company Parties and may be waived only by Seller (on behalf of itself and/or the Company Parties) in writing in its sole discretion without notice or Liability to any Person):
(a)Representations, Warranties and Covenants. The representations and warranties made by Acquirer herein shall be true and correct in all material respects (except for such representations and warranties that are qualified by their terms by a reference to materiality or Material Adverse Effect, which representations and warranties as so qualified shall be true and correct in all respects) on and as of the Agreement Date and on and as of the Closing Date as though such representations and warranties were made on and as of such dates (except for representations and warranties that address matters only as to a specified date or dates, which representations and warranties shall be true and correct with respect to such specified date or dates). Acquirer shall have performed and complied in all material respects with all covenants, agreements and obligations herein required to be performed and complied with by Acquirer at or prior to the Closing.
(b)Receipt of Closing Deliveries. Seller, the Company or Holdco2 shall have received each of the agreements, instruments, certificates and other documents set forth in Section 2.3(c) (other than clause (iv) thereof, which shall be delivered upon Closing as set forth in and in accordance with Section 2.5(a)(i)).
(c)No Material Adverse Effect. There shall not have occurred a Material Adverse Effect (substituting, in each case, “the Acquirer” for references to the Company Group or Company Parties) with respect to the Acquirer and its Subsidiaries (taken as a whole) that is continuing.
(d)Nasdaq Listing. The Stock Consideration issuable pursuant to this Agreement in connection with the Mergers (including pursuant to Section 2.7) shall have been approved for listing on Nasdaq (or any successor national securities exchange thereto), subject to official notice of issuance.
6.3Additional Conditions to the Obligations of Acquirer. The obligations of Acquirer and the Merger Subs to consummate the Transactions shall be subject to the satisfaction or waiver at or prior to the Closing of each of the following conditions (it being understood and agreed that each such condition is solely for the benefit of Acquirer
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and the Merger Subs and may be waived by Acquirer (on behalf of itself and/or Merger Sub) in writing in its sole discretion without notice or Liability to any Person):
(a)Representations, Warranties and Covenants. (i) The Company Fundamental Representations (other than those representations and warranties contained in Section 3.12 (Taxes)) shall be true and correct in all respects on and as of the Agreement Date and on and as of the Closing Date as though such representations and warranties were made on and as of such dates (except for representations and warranties that address matters only as to a specified date or dates, which representations and warranties shall be true and correct with respect to such specified date or dates); (ii) all other representations and warranties (including those contained in Section 3.12 (Taxes)) made by the Company Parties and Seller herein shall be true and correct in all material respects (except for such representations and warranties that are qualified by their terms by a reference to materiality or Material Adverse Effect, which representations and warranties as so qualified shall be true and correct in all respects) on and as of the Agreement Date and on and as of the Closing Date as though such representations and warranties were made on and as of such dates (except for representations and warranties that address matters only as to a specified date or dates, which representations and warranties shall be true and correct with respect to such specified date or dates); and (iii) each of Seller and the Company Parties shall have performed and complied in all material respects with all covenants, agreements and obligations herein required to be performed and complied with by Seller and the Company Parties, respectively, at or prior to the Closing.
(b)Receipt of Closing Deliveries. Acquirer shall have received each of the agreements, instruments, certificates and other documents set forth in Section 2.3(b).
(c)Injunctions or Restraints on Conduct of Business. No Order issued by any court of competent jurisdiction or other legal or regulatory restraint or prohibition materially limiting or restricting Acquirer’s ownership, conduct or operation of the Business following the Closing shall be in effect, and no Proceeding seeking any of the foregoing shall be pending or threatened.
(d)No Material Adverse Effect. There shall not have occurred a Material Adverse Effect with respect to the Company Group (taken as a whole) that is continuing.
(e)Financial Statements. Holdco2 shall have delivered to Acquirer, on or prior to five days prior to the Closing, the Required Financial Statements; provided that, the financial statements required by Item 9.01(a) and (b) of Form 8-K shall not be a condition to the Closing if the 71-day grace period provided by Item 9.01(a)(3) of Form 8-K shall then be available to Acquirer.
(f)Completion of the Pre-Closing Restructuring. Prior to the Closing, Seller and the Company Parties shall have completed the Pre-Closing Restructuring in accordance with the steps set forth on Schedule D and Holdco2 shall have delivered to Acquirer written confirmation from the IRS (or other evidence reasonably satisfactory to Acquirer) stating that the Company will retain its EIN following completion of the Transactions (the “Pre-Closing Restructuring Condition”).
(g)Key Employee. Katherine Stueland shall have remained continuously employed on a full-time basis with the Company through the Closing, Ms. Stueland’s Key Employment Agreement shall continue to be in full force and effect and no action shall have been taken by Ms. Stueland to repudiate or rescind such agreement and Ms. Stueland shall, as of the Closing, be ready, willing and able to perform the duties contemplated by the Key Employment Agreement following the Closing.
(h)Required Closing Contracts. A member of the Company Group and the applicable Third Parties shall have entered into the Required Closing Contracts and delivered copies thereof to Acquirer (together with the condition set forth in Section 2.3(b)(xii), the “Required Consent Condition”).
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ARTICLE 7
TERMINATION
7.1Termination. At any time prior to the Closing, this Agreement may be terminated and the Mergers abandoned by authorized action taken by the terminating Party or Parties, whether before or after the Holdco2 Stockholder Approval is obtained:
(a)by mutual written consent of Acquirer and Seller duly authorized by the Acquirer Board and the Seller Board, respectively;
(b)by either Acquirer or Seller, by written notice to the other, if the Closing shall not have occurred on or before August 14, 2022 or such other date that Acquirer and Seller may agree upon in writing (the “Termination Date”); provided that Acquirer or Seller may, by written notice to the other such Party, extend the Termination Date to October 14, 2022 if, as of the initial Termination Date, (A) any one or more of the Antitrust Condition, Pre-Closing Restructuring Condition and Required Consent Condition shall not have been satisfied and (B) all of the other conditions to the Closing set forth in Article 6 shall have been satisfied or waived (other than the conditions that, by their terms, are intended to be satisfied at the Closing, which conditions only need to be capable of being satisfied at the Closing); provided, further, that the right to terminate this Agreement under this Section 7.1(b) shall not be available to any party whose breach of any covenant, agreement or obligation hereunder will have been the principal cause of, or shall have directly resulted in, the failure of the Closing to occur on or before the Termination Date;
(c)by either Acquirer or Seller, by written notice to the other, if any Order of a Governmental Authority of competent authority preventing the consummation of the Mergers shall have become final and non-appealable;
(d)by Acquirer, by written notice to Seller, if (i) there shall have been an inaccuracy in any representation or warranty made by, or a breach of any covenant, agreement or obligation of, the Company Parties or Seller herein and such inaccuracy or breach shall not have been cured within 30 days after receipt by Seller of written notice from Acquirer of such inaccuracy or breach and, if not cured within such period and at or prior to the Closing, such inaccuracy or breach would result in the failure of any of the conditions set forth in Section 6.1 or Section 6.3 to be satisfied (provided that no such cure period shall be available or applicable to any such breach that by its nature cannot be cured); (ii) the Holdco2 Stockholder Approval is not obtained within seven (7) days following the execution of this Agreement; or
(e)by Seller, by written notice to Acquirer, if there shall have been an inaccuracy in any representation or warranty made by, or a breach of any covenant, agreement or obligation of, Acquirer or any of the Acquirer Parties herein and such inaccuracy or breach shall not have been cured within 30 days after receipt by Acquirer of written notice from Seller of such inaccuracy or breach and, if not cured within such period and at or prior to the Closing, such breach would result in the failure of any of the conditions set forth in Section 6.1 or Section 6.2 to be satisfied (provided that no such cure period shall be available or applicable to any such inaccuracy or breach that by its nature cannot be cured).
7.2Effect of Termination. In the event of termination of this Agreement as provided in Section 7.1, this Agreement shall forthwith become void and there shall be no Liability on the part of the Parties or their respective officers, directors, stockholders or Affiliates; provided that (i) Section 5.4 (Confidentiality; Public Disclosure), this Section 7.2 (Effect of Termination), Article 9 (Miscellaneous) and any related definition provisions in or referenced in Article 1 (Definitions) and the Confidentiality Agreement shall remain in full force and effect and survive any termination of this Agreement and (ii) nothing herein shall relieve any party hereto from Liability in connection with any intentional misrepresentation made by, or a willful breach of any covenant, agreement or obligation of, such party herein.
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ARTICLE 8
INDEMNIFICATION
8.1Survival of Representations; Claims Period.
(a)The representations and warranties contained in Article 3 and Article 4 that are not Fundamental Representations shall survive the Closing until the date that is 12 months following the Closing Date and the Fundamental Representations shall survive until the expiration of the applicable statute of limitations. All of the covenants and other agreements of the Parties contained in this Agreement to be performed at or prior to the Closing shall survive until the date that is 12 months following the Closing Date and all other covenants and other agreements of the Parties contained in this Agreement shall survive until fully performed or fulfilled. The period during which an Acquirer Indemnified Party may assert a claim for indemnification in respect of any of the matters set forth in clauses (iii) through (vi) of Section 8.2(a) shall survive indefinitely, except for the Repayment Obligations Indemnity, which period shall expire on the date that is two years following the Closing Date.
(b)Any claim for indemnification under this Article 8 must be asserted by a Claim Notice within the applicable survival period contemplated by Section 8.1(a), and if such a Claim Notice is given within such applicable period, the survival period for such representation, warranty, covenant or other agreement solely with respect to such claim shall continue until the claim is fully resolved.
8.2Indemnification.
(a)From and after the Closing, subject to the provisions of this Article 8, Seller shall indemnify, defend and hold harmless each Acquirer Party and each of its Affiliates (including, after the Closing, the Surviving Entity and the other members of the Company Group) and each Acquirer Party’s Representatives (the “Acquirer Indemnified Parties”) from and against any and all damages, claims, losses, costs, Liabilities, expenses or amounts paid in settlement, including interest, fines, penalties, reasonable attorneys’ fees and expenses of investigation, defense, enforcement of this Agreement and remedial action (collectively, “Damages”), asserted against, suffered, sustained, accrued or incurred by such Acquirer Indemnified Party as a result of or relating to:
(i)the breach of, or any inaccuracy in, any representation or warranty of the Company Parties or Seller in this Agreement or the Transaction Certificates to be true and correct on the Agreement Date and as of the Closing Date as if made on and as of the Closing Date (except that any such representations and warranties which by their express terms are made solely as of an earlier date shall be true and correct as of such earlier date); provided that (x) all materiality qualifications (such as “material” and “Material Adverse Effect”, other than the use of the word “Material” as part of any defined term) in such representations and warranties shall be disregarded for purposes of this Article 8 in determining the amount of Damages associated with a breach (but not, for the avoidance of doubt, for purposes of determining whether or not a breach has occurred) and (y) and with respect to the representations and warranties in Sections 3.19(b), 3.19(h), 3.19(i), 3.19(p), 3.20(a), 3.20(e), 3.20(f) and 3.20(g) all Knowledge qualifications (such as , “to the Knowledge of the Company”) shall be disregarded for purposes of determining whether or not a breach has occurred);
(ii)any breach of or failure to perform any covenant or obligation of the Company or Seller under this Agreement;
(iii)any Liabilities not related to the Business;
(iv)any Indebtedness of the Company Group or Transaction Expenses to the extent not taken into account in the calculation of the Cash Consideration in accordance with this Agreement, as finally determined in accordance with Section 2.6;
(v)any Pre-Closing Taxes or
(vi)any matter set forth on Schedule 8.2(a)(vi).
(b)From and after the Closing, subject to the provisions of this Article 8, Acquirer shall indemnify, defend and hold harmless Seller and each of its Affiliates (excluding, after the Closing, the Surviving Entity and the
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other members of the Company Group) and Seller and such Affiliates’ respective Representatives (the “Seller Indemnified Parties” and together with the Acquirer Indemnified Parties, the “Indemnified Parties”) from and against any and all Damages asserted against, suffered, sustained, accrued or incurred by such Seller Indemnified Party as a result of or relating to:
(i)the breach of, or any inaccuracy in, any representation or warranty of the Acquirer Parties in this Agreement or the Transaction Certificates to be true and correct on the Agreement Date and as of the Closing Date as if made on and as of the Closing Date (except that any such representations and warranties which by their express terms are made solely as of an earlier date shall be true and correct as of such earlier date), or in the case of a Third Party Claim, any allegation that, if true, would constitute or evidence such a breach of, or inaccuracy in, any such representation or warranty; provided that all materiality qualifications (such as “material” and “Material Adverse Effect”, other than the use of the word “Material” as part of any defined term) in such representations and warranties shall be disregarded for purposes of this Article 8 in determining the amount of Damages associated with a breach (but not, for the avoidance of doubt, for purposes of determining whether or not a breach has occurred); or
(ii)any breach of or failure to perform any covenant or obligation of Company Parties or Seller under this Agreement.
(c)The term “Damages” as used in this Article 8 is not limited to Third Party Claims, but includes Damages incurred or sustained by an Indemnified Party in the absence of Third Party Claims, and payments by an Indemnified Party shall not be a condition precedent to recovery; provided that Damages shall only include punitive damages to the extent such Indemnified Party is actually determined to be liable by a final judgment of the highest court with jurisdiction over the matter to a Third Party for such Damages in connection with a Third Party Claim and such Damages are indemnifiable pursuant to this Article 8. “Damages” shall not include consequential damages (except to the extent such damages would be reasonably foreseeable).
(d)Other than with respect to any claim for Fraud, no Indemnified Party shall be required to show reliance on any representation, warranty, covenant or agreement in order for such Indemnified Party to be entitled to indemnification, compensation or reimbursement in accordance with this Article 8.
8.3Notice of Claims.
(a)Any Indemnified Party seeking indemnification hereunder shall, within the relevant limitation period provided for in Section 8.1, give to the relevant indemnifying Party (the “Indemnifying Party”) a notice (a “Claim Notice”) describing in reasonable detail the facts giving rise to such claim for indemnification and shall include in such Claim Notice whether such claim relates to a claim by a Third Party against such Indemnified Party (a “Third Party Claim”) and (if then known) the amount or the method of computation of the amount of such claim, and a reference to the provision of this Agreement or Transaction Certificate upon which such claim is based; provided, that a Claim Notice in respect of any Proceeding by or against a Third Party as to which indemnification shall be sought shall be given promptly after the Indemnified Party becomes aware that such Proceeding has been commenced; and provided, further, that failure to give such notice shall not affect such Indemnified Party’s right to indemnification hereunder except to the extent the Indemnifying Party shall have been materially prejudiced by such failure.
(b)Except in the case of a Third Party Claim, the Indemnifying Party shall have twenty (20) Business Days following receipt of any Claim Notice pursuant hereto to (i) agree to such indemnification claims and the amount or method of determination set forth in the Claim Notice and satisfy such indemnification claim in accordance with Section 8.6 or (ii) to provide such Indemnified Party with notice that it disagrees with any such indemnification claim or the amount or method of determination set forth in the Claim Notice and thereafter comply with the dispute resolution provisions set forth in Section 2.9(a).
8.4Third Party Claims.
(a)The Indemnifying Party shall have the right to conduct (at the Indemnifying Party’s expense) the defense of a Third Party Claim with counsel reasonably satisfactory to the Indemnified Party, upon delivery of notice to such Indemnified Party (the “Defense Notice”) within twenty (20) days after the Indemnifying Party’s
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receipt of the Claim Notice; provided that the Defense Notice shall specify the counsel the Indemnifying Party will appoint to defend such Third Party Claim. The Indemnified Party shall be entitled to be indemnified for the reasonable fees and expenses of counsel for any period during which the Indemnifying Party has not assumed the defense of any such Third Party Claim in accordance herewith. If the Indemnifying Party delivers a Defense Notice and thereby elects to conduct the defense of the Third Party Claim, (i) such Indemnified Party will reasonably cooperate with and make available to the Indemnifying Party such assistance and materials as the Indemnifying Party may reasonably request, all at the sole expense of the Indemnifying Party, (ii) the Indemnified Party shall have the right at its sole expense to participate in the defense (including any discussions or negotiations in connection with the settlement, adjustment or compromise) of such Third Party Claim assisted by counsel of its own choosing, (iii) the Indemnifying Party shall deliver to the Indemnified Party, reasonably in advance so as to provide the Indemnified Party a reasonable opportunity to review and comment, copies of all pleadings, notices, offers of settlement and communications with respect to such Third Party Claim to the extent that receipt of such documents does not affect any privilege relating to the Indemnifying Party, subject to execution by the Indemnified Party of the Indemnifying Party’s (and, if required, such third party’s) standard non-disclosure agreement if and to the extent that such materials contain confidential or proprietary information and (iv) the Indemnifying Party shall keep the Indemnified Party reasonably apprised of developments with respect to such Third Party Claim and the defense thereof, and shall consider, in good faith, any recommendations made by the Indemnified Party with respect thereto.
(b)Notwithstanding the foregoing, the Indemnifying Party shall not be entitled to control the defense of any Third Party Claim if: (i) such claim for indemnification is with respect to a Proceeding (A) by a Governmental Authority, (B) that would reasonably be expected to result in a Material Adverse Effect with respect to the Surviving Entity and the probable Damage with respect to such Third Party Claim exceed the amount for which the Indemnifying Party could be liable pursuant to this this Article 8, or (C) regarding material Company IP, (ii) the applicable Indemnified Party has been advised by counsel that a material conflict of interest exists between the Indemnifying Party and such Indemnified Party with respect to such Third Party Claim, (iii) the Indemnifying Party has failed to deliver the Defense Notice or is failing to adequately prosecute or defend such Third Party Claim, (iv) such Third Party Claim seeks an injunction or other equitable relief against such Indemnified Party, (v) the amount of such claim for indemnification exceeds the Merger Consideration or (vi) such Third Party Claim relates to the Repayment Obligations Indemnity. In the event of any of the foregoing circumstances where the Indemnified Party has nonetheless permitted the Indemnifying Party to control the defense of a Third Party Claim, the Indemnified Party shall be entitled to retain one counsel, at the expense of the Indemnifying Party; provided, that if in the reasonable opinion of counsel to the Indemnified Party, (A) there are legal defenses available to an Indemnified Party that are different from or additional to those available to the Indemnifying Party; or (B) there exists a conflict of interest between the Indemnifying Party and the Indemnified Party that cannot be waived, the Indemnifying Party shall be liable for the reasonable fees and expenses of one counsel to the Indemnified Party. If the Indemnifying Party elects not to compromise or defend such Third Party Claim or is not entitled to assume the defense under the terms of this Agreement, the Indemnified Party may pay, settle, compromise and defend such Third Party Claim and seek indemnification for any and all Damages to the extent indemnifiable pursuant to Section 8.2(a). If an Indemnified Party settles a Third Party Claim without the prior written consent of the applicable Indemnifying Party (such consent not to be unreasonably withheld, conditioned or delayed), such settlement shall not be determinative of the amount or existence of Damages for which the Indemnifying Party is liable hereunder; provided, that, in no event shall the Indemnifying Party be liable for any amount in excess of the Damages awarded or agreed upon with respect to such settlement, together with the reasonable expenses of defending such claim and pursuing recovery hereunder.
(c)The Indemnifying Party shall not, without the prior written consent of the applicable Indemnified Party: (i) settle a Third Party Claim or consent to the entry of any Proceeding which does not include an unconditional, duly authorized, fully executed and acknowledged written release by the claimant or plaintiff of the Indemnified Parties from all liability in respect of the Third Party Claim; (i) settle any Third Party Claim if the settlement imposes equitable remedies or other obligations on any Indemnified Party; or (iii) settle any Third Party Claim if the result is to admit civil or criminal liability or culpability on the part of any Indemnified Party that could give rise to criminal liability with respect to any Indemnified Party.
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8.5Limitations on Indemnity.
(a)Deductible; Liability Cap. With respect to any claim for indemnification pursuant to Section 8.2(a)(i), Section 8.2(a)(ii), Section 8.2(b)(i) or Section 8.2(b)(ii) (other than in respect of Fundamental Representations, covenants to be performed following the Closing or Fraud) (collectively, “General Claims”):
(i)the Indemnifying Party shall not be liable for, and no Indemnified Party shall have a right to deliver a Claim Notice in respect of, any such individual General Claim or series of such related General Claims arising out of the same or related facts and circumstances where the Damages are less than $25,000 (“De Minimis Claims”), and no De Minimis Claims shall be included in the calculation used to determine whether the Deductible shall have been satisfied;
(ii)the Indemnifying Party shall not be liable for any such General Claims (or series of related General Claims) unless and until the aggregate of all indemnifiable Damages that may be recovered from such Indemnifying Party pursuant to Section 8.2(a)(i) or Section 8.2(b)(i), as applicable, exceeds $5,565,000 (the “Deductible”) and then such Indemnifying Party shall be liable only for those amount in excess of the Deductible; and
(iii)the maximum aggregate Liability of an Indemnifying Party with respect to General Claims shall not exceed an amount equal to the Escrow Amount.
(b)Maximum Liability Absent Fraud.
(i)Except in the case of (i) Fundamental Claims involving Third Party Claims and (ii) Fraud, no Indemnifying Party shall be liable under this Article 8 for an aggregate amount in excess of the actual amount of the Merger Consideration paid to Seller (it being agreed that, for purposes of calculating such amount, the shares of Acquirer Stock received by Seller shall be deemed to have a value equal to the Share Value); provided that, with respect to the Repayment Obligations Indemnity, Seller’s maximum liability under this Article 8 shall not exceed an amount equal to $35,000,000.
(ii)In the case of (i) Fundamental Claims (other than the Repayment Obligations Indemnity, which shall be limited as set forth in Section 8.5(b)(i)) involving Third Party Claims or (ii) Fraud, no Indemnifying Party shall be liable under this Article 8 for an aggregate amount in excess of the actual amount of the Total Merger Consideration paid to Seller.
(c)Insurance Proceeds; Tax Benefits.
(i)The amount of any Damages suffered by any Indemnified Party shall be calculated after giving effect to any payments from insurance, indemnity, contribution or other similar sources of recovery, in each case net of any related costs and expenses of the Indemnified Party, including the aggregate cost of pursuing insurance claims, incremental increases in insurance premiums or other chargebacks, legal fees, costs of investigation and other related expenses (each, a “Net Payment”). If an Indemnified Party receives a Net Payment after receiving payment from an Indemnifying Party with respect to the same Damages, and as a result the Indemnified Party has recovered amounts in excess of the total amount of the Damages, then the Indemnified Party shall promptly reimburse the Indemnifying Party the amount of such excess. With respect to any indemnifiable Damages, if and to the extent required by applicable Law, an Indemnified Party shall use its commercially reasonable efforts to mitigate any Damages for which it seeks indemnity hereunder.
(ii)The amount of any Damages for which an indemnity is to be provided hereunder shall be reduced by the amount of any actual net reduction in Taxes paid by the Company Group, their Subsidiaries and Affiliates (including Acquirer and any parent corporation of a consolidated or combined group which any member of the Company Group and/or its Subsidiaries may become a member of) as a result of incurring such Damages to the extent such reduction in Taxes arises in the year in which such Damages are incurred or in the three (3) years immediately after the year in which such Damages are incurred, determined on a “with and without” basis. To the extent an Indemnified Party or any of its Affiliates realizes a greater Tax benefit with respect to particular Damages in the year the Damages are incurred or in the three (3) years immediately after the year in which such Damages
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were incurred subsequent to a payment by the Indemnifying Party in respect of such Damages than was taken into account at the time of such payment, then such Indemnified Party shall promptly reimburse the Indemnifying Party for any such payment up to the amount of such greater Tax benefit.
8.6Payment of Indemnification Claims; Release of Escrow Amount; Set-off.
(a)In the event a claim for indemnification under this Article 8 shall have been finally determined, the amount of the related Damages (after taking into account the limitations of Section 8.5):
(i)shall, in the case of a General Claim, not exceed the Escrow Amount and, subject to Section 8.6(b), the Acquirer Indemnified Parties’ sole and exclusive recourse against Seller shall be against the Escrow Account (with any such recoveries satisfied 25% in cash and 75% in shares of Acquirer Stock (based on the Share Value)); and
(ii)may, in the case of any claim for indemnification under Section 8.2(a) or Section 8.2(b) (including in respect of Fundamental Representations and covenants to be performed following the Closing) that is not a General Claim (collectively, the “Fundamental Claims”), be satisfied: (A) in the case of claims against Seller: (1) against the Escrow Account, (2) by way of set-off against any Milestone Payment or (3) directly against Seller (it being agreed that, unless otherwise directed by Acquirer, Seller shall satisfy its portion of any such claim through a combination of cash payment and surrender to Acquirer of the number of shares of Acquirer Stock-based on the Share Value pro rata in proportion to the relative proportions of Stock Consideration and Cash Consideration) and (B) in the case of claims against Acquirer, directly against Acquirer.
Any claim, the Indemnifying Party’s Liability therefor and the amount of the related Damages shall be “finally determined” when the parties to such claim have so determined by mutual written agreement or, if disputed, when a final and non-appealable Order of a court of competent jurisdiction shall have been entered concerning such matters.
(b)Notwithstanding anything to the contrary contained herein, the amounts that an Acquirer Indemnified Party recovers from the Escrow Account with respect to Fundamental Claims shall not reduce the amount that an Acquirer Indemnified Party may recover with respect to General Claims. By way of illustration and not limitation, assuming there are no other claims for indemnification, compensation or reimbursement, in the event that Damages resulting from a Fundamental Claim are first satisfied from the Escrow Account and such recovery fully depletes the Escrow Account, the maximum amount recoverable by an Acquirer Indemnified Party pursuant to a subsequent General Claim shall continue to be the Escrow Amount irrespective of the fact that the Escrow Account was used to satisfy such Fundamental Claim, such that the amount recoverable for such two claims would be the same regardless of the chronological order in which they were made.
(c)The Escrow Agent will hold the Escrow Amount in the Escrow Account until the Escrow Expiration Date. On or before the second (2nd) Business Day after the Escrow Expiration Date, Acquirer shall notify Seller in writing of the amount that Acquirer reasonably determines in good faith to be necessary to satisfy all pending claims for indemnification that have been asserted in any Claim Notice that was delivered to Seller at or prior to 11:59 p.m. Eastern time on the Escrow Expiration Date, but not resolved, at or prior to such time (each such claim a “Continuing Claim” and such amount, the “Unresolved Escrow Amount”). Within five Business Days following the Escrow Expiration Date, (i) Acquirer and Seller shall deliver a joint instruction to the Escrow Agent instructing the Escrow Agent to release and distribute to Seller (A) the amount then-remaining in the Escrow Account as of the Escrow Expiration Date, minus (B) an amount equal to the Unresolved Escrow Amount and (ii) Acquirer shall direct its transfer agent to remove any restrictive escrow legends from any shares of Acquirer Stock to be released from escrow to Seller.
(d)Following the Escrow Expiration Date, after resolution and payment of a Continuing Claim, (i) Acquirer and Seller shall deliver a joint instruction to the Escrow Agent instructing the Escrow Agent to release to Seller from the Escrow Account an amount in the aggregate equal to (A) the amount then-remaining in the Escrow Account as of the date of such resolution and payment, minus (B) the amounts then being held in the Escrow Account in respect of Continuing Claims that have not been resolved (which amounts will continue to be held as the Unresolved Escrow Amount) and (ii) Acquirer shall direct its transfer agent to remove any restrictive escrow legends from any shares of Acquirer Stock to be so released to Seller.
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(e)If an amount has been claimed under a Claim Notice by an Acquirer Indemnified Party pursuant to Section 8.3(a) and finally determined, and if the Milestone Payments have not yet been fully paid pursuant to Article 2, Acquirer may set-off such finally determined amounts against any Milestone Payments not yet paid pursuant to Article 2, by deducting (i) cash on a dollar-for-dollar basis with respect to any portion of the Milestone Payments made in cash and/or (ii) by deducting a number of shares of Acquirer Stock equal to such finally determined amount divided by the Share Value with respect to Milestone Payments made in Acquirer Stock, subject to the limitations set forth in Section 8.5.
(f)Seller waives, and acknowledges and agrees that it shall not have and shall not exercise or assert (or attempt to exercise or assert), any right of contribution, right of indemnity or other right or remedy against any member of the Company Group for any indemnification claims asserted by any Acquirer Indemnified Party in connection with any indemnification obligation or any other Liability to which Seller may become subject under this Article 8, it being acknowledged and agreed that the representations, warranties, covenants and agreements of the Company Parties and Seller are solely for the benefit of Acquirer Indemnified Parties.
8.7Remedies. Except as provided under Section 2.9, from and after the Closing, the remedies in this Article 8 shall be the sole and exclusive monetary remedies of the Indemnified Parties with respect to any breach of the Company Parties’ and Seller’s representations, warranties, covenants and agreements set forth in this Agreement or otherwise arising out of this Agreement, regardless of the theory or cause of action pled, except for the remedies of specific performance, injunction and other equitable relief; provided that no Party hereto shall be deemed to have waived any rights, claims, causes of action or remedies, and none of the limitations contained herein shall limit any recovery related thereto, in the case of a Party’s Fraud or such rights, claims, causes of action or remedies may not be waived under applicable Law.
ARTICLE 9
MISCELLANEOUS
9.1Assignment; Binding Effect. This Agreement and the rights and obligations of the Parties hereunder shall not be assignable or transferable by any Party (including in connection with a merger, consolidation, sale of substantially all of the assets of such Party or otherwise by operation of Law) without the prior written consent of (a) Acquirer, in the case of any such attempted assignment or transfer by Seller or any Company Party or (b) Seller, in the case of any such attempted assignment or transfer by any Acquirer Party. Any attempted assignment in violation of this Section 9.1 shall be null and void. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns.
9.2Notices. All notices, demands, waivers and other communications pursuant to this Agreement will be in writing and will be deemed given if delivered personally or delivered by electronic mail or globally recognized express delivery service to the Parties at the addresses set forth below or to such other address as the Party to whom notice is to be given to the other Parties in writing in accordance herewith. Any such notice, demand, waiver or other communication will be deemed to have been delivered and received (a) in the case of personal delivery, on the date of such delivery, (b) in the case of electronic mail, on the date of sending if no automated notice of delivery failure is received by the sender, and (c) in the case of a globally recognized express delivery service, on the date on which receipt by the addressee is confirmed pursuant to the service’s systems.
If to an Acquirer Party, or after the Closing, to any member of the Company Group:
Sema4 Holdings Corp.
333 Ludlow Street, North Tower, 8th Floor
Stamford, Connecticut 06902
Attention: General Counsel
Email: legal@sema4.com
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with a copy (which shall not constitute notice) to:
Fenwick & West LLP
902 Broadway
New York, NY 10010
Email: eskerry@fenwick.com; vlupu@fenwick.com
Attention: Ethan A. Skerry; Victoria A. Lupu
If to Seller or, prior to Closing, the Company Parties, to: OPKO Health, Inc.
4400 Biscayne Blvd.
Miami, FL 33137
Attention: Steven D. Rubin
Email: srubin@opko.com
with a copy (which shall not constitute notice) to:
Greenberg Traurig, P.A.
333 S.E. 2nd St.
Suite 4400
Miami, FL 33131
Email: grossmanb@gtlaw.com; altmand@gtlaw.com
Attention: Robert L. Grossman; Drew M. Altman
9.3Governing Law. This Agreement, any non-contractual rights or obligations arising out of or in connection with it, and all Disputes will be governed by, and enforced and construed in accordance with, the Laws of the State of Delaware, without regard to the conflict of laws rules of such state that would result in the application of the Laws of another jurisdiction.
9.4Jurisdiction; Venue. Each of the Parties irrevocably consents to the exclusive jurisdiction and venue in the Delaware Court of Chancery within the State of Delaware (or, if the Delaware Court of Chancery declines to accept jurisdiction over a particular matter, any court of the United States located in the State of Delaware, or, if any such court of the United States located in the State of Delaware declines to accept jurisdiction over a particular matter, any state court located in the State of Delaware) in connection with any Dispute and agrees that process shall be served upon such Party in the manner set forth in Section9.2, and that service in such manner shall constitute valid and sufficient service of process. Each Party waives and covenants not to assert or plead any objection that such Party might otherwise have to such jurisdiction, venue and process. Each Party hereby agrees not to commence any legal proceedings relating to or arising out of this Agreement or the Transactions in any jurisdiction or courts other than as provided herein.
9.5WAIVER OF JURY TRIAL. EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY OR DISPUTES RELATING HERETO. EACH PARTY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF A DISPUTE, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.5.
9.6Amendments and Waivers. This Agreement may be amended, modified, superseded or canceled and any of the terms, covenants, representations, warranties or conditions hereof may be waived only by an instrument in writing signed by Acquirer and Seller, or, in the case of a waiver, by or on behalf of the Party waiving compliance (which, in the case of a waiver of any obligation of Acquirer following the Closing, shall be Seller). No course of dealing between the Parties shall be effective to amend or waive any provision of this Agreement. The waiver by
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any Party of any right hereunder or of the failure to perform or of a breach by any other Party shall not be deemed a waiver of any other right hereunder or of any other breach or failure by such other Party whether of a similar nature or otherwise.
9.7Counterparts. This Agreement may be executed in any number of counterparts (including electronically), and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. Delivery of an executed counterpart of a signature page of this Agreement by electronic mail or other electronic transmission shall be effective as delivery of a manually executed original counterpart of this Agreement.
9.8Severability. Any term or provision of this Agreement that is held by a court of competent jurisdiction or arbitrator to be invalid, void or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the invalid, void or unenforceable term or provision in any other situation or in any other jurisdiction. If the final judgment of such court or arbitrator declares that any term or provision hereof is invalid, void or unenforceable, the Parties agree to (a) reduce the scope, duration, area or applicability of the term or provision, to delete specific words or phrases, and (b) replace any invalid, void or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the original intention of the invalid or unenforceable term or provision.
9.9Schedules; Exhibits. The Schedules and the Exhibits referenced in this Agreement are a material part hereof and shall be treated as if fully incorporated into the body of the Agreement.
9.10No Third Party Beneficiaries. Nothing expressed or referred to in this Agreement will be construed to give any Person other than the Parties (and their successors and permitted assigns), the D&O Indemnified Persons pursuant to Section 5.12(b) and Indemnified Parties that are not Parties pursuant to Article 8 any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement.
9.11Expenses. Except as otherwise provided herein, all fees and expenses incurred in connection with this Agreement and the Transactions, including fees and expenses of financial advisors, financial sponsors, legal counsel and other advisors, shall be paid by the Party incurring such expenses whether or not the Transactions are consummated.
9.12No Strict Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement.
9.13Injunctive Relief; Specific Performance. The Parties hereby acknowledge that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached and that the non-breaching Parties would not have any adequate remedy at law. Accordingly, each Party shall be entitled to an injunction or injunctions to prevent breaches or threatened breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. Any requirements for the securing or posting of any bond with such remedy are waived.
9.14Further Assurances. Upon the reasonable request of Acquirer or Seller, each Party will, on and after the Closing Date, execute and deliver, or cause to be executed and delivered, to the other Party such other documents, assignments and other instruments or will take, or cause to be taken, all such further actions as may be reasonably required to effect and evidence the provisions of this Agreement and the Transactions.
9.15Entire Agreement. This Agreement, together with the Ancillary Agreements, the Confidentiality Agreement and the other documents and instruments specifically referred to herein, all Exhibits and Schedules hereto (which are a material part hereof and shall be treated as if fully incorporated into the body of this Agreement), and the Company Disclosure Schedules and the Acquirer Disclosure Schedules, constitutes the entire agreement among the Parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties.
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9.16Investigation and Non-Reliance. Each of Seller and the Company Parties, on one hand, and the Acquirer Parties, on the other, is a sophisticated seller or purchaser, as the case may be, and has made its own independent investigation, review and analysis regarding the other Party and the Transactions, which investigation, review and analysis were conducted by such Party together with its advisors, including legal counsel, that it has engaged for such purpose. No Party or any of their respective Affiliates or Representatives has made any representation or warranty, express or implied, as to the accuracy or completeness of any information concerning such Party made available in connection with any investigation of such Party, except as expressly set forth in this Agreement. No Party has relied and no Party is relying on any statement, representation or warranty, oral or written, express or implied, made by the other Party, or any their respective Affiliates or Representatives, except as expressly set forth in Article 3, Article 4 or any Transaction Certificates (or, with respect to Seller and the other Lock-Up Holders, the Shareholder Agreement). No Party or any of their respective Affiliates or Representatives shall have or be subject to any liability to any other Party or any other Person resulting from the distribution to any other Party, or such other Party’s use of, any information, documents or materials made available to such Party in the Data Room. No Party or any of their respective Affiliates or Representatives is making, directly or indirectly, any representation or warranty with respect to any estimates, projections or forecasts involving the such Party or any other Person. Each Party acknowledges that there are inherent uncertainties in attempting to make such estimates, projections and forecasts and that it takes full responsibility for making its own evaluation of the adequacy and accuracy of any such estimates, projections or forecasts (including the reasonableness of the assumptions underlying any such estimates, projections and forecasts).
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the Parties have executed this Agreement or caused this Agreement to be duly executed by their respective officers thereunto duly authorized, all as of the date first above written.
GENEDX, INC.
By:/s/ Katherine Stueland
Name:Katherine Stueland
Title:President and Chief Executive Officer
GENEDX HOLDING 2, INC.
By:/s/ Steven D. Rubin
Name:Steven D. Rubin
Title:President
OPKO HEALTH, INC.
By: /s/ Steven D. Rubin
Name:Steven D. Rubin
Title:Executive Vice President, Administration
[Signature Page to Agreement and Plan of Merger and Reorganization]

IN WITNESS WHEREOF, the Parties have executed this Agreement or caused this Agreement to be duly executed by their respective officers thereunto duly authorized, all as of the date first above written.
SEMA4 HOLDINGS CORP.
By:/s/ Eric Schadt
Name:Eric Schadt
Title:Chief Executive Officer
ORION MERGER SUB I, INC.
By:/s/ Eric Schadt
Name:Eric Schadt
Title:President
ORION MERGER SUB II, INC.
By:/s/ Eric Schadt
Name:Eric Schadt
Title:President
[Signature Page to Agreement and Plan of Merger and Reorganization]

EXHIBIT A
Form of Shareholder Agreement
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SHAREHOLDER AGREEMENT
[], 2022
Sema4 Holdings Corp.
333 Ludlow Street,
North Tower, 8th floor
Stamford, CT 06902
Ladies and Gentlemen:
This letter agreement (this “Agreement”) relates to that certain Agreement and Plan of Merger, dated as of January 14, 2022 (as amended, restated, supplemented or modified from time to time, the “Merger Agreement”), by and among Sema4 Holdings Corp., a Delaware corporation (“Acquirer”), Orion Merger Sub I, Inc., a Delaware corporation, Orion Merger Sub II, LLC (“Merger Sub I”), a Delaware limited liability company (“Merger Sub II”), GeneDx, Inc, a New Jersey corporation, GeneDx Holding 2, Inc., a Delaware Corporation (“Holdco2”), and OPKO Health, Inc., a Delaware Corporation (the “Seller”), pursuant to which Merger Sub I will merge with and into Holdco2 (the “First Merger”), with Holdco2 surviving such merger, following which Holdco2 will merge with and into Merger Sub II (the “Second Merger” and, together with the First Merger, the “Mergers”), with Merger Sub II continuing on as the surviving entity (the “Surviving Entity”) and a wholly owned subsidiary of Acquirer, on the terms and conditions set forth therein. Capitalized terms used and not otherwise defined herein are defined in the Merger Agreement and shall have the meaningrespective meanings given to such terms in the Preamble.Merger Agreement.
1.In order to induce the Acquirer Parties to consummate the transactions contemplated by the Merger Agreement 1[and as a condition to any transaction in which the Seller would distribute or otherwise transfer shares of Acquirer Stock to the undersigned], the undersigned hereby agrees that[, with respect to the portion of the Merger Consideration distributed or otherwise transferred to the undersigned], from the Closing Date until: (a) in the case of the stock portion of the Merger Consideration issued at the Closing, the date that is one (1) year from the Closing Date, (b) if and to the extent earned, in the case of the stock portion of the first Milestone Payment, the date that is one (1) year from the date of issuance for such payment and (c) if and to the extent earned, in the case of the stock portion of the second Milestone Payment, the date that is six (6) months from the date of issuance of such stock (the period between the Closing Date and the date indicated in clause (a) or (b), as applicable, a “Block TradeLock-Up Period” and the shares to which such respective Lock-Up Period applies, the “Lock-Up Shares”), the undersigned will not (i) offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any Lock-Up Shares, (ii) enter into a transaction which would have the same effect, or (iii) enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of such Lock-Up Shares, whether any such aforementioned transaction is to be settled by delivery of such Lock-Up Shares, in cash or otherwise, or publicly disclose the intention to make any such offer, sale, pledge or disposition, or to enter into any such transaction, swap, hedge or other arrangement (collectively, clauses (i) through (iii), the “Restricted Actions”).
2.Following the termination of any applicable Lock-Up Period (such date, the “Lock-Up Termination Date”) and for so long as the undersigned is the record or beneficial owner of at least 5% of the issued and outstanding Acquirer Stock, the undersigned hereby agrees that during any consecutive ninety (90) day period following the applicable Lock-Up Termination Date, the undersigned shall not, without the prior written consent of Acquirer (such consent not to be unreasonably, withheld, conditioned or delayed), take any Restricted Action that would result in the sale or other disposition of Lock-Up Shares in an amount that exceeds 25% of the total number of shares of Acquirer Stock 2[received by the undersigned in the Mergers][distributed or otherwise transferred to the undersigned by Seller], except as part of a marketed sale process for which one lead Bookrunner (as defined herein) has been selected by Acquirer in its sole discretion (such discretion to be exercised reasonably). For purposes of this Section 2, a “Bookrunner” shall mean a securities dealer who either (a) purchases the applicable securities as principal in an underwritten, registered
1 Bracketed language to be included for OPKO stockholders.
2 Bracketed language for each of OPKO and its stockholders.
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direct or other public offering registered under the Securities Act and not solely as part of such dealer’s market-making activities or (b) acts as placement agent in a private placement or offering of the applicable securities.
3.For the avoidance of doubt, none of the restrictions set forth in Section 1 or Section 2 of this Agreement shall apply to: (a) any shares of Acquirer Stock purchased by the undersigned in the open market or in any private sale transaction or otherwise or in any public or private capital raising transaction of Acquirer or otherwise, other than the Lock-up Shares; or (b) the inclusion of any Lock-Up Shares (but not the subsequent sale or transfer of such Lock-Up Shares) as part of the Initial Shelf (as defined below) or any other Registration Statement (as defined below) filed pursuant to Section 8(a) of this Agreement. For the avoidance of any doubt, the parties hereto acknowledge and agree that the undersigned shall retain all of its rights as a stockholder of Acquirer during the applicable Lock-up Period, including, without limitation, the right to vote, and to receive any dividends and distributions in respect of, the Lock-Up Shares, subject to the terms of this Agreement.
4.The undersigned hereby authorizes Acquirer during the applicable Lock-Up Period to cause its transfer agent for the Lock-Up Shares to decline to transfer, and to note stop transfer restrictions on the stock register and other records relating to the Lock-Up Shares for which the undersigned is the record holder.
5.Notwithstanding the foregoing, the undersigned may sell or otherwise transfer the Lock-Up Shares during the undersigned’s lifetime or on death (or, if the undersigned is not a natural person, during its existence) (a) if the undersigned is not a natural person, to its managers, partners (direct or indirect), members or other direct or indirect equity holders until the Lock-Up Shares come to be held by a natural person or to any of its other Affiliates or any subsidiary, employee, officer, director, investment fund controlling, controlled, managing or managed by or under common control with the undersigned or Affiliates of the undersigned (including, for the avoidance of doubt, where the undersigned is a partnership, to its general partner or a successor partnership or fund, or any other funds managed by such partnership), to the immediate family members (for purposes of this Agreement, “immediate family” shall mean any relationship by blood, current or former marriage, domestic partnership or adoption, not more remote than first cousin) of the undersigned, (c) to a partnership, limited liability company or other entity of which the undersigned and the immediate family members of the undersigned are the legal and beneficial owner of all of the outstanding equity securities or similar interests, (d) to a family trust, foundation or partnership established for the direct or indirect benefit of the undersigned, its equity holders or any of their respective immediate family members, or if the undersigned is a trust, to a trustor or beneficiary of the trust or to the estate of a beneficiary of such trust, (e) to a charitable foundation controlled by the undersigned, its Affiliates, partners, members or other direct or indirect equityholders or any of their respective immediate family members, (f) by will or intestacy, (g) by operation of law or pursuant to an order of a court (including a qualified domestic order, divorce settlement, divorce decree or separation agreement) or regulatory agency or (h) pursuant to a bona fide third-party tender offer, merger, consolidation or other similar transaction that is approved by the Acquirer Board and made to all holders of Acquirer’s capital stock involving an Acquirer Change in Control; provided that in the event that such tender offer, merger, consolidation or other similar transaction is not completed, the undersigned’s Lock-Up Shares shall remain subject to the provisions of this Agreement; provided, however, that in the case of each of clauses (a) through (g), any such sale or transfer shall be conditioned upon entry by such transferees into a written agreement, addressed to Acquirer, agreeing to be bound by these transfer restrictions and the other terms and conditions of this Agreement; and provided, further, for the avoidance of doubt, that nothing contained herein shall limit or restrict the admission of new managers, partners, members or other direct or indirect equityholders in, or the increase or decrease in the ownership interests of any managers, partners, members or other direct or indirect equity holders of, any entity holding any of the Lock-Up Shares.
6.For so long as the undersigned remains the record or beneficial owner of at least five percent (5%) of the outstanding Acquirer Stock, the undersigned agrees to vote all of his, her or its Lock-Up Shares, from time to time and at all times, in whatever manner is recommended by the Acquirer Board.
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7.The undersigned agrees that, for a period of twelve (12) months from the Closing Date (the “Standstill Period”), neither the undersigned nor any of its Affiliates or subsidiaries will, directly or indirectly, without the prior written consent of the Acquirer Board or Acquirer’s chief executive officer:
(a)acquire or agree, offer, seek or propose to acquire, or cause to be acquired, ownership (including any voting right or beneficial ownership as defined in Rule 13d-3 under the Exchange Act) of any voting securities of Acquirer or any of its subsidiaries or any option, forward contract, swap or other position with a value derived from voting securities of Acquirer or any of its subsidiaries or conveying the right to acquire or vote securities of Acquirer or any of its subsidiaries, or any ownership of any of the assets or businesses of Acquirer or any of its subsidiaries, or any rights or options to acquire any such ownership (including from a third party);
(b)make, or in any way participate in, any “solicitation” (as such terms is defined in Rule 14a- 1 under the Exchange Act, including any otherwise exempt solicitation pursuant to Rule 14a-2(b) under the Exchange Act) to vote or seek to advise or influence in any manner whatsoever any Person with respect to the voting of any securities of Acquirer or any of its subsidiaries;
(c)form, join, or in any way participate in a “group” (within the meaning of Section 13(d)(3) of the Exchange Act) with respect to any voting securities of Acquirer or any of its subsidiaries, other than any “group” to which it already belongs as of the date of this Agreement;
(d)arrange, or in any way participate in, any financing for the purchase of any voting securities or securities convertible or exchangeable into or exercisable for any voting securities or assets of Acquirer or any of its subsidiaries;
(e)propose, alone or with others, to Acquirer or any of its stockholders any merger, business combination, tender or exchange offer, restructuring, recapitalization, liquidation of or other transaction with or involving Acquirer or any of its subsidiaries or otherwise act, whether alone or with others, to seek to control, change or influence the management, board of directors or policies of Acquirer, or nominate any person as a director of Acquirer, or propose any matter to be voted upon by the stockholders of Acquirer;
(f)solicit or provide any material non-public information to any Person with respect to a merger, business combination, tender or exchange offer, restructuring, recapitalization, liquidation of or other transaction with or involving Acquirer or any of its subsidiaries or any other acquisition of Acquirer or any of its subsidiaries, any acquisition of voting securities of or all or any portion of the assets of Acquirer or any of its subsidiaries, or any other similar transaction;
(g)advise, assist or knowingly encourage any other Person in connection with any of the foregoing;
(h)enter into any discussions, negotiations, arrangements or understandings with any third party with respect to, any of the foregoing, or announce an intention to do so;
(i)take any action that would reasonably be expected to require Acquirer to make a public announcement regarding any of the types of matters set forth in this Section 7; or
(j)disclose any intention, plan or arrangement inconsistent with the foregoing. Notwithstanding anything to the contrary in this Section 7, nothing shall prevent a private communication to the Acquirer Board or Acquirer’s chief executive officer which does not require public disclosure by Acquirer (whether under applicable law or under the rules of its securities exchange, but other than in a proxy statement or Schedule 14d-9 with respect to a Transaction following execution of a definitive agreement between the Parties).
8.Registration Rights.
(a)Acquirer agrees that, as soon as practicable, but in no event later than thirty (30) calendar days after the Closing Date (the “Filing Date”), Acquirer will file with the SEC (at Acquirer’s sole cost and expense) a registration statement registering the resale of the Registrable Securities (as defined below) held by the Holders (as defined below) from time to time as permitted by Rule 415 under the Securities Act (or any successor or similar provision adopted by the SEC then in effect) (the “Initial Shelf” and any registration statement that covers the
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Registrable Securities pursuant to the provisions of this Agreement, including the prospectus included in such registration statement, amendments (including post-effective amendments) and supplements to such registration statement, and all exhibits to and all material incorporated by reference in such registration statement, a “Registration Statement”), and Acquirer shall use its commercially reasonable efforts to cause the Initial Shelf to be declared effective as soon as practicable after the filing thereof, but no later than the earlier of (i) the 60th calendar day (or 90th calendar day if the SEC notifies Acquirer that it will “review” the Initial Shelf) following the Closing and (ii) the fifth (5th) Business Day after the date Acquirer is notified (orally or in writing, whichever is earlier) by the SEC that the Initial Shelf will not be “reviewed” or will not be subject to further review (such earlier date, the “Effectiveness Date”); provided that if the SEC is closed for operations due to a government shutdown or otherwise, the Effectiveness Date shall be extended by the same amount of days that the SEC remains closed for operations. Without limiting the foregoing, as soon as practicable, but in no event later than three (3) Business Days, following the resolution or clearance of all SEC comments or, if applicable, following notification by the SEC that the Initial Shelf or any amendment thereto will not be subject to review, Acquirer shall file a request for acceleration of effectiveness of such Registration Statement (to the extent required, by declaration or ordering of effectiveness, of such Registration Statement or amendment thereto by the SEC) to a time and date not later than two (2) Business Days after the submission of such request. The Initial Shelf filed with the SEC pursuant shall be on Form S-1 or such other form of registration statement as is then available to effect a registration for resale of the Registrable Securities, provided, that Acquirer shall file, within thirty (30) days of such time as Form S-3 is available for the Initial Shelf, a post- effective amendment to the Initial Shelf then in effect, or otherwise file a Registration Statement on Form S-3, registering the Registrable Securities held by the Holders for resale on Form S-3 (provided that Acquirer shall use commercially reasonable efforts to maintain the effectiveness of the Initial Shelf then in effect until such time as a Registration Statement (or post-effective amendment) on Form S-3 covering such Registrable Securities has been declared effective by the SEC). Notwithstanding anything else in this Agreement, Acquirer’s obligations to include the applicable Registrable Securities of a Holder in a Registration Statement are contingent upon such Holder furnishing in writing to Acquirer such information regarding such Holder, the securities of Acquirer held by such Holder, the intended method of disposition of the applicable Registrable Securities and such other information as shall be reasonably requested by Acquirer to effect the registration of the applicable Registrable Securities on or prior to the third (3rd) Business Day prior to the first anticipated filing date of such Registration Statement, provided that the request by Acquirer shall be made not less than ten (10) Business Days prior to the first anticipated filing date of such Registration Statement. The Holders shall execute such documents in connection with such registration as Acquirer may reasonably request that are customary of a selling stockholder in similar situations; provided that under no circumstances shall a Holder be required to sign any type of additional lock-up agreement. Any failure by Acquirer to file the Initial Shelf by the Filing Date or for the Initial Shelf to be declared effective by the Effectiveness Date shall not otherwise relieve Acquirer of its obligations to file or effect the Initial Shelf as set forth above in this Section 8(a). In no event shall a Holder be identified as a statutory underwriter in a Registration Statement unless requested by the SEC; provided that, if the SEC requests that a Holder be identified as a statutory underwriter in a Registration Statement, such Holder will have an option, in its sole and absolute discretion, to withdraw the applicable Registrable Securities from such Registration Statement. Notwithstanding the foregoing, if the SEC prevents Acquirer from including any or all of the shares proposed to be registered under any single Registration Statement filed pursuant to this Section 8(a) due to limitations on the use of Rule 415 of the Securities Act for the resale of the applicable Registrable Securities by the applicable stockholders or otherwise, Acquirer agrees to promptly (i) inform each of the Holders thereof and use its commercially reasonable efforts to file amendments to such Registration Statement as required by the SEC and (ii) as soon as practicable but in no event later than the twentieth (20th) calendar day following the first date on which such Registrable Securities may then be included in a registration statement, file an additional Registration Statement (a “New Registration Statement”), on Form S-3, or if Form S-3 is not then available to Acquirer for such Registration Statement, on such other form available to register for resale the Registrable Securities held by the Holders as a secondary offering; provided, however, that prior to filing such amendment or New Registration Statement, Acquirer shall be obligated to use its commercially reasonable efforts to advocate with the SEC for the registration of all of the Registrable Securities in accordance with any publicly- available written or oral guidance, comments, requirements or requests of the SEC staff (the “SEC Guidance”), including without limitation, the Manual of Publicly Available Telephone Interpretations D.29. The Holders shall have the right to participate or have their respective legal counsel participate in any meetings or discussions with the SEC regarding the SEC’s position and to comment or have their respective counsel comment on any written submission made to the SEC with respect thereto. No such written submission shall
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be made to the SEC to which any such Holder’s counsel reasonably objects. Notwithstanding any other provision of this Agreement, if any SEC Guidance sets forth a limitation of the number of Registrable Securities permitted to be registered on a particular Registration Statement as a secondary offering, unless otherwise directed in writing by a Holder as to its Registrable Securities directing the inclusion of less than such Holder’s pro rata amount, the number of Registrable Securities to be registered on such Registration Statement will be reduced on a pro rata basis based on the total number of Registrable Securities held by the Holders. Acquirer will use its commercially reasonable efforts to cause the Initial Shelf to remain effective, and to be supplemented and amended to the extent necessary to ensure that the Initial Shelf is available or, if not available, that another Registration Statement is available at all times, for the public resale of all the Registrable Securities held by the Holders until all such Registrable Securities have ceased to be Registrable Securities. Acquirer will provide all customary and commercially reasonable cooperation necessary to enable the Holders to resell Registrable Securities pursuant to a Registration Statement or Rule 144 under the Securities Act (“Rule 144”), as applicable, qualify the Registrable Securities for listing on the primary stock exchange on which the Acquirer Stock is then listed, update or amend a Registration Statement as necessary to include Registrable Securities and provide customary notice to holders of Registrable Securities. “Holders” shall mean (i) the undersigned, (ii) [Seller][any 5% Insider (as defined below)] 3that is entering into a separate shareholder agreement with Acquirer on the date hereof with registration rights that are substantially similar to the registration rights set forth in this Section 8 (an “Other Shareholder Agreement”) and (iii) any 5% Insider who hereafter becomes a party to this Agreement or such Other Shareholder Agreement pursuant to Section 8(r) hereof or the corresponding section of such Other Shareholder Agreement, as applicable. “Registrable Securities” shall mean, as of any date of determination, (a) the Lock-Up Shares held by the undersigned, (b) the Lock- Up Shares held by any other Holder, and (c) any other equity security of Acquirer issued or issuable with respect to the Lock-Up Shares referred to in clause (a) or (b) by way of share split, dividend, distribution, recapitalization, merger, exchange, replacement or similar event or otherwise. As to any particular Registrable Securities, once issued, such securities shall cease to be Registrable Securities at the earliest of: (A) when a Registration Statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been sold, transferred, disposed of or exchanged in accordance with such Registration Statement; (B) the date all Registrable Securities held by such Holder may be sold without restriction under Rule 144, including without limitation, any volume and manner of sale restrictions which may be applicable to Affiliates under Rule 144, and without the requirement for Acquirer to be in compliance with the current public information required under Rule 144; (C) such securities have been otherwise transferred, new certificates for such securities not bearing a legend restricting further transfer shall have been delivered by Acquirer and subsequent public distribution of such securities shall not require registration under the Securities Act; or (D) such securities have been sold to, or through, a broker, dealer or underwriter in a public distribution or other public securities transaction.
(b)At any time and from time to time following the effectiveness of the Initial Shelf and following the expiration of any applicable Lock-up Period, any Holder may request to sell all or a portion of its Registrable Securities in a underwritten offering that is registered pursuant to a shelf registration statement under the Securities Act on Form S-3 pursuant to Rule 415, including by way of an underwritten offering, block sale or other distribution plan (a “Shelf Underwritten Offering”); provided that such Holder(s) reasonably expects to sell Registrable Securities yielding aggregate gross proceeds in excess of $50,000,000 from such Shelf Underwritten Offering (such amount of Registrable Securities, the “Minimum Amount”). All requests for a Shelf Underwritten Offering shall be made by giving written notice to Acquirer (the “Shelf Take Down Notice”). Each Shelf Take Down Notice shall specify the approximate number of Registrable Securities proposed to be sold in the Shelf Underwritten Offering and the expected price range (net of underwriting discounts and commissions) of such Shelf Underwritten Offering. Acquirer shall, subject to Section 8(c) (the “MNPI Provisions”), give written notice of such requested Shelf Underwritten Offering to all other Holders of Registrable Securities (the “Company Shelf Takedown Notice”) and, subject to the provisions of Section 8(e), shall include in such Shelf Underwritten Offering all Registrable Securities with respect to which Acquirer has received written requests for inclusion therein, within five (5) calendar days after sending the Company Shelf Takedown Notice. Acquirer shall enter into an underwriting agreement in a form as is customary in underwritten offerings of securities by the Company with the managing underwriter or underwriters selected by the Holders holding a majority-in-interest of the Registrable Securities to be included in such Shelf Underwritten Offering after consultation with, and approval (which shall not be unreasonably withheld, conditioned
3 Bracketed alternative language to be included for either OPKO or OPKO stockholders, as applicable.
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or delayed) by, Acquirer and shall take all such other reasonable actions as are requested by the managing underwriter or underwriters in order to expedite or facilitate the disposition of such Registrable Securities; provided, that, notwithstanding the foregoing, the selection of one lead Bookrunner in such Shelf Underwritten Offering shall be in the sole discretion of Acquirer (such discretion to be exercised reasonably) to the extent Section 2 is applicable. In connection with any Shelf Underwritten Offering contemplated by this Section 8(b), subject to Section 8(l) and Section 8(p), the underwriting agreement into which each Holder and Acquirer shall enter shall contain such representations, covenants, indemnities and other rights and obligations of Acquirer and the selling stockholders as are customary in underwritten offerings of securities by Acquirer. The Holders may demand not more than two (2) Shelf Underwritten Offerings pursuant to this Section 8(b) in any 12-month period. At least ten (10) Business Days prior to the first anticipated filing date of a Registration Statement pursuant to Sections 8(a), 8(b), 8(d) and 8(g), Acquirer shall use reasonable efforts to notify each Holder in writing (which may be by email) of the information reasonably necessary about the Holder to include such Holder’s Registrable Securities in such Registration Statement.
(c)Notwithstanding anything in this Agreement or any Other Shareholder Agreement to the contrary, Acquirer will not provide any material, nonpublic information to any Holder without the prior written consent of such Holder, and in the event that Acquirer believes that a notice or communication required by this Agreement or any Other Shareholder Agreement to be delivered to any Holder contains material, nonpublic information relating to Acquirer, its securities, any of its Affiliates or any other Person, Acquirer shall so indicate to such Holder prior to delivery of such notice or communication, and such indication shall provide such Holder the means to refuse to receive such notice or communication. No Holder nor any of its Affiliates or representatives shall have any duty of trust or confidence with respect to, or obligation not to trade in any securities while aware of, any material, nonpublic information provided to such Holder, Affiliate or representative in violation of this Section 8(c). Notwithstanding the foregoing, to the extent Acquirer reasonably and in good faith determines that it is necessary to disclose material non- public information to a Holder in order to comply with its obligations hereunder (a “Necessary Disclosure”), Acquirer shall inform counsel to such Holder to the extent such counsel has been identified in writing to Acquirer in advance of such determination without disclosing the applicable material non- public information, and Acquirer and such counsel on behalf of the applicable Holder shall endeavor to agree upon a process for making such Necessary Disclosure to the applicable Holder or its representatives that is mutually acceptable to such Holder and Acquirer (an “Agreed Disclosure Process”). Thereafter, Acquirer shall be permitted to make such Necessary Disclosure (only) in accordance with the Agreed Disclosure Process.
(d)Subject to the provisions of Section 8(f) and Section 8(m) hereof, and provided that Acquirer does not have an effective Registration Statement pursuant to Section 8(a) outstanding covering all of the Registrable Securities held by the Holders, following the expiration of any applicable Lock-up Period, Holders of at least a majority in interest of the then-outstanding number of Registrable Securities held by the Holders (a “Demanding Holder”) may make a written demand for registration of all or part of their Registrable Securities, which written demand shall describe the amount and type of securities to be included in such registration and the intended method(s) of distribution thereof (such written demand a “Demand Registration”). Subject to the MNPI Provisions, Acquirer shall, within five (5) calendar days of Acquirer’s receipt of the Demand Registration, notify, in writing all other Holders of Registrable Securities of such demand, and each Holder of Registrable Securities who thereafter wishes to include all or a portion of such Holder’s Registrable Securities in a registration pursuant to a Demand Registration (each such Holder that includes all or a portion of such Holder’s Registrable Securities in such registration, a “Requesting Holder”) shall so notify Acquirer, in writing, within five (5) calendar days after the receipt by the Holder of the notice from Acquirer. Upon receipt by Acquirer of any such written notification from a Requesting Holder(s) to Acquirer, subject to Section 8(e) below, such Requesting Holder(s) shall be entitled to have their Registrable Securities included in a Registration Statement pursuant to a Demand Registration and Acquirer shall effect, as soon thereafter as practicable, but not more than sixty (60) calendar days immediately after Acquirer’s receipt of the Demand Registration, the registration of all Registrable Securities requested by the Demanding Holders and Requesting Holders pursuant to such Demand Registration. Under no circumstances shall Acquirer be obligated to effect more than an aggregate of three (3) registrations pursuant to a Demand Registration by the Holders under this Section 8(d) with respect to any or all Registrable Securities. Notwithstanding the foregoing, (i) Acquirer shall not be required to give effect to a Demand Registration from a Demanding Holder if Acquirer has registered Registrable Securities pursuant to a Demand Registration (which has become effective) from
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such Demanding Holder in the preceding one hundred and twenty (120) days, and (ii) Acquirer’s obligations with respect to any Demand Registration shall be deemed satisfied so long as the Registration Statement filed pursuant to Section 8(a) includes all of such Demanding Holder’s Registrable Securities and is effective. Subject to the provisions of Sections 8(e) and Section 8(m) hereof, if a majority-in-interest of the Demanding Holders so advise Acquirer as part of their Demand Registration that the offering of the Registrable Securities pursuant to such Demand Registration shall be in the form of an underwritten offering, then the right of such Demanding Holder or Requesting Holder (if any) to include its Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwritten offering and the inclusion of such Holder’s Registrable Securities in such underwritten offering to the extent provided herein. All such Holders proposing to distribute their Registrable Securities through an underwritten offering under this Section 8(d), subject to Section 8(l) and Section 8(p), shall enter into an underwriting agreement in customary form with Acquirer and the underwriter(s) selected for such underwritten offering by a majority- in-interest of the Demanding Holders initiating the Demand Registration after consultation with, and approval by, Acquirer (which shall not be unreasonably withheld, conditioned or delayed); provided, that, notwithstanding the foregoing, the selection of one lead Bookrunner in such underwritten offering shall be in the sole discretion of Acquirer (such discretion to be exercised reasonably) to the extent Section 2 is applicable.
(e)If a Demand Registration is to be an underwritten offering and the managing underwriter or underwriters, in good faith, advises Acquirer, the Demanding Holders and the Requesting Holders (if any) in writing that, in its opinion, the dollar amount or number of Registrable Securities that the Demanding Holders and the Requesting Holders (if any) desire to sell, taken together with all other Acquirer Stock or other equity securities that Acquirer desires to sell for its own account and the Acquirer Stock, if any, as to which a registration has been requested pursuant to separate written contractual piggy-back registration rights held by any other stockholders of Acquirer who desire to sell, exceeds the maximum dollar amount or maximum number of equity securities that can be sold in such underwritten offering without adversely affecting the proposed offering price, the timing, the distribution method, or the probability of success of such offering (such maximum dollar amount or maximum number of such securities, as applicable, the “Maximum Number of Securities”), then Acquirer shall include in such underwritten offering, as follows:
(i)first, the Registrable Securities of the Demanding Holders and the Requesting Holders (if any) (pro rata based on the respective number of Registrable Securities held by each Demanding Holder and Requesting Holder (if any) and the aggregate number of Registrable Securities held by the Demanding Holders and Requesting Holders) that can be sold without exceeding the Maximum Number of Securities;
(ii)second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (i), the Acquirer Stock of holders exercising their piggy-back registration rights pursuant to Section 2.3 of that certain Amended and Restated Registration Rights Agreement, dated as of July 22, 2021, by and among Acquirer and the other parties thereto (the “July 2021 Registration Rights Agreement”), which can be sold without exceeding the Maximum Number of Securities;
(iii)third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (i) and (ii), the Acquirer Stock or other equity securities that Acquirer desires to sell for its own account, which can be sold without exceeding the Maximum Number of Securities;
(iv)fourth, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (i), (ii) and (iii), the Registrable Securities of Holders (pro rata, based on the respective number of Registrable Securities held by each Holder) exercising their rights to register their Registrable Securities pursuant to Section 8(g) hereof, without exceeding the Maximum Number of Securities; and
(v)fifth, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (i), (ii), (iii) and (iv), the Acquirer Stock or other equity securities of other Persons or entities that Acquirer is obligated to register in a registration pursuant to separate written contractual arrangements with such Persons and that can be sold without exceeding the Maximum Number of Securities.
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(f)A Demanding Holder or a Requesting Holder shall have the right to withdraw all or a portion of its Registrable Securities included in a Demand Registration pursuant to Section 8(d) or a Shelf Underwritten Offering pursuant to Section 8(b) for any or no reason whatsoever upon written notification to Acquirer and the underwriter or underwriters (if any) of its intention to so withdraw (a) in the case of a Demand Registration not involving an underwritten offering, one (1) Business Day prior to the effectiveness of the applicable Registration Statement or (b) in the case of any Demand Registration involving an underwritten offering or any Shelf Underwritten Offering, prior to the pricing of such underwritten offering or Shelf Underwritten Offering; provided, however, that upon withdrawal by a majority-in-interest of the Demanding Holders initiating a Demand Registration (or in the case of a Shelf Underwritten Offering, withdrawal of an amount of Registrable Securities included by the Holders in such Shelf Underwritten Offering, in their capacity as Demanding Holders, being less than the Minimum Amount), Acquirer shall cease all efforts to secure effectiveness of the applicable Registration Statement or complete the underwritten offering, as applicable. For the avoidance of doubt, any Demand Registration withdrawn pursuant to this Section 8(f) shall be counted toward the aggregate number of Demand Registrations Acquirer is obligated to effect pursuant to Section 8(d) unless (A)(1) the Demanding Holders reimburse Acquirer for all of its out-of-pocket costs and expenses incurred in connection with any such withdrawn Demand Registration incurred through the date of such withdrawal and (2) such revocation or withdrawal shall have been made prior to the commencement of any marketing efforts or “road shows” by Acquirer or the underwriters in connection with such Demand Registration, or (B) such withdrawal or revocation occurs following the issuance by Acquirer of a Suspension Notice (as defined below). Notwithstanding anything to the contrary in this Agreement or any Other Shareholder Agreement, Acquirer shall be responsible for the Registration Expenses (as defined below) incurred by it in connection with a registration pursuant to a Demand Registration or a Shelf Underwritten Offering prior to its withdrawal under this Section 8(f).
(g)If Acquirer proposes to file a registration statement under the Securities Act with respect to an offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into equity securities, for its own account or for the account of stockholders of Acquirer (or by Acquirer and by the stockholders of Acquirer including, without limitation, pursuant to Section 8(d) hereof), other than a registration statement (a) filed in connection with any employee stock option or other benefit plan, (b) for an exchange offer or offering of securities solely to Acquirer’s existing stockholders, (c) for an offering solely of debt that is convertible into equity securities of Acquirer, (d) for a dividend reinvestment plan, (e) for any issuances of securities in connection with a transaction involving a merger, consolidation, sale, exchange, issuance, transfer, reorganization or other extraordinary transaction between Acquirer or any of its Affiliates and any third party, or (f) filed pursuant to Section 8(a), then, subject to the MNPI Provisions, Acquirer shall give written notice of such proposed filing to all of the Holders of Registrable Securities as soon as practicable but not less than twenty (20) calendar days before the anticipated filing date of such registration statement, which notice shall (i) describe the amount and type of securities to be included in such offering, the intended method(s) of distribution (including whether such registration will be pursuant to a shelf registration statement), and the proposed price and name of the proposed managing underwriter or underwriters, if any, in such offering, (ii) describe such Holders’ rights under this Section 8(g), and (iii) offer to all of the Holders of Registrable Securities the opportunity to register the sale of such number of Registrable Securities as such Holders may request in writing within five (5) calendar days after receipt of such written notice (such registration, a “Piggyback Registration”). Acquirer shall, in good faith, cause such Registrable Securities identified in a Holder’s response noticed described in the foregoing sentence to be included in such Piggyback Registration and shall use its commercially reasonable efforts to cause the managing underwriter or underwriters of a proposed underwritten offering, if any, to permit the Registrable Securities requested by the Holders pursuant to this Section 8(g) to be included in a Piggyback Registration on the same terms and conditions as any similar securities of Acquirer or the Acquirer stockholder(s) for whose account the registration statement is to be filed included in such registration and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof. All such Holders proposing to distribute their Registrable Securities through an underwritten offering under this Section 8(g), subject to Section 8(l) and Section 8(p), shall enter into an underwriting agreement in customary form with the underwriter(s) selected for such underwritten offering by Acquirer. For purposes of clarity, any registration effected pursuant to Section 8(g) hereof shall not be counted as a registration pursuant to a Demand Registration effected under Section 8(d) hereof or a Shelf Underwritten Offering effected under Section 8(b). Any Holder of Registrable Securities shall have the right to withdraw all or any portion of its Registrable Securities in a Piggyback Registration for any or no reason whatsoever upon written notification to Acquirer and the underwriter or underwriters (if any) of his, her or its intention to
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withdraw such Registrable Securities from such Piggyback Registration (a) in the case of a Piggyback Registration not involving an underwritten offering or Shelf Underwritten Offering, one (1) Business Day prior to the effectiveness of the applicable Registration Statement or (b) in the case of any Piggyback Registration involving an underwritten offering or any Shelf Underwritten Offering, two (2) Business Days prior to the pricing of such underwritten offering or Shelf Underwritten Offering. Acquirer (whether on its own good-faith determination or as the result of a request for withdrawal by Persons pursuant to separate written contractual obligations) may withdraw a Registration Statement filed with the SEC in connection with a Piggyback Registration at any time prior to the effectiveness of such Registration Statement.
(h)If the managing underwriter or underwriters in an underwritten registration that is to be a Piggyback Registration, in good faith, advises Acquirer and the Holders of Registrable Securities participating in the Piggyback Registration in writing that, in its opinion, the dollar amount or number of the Acquirer Stock that Acquirer desires to sell, taken together with (a) the Acquirer Stock, if any, as to which registration has been demanded pursuant to separate written contractual arrangements with Persons or entities other than the Holders of Registrable Securities hereunder, (b) the Registrable Securities as to which registration has been requested pursuant to Section 8(g) hereof, and (c) the Acquirer Stock, if any, as to which registration has been requested pursuant to separate written contractual piggy-back registration rights of other stockholders of Acquirer, exceeds the Maximum Number of Securities, then:
(i)if the registration is undertaken for Acquirer’s account, Acquirer shall include in any such registration (a) first, the Acquirer Stock or other equity securities that Acquirer desires to sell, which can be sold without exceeding the Maximum Number of Securities; (b) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (a), the Acquirer Stock of holders exercising their piggy-back registration rights pursuant to Section 2.3 of the July 2021 Registration Rights Agreement, which can be sold without exceeding the Maximum Number of Securities; (c) third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (a) and (b), the Registrable Securities of Holders exercising their rights to register their Registrable Securities pursuant to Section 8(g) hereof (pro rata, based on the respective number of Registrable Securities held by each Holder), which can be sold without exceeding the Maximum Number of Securities and (d) fourth, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (a),(b) and (c), the Acquirer Stock, if any, as to which registration has been requested pursuant to any other written contractual piggy-back registration rights of other stockholders of Acquirer, which can be sold without exceeding the Maximum Number of Securities; and
(ii)if the registration is pursuant to a request by Persons or entities other than the Holders of Registrable Securities, then Acquirer shall include in any such registration (a) first, the Acquirer Stock or other equity securities, if any, of such requesting Persons or entities, other than the Holders of Registrable Securities, which can be sold without exceeding the Maximum Number of Securities; (b) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (a), the Acquirer Stock of holders exercising their piggy-back registration rights pursuant to Section 2.3 of the July 2021 Registration Rights Agreement, which can be sold without exceeding the Maximum Number of Securities; (c) third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (a) and (b), the Acquirer Stock or other equity securities that Acquirer desires to sell for its own account, which can be sold without exceeding the Maximum Number of Securities; (d) fourth, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (a), (b) and (c), the Registrable Securities of Holders exercising their rights to register their Registrable Securities pursuant to Section 8(g) hereof (pro rata, based on the respective number of Registrable Securities held by each Holder), which can be sold without exceeding the Maximum Number of Securities; and (e) fifth, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (a), (b), (c) and (d), the Acquirer Stock or other equity securities for the account of other Persons or entities that Acquirer is obligated to register pursuant to other separate written contractual arrangements with such Persons or entities, which can be sold without exceeding the Maximum Number of Securities.
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(i)Notwithstanding any other provision of this Agreement, but subject to the restrictions set forth in Section 1 or Section 2 of this Agreement and subject to Section 8(m), if a Demanding Holder desires to effect an offering or sale of Registrable Securities by any Holder on a block trade or underwritten basis (whether firm commitment or otherwise) effected pursuant to a Registration Statement without substantial marketing efforts prior to pricing, including, without limitation, a same day trade, overnight trade or similar transaction.
“Board”transaction (a “Block Trade”) (x) with a total offering price reasonably expected to exceed the Minimum Amount or (y) including all remaining Registrable Securities held by the Demanding Holder, then notwithstanding the time periods provided for in Section 8(b), such Demanding Holder shall mean the Board of Directorsnotify Acquirer of the Company.
“Block Trade at least five (5) Business Day”Days prior to the day such offering is to commence and Acquirer shall meanas expeditiously as possible use its commercially reasonable efforts to facilitate such Block Trade; provided that the Demanding Holders wishing to engage in the Block Trade shall use commercially reasonable efforts to work with Acquirer and any underwriters or placement agents or sales agents prior to making such request in order to facilitate preparation of the registration statement, prospectus and other offering documentation related to the Block Trade. Prior to the filing of the applicable “red herring” prospectus or prospectus supplement used in connection with a day that is not a Saturday or Sunday or a day on which banks in New York City are authorized or requested by law to close.
“Class A Common Stock”Block Trade, any Demanding Holders shall have the meaning given inright to submit a withdrawal notice to Acquirer and the Recitals hereto.underwriter or underwriters or placement agents or sales agents (if any) of their intention to withdraw from such Block Trade.
“(j)Class B Common Stock” shall mean Class B common stock, par value $0.0001 per share,In the case of the Company.registration, qualification, exemption or compliance effected by Acquirer pursuant to this Agreement, Acquirer shall, upon reasonable request, inform the Holders as to the status of such registration, qualification, exemption and compliance. At its expense Acquirer shall:
“(i)Closing Date” shall meanexcept for such times as Acquirer is permitted hereunder to suspend the dateuse of the consummationprospectus forming part of a Registration Statement or as otherwise provided in this Section 8, use its commercially reasonable efforts to keep such registration, and any qualification, exemption or compliance under state securities laws which Acquirer determines to obtain, continuously effective with respect to the transactions contemplatedHolders, and to keep the applicable Registration Statement or any subsequent shelf registration statement free of any material misstatements or omissions, until all Registrable Securities covered by the Merger Agreement.such Registration Statement have been sold;
“(ii)Commission” shall meanprepare and file with the SecuritiesSEC such amendments and Exchange Commission. “Commission’s Notice” shall havepost-effective amendments to the meaning given in subsection 2.1.5.
“Company” shall haveRegistration Statement, and such supplements to the meaning given in the Preamble.
“Company Shelf Takedown Notice” shall have the meaning given in subsection 2.1.3.
“Demand Registration” shall have the meaning given in subsection 2.2.1.
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“Demanding Holders” shall mean,Prospectus, as applicable, (a) the Existing Holders of at leastmay be reasonably requested by a majority in interest of the then-outstanding numberapplicable Holders of Registrable Securities held by the Existing Holders, (b) the New Holders of at least a majority in interest of the then-outstanding numberregistered on such Registration Statement or any underwriter of Registrable Securities heldor as may be required by the New Holdersrules, regulations or (c) any Holder meetinginstructions applicable to the Minimum Amount.registration form used by the SEC or by the Securities Act or rules and regulations thereunder to keep the Registration Statement effective until all Registrable Securities covered by such Registration Statement are sold in accordance with the intended plan of distribution set forth in such Registration Statement or supplement to the prospectus;
“(iii)DTC” shall haveadvise the meaning givenHolders, as promptly as practicable but in subsection 3.1.17.any event, within two Business Days:
“(1)DWAC” shall havewhen a Registration Statement or any amendment thereto has been filed with the meaning given in subsection 3.1.17.SEC and when such Registration Statement or any post-effective amendment thereto has become effective;
“(2)Earnout Shares” shall haveof the meaning given inissuance by the Recitals hereto.SEC of any stop order suspending the effectiveness of any Registration Statement or the initiation of any proceedings for such purpose;
“(3)Effectiveness Deadline” shall have the meaning given in subsection 2.1.1.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as it may be amended from time to time.
“Existing Registration Rights Agreement” shall have the meaning given in the Recitals hereto.
“Founder Shares” shall mean all shares of Class B Common Stock that are issued and outstanding as of the date hereof and all sharesreceipt by Acquirer of Class A Common Stock issued upon conversion thereof.
“Founder Shares Lock-up Period” shall mean,any notification with respect to the Founder Shares held by the Existing Holders or their Permitted Transferees, the period ending on the earlier of (a) one year after the Closing Date, (b) the first date that the closing pricesuspension of the Class A Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any twenty (20) trading days within any thirty (30)-trading-day period commencing at least one hundred and fifty (150) days after the Closing Date, and (c) the date on which the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in allqualification of the Company’s stockholders havingRegistrable Securities included therein for sale in any jurisdiction or the right to exchange their sharesinitiation or threatening of Class A Common Stockany proceeding for cash, securities or other property.such purpose; and
“(4)Form S-3 Shelf” shall havesubject to the meaning givenprovisions insubsection 2.1.2.
“Holders” shall mean the Existing Holders and the New Holders and any person or entity who hereafter becomes a party to this Agreement, pursuant to Section 5.2.“Immediate Family” shall meanof the occurrence of any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law and shall include adoptive relationships.
“Initial Shelf” shall haveevent that requires the meaning givenmaking of any changes in subsection 2.1.1.
“Insider Letter” shall meanany Registration Statement or prospectus included therein so that, certain letter agreement, dated as of September 1, 2020, bysuch date, the statements therein are not misleading and among the Company, the Sponsor and each of the Company’s officers, directors and director nominees.
“ISMMS Registration Rights Agreement” shall have the meaning given in the Recitals hereto.
“Maximum Number of Securities” shall have the meaning given in subsection 2.2.4.
“Merger Agreement” shall have the meaning given in the Recitals hereto. “Minimum Amount” shall have the meaning given in subsection 2.1.3.
“Misstatement” shall mean an untrue statement of a material fact or an omissiondo not omit to state a material fact required to be stated in a Registration Statement or Prospectustherein or necessary to make the statements therein (and in a Registration Statement or Prospectus, (in the case of any Prospectusa prospectus, in the light of the circumstances under which they were made) not misleading.
“MNPI Provisions” shall have meaning given in subsection 2.1.3.
“Nasdaq” shall have the meaning given in subsection 3.1.4.
“Necessary Disclosure” shall have the meaning given in subsection 3.5.4.misleading;
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“(iv)New Holder(s)use its commercially reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of any Registration Statement as soon as reasonably practicable;
(v)”upon the occurrence of any event contemplated in Section 8(j)(ii)(4), except for such times as Acquirer is permitted hereunder to suspend, and has suspended, the use of a prospectus forming part of a Registration Statement, Acquirer shall haveuse its commercially reasonable efforts to as soon as reasonably practicable prepare a post-effective amendment to such Registration Statement or a supplement to the meaning givenrelated prospectus, or file any other required document so that, as thereafter delivered to purchasers of the Registrable Securities included therein, such prospectus will not include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the Preamble.light of the circumstances under which they were made, not misleading;
“(vi)Newuse its commercially reasonable efforts to (1) register or qualify the Registrable Securities covered by any Registration Statement” shall have under such securities or “blue sky” laws of such jurisdictions in the meaning given in subsection 2.1.5.
“Permitted Transferees” shall mean (a) with respect to an Existing Holder, any Person to whom a HolderUnited States as the Holders of Registrable Securities is permittedincluded in such Registration Statement (in light of their intended plan of distribution) may request and to transferkeep such registration or qualification in effect for so long as such Registration Statement remains in effect and (2) take such action necessary to cause such Registrable Securities priorcovered by a Registration Statement to be registered with or approved by such other governmental authorities or securities exchanges, including the expirationapplicable Nasdaq Stock Market or such other primary securities exchange or market, if any, on which the Acquirer Stock has been listed no later than the effective date of the Founderapplicable Registration Statement on which such Registrable Securities are registered;
(vii)use its commercially reasonable efforts to take all other steps reasonably necessary to effect the registration of the Lock-Up Shares Lock-up Period, Private Placement Lock-Up Period or any other lock-up period,contemplated hereby and, for so long as the case may be,undersigned holds Lock-Up Shares, to enable the undersigned to sell the Lock-Up Shares under Rule 144;
(viii)provide a transfer agent and registrar for all such Registrable Securities no later than the Insider Letter, the Private Placement Warrants Purchase Agreement, this Agreement andeffective date of any other applicable agreement between such Existing Holder and the Company, and to any transferee thereafter; and (b) with respect to a New Holder, (i)Registration Statement;
(ix)at least five (5) Business Days (or, in the case of an individual,a Block Trade, at least one (1) calendar day) prior to the filing of any PersonRegistration Statement or prospectus or any amendment or supplement to whomsuch Registration Statement or prospectus, furnish a copy thereof to each seller of such Registrable Securities or its counsel, including, without limitation, providing, upon request of a Holder, transfers Registrable Securities (1) by giftcopies promptly upon receipt of any comment letters received with respect to any such Registration Statement or prospectus;
(x)permit a memberrepresentative of a majority-in-interest of the individual’s Immediate Family,Holders, the underwriters, if any, and any attorney or accountant retained by such Holders or underwriter to a trust, the beneficiary of which is a member of the individual’s Immediate Family or an Affiliate ofparticipate, at each such Person, or to a charitable organization, (2) by virtue of laws of descent and distribution upon death of the individual and (3) pursuant to a qualified domestic relations order; or (ii)Person’s own expense, in the casepreparation of an entity, any PersonRegistration Statement and cause Acquirer’s officers, directors and employees to whomsupply all information reasonably requested by any such representative, underwriter, attorney or accountant in connection with the registration; provided, however, that, if requested by Acquirer, such representatives or underwriters shall be required to enter into a Holder transfers Registrable Securities (1) by distributionconfidentiality agreement, in form and substance reasonably satisfactory to such entity’s members, partners, stockholdersAcquirer, prior to the release or equityholders, (2) to any of such entity’s Affiliates or to any fund or other entity controlled or managed by such entity or any of its Affiliates, or to investment manager or investment advisor of such entity or an Affiliatedisclosure of any such investment manager or investment advisor, and (3) to a nominee or custodian of a person or entity to whom a disposition or transfer would be permissible under clause (b) of this definition, provided that such transferee to which a transfer is being made pursuant to clause (a) or (b) above, if not a Holder, enters into a written agreement with the Company agreeing to be bound by the restrictions, including restrictions specific to certain holders, herein.information;
“(xi)Person” shall mean any individual, corporation, partnership, limited liability company, unincorporated association or other legal entity or business organization.
“Piggyback Registration” shall have the meaning given in subsection 2.3.1.
“Private Placement Lock-up Period” shall mean, with respect to Private Placement Warrants that are held by the initial purchasers of such Private Placement Warrants or their Permitted Transferees, the Private Placement Warrants and shares of Class A Common Stock issuable upon the exercise or conversion of the Private Placement Warrants, and that are held by the initial purchasers of the Private Placement Warrants or their Permitted Transferees, the period ending thirty (30) days after the Closing Date.
“Private Placement Warrants” shall mean the warrants to purchase shares of Class A Common Stock purchased by the Sponsor pursuant to the Private Placement Warrants Purchase Agreement.
“Private Placement Warrants Purchase Agreement” shall mean that certain Private Placement Warrants Purchase Agreement by and between the Company and the Sponsor,obtain a “cold comfort” letter (including a bring-down letter dated as of September 1, 2020.
“Pro Rata” shall have the meaning given in subsection 2.2.4.
“Prospectus” shall mean the prospectus included in any Registration Statement, including any preliminary prospectus and free writing prospectus, in each case, as supplemented by any and all prospectus supplements and as amended by any and all post-effective amendments and including all material incorporated by reference in such prospectus.
“Registrable Security” shall mean (a) the Founder Shares and the shares of Class A Common Stock issued or issuable upon the conversion of the Founder Shares, (b) the Private Placement Warrants (including any shares of Class A Common Stock issued or issuable upon the exercise of the Private Placement Warrants), (c) any issued and outstanding shares of Class A Common Stock or any other equity security (including the shares of Class A Common Stock issued or issuable upon the exercise of any other equity security) of the Company held by a Holder as of the date the Registrable Securities are delivered for sale pursuant to such registration) from Acquirer’s independent registered public accountants in the event of this Agreement, (d) any equity securities (includingan underwritten offering that the shares of Class A Common Stock issued or issuable upon the exercise of anyparticipating Holders may rely on, in customary form and covering such equity security)matters of the Company issuable upon conversiontype customarily covered by “comfort” letters as the managing underwriter may reasonably request, and reasonably satisfactory to a majority-in-interest of the participating Holders and any working capital loans inunderwriter;
(xii)on the date the Registrable Securities are delivered for sale pursuant to a registration, obtain an amount up to $1,500,000 madeopinion and negative assurance letter, dated such date, of counsel representing Acquirer for the purposes of such registration, addressed to the Company by a Holder (includingHolders, the Working Capital Warrantsplacement agent or sales agent, if any, and sharesthe underwriters, if any, covering such legal matters with respect to the registration in respect of Class A Common Stock issuedwhich such opinion is being given as the Holders, placement agent, sales agent, or issuable upon the exercise of the Working Capital Warrants), (e) any outstanding shares of Class A Common Stock or any other equity security of the Company held by a New Holderunderwriter may reasonably request and as are
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issuedcustomarily included in connectionsuch opinions and negative assurance letters, and reasonably satisfactory to a majority in interest of the participating Holders and any underwriter;
(xiii)in the event of any underwritten offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the transactions contemplated by the Merger Agreement (including any Earnout Shares), (f) any PIPE Shares, (g) any other equity securities (including sharesmanaging underwriter of Class A Common Stock)such offering;
(xiv)otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the Company held by a New HolderSEC, and to make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve (12) months, beginning with the Closing Date and (h) any other equity securityfirst day of Acquirer’s first full calendar quarter after the effective date of the Company issued or issuable with respect to any such share of Class A Common Stock by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or reorganization; provided, however, that, as to any particular Registrable Security, such securities shall cease to be Registrable Securities when: (i) a Registration Statement with respect towhich satisfies the saleprovisions of such securities shall have become effective underSection 11(a) of the Securities Act and such securities shall have been sold, transferred, disposed of or exchanged in accordance with such Registration Statement; (ii) such securities shall have ceased to be outstanding; (iii) such securities have been otherwise transferred, new certificates for such securities not bearing a legend restricting further transfer shall have been delivered by the Companyrules and subsequent public distribution of such securities shall not require registration under the Securities Act; (iv) with respect to a Holder, all such securities held by such Holder could be sold pursuant toregulations thereunder, including Rule 144 promulgated under the Securities Act158 thereunder (or any successor rule promulgated thereafter by the Commission) without restriction on volume or manner of sale in any three-month period and withoutSEC);
(xv)if the requirement forregistration involves the Company to be in compliance with the public information required under Rule 144; or (v) such securities have been sold to, or through, a broker, dealer or underwriter in a public distribution or other public securities transaction. For purposes of this Agreement, a Person shall be deemed to be a holderregistration of Registrable Securities involving gross proceeds in excess of $50,000,000, use its reasonable efforts to make available senior executives of Acquirer to participate in customary “road show” presentations that may be reasonably requested by a majority-in-interest of the participating Holders or the underwriter in any underwritten offering;
(xvi)cooperate with each Holder that holds Registrable Securities being offered and the underwriter in any underwritten offering with respect to an applicable Registration Statement, if any, to facilitate the timely (i) preparation and delivery of certificates (not bearing any restrictive legends) representing Registrable Securities that have been offered and sold pursuant to such Registration Statement, and enable such certificates to be registered in such names and in such denominations or amounts, as the case may be, or (ii) crediting of the Registrable Securities that have been offered and sold pursuant to a Registration Statement to the applicable account (or accounts) with The Depository Trust Company (“DTC”) through its Deposit/Withdrawal At Custodian (“DWAC”) system, in any such case as such Holder or underwriter, if any, may reasonably request;
(xvii)for so long as this Agreement remains effective, use reasonable best effects to (a) cause the Acquirer Stock to be eligible for clearing through DTC, through its DWAC system; (b) be eligible and participating in the Direct Registration System (DRS) of DTC with respect to the Acquirer Stock; and (c) ensure that the transfer agent for the Acquirer Stock is a participant in, and that the Acquirer Stock is eligible for transfer pursuant to, DTC’s Fast Automated Securities Transfer Program (or successor thereto);
(xviii)use its commercially reasonable efforts to make and keep public information available, as those terms are understood and defined in Rule 144, and, without limiting the foregoing, as long as any Holder shall own Registrable Securities (without taking into account the exclusion of the definition of such term contained in clause (iv) thereof), Acquirer, at all times while it shall be deemeda reporting company under the Exchange Act, covenants to file timely all reports required to be filed by Acquirer after the Closing Date pursuant to Sections 13 or 15(d) of the Exchange Act and to promptly furnish the Holders with true and complete copies of all such filings upon request; and
(xix)otherwise, in existence, whenevergood faith, cooperate reasonably with, and take such Person holds such Registrable Securities of record or in “street name” or hascustomary actions as may reasonably be requested by the right to acquire directly or indirectly such Registrable Securities (upon conversion or exerciseHolders in connection with a transferregistration.
(k)Except as otherwise provided herein, the Registration Expenses (as defined below) of securities or otherwise, but disregarding any restrictions or limitations uponall registrations pursuant to this Agreement shall be borne by Acquirer. It is acknowledged by the exercise of such right and, inHolders that the caseHolders shall bear all incremental selling expenses relating to the sale of Registrable Securities, issuable upon exercise of warrants, assuming the exercise thereof for cash), whether or not such acquisition has actually been effected,as underwriters’ commissions and such Person shall be entitled to exercise the rights of a holder of Registrable Securities hereunder; provided a holder of Registrable Securities may only request that Registrable Securitiesdiscounts, brokerage fees and, other than as set forth in the formdefinition of Class A Common Stock be registered pursuant to this Agreement.
“Registration“Registration Expenses,” shall mean a registration effected by preparingall reasonable fees and filing a registration statement or similar document in compliance withexpenses of any legal counsel representing the requirements of the Securities Act, and the applicable rules and regulations promulgated thereunder, and such registration statement becoming effective.
“Registration Date” shall have the meaning given in subsection 3.5.2.
“Registration Expenses”Holders except as otherwise provided herein. “Registration Expenses” shall mean the out-of-pocket expenses of a Registration,registration, including, without limitation, the following:
(a) all registration, qualification and filing fees (including fees with respect to filings required to be made with the Financial Industry Regulatory Authority, Inc.) and any securities exchange on which the Class A CommonAcquirer Stock is then listed;
(b) fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel for the Underwritersunderwriters in connection with blue sky qualifications of Registrable Securities);
(c) printing, messenger, telephone and delivery expenses;
(d) reasonable
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fees and disbursements of counsel for the Company;
Acquirer; (e) reasonable fees and disbursements of all independent registered public accountants of the CompanyAcquirer incurred specifically in connection with such Registration;registration; and
(f) reasonable fees and expenses of one (1) legal counsel selected by the Demanding Holders, not to exceed $75,000.
“(l)Registration Statement” shall meanNo Person may participate in any underwritten offering for equity securities of Acquirer pursuant to a registration statement that coversinitiated by Acquirer hereunder unless such Person (a) agrees to sell such Person’s securities on the Registrable Securitiesbasis provided in any underwriting arrangements approved by Acquirer and (b) completes and executes all customary questionnaires, powers of attorney, indemnities, lock-up agreements, underwriting agreements and other customary documents as may be reasonably required under the terms of such underwriting arrangements. In connection with any underwritten offering of equity securities of Acquirer (other than a Block Trade), each Holder participating in the underwritten offering pursuant to the provisionsterms of this Agreement including the Prospectusagrees that it shall not transfer any shares of Acquirer Stock or other equity securities of Acquirer (other than those included in such offering pursuant to this Agreement), without the prior written consent of Acquirer, during the 90-day period beginning on the date of pricing of such offering or such shorter period during which Acquirer agrees not to conduct an underwritten primary offering of Acquirer Stock, except in the event the underwriters managing the offering otherwise agree by written consent. Each Holder participating in the underwritten offering agrees to execute a customary lock-up agreement in favor of the underwriters to such effect (in each case on substantially the same terms and conditions as all such Holders). The immediately foregoing shall in no way limit the restrictions of undersigned’s Lock-Up Shares pursuant to the applicable Lock-Up Period.
(m)If (a) during the period starting with the date sixty (60) days prior to Acquirer’s good-faith estimate of the date of the filing of, and ending on a date one hundred and twenty (120) days after the effective date of, a Registration Statement in respect of an Acquirer initiated underwritten registration of its securities Acquirer receives a Demand Registration, and provided that Acquirer has delivered written notice to the Holders prior to receipt of a Demand Registration pursuant to Section 8(d) and it continues to actively employ, in good faith, all reasonable efforts to cause the applicable Acquirer-initiated registration statement to become effective, (b) the Holders have requested an underwritten registration and Acquirer and the Holders are unable to obtain the commitment of the underwriters to firmly underwrite the offer, or (c) in the good faith judgment of the Acquirer Board such registration would be seriously detrimental to Acquirer and the Acquirer Board concludes as a result that it is essential to defer the filing of such Registration Statement at such time, then in each case, Acquirer shall furnish to such Holders a certificate signed by the Chairman of the Acquirer Board stating that in the good-faith judgment of the Acquirer Board it would be seriously detrimental to Acquirer for a Registration Statement with respect to such Demand Registration to be filed in the near future and that it is therefore essential to defer the filing of such Registration Statement, Acquirer shall have the right to defer such filing for a period of not more than sixty (60) calendar days. For the avoidance of doubt, the foregoing ability to defer the filing of a Registration Statement shall not apply to Acquirer’s obligation to file the Initial Shelf pursuant to Section 8(a). Notwithstanding anything to the contrary in this Agreement, Acquirer may, subject to the MNPI Provisions and upon prompt written notice (a “Suspension Notice”) of such action to the Holders no later than three (3) Business Days from the date of such Suspension Event (as defined below), delay the filing or postpone the effectiveness of the Registration Statement, and from time to time to require the Holders not to sell under the Registration Statement or to suspend the effectiveness thereof, if (i) such filing, effectiveness or sales would require the inclusion in such Registration Statement of financial statements that are unavailable to Acquirer for reasons beyond Acquirer’s control or (ii) the negotiation or consummation of a transaction by Acquirer or its subsidiaries is pending or an event has occurred, which negotiation, consummation or event, the Acquirer Board reasonably believes would require additional disclosure by Acquirer in the Registration Statement of material information that Acquirer has a bona fide business purpose for keeping confidential and the non-disclosure of which in the Registration Statement would be expected, in the reasonable determination of the Acquirer Board would be expected to cause the Registration Statement to fail to comply with applicable disclosure requirements (each such circumstance, a “Suspension Event”); provided that Acquirer may not delay or suspend the Registration Statement on more than forty-five (45) consecutive calendar days, determined in good faith by the Acquirer Board to be necessary for such purpose; provided further that Acquirer shall not defer its obligations pursuant to this Section 8(m) more than twice during any twelve (12)-month period; provided further, that in no event shall Acquirer be entitled to delay or defer the filing or effectiveness of the Initial Shelf pursuant to this Section 8(m). Upon receipt of any Suspension Notice during the period that any Registration Statement is effective or if as a result of a Suspension Event any Registration Statement or related
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amendments (includingprospectus contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made (in the case of the prospectus) not misleading, the undersigned and each other Holder agrees that (i) it will immediately discontinue offers and sales of the Registrable Securities under such Registration Statement (excluding, for the avoidance of doubt, sales conducted pursuant to Rule 144) until such Holder receives copies of a supplemental or amended prospectus (which Acquirer agrees to promptly prepare) that corrects the misstatement(s) or omission(s) referred to above and receives notice that any post-effective amendments)amendment has become effective or unless otherwise notified by Acquirer that it may resume such offers and supplementssales, provided, for the avoidance of doubt, that the foregoing shall not restrict or otherwise affect the consummation of any sale pursuant to a contract entered into, or order placed, by any Holder prior to delivery of the Suspension Notice and (ii) it will maintain the confidentiality of any information included in such Suspension Notice unless otherwise required by law or subpoena. If so directed by Acquirer, each Holder will deliver to Acquirer or, in such Holder’s sole discretion destroy, all copies of the prospectus covering the Registrable Securities in such Holder’s possession; provided that this obligation to deliver or destroy all copies of the prospectus covering the Registrable Securities shall not apply (A) to the extent such Holder is required to retain a copy of such prospectus (1) in order to comply with applicable legal, regulatory, self-regulatory or professional requirements or (2) in accordance with a bona fide pre-existing document retention policy or (B) to copies stored electronically on archival servers as a result of automatic data back-up. Acquirer shall immediately notify the Holders of the expiration of any period during which it exercised its rights under this Section 8(m).
(n)A Holder may deliver written notice (an “Opt-Out Notice”) to Acquirer requesting that such Holder not receive notices from Acquirer otherwise required by this Section 8; provided that Holder may later revoke any such Opt-Out Notice in writing. Following receipt of an Opt-Out Notice from a Holder (unless subsequently revoked), (i) Acquirer shall not deliver any such notices to such registration statement,Holder and such Holder shall no longer be entitled to the rights associated with any such notice and (ii) each time prior to such Holder’s intended use of an effective Registration Statement, such Holder will notify Acquirer in writing at least two (2) Business Days in advance of such intended use, and if a notice of a Suspension Event was previously delivered (or would have been delivered but for the provisions of this Section 8(n)) and the related suspension period remains in effect, Acquirer will so notify such Holder, within one (1) Business Day of such Holder’s notification to Acquirer, by delivering to such Holder a copy of such Suspension Notice, and thereafter will provide such Holder with the related notice of the conclusion of such Suspension Event promptly following its availability.
(o)Other than with respect to any contractual restriction applicable to any Holder pursuant to this Agreement or any Other Shareholder Agreement, the stock certificates evidencing the Registrable Securities (and/or book entries representing the Registrable Securities) held by each Holder shall not contain or be subject to any legend restricting the transfer thereof (and the Registrable Securities shall not be subject to any stop transfer or similar instructions or notations): (A) while a Registration Statement covering the sale or resale of such securities is effective under the Securities Act, if such Holder provides paperwork to the effect that it has sold such securities and will distribute or transfer such securities pursuant to such Registration Statement and the plan of distribution set forth therein or Rule 144, or (B) if such Holder provides customary paperwork to the effect that it has sold such shares pursuant to Rule 144, or (C) if such Registrable Securities are eligible for sale under Rule 144 (including Rule 144(i)) as set forth in customary non-affiliate paperwork provided by such Holder and such non-affiliate Holder agrees to sell or transfer such Registrable Securities pursuant to Rule 144 or pursuant to a Registration Statement and the plan of distribution set forth therein or (D) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the SEC) as determined in good faith by counsel to Acquirer or set forth in a legal opinion delivered by nationally recognized counsel to the Holder (collectively, the “Unrestricted Conditions”). Acquirer agrees that at such time as any of the Unrestricted Conditions is met or such legend is otherwise no longer required it will, no later than two (2) Business Days following the delivery by a Holder to Acquirer or Acquirer’s transfer agent of a certificate representing any Registrable Securities, issued with a restrictive legend, (or, in the case of Registrable Securities represented by book entries, delivery by a Holder to Acquirer or Acquirer’s transfer agent of a legend removal request) deliver or cause to be delivered to such Holder a certificate or, at the request of such Holder, deliver or cause to be delivered such Registrable Securities to such Holder by crediting the account of such Holder’s prime broker with DTC through its DWAC system, in each case, free from all restrictive and other legends and stop transfer or similar instructions or
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notations. If any of the Unrestricted Conditions is met at the time of issuance of any Registrable Securities, then such securities shall be issued free of all legends.
(p)Indemnification.
(i)Acquirer shall, notwithstanding the termination of this Agreement, indemnify and hold harmless, to the extent permitted by law, each Holder and its respective directors, officers, employees, agents, trustees, partners, members, managers, stockholders, investment advisors and sub-advisors, each Person who controls such Holder (within the meaning of the Securities Act or the Exchange Act) and each Affiliate of such Holder from and against any and all exhibits tolosses, claims, damages, liabilities, costs and allexpenses (including, without limitation, any reasonable attorneys’ fees and expenses incurred in connection with defending or investigating any such action or claim) (collectively, “Losses”) that arise out of or are caused by any untrue or alleged untrue statement of material fact contained in any Registration Statement (or incorporated by reference therein), prospectus included in any Registration Statement (“Prospectus”) or preliminary Prospectus or any amendment thereof or supplement thereto or document incorporated by reference therein or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except insofar as the same are caused by or contained in any information furnished in writing to Acquirer by or on behalf of such Holder expressly for use therein. Acquirer shall notify each Holder promptly of the institution, threat or assertion (to Acquirer’s knowledge) of any proceeding arising from or in connection with a Registration Statement on which such Holder’s Registrable Securities are registered; provided that the indemnification contained in this Section 8(p) shall not apply to amounts paid in settlement of any Losses if such settlement is effected without the consent of Acquirer (which consent shall not be unreasonably withheld, conditioned or delayed), nor shall Acquirer be liable for any Losses to the extent they arise out of or are based upon a violation which occurs in connection with any offers or sales effected by or on behalf of such Holder in violation of this Agreement.
(ii)In connection with any Registration Statement in which any Holder is participating, such Holder shall furnish to Acquirer in writing such information as Acquirer reasonably requests for use in connection with any such Registration Statement or Prospectus. In connection with any Registration Statement in which any Holder is participating, such Holder agrees to indemnify and hold harmless, to the extent permitted by law, Acquirer, its directors and officers and agents and employees and each Person or entity who controls Acquirer (within the meaning of Section 15 of the Securities Act) against any Losses, resulting from or arising out of any untrue or alleged untrue statement of material fact contained in the Registration Statement, Prospectus or preliminary Prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein in light of the circumstances under which they were made, not misleading, but only to the extent that such untrue statement or omission is contained (or not contained in the case of an omission) in and are based on any information or affidavit so furnished in writing by or on behalf of such Holder expressly for use therein; provided that in no event shall the aggregate liability of a Holder (including, for the avoidance of doubt, under Section 8(p)(v)) be greater in amount than the dollar amount of the net proceeds received by such Holder from the sale of its Registrable Securities pursuant to such Registration Statement giving rise to such indemnification obligation.
(iii)Any Person entitled to indemnification herein shall (A) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that the failure to give prompt notice shall not impair any Person’s right to indemnification hereunder to the extent such failure has not materially prejudiced the indemnifying party in defending such claim) and (B) unless in such registration statement.indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim. permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party shall not be subject to any liability for any settlement made by the indemnified party without its consent (which consent shall not be unreasonably withheld, conditioned or delayed). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel (plus local counsel) for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of legal counsel to any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. No indemnifying party shall,
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without the consent of the indemnified party, consent to the entry of any judgment or enter into any settlement which cannot be settled in all respects by the payment of money (and such money is so paid by the indemnifying party pursuant to the terms of such settlement) or which settlement does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation or includes any admission as to fault or culpability or failure to act on the part of an indemnified party.
(iv)The indemnification provided under this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director, employee, agent, affiliate or controlling Person of such indemnified party and shall survive the transfer of the Lock-Up Shares.
(v)If the indemnification provided under this Section 8(p) from the indemnifying party is unavailable or insufficient to hold harmless an indemnified party in respect of any Losses referred to herein, then the indemnifying party, in lieu of indemnifying the indemnified party, shall contribute to the amount paid or payable by the indemnified party as a result of such Losses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and indemnified party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, was made by (or not made by, in the case of an omission), or relates to information supplied by (or not supplied by, in the case of an omission), such indemnifying party or indemnified party, and the indemnifying party’s and indemnified party’s relative intent, knowledge, access to information and opportunity to correct or prevent such action and the benefits received by the such indemnifying party or indemnified party; provided, however, that the liability of any Holder under this Section 8(p)(v) shall be limited to the amount of the net proceeds received by such Holder from the sale of Registrable Securities in such offering giving rise to such liability. The amount paid or payable by a party as a result of the Losses or other liabilities referred to above shall be deemed to include, subject to the limitations set forth in Section 8(p)(i), 8(p)(ii), and 8(p)(iii), any legal or other fees, charges or expenses reasonably incurred by such party in connection with any investigation or proceeding. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution pursuant to this Section 8(p)(v) from any Person who was not guilty of such fraudulent misrepresentation.
(q)The undersigned agrees that each New Holder (as defined in the July 2021 Registration Rights Agreement) shall have piggyback registration rights in respect of any Registration Statement that is filed pursuant to this Section 8, pursuant to and in accordance with Section 5.6 of the July 2021 Registration Rights Agreement, and that the provisions of the Registration Rights Agreement shall apply, mutatis mutandis, to the exercise of any such piggyback registration rights by any such New Holder in respect of any such Registration Statement.
(r)The rights, duties and obligations of the undersigned under this Section 8 may be freely assigned or delegated by the undersigned to a 5% Insider; provided, however, that if any such assignment or delegation occurs during a Lock-Up Period, such 5% Insider must enter into a written agreement with Acquirer agreeing to be bound by the provisions of this Agreement in accordance with Section 5 of this Agreement and shall thereafter be a “Holder” for purposes of this Section 8. For purposes of this Agreement, a “5% Insider” means any stockholder of Seller that is both the record or beneficial owner of at least 5% of the outstanding shares of common stock of Seller and an insider (non-institutional) stockholder of Seller.
9.The undersigned represents and warrants that it (i) is a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act) or an institutional “accredited investor” (within the meaning of Rule 501(a) under the Securities Act) satisfying the applicable requirements set forth on Schedule A, (ii) is acquiring the Lock-Up Shares only for its own account and not for the account of others, and (iii) is not acquiring the Lock-Up Shares with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act or any other securities laws of the United States or any other applicable jurisdiction (and shall provide the requested information on Schedule A following the signature page hereto). The undersigned is not an entity formed for the specific purpose of acquiring the Lock-Up Shares, unless such newly formed entity is an entity in which all of the equity owners are “accredited investors” (within the meaning of Rule 501(a) under the Securities Act).
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10.The undersigned understands that the Lock-Up Shares are being offered in a transaction not involving any public offering within the meaning of the Securities Act and that the Lock-Up Shares have not been registered under the Securities Act or any other securities laws of the United States or any other jurisdiction. The undersigned understands that it is acquiring its entire beneficial ownership interest in the Lock-Up Shares for the undersigned’s own account for investment purposes only and not with a view to any distribution of the Lock-Up Shares in any manner that would violate the securities laws of the United States or any other applicable jurisdiction. The undersigned understands that the Lock-Up Shares may not be resold, transferred, pledged or otherwise disposed of by the undersigned absent an effective registration statement under the Securities Act, except (i) to Acquirer or a subsidiary thereof, (ii) pursuant to offers and sales that occur in an “offshore transaction” within the meaning of Regulation S under the Securities Act, (iii) pursuant to Rule 144 under the Securities Act, provided that all of the applicable conditions thereof (including those set out in Rule 144(i) which are applicable to Acquirer) have been met, or (iv) pursuant to another applicable exemption from the registration requirements of the Securities Act, including pursuant to a private sale effected under Section 4(a)(7) of the Securities Act or applicable formal or informal SEC interpretation or guidance, such as a so-called “4(a)(1) and a half” sale, and that any certificates or book- entry records representing the Lock-Up Shares shall contain a legend to such effect. The undersigned understands and agrees that the Lock-Up Shares will be subject to the foregoing restrictions and, as a result, the undersigned may not be able to readily resell the Lock-Up Shares and may be required to bear the financial risk of an investment in the Lock-Up Shares for an indefinite period of time. The undersigned understands that it has been advised to consult legal counsel prior to making any offer, resale, pledge or transfer of any of the Lock-Up Shares. By making the representations in this Section 10, the undersigned does not agree to hold any of the Lock-Up Shares for any minimum or other specific term and reserves the right to assign, transfer or otherwise dispose of any of the Lock-Up Shares at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act; provided, however, that the Lock-Up Shares shall be subject to the restrictions set forth in Section 1 and Section 2 of this Agreement.
11.The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this Agreement and that this Agreement constitutes the legal, valid and binding obligation of the undersigned, enforceable in accordance with its terms. Any obligations of the undersigned shall be binding upon the successors and permitted assigns of the undersigned from and after the Closing Date.
12.This Agreement constitutes the entire agreement and understanding of the parties hereto in respect of the subject matter hereof and supersedes all prior understandings, agreements, or representations by or among the parties hereto, written or oral, to the extent they relate in any way to the subject matter hereof. This Agreement may not be changed, amended, modified or waived (other than to correct a typographical error) as to any particular provision, except by a written instrument executed by all parties hereto.
13.Except as provided in Sections 5 and 8 hereof, this Agreement and the rights and obligations of the parties hereunder shall not be assignable or transferable by any party hereto (including in connection with a merger, consolidation, sale of substantially all of the assets of such party or otherwise by operation of Law) without the prior written consent of (a) Acquirer, in the case of any such attempted assignment or transfer by the undersigned, or (b) the undersigned, in the case of any such attempted assignment or transfer by Acquirer. Any attempted assignment in violation of this Section 13 shall be null and void. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of Acquirer and the undersigned and their respective successors and permitted assigns.
14.This Agreement, any non-contractual rights or obligations arising out of or in connection with it, and all Disputes will be governed by, and enforced and construed in accordance with, the Laws of the State of Delaware, without regard to the conflict of laws rules of such state that would result in the application of the Laws of another jurisdiction.
15.EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY OR DISPUTES RELATING HERETO. EACH PARTY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
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EVENT OF A DISPUTE, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 15.
16.Any term or provision of this Agreement that is held by a court of competent jurisdiction or arbitrator to be invalid, void or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the invalid, void or unenforceable term or provision in any other situation or in any other jurisdiction. If the final judgment of such court or arbitrator declares that any term or provision hereof is invalid, void or unenforceable, the parties hereto agree to (a) reduce the scope, duration, area or applicability of the term or provision, to delete specific words or phrases, and (b) replace any invalid, void or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the original intention of the invalid or unenforceable term or provision.
17.This Agreement may be executed in any number of counterparts (including electronically), and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. Delivery of an executed counterpart of a signature page of this Agreement by electronic mail or other electronic transmission shall be effective as delivery of a manually executed original counterpart of this Agreement.
18.All notices, demands, waivers and other communications pursuant to this Agreement will be in writing and will be deemed given if delivered personally or delivered by electronic mail or globally recognized express delivery service to the parties hereto at the addresses set forth on the signature page hereto or to such other address as the party to whom notice is to be given to the other parties hereto in writing in accordance herewith. Any such notice, demand, waiver or other communication will be deemed to have been delivered and received (a) in the case of personal delivery, on the date of such delivery, (b) in the case of electronic mail, on the date of sending if no automated notice of delivery failure is received by the sender, and (c) in the case of a globally recognized express delivery service, on the date on which receipt by the addressee is confirmed pursuant to the service’s systems.
19.This Agreement shall become effective on the Closing Date. This Agreement and the obligations of each party hereunder shall automatically terminate upon any termination of the Merger Agreement.
[Signature on the following page]
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Very truly
yours,
By:
Name:
Title:
Address:
Email:
_____________________________Accepted and Agreed:
ACQUIRER
SEMA4 HOLDINGS CORP.
By:
Name:
Title:
Address:333 Ludlow Street,
North Tower, 8th floor
Stamford, CT 06902
Email:

[Signature Page to Shareholder Agreement]

SCHEDULE A
ELIGIBILITY REPRESENTATIONS OF THE UNDERSIGNED
AQUALIFIED INSTITUTIONAL BUYER STATUS
.(Please check the applicable subparagraphs):
1.
•We are a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act (a “QIB”)).
2.
•We are subscribing for the Lock-Up Shares as a fiduciary or agent for one or more investor accounts, and each owner of such account is a QIB.
*** OR ***
B.INSTITUTIONAL ACCREDITED INVESTOR STATUS
.(Please check each of the following subparagraphs):
1.
•We are an “accredited investor” (within the meaning of Rule 501(a) under the Securities Act) or an entity in which all of the equity holders are accredited investors within the meaning of Rule 501(a) under the Securities Act and have marked and initialed the appropriate box on the following page indicating the provision under which we qualify as an “accredited investor”.
2.
•We are not a natural person.
*** AND ***
C.AFFILIATE STATUS
.(Please check the applicable box)
THE UNDERSIGNED:
☐is:
☐is not:
an “affiliate” (as defined in Rule 144 under the Securities Act) of the Acquirer or acting on behalf of an affiliate of the Acquirer.
FINRA Rule 4512(c) states that an “institutional account” shall mean any person who comes within any of the below listed categories. The undersigned has indicated, by marking and initialing the appropriate box below, the provision(s) below which apply to the undersigned and under which the undersigned accordingly qualifies as an “institutional account.”
•a bank, savings and loan association, insurance company or registered investment company;
•an investment adviser registered either with the SEC under Section 203 of the Investment Advisers Act or with a state securities commission (or any agency or office performing like functions); or
•any other person (whether a natural person, corporation, partnership, trust or otherwise) with total assets of at least $50 million.
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This page should be completed by the undersigned
and constitutes a part of the Shareholder Agreement.
Schedule A-1
Rule 501(a), in relevant part, states that an “accredited investor” shall mean any person who comes within any of the below listed categories, or who the Acquirer reasonably believes comes within any of the below listed categories, at the time of the sale of the securities to that person. The undersigned has indicated, by marking and initialing the appropriate box below, the provision(s) below that apply to the undersigned and under which the undersigned accordingly qualifies as an “accredited investor.”
•Any bank as defined in section 3(a)(2) of the Securities Act, or any savings and loan association or other institution as defined in section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity;
•Any broker or dealer registered pursuant to section 15 of the Exchange Act;
•An investment adviser registered pursuant to section 203 of the Investment Advisers Act of 1940 or registered pursuant to the laws of a state;
•An investment adviser relying on the exemption from registering with the Securities and Exchange Commission under section 203(l) or (m) of the Investment Advisers Act of 1940;
•Any insurance company as defined in section 2(a)(13) of the Securities Act;
•Any investment company registered under the Investment Company Act of 1940 or a business development company as defined in section 2(a)(48) of the Securities Act;
•Any Small Business Investment Company licensed by the U.S. Small Business Administration under section 301(c) or (d) of the Small Business Investment Act of 1958;
•A Rural Business Investment Company as defined in section 384A of the Consolidated Farm and Rural Development Act;
•Any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000;
•Any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors;
•Any private business development company as defined in section 202(a)(22) of the Investment Advisers Act of 1940;
•Any organization described in section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, partnership or limited liability company, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000;
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This page should be completed by the undersigned
and constitutes a part of the Shareholder Agreement.
Schedule A-2
•Any trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) of the Securities Act;
•An entity, of a type not listed in any of the foregoing paragraphs, not formed for the specific purpose of acquiring the securities offered, owning investments in excess of $5,000,000;
•A “family office,” as defined in rule 202(a)(11)(G)-1 under the Investment Advisers Act of 1940 (17 CFR 275.202(a)(11)(G)-1): (i) with assets under management in excess of $5,000,000, (ii) that is not formed for the specific purpose of acquiring the securities offered, and (iii) whose prospective investment is directed by a person who has such knowledge and experience in financial and business matters that such family office is capable of evaluating the merits and risks of the prospective investment;
•A “family client,” as defined in rule 202(a)(11)(G)-1 under the Investment Advisers Act of 1940 (17 CFR 275.202(a)(11)(G)-1), of a family office meeting the requirements in the foregoing paragraph and whose prospective investment in the issuer is directed by such family office pursuant to clause (iii) in the foregoing paragraph;
•Any natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of his purchase exceeds $1,000,000. For purposes of calculating a natural person’s net worth: (a) the person’s primary residence must not be included as an asset; (b) indebtedness secured by the person’s primary residence up to the estimated fair market value of the primary residence must not be included as a liability (except that if the amount of such indebtedness outstanding at the time of calculation exceeds the amount outstanding 60 days before such time, other than as a result of the acquisition of the primary residence, the amount of such excess must be included as a liability); and (c) indebtedness that is secured by the person’s primary residence in excess of the estimated fair market value of the residence must be included as a liability;
•Any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year; or
•Any entity in which all of the equity owners are accredited investors meeting one or more of the above tests.
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EXHIBIT B
Form of Support Agreement

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STOCKHOLDER SUPPORT AGREEMENT
This Stockholder Support Agreement (this “Registration Trigger DateAgreement”) is dated as of January 14, 2022, by and among Sema4 Holdings Corp., a Delaware corporation (“Acquirer”), OPKO Health, Inc., a Delaware corporation (the “Seller”) and the Person set forth on Schedule I hereto (“Stockholder”). Capitalized terms used but not defined herein shall have the meaning givenrespective meanings ascribed to such terms in subsection 2.1.6the Merger Agreement (as defined below).
WHEREAS, as of the date hereof, Stockholder is the holder of record and/or beneficial owner (as defined in Rule 13d-3 of the Exchange Act) of the shares of Acquirer Stock set forth opposite its name on Schedule I attached hereto (all such shares of Acquirer Stock, together with any additional shares or other voting securities of Acquirer of which such Stockholder acquires record or beneficial ownership after the date of this Agreement, by any means, such Stockholder’s “Requesting HolderShares” shall have the meaning given in subsection 2.2.1.);
“WHEREASSEC Guidance, contemporaneously with the execution and delivery of this Agreement, Acquirer, Orion Merger Sub I, a Delaware corporation (“Merger Sub I” shall), Orion Merger Sub II, LLC, a Delaware limited liability company (“Merger Sub II”), GeneDx, Inc., a New Jersey corporation (“Company”), GeneDx Holding 2, Inc., a Delaware corporation (“Holdco2”), and Seller have the meaning given in subsection 2.1.5.
“Securities Act” shall mean the Securities Actentered into an Agreement and Plan of 1933, asMerger and Reorganization (as amended and the rules and regulations of the Commission promulgated thereafter, all as the same shall be in effector modified from time to time.time, the “Merger Agreement”), dated as of the date hereof, pursuant to which, among other transactions, on the Closing Date but following consummation of the Pre-Closing Restructuring, Merger Sub I will merge with and into Holdco2 (the “First Merger”), with Holdco2 as the surviving corporation in the First Merger and Merger Sub I will merge with and into HoldCo2 (the “First Merger”), with HoldCo2 as the surviving corporation in the First Merger, and immediately after the consummation of the First Merger, as part of the same overall transaction, Holdco2, as the surviving corporation in the First Merger, will merge with and into Merger Sub II (the “Second Merger” and, together with the First Merger, the “Mergers”), with Merger Sub II as the surviving corporation and the direct owner of all of the equity interests in GeneDx Delaware LLC.
“WHEREASShelf Take Down Notice” shall have, on or prior to the meaning given in subsection 2.1.3.
“Shelf Underwritten Offering” shall mean an underwritten offering that is registered pursuant to a Shelf, including a Block Trade.
“Sponsor” shall have the meaning given in the Preamble.
date hereof, Acquirer entered into subscription agreements (the “Subscription Agreements” shall means those certain subscription agreements dated February 9, 2021 bywith the PIPE Investors pursuant to which, and betweenon the Companyterms and certain subscriberssubject to the conditions of which, such PIPE Investors have agreed to purchase from Acquirer shares of Class A Common Stock.Acquirer Stock for an aggregate purchase price equal to the PIPE Investment Amount, such purchases to be consummated prior to or substantially concurrently with the Closing (the “PIPE Investment,” and, together with the other transactions contemplated by the Merger Agreement, the “Transactions”).
WHEREAS, as an inducement to Seller and Acquirer to enter into the Merger Agreement and to consummate the Transactions, the parties hereto desire to agree to certain matters as set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, and intending to be legally bound hereby, the parties hereto hereby agree as follows:
ARTICLE I
STOCKHOLDER SUPPORT AGREEMENT; COVENANTS
Section 1.1 No Transfer. Stockholder agrees that during the term of this Agreement, Stockholder shall not, directly or indirectly, (a) sell, assign, transfer (including by operation of law), swap, convert, lien, pledge, gift, dispose of or otherwise encumber (including by merger (including by conversion into securities or other consideration), by tendering into any tender or exchange offer, by testamentary disposition, by operation of Law or otherwise, or by divesting itself (pursuant to contract or otherwise) of any rights as a stockholder of Stockholder’s Shares, including, without limitation, the right to vote such Shares) (collectively, a “Suspension EventTransfer” shall) or enter into any contract or option with respect to the Transfer of, (i) any of such Stockholder’s Shares (the “Restricted Amount”), (b) publicly announce to do any of the foregoing or (c) take any action that would make any representation or warranty of such Stockholder contained herein untrue or incorrect or which would have the meaning giveneffect of preventing or disabling Stockholder from performing his, her or its obligations under this Agreement in any material respect; provided that the foregoing shall not prohibit (W) for all purposes of this Section 1(a) from and after the date of the Acquirer Stockholders’ Meeting at which the Requisite Vote is obtained, the Stockholder and its affiliates shall be permitted to Transfer (and enter into any Contract or option with respect to any such Transfer), 100% of the Restricted Amount (such maximum aggregate amount of shares, the “Transferrable Amount”), it being understood
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and agreed, for the avoidance of doubt, that prior to the date of such Acquirer Stockholders’ Meeting the Stockholder shall not enter into any Contract or option with respect to any such Transfer or publicly disclose, or take any action, that would reasonably be expected to require public disclosure of any intent or plan by Stockholder to engage in any such Transfer (provided that the foregoing shall not restrict the Stockholder from disclosing (including in any filing required by law to be made with the SEC) the existence of this Agreement or the rights of the Stockholder to Transfer Shares in accordance with this Agreement), (X) the transfer of any of the Shares by Stockholder to any managers, partners, members or other direct or indirect equity holders or affiliates of Stockholder (which, for the avoidance of doubt, shall include any investment fund or managed account that is managed on a discretionary basis by the same investment manager as Stockholder) or to any of its or their officers, directors or employees, but only if any such transferee shall execute a joinder or other instrument agreeing to be bound by the provisions of this Agreement, (Y) any pledge of the Shares in connection with a bona fide margin agreement or grant of a security interest in some or all of the Shares to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act, or (Z) any hedging or other transactions, including without limitation any short sales or purchases or sales of “derivative” securities based on securities issued by Acquirer, that do not result in the transfer of any of the Shares or the disposition of voting power in respect thereof prior to the termination of this Agreement. Stockholder hereby covenants and agrees that such Stockholder shall not (i) enter into any voting agreement or voting trust with respect to any of such Stockholder’s Shares that is inconsistent with such Stockholder’s obligations pursuant to this Agreement, grant a proxy or power of attorney with respect to any of such Stockholder’s Shares that is inconsistent with such Stockholder’s obligations pursuant to this Agreement or (iii) enter into any agreement or undertaking that is otherwise inconsistent with, or would interfere with, or prohibit or prevent such Stockholder from satisfying its obligations pursuant to this Agreement. In furtherance of the agreements set forth in this Agreement, Stockholder hereby authorizes Acquirer or its counsel to instruct its transfer agent to put in place a stop transfer order with respect to the Restricted Amount except with respect to Transfers of Shares permitted hereby.
Section 3.41.2 Agreement to Vote. Stockholder hereby unconditionally and irrevocably agrees that, at any meeting of the stockholders of Acquirer however called or at any adjournment thereof, or in any other circumstance that the vote, consent or other approval of the stockholders of Acquirer is sought (the “Requisite Vote”), such Stockholder shall (i) appear at such meeting or otherwise cause all of such Stockholder’s Shares to be counted present thereat for purposes of calculating a quorum and (ii) vote or cause to be voted (or duly and promptly execute and deliver, or cause to be duly and promptly executed and delivered, an action by written consent which written consent shall be delivered promptly, and in any event within three Business Days, after Acquirer, as applicable requests such delivery), all of such Stockholder’s Shares:
(a)to approve the issuance of the Stock Consideration pursuant to the Merger Agreement and the issuance of the shares of Acquirer Stock pursuant to the Subscription Agreements;
(b)to approve the appointment of the Specified Designees to the Acquirer Board for terms that expire no earlier than the end of the Second Milestone Period;
(c)to approve an amendment to the Company’s current Third Amended and Restated Certificate of Incorporation to increase the authorized shares of Acquirer Stock from 380,000,000 to 1,000,000,000;
(d)to approve any other proposal included in the Proxy Statement that is recommended by the Acquirer Board as necessary to consummate the Transactions;
(e)to approve any proposal that is recommended by the Acquirer Board to adjourn the meeting to a later date, if there are not sufficient affirmative votes (in person or by proxy) to obtain the requested approvals on the date on which such meeting is held; and
(f)against any and all other proposals that could reasonably be expected to delay or impair the ability of Acquirer to consummate the Transactions.
Nothing in this Agreement limits or restricts any Affiliate or designee of Stockholder who serves as a member of the Acquirer Board in acting or voting in his or her capacity as a director of Acquirer and exercising his or her fiduciary duties and responsibilities, it being understood that this Agreement applies to Stockholder solely in its
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capacity as a stockholder of Acquirer and does not apply to any such Affiliate or designee’s actions, judgments or decisions as a director of Acquirer, and such actions (or failures to act) shall not be deemed to constitute a breach of this Agreement.
Section 1.3 Proxy.
“(a)Suspension NoticeSolely in furtherance of Section 1.2 of this Agreement and subject to termination as provided in Section 3.1 of this Agreement, Stockholder (i) hereby irrevocably grants to, and appoints, Acquirer or any individual designated by Acquirer as the Stockholder’s agent, irrevocable proxy and attorney-in-fact (with full power of substitution and resubstitution) to vote the Shares, provide written consents, express consent or otherwise utilize voting power as indicated in Section 1.2 of this Agreement; provided, however, that Stockholder’s grant of the proxy contemplated by this Section 1.3(a) shall be effective if, and only if, Stockholder has not delivered to the Secretary of Acquirer at least five Business Days prior to such meeting a duly executed proxy card previously approved by Acquirer voting Stockholder’s Shares in the manner specified in Section 1.2 or in the event such proxy card has been thereafter modified or revoked or otherwise fails to provide evidence of Stockholder’s compliance with its obligations under Section 1.2 in form and substance reasonably acceptable to Acquirer, (ii) hereby affirms that the irrevocable proxy set forth in this Section 1.3, if it becomes effective pursuant to clause (i), is given in connection with the execution of the Merger Agreement, and that such irrevocable proxy is given to secure the performance of the duties of Stockholder under this Agreement and (iii) hereby (a) affirms that the irrevocable proxy is coupled with an interest and (b) affirms that such irrevocable proxy, if it becomes effective pursuant to clause (i), is executed and intended to be irrevocable in accordance with the provisions of Section 212(e) of the General Corporation Law of the State of Delaware.
(b)”Stockholder hereby represents that all proxies, powers of attorney, instructions or other requests given by Stockholder prior to the execution of this Agreement in respect of the voting of Stockholder’s Shares, if any, are not irrevocable and Stockholder hereby revokes (or causes to be revoked) any and all previous proxies, powers of attorney, instructions or other requests with respect to Stockholder’s Shares. The vote, if any, of the proxy holder pursuant to the proxy set forth in this Section 1.3 shall control the outcome, and be determinative, of any conflict between the vote by the proxy holder of the Shares and a vote by a Stockholder of the Shares. Stockholder shall provide evidence to Acquirer in connection with the actions of the Stockholder under or relating to this Section 1.3 as Acquirer shall reasonably request.
Section 1.4 No Challenges. Stockholder agrees not to commence, join in, facilitate, assist or knowingly encourage, and agrees to take all actions reasonably necessary to opt out of any class in any class action with respect to, any claim, derivative or otherwise, against Acquirer or any of its respective successors or directors challenging the validity of, or seeking to enjoin the operation of, any provision of this Agreement.
Section 1.5 No Ownership Interest. Nothing contained in this Agreement shall be deemed to vest in the Acquirer Parties any direct or indirect ownership or incidence of ownership of or with respect to any Shares, except as expressly provided herein. All rights, ownership and economic benefits of and relating to the Shares shall remain vested in and belong to Stockholder, and neither Acquirer nor Merger Subs shall have any authority to direct Stockholder in the meaning given in Section 3.4.voting or disposition of any of the Shares, except as otherwise provided herein.
“Section 1.6 Trading Day” shall have the meaning given in subsection 2.1.6No Inconsistent Agreement. Stockholder hereby represents and covenants that such Stockholder has not entered into, shall not enter into and is not otherwise bound by, any agreement that would restrict, limit or interfere with the performance of such Stockholder’s obligations hereunder.
“Section 1.7 UnderwriterConsent to Disclosure” shall mean a. Stockholder hereby consents to the publication and disclosure required by applicable securities dealer who purchasesLaws or the SEC or any Registrable Securities as principal in an Underwritten Offering and not as partother securities authorities, any other documents or communications provided by Acquirer to any Governmental Authority of such dealer’s market-making activities.Stockholder’s identity and beneficial ownership of Shares and the nature of such Stockholder’s commitments, arrangements and understandings under and relating to this Agreement and, if deemed appropriate by Acquirer, a form of this Agreement. Stockholder will promptly provide any information reasonably requested by Acquirer that is necessary for any regulatory application or filing made or approval sought in connection with the Transactions (including filings with the SEC). The Acquirer shall provide Stockholder with a reasonable opportunity to review and comment on any disclosure made in accordance
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“
Underwritten Registration”
with Section 1.7 and shall consider in good faith any comments of Stockholder, and the Acquirer shall not make any substantive revision to information regarding Stockholder that is provided by Stockholder for inclusion in any filing with the SEC without Stockholder’s approval, which shall not be unreasonably withheld, delayed or “Underwritten Offering” shall mean a Registration in which securities of the Company are sold to an Underwriter in a firm commitment underwriting for distribution to the public.conditioned.
“Unrestricted Conditions” shall have the meaning given in subsection 3.5.2.
ARTICLE II
REGISTRATIONSREPRESENTATIONS AND WARRANTIES
Section 2.1 Shelf Registration.Representations and Warranties of the Stockholder.          Stockholder represents and warrants as of the date hereof to Acquirer as follows:
2.1.1    The Company shall,(a)Organization; Due Authorization. If such Stockholder is not a natural person, it is duly organized, validly existing and in good standing under the Laws of the jurisdiction in which it is incorporated, formed, organized or constituted, and the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby are within such Stockholder’s corporate, limited liability company or organizational powers and have been duly authorized by all necessary corporate, limited liability company or organizational actions on the part of such Stockholder. If such Stockholder is a natural person, such Stockholder has full legal capacity, right and authority to execute and deliver this Agreement and to perform his or her obligations hereunder. This Agreement has been duly executed and delivered by such Stockholder and, assuming due authorization, execution and delivery by the other parties to this Agreement, this Agreement constitutes a legally valid and binding obligation of such Stockholder, enforceable against such Stockholder in accordance with the terms hereof (except as soon as practicable, butenforceability may be limited by bankruptcy Laws, other similar Laws affecting creditors’ rights and general principles of equity affecting the availability of specific performance and other equitable remedies). If this Agreement is being executed in a representative or fiduciary capacity, the Person signing this Agreement has full power and authority to enter into this Agreement on behalf of the applicable Stockholder.
(b)Ownership. Such Stockholder is the record and/or beneficial owner (as defined in Rule 13d-3 of the Exchange Act) of, and has good title to, all of such Stockholder’s Shares, and there exist no encumbrances or any event within thirty (30) days afterother limitation or restriction (including any restriction on the Closing Date (the “Filing Deadline”), file a Registration Statementright to vote, sell or otherwise dispose of such Shares (other than transfer restrictions under the Securities Act (the “Initial Shelf”Act)) to permit the public resale of all the Registrable Securities held by the Holders from time to time as permitted by Rule 415 under the Securities Act (oraffecting any successor or similar provision adopted by the Commission then in effect) on the terms and conditions specified in this subsection 2.1.1 and shall use its commercially reasonable efforts to cause such Initial Shelf to be declared effective as soon as practicable after the filing thereof, but in no event laterShares, other than the earlier of (i) sixty (60) days following the Filing Deadline and (ii) five (5) Business Days after the Commission notifies the Company that it will not review the Initial Shelf, if applicable (the “Effectiveness Deadline”); provided that the Effectiveness Deadline shall be extended to ninety (90) days after the Filing Deadline if the Initial Shelf is reviewed by, and receives comments from, the Commission. Without limiting the foregoing, as soon as practicable, but in no event later than three (3) Business Days, following the resolution or clearance of all Commission comments or, if applicable, following notification by the Commission that the Initial Shelf or any amendment thereto will not be subject to review, the Company shall file a request for acceleration of effectiveness of such Initial Shelf (to the extent required, by declaration or ordering of effectiveness, of such Initial Shelf or amendment thereto by the Commission) to a time and date not later than two (2) Business Days after the submission of such request. The Initial Shelf filed with the Commissionencumbrances pursuant to (i) this subsection 2.1.1 shall be on Form S-1 or such other
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formAgreement, (ii) the certificate of registration statement as is then available to effect a registration for resaleincorporation of Acquirer, (iii) the Registrable Securities, provided, that the Company shall file, within thirty (30) days of such time as Form S-3 is available for the Initial Shelf, a post-effective amendment to the Initial Shelf then in effect, or otherwise file a Registration Statement on Form S-3, registering the Registrable Securities for resale on Form S-3 (provided that the Company shall use commercially reasonable efforts to maintain the effectiveness of the Initial Shelf then in effect until such time as a Registration Statement (or post-effective amendment) on Form S-3 covering such Registrable Securities has been declared effective by the Commission. The Initial Shelf shall cover all Registrable Securities, and shall contain a Prospectus in such form as permits any Holder to sell such Registrable Securities pursuant to Rule 415 under the Securities Act (or any successor or similar provision adopted by the Commission then in effect) at any time beginning on the effective date for such Initial Shelf and the Company shall file with the Commission the final form of such Prospectus pursuant to Rule 424 (or successor thereto) under the Securities Act no later than the second (2nd) Business Day after the Initial Shelf becomes effective. The Initial Shelf shall provide for the resaleMerger Agreement, (iv) pursuant to any methodexisting lock-up agreement, (v) any applicable securities Laws or combination(vi) that would not prevent, enjoin or delay in any manner Stockholder’s performance of methods legally availableits obligations under this Agreement. Such Stockholder’s Shares are the only equity securities in Acquirer owned of record or beneficially by such Stockholder on the date of this Agreement, and none of such Stockholder’s Shares are subject to any proxy, voting trust or other agreement or arrangement with respect to the voting of such Shares, except as provided hereunder and requestedunder the certificate of incorporation of Acquirer or as noted on Schedule I. Such Stockholder does not hold or own any rights to acquire (directly or indirectly) any equity securities of Acquirer or any equity securities convertible into, or which can be exchanged for, equity securities of Acquirer other than warrants issued by the HoldersAcquirer prior to the date of this Agreement or earn-out shares issuable pursuant to the Agreement and shall includePlan of Merger by and among Acquirer, S-IV Sub, Inc. and Mount Sinai Genomics, Inc. dated as of February 9, 2021, as amended.
(c)No Conflicts. The execution and delivery of this Agreement by such Stockholder does not, and the performance by such Stockholder of his, her or its obligations hereunder will not, (i) if such Stockholder is not an individual, conflict with or result in a customary “planviolation of distribution.” The Company shall use its commercially reasonable efforts to cause the Initial Shelf to remain effective, and to be supplemented and amendedorganizational documents of such Stockholder or (ii) require any consent or approval that has not been given or other action that has not been taken by any Person (including under any Contract binding upon such Stockholder or such Stockholder’s Shares) to the extent necessarysuch consent, approval or other action would prevent, enjoin or materially delay the performance by such Stockholder of its, his or her obligations under this Agreement.
(d)Litigation. There are no Proceedings pending against such Stockholder, or to ensurethe knowledge of such Stockholder threatened against such Stockholder, before (or, in the case of threatened Proceedings, that the Initial Shelf is availablewould be before) any arbitrator or if not available, that another Registration Statement is available at all times, for the public resale of all the Registrable Securities held by the Holders until all such Registrable Securities have ceased to be Registrable Securities. As soon as practicable following the effective date of the Initial Shelf, butany Governmental Authority, which in any event within three (3) Business Daysmanner challenges or seeks to prevent, enjoin or materially delay the performance by such Stockholder of such date, the Company shall notify the Holders of the effectiveness of such the Initial Shelf.
2.1.2    Form of Registration. If the Company files the Initial Shelf on Form S-3 (a “Form S-3 Shelf”) and thereafter the Company becomes ineligible to use Form S-3 for secondary sales, the Company shall use its, commercially reasonable efforts to file the Initial Shelf on Form S-1 as promptly as practicable to replace the shelf registration statement that is on Form S-3 and have the Initial Shelf declared effective as promptly as practicable and to cause such Initial Shelf to remain effective, and to be supplemented and amended to the extent necessary to ensure that such Initial Shelf is availablehis or if not available, that another Registration Statement is available, for the public resale of all the Registrable Securities held by the Holders until all such Registrable Securities have ceased to be Registrable Securities.
2.1.3    Underwritten Shelf Takedowns. At any time and from time to time following the effectiveness of the Initial Shelf, any Holder may request to sell all or a portion of their Registrable Securities in a Shelf Underwritten Offering; provided that such Holder(s) reasonably expects to sell Registrable Securities yielding aggregate gross proceeds in excess of $50,000,000 from such Shelf Underwritten Offering (such amount of Registrable Securities, the “Minimum Amount”). All requests for a Shelf Underwritten Offering shall be made by giving written notice to the Company (the “Shelf Take Down Notice”). Each Shelf Take Down Notice shall specify the approximate number of Registrable Securities proposed to be sold in the Shelf Underwritten Offering and the expected price range (net of underwriting discounts and commissions) of such Shelf Underwritten Offering. Except with respect to any Registrable Securities distributed by the Sponsor to its members following the expiration of the Founder Shares Lock-up Period or the Private Placement Lock-up Period, as applicable, within five (5) days after receipt of any Shelf Take Down Notice, the Company shall, subject to subsections 3.5.3 and 3.5.4 (collectively, the “MNPI Provisions”), give written notice of such requested Shelf Underwritten Offering to all other Holders of Registrable Securities (the “Company Shelf Takedown Notice”) and, subject to the provisions of subsection 2.2.4, shall include in such Shelf Underwritten Offering all Registrable Securities with respect to which the Company has received written requests for inclusion therein, within five (5) days after sending the Company Shelf Takedown Notice. The Company shall enter into an underwriting agreement in a form as is customary in Underwritten Offerings of securities by the Company with the managing Underwriter or Underwriters selected by the Holders holding a majority-in-interest of the Registrable Securities to be included in such Shelf Underwritten Offering after consultation with, and approval (which shall not be unreasonably withheld, conditioned or delayed) by, the Company and shall take all such other reasonable actions as are requested by the managing Underwriter or Underwriters in order to expedite or facilitate the disposition of such Registrable Securities. In connection with any Shelf Underwritten Offering contemplated byher obligations under this subsection 2.1.3, subject to Section 3.3 and Article IV, the underwriting agreement into which each Holder and the Company shall enter shall contain such representations, covenants, indemnities and other rights and obligations of the Company and the selling stockholders as areAgreement.
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customary in underwritten offerings of securities by the Company. The New Holders, on the one hand, and the Existing Holders, on the other hand, may each demand not more than two (2) Shelf Underwritten Offerings pursuant to this Section 2.1.3 in any 12-month period.
2.1.4    At least ten (10) Business Days prior to the first anticipated filing date of a Registration Statement pursuant to this Article II, the Company shall use reasonable efforts to notify each Holder in writing (which may be by email) of the information reasonably necessary about the Holder to include such Holder’s Registrable Securities in such Registration Statement. Notwithstanding anything else in this Agreement, the Company shall not be obligated to include such Holder’s Registrable Securities to the extent the Company has not received such information, and received any other reasonably requested agreements or certificates, on or prior to the third (3rd) Business Day prior to the first anticipated filing date of a Registration Statement pursuant to this Article II.
2.1.5    Notwithstanding the registration obligations set forth in this Section 2, in the event that, despite the Company’s efforts to include all of the Registrable Securities in any Registration Statement filed pursuant to subsection 2.1.1, the Commission informs the Company (the “Commission’s Notice”) that all of the Registrable Securities cannot, as a result of the application of Rule 415 or otherwise, be registered for resale as a secondary offering on a single Registration Statement, the Company agrees to promptly (i) inform each of the holders thereof and use its commercially reasonable efforts to file amendments to the Initial Shelf as required by the Commission and (ii) as soon as practicable but in no event later than the twentieth (20th) day following the first date on which such Registrable Securities may then be included in a Registration Statement, file an additional Registration Statement (a “New Registration Statement”), on Form S-3, or if Form S-3 is not then available to the Company for such Registration Statement, on such other form available to register for resale the Registrable Securities as a secondary offering; provided, however, that prior to filing such amendment or New Registration Statement, the Company shall be obligated to use its commercially reasonable efforts to advocate with the Commission for the registration of all of the Registrable Securities in accordance with any publicly-available written or oral guidance, comments, requirements or requests of the Commission staff (the “SEC Guidance”), including without limitation, the Manual of Publicly Available Telephone Interpretations D.29. The Holders shall have the right to participate or have their respective legal counsel participate in any meetings or discussions with the Commission regarding the Commission’s position and to comment or have their respective counsel comment on any written submission made to the Commission with respect thereto. No such written submission shall be made to the Commission to which any Holder’s counsel reasonably objects. Notwithstanding any other provision of this Agreement, if any SEC Guidance sets forth a limitation of the number of Registrable Securities permitted to be registered on a particular Registration Statement as a secondary offering, unless otherwise directed in writing by a holder as to its Registrable Securities directing the inclusion of less than such holder’s pro rata amount, the number of Registrable Securities to be registered on such Registration Statement will be reduced on a pro rata basis based on the total number of Registrable Securities held by the Holders. In the event the Company amends the Initial Shelf or files a New Registration Statement, as the case may be, under clauses (i) or (ii) above, the Company will use its commercially reasonable efforts to file with the Commission, as promptly as allowed by Commission or SEC Guidance provided to the Company or to registrants of securities in general, one or more Registration Statements on Form S-3 or such other form available to register for resale those Registrable Securities that were not registered for resale on the Initial Shelf, as amended, or the New Registration Statement.
2.1.6    No Holder shall be named as an “underwriter” in any Registration Statement filed pursuant to this Section 2 without the Holder’s prior written consent; provided that if the Commission requests that a Holder be identified as a statutory underwriter in the Registration Statement, then such Holder will have the option, in its sole and absolute discretion, to either (i) have the opportunity to withdraw from the Registration Statement upon its prompt written request to the Company, in which case the Company’s obligation to register such Holder’s Registrable Securities shall be deemed satisfied or (ii) be included as such in the Registration Statement. Each Registration Statement (and each amendment or supplement thereto) shall be provided to (and shall be subject to the approval, which shall not be unreasonably withheld or delayed, of) the Holders prior to its filing with, or other submission to, the Commission.
2.1.7    In the event that on any Trading Day (as defined below) (the “Registration Trigger Date”) the number of shares available under the Registration Statements filed pursuant to this Section 2 is insufficient to cover all of the Registrable Securities (without giving effect to any limitations on the exercise or conversion of any securities
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exercisable for,(e)Brokerage Fees. No broker, finder, investment banker or convertible into, Registrable Securities and, in the case of Registrable Securities issuable upon the exercise of warrants, assuming the exercise of such warrants for cash), the Company shall amend such Registration Statements, or file a new Registration Statement (on the short form available therefor, if applicable), or both, so as to cover the total number of Registrable Securities so issued or issuable (without giving effectother Person is entitled to any limitations on the exercise or conversion of any securities exercisable for, or convertible into, Registrable Securities and, in the case of Registrable Securities issuable upon the exercise of warrants, assuming the exercise of such warrants for cash) as of the Registration Trigger Date as soon as practicable, but in any event within fifteen (15) days after the Registration Trigger Date. The Company shall use its commercially reasonable efforts to cause such amendment and/or new Registration Statement to become effective as soon as practicable following the filing thereof, but in any event no later than sixty (60) days of the Registration Trigger Date (or ninety (90) days if the applicable Registration Statement or amendment is reviewed by, and comments are thereto provided from, the Commission) or as promptly as practicable in the event the Company is required to increase its authorized shares. “Trading Day” shall mean any day on which the Class A Common Stock is traded for any period on the principal securities exchange or market on which the Class A Common Stock is then being traded.
Section 2.2    Demand Registration.
2.2.1    Request for Registration. Subject to the provisions of subsection 2.2.5 and Sections 2.4 and 3.4 hereof, and provided that the Company does not have an effective Registration Statement pursuant to subsection 2.1.1, outstanding covering all of the Registrable Securities, following the expiration of the Founder Shares Lock-up Period, the Private Placement Lock-up Period or any other applicable lock-up period, as the case may be, a Demanding Holder may make a written demand for Registration of all or part of their Registrable Securities, which written demand shall describe the amount and type of securities to be included in such Registration and the intended method(s) of distribution thereof (such written demand a “Demand Registration”). Subject to the MNPI Provisions, the Company shall, within five (5) days of the Company’s receipt of the Demand Registration, notify, in writing all other Holders of Registrable Securities of such demand, and each Holder of Registrable Securities who thereafter wishes to include all or a portion of such Holder’s Registrable Securities in a Registration pursuant to a Demand Registration (each such Holder that includes all or a portion of such Holder’s Registrable Securities in such Registration, a “Requesting Holder”) shall so notify the Company, in writing, within five (5) days after the receipt by the Holder of the notice from the Company. Upon receipt by the Company of any such written notification from a Requesting Holder(s) to the Company, subject to subsection 2.2.4 below, such Requesting Holder(s) shall be entitled to have their Registrable Securities included in a Registration pursuant to a Demand Registration and the Company shall effect, as soon thereafter as practicable, but not more than sixty (60) days immediately after the Company’s receipt of the Demand Registration, the Registration of all Registrable Securities requested by the Demanding Holders and Requesting Holders pursuant to such Demand Registration. Under no circumstances shall the Company be obligated to effect more than an aggregate of three (3) Registrations pursuant to a Demand Registration by the Existing Holders and an aggregate of five (5) Registration pursuant to a Demand Registration by the New Holders under this subsection 2.1.1 with respect to any or all Registrable Securities. Notwithstanding the foregoing, (i) the Company shall not be required to give effect to a Demand Registration from a Demanding Holder if the Company has registered Registrable Securities pursuant to a Demand Registration (which has become effective) from such Demanding Holder in the preceding one hundred and twenty (120) days, and (ii) the Company’s obligations with respect to any Demand Registration shall be deemed satisfied so long as the Registration Statement filed pursuant to subsection 2.1.1 includes all of such Demanding Holder’s Registrable Securities and is effective.
2.2.2    Effective Registration. Notwithstanding the provisions of subsection 2.2.1 above or any other part of this Agreement, a Registration pursuant to a Demand Registration shall not count as a Registration unless and until (a) the Registration Statement filed with the Commission with respect to a Registration pursuant to a Demand Registration has been declared effective by the Commission and, (b) the Company has complied with all of its obligations under this Agreement with respect thereto; provided, further, that if, after such Registration Statement has been declared effective, an offering of Registrable Securities in a Registration pursuant to a Demand Registration is subsequently interfered with by any stop order or injunction of the Commission, federal or state court or any other governmental agency, the Registration Statement with respect to such Registration shall be deemed not to have been declared effective, unless and until, (i) such stop order or injunction is removed, rescinded or otherwise terminated, and (ii) a majority-in-interest of the Demanding Holders initiating such Demand Registration thereafter
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affirmatively elect to continue with such Registration and accordingly notify the Company in writing, but in no event later than five (5) days thereafter, of such election. The Company shall not be obligated or required to file another Registration Statement until the Registration Statement that has been previously filed with respect to a Registration pursuant to a Demand Registration by the same Demanding Holder becomes effective or is subsequently terminated.
2.2.3    Underwritten Offering. Subject to the provisions of subsection 2.2.4 and Sections 2.4 and 3.4 hereof, if a majority-in-interest of the Demanding Holders so advise the Company as part of their Demand Registration that the offering of the Registrable Securities pursuant to such Demand Registration shall be in the form of an Underwritten Offering, then the right of such Demanding Holder or Requesting Holder (if any) to include its Registrable Securities in such Registration shall be conditioned upon such Holder’s participation in such Underwritten Offering and the inclusion of such Holder’s Registrable Securities in such Underwritten Offering to the extent provided herein. All such Holders proposing to distribute their Registrable Securities through an Underwritten Offering under this subsection 2.2.3, subject to Section 3.3 and Article IV, shall enter into an underwriting agreement in customary form with the Company and the Underwriter(s) selected for such Underwritten Offering by a majority-in-interest of the Demanding Holders initiating the Demand Registration after consultation with, and approval by, the Company (which shall not be unreasonably withheld, conditioned or delayed).
2.2.4    Reduction of Underwritten Offering. If a Demand Registration is to be an Underwritten Offering and the managing Underwriter or Underwriters, in good faith, advises the Company, the Demanding Holders and the Requesting Holders (if any) in writing that, in its opinion, the dollar amount or number of Registrable Securities that the Demanding Holders and the Requesting Holders (if any) desire to sell, taken together with all other Class A Common Stockbrokerage fee, finders’ fee or other equity securities that the Company desires to sell for its own account and the Class A Common Stock, if any, as to which a Registration has been requested pursuant to separate written contractual piggy-back registration rights held by any other stockholders of the Company who desire to sell, exceeds the maximum dollar amount or maximum number of equity securities that can be sold in such Underwritten Offering without adversely affecting the proposed offering price, the timing, the distribution method, or the probability of success of such offering (such maximum dollar amount or maximum number of such securities, as applicable, the “Maximum Number of Securities”), then the Company shall include in such Underwritten Offering, as follows:
(a)    first, the Registrable Securities of the Demanding Holders and the Requesting Holders (if any) (pro rata based on the respective number of Registrable Securities held by each Demanding Holder and Requesting Holder (if any) and the aggregate number of Registrable Securities held by the Demanding Holders and Requesting Holders (such proportion is referred to herein as “Pro Rata”)) that can be sold without exceeding the Maximum Number of Securities;
(b)     second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (a), the Registrable Securities of Holders (Pro Rata, based on the respective number of Registrable Securities held by each Holder) exercising their rights to register their Registrable Securities pursuant to subsection 2.3.1 hereof, without exceeding the Maximum Number of Securities;
(c)    third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (a) and (b), the Class A Common Stock or other equity securities that the Company desires to sell for its own account, which can be sold without exceeding the Maximum Number of Securities; and
(d)    fourth, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (a), (b) and (c), the Class A Common Stock or other equity securities of other persons or entities that the Company is obligated to register in a Registration pursuant to separate written contractual arrangements with such persons and that can be sold without exceeding the Maximum Number of Securities.
2.2.5    Demand Registration Withdrawal. A Demanding Holder or a Requesting Holder shall have the right to withdraw all or a portion of its Registrable Securities included in a Demand Registration pursuant to subsection 2.2.1 or a Shelf Underwritten Offering pursuant to subsection 2.1.3 for any or no reason whatsoever upon written notification to the Company and the Underwriter or Underwriters (if any) of its intention to so withdraw (a) in the case of a Demand Registration not involving an Underwritten Offering, one (1) Business Day prior to the
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effectiveness of the applicable Registration Statement or (b) in the case of any Demand Registration involving an Underwritten Offering or any Shelf Underwritten Offering, prior to the pricing of such Underwritten Offering or Shelf Underwritten Offering; provided,however, that upon withdrawal by a majority-in-interest of the Demanding Holders initiating a Demand Registration (or in the case of a Shelf Underwritten Offering, withdrawal of an amount of Registrable Securities included by the Holders in such Shelf Underwritten Offering, in their capacity as Demanding Holders, being less than the Minimum Amount), the Company shall cease all efforts to secure effectiveness of the applicable Registration Statement or complete the Underwritten Offering, as applicable. For the avoidance of doubt, any Demand Registration withdrawn pursuant to this subsection 2.2.5 shall be counted toward the aggregate number of Demand Registrations the Company is obligated to effect pursuant to subsection 2.2.1 unless (A)(1) the Demanding Holders reimburse the Company for all of its out-of-pocket costs and expenses incurredcommission in connection with any such withdrawn Demand Registration incurred through the date of such withdrawal and (2) such revocation or withdrawal shall have been made prior to the commencement of any marketing efforts or “road shows”transactions contemplated by the Company or the underwriters in connection withMerger Agreement based upon arrangements made by such Demand Registration, or (B) such withdrawal or revocation occurs following the issuance by the Company of a Suspension Notice. Notwithstanding anything to the contrary in this Agreement, the Company shall be responsibleStockholder, for the Registration Expenses incurred by it in connection with a Registration pursuant to a Demand Registration or a Shelf Underwritten Offering prior to its withdrawal under this subsection 2.2.5.
Section 2.3    Piggyback Registration.
2.3.1    Piggyback Rights. If the Company proposes to file a Registration Statement under the Securities Act with respect to an offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into equity securities, for its own account or for the account of stockholders of the Company (or by the Company and by the stockholders of the Company including, without limitation, pursuant to Section 2.2 hereof), other than a Registration Statement (a) filed in connection with any employee stock option or other benefit plan, (b) for an exchange offer or offering of securities solely to the Company’s existing stockholders, (c) for an offering solely of debt that is convertible into equity securities of the Company, (d) for a dividend reinvestment plan, (e) for any issuances of securities in connection with a transaction involving a merger, consolidation, sale, exchange, issuance, transfer, reorganization or other extraordinary transaction between the Companywhich Acquirer or any of its Affiliates and any third party, or (f) filed pursuant to subsection 2.1.1, then, subject to the MNPI Provisions, the Company shall give written notice of such proposed filing to all of the Holders of Registrable Securities (excluding the Sponsor with respect to any Registrable Securities distributed by the Sponsor to its members following the expiration of the Founder Shares Lock-up Period or the Private Placement Lock-up Period, as applicable) as soon as practicable but not less than twenty (20) days before the anticipated filing date of such Registration Statement, which notice shall (i) describe the amount and type of securities to be included in such offering, the intended method(s) of distribution (including whether such registration will be pursuant to a shelf registration statement), and the proposed price and name of the proposed managing Underwriter or Underwriters, if any, in such offering, (ii) describe such Holders’ rights under this Section 2.3, and (iii) offer to all of the Holders of Registrable Securities the opportunity to register the sale of such number of Registrable Securities as such Holders may request in writing within five (5) days after receipt of such written notice (such Registration, a “Piggyback Registration”). The Company shall, in good faith, cause such Registrable Securities identified in a Holder’s response noticed described in the foregoing sentence to be included in such Piggyback Registration and shall use its commercially reasonable efforts to cause the managing Underwriter or Underwriters of a proposed Underwritten Offering, if any, to permit the Registrable Securities requested by the Holders pursuant to this subsection 2.3.1 to be included in a Piggyback Registration on the same terms and conditions as any similar securities of the Company or Company stockholder(s) for whose account the Registration Statement is to be filed included in such Registration and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof. All such Holders proposing to distribute their Registrable Securities through an Underwritten Offering under this subsection 2.3.1, subject to Section 3.3 and Article IV, shall enter into an underwriting agreement in customary form with the Underwriter(s) selected for such Underwritten Offering by the Company.become liable.
2.3.2    (f)Reduction of Piggyback Registration. IfAcknowledgment. Such Stockholder understands and acknowledges that Seller and Acquirer are entering into the managing Underwriter or UnderwritersMerger Agreement in an Underwritten Registration that is to be a Piggyback Registration, in good faith, advises the Companyreliance upon such Stockholder’s execution, delivery and the Holders of Registrable Securities participating in the Piggyback Registration in writing that, in its opinion, the dollar amount or
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number of the Class A Common Stock that the Company desires to sell, taken together with (a) the Class A Common Stock, if any, as to which Registration has been demanded pursuant to separate written contractual arrangements with persons or entities other than the Holders of Registrable Securities hereunder, (b) the Registrable Securities as to which registration has been requested pursuant to Section 2.3 hereof, and (c) the Class A Common Stock, if any, as to which Registration has been requested pursuant to separate written contractual piggy-back registration rights of other stockholders of the Company, exceeds the Maximum Number of Securities, then:
2.3.2.1    if the Registration is undertaken for the Company’s account, the Company shall include in any such Registration (a) first, the Class A Common Stock or other equity securities that the Company desires to sell, which can be sold without exceeding the Maximum Number of Securities; (b) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (a), the Registrable Securities of Holders exercising their rights to register their Registrable Securities pursuant to subsection 2.3.1 hereof, Pro Rata, which can be sold without exceeding the Maximum Number of Securities; and (c) third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (a) and (b), the Class A Common Stock, if any, as to which Registration has been requested pursuant to written contractual piggy-back registration rights of other stockholders of the Company, which can be sold without exceeding the Maximum Number of Securities; and
2.3.2.2    if the Registration is pursuant to a request by persons or entities other than the Holders of Registrable Securities, then the Company shall include in any such Registration (a) first, the Class A Common Stock or other equity securities, if any, of such requesting persons or entities, other than the Holders of Registrable Securities, which can be sold without exceeding the Maximum Number of Securities; (b) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (a), the Registrable Securities of Holders exercising their rights to register their Registrable Securities pursuant to subsection 2.3.1 hereof, Pro Rata, which can be sold without exceeding the Maximum Number of Securities; (c) third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (a) and (b), the Class A Common Stock or other equity securities that the Company desires to sell for its own account, which can be sold without exceeding the Maximum Number of Securities; and (d) fourth, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (a), (b) and (c), the Class A Common Stock or other equity securities for the account of other persons or entities that the Company is obligated to register pursuant to separate written contractual arrangements with such persons or entities, which can be sold without exceeding the Maximum Number of Securities.
2.3.3    Piggyback Registration Withdrawal. Any Holder of Registrable Securities shall have the right to withdraw all or any portion of its Registrable Securities in a Piggyback Registration for any or no reason whatsoever upon written notification to the Company and the Underwriter or Underwriters (if any) of his, her or its intention to withdraw such Registrable Securities from such Piggyback Registration (a) in the case of a Piggyback Registration not involving an Underwritten Offering or Shelf Underwritten Offering, one (1) Business Day prior to the effectiveness of the applicable Registration Statement or (b) in the case of any Piggyback Registration involving an Underwritten Offering or any Shelf Underwritten Offering, two (2) Business Days prior to the pricing of such Underwritten Offering or Shelf Underwritten Offering. The Company (whether on its own good-faith determination or as the result of a request for withdrawal by persons pursuant to separate written contractual obligations) may withdraw a Registration Statement filed with the Commission in connection with a Piggyback Registration at any time prior to the effectiveness of such Registration Statement.
2.3.4    Unlimited Piggyback Registration Rights. For purposes of clarity, any Registration effected pursuant to Section 2.3 hereof shall not be counted as a Registration pursuant to a Demand Registration effected under Section 2.2 hereof or a Shelf Underwritten Offering effected under subsection 2.1.3.
Section 2.4    Reserved.
Section 2.5    Block Trades.
2.5.1    Notwithstanding any other provisionperformance of this Agreement, but subject to Sections 2.4 and 3.4, if a Demanding Holder desires to effect a Block Trade with a total offering price reasonably expected to exceed, in the aggregate, either (x) the Minimum Amount or (y) all remaining Registrable Securities held by the DemandingAgreement.
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Holder, then notwithstanding the time periods provided for in subsection 2.1.4, such Demanding Holder shall notify the Company of the Block Trade at least five (5) Business Days prior to the day such offering is to commence and the Company shall as expeditiously as possible use its commercially reasonable efforts to facilitate such Block Trade; provided that the Demanding Holders wishing to engage in the Block Trade shall use commercially reasonable efforts to work with the Company and any Underwriters or placement agents or sales agents prior to making such request in order to facilitate preparation of the registration statement, prospectus and other offering documentation related to the Block Trade.
2.5.2    Prior to the filing of the applicable “red herring” prospectus or prospectus supplement used in connection with a Block Trade, any Demanding Holders shall have the right to submit a Withdrawal Notice to the Company and the Underwriter or Underwriters or placement agents or sales agents (if any) of their intention to withdraw from such Block Trade.
Section 2.6    Market Stand-Off. In connection with any Underwritten Offering of equity securities of the Company (other than a Block Trade), each Holder participating in the Underwritten Offering pursuant to the terms of this Agreement agrees that it shall not Transfer any shares of Class A Common Stock or other equity securities of the Company (other than those included in such offering pursuant to this Agreement), without the prior written consent of the Company, during the 90-day period beginning on the date of pricing of such offering or such shorter period during which the Company agrees not to conduct an underwritten primary offering of Class A Common Stock, except in the event the Underwriters managing the offering otherwise agree by written consent. Each Holder participating in the Underwritten Offering agrees to execute a customary lock-up agreement in favor of the Underwriters to such effect (in each case on substantially the same terms and conditions as all such Holders).
ARTICLE III
COMPANY PROCEDURESMISCELLANEOUS
Section 3.1    9.1General ProceduresAssignment; Binding Effect. This Agreement and the rights and obligations of the Parties hereunder shall not be assignable or transferable by any Party (including in connection with a merger, consolidation, sale of substantially all of the assets of such Party or otherwise by operation of Law) without the prior written consent of (a) Acquirer, in the case of any such attempted assignment or transfer by Seller or any Company Party or (b) Seller, in the case of any such attempted assignment or transfer by any Acquirer Party. Any attempted assignment in violation of this Section 9.1 shall be null and void. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns.
9.2Notices. All notices, demands, waivers and other communications pursuant to this Agreement will be in writing and will be deemed given if delivered personally or delivered by electronic mail or globally recognized express delivery service to the Parties at the addresses set forth below or to such other address as the Party to whom notice is to be given to the other Parties in writing in accordance herewith. Any such notice, demand, waiver or other communication will be deemed to have been delivered and received (a) in the case of personal delivery, on the date of such delivery, (b) in the case of electronic mail, on the date of sending if no automated notice of delivery failure is received by the sender, and (c) in the case of a globally recognized express delivery service, on the date on which receipt by the addressee is confirmed pursuant to the service’s systems.
If to an Acquirer Party, or after the Closing, to any member of the Company Group:
Sema4 Holdings Corp.
333 Ludlow Street, North Tower, 8th Floor
Stamford, Connecticut 06902
Attention: General Counsel
Email: legal@sema4.com
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with a copy (which shall not constitute notice) to:
Fenwick & West LLP
902 Broadway
New York, NY 10010
Email: eskerry@fenwick.com; vlupu@fenwick.com
Attention: Ethan A. Skerry; Victoria A. Lupu
If to Seller or, prior to Closing, the Company Parties, to: OPKO Health, Inc.
4400 Biscayne Blvd.
Miami, FL 33137
Attention: Steven D. Rubin
Email: srubin@opko.com
with a copy (which shall not constitute notice) to:
Greenberg Traurig, P.A.
333 S.E. 2nd St.
Suite 4400
Miami, FL 33131
Email: grossmanb@gtlaw.com; altmand@gtlaw.com
Attention: Robert L. Grossman; Drew M. Altman
9.3Governing Law. This Agreement, any non-contractual rights or obligations arising out of or in connection with it, and all Disputes will be governed by, and enforced and construed in accordance with, the Laws of the State of Delaware, without regard to the conflict of laws rules of such state that would result in the application of the Laws of another jurisdiction.
9.4Jurisdiction; Venue. Each of the Parties irrevocably consents to the exclusive jurisdiction and venue in the Delaware Court of Chancery within the State of Delaware (or, if the Delaware Court of Chancery declines to accept jurisdiction over a particular matter, any court of the United States located in the State of Delaware, or, if any such court of the United States located in the State of Delaware declines to accept jurisdiction over a particular matter, any state court located in the State of Delaware) in connection with any Dispute and agrees that process shall be served upon such Party in the manner set forth in Section9.2, and that service in such manner shall constitute valid and sufficient service of process. Each Party waives and covenants not to assert or plead any objection that such Party might otherwise have to such jurisdiction, venue and process. Each Party hereby agrees not to commence any legal proceedings relating to or arising out of this Agreement or the Transactions in any jurisdiction or courts other than as provided herein.
9.5WAIVER OF JURY TRIAL. EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY OR DISPUTES RELATING HERETO. EACH PARTY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF A DISPUTE, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.5.
9.6Amendments and Waivers. This Agreement may be amended, modified, superseded or canceled and any of the terms, covenants, representations, warranties or conditions hereof may be waived only by an instrument in writing signed by Acquirer and Seller, or, in the case of a waiver, by or on behalf of the Party waiving compliance (which, in the case of a waiver of any obligation of Acquirer following the Closing, shall be Seller). No course of dealing between the Parties shall be effective to amend or waive any provision of this Agreement. The waiver by
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any Party of any right hereunder or of the failure to perform or of a breach by any other Party shall not be deemed a waiver of any other right hereunder or of any other breach or failure by such other Party whether of a similar nature or otherwise.
9.7Counterparts. This Agreement may be executed in any number of counterparts (including electronically), and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. Delivery of an executed counterpart of a signature page of this Agreement by electronic mail or other electronic transmission shall be effective as delivery of a manually executed original counterpart of this Agreement.
9.8Severability. Any term or provision of this Agreement that is held by a court of competent jurisdiction or arbitrator to be invalid, void or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the invalid, void or unenforceable term or provision in any other situation or in any other jurisdiction. If the Companyfinal judgment of such court or arbitrator declares that any term or provision hereof is invalid, void or unenforceable, the Parties agree to (a) reduce the scope, duration, area or applicability of the term or provision, to delete specific words or phrases, and (b) replace any invalid, void or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the original intention of the invalid or unenforceable term or provision.
9.9Schedules; Exhibits. The Schedules and the Exhibits referenced in this Agreement are a material part hereof and shall be treated as if fully incorporated into the body of the Agreement.
9.10No Third Party Beneficiaries. Nothing expressed or referred to in this Agreement will be construed to give any Person other than the Parties (and their successors and permitted assigns), the D&O Indemnified Persons pursuant to Section 5.12(b) and Indemnified Parties that are not Parties pursuant to Article 8 any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement.
9.11Expenses. Except as otherwise provided herein, all fees and expenses incurred in connection with this Agreement and the Transactions, including fees and expenses of financial advisors, financial sponsors, legal counsel and other advisors, shall be paid by the Party incurring such expenses whether or not the Transactions are consummated.
9.12No Strict Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement.
9.13Injunctive Relief; Specific Performance. The Parties hereby acknowledge that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached and that the non-breaching Parties would not have any adequate remedy at law. Accordingly, each Party shall be entitled to an injunction or injunctions to prevent breaches or threatened breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. Any requirements for the securing or posting of any bond with such remedy are waived.
9.14Further Assurances. Upon the reasonable request of Acquirer or Seller, each Party will, on and after the Closing Date, execute and deliver, or cause to be executed and delivered, to the other Party such other documents, assignments and other instruments or will take, or cause to be taken, all such further actions as may be reasonably required to effect and evidence the provisions of this Agreement and the Transactions.
9.15Entire Agreement. This Agreement, together with the Ancillary Agreements, the Confidentiality Agreement and the other documents and instruments specifically referred to herein, all Exhibits and Schedules hereto (which are a material part hereof and shall be treated as if fully incorporated into the body of this Agreement), and the Company Disclosure Schedules and the Acquirer Disclosure Schedules, constitutes the entire agreement among the Parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties.
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9.16Investigation and Non-Reliance. Each of Seller and the Company Parties, on one hand, and the Acquirer Parties, on the other, is a sophisticated seller or purchaser, as the case may be, and has made its own independent investigation, review and analysis regarding the other Party and the Transactions, which investigation, review and analysis were conducted by such Party together with its advisors, including legal counsel, that it has engaged for such purpose. No Party or any of their respective Affiliates or Representatives has made any representation or warranty, express or implied, as to the accuracy or completeness of any information concerning such Party made available in connection with any investigation of such Party, except as expressly set forth in this Agreement. No Party has relied and no Party is relying on any statement, representation or warranty, oral or written, express or implied, made by the other Party, or any their respective Affiliates or Representatives, except as expressly set forth in Article 3, Article 4 or any Transaction Certificates (or, with respect to Seller and the other Lock-Up Holders, the Shareholder Agreement). No Party or any of their respective Affiliates or Representatives shall have or be subject to any liability to any other Party or any other Person resulting from the distribution to any other Party, or such other Party’s use of, any information, documents or materials made available to such Party in the Data Room. No Party or any of their respective Affiliates or Representatives is making, directly or indirectly, any representation or warranty with respect to any estimates, projections or forecasts involving the such Party or any other Person. Each Party acknowledges that there are inherent uncertainties in attempting to make such estimates, projections and forecasts and that it takes full responsibility for making its own evaluation of the adequacy and accuracy of any such estimates, projections or forecasts (including the reasonableness of the assumptions underlying any such estimates, projections and forecasts).
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the Parties have executed this Agreement or caused this Agreement to be duly executed by their respective officers thereunto duly authorized, all as of the date first above written.
GENEDX, INC.
By:/s/ Katherine Stueland
Name:Katherine Stueland
Title:President and Chief Executive Officer
GENEDX HOLDING 2, INC.
By:/s/ Steven D. Rubin
Name:Steven D. Rubin
Title:President
OPKO HEALTH, INC.
By: /s/ Steven D. Rubin
Name:Steven D. Rubin
Title:Executive Vice President, Administration
[Signature Page to Agreement and Plan of Merger and Reorganization]

IN WITNESS WHEREOF, the Parties have executed this Agreement or caused this Agreement to be duly executed by their respective officers thereunto duly authorized, all as of the date first above written.
SEMA4 HOLDINGS CORP.
By:/s/ Eric Schadt
Name:Eric Schadt
Title:Chief Executive Officer
ORION MERGER SUB I, INC.
By:/s/ Eric Schadt
Name:Eric Schadt
Title:President
ORION MERGER SUB II, INC.
By:/s/ Eric Schadt
Name:Eric Schadt
Title:President
[Signature Page to Agreement and Plan of Merger and Reorganization]

EXHIBIT A
Form of Shareholder Agreement
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SHAREHOLDER AGREEMENT
[], 2022
Sema4 Holdings Corp.
333 Ludlow Street,
North Tower, 8th floor
Stamford, CT 06902
Ladies and Gentlemen:
This letter agreement (this “Agreement”) relates to that certain Agreement and Plan of Merger, dated as of January 14, 2022 (as amended, restated, supplemented or modified from time to time, the “Merger Agreement”), by and among Sema4 Holdings Corp., a Delaware corporation (“Acquirer”), Orion Merger Sub I, Inc., a Delaware corporation, Orion Merger Sub II, LLC (“Merger Sub I”), a Delaware limited liability company (“Merger Sub II”), GeneDx, Inc, a New Jersey corporation, GeneDx Holding 2, Inc., a Delaware Corporation (“Holdco2”), and OPKO Health, Inc., a Delaware Corporation (the “Seller”), pursuant to which Merger Sub I will merge with and into Holdco2 (the “First Merger”), with Holdco2 surviving such merger, following which Holdco2 will merge with and into Merger Sub II (the “Second Merger” and, together with the First Merger, the “Mergers”), with Merger Sub II continuing on as the surviving entity (the “Surviving Entity”) and a wholly owned subsidiary of Acquirer, on the terms and conditions set forth therein. Capitalized terms used and not otherwise defined herein are defined in the Merger Agreement and shall have the respective meanings given to such terms in the Merger Agreement.
1.In order to induce the Acquirer Parties to consummate the transactions contemplated by the Merger Agreement 1[and as a condition to any transaction in which the Seller would distribute or otherwise transfer shares of Acquirer Stock to the undersigned], the undersigned hereby agrees that[, with respect to the portion of the Merger Consideration distributed or otherwise transferred to the undersigned], from the Closing Date until: (a) in the case of the stock portion of the Merger Consideration issued at the Closing, the date that is one (1) year from the Closing Date, (b) if and to the extent earned, in the case of the stock portion of the first Milestone Payment, the date that is one (1) year from the date of issuance for such payment and (c) if and to the extent earned, in the case of the stock portion of the second Milestone Payment, the date that is six (6) months from the date of issuance of such stock (the period between the Closing Date and the date indicated in clause (a) or (b), as applicable, a “Lock-Up Period” and the shares to which such respective Lock-Up Period applies, the “Lock-Up Shares”), the undersigned will not (i) offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any Lock-Up Shares, (ii) enter into a transaction which would have the same effect, or (iii) enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of such Lock-Up Shares, whether any such aforementioned transaction is to be settled by delivery of such Lock-Up Shares, in cash or otherwise, or publicly disclose the intention to make any such offer, sale, pledge or disposition, or to enter into any such transaction, swap, hedge or other arrangement (collectively, clauses (i) through (iii), the “Restricted Actions”).
2.Following the termination of any applicable Lock-Up Period (such date, the “Lock-Up Termination Date”) and for so long as the undersigned is the record or beneficial owner of at least 5% of the issued and outstanding Acquirer Stock, the undersigned hereby agrees that during any consecutive ninety (90) day period following the applicable Lock-Up Termination Date, the undersigned shall not, without the prior written consent of Acquirer (such consent not to be unreasonably, withheld, conditioned or delayed), take any Restricted Action that would result in the sale or other disposition of Lock-Up Shares in an amount that exceeds 25% of the total number of shares of Acquirer Stock 2[received by the undersigned in the Mergers][distributed or otherwise transferred to the undersigned by Seller], except as part of a marketed sale process for which one lead Bookrunner (as defined herein) has been selected by Acquirer in its sole discretion (such discretion to be exercised reasonably). For purposes of this Section 2, a “Bookrunner” shall mean a securities dealer who either (a) purchases the applicable securities as principal in an underwritten, registered
1 Bracketed language to be included for OPKO stockholders.
2 Bracketed language for each of OPKO and its stockholders.
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direct or other public offering registered under the Securities Act and not solely as part of such dealer’s market-making activities or (b) acts as placement agent in a private placement or offering of the applicable securities.
3.For the avoidance of doubt, none of the restrictions set forth in Section 1 or Section 2 of this Agreement shall apply to: (a) any shares of Acquirer Stock purchased by the undersigned in the open market or in any private sale transaction or otherwise or in any public or private capital raising transaction of Acquirer or otherwise, other than the Lock-up Shares; or (b) the inclusion of any Lock-Up Shares (but not the subsequent sale or transfer of such Lock-Up Shares) as part of the Initial Shelf (as defined below) or any other Registration Statement (as defined below) filed pursuant to Section 8(a)of this Agreement. For the avoidance of any doubt, the parties hereto acknowledge and agree that the undersigned shall retain all of its rights as a stockholder of Acquirer during the applicable Lock-up Period, including, without limitation, the right to vote, and to receive any dividends and distributions in respect of, the Lock-Up Shares, subject to the terms of this Agreement.
4.The undersigned hereby authorizes Acquirer during the applicable Lock-Up Period to cause its transfer agent for the Lock-Up Shares to decline to transfer, and to note stop transfer restrictions on the stock register and other records relating to the Lock-Up Shares for which the undersigned is the record holder.
5.Notwithstanding the foregoing, the undersigned may sell or otherwise transfer the Lock-Up Shares during the undersigned’s lifetime or on death (or, if the undersigned is not a natural person, during its existence) (a) if the undersigned is not a natural person, to its managers, partners (direct or indirect), members or other direct or indirect equity holders until the Lock-Up Shares come to be held by a natural person or to any of its other Affiliates or any subsidiary, employee, officer, director, investment fund controlling, controlled, managing or managed by or under common control with the undersigned or Affiliates of the undersigned (including, for the avoidance of doubt, where the undersigned is a partnership, to its general partner or a successor partnership or fund, or any other funds managed by such partnership), to the immediate family members (for purposes of this Agreement, “immediate family” shall mean any relationship by blood, current or former marriage, domestic partnership or adoption, not more remote than first cousin) of the undersigned, (c) to a partnership, limited liability company or other entity of which the undersigned and the immediate family members of the undersigned are the legal and beneficial owner of all of the outstanding equity securities or similar interests, (d) to a family trust, foundation or partnership established for the direct or indirect benefit of the undersigned, its equity holders or any of their respective immediate family members, or if the undersigned is a trust, to a trustor or beneficiary of the trust or to the estate of a beneficiary of such trust, (e) to a charitable foundation controlled by the undersigned, its Affiliates, partners, members or other direct or indirect equityholders or any of their respective immediate family members, (f) by will or intestacy, (g) by operation of law or pursuant to an order of a court (including a qualified domestic order, divorce settlement, divorce decree or separation agreement) or regulatory agency or (h) pursuant to a bona fide third-party tender offer, merger, consolidation or other similar transaction that is approved by the Acquirer Board and made to all holders of Acquirer’s capital stock involving an Acquirer Change in Control; provided that in the event that such tender offer, merger, consolidation or other similar transaction is not completed, the undersigned’s Lock-Up Shares shall remain subject to the provisions of this Agreement; provided, however, that in the case of each of clauses (a) through (g), any such sale or transfer shall be conditioned upon entry by such transferees into a written agreement, addressed to Acquirer, agreeing to be bound by these transfer restrictions and the other terms and conditions of this Agreement; and provided, further, for the avoidance of doubt, that nothing contained herein shall limit or restrict the admission of new managers, partners, members or other direct or indirect equityholders in, or the increase or decrease in the ownership interests of any managers, partners, members or other direct or indirect equity holders of, any entity holding any of the Lock-Up Shares.
6.For so long as the undersigned remains the record or beneficial owner of at least five percent (5%) of the outstanding Acquirer Stock, the undersigned agrees to vote all of his, her or its Lock-Up Shares, from time to time and at all times, in whatever manner is recommended by the Acquirer Board.
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7.The undersigned agrees that, for a period of twelve (12) months from the Closing Date (the “Standstill Period”), neither the undersigned nor any of its Affiliates or subsidiaries will, directly or indirectly, without the prior written consent of the Acquirer Board or Acquirer’s chief executive officer:
(a)acquire or agree, offer, seek or propose to acquire, or cause to be acquired, ownership (including any voting right or beneficial ownership as defined in Rule 13d-3 under the Exchange Act) of any voting securities of Acquirer or any of its subsidiaries or any option, forward contract, swap or other position with a value derived from voting securities of Acquirer or any of its subsidiaries or conveying the right to acquire or vote securities of Acquirer or any of its subsidiaries, or any ownership of any of the assets or businesses of Acquirer or any of its subsidiaries, or any rights or options to acquire any such ownership (including from a third party);
(b)make, or in any way participate in, any “solicitation” (as such terms is defined in Rule 14a- 1 under the Exchange Act, including any otherwise exempt solicitation pursuant to Rule 14a-2(b) under the Exchange Act) to vote or seek to advise or influence in any manner whatsoever any Person with respect to the voting of any securities of Acquirer or any of its subsidiaries;
(c)form, join, or in any way participate in a “group” (within the meaning of Section 13(d)(3) of the Exchange Act) with respect to any voting securities of Acquirer or any of its subsidiaries, other than any “group” to which it already belongs as of the date of this Agreement;
(d)arrange, or in any way participate in, any financing for the purchase of any voting securities or securities convertible or exchangeable into or exercisable for any voting securities or assets of Acquirer or any of its subsidiaries;
(e)propose, alone or with others, to Acquirer or any of its stockholders any merger, business combination, tender or exchange offer, restructuring, recapitalization, liquidation of or other transaction with or involving Acquirer or any of its subsidiaries or otherwise act, whether alone or with others, to seek to control, change or influence the management, board of directors or policies of Acquirer, or nominate any person as a director of Acquirer, or propose any matter to be voted upon by the stockholders of Acquirer;
(f)solicit or provide any material non-public information to any Person with respect to a merger, business combination, tender or exchange offer, restructuring, recapitalization, liquidation of or other transaction with or involving Acquirer or any of its subsidiaries or any other acquisition of Acquirer or any of its subsidiaries, any acquisition of voting securities of or all or any portion of the assets of Acquirer or any of its subsidiaries, or any other similar transaction;
(g)advise, assist or knowingly encourage any other Person in connection with any of the foregoing;
(h)enter into any discussions, negotiations, arrangements or understandings with any third party with respect to, any of the foregoing, or announce an intention to do so;
(i)take any action that would reasonably be expected to require Acquirer to make a public announcement regarding any of the types of matters set forth in this Section 7; or
(j)disclose any intention, plan or arrangement inconsistent with the foregoing. Notwithstanding anything to the contrary in this Section 7, nothing shall prevent a private communication to the Acquirer Board or Acquirer’s chief executive officer which does not require public disclosure by Acquirer (whether under applicable law or under the rules of its securities exchange, but other than in a proxy statement or Schedule 14d-9 with respect to a Transaction following execution of a definitive agreement between the Parties).
8.Registration Rights.
(a)Acquirer agrees that, as soon as practicable, but in no event later than thirty (30) calendar days after the Closing Date (the “Filing Date”), Acquirer will file with the SEC (at Acquirer’s sole cost and expense) a registration statement registering the resale of the Registrable Securities (as defined below) held by the CompanyHolders (as defined below) from time to time as permitted by Rule 415 under the Securities Act (or any successor or similar provision adopted by the SEC then in effect) (the “Initial Shelf” and any registration statement that covers the
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Registrable Securities pursuant to the provisions of this Agreement, including the prospectus included in such registration statement, amendments (including post-effective amendments) and supplements to such registration statement, and all exhibits to and all material incorporated by reference in such registration statement, a “Registration Statement”), and Acquirer shall use its commercially reasonable efforts to effectcause the Initial Shelf to be declared effective as soon as practicable after the filing thereof, but no later than the earlier of (i) the 60th calendar day (or 90th calendar day if the SEC notifies Acquirer that it will “review” the Initial Shelf) following the Closing and (ii) the fifth (5th) Business Day after the date Acquirer is notified (orally or in writing, whichever is earlier) by the SEC that the Initial Shelf will not be “reviewed” or will not be subject to further review (such earlier date, the “Effectiveness Date”); provided that if the SEC is closed for operations due to a government shutdown or otherwise, the Effectiveness Date shall be extended by the same amount of days that the SEC remains closed for operations. Without limiting the foregoing, as soon as practicable, but in no event later than three (3) Business Days, following the resolution or clearance of all SEC comments or, if applicable, following notification by the SEC that the Initial Shelf or any amendment thereto will not be subject to review, Acquirer shall file a request for acceleration of effectiveness of such Registration Statement (to the extent required, by declaration or ordering of effectiveness, of such Registration Statement or amendment thereto by the SEC) to a time and date not later than two (2) Business Days after the submission of such request. The Initial Shelf filed with the SEC pursuant shall be on Form S-1 or such other form of registration statement as is then available to effect a registration for resale of the Registrable Securities, provided, that Acquirer shall file, within thirty (30) days of such time as Form S-3 is available for the Initial Shelf, a post- effective amendment to the Initial Shelf then in effect, or otherwise file a Registration Statement on Form S-3, registering the Registrable Securities held by the Holders for resale on Form S-3 (provided that Acquirer shall use commercially reasonable efforts to maintain the effectiveness of the Initial Shelf then in effect until such time as a Registration Statement (or post-effective amendment) on Form S-3 covering such Registrable Securities has been declared effective by the SEC). Notwithstanding anything else in this Agreement, Acquirer’s obligations to include the applicable Registrable Securities of a Holder in a Registration Statement are contingent upon such Holder furnishing in writing to Acquirer such information regarding such Holder, the securities of Acquirer held by such Holder, the intended method of disposition of the applicable Registrable Securities and such other information as shall be reasonably requested by Acquirer to effect the registration of the applicable Registrable Securities on or prior to the third (3rd) Business Day prior to the first anticipated filing date of such Registration Statement, provided that the request by Acquirer shall be made not less than ten (10) Business Days prior to the first anticipated filing date of such Registration Statement. The Holders shall execute such documents in connection with such registration as Acquirer may reasonably request that are customary of a selling stockholder in similar situations; provided that under no circumstances shall a Holder be required to sign any type of additional lock-up agreement. Any failure by Acquirer to file the Initial Shelf by the Filing Date or for the Initial Shelf to be declared effective by the Effectiveness Date shall not otherwise relieve Acquirer of its obligations to file or effect the Initial Shelf as set forth above in this Section 8(a). In no event shall a Holder be identified as a statutory underwriter in a Registration Statement unless requested by the SEC; provided that, if the SEC requests that a Holder be identified as a statutory underwriter in a Registration Statement, such Holder will have an option, in its sole and absolute discretion, to withdraw the applicable Registrable Securities from such Registration Statement. Notwithstanding the foregoing, if the SEC prevents Acquirer from including any or all of the shares proposed to be registered under any single Registration Statement filed pursuant to this Section 8(a) due to limitations on the use of Rule 415 of the Securities Act for the resale of the applicable Registrable Securities by the applicable stockholders or otherwise, Acquirer agrees to promptly (i) inform each of the Holders thereof and use its commercially reasonable efforts to file amendments to such Registration Statement as required by the SEC and (ii) as soon as practicable but in no event later than the twentieth (20th) calendar day following the first date on which such Registrable Securities may then be included in a registration statement, file an additional Registration Statement (a “New Registration Statement”), on Form S-3, or if Form S-3 is not then available to Acquirer for such Registration Statement, on such other form available to register for resale the Registrable Securities held by the Holders as a secondary offering; provided, however, that prior to filing such amendment or New Registration Statement, Acquirer shall be obligated to use its commercially reasonable efforts to advocate with the SEC for the registration of all of the Registrable Securities in accordance with any publicly- available written or oral guidance, comments, requirements or requests of the SEC staff (the “SEC Guidance”), including without limitation, the Manual of Publicly Available Telephone Interpretations D.29. The Holders shall have the right to participate or have their respective legal counsel participate in any meetings or discussions with the SEC regarding the SEC’s position and to comment or have their respective counsel comment on any written submission made to the SEC with respect thereto. No such written submission shall
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be made to the SEC to which any such Holder’s counsel reasonably objects. Notwithstanding any other provision of this Agreement, if any SEC Guidance sets forth a limitation of the number of Registrable Securities permitted to be registered on a particular Registration Statement as a secondary offering, unless otherwise directed in writing by a Holder as to its Registrable Securities directing the inclusion of less than such Holder’s pro rata amount, the number of Registrable Securities to be registered on such Registration Statement will be reduced on a pro rata basis based on the total number of Registrable Securities held by the Holders. Acquirer will use its commercially reasonable efforts to cause the Initial Shelf to remain effective, and to be supplemented and amended to the extent necessary to ensure that the Initial Shelf is available or, if not available, that another Registration Statement is available at all times, for the public resale of all the Registrable Securities held by the Holders until all such Registrable Securities have ceased to be Registrable Securities. Acquirer will provide all customary and commercially reasonable cooperation necessary to enable the Holders to resell Registrable Securities pursuant to a Registration Statement or Rule 144 under the Securities Act (“Rule 144”), as applicable, qualify the Registrable Securities for listing on the primary stock exchange on which the Acquirer Stock is then listed, update or amend a Registration Statement as necessary to include Registrable Securities and provide customary notice to holders of Registrable Securities. “Holders” shall mean (i) the undersigned, (ii) [Seller][any 5% Insider (as defined below)] 3that is entering into a separate shareholder agreement with Acquirer on the date hereof with registration rights that are substantially similar to the registration rights set forth in this Section 8 (an “Other Shareholder Agreement”) and (iii) any 5% Insider who hereafter becomes a party to this Agreement or such Other Shareholder Agreement pursuant to Section 8(r) hereof or the corresponding section of such Other Shareholder Agreement, as applicable. “Registrable Securities” shall mean, as of any date of determination, (a) the Lock-Up Shares held by the undersigned, (b) the Lock- Up Shares held by any other Holder, and (c) any other equity security of Acquirer issued or issuable with respect to the Lock-Up Shares referred to in clause (a) or (b) by way of share split, dividend, distribution, recapitalization, merger, exchange, replacement or similar event or otherwise. As to any particular Registrable Securities, once issued, such securities shall cease to be Registrable Securities at the earliest of: (A) when a Registration Statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been sold, transferred, disposed of or exchanged in accordance with such Registration Statement; (B) the date all Registrable Securities held by such Holder may be sold without restriction under Rule 144, including without limitation, any volume and manner of sale restrictions which may be applicable to Affiliates under Rule 144, and without the requirement for Acquirer to be in compliance with the current public information required under Rule 144; (C) such securities have been otherwise transferred, new certificates for such securities not bearing a legend restricting further transfer shall have been delivered by Acquirer and subsequent public distribution of such securities shall not require registration under the Securities Act; or (D) such securities have been sold to, or through, a broker, dealer or underwriter in a public distribution or other public securities transaction.
(b)At any time and from time to time following the effectiveness of the Initial Shelf and following the expiration of any applicable Lock-up Period, any Holder may request to sell all or a portion of its Registrable Securities in a underwritten offering that is registered pursuant to a shelf registration statement under the Securities Act on Form S-3 pursuant to Rule 415, including by way of an underwritten offering, block sale or other distribution plan (a “Shelf Underwritten Offering”); provided that such Holder(s) reasonably expects to sell Registrable Securities yielding aggregate gross proceeds in excess of $50,000,000 from such Shelf Underwritten Offering (such amount of Registrable Securities, the “Minimum Amount”). All requests for a Shelf Underwritten Offering shall be made by giving written notice to Acquirer (the “Shelf Take Down Notice”). Each Shelf Take Down Notice shall specify the approximate number of Registrable Securities proposed to be sold in the Shelf Underwritten Offering and the expected price range (net of underwriting discounts and commissions) of such Shelf Underwritten Offering. Acquirer shall, subject to Section 8(c) (the “MNPI Provisions”), give written notice of such requested Shelf Underwritten Offering to all other Holders of Registrable Securities (the “Company Shelf Takedown Notice”) and, subject to the provisions of Section 8(e), shall include in such Shelf Underwritten Offering all Registrable Securities with respect to which Acquirer has received written requests for inclusion therein, within five (5) calendar days after sending the Company Shelf Takedown Notice. Acquirer shall enter into an underwriting agreement in a form as is customary in underwritten offerings of securities by the Company with the managing underwriter or underwriters selected by the Holders holding a majority-in-interest of the Registrable Securities to be included in such Shelf Underwritten Offering after consultation with, and approval (which shall not be unreasonably withheld, conditioned
3 Bracketed alternative language to be included for either OPKO or OPKO stockholders, as applicable.
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or delayed) by, Acquirer and shall take all such other reasonable actions as are requested by the managing underwriter or underwriters in order to expedite or facilitate the disposition of such Registrable Securities; provided, that, notwithstanding the foregoing, the selection of one lead Bookrunner in such Shelf Underwritten Offering shall be in the sole discretion of Acquirer (such discretion to be exercised reasonably) to the extent Section 2 is applicable. In connection with any Shelf Underwritten Offering contemplated by this Section 8(b), subject to Section 8(l) and Section 8(p), the underwriting agreement into which each Holder and Acquirer shall enter shall contain such representations, covenants, indemnities and other rights and obligations of Acquirer and the selling stockholders as are customary in underwritten offerings of securities by Acquirer. The Holders may demand not more than two (2) Shelf Underwritten Offerings pursuant to this Section 8(b) in any 12-month period. At least ten (10) Business Days prior to the first anticipated filing date of a Registration Statement pursuant to Sections 8(a), 8(b), 8(d) and 8(g), Acquirer shall use reasonable efforts to notify each Holder in writing (which may be by email) of the information reasonably necessary about the Holder to include such Holder’s Registrable Securities in such Registration Statement.
(c)Notwithstanding anything in this Agreement or any Other Shareholder Agreement to the contrary, Acquirer will not provide any material, nonpublic information to any Holder without the prior written consent of such Holder, and in the event that Acquirer believes that a notice or communication required by this Agreement or any Other Shareholder Agreement to be delivered to any Holder contains material, nonpublic information relating to Acquirer, its securities, any of its Affiliates or any other Person, Acquirer shall so indicate to such Holder prior to delivery of such notice or communication, and such indication shall provide such Holder the means to refuse to receive such notice or communication. No Holder nor any of its Affiliates or representatives shall have any duty of trust or confidence with respect to, or obligation not to trade in any securities while aware of, any material, nonpublic information provided to such Holder, Affiliate or representative in violation of this Section 8(c). Notwithstanding the foregoing, to the extent Acquirer reasonably and in good faith determines that it is necessary to disclose material non- public information to a Holder in order to comply with its obligations hereunder (a “Necessary Disclosure”), Acquirer shall inform counsel to such Holder to the extent such counsel has been identified in writing to Acquirer in advance of such determination without disclosing the applicable material non- public information, and Acquirer and such counsel on behalf of the applicable Holder shall endeavor to agree upon a process for making such Necessary Disclosure to the applicable Holder or its representatives that is mutually acceptable to such Holder and Acquirer (an “Agreed Disclosure Process”). Thereafter, Acquirer shall be permitted to make such Necessary Disclosure (only) in accordance with the Agreed Disclosure Process.
(d)Subject to the provisions of Section 8(f) and Section 8(m) hereof, and provided that Acquirer does not have an effective Registration Statement pursuant to Section 8(a) outstanding covering all of the Registrable Securities held by the Holders, following the expiration of any applicable Lock-up Period, Holders of at least a majority in interest of the then-outstanding number of Registrable Securities held by the Holders (a “Demanding Holder”) may make a written demand for registration of all or part of their Registrable Securities, which written demand shall describe the amount and type of securities to be included in such registration and the intended method(s) of distribution thereof (such written demand a “Demand Registration”). Subject to the MNPI Provisions, Acquirer shall, within five (5) calendar days of Acquirer’s receipt of the Demand Registration, notify, in writing all other Holders of Registrable Securities of such demand, and each Holder of Registrable Securities who thereafter wishes to include all or a portion of such Holder’s Registrable Securities in a registration pursuant to a Demand Registration (each such Holder that includes all or a portion of such Holder’s Registrable Securities in such registration, a “Requesting Holder”) shall so notify Acquirer, in writing, within five (5) calendar days after the receipt by the Holder of the notice from Acquirer. Upon receipt by Acquirer of any such written notification from a Requesting Holder(s) to Acquirer, subject to Section 8(e) below, such Requesting Holder(s) shall be entitled to have their Registrable Securities included in a Registration Statement pursuant to a Demand Registration and Acquirer shall effect, as soon thereafter as practicable, but not more than sixty (60) calendar days immediately after Acquirer’s receipt of the Demand Registration, the registration of all Registrable Securities requested by the Demanding Holders and Requesting Holders pursuant to such Demand Registration. Under no circumstances shall Acquirer be obligated to effect more than an aggregate of three (3) registrations pursuant to a Demand Registration by the Holders under this Section 8(d) with respect to any or all Registrable Securities. Notwithstanding the foregoing, (i) Acquirer shall not be required to give effect to a Demand Registration from a Demanding Holder if Acquirer has registered Registrable Securities pursuant to a Demand Registration (which has become effective) from
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such Demanding Holder in the preceding one hundred and twenty (120) days, and (ii) Acquirer’s obligations with respect to any Demand Registration shall be deemed satisfied so long as the Registration Statement filed pursuant to Section 8(a) includes all of such Demanding Holder’s Registrable Securities and is effective. Subject to the provisions of Sections 8(e) and Section 8(m) hereof, if a majority-in-interest of the Demanding Holders so advise Acquirer as part of their Demand Registration that the offering of the Registrable Securities pursuant to such Demand Registration shall be in the form of an underwritten offering, then the right of such Demanding Holder or Requesting Holder (if any) to include its Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwritten offering and the inclusion of such Holder’s Registrable Securities in such underwritten offering to the extent provided herein. All such Holders proposing to distribute their Registrable Securities through an underwritten offering under this Section 8(d), subject to Section 8(l) and Section 8(p), shall enter into an underwriting agreement in customary form with Acquirer and the underwriter(s) selected for such underwritten offering by a majority- in-interest of the Demanding Holders initiating the Demand Registration after consultation with, and approval by, Acquirer (which shall not be unreasonably withheld, conditioned or delayed); provided, that, notwithstanding the foregoing, the selection of one lead Bookrunner in such underwritten offering shall be in the sole discretion of Acquirer (such discretion to be exercised reasonably) to the extent Section 2 is applicable.
(e)If a Demand Registration is to be an underwritten offering and the managing underwriter or underwriters, in good faith, advises Acquirer, the Demanding Holders and the Requesting Holders (if any) in writing that, in its opinion, the dollar amount or number of Registrable Securities that the Demanding Holders and the Requesting Holders (if any) desire to sell, taken together with all other Acquirer Stock or other equity securities that Acquirer desires to sell for its own account and the Acquirer Stock, if any, as to which a registration has been requested pursuant to separate written contractual piggy-back registration rights held by any other stockholders of Acquirer who desire to sell, exceeds the maximum dollar amount or maximum number of equity securities that can be sold in such underwritten offering without adversely affecting the proposed offering price, the timing, the distribution method, or the probability of success of such offering (such maximum dollar amount or maximum number of such securities, as applicable, the “Maximum Number of Securities”), then Acquirer shall include in such underwritten offering, as follows:
(i)first, the Registrable Securities of the Demanding Holders and the Requesting Holders (if any) (pro rata based on the respective number of Registrable Securities held by each Demanding Holder and Requesting Holder (if any) and the aggregate number of Registrable Securities held by the Demanding Holders and Requesting Holders) that can be sold without exceeding the Maximum Number of Securities;
(ii)second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (i), the Acquirer Stock of holders exercising their piggy-back registration rights pursuant to Section 2.3 of that certain Amended and Restated Registration Rights Agreement, dated as of July 22, 2021, by and among Acquirer and the other parties thereto (the “July 2021 Registration Rights Agreement”), which can be sold without exceeding the Maximum Number of Securities;
(iii)third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (i) and (ii), the Acquirer Stock or other equity securities that Acquirer desires to sell for its own account, which can be sold without exceeding the Maximum Number of Securities;
(iv)fourth, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (i), (ii) and (iii), the Registrable Securities of Holders (pro rata, based on the respective number of Registrable Securities held by each Holder) exercising their rights to register their Registrable Securities pursuant to Section 8(g) hereof, without exceeding the Maximum Number of Securities; and
(v)fifth, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (i), (ii), (iii) and (iv), the Acquirer Stock or other equity securities of other Persons or entities that Acquirer is obligated to register in a registration pursuant to separate written contractual arrangements with such Persons and that can be sold without exceeding the Maximum Number of Securities.
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(f)A Demanding Holder or a Requesting Holder shall have the right to withdraw all or a portion of its Registrable Securities included in a Demand Registration pursuant to Section 8(d) or a Shelf Underwritten Offering pursuant to Section 8(b) for any or no reason whatsoever upon written notification to Acquirer and the underwriter or underwriters (if any) of its intention to so withdraw (a) in the case of a Demand Registration not involving an underwritten offering, one (1) Business Day prior to the effectiveness of the applicable Registration Statement or (b) in the case of any Demand Registration involving an underwritten offering or any Shelf Underwritten Offering, prior to the pricing of such underwritten offering or Shelf Underwritten Offering; provided, however, that upon withdrawal by a majority-in-interest of the Demanding Holders initiating a Demand Registration (or in the case of a Shelf Underwritten Offering, withdrawal of an amount of Registrable Securities included by the Holders in such Shelf Underwritten Offering, in their capacity as Demanding Holders, being less than the Minimum Amount), Acquirer shall cease all efforts to secure effectiveness of the applicable Registration Statement or complete the underwritten offering, as applicable. For the avoidance of doubt, any Demand Registration withdrawn pursuant to this Section 8(f) shall be counted toward the aggregate number of Demand Registrations Acquirer is obligated to effect pursuant to Section 8(d) unless (A)(1) the Demanding Holders reimburse Acquirer for all of its out-of-pocket costs and expenses incurred in connection with any such withdrawn Demand Registration incurred through the date of such withdrawal and (2) such revocation or withdrawal shall have been made prior to the commencement of any marketing efforts or “road shows” by Acquirer or the underwriters in connection with such Demand Registration, or (B) such withdrawal or revocation occurs following the issuance by Acquirer of a Suspension Notice (as defined below). Notwithstanding anything to the contrary in this Agreement or any Other Shareholder Agreement, Acquirer shall be responsible for the Registration Expenses (as defined below) incurred by it in connection with a registration pursuant to a Demand Registration or a Shelf Underwritten Offering prior to its withdrawal under this Section 8(f).
(g)If Acquirer proposes to file a registration statement under the Securities Act with respect to an offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into equity securities, for its own account or for the account of stockholders of Acquirer (or by Acquirer and by the stockholders of Acquirer including, without limitation, pursuant to Section 8(d) hereof), other than a registration statement (a) filed in connection with any employee stock option or other benefit plan, (b) for an exchange offer or offering of securities solely to Acquirer’s existing stockholders, (c) for an offering solely of debt that is convertible into equity securities of Acquirer, (d) for a dividend reinvestment plan, (e) for any issuances of securities in connection with a transaction involving a merger, consolidation, sale, exchange, issuance, transfer, reorganization or other extraordinary transaction between Acquirer or any of its Affiliates and any third party, or (f) filed pursuant to Section 8(a), then, subject to the MNPI Provisions, Acquirer shall give written notice of such proposed filing to all of the Holders of Registrable Securities as soon as practicable but not less than twenty (20) calendar days before the anticipated filing date of such registration statement, which notice shall (i) describe the amount and type of securities to be included in such offering, the intended method(s) of distribution (including whether such registration will be pursuant to a shelf registration statement), and the proposed price and name of the proposed managing underwriter or underwriters, if any, in such offering, (ii) describe such Holders’ rights under this Section 8(g), and (iii) offer to all of the Holders of Registrable Securities the opportunity to register the sale of such number of Registrable Securities as such Holders may request in writing within five (5) calendar days after receipt of such written notice (such registration, a “Piggyback Registration”). Acquirer shall, in good faith, cause such Registrable Securities identified in a Holder’s response noticed described in the foregoing sentence to be included in such Piggyback Registration and shall use its commercially reasonable efforts to cause the managing underwriter or underwriters of a proposed underwritten offering, if any, to permit the Registrable Securities requested by the Holders pursuant to this Section 8(g) to be included in a Piggyback Registration on the same terms and conditions as any similar securities of Acquirer or the Acquirer stockholder(s) for whose account the registration statement is to be filed included in such registration and to permit the sale or other disposition of such Registrable Securities in accordance with the intended planmethod(s) of distribution thereof. When effective,All such Holders proposing to distribute their Registrable Securities through an underwritten offering under this Section 8(g), subject to Section 8(l) and Section 8(p), shall enter into an underwriting agreement in customary form with the Registration Statements filedunderwriter(s) selected for such underwritten offering by Acquirer. For purposes of clarity, any registration effected pursuant to this Agreement (includingSection 8(g) hereof shall not be counted as a registration pursuant to a Demand Registration effected under Section 8(d) hereof or a Shelf Underwritten Offering effected under Section 8(b). Any Holder of Registrable Securities shall have the documents incorporated thereinright to withdraw all or any portion of its Registrable Securities in a Piggyback Registration for any or no reason whatsoever upon written notification to Acquirer and the underwriter or underwriters (if any) of his, her or its intention to
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withdraw such Registrable Securities from such Piggyback Registration (a) in the case of a Piggyback Registration not involving an underwritten offering or Shelf Underwritten Offering, one (1) Business Day prior to the effectiveness of the applicable Registration Statement or (b) in the case of any Piggyback Registration involving an underwritten offering or any Shelf Underwritten Offering, two (2) Business Days prior to the pricing of such underwritten offering or Shelf Underwritten Offering. Acquirer (whether on its own good-faith determination or as the result of a request for withdrawal by reference) will complyPersons pursuant to separate written contractual obligations) may withdraw a Registration Statement filed with the SEC in connection with a Piggyback Registration at any time prior to the effectiveness of such Registration Statement.
(h)If the managing underwriter or underwriters in an underwritten registration that is to be a Piggyback Registration, in good faith, advises Acquirer and the Holders of Registrable Securities participating in the Piggyback Registration in writing that, in its opinion, the dollar amount or number of the Acquirer Stock that Acquirer desires to sell, taken together with (a) the Acquirer Stock, if any, as to formwhich registration has been demanded pursuant to separate written contractual arrangements with Persons or entities other than the Holders of Registrable Securities hereunder, (b) the Registrable Securities as to which registration has been requested pursuant to Section 8(g) hereof, and (c) the Acquirer Stock, if any, as to which registration has been requested pursuant to separate written contractual piggy-back registration rights of other stockholders of Acquirer, exceeds the Maximum Number of Securities, then:
(i)if the registration is undertaken for Acquirer’s account, Acquirer shall include in all material respects with all applicable requirementsany such registration (a) first, the Acquirer Stock or other equity securities that Acquirer desires to sell, which can be sold without exceeding the Maximum Number of Securities; (b) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (a), the Acquirer Stock of holders exercising their piggy-back registration rights pursuant to Section 2.3 of the July 2021 Registration Rights Agreement, which can be sold without exceeding the Maximum Number of Securities; (c) third, to the extent that the Maximum Number of Securities Acthas not been reached under the foregoing clauses (a) and (b), the Exchange Act and will not contain a Misstatement. In connection with effecting a RegistrationRegistrable Securities of Holders exercising their rights to register their Registrable Securities pursuant to Section 8(g) hereof (pro rata, based on the respective number of Registrable Securities held by each Holder), which can be sold without exceeding the Maximum Number of Securities and (d) fourth, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (a),(b) and (c), the Acquirer Stock, if any, as to which registration has been requested pursuant to any other written contractual piggy-back registration rights of other stockholders of Acquirer, which can be sold without exceeding the Maximum Number of Securities; and
(ii)if the registration is pursuant to a request by Persons or entities other than the Holders of Registrable Securities, then Acquirer shall include in any such registration (a) first, the Acquirer Stock or other equity securities, if any, of such requesting Persons or entities, other than the Holders of Registrable Securities, which can be sold without exceeding the Maximum Number of Securities; (b) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (a), the Acquirer Stock of holders exercising their piggy-back registration rights pursuant to Section 2.3 of the July 2021 Registration Rights Agreement, which can be sold without exceeding the Maximum Number of Securities; (c) third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (a) and (b), the Acquirer Stock or other equity securities that Acquirer desires to sell for its own account, which can be sold without exceeding the Maximum Number of Securities; (d) fourth, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (a), (b) and (c), the Registrable Securities of Holders exercising their rights to register their Registrable Securities pursuant to Section 8(g) hereof (pro rata, based on the respective number of Registrable Securities held by each Holder), which can be sold without exceeding the Maximum Number of Securities; and (e) fifth, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (a), (b), (c) and (d), the Acquirer Stock or other equity securities for the account of other Persons or entities that Acquirer is obligated to register pursuant to other separate written contractual arrangements with such Persons or entities, which can be sold without exceeding the Maximum Number of Securities.
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(i)Notwithstanding any other provision of this Agreement, but subject to the Companyrestrictions set forth in Section 1 or Section 2 of this Agreement and subject to Section 8(m), if a Demanding Holder desires to effect an offering or sale of Registrable Securities by any Holder on a block trade or underwritten basis (whether firm commitment or otherwise) effected pursuant to a Registration Statement without substantial marketing efforts prior to pricing, including, without limitation, a same day trade, overnight trade or similar transaction (a “Block Trade”) (x) with a total offering price reasonably expected to exceed the Minimum Amount or (y) including all remaining Registrable Securities held by the Demanding Holder, then notwithstanding the time periods provided for in Section 8(b), such Demanding Holder shall notify Acquirer of the Block Trade at least five (5) Business Days prior to the day such offering is to commence and Acquirer shall as expeditiously as possible:
3.1.1    prepare and file with the Commission as soon as practicable a Registration Statement with respect to such Registrable Securities and, except as otherwise set forth herein,possible use its commercially reasonable efforts to causefacilitate such Block Trade; provided that the Demanding Holders wishing to engage in the Block Trade shall use commercially reasonable efforts to work with Acquirer and any underwriters or placement agents or sales agents prior to making such request in order to facilitate preparation of the registration statement, prospectus and other offering documentation related to the Block Trade. Prior to the filing of the applicable “red herring” prospectus or prospectus supplement used in connection with a Block Trade, any Demanding Holders shall have the right to submit a withdrawal notice to Acquirer and the underwriter or underwriters or placement agents or sales agents (if any) of their intention to withdraw from such Block Trade.
(j)In the case of the registration, qualification, exemption or compliance effected by Acquirer pursuant to this Agreement, Acquirer shall, upon reasonable request, inform the Holders as to the status of such registration, qualification, exemption and compliance. At its expense Acquirer shall:
(i)except for such times as Acquirer is permitted hereunder to suspend the use of the prospectus forming part of a Registration Statement or as otherwise provided in this Section 8, use its commercially reasonable efforts to becomekeep such registration, and any qualification, exemption or compliance under state securities laws which Acquirer determines to obtain, continuously effective with respect to the Holders, and remain effectiveto keep the applicable Registration Statement or any subsequent shelf registration statement free of any material misstatements or omissions, until all Registrable Securities covered by such Registration Statement have been sold;
3.1.2    (ii)prepare and file with the CommissionSEC such amendments and post-effective amendments to the Registration Statement, and such supplements to the Prospectus, as may be reasonably requested by a majority in interest of the applicable Holders of Registrable Securities registered on such Registration Statement or any Underwriterunderwriter of Registrable Securities or as may be required by the rules, regulations or instructions applicable to the registration form used by the CompanySEC or by the Securities Act or rules and regulations thereunder to keep the Registration Statement effective until all Registrable Securities covered by such Registration Statement are sold in accordance with the intended plan of distribution set forth in such Registration Statement or supplement to the Prospectus;prospectus;
3.1.3    prior to filing(iii)advise the Holders, as promptly as practicable but in any event, within two Business Days:
(1)when a Registration Statement or Prospectus,any amendment thereto has been filed with the SEC and when such Registration Statement or any post-effective amendment thereto has become effective;
(2)of the issuance by the SEC of any stop order suspending the effectiveness of any Registration Statement or supplement thereto, furnish without chargethe initiation of any proceedings for such purpose;
(3)of the receipt by Acquirer of any notification with respect to the Underwriters, if any, andsuspension of the Holdersqualification of the Registrable Securities included therein for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and
(4)subject to the provisions in this Agreement, of the occurrence of any event that requires the making of any changes in any Registration and such Holders’ legal counsel, copiesStatement or prospectus included therein so that, as of such Registration Statement as proposeddate, the statements therein are not misleading and do not omit to state a material fact required to be filed, each amendment and supplementstated therein or necessary to such Registration Statement (in eachmake the statements therein (and in the case including all exhibits thereto and documents incorporated by reference therein),of a prospectus, in the Prospectus included in such Registration Statement (including each preliminary Prospectus), and such other documents aslight of the Underwriters and the Holders of Registrable Securities included in such Registration or the legal counsel for any such Holders may request in order to facilitate the disposition of thecircumstances under which they were made) not misleading;
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Registrable Securities owned by such Holders, and no document shall be filed with the Commission to which any Holder or its counsel reasonably objects in good faith;
3.1.4    prior to any public offering of Registrable Securities, but in any case no later than the effective date of the applicable Registration Statement, (iv)use its commercially reasonable efforts to (a)obtain the withdrawal of any order suspending the effectiveness of any Registration Statement as soon as reasonably practicable;
(v)upon the occurrence of any event contemplated in Section 8(j)(ii)(4), except for such times as Acquirer is permitted hereunder to suspend, and has suspended, the use of a prospectus forming part of a Registration Statement, Acquirer shall use its commercially reasonable efforts to as soon as reasonably practicable prepare a post-effective amendment to such Registration Statement or a supplement to the related prospectus, or file any other required document so that, as thereafter delivered to purchasers of the Registrable Securities included therein, such prospectus will not include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;
(vi)use its commercially reasonable efforts to (1) register or qualify the Registrable Securities covered by theany Registration Statement under such securities or “blue sky” laws of such jurisdictions in the United States as the Holders of Registrable Securities included in such Registration Statement (in light of their intended plan of distribution) may request and to keep such registration or qualification in effect for so long as such Registration Statement remains in effect and (b)(2) take such action necessary to cause such Registrable Securities covered by thea Registration Statement to be registered with or approved by such other governmental authorities or securities exchanges, including the applicable Nasdaq Stock Market (“Nasdaq”), as may be necessary by virtue of the business and operations of the Company or otherwise and do any and allsuch other acts and things that may be necessary or advisable, in each case, to enable the Holders of Registrable Securities included in such Registration Statement to consummate the disposition of such Registrable Securities in such jurisdictions; provided, however, that the Company shall not be required to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify or take any action to which it would be subject to general service of process or taxation in any such jurisdiction where it is not then otherwise so subject;
3.1.5    cause all such Registrable Securities to be listed on eachprimary securities exchange or automated quotation systemmarket, if any, on which similar securities issued by the Company are thenAcquirer Stock has been listed no later than the effective date of the applicable Registration Statement on which such Registration Statement;Registrable Securities are registered;
3.1.6    (vii)use its commercially reasonable efforts to take all other steps reasonably necessary to effect the registration of the Lock-Up Shares contemplated hereby and, for so long as the undersigned holds Lock-Up Shares, to enable the undersigned to sell the Lock-Up Shares under Rule 144;
(viii)provide a transfer agent or warrant agent, as applicable, and registrar for all such Registrable Securities no later than the effective date of suchany Registration Statement;
3.1.7    advise each seller of such Registrable Securities, promptly after it shall receive notice or obtain knowledge thereof, of (i) subject to the MNPI Provisions, any request by the Commission that the Company amend or supplement such Registration Statement or Prospectus or (ii) the issuance of any stop order by the Commission suspending the effectiveness of such Registration Statement or Prospectus or the initiation or threatening of any proceeding for such purpose and promptly use its commercially reasonable efforts to amend or supplement such Registration Statement or Prospectus or prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued, as applicable;
3.1.8    (ix)at least five (5) Business Days (or, in the case of a Block Trade, at least one (1) calendar day) prior to the filing of any Registration Statement or Prospectusprospectus or any amendment or supplement to such Registration Statement or Prospectus or any document that is to be incorporated by reference into such Registration Statement or Prospectus,prospectus, furnish a copy thereof to each seller of such Registrable Securities or its counsel, including, without limitation, providing, upon request of a Holder, copies promptly upon receipt of any comment letters received with respect to any such Registration Statement or Prospectus;
3.1.9    notify the Holders promptly at any time when a Prospectus relating to such Registration Statement is required to be delivered under the Securities Act, of the happening of any event as a result of which the Prospectus included in such Registration Statement, as then in effect, includes a Misstatement, and then correct such Misstatement or include such information as is necessary to comply with law, in each case as set forth in Section 3.4 hereof;prospectus;
3.1.10    (x)permit a representative of a majority-in-interest of the New Holders, the Underwriters,underwriters, if any, and any attorney or accountant retained by such Holders or Underwriterunderwriter to participate, at each such person’sPerson’s own expense, in the preparation of any Registration Statement and cause the Company’sAcquirer’s officers, directors and employees to supply all information reasonably requested by any such representative, Underwriter,underwriter, attorney or accountant in connection with the Registration; registration; provided,, however,, that, if requested by the Company,Acquirer, such representatives or Underwritersunderwriters shall be required to enter into a confidentiality agreement, in form and substance reasonably satisfactory to the Company,Acquirer, prior to the release or disclosure of any such information;
3.1.11    (xi)obtain a “cold comfort” letter (including a bring-down letter dated as of the date the Registrable Securities are delivered for sale pursuant to such Registration)registration) from the Company’sAcquirer’s independent registered public
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accountants in the event of an Underwritten Offeringunderwritten offering that the participating Holders may rely on, in customary form and covering such matters of the type customarily covered by “comfort” letters as the managing Underwriterunderwriter may reasonably request, and reasonably satisfactory to a majority-in-interest of the participating Holders and any Underwriter;underwriter;
3.1.12    (xii)on the date the Registrable Securities are delivered for sale pursuant to such Registration,a registration, obtain an opinion and negative assurance letter, dated such date, of counsel representing the CompanyAcquirer for the purposes of such Registration,registration, addressed to the Holders, the placement agent or sales agent, if any, and the Underwriters,underwriters, if any, covering such legal matters with respect to the Registrationregistration in respect of which such opinion is being given as the Holders, placement agent, sales agent, or Underwriterunderwriter may reasonably request and as are
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customarily included in such opinions and negative assurance letters, and reasonably satisfactory to a majority in interest of the participating Holders and any Underwriter;underwriter;
3.1.13    (xiii)in the event of any Underwritten Offering,underwritten offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing Underwriterunderwriter of such offering;
3.1.14    (xiv)otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the Commission,SEC, and to make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve (12) months, beginning with the first day of the Company’sAcquirer’s first full calendar quarter after the effective date of the Registration Statement which satisfies the provisions of Section 11(a) of the Securities Act and the rules and regulations thereunder, including Rule 158 thereunder (or any successor rule promulgated thereafter by the Commission)SEC);
3.1.15    (xv)if the Registrationregistration involves the Registrationregistration of Registrable Securities involving gross proceeds in excess of $50,000,000, use its reasonable efforts to make available senior executives of the CompanyAcquirer to participate in customary “road show” presentations that may be reasonably requested by a majority-in-interest of the participating Holders or the Underwriterunderwriter in any Underwritten Offering;
3.1.16    if applicable, promptly effect a filing with FINRA pursuant to FINRA Rule 5110 (or successor thereto) with respect to the public offering contemplated by resales of securities under the Initial Shelf (an “Issuer Filing”), pay the filing fee required by such Issuer Filing and use its commercially reasonable efforts to complete the Issuer Filing until FINRA issues a letter confirming that it does not object to the terms of the offering contemplated by the Initial Shelf.underwritten offering;
3.1.17    (xvi)cooperate with each Holder that holds Registrable Securities being offered and the Underwriterunderwriter in any Underwritten Offeringunderwritten offering with respect to an applicable Registration Statement, if any, to facilitate the timely (i) preparation and delivery of certificates (not bearing any restrictive legends) representing Registrable Securities that have been offered and sold pursuant to such Registration Statement, and enable such certificates to be registered in such names and in such denominations or amounts, as the case may be, or (ii) crediting of the Registrable Securities that have been offered and sold pursuant to a Registration Statement to the applicable account (or accounts) with The Depository Trust Company (“DTC”) through its Deposit/Withdrawal At Custodian (“DWAC”DWAC”) system, in any such case as such Holder or Underwriter,underwriter, if any, may reasonably request;
3.1.18    (xvii)for so long as this Agreement remains effective, use reasonable best effects to (a) cause the Class A CommonAcquirer Stock to be eligible for clearing through DTC, through its DWAC system; (b) be eligible and participating in the Direct Registration System (DRS) of DTC with respect to the Class A CommonAcquirer Stock; and (c) ensure that the transfer agent for the Class A CommonAcquirer Stock is a participant in, and that the Class A CommonAcquirer Stock is eligible for transfer pursuant to, DTC’s Fast Automated Securities Transfer Program (or successor thereto);
(xviii)use its commercially reasonable efforts to make and keep public information available, as those terms are understood and defined in Rule 144, and, without limiting the foregoing, as long as any Holder shall own Registrable Securities (without taking into account the exclusion of the definition of such term contained in clause (iv) thereof), Acquirer, at all times while it shall be a reporting company under the Exchange Act, covenants to file timely all reports required to be filed by Acquirer after the Closing Date pursuant to Sections 13 or 15(d) of the Exchange Act and to promptly furnish the Holders with true and complete copies of all such filings upon request; and
3.1.19    (xix)otherwise, in good faith, cooperate reasonably with, and take such customary actions as may reasonably be requested by the Holders in connection with such Registration.a registration.
Section 3.2    (k)Registration Expenses.Except as otherwise provided herein, the Registration Expenses (as defined below) of all Registrationsregistrations pursuant to this Agreement shall be borne by the Company.Acquirer. It is acknowledged by the Holders that the Holders shall bear all incremental selling expenses relating to the sale of Registrable Securities, such as Underwriters’underwriters’ commissions and
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discounts, brokerage fees and, other than as set forth in the definition of “Registration Expenses,” all reasonable fees and expenses of any legal counsel representing the Holders except as otherwise provided herein. “Registration Expenses” shall mean the out-of-pocket expenses of a registration, including, without limitation, the following: (a) all registration, qualification and filing fees (including fees with respect to filings required to be made with the Financial Industry Regulatory Authority, Inc.) and any securities exchange on which the Acquirer Stock is then listed; (b) fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel for the underwriters in connection with blue sky qualifications of Registrable Securities); (c) printing, messenger, telephone and delivery expenses; (d) reasonable
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fees and disbursements of counsel for Acquirer; (e) reasonable fees and disbursements of all independent registered public accountants of Acquirer incurred specifically in connection with such registration; and (f) reasonable fees and expenses of one (1) legal counsel selected by the Demanding Holders, not to exceed $75,000.
Section 3.3    (l)Participation in Underwritten Offerings.No Person may participate in any Underwritten Offeringunderwritten offering for equity securities of the CompanyAcquirer pursuant to a Registrationregistration initiated by the CompanyAcquirer hereunder unless such Person (a) agrees to sell such Person’s securities on the basis provided in any underwriting arrangements approved by the CompanyAcquirer and (b) completes and executes all customary questionnaires, powers of attorney, indemnities, lock-up agreements, underwriting agreements and other customary documents as may be reasonably required under the terms of such underwriting arrangements. In connection with any underwritten offering of equity securities of Acquirer (other than a Block Trade), each Holder participating in the underwritten offering pursuant to the terms of this Agreement agrees that it shall not transfer any shares of Acquirer Stock or other equity securities of Acquirer (other than those included in such offering pursuant to this Agreement), without the prior written consent of Acquirer, during the 90-day period beginning on the date of pricing of such offering or such shorter period during which Acquirer agrees not to conduct an underwritten primary offering of Acquirer Stock, except in the event the underwriters managing the offering otherwise agree by written consent. Each Holder participating in the underwritten offering agrees to execute a customary lock-up agreement in favor of the underwriters to such effect (in each case on substantially the same terms and conditions as all such Holders). The immediately foregoing shall in no way limit the restrictions of undersigned’s Lock-Up Shares pursuant to the applicable Lock-Up Period.
Section 3.4    (m)Restrictions on Registration Rights; Suspension of Sales; Adverse Disclosure. If (a) during the period starting with the date sixty (60) days prior to the Company’sAcquirer’s good-faith estimate of the date of the filing of, and ending on a date one hundred and twenty (120) days after the effective date of, a Registration Statement in respect of a Companyan Acquirer initiated underwritten Registration the Companyregistration of its securities Acquirer receives a Demand Registration, and provided that the CompanyAcquirer has delivered written notice to the Holders prior to receipt of a Demand Registration pursuant to subsection 2.2.1Section 8(d) and it continues to actively employ, in good faith, all reasonable efforts to cause the applicable Company-initiated Registration StatementAcquirer-initiated registration statement to become effective, (b) the Holders have requested an Underwritten Registrationunderwritten registration and the CompanyAcquirer and the Holders are unable to obtain the commitment of the underwriters to firmly underwrite the offer, or (c) in the good faith judgment of the Acquirer Board such Registrationregistration would be seriously detrimental to the CompanyAcquirer and the Acquirer Board concludes as a result that it is essential to defer the filing of such Registration Statement at such time, then in each case, the CompanyAcquirer shall furnish to such Holders a certificate signed by the Chairman of the Acquirer Board stating that in the good-faith judgment of the Acquirer Board it would be seriously detrimental to the CompanyAcquirer for a Registration Statement with respect to such Demand Registration to be filed in the near future and that it is therefore essential to defer the filing of such Registration Statement, the CompanyAcquirer shall have the right to defer such filing for a period of not more than sixty (60) calendar days. For the avoidance of doubt, the foregoing ability to defer the filing of a Registration Statement shall not apply to the Company’sAcquirer’s obligation to file the Initial Shelf pursuant to subsection 2.1.1Section 8(a). Upon receipt ofNotwithstanding anything to the contrary in this Agreement, Acquirer may, subject to the MNPI Provisions and upon prompt written notice (a “Suspension Notice”) of such action to the Holders no later than three (3) Business Days from the Company that adate of such Suspension Event (as defined below), delay the filing or postpone the effectiveness of the Registration Statement, or Prospectus contains a Misstatement, or in the opinion of counsel for the Company it is necessaryand from time to supplement or amend such Prospectustime to comply with law, each ofrequire the Holders shall forthwith discontinue disposition of Registrable Securities until it has received copies of a supplemented or amended Prospectus correcting the Misstatement or including the information counsel for the Company instructs is necessarynot to comply with law (it being understood that the Company hereby covenants to prepare and file such supplement or amendment as soon as practicable after the time of such notice such thatsell under the Registration Statement or Prospectus, as so amended or supplemented, as applicable, will not include a Misstatement and complies with law), or until it is advised in writing byto suspend the Company that the use of the Prospectus may be resumed. If theeffectiveness thereof, if (i) such filing, initial effectiveness or continued use of a Registration Statement in respect of any Registration at any time would require the Company to make an Adverse Disclosure orsales would require the inclusion in such Registration Statement of financial statements that are unavailable to the CompanyAcquirer for reasons beyond Acquirer’s control or (ii) the Company’s control (a “Suspension Event”),negotiation or consummation of a transaction by Acquirer or its subsidiaries is pending or an event has occurred, which negotiation, consummation or event, the CompanyAcquirer Board reasonably believes would require additional disclosure by Acquirer in the Registration Statement of material information that Acquirer has a bona fide business purpose for keeping confidential and the non-disclosure of which in the Registration Statement would be expected, in the reasonable determination of the Acquirer Board would be expected to cause the Registration Statement to fail to comply with applicable disclosure requirements (each such circumstance, a “Suspension Event”); provided that Acquirer may subject to the MNPI Provisions, upon giving prompt written notice of such action to the Holders (a “Suspension Notice”), no later than three (3) Business Days from the date of such Suspension Event,not delay the filing or initial effectiveness of, or suspend use of, suchthe Registration Statement for the shortest period of time required to resolve such issue, but in no eventon more than forty-five (45) consecutive calendar days, determined in good faith by the Acquirer Board to be necessary for such purpose; provided further that the CompanyAcquirer shall not defer its obligations pursuant to this Section 3.48(m) more than twice during any twelve (12)-month period; provided further, that in no event shall the CompanyAcquirer be entitled to delay or defer the filing or effectiveness of the Initial Shelf pursuant to this Section 3.48(m). In the event the Company exercises its rights under the preceding sentence, the Holders agree to suspend, immediately upon theirUpon receipt of theany Suspension Notice their useduring the period that any Registration Statement is effective or if as a result of a Suspension Event any Registration Statement or related
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prospectus contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the Prospectus relatingcircumstances under which they were made (in the case of the prospectus) not misleading, the undersigned and each other Holder agrees that (i) it will immediately discontinue offers and sales of the Registrable Securities under such Registration Statement (excluding, for the avoidance of doubt, sales conducted pursuant to Rule 144) until such Holder receives copies of a supplemental or amended prospectus (which Acquirer agrees to promptly prepare) that corrects the misstatement(s) or omission(s) referred to above and receives notice that any Registration in connection with any salepost-effective amendment has become effective or offer to sell Registrable Securities;unless otherwise notified by Acquirer that it may resume such offers and sales, provided, for the avoidance of doubt, that the foregoing shall not restrict or otherwise affect the consummation of any sale pursuant to a contract entered into, or order placed, by any Holder prior to delivery of the Suspension Notice. The CompanyNotice and (ii) it will maintain the confidentiality of any information included in such Suspension Notice unless otherwise required by law or subpoena. If so directed by Acquirer, each Holder will deliver to Acquirer or, in such Holder’s sole discretion destroy, all copies of the prospectus covering the Registrable Securities in such Holder’s possession; provided that this obligation to deliver or destroy all copies of the prospectus covering the Registrable Securities shall not apply (A) to the extent such Holder is required to retain a copy of such prospectus (1) in order to comply with applicable legal, regulatory, self-regulatory or professional requirements or (2) in accordance with a bona fide pre-existing document retention policy or (B) to copies stored electronically on archival servers as a result of automatic data back-up. Acquirer shall immediately notify the Holders of the expiration of any period during which it exercised its rights under this Section 8(m).
(n)Section 3.4. The Holders agreeA Holder may deliver written notice (an “Opt-Out Notice”) to Acquirer requesting that except assuch Holder not receive notices from Acquirer otherwise required by applicable law,this Section 8; provided that Holder may later revoke any such Opt-Out Notice in writing. Following receipt of an Opt-Out Notice from a Holder (unless subsequently revoked), (i) Acquirer shall not deliver any such notices to such Holder and such Holder shall no longer be entitled to the Holders shall treat as confidential the receiptrights associated with any such notice and (ii) each time prior to such Holder’s intended use of an effective Registration Statement, such Holder will notify Acquirer in writing at least two (2) Business Days in advance of such intended use, and if a notice of a Suspension Event was previously delivered (or would have been delivered but for the provisions of this Section 8(n)) and the related suspension period remains in effect, Acquirer will so notify such Holder, within one (1) Business Day of such Holder’s notification to Acquirer, by delivering to such Holder a copy of such Suspension Notice, fromand thereafter will provide such Holder with the Company under this Section 3.4 (provided that in no event shall suchrelated notice disclose the basis for suspension or contain any material nonpublic information) and shall not disclose the information contained in such written notice without the prior written consent
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of the Company until such time as the information contained therein is or becomes public, other than as a result of disclosure by a holder of Registrable Securities in breach of the terms of this Agreement.
Section 3.5    Covenants of the Company.
3.5.1    The Company will use its commercially reasonable efforts to make and keep public information available, as those terms are understood and defined in Rule 144. Without limiting the foregoing, as long as any Holder shall own Registrable Securities (without taking into account the exclusion of the definitionconclusion of such term contained in clause (iv) thereof), the Company, at all times while it shall be a reporting company under the Exchange Act, covenants to file timely all reports required to be filed by the Company after the date hereof pursuant to Sections 13 or 15(d) of the Exchange Act and toSuspension Event promptly furnish the Holders with true and complete copies of all such filings. The Company further covenants that it shall take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell shares of Class A Common Stock held by such Holder without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities Act (or any successor rule promulgated thereafter by the Commission), including providing any legal opinions.following its availability.
3.5.2    (o)Other than with respect to any contractual restriction applicable to any Holder pursuant to this Agreement or any Other Shareholder Agreement, the stock certificates evidencing the Registrable Securities (without taking into account the exclusion of the definition of such term contained in clause (iv) thereof) (and/or book entries representing the Registrable Securities) held by each Holder shall not contain or be subject to any legend restricting the transfer thereof (and the Registrable Securities shall not be subject to any stop transfer or similar instructions or notations): (A) while a Registration Statement covering the sale or resale of such securities is effective under the Securities Act, if such Holder provides paperwork to the effect that it has sold such securities and will sell, distribute or transfer such securities pursuant to such Registration Statement and the plan of distribution set forth therein or Rule 144, or (B) if such Holder provides customary paperwork to the effect that it has sold such shares pursuant to Rule 144, or (C) if such Registrable Securities are eligible for sale under Rule 144 (including Rule 144(i)) as set forth in customary non-affiliate paperwork provided by such Holder and such non-affiliate Holder agrees to sell or transfer such Registrable Securities pursuant to Rule 144 or pursuant to a Registration Statement and the plan of distribution set forth therein or (D) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission)SEC) as determined in good faith by counsel to the CompanyAcquirer or set forth in a legal opinion delivered by nationally recognized counsel to the Holder (collectively, the “Unrestricted Conditions”“Unrestricted Conditions”). The CompanyAcquirer agrees that at such time as any of the Unrestricted Conditions is met or such legend is otherwise no longer required it will, no later than two (2) Business Days following the delivery by a Holder to the CompanyAcquirer or the Company’sAcquirer’s transfer agent of a certificate representing any Registrable Securities, issued with a restrictive legend, (or, in the case of Registrable Securities represented by book entries, delivery by a Holder to the CompanyAcquirer or the Company’sAcquirer’s transfer agent of a legend removal request) deliver or cause to be delivered to such Holder a certificate or, at the request of such Holder, deliver or cause to be delivered such Registrable Securities to such Holder by crediting the account of such Holder’s prime broker with DTC through its Deposit/Withdrawal at Custodian (DWAC)DWAC system, in each case, free from all restrictive and other legends and stop transfer or similar instructions or
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notations. If any of the Unrestricted Conditions is met at the time of issuance of any Registrable Securities, (e.g., upon exercise of warrants), then such securities shall be issued free of all legends.
3.5.3    Notwithstanding anything in this Agreement to the contrary, the Company will not provide any material, nonpublic information to any Holder without the prior written consent of such Holder, and in the event that the Company believes that a notice or communication required by this Agreement to be delivered to any Holder contains material, nonpublic information relating to the Company, its securities, any of its Affiliates or any other Person, the Company shall so indicate to such Holder prior to delivery of such notice or communication, and such indication shall provide such Holder the means to refuse to receive such notice or communication. No Holder nor any of its Affiliates or representatives shall have any duty of trust or confidence with respect to, or obligation not to trade in any securities while aware of, any material, nonpublic information provided to such Holder, Affiliate or representative in violation of this subsection 3.5.3.
3.5.4    Notwithstanding the foregoing, to the extent the Company reasonably and in good faith determines that it is necessary to disclose material non-public information to a Holder in order to comply with its obligations
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hereunder (a “NecessaryDisclosure”), the Company shall inform counsel to such Holder to the extent such counsel has been identified in writing to the Company in advance of such determination without disclosing the applicable material non-public information, and the Company and such counsel on behalf of the applicable Holder shall endeavor to agree upon a process for making such Necessary Disclosure to the applicable Holder or its representatives that is mutually acceptable to such Holder and the Company (an “Agreed Disclosure Process”). Thereafter, the Company shall be permitted to make such Necessary Disclosure (only) in accordance with the Agreed Disclosure Process.
Section 3.6    Information. The Holders shall provide such information as may reasonably be requested by the Company, or the managing Underwriter, if any, in connection with the preparation of any Registration Statement, including amendments and supplements thereto, in order to effect the Registration of any Registrable Securities under the Securities Act pursuant to Article II and in connection with the Company’s obligation to comply with federal and applicable state securities laws.
ARTICLE IV
INDEMNIFICATION AND CONTRIBUTION
Section 4.1    (p)Indemnification.
4.1.1    The Company agrees to(i)Acquirer shall, notwithstanding the termination of this Agreement, indemnify defend and hold harmless, to the fullest extent permitted by law, each Holder of Registrable Securities,and its respective directors, officers, employees, agents, trustees, partners, members, managers, stockholders, investment advisors and sub-advisors, each Person who controls such Holder (within the meaning of the Securities Act or the Exchange Act) and each Holder’sAffiliate of such Holder from and control Person’s officers, directors, members, partners,against any and managers against all losses, claims, actions, damages, liabilities, costs and expenses (including, without limitation, any reasonable attorneys’ fees) resulting fromfees and expenses incurred in connection with defending or investigating any Misstatementsuch action or claim) (collectively, “Losses”) that arise out of or are caused by any untrue or alleged Misstatement,untrue statement of material fact contained in any Registration Statement (or incorporated by reference therein), prospectus included in any Registration Statement (“Prospectus”) or preliminary Prospectus or any amendment thereof or supplement thereto or document incorporated by reference therein or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the CompanyAcquirer by or on behalf of such Holder expressly for use therein. Acquirer shall notify each Holder promptly of the institution, threat or assertion (to Acquirer’s knowledge) of any proceeding arising from or in connection with a Registration Statement on which such Holder’s Registrable Securities are registered; provided that the indemnification contained in this Section 8(p) shall not apply to amounts paid in settlement of any Losses if such settlement is effected without the consent of Acquirer (which consent shall not be unreasonably withheld, conditioned or Prospectus. The Companydelayed), nor shall indemnify the Underwriters, their officers and directors and agents and each Person who controls such Underwriters (within the meaning of the Securities Act)Acquirer be liable for any Losses to the same extent as providedthey arise out of or are based upon a violation which occurs in the foregoingconnection with respect to the indemnificationany offers or sales effected by or on behalf of the Holder.such Holder in violation of this Agreement.
4.1.2    (ii)In connection with any Registration Statement in which aany Holder of Registrable Securities is participating, such Holder shall furnish to the CompanyAcquirer in writing such information relating to such Holder as the CompanyAcquirer reasonably requests for use in connection with any such Registration Statement or ProspectusProspectus. In connection with any Registration Statement in which any Holder is participating, such Holder agrees to indemnify and hold harmless, to the extent permitted by law, shall indemnify the Company,Acquirer, its directors and officers and agents and employees and each Person or entity who controls the CompanyAcquirer (within the meaning of Section 15 of the Securities Act) against any losses, claims, damages, liabilities and expenses (including without limitation reasonable attorneys’ fees)Losses, resulting from or arising out of any Misstatementuntrue or alleged Misstatement,untrue statement of material fact contained in the Registration Statement, Prospectus or preliminary Prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein in light of the circumstances under which they were made, not misleading, but only to the extent that such Misstatementuntrue statement or alleged Misstatementomission is contained (or not contained in the case of an omission) in and are based on any information or affidavit so furnished in writing by or on behalf of such Holder expressly for use therein; provided that in such Registration Statement or Prospectus; provided, however, thatno event shall the obligation to indemnify shall be several, not joint and several, among such Holders of Registrable Securities, and theaggregate liability of each sucha Holder (including, for the avoidance of Registrable Securities shalldoubt, under Section 8(p)(v)) be greater in proportion to and limited toamount than the dollar amount of the net proceeds actually received by such Holder from the sale of its Registrable Securities inpursuant to such offeringRegistration Statement giving rise to such liability. The Holders of Registrable Securities shall indemnify the Underwriters, their officers, directors and each Person who controls such Underwriters (within the meaning of the Securities Act) to the same extent as provided in the foregoing with respect to indemnification of the Company.obligation.
4.1.3    (iii)Any Person entitled to indemnification herein shall (i)(A) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that the failure to give prompt notice shall not impair any Person’s right to indemnification hereunder to the extent such failure has not materially prejudiced the indemnifying party in defending such claim) and (ii)(B) unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim,claim. permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party shall not be subject to any liability for any settlement made by the indemnified party without its consent (but such(which consent shall not be unreasonably withheld, conditioned or delayed). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel (plus local counsel) for all parties
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indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of legal counsel to any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. No indemnifying party shall,
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without the consent of the indemnified party, consent to the entry of any judgment or enter into any settlement which cannot be settled in all respects by the payment of money (and such money is so paid by the indemnifying party pursuant to the terms of such settlement) or which settlement does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation or includes any admission as to fault or culpability or failure to act on the part of an indemnified party.
4.1.4    (iv)The indemnification and contribution provided for under this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director, manager,employee, agent, affiliate or controlling Person of such indemnified party and shall survive the transfer of securities. The Company and each Holder of Registrable Securities participating in an offering also agrees to make such provisions as are reasonably requested by any indemnified party for contribution to such party in the event the Company’s or such Holder’s indemnification is unavailable for any reason.Lock-Up Shares.
4.1.5    (v)If the indemnification provided under this Section 4.1 hereof8(p) from the indemnifying party is unavailable or insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities and expensesLosses referred to herein, then the indemnifying party, in lieu of indemnifying the indemnified party, shall contribute to the amount paid or payable by the indemnified party as a result of such losses, claims, damages, liabilities and expensesLosses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and indemnified party shall be determined by reference to, among other things, whether any action in question, including any Misstatementuntrue or alleged Misstatement,untrue statement of a material fact or omission or alleged omission to state a material fact, was made by (or not made by, in the case of an omission), or relates to information supplied by (or not supplied by, in the case of an omission), such indemnifying party or indemnified party, and the indemnifying party’s and indemnified party’s relative intent, knowledge, access to information and opportunity to correct or prevent such action and the benefits received by the such indemnifying party or indemnified party; provided,, however,, that the liability of any Holder under this subsection 4.1.5Section 8(p)(v) shall be limited to the amount of the net proceeds received by such Holder from the sale of Registrable Securities in such offering giving rise to such liability. The amount paid or payable by a party as a result of the lossesLosses or other liabilities referred to above shall be deemed to include, subject to the limitations set forth in subsections 4.1.1Section 8(p)(i), 4.1.28(p)(ii), and 4.1.3 above,8(p)(iii), any legal or other fees, charges or expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this subsection 4.1.5 were determined by pro rata allocation or by any other method of allocation, which does not take account of the equitable considerations referred to in this subsection 4.1.5. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution pursuant to this subsection 4.1.5Section 8(p)(v) from any Person who was not guilty of such fraudulent misrepresentation.
(q)The undersigned agrees that each New Holder (as defined in the July 2021 Registration Rights Agreement) shall have piggyback registration rights in respect of any Registration Statement that is filed pursuant to this Section 8, pursuant to and in accordance with Section 5.6 of the July 2021 Registration Rights Agreement, and that the provisions of the Registration Rights Agreement shall apply, mutatis mutandis, to the exercise of any such piggyback registration rights by any such New Holder in respect of any such Registration Statement.
(r)The rights, duties and obligations of the undersigned under this Section 8 may be freely assigned or delegated by the undersigned to a 5% Insider; provided, however, that if any such assignment or delegation occurs during a Lock-Up Period, such 5% Insider must enter into a written agreement with Acquirer agreeing to be bound by the provisions of this Agreement in accordance with Section 5 of this Agreement and shall thereafter be a “Holder” for purposes of this Section 8. For purposes of this Agreement, a “5% Insider” means any stockholder of Seller that is both the record or beneficial owner of at least 5% of the outstanding shares of common stock of Seller and an insider (non-institutional) stockholder of Seller.
9.The undersigned represents and warrants that it (i) is a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act) or an institutional “accredited investor” (within the meaning of Rule 501(a) under the Securities Act) satisfying the applicable requirements set forth on Schedule A, (ii) is acquiring the Lock-Up Shares only for its own account and not for the account of others, and (iii) is not acquiring the Lock-Up Shares with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act or any other securities laws of the United States or any other applicable jurisdiction (and shall provide the requested information on Schedule A following the signature page hereto). The undersigned is not an entity formed for the specific purpose of acquiring the Lock-Up Shares, unless such newly formed entity is an entity in which all of the equity owners are “accredited investors” (within the meaning of Rule 501(a) under the Securities Act).
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10.The undersigned understands that the Lock-Up Shares are being offered in a transaction not involving any public offering within the meaning of the Securities Act and that the Lock-Up Shares have not been registered under the Securities Act or any other securities laws of the United States or any other jurisdiction. The undersigned understands that it is acquiring its entire beneficial ownership interest in the Lock-Up Shares for the undersigned’s own account for investment purposes only and not with a view to any distribution of the Lock-Up Shares in any manner that would violate the securities laws of the United States or any other applicable jurisdiction. The undersigned understands that the Lock-Up Shares may not be resold, transferred, pledged or otherwise disposed of by the undersigned absent an effective registration statement under the Securities Act, except (i) to Acquirer or a subsidiary thereof, (ii) pursuant to offers and sales that occur in an “offshore transaction” within the meaning of Regulation S under the Securities Act, (iii) pursuant to Rule 144 under the Securities Act, provided that all of the applicable conditions thereof (including those set out in Rule 144(i) which are applicable to Acquirer) have been met, or (iv) pursuant to another applicable exemption from the registration requirements of the Securities Act, including pursuant to a private sale effected under Section 4(a)(7) of the Securities Act or applicable formal or informal SEC interpretation or guidance, such as a so-called “4(a)(1) and a half” sale, and that any certificates or book- entry records representing the Lock-Up Shares shall contain a legend to such effect. The undersigned understands and agrees that the Lock-Up Shares will be subject to the foregoing restrictions and, as a result, the undersigned may not be able to readily resell the Lock-Up Shares and may be required to bear the financial risk of an investment in the Lock-Up Shares for an indefinite period of time. The undersigned understands that it has been advised to consult legal counsel prior to making any offer, resale, pledge or transfer of any of the Lock-Up Shares. By making the representations in this Section 10, the undersigned does not agree to hold any of the Lock-Up Shares for any minimum or other specific term and reserves the right to assign, transfer or otherwise dispose of any of the Lock-Up Shares at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act; provided, however, that the Lock-Up Shares shall be subject to the restrictions set forth in Section 1 and Section 2 of this Agreement.
11.The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this Agreement and that this Agreement constitutes the legal, valid and binding obligation of the undersigned, enforceable in accordance with its terms. Any obligations of the undersigned shall be binding upon the successors and permitted assigns of the undersigned from and after the Closing Date.
12.This Agreement constitutes the entire agreement and understanding of the parties hereto in respect of the subject matter hereof and supersedes all prior understandings, agreements, or representations by or among the parties hereto, written or oral, to the extent they relate in any way to the subject matter hereof. This Agreement may not be changed, amended, modified or waived (other than to correct a typographical error) as to any particular provision, except by a written instrument executed by all parties hereto.
13.Except as provided in Sections 5 and 8 hereof, this Agreement and the rights and obligations of the parties hereunder shall not be assignable or transferable by any party hereto (including in connection with a merger, consolidation, sale of substantially all of the assets of such party or otherwise by operation of Law) without the prior written consent of (a) Acquirer, in the case of any such attempted assignment or transfer by the undersigned, or (b) the undersigned, in the case of any such attempted assignment or transfer by Acquirer. Any attempted assignment in violation of this Section 13 shall be null and void. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of Acquirer and the undersigned and their respective successors and permitted assigns.
14.This Agreement, any non-contractual rights or obligations arising out of or in connection with it, and all Disputes will be governed by, and enforced and construed in accordance with, the Laws of the State of Delaware, without regard to the conflict of laws rules of such state that would result in the application of the Laws of another jurisdiction.
15.EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY OR DISPUTES RELATING HERETO. EACH PARTY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
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EVENT OF A DISPUTE, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 15.
16.Any term or provision of this Agreement that is held by a court of competent jurisdiction or arbitrator to be invalid, void or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the invalid, void or unenforceable term or provision in any other situation or in any other jurisdiction. If the final judgment of such court or arbitrator declares that any term or provision hereof is invalid, void or unenforceable, the parties hereto agree to (a) reduce the scope, duration, area or applicability of the term or provision, to delete specific words or phrases, and (b) replace any invalid, void or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the original intention of the invalid or unenforceable term or provision.
17.This Agreement may be executed in any number of counterparts (including electronically), and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. Delivery of an executed counterpart of a signature page of this Agreement by electronic mail or other electronic transmission shall be effective as delivery of a manually executed original counterpart of this Agreement.
18.All notices, demands, waivers and other communications pursuant to this Agreement will be in writing and will be deemed given if delivered personally or delivered by electronic mail or globally recognized express delivery service to the parties hereto at the addresses set forth on the signature page hereto or to such other address as the party to whom notice is to be given to the other parties hereto in writing in accordance herewith. Any such notice, demand, waiver or other communication will be deemed to have been delivered and received (a) in the case of personal delivery, on the date of such delivery, (b) in the case of electronic mail, on the date of sending if no automated notice of delivery failure is received by the sender, and (c) in the case of a globally recognized express delivery service, on the date on which receipt by the addressee is confirmed pursuant to the service’s systems.
19.This Agreement shall become effective on the Closing Date. This Agreement and the obligations of each party hereunder shall automatically terminate upon any termination of the Merger Agreement.
[Signature on the following page]
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Very truly
yours,
By:
Name:
Title:
Address:
Email:
_____________________________Accepted and Agreed:
ACQUIRER
SEMA4 HOLDINGS CORP.
By:
Name:
Title:
Address:333 Ludlow Street,
North Tower, 8th floor
Stamford, CT 06902
Email:

[Signature Page to Shareholder Agreement]

SCHEDULE A
ELIGIBILITY REPRESENTATIONS OF THE UNDERSIGNED
AQUALIFIED INSTITUTIONAL BUYER STATUS
.(Please check the applicable subparagraphs):
1.
•We are a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act (a “QIB”)).
2.
•We are subscribing for the Lock-Up Shares as a fiduciary or agent for one or more investor accounts, and each owner of such account is a QIB.
*** OR ***
B.INSTITUTIONAL ACCREDITED INVESTOR STATUS
.(Please check each of the following subparagraphs):
1.
•We are an “accredited investor” (within the meaning of Rule 501(a) under the Securities Act) or an entity in which all of the equity holders are accredited investors within the meaning of Rule 501(a) under the Securities Act and have marked and initialed the appropriate box on the following page indicating the provision under which we qualify as an “accredited investor”.
2.
•We are not a natural person.
*** AND ***
C.AFFILIATE STATUS
.(Please check the applicable box)
THE UNDERSIGNED:
☐is:
☐is not:
an “affiliate” (as defined in Rule 144 under the Securities Act) of the Acquirer or acting on behalf of an affiliate of the Acquirer.
FINRA Rule 4512(c) states that an “institutional account” shall mean any person who comes within any of the below listed categories. The undersigned has indicated, by marking and initialing the appropriate box below, the provision(s) below which apply to the undersigned and under which the undersigned accordingly qualifies as an “institutional account.”
•a bank, savings and loan association, insurance company or registered investment company;
•an investment adviser registered either with the SEC under Section 203 of the Investment Advisers Act or with a state securities commission (or any agency or office performing like functions); or
•any other person (whether a natural person, corporation, partnership, trust or otherwise) with total assets of at least $50 million.
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This page should be completed by the undersigned
and constitutes a part of the Shareholder Agreement.
Schedule A-1
Rule 501(a), in relevant part, states that an “accredited investor” shall mean any person who comes within any of the below listed categories, or who the Acquirer reasonably believes comes within any of the below listed categories, at the time of the sale of the securities to that person. The undersigned has indicated, by marking and initialing the appropriate box below, the provision(s) below that apply to the undersigned and under which the undersigned accordingly qualifies as an “accredited investor.”
•Any bank as defined in section 3(a)(2) of the Securities Act, or any savings and loan association or other institution as defined in section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity;
•Any broker or dealer registered pursuant to section 15 of the Exchange Act;
•An investment adviser registered pursuant to section 203 of the Investment Advisers Act of 1940 or registered pursuant to the laws of a state;
•An investment adviser relying on the exemption from registering with the Securities and Exchange Commission under section 203(l) or (m) of the Investment Advisers Act of 1940;
•Any insurance company as defined in section 2(a)(13) of the Securities Act;
•Any investment company registered under the Investment Company Act of 1940 or a business development company as defined in section 2(a)(48) of the Securities Act;
•Any Small Business Investment Company licensed by the U.S. Small Business Administration under section 301(c) or (d) of the Small Business Investment Act of 1958;
•A Rural Business Investment Company as defined in section 384A of the Consolidated Farm and Rural Development Act;
•Any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000;
•Any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors;
•Any private business development company as defined in section 202(a)(22) of the Investment Advisers Act of 1940;
•Any organization described in section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, partnership or limited liability company, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000;
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This page should be completed by the undersigned
and constitutes a part of the Shareholder Agreement.
Schedule A-2
•Any trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) of the Securities Act;
•An entity, of a type not listed in any of the foregoing paragraphs, not formed for the specific purpose of acquiring the securities offered, owning investments in excess of $5,000,000;
•A “family office,” as defined in rule 202(a)(11)(G)-1 under the Investment Advisers Act of 1940 (17 CFR 275.202(a)(11)(G)-1): (i) with assets under management in excess of $5,000,000, (ii) that is not formed for the specific purpose of acquiring the securities offered, and (iii) whose prospective investment is directed by a person who has such knowledge and experience in financial and business matters that such family office is capable of evaluating the merits and risks of the prospective investment;
•A “family client,” as defined in rule 202(a)(11)(G)-1 under the Investment Advisers Act of 1940 (17 CFR 275.202(a)(11)(G)-1), of a family office meeting the requirements in the foregoing paragraph and whose prospective investment in the issuer is directed by such family office pursuant to clause (iii) in the foregoing paragraph;
•Any natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of his purchase exceeds $1,000,000. For purposes of calculating a natural person’s net worth: (a) the person’s primary residence must not be included as an asset; (b) indebtedness secured by the person’s primary residence up to the estimated fair market value of the primary residence must not be included as a liability (except that if the amount of such indebtedness outstanding at the time of calculation exceeds the amount outstanding 60 days before such time, other than as a result of the acquisition of the primary residence, the amount of such excess must be included as a liability); and (c) indebtedness that is secured by the person’s primary residence in excess of the estimated fair market value of the residence must be included as a liability;
•Any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year; or
•Any entity in which all of the equity owners are accredited investors meeting one or more of the above tests.
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EXHIBIT B
Form of Support Agreement

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STOCKHOLDER SUPPORT AGREEMENT
This Stockholder Support Agreement (this “Agreement”) is dated as of January 14, 2022, by and among Sema4 Holdings Corp., a Delaware corporation (“Acquirer”), OPKO Health, Inc., a Delaware corporation (the “Seller”) and the Person set forth on Schedule I hereto (“Stockholder”). Capitalized terms used but not defined herein shall have the respective meanings ascribed to such terms in the Merger Agreement (as defined below).
WHEREAS, as of the date hereof, Stockholder is the holder of record and/or beneficial owner (as defined in Rule 13d-3 of the Exchange Act) of the shares of Acquirer Stock set forth opposite its name on Schedule I attached hereto (all such shares of Acquirer Stock, together with any additional shares or other voting securities of Acquirer of which such Stockholder acquires record or beneficial ownership after the date of this Agreement, by any means, such Stockholder’s “Shares”);
WHEREAS, contemporaneously with the execution and delivery of this Agreement, Acquirer, Orion Merger Sub I, a Delaware corporation (“Merger Sub I”), Orion Merger Sub II, LLC, a Delaware limited liability company (“Merger Sub II”), GeneDx, Inc., a New Jersey corporation (“Company”), GeneDx Holding 2, Inc., a Delaware corporation (“Holdco2”), and Seller have entered into an Agreement and Plan of Merger and Reorganization (as amended or modified from time to time, the “Merger Agreement”), dated as of the date hereof, pursuant to which, among other transactions, on the Closing Date but following consummation of the Pre-Closing Restructuring, Merger Sub I will merge with and into Holdco2 (the “First Merger”), with Holdco2 as the surviving corporation in the First Merger and Merger Sub I will merge with and into HoldCo2 (the “First Merger”), with HoldCo2 as the surviving corporation in the First Merger, and immediately after the consummation of the First Merger, as part of the same overall transaction, Holdco2, as the surviving corporation in the First Merger, will merge with and into Merger Sub II (the “Second Merger” and, together with the First Merger, the “Mergers”), with Merger Sub II as the surviving corporation and the direct owner of all of the equity interests in GeneDx Delaware LLC.
WHEREAS, on or prior to the date hereof, Acquirer entered into subscription agreements (the “Subscription Agreements” with the PIPE Investors pursuant to which, and on the terms and subject to the conditions of which, such PIPE Investors have agreed to purchase from Acquirer shares of Acquirer Stock for an aggregate purchase price equal to the PIPE Investment Amount, such purchases to be consummated prior to or substantially concurrently with the Closing (the “PIPE Investment,” and, together with the other transactions contemplated by the Merger Agreement, the “Transactions”).
WHEREAS, as an inducement to Seller and Acquirer to enter into the Merger Agreement and to consummate the Transactions, the parties hereto desire to agree to certain matters as set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, and intending to be legally bound hereby, the parties hereto hereby agree as follows:
ARTICLE VI
STOCKHOLDER SUPPORT AGREEMENT; COVENANTS
Section 1.1 No Transfer. Stockholder agrees that during the term of this Agreement, Stockholder shall not, directly or indirectly, (a) sell, assign, transfer (including by operation of law), swap, convert, lien, pledge, gift, dispose of or otherwise encumber (including by merger (including by conversion into securities or other consideration), by tendering into any tender or exchange offer, by testamentary disposition, by operation of Law or otherwise, or by divesting itself (pursuant to contract or otherwise) of any rights as a stockholder of Stockholder’s Shares, including, without limitation, the right to vote such Shares) (collectively, a “Transfer”) or enter into any contract or option with respect to the Transfer of, (i) any of such Stockholder’s Shares (the “Restricted Amount”), (b) publicly announce to do any of the foregoing or (c) take any action that would make any representation or warranty of such Stockholder contained herein untrue or incorrect or which would have the effect of preventing or disabling Stockholder from performing his, her or its obligations under this Agreement in any material respect; provided that the foregoing shall not prohibit (W) for all purposes of this Section 1(a) from and after the date of the Acquirer Stockholders’ Meeting at which the Requisite Vote is obtained, the Stockholder and its affiliates shall be permitted to Transfer (and enter into any Contract or option with respect to any such Transfer), 100% of the Restricted Amount (such maximum aggregate amount of shares, the “Transferrable Amount”), it being understood
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and agreed, for the avoidance of doubt, that prior to the date of such Acquirer Stockholders’ Meeting the Stockholder shall not enter into any Contract or option with respect to any such Transfer or publicly disclose, or take any action, that would reasonably be expected to require public disclosure of any intent or plan by Stockholder to engage in any such Transfer (provided that the foregoing shall not restrict the Stockholder from disclosing (including in any filing required by law to be made with the SEC) the existence of this Agreement or the rights of the Stockholder to Transfer Shares in accordance with this Agreement), (X) the transfer of any of the Shares by Stockholder to any managers, partners, members or other direct or indirect equity holders or affiliates of Stockholder (which, for the avoidance of doubt, shall include any investment fund or managed account that is managed on a discretionary basis by the same investment manager as Stockholder) or to any of its or their officers, directors or employees, but only if any such transferee shall execute a joinder or other instrument agreeing to be bound by the provisions of this Agreement, (Y) any pledge of the Shares in connection with a bona fide margin agreement or grant of a security interest in some or all of the Shares to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act, or (Z) any hedging or other transactions, including without limitation any short sales or purchases or sales of “derivative” securities based on securities issued by Acquirer, that do not result in the transfer of any of the Shares or the disposition of voting power in respect thereof prior to the termination of this Agreement. Stockholder hereby covenants and agrees that such Stockholder shall not (i) enter into any voting agreement or voting trust with respect to any of such Stockholder’s Shares that is inconsistent with such Stockholder’s obligations pursuant to this Agreement, grant a proxy or power of attorney with respect to any of such Stockholder’s Shares that is inconsistent with such Stockholder’s obligations pursuant to this Agreement or (iii) enter into any agreement or undertaking that is otherwise inconsistent with, or would interfere with, or prohibit or prevent such Stockholder from satisfying its obligations pursuant to this Agreement. In furtherance of the agreements set forth in this Agreement, Stockholder hereby authorizes Acquirer or its counsel to instruct its transfer agent to put in place a stop transfer order with respect to the Restricted Amount except with respect to Transfers of Shares permitted hereby.
Section 1.2 Agreement to Vote. Stockholder hereby unconditionally and irrevocably agrees that, at any meeting of the stockholders of Acquirer however called or at any adjournment thereof, or in any other circumstance that the vote, consent or other approval of the stockholders of Acquirer is sought (the “Requisite Vote”), such Stockholder shall (i) appear at such meeting or otherwise cause all of such Stockholder’s Shares to be counted present thereat for purposes of calculating a quorum and (ii) vote or cause to be voted (or duly and promptly execute and deliver, or cause to be duly and promptly executed and delivered, an action by written consent which written consent shall be delivered promptly, and in any event within three Business Days, after Acquirer, as applicable requests such delivery), all of such Stockholder’s Shares:
(a)to approve the issuance of the Stock Consideration pursuant to the Merger Agreement and the issuance of the shares of Acquirer Stock pursuant to the Subscription Agreements;
(b)to approve the appointment of the Specified Designees to the Acquirer Board for terms that expire no earlier than the end of the Second Milestone Period;
(c)to approve an amendment to the Company’s current Third Amended and Restated Certificate of Incorporation to increase the authorized shares of Acquirer Stock from 380,000,000 to 1,000,000,000;
(d)to approve any other proposal included in the Proxy Statement that is recommended by the Acquirer Board as necessary to consummate the Transactions;
(e)to approve any proposal that is recommended by the Acquirer Board to adjourn the meeting to a later date, if there are not sufficient affirmative votes (in person or by proxy) to obtain the requested approvals on the date on which such meeting is held; and
(f)against any and all other proposals that could reasonably be expected to delay or impair the ability of Acquirer to consummate the Transactions.
Nothing in this Agreement limits or restricts any Affiliate or designee of Stockholder who serves as a member of the Acquirer Board in acting or voting in his or her capacity as a director of Acquirer and exercising his or her fiduciary duties and responsibilities, it being understood that this Agreement applies to Stockholder solely in its
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capacity as a stockholder of Acquirer and does not apply to any such Affiliate or designee’s actions, judgments or decisions as a director of Acquirer, and such actions (or failures to act) shall not be deemed to constitute a breach of this Agreement.
Section 1.3 Proxy.
(a)Solely in furtherance of Section 1.2 of this Agreement and subject to termination as provided in Section 3.1 of this Agreement, Stockholder (i) hereby irrevocably grants to, and appoints, Acquirer or any individual designated by Acquirer as the Stockholder’s agent, irrevocable proxy and attorney-in-fact (with full power of substitution and resubstitution) to vote the Shares, provide written consents, express consent or otherwise utilize voting power as indicated in Section 1.2 of this Agreement; provided, however, that Stockholder’s grant of the proxy contemplated by this Section 1.3(a) shall be effective if, and only if, Stockholder has not delivered to the Secretary of Acquirer at least five Business Days prior to such meeting a duly executed proxy card previously approved by Acquirer voting Stockholder’s Shares in the manner specified in Section 1.2 or in the event such proxy card has been thereafter modified or revoked or otherwise fails to provide evidence of Stockholder’s compliance with its obligations under Section 1.2 in form and substance reasonably acceptable to Acquirer, (ii) hereby affirms that the irrevocable proxy set forth in this Section 1.3, if it becomes effective pursuant to clause (i), is given in connection with the execution of the Merger Agreement, and that such irrevocable proxy is given to secure the performance of the duties of Stockholder under this Agreement and (iii) hereby (a) affirms that the irrevocable proxy is coupled with an interest and (b) affirms that such irrevocable proxy, if it becomes effective pursuant to clause (i), is executed and intended to be irrevocable in accordance with the provisions of Section 212(e) of the General Corporation Law of the State of Delaware.
(b)Stockholder hereby represents that all proxies, powers of attorney, instructions or other requests given by Stockholder prior to the execution of this Agreement in respect of the voting of Stockholder’s Shares, if any, are not irrevocable and Stockholder hereby revokes (or causes to be revoked) any and all previous proxies, powers of attorney, instructions or other requests with respect to Stockholder’s Shares. The vote, if any, of the proxy holder pursuant to the proxy set forth in this Section 1.3 shall control the outcome, and be determinative, of any conflict between the vote by the proxy holder of the Shares and a vote by a Stockholder of the Shares. Stockholder shall provide evidence to Acquirer in connection with the actions of the Stockholder under or relating to this Section 1.3 as Acquirer shall reasonably request.
Section 1.4 No Challenges. Stockholder agrees not to commence, join in, facilitate, assist or knowingly encourage, and agrees to take all actions reasonably necessary to opt out of any class in any class action with respect to, any claim, derivative or otherwise, against Acquirer or any of its respective successors or directors challenging the validity of, or seeking to enjoin the operation of, any provision of this Agreement.
Section 1.5 No Ownership Interest. Nothing contained in this Agreement shall be deemed to vest in the Acquirer Parties any direct or indirect ownership or incidence of ownership of or with respect to any Shares, except as expressly provided herein. All rights, ownership and economic benefits of and relating to the Shares shall remain vested in and belong to Stockholder, and neither Acquirer nor Merger Subs shall have any authority to direct Stockholder in the voting or disposition of any of the Shares, except as otherwise provided herein.
Section 1.6 No Inconsistent Agreement. Stockholder hereby represents and covenants that such Stockholder has not entered into, shall not enter into and is not otherwise bound by, any agreement that would restrict, limit or interfere with the performance of such Stockholder’s obligations hereunder.
Section 1.7 Consent to Disclosure. Stockholder hereby consents to the publication and disclosure required by applicable securities Laws or the SEC or any other securities authorities, any other documents or communications provided by Acquirer to any Governmental Authority of such Stockholder’s identity and beneficial ownership of Shares and the nature of such Stockholder’s commitments, arrangements and understandings under and relating to this Agreement and, if deemed appropriate by Acquirer, a form of this Agreement. Stockholder will promptly provide any information reasonably requested by Acquirer that is necessary for any regulatory application or filing made or approval sought in connection with the Transactions (including filings with the SEC). The Acquirer shall provide Stockholder with a reasonable opportunity to review and comment on any disclosure made in accordance
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with Section 1.7 and shall consider in good faith any comments of Stockholder, and the Acquirer shall not make any substantive revision to information regarding Stockholder that is provided by Stockholder for inclusion in any filing with the SEC without Stockholder’s approval, which shall not be unreasonably withheld, delayed or conditioned.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of the Stockholder.          Stockholder represents and warrants as of the date hereof to Acquirer as follows:
(a)Organization; Due Authorization. If such Stockholder is not a natural person, it is duly organized, validly existing and in good standing under the Laws of the jurisdiction in which it is incorporated, formed, organized or constituted, and the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby are within such Stockholder’s corporate, limited liability company or organizational powers and have been duly authorized by all necessary corporate, limited liability company or organizational actions on the part of such Stockholder. If such Stockholder is a natural person, such Stockholder has full legal capacity, right and authority to execute and deliver this Agreement and to perform his or her obligations hereunder. This Agreement has been duly executed and delivered by such Stockholder and, assuming due authorization, execution and delivery by the other parties to this Agreement, this Agreement constitutes a legally valid and binding obligation of such Stockholder, enforceable against such Stockholder in accordance with the terms hereof (except as enforceability may be limited by bankruptcy Laws, other similar Laws affecting creditors’ rights and general principles of equity affecting the availability of specific performance and other equitable remedies). If this Agreement is being executed in a representative or fiduciary capacity, the Person signing this Agreement has full power and authority to enter into this Agreement on behalf of the applicable Stockholder.
(b)Ownership. Such Stockholder is the record and/or beneficial owner (as defined in Rule 13d-3 of the Exchange Act) of, and has good title to, all of such Stockholder’s Shares, and there exist no encumbrances or any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of such Shares (other than transfer restrictions under the Securities Act)) affecting any such Shares, other than encumbrances pursuant to (i) this Agreement, (ii) the certificate of incorporation of Acquirer, (iii) the Merger Agreement, (iv) pursuant to any existing lock-up agreement, (v) any applicable securities Laws or (vi) that would not prevent, enjoin or delay in any manner Stockholder’s performance of its obligations under this Agreement. Such Stockholder’s Shares are the only equity securities in Acquirer owned of record or beneficially by such Stockholder on the date of this Agreement, and none of such Stockholder’s Shares are subject to any proxy, voting trust or other agreement or arrangement with respect to the voting of such Shares, except as provided hereunder and under the certificate of incorporation of Acquirer or as noted on Schedule I. Such Stockholder does not hold or own any rights to acquire (directly or indirectly) any equity securities of Acquirer or any equity securities convertible into, or which can be exchanged for, equity securities of Acquirer other than warrants issued by the Acquirer prior to the date of this Agreement or earn-out shares issuable pursuant to the Agreement and Plan of Merger by and among Acquirer, S-IV Sub, Inc. and Mount Sinai Genomics, Inc. dated as of February 9, 2021, as amended.
(c)No Conflicts. The execution and delivery of this Agreement by such Stockholder does not, and the performance by such Stockholder of his, her or its obligations hereunder will not, (i) if such Stockholder is not an individual, conflict with or result in a violation of the organizational documents of such Stockholder or (ii) require any consent or approval that has not been given or other action that has not been taken by any Person (including under any Contract binding upon such Stockholder or such Stockholder’s Shares) to the extent such consent, approval or other action would prevent, enjoin or materially delay the performance by such Stockholder of its, his or her obligations under this Agreement.
(d)Litigation. There are no Proceedings pending against such Stockholder, or to the knowledge of such Stockholder threatened against such Stockholder, before (or, in the case of threatened Proceedings, that would be before) any arbitrator or any Governmental Authority, which in any manner challenges or seeks to prevent, enjoin or materially delay the performance by such Stockholder of its, his or her obligations under this Agreement.
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(e)Brokerage Fees. No broker, finder, investment banker or other Person is entitled to any brokerage fee, finders’ fee or other commission in connection with the transactions contemplated by the Merger Agreement based upon arrangements made by such Stockholder, for which Acquirer or any of its Affiliates may become liable.
(f)Acknowledgment. Such Stockholder understands and acknowledges that Seller and Acquirer are entering into the Merger Agreement in reliance upon such Stockholder’s execution, delivery and performance of this Agreement.
MISCELLANEOUS
9.1Assignment; Binding Effect. This Agreement and the rights and obligations of the Parties hereunder shall not be assignable or transferable by any Party (including in connection with a merger, consolidation, sale of substantially all of the assets of such Party or otherwise by operation of Law) without the prior written consent of (a) Acquirer, in the case of any such attempted assignment or transfer by Seller or any Company Party or (b) Seller, in the case of any such attempted assignment or transfer by any Acquirer Party. Any attempted assignment in violation of this Section 5.1    Notices.9.1 Any notice or communication undershall be null and void. Subject to the foregoing, this Agreement mustshall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns.
9.2Notices. All notices, demands, waivers and other communications pursuant to this Agreement will be in writing and will be deemed given by (i) deposit in the United States mail, addressed to the party to be notified, postage prepaid and registeredif delivered personally or certified with return receipt requested, (ii) delivery in person ordelivered by courier service providing evidence of delivery, or (iii) transmission by hand delivery, electronic mail or facsimile. Eachglobally recognized express delivery service to the Parties at the addresses set forth below or to such other address as the Party to whom notice is to be given to the other Parties in writing in accordance herewith. Any such notice, demand, waiver or other communication that is mailed, delivered, or transmitted in the manner described above shallwill be deemed sufficiently given, served, sent,to have been delivered and received (a) in the case of mailed notices,personal delivery, on the third (3rd) Business Day following the date on which it is mailed and, in the case of notices delivered by courier service, handsuch delivery, electronic mail (provided no “bounce back” or notice of non-delivery is received) or facsimile, at such time as it is delivered to the addressee (except(b) in the case of electronic mail, withon the date of sending if no automated notice of delivery receipt) or at such time asfailure is received by the sender, and (c) in the case of a globally recognized express delivery is refusedservice, on the date on which receipt by the addressee upon presentation. Any notice or communication under this Agreement must be addressed, ifis confirmed pursuant to the service’s systems.
If to an Acquirer Party, or after the Closing, to any member of the Company to: Group:
Sema4 Holdings Corp.
333 Ludlow Street, North Tower, 8th Floor
Stamford, CTConnecticut 06902and, if to any Holder, at such Holder’s address or contact information as set forth in the Company’s books and records. Any party may change its address for notice at any time and from time to time by written notice to the
Attention: General Counsel
Email: legal@sema4.com
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other parties hereto, and such change of addresswith a copy (which shall become effective after delivery of such notice as provided in this Section 5.1.not constitute notice) to:
Fenwick & West LLP
902 Broadway
New York, NY 10010
Email: eskerry@fenwick.com; vlupu@fenwick.com
Attention: Ethan A. Skerry; Victoria A. Lupu
If to Seller or, prior to Closing, the Company Parties, to: OPKO Health, Inc.
4400 Biscayne Blvd.
Miami, FL 33137
Attention: Steven D. Rubin
Email: srubin@opko.com
with a copy (which shall not constitute notice) to:
Greenberg Traurig, P.A.
333 S.E. 2nd St.
Suite 4400
Miami, FL 33131
Email: grossmanb@gtlaw.com; altmand@gtlaw.com
Attention: Robert L. Grossman; Drew M. Altman
Section 5.2    9.3Assignment; No Third Party BeneficiariesGoverning Law.
5.2.1 This Agreement, and theany non-contractual rights duties and obligations of the Company and the Holders hereunder may not be assigned or delegated by the Company or the Holders, as the case may be, in whole or in part.
5.2.2    Prior to the expiration of the Founder Shares Lock-up Period or the Private Placement Lock-up Period, as the case may be, no Existing Holder who is subject to either or both the Founder Shares Lock-up Period or the Private Placement Lock-up Period may assign or delegate such Existing Holder’s rights, duties or obligations under this Agreement, in wholearising out of or in part, except in connection with a transferit, and all Disputes will be governed by, and enforced and construed in accordance with, the Laws of Registrable Securities by such Holder to a Permitted Transferee, to an Affiliate or as otherwise permitted pursuantthe State of Delaware, without regard to the termsconflict of laws rules of such state that would result in the application of the Founder Shares Lock-up Period,Laws of another jurisdiction.
9.4Jurisdiction; Venue. Each of the Private Placement Lock-up PeriodParties irrevocably consents to the exclusive jurisdiction and venue in the Delaware Court of Chancery within the State of Delaware (or, if the Delaware Court of Chancery declines to accept jurisdiction over a particular matter, any court of the United States located in the State of Delaware, or, other lock-up period, as applicable.
5.2.3    This Agreementif any such court of the United States located in the State of Delaware declines to accept jurisdiction over a particular matter, any state court located in the State of Delaware) in connection with any Dispute and the provisions hereofagrees that process shall be bindingserved upon and shall inure tosuch Party in the benefit of each of the parties and its successors and the permitted assigns of the applicable Holders, which shall include Permitted Transferees.
5.2.4    This Agreement shall not confer any rights or benefits on any Persons that are not parties hereto, other than as expresslymanner set forth in this AgreementSection9.2, and Section 5.2 hereof.
5.2.5    No assignment (includingthat service in such manner shall constitute valid and sufficient service of process. Each Party waives and covenants not to a Permitted Transferee) byassert or plead any party hereto ofobjection that such party’s rights, dutiesParty might otherwise have to such jurisdiction, venue and obligations hereunder shall be binding uponprocess. Each Party hereby agrees not to commence any legal proceedings relating to or obligate the Company unless and until the Company shall have received (a) written notice of such assignment as provided in Section 5.1 hereof and (b) the written agreement of the assignee, in a form reasonably satisfactory to the Company, to be bound by the terms and provisionsarising out of this Agreement (which may be accomplished by an addendum or certificate of joinder to this Agreement). Any transferthe Transactions in any jurisdiction or assignment madecourts other than as provided herein.
9.5WAIVER OF JURY TRIAL. EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY OR DISPUTES RELATING HERETO. EACH PARTY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF A DISPUTE, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.5.
9.6Amendments and Waivers. This Agreement may be amended, modified, superseded or canceled and any of the terms, covenants, representations, warranties or conditions hereof may be waived only by an instrument in this Section 5.2writing signed by Acquirer and Seller, or, in the case of a waiver, by or on behalf of the Party waiving compliance (which, in the case of a waiver of any obligation of Acquirer following the Closing, shall be null and void.Seller). No course of dealing between the Parties shall be effective to amend or waive any provision of this Agreement. The waiver by
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Section 5.3    
any Party of any right hereunder or of the failure to perform or of a breach by any other Party shall not be deemed a waiver of any other right hereunder or of any other breach or failure by such other Party whether of a similar nature or otherwise.
9.7Counterparts. This Agreement may be executed in multipleany number of counterparts (including facsimile, PDFelectronically), and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. Delivery of an executed counterpart of a signature page of this Agreement by electronic mail or other electronic transmission), each of whichtransmission shall be deemedeffective as delivery of a manually executed original counterpart of this Agreement.
9.8Severability. Any term or provision of this Agreement that is held by a court of competent jurisdiction or arbitrator to be invalid, void or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the invalid, void or unenforceable term or provision in any other situation or in any other jurisdiction. If the final judgment of such court or arbitrator declares that any term or provision hereof is invalid, void or unenforceable, the Parties agree to (a) reduce the scope, duration, area or applicability of the term or provision, to delete specific words or phrases, and (b) replace any invalid, void or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the original intention of the invalid or unenforceable term or provision.
9.9Schedules; Exhibits. The Schedules and the Exhibits referenced in this Agreement are a material part hereof and shall be treated as if fully incorporated into the body of the Agreement.
9.10No Third Party Beneficiaries. Nothing expressed or referred to in this Agreement will be construed to give any Person other than the Parties (and their successors and permitted assigns), the D&O Indemnified Persons pursuant to Section 5.12(b) and Indemnified Parties that are not Parties pursuant to Article 8 any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement.
9.11Expenses. Except as otherwise provided herein, all fees and expenses incurred in connection with this Agreement and the Transactions, including fees and expenses of financial advisors, financial sponsors, legal counsel and other advisors, shall be paid by the Party incurring such expenses whether or not the Transactions are consummated.
9.12No Strict Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an original,ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement.
9.13Injunctive Relief; Specific Performance. The Parties hereby acknowledge that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached and that the non-breaching Parties would not have any adequate remedy at law. Accordingly, each Party shall be entitled to an injunction or injunctions to prevent breaches or threatened breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. Any requirements for the securing or posting of which together shall constitute the same instrument, but only one of which need be produced.any bond with such remedy are waived.
Section 5.4    9.14Governing Law; Venue. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT (I) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK AS APPLIED TO AGREEMENTS AMONG NEW YORK RESIDENTS ENTERED INTO AND TO BE PERFORMED ENTIRELY WITHIN NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS OF SUCH JURISDICTION THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION AND (II) THE VENUE FOR ANY ACTION TAKEN WITH RESPECT TO THIS AGREEMENT SHALL BE ANY STATE OR FEDERAL COURT IN NEW YORK COUNTY IN THE STATE OF NEW YORK.
Section 5.5    Amendments and ModificationsFurther Assurances. Upon the reasonable request of Acquirer or Seller, each Party will, on and after the Closing Date, execute and deliver, or cause to be executed and delivered, to the other Party such other documents, assignments and other instruments or will take, or cause to be taken, all such further actions as may be reasonably required to effect and evidence the provisions of this Agreement and the Transactions.
9.15Entire Agreement. This Agreement, together with the Ancillary Agreements, the Confidentiality Agreement and the other documents and instruments specifically referred to herein, all Exhibits and Schedules hereto (which are a material part hereof and shall be treated as if fully incorporated into the body of this Agreement), and the Company Disclosure Schedules and the Acquirer Disclosure Schedules, constitutes the entire agreement among the Parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, consent of the Company and the Holders of at least a majority-in-interest of the Registrable Securities at the time in question, compliance with any of the provisions, covenants and conditions set forth in this Agreement may be waived, or any of such provisions, covenants or conditions may be amended or modified; provided, however, that, notwithstanding the foregoing, any amendment hereto or waiver hereof that adversely affects either the Existing Holders as a group or the New Holders as a group, respectively, in a manner that is materially adversely different from the Existing Holders or New Holders, as applicable, shall require the consent of at least a majority-in-interest of the Registrable Securities held by such Existing Holders or New Holders, as applicable, at the time in question; provided, further, that, notwithstanding the foregoing, any amendment hereto or waiver hereof that adversely affects one Holder, solely in its capacity as a holder of the shares of capital stock of the Company, in a manner that is materially different from the other Holders (in such capacity) shall require the consent of the Holder so affected; provided, further, that notwithstanding the foregoing, any amendment to Section 2.6 that affects a party hereto shall require the written consent of such party. No course of dealing between any Holder or the Company and any other party hereto or any failure or delay on theParties.
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part9.16Investigation and Non-Reliance. Each of a Holder orSeller and the Company in exercisingParties, on one hand, and the Acquirer Parties, on the other, is a sophisticated seller or purchaser, as the case may be, and has made its own independent investigation, review and analysis regarding the other Party and the Transactions, which investigation, review and analysis were conducted by such Party together with its advisors, including legal counsel, that it has engaged for such purpose. No Party or any rightsof their respective Affiliates or remedies under this Agreement shall operateRepresentatives has made any representation or warranty, express or implied, as a waiverto the accuracy or completeness of any rights or remedies of any Holder or the Company. No single or partial exercise of any rights or remedies under this Agreement by a party shall operate as a waiver or preclude the exercise of any other rights or remedies hereunder or thereunder byinformation concerning such party.
Section 5.6    Other Registration Rights. Other than pursuant to the terms of the Subscription AgreementsParty made available in connection with the PIPE Investment, the Company representsany investigation of such Party, except as expressly set forth in this Agreement. No Party has relied and warrants that no Person, other than a Holder of Registrable Securities, hasParty is relying on any right to require the Company to register any securities of the Company for salestatement, representation or to include such securities of the Company in any Registration filedwarranty, oral or written, express or implied, made by the Company forother Party, or any their respective Affiliates or Representatives, except as expressly set forth in Article 3, Article 4 or any Transaction Certificates (or, with respect to Seller and the saleother Lock-Up Holders, the Shareholder Agreement). No Party or any of securities for its own accounttheir respective Affiliates or forRepresentatives shall have or be subject to any liability to any other Party or any other Person resulting from the accountdistribution to any other Party, or such other Party’s use of, any information, documents or materials made available to such Party in the Data Room. No Party or any of their respective Affiliates or Representatives is making, directly or indirectly, any representation or warranty with respect to any estimates, projections or forecasts involving the such Party or any other Person. The Company represents, warrantsEach Party acknowledges that there are inherent uncertainties in attempting to make such estimates, projections and agreesforecasts and that this Agreement supersedes any other registration rights agreement or agreement with similar termsit takes full responsibility for making its own evaluation of the adequacy and conditions among the parties thereto, and in the eventaccuracy of a conflict between any such agreementestimates, projections or agreements and this Agreement,forecasts (including the terms of this Agreement shall prevail. To the extent the Company grants any Person(s) the right to request the Company or any of its subsidiaries to register any equity securitiesreasonableness of the Company orassumptions underlying any of its subsidiaries or any securities convertible or exchangeable into or exercisable for such securities, the Company shall grant piggyback registration rights to the New Holders in connection therewith.
Section 5.7    Term. This Agreement shall terminate upon the earlier of (a) the tenth anniversary of the date of this Agreement, (b) the date as of which all of the Registrable Securities have been sold pursuant to a Registration Statement (but in no event prior to the applicable period referred to in Section 4(a)(3) of the Securities Actestimates, projections and Rule 174 thereunder (or any successor rule promulgated thereafter by the Commission)) or (c) with respect to a particular Holder, the date as of which all Registrable Securities held by such Holder have been sold (x) pursuant to a Registration Statement (but in no event prior to the applicable period referred to in Section 4(a)(3) of the Securities Act and Rule 174 thereunder (or any successor rule promulgated thereafter by the Commission)) or (y) under Rule 144 or another exemption from registration under the Securities Act. The provisions of Section 3.5 and Article IV shall survive any termination.
Section 5.8    Rules of Constructionforecasts). Any provision of this Agreement that refers to the words “include,” “includes” or “including” shall be deemed to be followed by the words “without limitation.” References to numbered or letter articles, sections and subsections refer to articles, sections and subsections, respectively, of this Agreement unless expressly stated otherwise. All references to this Agreement include, whether or not expressly referenced, the exhibits and schedules attached hereto. References to a Section, paragraph, Exhibit or Schedule, such reference shall be to a Section or paragraph of, or Exhibit or Schedule to, this Agreement unless otherwise indicated. The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The word “or” when used in this Agreement is not exclusive. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Any agreement, instrument, law or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument, or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and includes references to all attachments thereto and instruments incorporated therein unless otherwise indicated. References to a Person are also to its permitted successors and assigns. In the event that any claim is made by any Person relating to any conflict, omission or ambiguity in this Agreement, no presumption or burden of proof or persuasion shall be implied by virtue of the fact that this Agreement was prepared by or at the request of a particular Person or its counsel.
[Signature Pages Follow]remainder of page intentionally left blank]
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IN WITNESS WHEREOF,, the undersignedParties have executed this Agreement or caused this Agreement to be duly executed by their respective officers thereunto duly authorized, all as of the date first written above.above written.
GENEDX, INC.
COMPANY:
CM LIFE SCIENCES, INC., a Delaware corporation
By:/s/ Katherine Stueland
Name:By:Katherine Stueland
Title:President and Chief Executive Officer
Name:GENEDX HOLDING 2, INC.
Title:
By:/s/ Steven D. Rubin
Name:EXISTING HOLDERS:Steven D. Rubin
Title:President
CMLS HOLDINGS LLC, a Delaware limited liability companyOPKO HEALTH, INC.
By: /s/ Steven D. Rubin
Name:By:Steven D. Rubin
Title:Executive Vice President, Administration
[Signature Page to Agreement and Plan of Merger and Reorganization]

IN WITNESS WHEREOF, the Parties have executed this Agreement or caused this Agreement to be duly executed by their respective officers thereunto duly authorized, all as of the date first above written.
Name:SEMA4 HOLDINGS CORP.
Title:
By:/s/ Eric Schadt
Name:Eric Schadt
Title:Chief Executive Officer
Name: Munib IslamORION MERGER SUB I, INC.
By:/s/ Eric Schadt
Name:Name: Emily LeproustEric Schadt
Title:President
ORION MERGER SUB II, INC.
By:/s/ Eric Schadt
Name:Eric Schadt
Title:President
[Signature Page to Agreement and Plan of Merger and Reorganization]

EXHIBIT A
Form of Shareholder Agreement
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SHAREHOLDER AGREEMENT
[], 2022
Sema4 Holdings Corp.
333 Ludlow Street,
North Tower, 8th floor
Stamford, CT 06902
Ladies and Gentlemen:
This letter agreement (this “Agreement”) relates to that certain Agreement and Plan of Merger, dated as of January 14, 2022 (as amended, restated, supplemented or modified from time to time, the “Merger Agreement”), by and among Sema4 Holdings Corp., a Delaware corporation (“Acquirer”), Orion Merger Sub I, Inc., a Delaware corporation, Orion Merger Sub II, LLC (“Merger Sub I”), a Delaware limited liability company (“Merger Sub II”), GeneDx, Inc, a New Jersey corporation, GeneDx Holding 2, Inc., a Delaware Corporation (“Holdco2”), and OPKO Health, Inc., a Delaware Corporation (the “Seller”), pursuant to which Merger Sub I will merge with and into Holdco2 (the “First Merger”), with Holdco2 surviving such merger, following which Holdco2 will merge with and into Merger Sub II (the “Second Merger” and, together with the First Merger, the “Mergers”), with Merger Sub II continuing on as the surviving entity (the “Surviving Entity”) and a wholly owned subsidiary of Acquirer, on the terms and conditions set forth therein. Capitalized terms used and not otherwise defined herein are defined in the Merger Agreement and shall have the respective meanings given to such terms in the Merger Agreement.
1.In order to induce the Acquirer Parties to consummate the transactions contemplated by the Merger Agreement 1[and as a condition to any transaction in which the Seller would distribute or otherwise transfer shares of Acquirer Stock to the undersigned], the undersigned hereby agrees that[, with respect to the portion of the Merger Consideration distributed or otherwise transferred to the undersigned], from the Closing Date until: (a) in the case of the stock portion of the Merger Consideration issued at the Closing, the date that is one (1) year from the Closing Date, (b) if and to the extent earned, in the case of the stock portion of the first Milestone Payment, the date that is one (1) year from the date of issuance for such payment and (c) if and to the extent earned, in the case of the stock portion of the second Milestone Payment, the date that is six (6) months from the date of issuance of such stock (the period between the Closing Date and the date indicated in clause (a) or (b), as applicable, a “Lock-Up Period” and the shares to which such respective Lock-Up Period applies, the “Lock-Up Shares”), the undersigned will not (i) offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any Lock-Up Shares, (ii) enter into a transaction which would have the same effect, or (iii) enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of such Lock-Up Shares, whether any such aforementioned transaction is to be settled by delivery of such Lock-Up Shares, in cash or otherwise, or publicly disclose the intention to make any such offer, sale, pledge or disposition, or to enter into any such transaction, swap, hedge or other arrangement (collectively, clauses (i) through (iii), the “Restricted Actions”).
2.Following the termination of any applicable Lock-Up Period (such date, the “Lock-Up Termination Date”) and for so long as the undersigned is the record or beneficial owner of at least 5% of the issued and outstanding Acquirer Stock, the undersigned hereby agrees that during any consecutive ninety (90) day period following the applicable Lock-Up Termination Date, the undersigned shall not, without the prior written consent of Acquirer (such consent not to be unreasonably, withheld, conditioned or delayed), take any Restricted Action that would result in the sale or other disposition of Lock-Up Shares in an amount that exceeds 25% of the total number of shares of Acquirer Stock 2[received by the undersigned in the Mergers][distributed or otherwise transferred to the undersigned by Seller], except as part of a marketed sale process for which one lead Bookrunner (as defined herein) has been selected by Acquirer in its sole discretion (such discretion to be exercised reasonably). For purposes of this Section 2, a “Bookrunner” shall mean a securities dealer who either (a) purchases the applicable securities as principal in an underwritten, registered
1 Bracketed language to be included for OPKO stockholders.
2 Bracketed language for each of OPKO and its stockholders.
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direct or other public offering registered under the Securities Act and not solely as part of such dealer’s market-making activities or (b) acts as placement agent in a private placement or offering of the applicable securities.
3.For the avoidance of doubt, none of the restrictions set forth in Section 1 or Section 2 of this Agreement shall apply to: (a) any shares of Acquirer Stock purchased by the undersigned in the open market or in any private sale transaction or otherwise or in any public or private capital raising transaction of Acquirer or otherwise, other than the Lock-up Shares; or (b) the inclusion of any Lock-Up Shares (but not the subsequent sale or transfer of such Lock-Up Shares) as part of the Initial Shelf (as defined below) or any other Registration Statement (as defined below) filed pursuant to Section 8(a) of this Agreement. For the avoidance of any doubt, the parties hereto acknowledge and agree that the undersigned shall retain all of its rights as a stockholder of Acquirer during the applicable Lock-up Period, including, without limitation, the right to vote, and to receive any dividends and distributions in respect of, the Lock-Up Shares, subject to the terms of this Agreement.
4.The undersigned hereby authorizes Acquirer during the applicable Lock-Up Period to cause its transfer agent for the Lock-Up Shares to decline to transfer, and to note stop transfer restrictions on the stock register and other records relating to the Lock-Up Shares for which the undersigned is the record holder.
5.Notwithstanding the foregoing, the undersigned may sell or otherwise transfer the Lock-Up Shares during the undersigned’s lifetime or on death (or, if the undersigned is not a natural person, during its existence) (a) if the undersigned is not a natural person, to its managers, partners (direct or indirect), members or other direct or indirect equity holders until the Lock-Up Shares come to be held by a natural person or to any of its other Affiliates or any subsidiary, employee, officer, director, investment fund controlling, controlled, managing or managed by or under common control with the undersigned or Affiliates of the undersigned (including, for the avoidance of doubt, where the undersigned is a partnership, to its general partner or a successor partnership or fund, or any other funds managed by such partnership), to the immediate family members (for purposes of this Agreement, “immediate family” shall mean any relationship by blood, current or former marriage, domestic partnership or adoption, not more remote than first cousin) of the undersigned, (c) to a partnership, limited liability company or other entity of which the undersigned and the immediate family members of the undersigned are the legal and beneficial owner of all of the outstanding equity securities or similar interests, (d) to a family trust, foundation or partnership established for the direct or indirect benefit of the undersigned, its equity holders or any of their respective immediate family members, or if the undersigned is a trust, to a trustor or beneficiary of the trust or to the estate of a beneficiary of such trust, (e) to a charitable foundation controlled by the undersigned, its Affiliates, partners, members or other direct or indirect equityholders or any of their respective immediate family members, (f) by will or intestacy, (g) by operation of law or pursuant to an order of a court (including a qualified domestic order, divorce settlement, divorce decree or separation agreement) or regulatory agency or (h) pursuant to a bona fide third-party tender offer, merger, consolidation or other similar transaction that is approved by the Acquirer Board and made to all holders of Acquirer’s capital stock involving an Acquirer Change in Control; provided that in the event that such tender offer, merger, consolidation or other similar transaction is not completed, the undersigned’s Lock-Up Shares shall remain subject to the provisions of this Agreement; provided, however, that in the case of each of clauses (a) through (g), any such sale or transfer shall be conditioned upon entry by such transferees into a written agreement, addressed to Acquirer, agreeing to be bound by these transfer restrictions and the other terms and conditions of this Agreement; and provided, further, for the avoidance of doubt, that nothing contained herein shall limit or restrict the admission of new managers, partners, members or other direct or indirect equityholders in, or the increase or decrease in the ownership interests of any managers, partners, members or other direct or indirect equity holders of, any entity holding any of the Lock-Up Shares.
6.For so long as the undersigned remains the record or beneficial owner of at least five percent (5%) of the outstanding Acquirer Stock, the undersigned agrees to vote all of his, her or its Lock-Up Shares, from time to time and at all times, in whatever manner is recommended by the Acquirer Board.
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7.The undersigned agrees that, for a period of twelve (12) months from the Closing Date (the “Standstill Period”), neither the undersigned nor any of its Affiliates or subsidiaries will, directly or indirectly, without the prior written consent of the Acquirer Board or Acquirer’s chief executive officer:
(a)acquire or agree, offer, seek or propose to acquire, or cause to be acquired, ownership (including any voting right or beneficial ownership as defined in Rule 13d-3 under the Exchange Act) of any voting securities of Acquirer or any of its subsidiaries or any option, forward contract, swap or other position with a value derived from voting securities of Acquirer or any of its subsidiaries or conveying the right to acquire or vote securities of Acquirer or any of its subsidiaries, or any ownership of any of the assets or businesses of Acquirer or any of its subsidiaries, or any rights or options to acquire any such ownership (including from a third party);
(b)make, or in any way participate in, any “solicitation” (as such terms is defined in Rule 14a- 1 under the Exchange Act, including any otherwise exempt solicitation pursuant to Rule 14a-2(b) under the Exchange Act) to vote or seek to advise or influence in any manner whatsoever any Person with respect to the voting of any securities of Acquirer or any of its subsidiaries;
(c)form, join, or in any way participate in a “group” (within the meaning of Section 13(d)(3) of the Exchange Act) with respect to any voting securities of Acquirer or any of its subsidiaries, other than any “group” to which it already belongs as of the date of this Agreement;
(d)arrange, or in any way participate in, any financing for the purchase of any voting securities or securities convertible or exchangeable into or exercisable for any voting securities or assets of Acquirer or any of its subsidiaries;
(e)propose, alone or with others, to Acquirer or any of its stockholders any merger, business combination, tender or exchange offer, restructuring, recapitalization, liquidation of or other transaction with or involving Acquirer or any of its subsidiaries or otherwise act, whether alone or with others, to seek to control, change or influence the management, board of directors or policies of Acquirer, or nominate any person as a director of Acquirer, or propose any matter to be voted upon by the stockholders of Acquirer;
(f)solicit or provide any material non-public information to any Person with respect to a merger, business combination, tender or exchange offer, restructuring, recapitalization, liquidation of or other transaction with or involving Acquirer or any of its subsidiaries or any other acquisition of Acquirer or any of its subsidiaries, any acquisition of voting securities of or all or any portion of the assets of Acquirer or any of its subsidiaries, or any other similar transaction;
(g)advise, assist or knowingly encourage any other Person in connection with any of the foregoing;
(h)enter into any discussions, negotiations, arrangements or understandings with any third party with respect to, any of the foregoing, or announce an intention to do so;
(i)take any action that would reasonably be expected to require Acquirer to make a public announcement regarding any of the types of matters set forth in this Section 7; or
(j)disclose any intention, plan or arrangement inconsistent with the foregoing. Notwithstanding anything to the contrary in this Section 7, nothing shall prevent a private communication to the Acquirer Board or Acquirer’s chief executive officer which does not require public disclosure by Acquirer (whether under applicable law or under the rules of its securities exchange, but other than in a proxy statement or Schedule 14d-9 with respect to a Transaction following execution of a definitive agreement between the Parties).
8.Registration Rights.
(a)Acquirer agrees that, as soon as practicable, but in no event later than thirty (30) calendar days after the Closing Date (the “Filing Date”), Acquirer will file with the SEC (at Acquirer’s sole cost and expense) a registration statement registering the resale of the Registrable Securities (as defined below) held by the Holders (as defined below) from time to time as permitted by Rule 415 under the Securities Act (or any successor or similar provision adopted by the SEC then in effect) (the “Initial Shelf” and any registration statement that covers the
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Registrable Securities pursuant to the provisions of this Agreement, including the prospectus included in such registration statement, amendments (including post-effective amendments) and supplements to such registration statement, and all exhibits to and all material incorporated by reference in such registration statement, a “Registration Statement”), and Acquirer shall use its commercially reasonable efforts to cause the Initial Shelf to be declared effective as soon as practicable after the filing thereof, but no later than the earlier of (i) the 60th calendar day (or 90th calendar day if the SEC notifies Acquirer that it will “review” the Initial Shelf) following the Closing and (ii) the fifth (5th) Business Day after the date Acquirer is notified (orally or in writing, whichever is earlier) by the SEC that the Initial Shelf will not be “reviewed” or will not be subject to further review (such earlier date, the “Effectiveness Date”); provided that if the SEC is closed for operations due to a government shutdown or otherwise, the Effectiveness Date shall be extended by the same amount of days that the SEC remains closed for operations. Without limiting the foregoing, as soon as practicable, but in no event later than three (3) Business Days, following the resolution or clearance of all SEC comments or, if applicable, following notification by the SEC that the Initial Shelf or any amendment thereto will not be subject to review, Acquirer shall file a request for acceleration of effectiveness of such Registration Statement (to the extent required, by declaration or ordering of effectiveness, of such Registration Statement or amendment thereto by the SEC) to a time and date not later than two (2) Business Days after the submission of such request. The Initial Shelf filed with the SEC pursuant shall be on Form S-1 or such other form of registration statement as is then available to effect a registration for resale of the Registrable Securities, provided, that Acquirer shall file, within thirty (30) days of such time as Form S-3 is available for the Initial Shelf, a post- effective amendment to the Initial Shelf then in effect, or otherwise file a Registration Statement on Form S-3, registering the Registrable Securities held by the Holders for resale on Form S-3 (provided that Acquirer shall use commercially reasonable efforts to maintain the effectiveness of the Initial Shelf then in effect until such time as a Registration Statement (or post-effective amendment) on Form S-3 covering such Registrable Securities has been declared effective by the SEC). Notwithstanding anything else in this Agreement, Acquirer’s obligations to include the applicable Registrable Securities of a Holder in a Registration Statement are contingent upon such Holder furnishing in writing to Acquirer such information regarding such Holder, the securities of Acquirer held by such Holder, the intended method of disposition of the applicable Registrable Securities and such other information as shall be reasonably requested by Acquirer to effect the registration of the applicable Registrable Securities on or prior to the third (3rd) Business Day prior to the first anticipated filing date of such Registration Statement, provided that the request by Acquirer shall be made not less than ten (10) Business Days prior to the first anticipated filing date of such Registration Statement. The Holders shall execute such documents in connection with such registration as Acquirer may reasonably request that are customary of a selling stockholder in similar situations; provided that under no circumstances shall a Holder be required to sign any type of additional lock-up agreement. Any failure by Acquirer to file the Initial Shelf by the Filing Date or for the Initial Shelf to be declared effective by the Effectiveness Date shall not otherwise relieve Acquirer of its obligations to file or effect the Initial Shelf as set forth above in this Section 8(a). In no event shall a Holder be identified as a statutory underwriter in a Registration Statement unless requested by the SEC; provided that, if the SEC requests that a Holder be identified as a statutory underwriter in a Registration Statement, such Holder will have an option, in its sole and absolute discretion, to withdraw the applicable Registrable Securities from such Registration Statement. Notwithstanding the foregoing, if the SEC prevents Acquirer from including any or all of the shares proposed to be registered under any single Registration Statement filed pursuant to this Section 8(a) due to limitations on the use of Rule 415 of the Securities Act for the resale of the applicable Registrable Securities by the applicable stockholders or otherwise, Acquirer agrees to promptly (i) inform each of the Holders thereof and use its commercially reasonable efforts to file amendments to such Registration Statement as required by the SEC and (ii) as soon as practicable but in no event later than the twentieth (20th) calendar day following the first date on which such Registrable Securities may then be included in a registration statement, file an additional Registration Statement (a “New Registration Statement”), on Form S-3, or if Form S-3 is not then available to Acquirer for such Registration Statement, on such other form available to register for resale the Registrable Securities held by the Holders as a secondary offering; provided, however, that prior to filing such amendment or New Registration Statement, Acquirer shall be obligated to use its commercially reasonable efforts to advocate with the SEC for the registration of all of the Registrable Securities in accordance with any publicly- available written or oral guidance, comments, requirements or requests of the SEC staff (the “SEC Guidance”), including without limitation, the Manual of Publicly Available Telephone Interpretations D.29. The Holders shall have the right to participate or have their respective legal counsel participate in any meetings or discussions with the SEC regarding the SEC’s position and to comment or have their respective counsel comment on any written submission made to the SEC with respect thereto. No such written submission shall
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be made to the SEC to which any such Holder’s counsel reasonably objects. Notwithstanding any other provision of this Agreement, if any SEC Guidance sets forth a limitation of the number of Registrable Securities permitted to be registered on a particular Registration Statement as a secondary offering, unless otherwise directed in writing by a Holder as to its Registrable Securities directing the inclusion of less than such Holder’s pro rata amount, the number of Registrable Securities to be registered on such Registration Statement will be reduced on a pro rata basis based on the total number of Registrable Securities held by the Holders. Acquirer will use its commercially reasonable efforts to cause the Initial Shelf to remain effective, and to be supplemented and amended to the extent necessary to ensure that the Initial Shelf is available or, if not available, that another Registration Statement is available at all times, for the public resale of all the Registrable Securities held by the Holders until all such Registrable Securities have ceased to be Registrable Securities. Acquirer will provide all customary and commercially reasonable cooperation necessary to enable the Holders to resell Registrable Securities pursuant to a Registration Statement or Rule 144 under the Securities Act (“Rule 144”), as applicable, qualify the Registrable Securities for listing on the primary stock exchange on which the Acquirer Stock is then listed, update or amend a Registration Statement as necessary to include Registrable Securities and provide customary notice to holders of Registrable Securities. “Holders” shall mean (i) the undersigned, (ii) [Seller][any 5% Insider (as defined below)] 3that is entering into a separate shareholder agreement with Acquirer on the date hereof with registration rights that are substantially similar to the registration rights set forth in this Section 8 (an “Other Shareholder Agreement”) and (iii) any 5% Insider who hereafter becomes a party to this Agreement or such Other Shareholder Agreement pursuant to Section 8(r) hereof or the corresponding section of such Other Shareholder Agreement, as applicable. “Registrable Securities” shall mean, as of any date of determination, (a) the Lock-Up Shares held by the undersigned, (b) the Lock- Up Shares held by any other Holder, and (c) any other equity security of Acquirer issued or issuable with respect to the Lock-Up Shares referred to in clause (a) or (b) by way of share split, dividend, distribution, recapitalization, merger, exchange, replacement or similar event or otherwise. As to any particular Registrable Securities, once issued, such securities shall cease to be Registrable Securities at the earliest of: (A) when a Registration Statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been sold, transferred, disposed of or exchanged in accordance with such Registration Statement; (B) the date all Registrable Securities held by such Holder may be sold without restriction under Rule 144, including without limitation, any volume and manner of sale restrictions which may be applicable to Affiliates under Rule 144, and without the requirement for Acquirer to be in compliance with the current public information required under Rule 144; (C) such securities have been otherwise transferred, new certificates for such securities not bearing a legend restricting further transfer shall have been delivered by Acquirer and subsequent public distribution of such securities shall not require registration under the Securities Act; or (D) such securities have been sold to, or through, a broker, dealer or underwriter in a public distribution or other public securities transaction.
(b)At any time and from time to time following the effectiveness of the Initial Shelf and following the expiration of any applicable Lock-up Period, any Holder may request to sell all or a portion of its Registrable Securities in a underwritten offering that is registered pursuant to a shelf registration statement under the Securities Act on Form S-3 pursuant to Rule 415, including by way of an underwritten offering, block sale or other distribution plan (a “Shelf Underwritten Offering”); provided that such Holder(s) reasonably expects to sell Registrable Securities yielding aggregate gross proceeds in excess of $50,000,000 from such Shelf Underwritten Offering (such amount of Registrable Securities, the “Minimum Amount”). All requests for a Shelf Underwritten Offering shall be made by giving written notice to Acquirer (the “Shelf Take Down Notice”). Each Shelf Take Down Notice shall specify the approximate number of Registrable Securities proposed to be sold in the Shelf Underwritten Offering and the expected price range (net of underwriting discounts and commissions) of such Shelf Underwritten Offering. Acquirer shall, subject to Section 8(c) (the “MNPI Provisions”), give written notice of such requested Shelf Underwritten Offering to all other Holders of Registrable Securities (the “Company Shelf Takedown Notice”) and, subject to the provisions of Section 8(e), shall include in such Shelf Underwritten Offering all Registrable Securities with respect to which Acquirer has received written requests for inclusion therein, within five (5) calendar days after sending the Company Shelf Takedown Notice. Acquirer shall enter into an underwriting agreement in a form as is customary in underwritten offerings of securities by the Company with the managing underwriter or underwriters selected by the Holders holding a majority-in-interest of the Registrable Securities to be included in such Shelf Underwritten Offering after consultation with, and approval (which shall not be unreasonably withheld, conditioned
3 Bracketed alternative language to be included for either OPKO or OPKO stockholders, as applicable.
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or delayed) by, Acquirer and shall take all such other reasonable actions as are requested by the managing underwriter or underwriters in order to expedite or facilitate the disposition of such Registrable Securities; provided, that, notwithstanding the foregoing, the selection of one lead Bookrunner in such Shelf Underwritten Offering shall be in the sole discretion of Acquirer (such discretion to be exercised reasonably) to the extent Section 2 is applicable. In connection with any Shelf Underwritten Offering contemplated by this Section 8(b), subject to Section 8(l) and Section 8(p), the underwriting agreement into which each Holder and Acquirer shall enter shall contain such representations, covenants, indemnities and other rights and obligations of Acquirer and the selling stockholders as are customary in underwritten offerings of securities by Acquirer. The Holders may demand not more than two (2) Shelf Underwritten Offerings pursuant to this Section 8(b) in any 12-month period. At least ten (10) Business Days prior to the first anticipated filing date of a Registration Statement pursuant to Sections 8(a), 8(b), 8(d) and 8(g), Acquirer shall use reasonable efforts to notify each Holder in writing (which may be by email) of the information reasonably necessary about the Holder to include such Holder’s Registrable Securities in such Registration Statement.
(c)Notwithstanding anything in this Agreement or any Other Shareholder Agreement to the contrary, Acquirer will not provide any material, nonpublic information to any Holder without the prior written consent of such Holder, and in the event that Acquirer believes that a notice or communication required by this Agreement or any Other Shareholder Agreement to be delivered to any Holder contains material, nonpublic information relating to Acquirer, its securities, any of its Affiliates or any other Person, Acquirer shall so indicate to such Holder prior to delivery of such notice or communication, and such indication shall provide such Holder the means to refuse to receive such notice or communication. No Holder nor any of its Affiliates or representatives shall have any duty of trust or confidence with respect to, or obligation not to trade in any securities while aware of, any material, nonpublic information provided to such Holder, Affiliate or representative in violation of this Section 8(c). Notwithstanding the foregoing, to the extent Acquirer reasonably and in good faith determines that it is necessary to disclose material non- public information to a Holder in order to comply with its obligations hereunder (a “Necessary Disclosure”), Acquirer shall inform counsel to such Holder to the extent such counsel has been identified in writing to Acquirer in advance of such determination without disclosing the applicable material non- public information, and Acquirer and such counsel on behalf of the applicable Holder shall endeavor to agree upon a process for making such Necessary Disclosure to the applicable Holder or its representatives that is mutually acceptable to such Holder and Acquirer (an “Agreed Disclosure Process”). Thereafter, Acquirer shall be permitted to make such Necessary Disclosure (only) in accordance with the Agreed Disclosure Process.
(d)Subject to the provisions of Section 8(f) and Section 8(m) hereof, and provided that Acquirer does not have an effective Registration Statement pursuant to Section 8(a) outstanding covering all of the Registrable Securities held by the Holders, following the expiration of any applicable Lock-up Period, Holders of at least a majority in interest of the then-outstanding number of Registrable Securities held by the Holders (a “Demanding Holder”) may make a written demand for registration of all or part of their Registrable Securities, which written demand shall describe the amount and type of securities to be included in such registration and the intended method(s) of distribution thereof (such written demand a “Demand Registration”). Subject to the MNPI Provisions, Acquirer shall, within five (5) calendar days of Acquirer’s receipt of the Demand Registration, notify, in writing all other Holders of Registrable Securities of such demand, and each Holder of Registrable Securities who thereafter wishes to include all or a portion of such Holder’s Registrable Securities in a registration pursuant to a Demand Registration (each such Holder that includes all or a portion of such Holder’s Registrable Securities in such registration, a “Requesting Holder”) shall so notify Acquirer, in writing, within five (5) calendar days after the receipt by the Holder of the notice from Acquirer. Upon receipt by Acquirer of any such written notification from a Requesting Holder(s) to Acquirer, subject to Section 8(e) below, such Requesting Holder(s) shall be entitled to have their Registrable Securities included in a Registration Statement pursuant to a Demand Registration and Acquirer shall effect, as soon thereafter as practicable, but not more than sixty (60) calendar days immediately after Acquirer’s receipt of the Demand Registration, the registration of all Registrable Securities requested by the Demanding Holders and Requesting Holders pursuant to such Demand Registration. Under no circumstances shall Acquirer be obligated to effect more than an aggregate of three (3) registrations pursuant to a Demand Registration by the Holders under this Section 8(d) with respect to any or all Registrable Securities. Notwithstanding the foregoing, (i) Acquirer shall not be required to give effect to a Demand Registration from a Demanding Holder if Acquirer has registered Registrable Securities pursuant to a Demand Registration (which has become effective) from
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such Demanding Holder in the preceding one hundred and twenty (120) days, and (ii) Acquirer’s obligations with respect to any Demand Registration shall be deemed satisfied so long as the Registration Statement filed pursuant to Section 8(a) includes all of such Demanding Holder’s Registrable Securities and is effective. Subject to the provisions of Sections 8(e) and Section 8(m) hereof, if a majority-in-interest of the Demanding Holders so advise Acquirer as part of their Demand Registration that the offering of the Registrable Securities pursuant to such Demand Registration shall be in the form of an underwritten offering, then the right of such Demanding Holder or Requesting Holder (if any) to include its Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwritten offering and the inclusion of such Holder’s Registrable Securities in such underwritten offering to the extent provided herein. All such Holders proposing to distribute their Registrable Securities through an underwritten offering under this Section 8(d), subject to Section 8(l) and Section 8(p), shall enter into an underwriting agreement in customary form with Acquirer and the underwriter(s) selected for such underwritten offering by a majority- in-interest of the Demanding Holders initiating the Demand Registration after consultation with, and approval by, Acquirer (which shall not be unreasonably withheld, conditioned or delayed); provided, that, notwithstanding the foregoing, the selection of one lead Bookrunner in such underwritten offering shall be in the sole discretion of Acquirer (such discretion to be exercised reasonably) to the extent Section 2 is applicable.
(e)If a Demand Registration is to be an underwritten offering and the managing underwriter or underwriters, in good faith, advises Acquirer, the Demanding Holders and the Requesting Holders (if any) in writing that, in its opinion, the dollar amount or number of Registrable Securities that the Demanding Holders and the Requesting Holders (if any) desire to sell, taken together with all other Acquirer Stock or other equity securities that Acquirer desires to sell for its own account and the Acquirer Stock, if any, as to which a registration has been requested pursuant to separate written contractual piggy-back registration rights held by any other stockholders of Acquirer who desire to sell, exceeds the maximum dollar amount or maximum number of equity securities that can be sold in such underwritten offering without adversely affecting the proposed offering price, the timing, the distribution method, or the probability of success of such offering (such maximum dollar amount or maximum number of such securities, as applicable, the “Maximum Number of Securities”), then Acquirer shall include in such underwritten offering, as follows:
(i)first, the Registrable Securities of the Demanding Holders and the Requesting Holders (if any) (pro rata based on the respective number of Registrable Securities held by each Demanding Holder and Requesting Holder (if any) and the aggregate number of Registrable Securities held by the Demanding Holders and Requesting Holders) that can be sold without exceeding the Maximum Number of Securities;
(ii)second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (i), the Acquirer Stock of holders exercising their piggy-back registration rights pursuant to Section 2.3 of that certain Amended and Restated Registration Rights Agreement, dated as of July 22, 2021, by and among Acquirer and the other parties thereto (the “July 2021 Registration Rights Agreement”), which can be sold without exceeding the Maximum Number of Securities;
(iii)third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (i) and (ii), the Acquirer Stock or other equity securities that Acquirer desires to sell for its own account, which can be sold without exceeding the Maximum Number of Securities;
(iv)fourth, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (i), (ii) and (iii), the Registrable Securities of Holders (pro rata, based on the respective number of Registrable Securities held by each Holder) exercising their rights to register their Registrable Securities pursuant to Section 8(g) hereof, without exceeding the Maximum Number of Securities; and
(v)fifth, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (i), (ii), (iii) and (iv), the Acquirer Stock or other equity securities of other Persons or entities that Acquirer is obligated to register in a registration pursuant to separate written contractual arrangements with such Persons and that can be sold without exceeding the Maximum Number of Securities.
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(f)A Demanding Holder or a Requesting Holder shall have the right to withdraw all or a portion of its Registrable Securities included in a Demand Registration pursuant to Section 8(d) or a Shelf Underwritten Offering pursuant to Section 8(b) for any or no reason whatsoever upon written notification to Acquirer and the underwriter or underwriters (if any) of its intention to so withdraw (a) in the case of a Demand Registration not involving an underwritten offering, one (1) Business Day prior to the effectiveness of the applicable Registration Statement or (b) in the case of any Demand Registration involving an underwritten offering or any Shelf Underwritten Offering, prior to the pricing of such underwritten offering or Shelf Underwritten Offering; provided, however, that upon withdrawal by a majority-in-interest of the Demanding Holders initiating a Demand Registration (or in the case of a Shelf Underwritten Offering, withdrawal of an amount of Registrable Securities included by the Holders in such Shelf Underwritten Offering, in their capacity as Demanding Holders, being less than the Minimum Amount), Acquirer shall cease all efforts to secure effectiveness of the applicable Registration Statement or complete the underwritten offering, as applicable. For the avoidance of doubt, any Demand Registration withdrawn pursuant to this Section 8(f) shall be counted toward the aggregate number of Demand Registrations Acquirer is obligated to effect pursuant to Section 8(d) unless (A)(1) the Demanding Holders reimburse Acquirer for all of its out-of-pocket costs and expenses incurred in connection with any such withdrawn Demand Registration incurred through the date of such withdrawal and (2) such revocation or withdrawal shall have been made prior to the commencement of any marketing efforts or “road shows” by Acquirer or the underwriters in connection with such Demand Registration, or (B) such withdrawal or revocation occurs following the issuance by Acquirer of a Suspension Notice (as defined below). Notwithstanding anything to the contrary in this Agreement or any Other Shareholder Agreement, Acquirer shall be responsible for the Registration Expenses (as defined below) incurred by it in connection with a registration pursuant to a Demand Registration or a Shelf Underwritten Offering prior to its withdrawal under this Section 8(f).
(g)If Acquirer proposes to file a registration statement under the Securities Act with respect to an offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into equity securities, for its own account or for the account of stockholders of Acquirer (or by Acquirer and by the stockholders of Acquirer including, without limitation, pursuant to Section 8(d) hereof), other than a registration statement (a) filed in connection with any employee stock option or other benefit plan, (b) for an exchange offer or offering of securities solely to Acquirer’s existing stockholders, (c) for an offering solely of debt that is convertible into equity securities of Acquirer, (d) for a dividend reinvestment plan, (e) for any issuances of securities in connection with a transaction involving a merger, consolidation, sale, exchange, issuance, transfer, reorganization or other extraordinary transaction between Acquirer or any of its Affiliates and any third party, or (f) filed pursuant to Section 8(a), then, subject to the MNPI Provisions, Acquirer shall give written notice of such proposed filing to all of the Holders of Registrable Securities as soon as practicable but not less than twenty (20) calendar days before the anticipated filing date of such registration statement, which notice shall (i) describe the amount and type of securities to be included in such offering, the intended method(s) of distribution (including whether such registration will be pursuant to a shelf registration statement), and the proposed price and name of the proposed managing underwriter or underwriters, if any, in such offering, (ii) describe such Holders’ rights under this Section 8(g), and (iii) offer to all of the Holders of Registrable Securities the opportunity to register the sale of such number of Registrable Securities as such Holders may request in writing within five (5) calendar days after receipt of such written notice (such registration, a “Piggyback Registration”). Acquirer shall, in good faith, cause such Registrable Securities identified in a Holder’s response noticed described in the foregoing sentence to be included in such Piggyback Registration and shall use its commercially reasonable efforts to cause the managing underwriter or underwriters of a proposed underwritten offering, if any, to permit the Registrable Securities requested by the Holders pursuant to this Section 8(g) to be included in a Piggyback Registration on the same terms and conditions as any similar securities of Acquirer or the Acquirer stockholder(s) for whose account the registration statement is to be filed included in such registration and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof. All such Holders proposing to distribute their Registrable Securities through an underwritten offering under this Section 8(g), subject to Section 8(l) and Section 8(p), shall enter into an underwriting agreement in customary form with the underwriter(s) selected for such underwritten offering by Acquirer. For purposes of clarity, any registration effected pursuant to Section 8(g) hereof shall not be counted as a registration pursuant to a Demand Registration effected under Section 8(d) hereof or a Shelf Underwritten Offering effected under Section 8(b). Any Holder of Registrable Securities shall have the right to withdraw all or any portion of its Registrable Securities in a Piggyback Registration for any or no reason whatsoever upon written notification to Acquirer and the underwriter or underwriters (if any) of his, her or its intention to
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withdraw such Registrable Securities from such Piggyback Registration (a) in the case of a Piggyback Registration not involving an underwritten offering or Shelf Underwritten Offering, one (1) Business Day prior to the effectiveness of the applicable Registration Statement or (b) in the case of any Piggyback Registration involving an underwritten offering or any Shelf Underwritten Offering, two (2) Business Days prior to the pricing of such underwritten offering or Shelf Underwritten Offering. Acquirer (whether on its own good-faith determination or as the result of a request for withdrawal by Persons pursuant to separate written contractual obligations) may withdraw a Registration Statement filed with the SEC in connection with a Piggyback Registration at any time prior to the effectiveness of such Registration Statement.
(h)If the managing underwriter or underwriters in an underwritten registration that is to be a Piggyback Registration, in good faith, advises Acquirer and the Holders of Registrable Securities participating in the Piggyback Registration in writing that, in its opinion, the dollar amount or number of the Acquirer Stock that Acquirer desires to sell, taken together with (a) the Acquirer Stock, if any, as to which registration has been demanded pursuant to separate written contractual arrangements with Persons or entities other than the Holders of Registrable Securities hereunder, (b) the Registrable Securities as to which registration has been requested pursuant to Section 8(g) hereof, and (c) the Acquirer Stock, if any, as to which registration has been requested pursuant to separate written contractual piggy-back registration rights of other stockholders of Acquirer, exceeds the Maximum Number of Securities, then:
(i)if the registration is undertaken for Acquirer’s account, Acquirer shall include in any such registration (a) first, the Acquirer Stock or other equity securities that Acquirer desires to sell, which can be sold without exceeding the Maximum Number of Securities; (b) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (a), the Acquirer Stock of holders exercising their piggy-back registration rights pursuant to Section 2.3 of the July 2021 Registration Rights Agreement, which can be sold without exceeding the Maximum Number of Securities; (c) third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (a) and (b), the Registrable Securities of Holders exercising their rights to register their Registrable Securities pursuant to Section 8(g) hereof (pro rata, based on the respective number of Registrable Securities held by each Holder), which can be sold without exceeding the Maximum Number of Securities and (d) fourth, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (a),(b) and (c), the Acquirer Stock, if any, as to which registration has been requested pursuant to any other written contractual piggy-back registration rights of other stockholders of Acquirer, which can be sold without exceeding the Maximum Number of Securities; and
(ii)if the registration is pursuant to a request by Persons or entities other than the Holders of Registrable Securities, then Acquirer shall include in any such registration (a) first, the Acquirer Stock or other equity securities, if any, of such requesting Persons or entities, other than the Holders of Registrable Securities, which can be sold without exceeding the Maximum Number of Securities; (b) second, to the extent that the Maximum Number of Securities has not been reached under the foregoing clause (a), the Acquirer Stock of holders exercising their piggy-back registration rights pursuant to Section 2.3 of the July 2021 Registration Rights Agreement, which can be sold without exceeding the Maximum Number of Securities; (c) third, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (a) and (b), the Acquirer Stock or other equity securities that Acquirer desires to sell for its own account, which can be sold without exceeding the Maximum Number of Securities; (d) fourth, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (a), (b) and (c), the Registrable Securities of Holders exercising their rights to register their Registrable Securities pursuant to Section 8(g) hereof (pro rata, based on the respective number of Registrable Securities held by each Holder), which can be sold without exceeding the Maximum Number of Securities; and (e) fifth, to the extent that the Maximum Number of Securities has not been reached under the foregoing clauses (a), (b), (c) and (d), the Acquirer Stock or other equity securities for the account of other Persons or entities that Acquirer is obligated to register pursuant to other separate written contractual arrangements with such Persons or entities, which can be sold without exceeding the Maximum Number of Securities.
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(i)Notwithstanding any other provision of this Agreement, but subject to the restrictions set forth in Section 1 or Section 2 of this Agreement and subject to Section 8(m), if a Demanding Holder desires to effect an offering or sale of Registrable Securities by any Holder on a block trade or underwritten basis (whether firm commitment or otherwise) effected pursuant to a Registration Statement without substantial marketing efforts prior to pricing, including, without limitation, a same day trade, overnight trade or similar transaction (a “Block Trade”) (x) with a total offering price reasonably expected to exceed the Minimum Amount or (y) including all remaining Registrable Securities held by the Demanding Holder, then notwithstanding the time periods provided for in Section 8(b), such Demanding Holder shall notify Acquirer of the Block Trade at least five (5) Business Days prior to the day such offering is to commence and Acquirer shall as expeditiously as possible use its commercially reasonable efforts to facilitate such Block Trade; provided that the Demanding Holders wishing to engage in the Block Trade shall use commercially reasonable efforts to work with Acquirer and any underwriters or placement agents or sales agents prior to making such request in order to facilitate preparation of the registration statement, prospectus and other offering documentation related to the Block Trade. Prior to the filing of the applicable “red herring” prospectus or prospectus supplement used in connection with a Block Trade, any Demanding Holders shall have the right to submit a withdrawal notice to Acquirer and the underwriter or underwriters or placement agents or sales agents (if any) of their intention to withdraw from such Block Trade.
(j)In the case of the registration, qualification, exemption or compliance effected by Acquirer pursuant to this Agreement, Acquirer shall, upon reasonable request, inform the Holders as to the status of such registration, qualification, exemption and compliance. At its expense Acquirer shall:
(i)except for such times as Acquirer is permitted hereunder to suspend the use of the prospectus forming part of a Registration Statement or as otherwise provided in this Section 8, use its commercially reasonable efforts to keep such registration, and any qualification, exemption or compliance under state securities laws which Acquirer determines to obtain, continuously effective with respect to the Holders, and to keep the applicable Registration Statement or any subsequent shelf registration statement free of any material misstatements or omissions, until all Registrable Securities covered by such Registration Statement have been sold;
(ii)prepare and file with the SEC such amendments and post-effective amendments to the Registration Statement, and such supplements to the Prospectus, as may be reasonably requested by a majority in interest of the applicable Holders of Registrable Securities registered on such Registration Statement or any underwriter of Registrable Securities or as may be required by the rules, regulations or instructions applicable to the registration form used by the SEC or by the Securities Act or rules and regulations thereunder to keep the Registration Statement effective until all Registrable Securities covered by such Registration Statement are sold in accordance with the intended plan of distribution set forth in such Registration Statement or supplement to the prospectus;
(iii)advise the Holders, as promptly as practicable but in any event, within two Business Days:
(1)when a Registration Statement or any amendment thereto has been filed with the SEC and when such Registration Statement or any post-effective amendment thereto has become effective;
(2)of the issuance by the SEC of any stop order suspending the effectiveness of any Registration Statement or the initiation of any proceedings for such purpose;
(3)of the receipt by Acquirer of any notification with respect to the suspension of the qualification of the Registrable Securities included therein for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and
(4)subject to the provisions in this Agreement, of the occurrence of any event that requires the making of any changes in any Registration Statement or prospectus included therein so that, as of such date, the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein (and in the case of a prospectus, in the light of the circumstances under which they were made) not misleading;
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(iv)use its commercially reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of any Registration Statement as soon as reasonably practicable;
(v)upon the occurrence of any event contemplated in Section 8(j)(ii)(4), except for such times as Acquirer is permitted hereunder to suspend, and has suspended, the use of a prospectus forming part of a Registration Statement, Acquirer shall use its commercially reasonable efforts to as soon as reasonably practicable prepare a post-effective amendment to such Registration Statement or a supplement to the related prospectus, or file any other required document so that, as thereafter delivered to purchasers of the Registrable Securities included therein, such prospectus will not include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;
(vi)use its commercially reasonable efforts to (1) register or qualify the Registrable Securities covered by any Registration Statement under such securities or “blue sky” laws of such jurisdictions in the United States as the Holders of Registrable Securities included in such Registration Statement (in light of their intended plan of distribution) may request and to keep such registration or qualification in effect for so long as such Registration Statement remains in effect and (2) take such action necessary to cause such Registrable Securities covered by a Registration Statement to be registered with or approved by such other governmental authorities or securities exchanges, including the applicable Nasdaq Stock Market or such other primary securities exchange or market, if any, on which the Acquirer Stock has been listed no later than the effective date of the applicable Registration Statement on which such Registrable Securities are registered;
(vii)use its commercially reasonable efforts to take all other steps reasonably necessary to effect the registration of the Lock-Up Shares contemplated hereby and, for so long as the undersigned holds Lock-Up Shares, to enable the undersigned to sell the Lock-Up Shares under Rule 144;
(viii)provide a transfer agent and registrar for all such Registrable Securities no later than the effective date of any Registration Statement;
(ix)at least five (5) Business Days (or, in the case of a Block Trade, at least one (1) calendar day) prior to the filing of any Registration Statement or prospectus or any amendment or supplement to such Registration Statement or prospectus, furnish a copy thereof to each seller of such Registrable Securities or its counsel, including, without limitation, providing, upon request of a Holder, copies promptly upon receipt of any comment letters received with respect to any such Registration Statement or prospectus;
(x)permit a representative of a majority-in-interest of the Holders, the underwriters, if any, and any attorney or accountant retained by such Holders or underwriter to participate, at each such Person’s own expense, in the preparation of any Registration Statement and cause Acquirer’s officers, directors and employees to supply all information reasonably requested by any such representative, underwriter, attorney or accountant in connection with the registration; provided, however, that, if requested by Acquirer, such representatives or underwriters shall be required to enter into a confidentiality agreement, in form and substance reasonably satisfactory to Acquirer, prior to the release or disclosure of any such information;
(xi)obtain a “cold comfort” letter (including a bring-down letter dated as of the date the Registrable Securities are delivered for sale pursuant to such registration) from Acquirer’s independent registered public accountants in the event of an underwritten offering that the participating Holders may rely on, in customary form and covering such matters of the type customarily covered by “comfort” letters as the managing underwriter may reasonably request, and reasonably satisfactory to a majority-in-interest of the participating Holders and any underwriter;
(xii)on the date the Registrable Securities are delivered for sale pursuant to a registration, obtain an opinion and negative assurance letter, dated such date, of counsel representing Acquirer for the purposes of such registration, addressed to the Holders, the placement agent or sales agent, if any, and the underwriters, if any, covering such legal matters with respect to the registration in respect of which such opinion is being given as the Holders, placement agent, sales agent, or underwriter may reasonably request and as are
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customarily included in such opinions and negative assurance letters, and reasonably satisfactory to a majority in interest of the participating Holders and any underwriter;
(xiii)in the event of any underwritten offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering;
(xiv)otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the SEC, and to make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve (12) months, beginning with the first day of Acquirer’s first full calendar quarter after the effective date of the Registration Statement which satisfies the provisions of Section 11(a) of the Securities Act and the rules and regulations thereunder, including Rule 158 thereunder (or any successor rule promulgated thereafter by the SEC);
(xv)if the registration involves the registration of Registrable Securities involving gross proceeds in excess of $50,000,000, use its reasonable efforts to make available senior executives of Acquirer to participate in customary “road show” presentations that may be reasonably requested by a majority-in-interest of the participating Holders or the underwriter in any underwritten offering;
(xvi)cooperate with each Holder that holds Registrable Securities being offered and the underwriter in any underwritten offering with respect to an applicable Registration Statement, if any, to facilitate the timely (i) preparation and delivery of certificates (not bearing any restrictive legends) representing Registrable Securities that have been offered and sold pursuant to such Registration Statement, and enable such certificates to be registered in such names and in such denominations or amounts, as the case may be, or (ii) crediting of the Registrable Securities that have been offered and sold pursuant to a Registration Statement to the applicable account (or accounts) with The Depository Trust Company (“DTC”) through its Deposit/Withdrawal At Custodian (“DWAC”) system, in any such case as such Holder or underwriter, if any, may reasonably request;
(xvii)for so long as this Agreement remains effective, use reasonable best effects to (a) cause the Acquirer Stock to be eligible for clearing through DTC, through its DWAC system; (b) be eligible and participating in the Direct Registration System (DRS) of DTC with respect to the Acquirer Stock; and (c) ensure that the transfer agent for the Acquirer Stock is a participant in, and that the Acquirer Stock is eligible for transfer pursuant to, DTC’s Fast Automated Securities Transfer Program (or successor thereto);
(xviii)use its commercially reasonable efforts to make and keep public information available, as those terms are understood and defined in Rule 144, and, without limiting the foregoing, as long as any Holder shall own Registrable Securities (without taking into account the exclusion of the definition of such term contained in clause (iv) thereof), Acquirer, at all times while it shall be a reporting company under the Exchange Act, covenants to file timely all reports required to be filed by Acquirer after the Closing Date pursuant to Sections 13 or 15(d) of the Exchange Act and to promptly furnish the Holders with true and complete copies of all such filings upon request; and
(xix)otherwise, in good faith, cooperate reasonably with, and take such customary actions as may reasonably be requested by the Holders in connection with a registration.
(k)Except as otherwise provided herein, the Registration Expenses (as defined below) of all registrations pursuant to this Agreement shall be borne by Acquirer. It is acknowledged by the Holders that the Holders shall bear all incremental selling expenses relating to the sale of Registrable Securities, such as underwriters’ commissions and discounts, brokerage fees and, other than as set forth in the definition of “Registration Expenses,” all reasonable fees and expenses of any legal counsel representing the Holders except as otherwise provided herein. “Registration Expenses” shall mean the out-of-pocket expenses of a registration, including, without limitation, the following: (a) all registration, qualification and filing fees (including fees with respect to filings required to be made with the Financial Industry Regulatory Authority, Inc.) and any securities exchange on which the Acquirer Stock is then listed; (b) fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel for the underwriters in connection with blue sky qualifications of Registrable Securities); (c) printing, messenger, telephone and delivery expenses; (d) reasonable
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fees and disbursements of counsel for Acquirer; (e) reasonable fees and disbursements of all independent registered public accountants of Acquirer incurred specifically in connection with such registration; and (f) reasonable fees and expenses of one (1) legal counsel selected by the Demanding Holders, not to exceed $75,000.
(l)No Person may participate in any underwritten offering for equity securities of Acquirer pursuant to a registration initiated by Acquirer hereunder unless such Person (a) agrees to sell such Person’s securities on the basis provided in any underwriting arrangements approved by Acquirer and (b) completes and executes all customary questionnaires, powers of attorney, indemnities, lock-up agreements, underwriting agreements and other customary documents as may be reasonably required under the terms of such underwriting arrangements. In connection with any underwritten offering of equity securities of Acquirer (other than a Block Trade), each Holder participating in the underwritten offering pursuant to the terms of this Agreement agrees that it shall not transfer any shares of Acquirer Stock or other equity securities of Acquirer (other than those included in such offering pursuant to this Agreement), without the prior written consent of Acquirer, during the 90-day period beginning on the date of pricing of such offering or such shorter period during which Acquirer agrees not to conduct an underwritten primary offering of Acquirer Stock, except in the event the underwriters managing the offering otherwise agree by written consent. Each Holder participating in the underwritten offering agrees to execute a customary lock-up agreement in favor of the underwriters to such effect (in each case on substantially the same terms and conditions as all such Holders). The immediately foregoing shall in no way limit the restrictions of undersigned’s Lock-Up Shares pursuant to the applicable Lock-Up Period.
(m)If (a) during the period starting with the date sixty (60) days prior to Acquirer’s good-faith estimate of the date of the filing of, and ending on a date one hundred and twenty (120) days after the effective date of, a Registration Statement in respect of an Acquirer initiated underwritten registration of its securities Acquirer receives a Demand Registration, and provided that Acquirer has delivered written notice to the Holders prior to receipt of a Demand Registration pursuant to Section 8(d) and it continues to actively employ, in good faith, all reasonable efforts to cause the applicable Acquirer-initiated registration statement to become effective, (b) the Holders have requested an underwritten registration and Acquirer and the Holders are unable to obtain the commitment of the underwriters to firmly underwrite the offer, or (c) in the good faith judgment of the Acquirer Board such registration would be seriously detrimental to Acquirer and the Acquirer Board concludes as a result that it is essential to defer the filing of such Registration Statement at such time, then in each case, Acquirer shall furnish to such Holders a certificate signed by the Chairman of the Acquirer Board stating that in the good-faith judgment of the Acquirer Board it would be seriously detrimental to Acquirer for a Registration Statement with respect to such Demand Registration to be filed in the near future and that it is therefore essential to defer the filing of such Registration Statement, Acquirer shall have the right to defer such filing for a period of not more than sixty (60) calendar days. For the avoidance of doubt, the foregoing ability to defer the filing of a Registration Statement shall not apply to Acquirer’s obligation to file the Initial Shelf pursuant to Section 8(a). Notwithstanding anything to the contrary in this Agreement, Acquirer may, subject to the MNPI Provisions and upon prompt written notice (a “Suspension Notice”) of such action to the Holders no later than three (3) Business Days from the date of such Suspension Event (as defined below), delay the filing or postpone the effectiveness of the Registration Statement, and from time to time to require the Holders not to sell under the Registration Statement or to suspend the effectiveness thereof, if (i) such filing, effectiveness or sales would require the inclusion in such Registration Statement of financial statements that are unavailable to Acquirer for reasons beyond Acquirer’s control or (ii) the negotiation or consummation of a transaction by Acquirer or its subsidiaries is pending or an event has occurred, which negotiation, consummation or event, the Acquirer Board reasonably believes would require additional disclosure by Acquirer in the Registration Statement of material information that Acquirer has a bona fide business purpose for keeping confidential and the non-disclosure of which in the Registration Statement would be expected, in the reasonable determination of the Acquirer Board would be expected to cause the Registration Statement to fail to comply with applicable disclosure requirements (each such circumstance, a “Suspension Event”); provided that Acquirer may not delay or suspend the Registration Statement on more than forty-five (45) consecutive calendar days, determined in good faith by the Acquirer Board to be necessary for such purpose; provided further that Acquirer shall not defer its obligations pursuant to this Section 8(m) more than twice during any twelve (12)-month period; provided further, that in no event shall Acquirer be entitled to delay or defer the filing or effectiveness of the Initial Shelf pursuant to this Section 8(m). Upon receipt of any Suspension Notice during the period that any Registration Statement is effective or if as a result of a Suspension Event any Registration Statement or related
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prospectus contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made (in the case of the prospectus) not misleading, the undersigned and each other Holder agrees that (i) it will immediately discontinue offers and sales of the Registrable Securities under such Registration Statement (excluding, for the avoidance of doubt, sales conducted pursuant to Rule 144) until such Holder receives copies of a supplemental or amended prospectus (which Acquirer agrees to promptly prepare) that corrects the misstatement(s) or omission(s) referred to above and receives notice that any post-effective amendment has become effective or unless otherwise notified by Acquirer that it may resume such offers and sales, provided, for the avoidance of doubt, that the foregoing shall not restrict or otherwise affect the consummation of any sale pursuant to a contract entered into, or order placed, by any Holder prior to delivery of the Suspension Notice and (ii) it will maintain the confidentiality of any information included in such Suspension Notice unless otherwise required by law or subpoena. If so directed by Acquirer, each Holder will deliver to Acquirer or, in such Holder’s sole discretion destroy, all copies of the prospectus covering the Registrable Securities in such Holder’s possession; provided that this obligation to deliver or destroy all copies of the prospectus covering the Registrable Securities shall not apply (A) to the extent such Holder is required to retain a copy of such prospectus (1) in order to comply with applicable legal, regulatory, self-regulatory or professional requirements or (2) in accordance with a bona fide pre-existing document retention policy or (B) to copies stored electronically on archival servers as a result of automatic data back-up. Acquirer shall immediately notify the Holders of the expiration of any period during which it exercised its rights under this Section 8(m).
(n)A Holder may deliver written notice (an “Opt-Out Notice”) to Acquirer requesting that such Holder not receive notices from Acquirer otherwise required by this Section 8; provided that Holder may later revoke any such Opt-Out Notice in writing. Following receipt of an Opt-Out Notice from a Holder (unless subsequently revoked), (i) Acquirer shall not deliver any such notices to such Holder and such Holder shall no longer be entitled to the rights associated with any such notice and (ii) each time prior to such Holder’s intended use of an effective Registration Statement, such Holder will notify Acquirer in writing at least two (2) Business Days in advance of such intended use, and if a notice of a Suspension Event was previously delivered (or would have been delivered but for the provisions of this Section 8(n)) and the related suspension period remains in effect, Acquirer will so notify such Holder, within one (1) Business Day of such Holder’s notification to Acquirer, by delivering to such Holder a copy of such Suspension Notice, and thereafter will provide such Holder with the related notice of the conclusion of such Suspension Event promptly following its availability.
(o)Other than with respect to any contractual restriction applicable to any Holder pursuant to this Agreement or any Other Shareholder Agreement, the stock certificates evidencing the Registrable Securities (and/or book entries representing the Registrable Securities) held by each Holder shall not contain or be subject to any legend restricting the transfer thereof (and the Registrable Securities shall not be subject to any stop transfer or similar instructions or notations): (A) while a Registration Statement covering the sale or resale of such securities is effective under the Securities Act, if such Holder provides paperwork to the effect that it has sold such securities and will distribute or transfer such securities pursuant to such Registration Statement and the plan of distribution set forth therein or Rule 144, or (B) if such Holder provides customary paperwork to the effect that it has sold such shares pursuant to Rule 144, or (C) if such Registrable Securities are eligible for sale under Rule 144 (including Rule 144(i)) as set forth in customary non-affiliate paperwork provided by such Holder and such non-affiliate Holder agrees to sell or transfer such Registrable Securities pursuant to Rule 144 or pursuant to a Registration Statement and the plan of distribution set forth therein or (D) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the SEC) as determined in good faith by counsel to Acquirer or set forth in a legal opinion delivered by nationally recognized counsel to the Holder (collectively, the “Unrestricted Conditions”). Acquirer agrees that at such time as any of the Unrestricted Conditions is met or such legend is otherwise no longer required it will, no later than two (2) Business Days following the delivery by a Holder to Acquirer or Acquirer’s transfer agent of a certificate representing any Registrable Securities, issued with a restrictive legend, (or, in the case of Registrable Securities represented by book entries, delivery by a Holder to Acquirer or Acquirer’s transfer agent of a legend removal request) deliver or cause to be delivered to such Holder a certificate or, at the request of such Holder, deliver or cause to be delivered such Registrable Securities to such Holder by crediting the account of such Holder’s prime broker with DTC through its DWAC system, in each case, free from all restrictive and other legends and stop transfer or similar instructions or
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notations. If any of the Unrestricted Conditions is met at the time of issuance of any Registrable Securities, then such securities shall be issued free of all legends.
(p)Indemnification.
(i)Acquirer shall, notwithstanding the termination of this Agreement, indemnify and hold harmless, to the extent permitted by law, each Holder and its respective directors, officers, employees, agents, trustees, partners, members, managers, stockholders, investment advisors and sub-advisors, each Person who controls such Holder (within the meaning of the Securities Act or the Exchange Act) and each Affiliate of such Holder from and against any and all losses, claims, damages, liabilities, costs and expenses (including, without limitation, any reasonable attorneys’ fees and expenses incurred in connection with defending or investigating any such action or claim) (collectively, “Losses”) that arise out of or are caused by any untrue or alleged untrue statement of material fact contained in any Registration Statement (or incorporated by reference therein), prospectus included in any Registration Statement (“Prospectus”) or preliminary Prospectus or any amendment thereof or supplement thereto or document incorporated by reference therein or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except insofar as the same are caused by or contained in any information furnished in writing to Acquirer by or on behalf of such Holder expressly for use therein. Acquirer shall notify each Holder promptly of the institution, threat or assertion (to Acquirer’s knowledge) of any proceeding arising from or in connection with a Registration Statement on which such Holder’s Registrable Securities are registered; provided that the indemnification contained in this Section 8(p) shall not apply to amounts paid in settlement of any Losses if such settlement is effected without the consent of Acquirer (which consent shall not be unreasonably withheld, conditioned or delayed), nor shall Acquirer be liable for any Losses to the extent they arise out of or are based upon a violation which occurs in connection with any offers or sales effected by or on behalf of such Holder in violation of this Agreement.
(ii)In connection with any Registration Statement in which any Holder is participating, such Holder shall furnish to Acquirer in writing such information as Acquirer reasonably requests for use in connection with any such Registration Statement or Prospectus. In connection with any Registration Statement in which any Holder is participating, such Holder agrees to indemnify and hold harmless, to the extent permitted by law, Acquirer, its directors and officers and agents and employees and each Person or entity who controls Acquirer (within the meaning of Section 15 of the Securities Act) against any Losses, resulting from or arising out of any untrue or alleged untrue statement of material fact contained in the Registration Statement, Prospectus or preliminary Prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein in light of the circumstances under which they were made, not misleading, but only to the extent that such untrue statement or omission is contained (or not contained in the case of an omission) in and are based on any information or affidavit so furnished in writing by or on behalf of such Holder expressly for use therein; provided that in no event shall the aggregate liability of a Holder (including, for the avoidance of doubt, under Section 8(p)(v)) be greater in amount than the dollar amount of the net proceeds received by such Holder from the sale of its Registrable Securities pursuant to such Registration Statement giving rise to such indemnification obligation.
(iii)Any Person entitled to indemnification herein shall (A) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that the failure to give prompt notice shall not impair any Person’s right to indemnification hereunder to the extent such failure has not materially prejudiced the indemnifying party in defending such claim) and (B) unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim. permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party shall not be subject to any liability for any settlement made by the indemnified party without its consent (which consent shall not be unreasonably withheld, conditioned or delayed). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel (plus local counsel) for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of legal counsel to any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. No indemnifying party shall,
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without the consent of the indemnified party, consent to the entry of any judgment or enter into any settlement which cannot be settled in all respects by the payment of money (and such money is so paid by the indemnifying party pursuant to the terms of such settlement) or which settlement does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation or includes any admission as to fault or culpability or failure to act on the part of an indemnified party.
(iv)The indemnification provided under this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director, employee, agent, affiliate or controlling Person of such indemnified party and shall survive the transfer of the Lock-Up Shares.
(v)If the indemnification provided under this Section 8(p) from the indemnifying party is unavailable or insufficient to hold harmless an indemnified party in respect of any Losses referred to herein, then the indemnifying party, in lieu of indemnifying the indemnified party, shall contribute to the amount paid or payable by the indemnified party as a result of such Losses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and indemnified party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, was made by (or not made by, in the case of an omission), or relates to information supplied by (or not supplied by, in the case of an omission), such indemnifying party or indemnified party, and the indemnifying party’s and indemnified party’s relative intent, knowledge, access to information and opportunity to correct or prevent such action and the benefits received by the such indemnifying party or indemnified party; provided, however, that the liability of any Holder under this Section 8(p)(v) shall be limited to the amount of the net proceeds received by such Holder from the sale of Registrable Securities in such offering giving rise to such liability. The amount paid or payable by a party as a result of the Losses or other liabilities referred to above shall be deemed to include, subject to the limitations set forth in Section 8(p)(i), 8(p)(ii), and 8(p)(iii), any legal or other fees, charges or expenses reasonably incurred by such party in connection with any investigation or proceeding. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution pursuant to this Section 8(p)(v) from any Person who was not guilty of such fraudulent misrepresentation.
(q)The undersigned agrees that each New Holder (as defined in the July 2021 Registration Rights Agreement) shall have piggyback registration rights in respect of any Registration Statement that is filed pursuant to this Section 8, pursuant to and in accordance with Section 5.6 of the July 2021 Registration Rights Agreement, and that the provisions of the Registration Rights Agreement shall apply, mutatis mutandis, to the exercise of any such piggyback registration rights by any such New Holder in respect of any such Registration Statement.
(r)The rights, duties and obligations of the undersigned under this Section 8 may be freely assigned or delegated by the undersigned to a 5% Insider; provided, however, that if any such assignment or delegation occurs during a Lock-Up Period, such 5% Insider must enter into a written agreement with Acquirer agreeing to be bound by the provisions of this Agreement in accordance with Section 5 of this Agreement and shall thereafter be a “Holder” for purposes of this Section 8. For purposes of this Agreement, a “5% Insider” means any stockholder of Seller that is both the record or beneficial owner of at least 5% of the outstanding shares of common stock of Seller and an insider (non-institutional) stockholder of Seller.
9.The undersigned represents and warrants that it (i) is a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act) or an institutional “accredited investor” (within the meaning of Rule 501(a) under the Securities Act) satisfying the applicable requirements set forth on Schedule A, (ii) is acquiring the Lock-Up Shares only for its own account and not for the account of others, and (iii) is not acquiring the Lock-Up Shares with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act or any other securities laws of the United States or any other applicable jurisdiction (and shall provide the requested information on Schedule A following the signature page hereto). The undersigned is not an entity formed for the specific purpose of acquiring the Lock-Up Shares, unless such newly formed entity is an entity in which all of the equity owners are “accredited investors” (within the meaning of Rule 501(a) under the Securities Act).
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10.The undersigned understands that the Lock-Up Shares are being offered in a transaction not involving any public offering within the meaning of the Securities Act and that the Lock-Up Shares have not been registered under the Securities Act or any other securities laws of the United States or any other jurisdiction. The undersigned understands that it is acquiring its entire beneficial ownership interest in the Lock-Up Shares for the undersigned’s own account for investment purposes only and not with a view to any distribution of the Lock-Up Shares in any manner that would violate the securities laws of the United States or any other applicable jurisdiction. The undersigned understands that the Lock-Up Shares may not be resold, transferred, pledged or otherwise disposed of by the undersigned absent an effective registration statement under the Securities Act, except (i) to Acquirer or a subsidiary thereof, (ii) pursuant to offers and sales that occur in an “offshore transaction” within the meaning of Regulation S under the Securities Act, (iii) pursuant to Rule 144 under the Securities Act, provided that all of the applicable conditions thereof (including those set out in Rule 144(i) which are applicable to Acquirer) have been met, or (iv) pursuant to another applicable exemption from the registration requirements of the Securities Act, including pursuant to a private sale effected under Section 4(a)(7) of the Securities Act or applicable formal or informal SEC interpretation or guidance, such as a so-called “4(a)(1) and a half” sale, and that any certificates or book- entry records representing the Lock-Up Shares shall contain a legend to such effect. The undersigned understands and agrees that the Lock-Up Shares will be subject to the foregoing restrictions and, as a result, the undersigned may not be able to readily resell the Lock-Up Shares and may be required to bear the financial risk of an investment in the Lock-Up Shares for an indefinite period of time. The undersigned understands that it has been advised to consult legal counsel prior to making any offer, resale, pledge or transfer of any of the Lock-Up Shares. By making the representations in this Section 10, the undersigned does not agree to hold any of the Lock-Up Shares for any minimum or other specific term and reserves the right to assign, transfer or otherwise dispose of any of the Lock-Up Shares at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act; provided, however, that the Lock-Up Shares shall be subject to the restrictions set forth in Section 1 and Section 2 of this Agreement.
11.The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this Agreement and that this Agreement constitutes the legal, valid and binding obligation of the undersigned, enforceable in accordance with its terms. Any obligations of the undersigned shall be binding upon the successors and permitted assigns of the undersigned from and after the Closing Date.
12.This Agreement constitutes the entire agreement and understanding of the parties hereto in respect of the subject matter hereof and supersedes all prior understandings, agreements, or representations by or among the parties hereto, written or oral, to the extent they relate in any way to the subject matter hereof. This Agreement may not be changed, amended, modified or waived (other than to correct a typographical error) as to any particular provision, except by a written instrument executed by all parties hereto.
13.Except as provided in Sections 5 and 8 hereof, this Agreement and the rights and obligations of the parties hereunder shall not be assignable or transferable by any party hereto (including in connection with a merger, consolidation, sale of substantially all of the assets of such party or otherwise by operation of Law) without the prior written consent of (a) Acquirer, in the case of any such attempted assignment or transfer by the undersigned, or (b) the undersigned, in the case of any such attempted assignment or transfer by Acquirer. Any attempted assignment in violation of this Section 13 shall be null and void. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of Acquirer and the undersigned and their respective successors and permitted assigns.
14.This Agreement, any non-contractual rights or obligations arising out of or in connection with it, and all Disputes will be governed by, and enforced and construed in accordance with, the Laws of the State of Delaware, without regard to the conflict of laws rules of such state that would result in the application of the Laws of another jurisdiction.
15.EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY OR DISPUTES RELATING HERETO. EACH PARTY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
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EVENT OF A DISPUTE, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 15.
16.Any term or provision of this Agreement that is held by a court of competent jurisdiction or arbitrator to be invalid, void or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the invalid, void or unenforceable term or provision in any other situation or in any other jurisdiction. If the final judgment of such court or arbitrator declares that any term or provision hereof is invalid, void or unenforceable, the parties hereto agree to (a) reduce the scope, duration, area or applicability of the term or provision, to delete specific words or phrases, and (b) replace any invalid, void or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the original intention of the invalid or unenforceable term or provision.
17.This Agreement may be executed in any number of counterparts (including electronically), and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. Delivery of an executed counterpart of a signature page of this Agreement by electronic mail or other electronic transmission shall be effective as delivery of a manually executed original counterpart of this Agreement.
18.All notices, demands, waivers and other communications pursuant to this Agreement will be in writing and will be deemed given if delivered personally or delivered by electronic mail or globally recognized express delivery service to the parties hereto at the addresses set forth on the signature page hereto or to such other address as the party to whom notice is to be given to the other parties hereto in writing in accordance herewith. Any such notice, demand, waiver or other communication will be deemed to have been delivered and received (a) in the case of personal delivery, on the date of such delivery, (b) in the case of electronic mail, on the date of sending if no automated notice of delivery failure is received by the sender, and (c) in the case of a globally recognized express delivery service, on the date on which receipt by the addressee is confirmed pursuant to the service’s systems.
19.This Agreement shall become effective on the Closing Date. This Agreement and the obligations of each party hereunder shall automatically terminate upon any termination of the Merger Agreement.
[Signature on the following page]
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Very truly
yours,
By:Name: Nat Turner
Name:
Title:
Address:
Email:
_____________________________Accepted and Agreed:
ACQUIRER
SEMA4 HOLDINGS CORP.
By:
Name:
Title:
Address:333 Ludlow Street,
North Tower, 8th floor
Stamford, CT 06902
Email:

[Signature Page to Registration RightsShareholder Agreement]

SCHEDULE A
ELIGIBILITY REPRESENTATIONS OF THE UNDERSIGNED
AQUALIFIED INSTITUTIONAL BUYER STATUS
.(Please check the applicable subparagraphs):
1.
•We are a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act (a “QIB”)).
2.
•We are subscribing for the Lock-Up Shares as a fiduciary or agent for one or more investor accounts, and each owner of such account is a QIB.
*** OR ***
B.INSTITUTIONAL ACCREDITED INVESTOR STATUS
.(Please check each of the following subparagraphs):
1.
•We are an “accredited investor” (within the meaning of Rule 501(a) under the Securities Act) or an entity in which all of the equity holders are accredited investors within the meaning of Rule 501(a) under the Securities Act and have marked and initialed the appropriate box on the following page indicating the provision under which we qualify as an “accredited investor”.
2.
•We are not a natural person.
*** AND ***
C.AFFILIATE STATUS
.(Please check the applicable box)
THE UNDERSIGNED:
☐is:
☐is not:
an “affiliate” (as defined in Rule 144 under the Securities Act) of the Acquirer or acting on behalf of an affiliate of the Acquirer.
FINRA Rule 4512(c) states that an “institutional account” shall mean any person who comes within any of the below listed categories. The undersigned has indicated, by marking and initialing the appropriate box below, the provision(s) below which apply to the undersigned and under which the undersigned accordingly qualifies as an “institutional account.”
•a bank, savings and loan association, insurance company or registered investment company;
•an investment adviser registered either with the SEC under Section 203 of the Investment Advisers Act or with a state securities commission (or any agency or office performing like functions); or
•any other person (whether a natural person, corporation, partnership, trust or otherwise) with total assets of at least $50 million.
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This page should be completed by the undersigned
and constitutes a part of the Shareholder Agreement.
Schedule A-1
Rule 501(a), in relevant part, states that an “accredited investor” shall mean any person who comes within any of the below listed categories, or who the Acquirer reasonably believes comes within any of the below listed categories, at the time of the sale of the securities to that person. The undersigned has indicated, by marking and initialing the appropriate box below, the provision(s) below that apply to the undersigned and under which the undersigned accordingly qualifies as an “accredited investor.”
•Any bank as defined in section 3(a)(2) of the Securities Act, or any savings and loan association or other institution as defined in section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity;
•Any broker or dealer registered pursuant to section 15 of the Exchange Act;
•An investment adviser registered pursuant to section 203 of the Investment Advisers Act of 1940 or registered pursuant to the laws of a state;
•An investment adviser relying on the exemption from registering with the Securities and Exchange Commission under section 203(l) or (m) of the Investment Advisers Act of 1940;
•Any insurance company as defined in section 2(a)(13) of the Securities Act;
•Any investment company registered under the Investment Company Act of 1940 or a business development company as defined in section 2(a)(48) of the Securities Act;
•Any Small Business Investment Company licensed by the U.S. Small Business Administration under section 301(c) or (d) of the Small Business Investment Act of 1958;
•A Rural Business Investment Company as defined in section 384A of the Consolidated Farm and Rural Development Act;
•Any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000;
•Any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors;
•Any private business development company as defined in section 202(a)(22) of the Investment Advisers Act of 1940;
•Any organization described in section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, partnership or limited liability company, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000;
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This page should be completed by the undersigned
and constitutes a part of the Shareholder Agreement.
Schedule A-2
•Any trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) of the Securities Act;
•An entity, of a type not listed in any of the foregoing paragraphs, not formed for the specific purpose of acquiring the securities offered, owning investments in excess of $5,000,000;
•A “family office,” as defined in rule 202(a)(11)(G)-1 under the Investment Advisers Act of 1940 (17 CFR 275.202(a)(11)(G)-1): (i) with assets under management in excess of $5,000,000, (ii) that is not formed for the specific purpose of acquiring the securities offered, and (iii) whose prospective investment is directed by a person who has such knowledge and experience in financial and business matters that such family office is capable of evaluating the merits and risks of the prospective investment;
•A “family client,” as defined in rule 202(a)(11)(G)-1 under the Investment Advisers Act of 1940 (17 CFR 275.202(a)(11)(G)-1), of a family office meeting the requirements in the foregoing paragraph and whose prospective investment in the issuer is directed by such family office pursuant to clause (iii) in the foregoing paragraph;
•Any natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of his purchase exceeds $1,000,000. For purposes of calculating a natural person’s net worth: (a) the person’s primary residence must not be included as an asset; (b) indebtedness secured by the person’s primary residence up to the estimated fair market value of the primary residence must not be included as a liability (except that if the amount of such indebtedness outstanding at the time of calculation exceeds the amount outstanding 60 days before such time, other than as a result of the acquisition of the primary residence, the amount of such excess must be included as a liability); and (c) indebtedness that is secured by the person’s primary residence in excess of the estimated fair market value of the residence must be included as a liability;
•Any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year; or
•Any entity in which all of the equity owners are accredited investors meeting one or more of the above tests.
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EXHIBIT B
Form of Support Agreement

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STOCKHOLDER SUPPORT AGREEMENT
This Stockholder Support Agreement (this “Agreement”) is dated as of January 14, 2022, by and among Sema4 Holdings Corp., a Delaware corporation (“Acquirer”), OPKO Health, Inc., a Delaware corporation (the “Seller”) and the Person set forth on Schedule I hereto (“Stockholder”). Capitalized terms used but not defined herein shall have the respective meanings ascribed to such terms in the Merger Agreement (as defined below).
WHEREAS, as of the date hereof, Stockholder is the holder of record and/or beneficial owner (as defined in Rule 13d-3 of the Exchange Act) of the shares of Acquirer Stock set forth opposite its name on Schedule I attached hereto (all such shares of Acquirer Stock, together with any additional shares or other voting securities of Acquirer of which such Stockholder acquires record or beneficial ownership after the date of this Agreement, by any means, such Stockholder’s “Shares”);
WHEREAS, contemporaneously with the execution and delivery of this Agreement, Acquirer, Orion Merger Sub I, a Delaware corporation (“Merger Sub I”), Orion Merger Sub II, LLC, a Delaware limited liability company (“Merger Sub II”), GeneDx, Inc., a New Jersey corporation (“Company”), GeneDx Holding 2, Inc., a Delaware corporation (“Holdco2”), and Seller have entered into an Agreement and Plan of Merger and Reorganization (as amended or modified from time to time, the “Merger Agreement”), dated as of the date hereof, pursuant to which, among other transactions, on the Closing Date but following consummation of the Pre-Closing Restructuring, Merger Sub I will merge with and into Holdco2 (the “First Merger”), with Holdco2 as the surviving corporation in the First Merger and Merger Sub I will merge with and into HoldCo2 (the “First Merger”), with HoldCo2 as the surviving corporation in the First Merger, and immediately after the consummation of the First Merger, as part of the same overall transaction, Holdco2, as the surviving corporation in the First Merger, will merge with and into Merger Sub II (the “Second Merger” and, together with the First Merger, the “Mergers”), with Merger Sub II as the surviving corporation and the direct owner of all of the equity interests in GeneDx Delaware LLC.
WHEREAS, on or prior to the date hereof, Acquirer entered into subscription agreements (the “Subscription Agreements” with the PIPE Investors pursuant to which, and on the terms and subject to the conditions of which, such PIPE Investors have agreed to purchase from Acquirer shares of Acquirer Stock for an aggregate purchase price equal to the PIPE Investment Amount, such purchases to be consummated prior to or substantially concurrently with the Closing (the “PIPE Investment,” and, together with the other transactions contemplated by the Merger Agreement, the “Transactions”).
WHEREAS, as an inducement to Seller and Acquirer to enter into the Merger Agreement and to consummate the Transactions, the parties hereto desire to agree to certain matters as set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, and intending to be legally bound hereby, the parties hereto hereby agree as follows:
ARTICLE I
STOCKHOLDER SUPPORT AGREEMENT; COVENANTS
Section 1.1 No Transfer. Stockholder agrees that during the term of this Agreement, Stockholder shall not, directly or indirectly, (a) sell, assign, transfer (including by operation of law), swap, convert, lien, pledge, gift, dispose of or otherwise encumber (including by merger (including by conversion into securities or other consideration), by tendering into any tender or exchange offer, by testamentary disposition, by operation of Law or otherwise, or by divesting itself (pursuant to contract or otherwise) of any rights as a stockholder of Stockholder’s Shares, including, without limitation, the right to vote such Shares) (collectively, a “Transfer”) or enter into any contract or option with respect to the Transfer of, (i) any of such Stockholder’s Shares (the “Restricted Amount”), (b) publicly announce to do any of the foregoing or (c) take any action that would make any representation or warranty of such Stockholder contained herein untrue or incorrect or which would have the effect of preventing or disabling Stockholder from performing his, her or its obligations under this Agreement in any material respect; provided that the foregoing shall not prohibit (W) for all purposes of this Section 1(a) from and after the date of the Acquirer Stockholders’ Meeting at which the Requisite Vote is obtained, the Stockholder and its affiliates shall be permitted to Transfer (and enter into any Contract or option with respect to any such Transfer), 100% of the Restricted Amount (such maximum aggregate amount of shares, the “Transferrable Amount”), it being understood
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and agreed, for the avoidance of doubt, that prior to the date of such Acquirer Stockholders’ Meeting the Stockholder shall not enter into any Contract or option with respect to any such Transfer or publicly disclose, or take any action, that would reasonably be expected to require public disclosure of any intent or plan by Stockholder to engage in any such Transfer (provided that the foregoing shall not restrict the Stockholder from disclosing (including in any filing required by law to be made with the SEC) the existence of this Agreement or the rights of the Stockholder to Transfer Shares in accordance with this Agreement), (X) the transfer of any of the Shares by Stockholder to any managers, partners, members or other direct or indirect equity holders or affiliates of Stockholder (which, for the avoidance of doubt, shall include any investment fund or managed account that is managed on a discretionary basis by the same investment manager as Stockholder) or to any of its or their officers, directors or employees, but only if any such transferee shall execute a joinder or other instrument agreeing to be bound by the provisions of this Agreement, (Y) any pledge of the Shares in connection with a bona fide margin agreement or grant of a security interest in some or all of the Shares to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act, or (Z) any hedging or other transactions, including without limitation any short sales or purchases or sales of “derivative” securities based on securities issued by Acquirer, that do not result in the transfer of any of the Shares or the disposition of voting power in respect thereof prior to the termination of this Agreement. Stockholder hereby covenants and agrees that such Stockholder shall not (i) enter into any voting agreement or voting trust with respect to any of such Stockholder’s Shares that is inconsistent with such Stockholder’s obligations pursuant to this Agreement, grant a proxy or power of attorney with respect to any of such Stockholder’s Shares that is inconsistent with such Stockholder’s obligations pursuant to this Agreement or (iii) enter into any agreement or undertaking that is otherwise inconsistent with, or would interfere with, or prohibit or prevent such Stockholder from satisfying its obligations pursuant to this Agreement. In furtherance of the agreements set forth in this Agreement, Stockholder hereby authorizes Acquirer or its counsel to instruct its transfer agent to put in place a stop transfer order with respect to the Restricted Amount except with respect to Transfers of Shares permitted hereby.
Section 1.2 Agreement to Vote. Stockholder hereby unconditionally and irrevocably agrees that, at any meeting of the stockholders of Acquirer however called or at any adjournment thereof, or in any other circumstance that the vote, consent or other approval of the stockholders of Acquirer is sought (the “Requisite Vote”), such Stockholder shall (i) appear at such meeting or otherwise cause all of such Stockholder’s Shares to be counted present thereat for purposes of calculating a quorum and (ii) vote or cause to be voted (or duly and promptly execute and deliver, or cause to be duly and promptly executed and delivered, an action by written consent which written consent shall be delivered promptly, and in any event within three Business Days, after Acquirer, as applicable requests such delivery), all of such Stockholder’s Shares:
(a)to approve the issuance of the Stock Consideration pursuant to the Merger Agreement and the issuance of the shares of Acquirer Stock pursuant to the Subscription Agreements;
(b)to approve the appointment of the Specified Designees to the Acquirer Board for terms that expire no earlier than the end of the Second Milestone Period;
(c)to approve an amendment to the Company’s current Third Amended and Restated Certificate of Incorporation to increase the authorized shares of Acquirer Stock from 380,000,000 to 1,000,000,000;
(d)to approve any other proposal included in the Proxy Statement that is recommended by the Acquirer Board as necessary to consummate the Transactions;
(e)to approve any proposal that is recommended by the Acquirer Board to adjourn the meeting to a later date, if there are not sufficient affirmative votes (in person or by proxy) to obtain the requested approvals on the date on which such meeting is held; and
(f)against any and all other proposals that could reasonably be expected to delay or impair the ability of Acquirer to consummate the Transactions.
Nothing in this Agreement limits or restricts any Affiliate or designee of Stockholder who serves as a member of the Acquirer Board in acting or voting in his or her capacity as a director of Acquirer and exercising his or her fiduciary duties and responsibilities, it being understood that this Agreement applies to Stockholder solely in its
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capacity as a stockholder of Acquirer and does not apply to any such Affiliate or designee’s actions, judgments or decisions as a director of Acquirer, and such actions (or failures to act) shall not be deemed to constitute a breach of this Agreement.
Section 1.3 Proxy.
(a)Solely in furtherance of Section 1.2 of this Agreement and subject to termination as provided in Section 3.1 of this Agreement, Stockholder (i) hereby irrevocably grants to, and appoints, Acquirer or any individual designated by Acquirer as the Stockholder’s agent, irrevocable proxy and attorney-in-fact (with full power of substitution and resubstitution) to vote the Shares, provide written consents, express consent or otherwise utilize voting power as indicated in Section 1.2 of this Agreement; provided, however, that Stockholder’s grant of the proxy contemplated by this Section 1.3(a) shall be effective if, and only if, Stockholder has not delivered to the Secretary of Acquirer at least five Business Days prior to such meeting a duly executed proxy card previously approved by Acquirer voting Stockholder’s Shares in the manner specified in Section 1.2 or in the event such proxy card has been thereafter modified or revoked or otherwise fails to provide evidence of Stockholder’s compliance with its obligations under Section 1.2 in form and substance reasonably acceptable to Acquirer, (ii) hereby affirms that the irrevocable proxy set forth in this Section 1.3, if it becomes effective pursuant to clause (i), is given in connection with the execution of the Merger Agreement, and that such irrevocable proxy is given to secure the performance of the duties of Stockholder under this Agreement and (iii) hereby (a) affirms that the irrevocable proxy is coupled with an interest and (b) affirms that such irrevocable proxy, if it becomes effective pursuant to clause (i), is executed and intended to be irrevocable in accordance with the provisions of Section 212(e) of the General Corporation Law of the State of Delaware.
(b)Stockholder hereby represents that all proxies, powers of attorney, instructions or other requests given by Stockholder prior to the execution of this Agreement in respect of the voting of Stockholder’s Shares, if any, are not irrevocable and Stockholder hereby revokes (or causes to be revoked) any and all previous proxies, powers of attorney, instructions or other requests with respect to Stockholder’s Shares. The vote, if any, of the proxy holder pursuant to the proxy set forth in this Section 1.3 shall control the outcome, and be determinative, of any conflict between the vote by the proxy holder of the Shares and a vote by a Stockholder of the Shares. Stockholder shall provide evidence to Acquirer in connection with the actions of the Stockholder under or relating to this Section 1.3 as Acquirer shall reasonably request.
Section 1.4 No Challenges. Stockholder agrees not to commence, join in, facilitate, assist or knowingly encourage, and agrees to take all actions reasonably necessary to opt out of any class in any class action with respect to, any claim, derivative or otherwise, against Acquirer or any of its respective successors or directors challenging the validity of, or seeking to enjoin the operation of, any provision of this Agreement.
Section 1.5 No Ownership Interest. Nothing contained in this Agreement shall be deemed to vest in the Acquirer Parties any direct or indirect ownership or incidence of ownership of or with respect to any Shares, except as expressly provided herein. All rights, ownership and economic benefits of and relating to the Shares shall remain vested in and belong to Stockholder, and neither Acquirer nor Merger Subs shall have any authority to direct Stockholder in the voting or disposition of any of the Shares, except as otherwise provided herein.
Section 1.6 No Inconsistent Agreement. Stockholder hereby represents and covenants that such Stockholder has not entered into, shall not enter into and is not otherwise bound by, any agreement that would restrict, limit or interfere with the performance of such Stockholder’s obligations hereunder.
Section 1.7 Consent to Disclosure. Stockholder hereby consents to the publication and disclosure required by applicable securities Laws or the SEC or any other securities authorities, any other documents or communications provided by Acquirer to any Governmental Authority of such Stockholder’s identity and beneficial ownership of Shares and the nature of such Stockholder’s commitments, arrangements and understandings under and relating to this Agreement and, if deemed appropriate by Acquirer, a form of this Agreement. Stockholder will promptly provide any information reasonably requested by Acquirer that is necessary for any regulatory application or filing made or approval sought in connection with the Transactions (including filings with the SEC). The Acquirer shall provide Stockholder with a reasonable opportunity to review and comment on any disclosure made in accordance
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with Section 1.7 and shall consider in good faith any comments of Stockholder, and the Acquirer shall not make any substantive revision to information regarding Stockholder that is provided by Stockholder for inclusion in any filing with the SEC without Stockholder’s approval, which shall not be unreasonably withheld, delayed or conditioned.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of the Stockholder.          Stockholder represents and warrants as of the date hereof to Acquirer as follows:
(a)Organization; Due Authorization. If such Stockholder is not a natural person, it is duly organized, validly existing and in good standing under the Laws of the jurisdiction in which it is incorporated, formed, organized or constituted, and the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby are within such Stockholder’s corporate, limited liability company or organizational powers and have been duly authorized by all necessary corporate, limited liability company or organizational actions on the part of such Stockholder. If such Stockholder is a natural person, such Stockholder has full legal capacity, right and authority to execute and deliver this Agreement and to perform his or her obligations hereunder. This Agreement has been duly executed and delivered by such Stockholder and, assuming due authorization, execution and delivery by the other parties to this Agreement, this Agreement constitutes a legally valid and binding obligation of such Stockholder, enforceable against such Stockholder in accordance with the terms hereof (except as enforceability may be limited by bankruptcy Laws, other similar Laws affecting creditors’ rights and general principles of equity affecting the availability of specific performance and other equitable remedies). If this Agreement is being executed in a representative or fiduciary capacity, the Person signing this Agreement has full power and authority to enter into this Agreement on behalf of the applicable Stockholder.
(b)Ownership. Such Stockholder is the record and/or beneficial owner (as defined in Rule 13d-3 of the Exchange Act) of, and has good title to, all of such Stockholder’s Shares, and there exist no encumbrances or any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of such Shares (other than transfer restrictions under the Securities Act)) affecting any such Shares, other than encumbrances pursuant to (i) this Agreement, (ii) the certificate of incorporation of Acquirer, (iii) the Merger Agreement, (iv) pursuant to any existing lock-up agreement, (v) any applicable securities Laws or (vi) that would not prevent, enjoin or delay in any manner Stockholder’s performance of its obligations under this Agreement. Such Stockholder’s Shares are the only equity securities in Acquirer owned of record or beneficially by such Stockholder on the date of this Agreement, and none of such Stockholder’s Shares are subject to any proxy, voting trust or other agreement or arrangement with respect to the voting of such Shares, except as provided hereunder and under the certificate of incorporation of Acquirer or as noted on Schedule I. Such Stockholder does not hold or own any rights to acquire (directly or indirectly) any equity securities of Acquirer or any equity securities convertible into, or which can be exchanged for, equity securities of Acquirer other than warrants issued by the Acquirer prior to the date of this Agreement or earn-out shares issuable pursuant to the Agreement and Plan of Merger by and among Acquirer, S-IV Sub, Inc. and Mount Sinai Genomics, Inc. dated as of February 9, 2021, as amended.
(c)No Conflicts. The execution and delivery of this Agreement by such Stockholder does not, and the performance by such Stockholder of his, her or its obligations hereunder will not, (i) if such Stockholder is not an individual, conflict with or result in a violation of the organizational documents of such Stockholder or (ii) require any consent or approval that has not been given or other action that has not been taken by any Person (including under any Contract binding upon such Stockholder or such Stockholder’s Shares) to the extent such consent, approval or other action would prevent, enjoin or materially delay the performance by such Stockholder of its, his or her obligations under this Agreement.
(d)Litigation. There are no Proceedings pending against such Stockholder, or to the knowledge of such Stockholder threatened against such Stockholder, before (or, in the case of threatened Proceedings, that would be before) any arbitrator or any Governmental Authority, which in any manner challenges or seeks to prevent, enjoin or materially delay the performance by such Stockholder of its, his or her obligations under this Agreement.
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(e)Brokerage Fees. No broker, finder, investment banker or other Person is entitled to any brokerage fee, finders’ fee or other commission in connection with the transactions contemplated by the Merger Agreement based upon arrangements made by such Stockholder, for which Acquirer or any of its Affiliates may become liable.
(f)Acknowledgment. Such Stockholder understands and acknowledges that Seller and Acquirer are entering into the Merger Agreement in reliance upon such Stockholder’s execution, delivery and performance of this Agreement.
ARTICLE III
MISCELLANEOUS
Section 3.1 Termination. All of the provisions this Agreement (and the proxy granted hereunder) shall terminate and be of no further force or effect upon the earlier of (a) the Effective Time, (b) such date and time as the Merger Agreement shall be terminated in accordance with Section 7.1 thereof (the earlier of clause (a) and (b) being the “Expiration Time”) and (c) the written agreement of Acquirer, Seller and Stockholder to terminate the provisions of this Agreement. Stockholder shall also have the right to terminate this Agreement (and the proxy granted hereunder) by written notice to Acquirer if the Transactions have not been consummated by the Outside Date (as defined in the Subscription Agreements). Upon any termination of this Agreement, all obligations of Acquirer and Stockholder under this Agreement will terminate, without any liability or other obligation on the part of any party hereto to any person or entity in respect hereof or the transactions contemplated hereby, and no party hereto shall have any claim against another (and no person or entity shall have any rights against such party), whether under contract, tort or otherwise, with respect to the subject matter hereof; provided, however, that the termination of the provisions of this Agreement shall not relieve any party hereto from liability arising in respect of any willful breach of the provisions of this Agreement prior to such termination. Stockholder’s obligations under Section 1.2 and 1.3 shall cease to apply, and the proxy granted under Section 1.3 shall terminate, in the event that the Merger Agreement is amended, modified, supplemented or waived in a manner that (A) increases the Stock Consideration, otherwise materially changes the form, or otherwise materially increases the amount, of the consideration payable by Acquirer pursuant to the Merger Agreement, (B) changes the definition of Specified Designees or (C) is otherwise materially adverse to Stockholder, unless Stockholder has consented to such amendment, modification, supplement or waiver in writing (which consent will not be unreasonably withheld, delayed or conditioned if so requested by Acquirer). This ARTICLE III shall survive the termination of this Agreement.
Section 3.2 Other Agreements. Acquirer represents and warrants to Stockholder that it has obtained a binding support agreement or commitment from the stockholders listed in Schedule II (each a “Supporting Stockholder”) in respect of the Requisite Vote with substantially the same commitment and terms, including restrictions on transfer as noted in such Schedule, set forth in this Agreement (each a “Supporting Stockholder Voting Commitment”). Acquirer shall not agree to any amendment, waiver, termination or modification of a material term of a Supporting Stockholder Voting Commitment without offering the same amendment, waiver, termination or modification to Stockholder. The obligations of each Supporting Stockholder under any Supporting Stockholder Voting Commitment are several and not joint with the obligations of any other Supporting Stockholder, and no Supporting Stockholder shall be responsible in any way for the performance of the obligations of any other Supporting Stockholder under any Supporting Stockholder Voting Commitment. Nothing contained herein or in any other Supporting Stockholder Voting Commitment , and no action taken by any Supporting Stockholder pursuant hereto or thereto, shall be deemed to constitute the Supporting Stockholders and Stockholder as, and Acquirer acknowledges that the Supporting Stockholders and Stockholder do not so constitute, a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Supporting Stockholders and Stockholder are in any way acting in concert or as a group, and no party hereto will assert any such claim with respect to such obligations or the transactions contemplated hereby or by the Supporting Stockholder Voting Commitments. Acquirer acknowledges and Stockholder confirms that it has independently participated in the negotiation of the transaction contemplated hereby with the advice of its own counsel and advisors. Stockholder shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement, and shall not seek, nor shall it be necessary for, any Supporting Stockholder to be joined as an additional party in any proceeding for such purpose.
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Section 3.3 Injunctive Relief; Specific Performance. The parties hereto agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof, and, accordingly, that the parties hereto shall, to the fullest extent permitted by Law, be entitled to an injunction or injunctions to prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof in the Court of Chancery of the State of Delaware or, if that court does not have jurisdiction, any federal court located in the State of Delaware or any other Delaware State Court without proof of actual damages or otherwise, in addition to any other remedy to which they are entitled at law or in equity as expressly permitted in this Agreement. To the fullest extent permitted by applicable Law, each of the parties hereto hereby further waives (a) any defense in any Proceeding for specific performance that a remedy at law would be adequate and (b) any requirement under any Law to post security or a bond as a prerequisite to obtaining equitable relief. Each of the parties hereto hereby acknowledges and agrees that it may be difficult to prove damages with reasonable certainty, that it may be difficult to procure suitable substitute performance, and that injunctive relief and/or specific performance will not cause an undue hardship to the parties hereto. Each of the parties hereto hereby further acknowledges that the existence of any other remedy contemplated by this Agreement does not diminish the availability of specific performance of the obligations hereunder or any other injunctive relief. Each party hereto hereby further agrees that in the event of any action by any other party for specific performance or injunctive relief, such party will not assert that a remedy at law or other remedy would be adequate or that specific performance or injunctive relief in respect of such breach or violation should not be available on the grounds that money damages are adequate or any other grounds
Section 3.4 Governing Law; Jurisdiction; Waiver of Jury Trial. This Agreement shall be governed by, and construed in accordance with, the Laws of the State of Delaware applicable to contracts executed in and to be performed in that State. Any Proceeding arising out of or relating to this Agreement or the transactions contemplated hereby shall, to the fullest extent permitted by applicable Law, be heard and determined exclusively in the Court of Chancery of the State of Delaware; provided, that if jurisdiction is not available in such court, then any such legal Proceeding may be brought in any federal court located in the State of Delaware or any other Delaware state court. To the fullest extent permitted by applicable Law, the parties hereto hereby (i) irrevocably submit to the exclusive jurisdiction of the aforesaid courts for themselves and with respect to their respective properties for the purpose of any Proceeding arising out of or relating to this Agreement or the transactions contemplated hereby brought by any party hereto, and (ii) agree not to commence any such Proceeding except in the courts described above in Delaware, other than any Proceeding in any court of competent jurisdiction to enforce any judgment, decree or award rendered by any such court in Delaware as described herein. To the fullest extent permitted by applicable Law, each of the parties hereto further agrees that notice as provided herein shall constitute sufficient service of process and the parties hereto further waive any argument that such service is insufficient. To the fullest extent permitted by applicable Law, each of the parties hereto hereby irrevocably and unconditionally waives, and agrees not to assert, by way of motion or as a defense, counterclaim or otherwise, in any Proceeding arising out of or relating to this Agreement or the transactions contemplated hereby, (x) any claim that such party is not personally subject to the jurisdiction of the courts in Delaware as described herein for any reason, (y) that such party or such party’s property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (z) that (A) the Proceeding in any such court is brought in an inconvenient forum, (B) the venue of such Proceeding is improper or (C) this Agreement or the transactions contemplated hereby, or the subject matter hereof, may not be enforced in or by such courts. EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO A TRIAL BY JURY IN ANY PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (III) IT MAKES SUCH WAIVERS VOLUNTARILY AND (IV) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, BY, AMONG OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THIS SECTION.
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Section 3.5 Assignment. This Agreement and all of the provisions hereof will be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and permitted assigns. Except by a Stockholder in connection with a transfer of Shares permitted by Section 1.1 herein, neither this Agreement nor any of the rights, interests or obligations hereunder will be assigned (including by operation of Law) without the prior written consent of the parties hereto.
Section 3.6 Amendment; Waiver; Severability. This Agreement may not be amended, changed, supplemented, waived or otherwise modified or terminated, except upon the execution and delivery of a written agreement executed by the parties to this Agreement. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.
Section 3.7 Notices. All notices and other communications among the parties hereto shall be in writing and shall be deemed to have been duly given (a) when delivered in person, (b) when delivered after posting in the United States mail having been sent registered or certified mail return receipt requested, postage prepaid, (c) when delivered by FedEx or other nationally recognized overnight delivery service or (d) when e-mailed during normal business hours (and otherwise as of the immediately following Business Day), addressed as follows:
If to Acquirer:
Sema4 Holdings Corp.
333 Ludlow Street, North Tower, 8th Floor
Stamford, Connecticut 06902
Attention: General Counsel
Email: legal@sema4.com
with a copy to (which will not constitute notice):
Fenwick & West LLP
902 Broadway
New York, NY 10010
Email: eskerry@fenwick.com; vlupu@fenwick.com
Attention: Ethan A. Skerry; Victoria A. Lupu
If to Seller:
OPKO Health, Inc.
4400 Biscayne Blvd.
Miami, FL 33137
Attention: Steven D. Rubin
Email: srubin@opko.com
with a copy (which will not constitute notice) to:
Greenberg Traurig, P.A.
333 S.E. 2nd St.
Suite 4400
Miami, FL 33131
Email: grossmanb@gtlaw.com; altmand@gtlaw.com
Attention: Robert L. Grossman; Drew M. Altman
A-121

If to Stockholder:
To such Stockholder’s address set forth in Schedule I (with a copy (which will not constitute notice) as provided thereon, if any.
Notwithstanding the foregoing, in the event notice is delivered pursuant to this Section 3.7 by a means other than email, such party shall email such notice within one (1) Business Day of delivery of such notice by such other means.
Section 3.8 Counterparts. This Agreement may be executed in two or more counterparts (any of which may be delivered by electronic transmission), each of which shall constitute an original, and all of which taken together shall constitute one and the same instrument.
Section 3.9 Entire Agreement. This Agreement and the agreements referenced herein constitute the entire agreement and understanding of the parties hereto in respect of the subject matter hereof and supersede all prior understandings, agreements or representations by or among the parties hereto to the extent they relate in any way to the subject matter hereof.
Section 3.10 Third Party Beneficiaries. This Agreement is not intended to confer upon any person other than the parties hereto (and their respective successors and permitted assigns) any rights (legal, equitable or otherwise) or remedies, whether as third-party beneficiaries or otherwise.
Section 3.11 Expenses. Except as otherwise expressly provided in this Agreement or the Merger Agreement, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs or expenses.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the Stockholder, Seller and Acquirer have each caused this Stockholder Support Agreement to be duly executed as of the date first written above.
STOCKHOLDER:
[NAME]
By:
Name:
Title:
[Signature Page to Stockholder Support Agreement]
IN WITNESS WHEREOF, the Stockholder, Seller and Acquirer have each caused this Stockholder Support Agreement to be duly executed as of the date first written above.
ACQUIRER:
SEMA4 HOLDINGS CORP.
By:
Name:
Title:
[Signature Page to Stockholder Support Agreement]

SELLER:
OPKO HEALTH, INC.
By:
Name:
Title:
[Signature Page to Stockholder Support Agreement]

EXHIBIT C-1
Form of First Certificate of Merger
A-126

CERTIFICATE OF MERGER
FOR THE MERGER OF
ORION MERGER SUB I, INC.
WITH AND INTO
GENEDX HOLDING 2, INC.
[●], 2022

Pursuant to Section 251 of the
General Corporation Law of the State of Delaware

GeneDx Holding 2, Inc., a Delaware corporation (the “Company”), hereby certifies:
FIRST:                                          The name and state of incorporation of each of the constituent corporations are as
follows: Name: GeneDx Holding 2, Inc.      State of Incorporation: Delaware
Name: Orion Merger Sub I, Inc.      State of Incorporation: Delaware
SECOND:                                An Agreement and Plan of Merger and Reorganization (as amended from time to time in accordance with its terms, the “Merger Agreement”) has been approved, adopted, executed and acknowledged by the Company and by Orion Merger Sub I, Inc., a Delaware corporation, (“Merger Sub I”) in accordance with Section 251 [(and, with respect to [], by the written consent of its stockholder(s) in accordance with Section 228)]14 of the General Corporation Law of the State of Delaware (DGCL”).
THIRD:                                        The name of the surviving corporation of the Merger shall be GeneDx Holding 2, Inc., which shall continue its existence as the surviving corporation under the name GeneDx Holding 2, Inc. (the “Surviving Corporation”).
FOURTH:                                Upon the effectiveness of the filing of this Certificate of Merger, the Certificate of Incorporation of the Company, as amended to date, shall be amended and restated to read in its entirety by reason of the Merger herein certified as set forth in Exhibit A attached hereto and shall continue as the amended and restated Certificate of Incorporation of the Surviving Corporation until further amended in accordance with the provisions of the DGCL.
FIFTH:                                         The executed Merger Agreement is on file at an office of the Surviving Corporation, at 333 Ludlow Street, North Tower, 8th Floor, Stamford, Connecticut, 06902.
SIXTH:                                        A copy of the executed Merger Agreement will be furnished by the Surviving Corporation, on request and without cost, to any stockholder of any constituent corporation.
SEVENTH:                                The Merger shall become effective immediately upon filing of this Certificate of Merger with the Secretary of State of the State of Delaware in accordance with the provisions of Sections 103 and 251(c) of the DGCL.
[Remainder of Page Intentionally Left Blank]
4To be included for each constituent corporation whose stockholders approve the merger by written consent.
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IN WITNESS WHEREOF, the undersigned haveGeneDx Holding 2, Inc. has caused this AgreementCertificate of Merger to be executed as of the date first written above.
[NEW HOLDERS]

A-164

AMENDMENT TO
AGREEMENT AND PLAN OF MERGER
This Amendment (this “Amendment”) is made as of May 3, 2021 and amends that certain Agreement and Plan of Merger (the “Agreement”), dated February 9, 2021, by and among CM Life Sciences, Inc., a Delaware corporation (“Parent”), S-IV Sub, Inc., a Delaware corporation and a direct, wholly-owned subsidiary of Parent (“Merger Sub”), and Mount Sinai Genomics, Inc., a Delaware corporation, d/b/a Sema4 (the “Company” and, collectively, the “Parties”). Capitalized terms not herein defined shall have the meanings ascribed to them in the Agreement.
WHEREAS, each of the Parties now desire to amend the Agreement as set forth herein, on the terms set forth herein.
WHEREAS, Section 11.12 of the Agreement provides that the Agreement may be amended pursuant to an instrument in writing signed by each of the Parties thereto.
NOW, THEREFORE, in consideration of the mutual promises herein contained, and other consideration, the receipt and adequacy of which hereby is acknowledged the Parties hereby agree as follows:
1.Amendments to the Agreement.
a.The definition of the term “Closing Number of Securities” in Section 1.2 of the Agreement is hereby amended and restated in its entirety to read as follows:
“ “Closing Number of Securities” shall mean the aggregate number of shares of Parent Class A Stock to be issued at Closing to equityholders of the Company pursuant to Section 2.7 and Section 2.12.”
b.Section 3.1(b) of the Agreement is hereby amended and restated to read incorporate name by its entirety as follows:
“(b) Upon the last day of any calendar year, Parent shall issue or cause to be issued to each Company Stockholder (other than holders of Dissenting Shares) and Earn-Out Service Provider (in accordance with its respective Earn-Out Pro Rata Share and, in the case of the Earn-Out Service Providers, in accordance with the terms of the applicable Earn-Out Award Agreement) the Earn-Out Shares that (i) are in the Forfeiture Pool as in effect as of such date and (ii) would have been issuable to Company Stockholders pursuant to Section 3.1(a) as a result of the occurrence of a Triggering Event had they not been made subject to an award of Earn-Out RSUs.”
c.Section 3.4 of the Agreement is hereby amended and restated to read in its entirety as follows:
“Section 3.4 Earn-Out Service Providers. Earn-Out Shares issuable upon the occurrence of a Triggering Event may be issued to Earn-Out Service Providers as described in this Section 3.4 rather than to Company Stockholders. The terms of the issuance of the Earn-Out Shares underlying an award of Earn-Out RSUs to the Earn-Out Service Providers shall be set forth in a written agreement between the Company and such Earn-Out Service Provider (each, an “Earn Out Award Agreement”), in a form reasonably acceptable to Parent, which may provide that the Earn-Out Shares that would otherwise become issuable to an Earn-Out Service Provider pursuant to Section 3.1(a) or 3.1(b) shall remain subject to certain additional vesting conditions as set forth therein, and which may provide for accelerated vesting in the event of a Change in Control. In the event that an Earn-Out Service Provider does not satisfy the vesting conditions set forth in his or her Earn-Out Award Agreement (an “Earn-Out Forfeiture”), such Earn-Out Service Provider shall be deemed to have forfeited his or her right to receive the applicable Earn-Out Shares for no consideration. Any such Earn-Out Shares that are forfeited under the terms of an Earn-Out Award Agreement shall accumulate in the “Forfeiture Pool” until such time as they are issued in accordance with Section 3.1(b). For clarity, no shares of Parent Class A Common Stock shall be issuable pursuant to Section 3.1(b) other than Earn-Out Shares that have been included in the Forfeiture Pool and that become issuable as a result of the
A-165

occurrence of a Triggering Event. The delivery of Earn-Out Shares underlying the Earn-Out RSUs shall be subject to the payment of any applicable Tax withholdings and compliance with any applicable requirements of the securities and other laws.”
2.Amendment. The parties acknowledge and agree that this Amendment does not require the further approval of the stockholders of the Company under the DGCL or other Applicable Legal Requirements. Except as expressly set forth in this Amendment, the Agreement shall continue in full force in all respects.
3.Counterparts; Electronic Delivery. This Amendment may be executed in one or more counterparts, all of which shall be considered one and the same document and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Parties, it being understood that all Parties need not sign the same counterpart. Delivery by electronic transmission to counsel for the other Parties of a counterpart executed by a Party shall be deemed to meet the requirements of the previous sentence.
4.Governing Law. This Amendment shall be governed by and construed in accordance with the internal law of the State of Delaware regardless of the law that might otherwise govern under applicable principles of conflicts of law thereof.
[signature page follows]

A-166

IN WITNESS WHEREOF, the Parties have caused this Amendment to be duly executed,authorized officer as of the date first above written.
CM LIFE SCIENCES,GENEDX HOLDING 2, INC.
By:/s/ Brian Emes
Name:Brian Emes
Title:Chief Financial Officer
S-IV SUB, INC
By:/s/ Brian Emes
Name:Brian Emes
Title:Chief Financial Officer
MOUNT SINAI GENOMICS, INC
By:/s/ Eric Schadt
Name: Eric Schadt, PhD
Title:CEO

[SIGNATURE PAGE TO FIRST CERTIFICATE OF MERGER]

A-167

ANNEX B
[CM LIFE SCIENCES, INC.]
THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
[CM Life Sciences, Inc.], a Delaware corporation, hereby certifies as follows:
1.    The name of this corporation is “[CM Life Sciences, Inc.]” The date of the filing of its original Certificate of Incorporation with the Secretary of State of the State of Delaware was July 10, 2020 (the “Original Certificate”), the First Amendment and Restatement to the Original Certificate was filed with the Secretary of State of the State of Delaware on July 13, 2020 (the “First Amended Certificate”), and Second Amended and Restated Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on September 1, 2020 (the “Second Amended Certificate”).
2.    This Third Amended and Restated Certificate of Incorporation of the corporation attached hereto as Exhibit A, which is incorporated herein by this reference, and which restates, integrates and further amends the provisions of the Certificate of Incorporation of this corporation as previously amended and/or restated, has been duly adopted by this corporation’s Board of Directors and by the stockholders in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware, with the approval of this corporation’s stockholders having been given by written consent without a meeting in accordance with Section 228 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, this corporation has caused this Restated Certificate of Incorporation to be signed by its duly authorized officer and the foregoing facts stated herein are true and correct.
Dated: [●], 2021[CM LIFE SCIENCES, INC.]
By:
Name:
Title:
B-1

EXHIBIT A
[COMPANY NAME]
THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
GENEDX HOLDING 2, INC.
ARTICLE I: NAME
The name of the corporation is [Company Name] (theGeneDx Holding 2, Inc. (the “Corporation”).
ARTICLE II: AGENT FOR SERVICE OF PROCESS
The address of the registered office of thisthe Corporation in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle, 19801, and theDelaware 19801. The name of theits registered agent of this Corporation in the State of Delaware at such address is The Corporation Trust Company.
ARTICLE III: PURPOSE
The purpose of the Corporation is to engage in any lawful act or activity for which corporationsa corporation may be organized under the General Corporation Law of the State of Delaware (the “General Corporation LawDGCL”).
ARTICLE IV: AUTHORIZED STOCK
1.Total Authorized.The total number of shares of all classes of stock that the Corporation has authority to issue is [●]100 shares, consistingall of two classes: [●] shares of Class A Common Stock,which shall be common stock, $0.0001 par value per share (the “Common Stock”); and [●] shares of Preferred Stock, $0.0001 par value per share (“Preferred Stock”).
2.    Designation of Additional Series.
2.1.    The Board of Directors of the Corporation (the “Board”) is authorized, subject to any limitations prescribed by the law of the State of Delaware, to provide for the issuance of the shares of Preferred Stock in one or more series, and, by filing a Certificate of Designation pursuant to the applicable law of the State of Delaware (“Certificate of Designation”), to establish from time to time the number of shares to be included in each such series, to fix the designation, vesting, powers (including voting powers), preferences and relative, participating, optional or other special rights, if any, of the shares of each such series and any qualifications, limitations or restrictions thereof, and, except where otherwise provided in the applicable Certificate of Designation, to thereafter increase (but not above the total number of authorized shares of the Preferred Stock) or decrease (but not below the number of shares of such series then outstanding) the number of shares of any such series. The number of authorized shares of Preferred Stock may also be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of two-thirds of the voting power of all then-outstanding shares of capital stock of the Corporation entitled to vote thereon, voting together as a single class, without a separate vote of the holders of the Preferred Stock, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law, unless a separate vote of the holders of one or more series is required pursuant to the terms of any Certificate of Designation; provided,however, that if two-thirds of the Whole Board (as defined below) has approved such increase or decrease of the number of authorized shares of Preferred Stock, then only the affirmative vote of the holders of a majority of the voting power of all then-outstanding shares of the capital stock of the Corporation entitled to vote thereon, voting together as a single class, without a separate vote of the holders of the Preferred Stock, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law, unless a separate vote of the holders of one or more series is required pursuant to the terms of any Certificate of Designation, shall be required to effect such increase or decrease. For purposes of this Third Amended and Restated Certificate of Incorporation (as the same may be amended and/or restated from time to time, including pursuant to the terms of any Certificate of Designation designating a series of Preferred Stock, this “Certificate of Incorporation”), the term “Whole Board” shall mean the total number of authorized directors whether or not there exist any vacancies in previously authorized directorships.
B-2

2.2.    Except as otherwise expressly provided in any Certificate of Designation designating any series of Preferred Stock pursuant to the foregoing provisions of this Article IV, any new series of Preferred Stock may be designated, fixed and determined as provided herein by the Board without approval of the holders of Common Stock or the holders of Preferred Stock, or any series thereof, and any such new series may have powers, preferences and rights, including, without limitation, voting powers, dividend rights, liquidation rights, redemption rights and conversion rights, senior to, junior to or pari passu with the rights of the Common Stock, any series of Preferred Stock or any future class or series of capital stock of the Corporation.
2.3.    Each outstanding share of Common Stock shall entitle the holder thereof to one vote on each matter properly submitted to the stockholders of the Corporation for their vote; provided, that, except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Certificate of Incorporation (including any Certificate of Designation relating to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more other such series, to vote thereon pursuant to this Certificate of Incorporation (including any Certificate of Designation relating to any series of Preferred Stock).
share.
ARTICLE V: AMENDMENT OF BYLAWS
The Boardboard of directors of the Corporation shall have the power to adopt, amend or repeal the Bylawsbylaws of the Corporation (as the same may be amended and/or restated from time to time, the “Bylaws”). Any adoption, amendment or repeal of the Bylaws by the Board shall require the approval of a majority of the Whole Board. The stockholders shall also have power to adopt, amend or repeal the Bylaws; provided, that, notwithstanding any other provision of this Certificate of Incorporation or any provision of law that might otherwise permit a lesser or no vote, but in addition to any vote of the holders of any class or series of stock of the Corporation required by applicable law or by this Certificate of Incorporation (including any Preferred Stock issued pursuant to a Certificate of Designation), the affirmative vote of the holders of at least two-thirds of the voting power of all then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required for the stockholders to adopt, amend or repeal any provision of the Bylaws; provided, further, that, in the case of any proposed adoption, amendment or repeal of any provisions of the Bylaws that is approved by the Board and submitted to the stockholders for adoption thereby, if two-thirds of the Whole Board has approved such adoption, amendment or repeal of any provisions of the Bylaws, then only the affirmative vote of the holders of a majority of the voting power of all then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class (in addition to any vote of the holders of any class or series of stock of the Corporation required by applicable law or by this Certificate of Incorporation (including any Preferred Stock issued pursuant to a Certificate of Designation)), shall be required to adopt, amend or repeal any provision of the Bylaws.
corporation.
ARTICLE VI: MATTERS RELATING TO THE BOARD OF DIRECTORSVOTE BY BALLOT
1.Director Powers. Except as otherwise provided by the General Corporation Law, the Bylaws of the Corporation or this Certificate of Incorporation, the business and affairs of the Corporation shall be managed by or under the direction of the Board.
2.Number of Directors. Subject to the special rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the total number of directors constituting the Whole Board shall be fixed from time to time exclusively by resolution adopted by a majority of the Whole Board.
3.    Classified Board. Subject to the special rights of the holders of one or more series of Preferred Stock to elect additional directors under specified circumstances, the directors shall be divided, with respect to the time for which they severally hold office, into three classes designated as Class I, Class II and Class III, respectively (the “Classified Board”). The Board may assign members of the Board already in office to the Classified Board, which assignments shall become effective at the same time that the Classified Board becomes effective. Directors shall be assigned to each class in accordance with a resolution or resolutions adopted by the Board. The number of directors in each class shall be divided as nearly equal as is practicable. The initial term of office of the Class I directors shall expire at the Corporation’s first annual meeting of stockholders following the effectiveness of this Certificate of
B-3

Incorporation, the initial term of office of the Class II directors shall expire at the Corporation’s second annual meeting of stockholders following the effectiveness of this Certificate of Incorporation and the initial term of office of the Class III directors shall expire at the Corporation’s third annual meeting of stockholders following the effectiveness of this Certificate of Incorporation. At each annual meeting of stockholders following the effectiveness of this Certificate of Incorporation, directors elected to succeed those directors of the class whose terms then expire shall be elected for a term of office expiring at the third succeeding annual meeting of stockholders after their election.
4.    Term and Removal. Each director shall hold office until the annual meeting at which such director’s term expires and until such director’s successor is duly elected and qualified, or until such director’s earlier death, resignation, disqualification or removal. Any director may resign at any time by delivering a resignation in writing or by electronic transmission to the Corporation at its principal office or to the Chairperson of the Board, the Chief Executive Officer, or the Secretary. Subject to the special rights of the holders of any series of Preferred Stock, no director may be removed from the Board except for cause and only by the affirmative vote of the holders of at least two-thirds of the voting power of the then-outstanding shares of capital stock of the Corporation entitled to vote thereon, voting together as a single class. In the event of any increase or decrease in the authorized number of directors, (a) each director then serving as such shall nevertheless continue as a director of the class of which he or she is a member and (b) the newly created or eliminated directorships resulting from such increase or decrease shall be apportioned by the Board among the classes of directors so as to make all classes as nearly equal in number as is practicable, provided that no decrease in the number of directors constituting the Board shall shorten the term of any director.
5.    Board Vacancies and Newly Created Directorships. Subject to the special rights of the holders of any series of Preferred Stock, any vacancy occurring in the Board for any cause, and any newly created directorship resulting from any increase in the authorized number of directors, shall, unless (a) the Board determines by resolution that any such vacancies or newly created directorships shall be filled by the stockholders or (b) as otherwise provided by law, be filled only by the affirmative vote of a majority of the directors then in office, even if less than a quorum, or by a sole remaining director, and shall not be filled by the stockholders. Any director elected in accordance with the preceding sentence shall hold office for a term expiring at the annual meeting of stockholders at which the term of office of the class to which the director has been assigned expires and until such director’s successor shall have been duly elected and qualified, or until such director’s earlier death, resignation, disqualification or removal.
6.Vote by Ballot.Election of directors need not be by written ballot unless the Bylawsbylaws of the Corporation shall so provide.
ARTICLE VII: DIRECTOR LIABILITY
1.Limitation of Liability.To the fullest extent permitted by law, no director of the Corporation shall be personally liable for monetary damages for breach of fiduciary duty as a director. Without limiting the effect of the preceding sentence, if the General Corporation LawDGCL is hereafter amended to authorize the further elimination or limitation of the liability of a director, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law,DGCL, as so amended.
2.Change in Rights.Neither any amendment nor repeal of this Article VII, nor the adoption of any provision of this Certificate of Incorporation inconsistent with this Article VII, shall eliminate, reduce or otherwise adversely affect any limitation on the personal liability of a director of the Corporation existing at the time of such amendment, repeal or adoption of such an inconsistent provision.
A-129
ARTICLE VIII: MATTERS RELATING TO STOCKHOLDERS

EXHIBIT C-2
Form of Second Certificate of Merge
A-130
1.
No Action
CERTIFICATE OF MERGER
FOR THE MERGER OF
GENEDX HOLDING 2, INC.
WITH AND INTO
ORION MERGER SUB II, LLC
[●], 2022

Pursuant to Section 264 of the
General Corporation Law of the State of Delaware
and Section 18-209 of the Delaware Limited Liability Company Act

The undersigned limited liability company, duly formed and existing under and by Written Consentvirtue of Stockholders. Subjectthe Delaware Limited Liability Company Act, does hereby certify that:
FIRST:                                  The name, jurisdiction of formation or organization and type of entity of each of the constituent entities which is to merge are as follows:
Name
Jurisdiction of Formationor Organization
Type of Entity
GeneDx Holding 2, Inc.DelawareCorporation
Orion Merger Sub II, LLCDelawareLimited Liability Company
SECOND:                          An Agreement and Plan of Merger and Reorganization (as amended from time to time in accordance with its terms, the “Merger Agreement”), has been approved, adopted, certified, executed and acknowledged by Orion Merger Sub II, LLC, a Delaware limited liability company (“Merger Sub II”), and GeneDx Holding 2, Inc., a Delaware corporation (“Company”), in accordance with the provisions of § 18-209 of the Delaware Limited Liability Company Act and in accordance with the provisions of § 264 (and by the consent of the Company’s stockholders in accordance with the provisions of Section 228) of the General Corporation Law of the State of Delaware.
THIRD:                                  The name of the surviving limited liability company is Orion Merger Sub II, LLC which shall continue its existence as said surviving limited liability company under the name “GeneDx Holding 2, LLC” upon the effectiveness of the Merger (the “Surviving Entity”).
FOURTH:                              Pursuant to § 18-209(c)(4) of the Delaware Limited Liability Company Act, the first paragraph of the Certificate of Formation Merger Sub II, relating to the rightsname of any seriesMerger Sub II, is hereby amended to read in its entirety as follows: “The name of Preferred Stock then outstanding, no action shall be takenthe limited liability company is GeneDx Holding 2, LLC.” The Certificate of Formation of Merger Sub II, as amended by the stockholdersimmediately preceding sentence, shall continue to be the Certificate of Formation of the Corporation exceptSurviving Entity until amended or changed pursuant to the provisions of the Delaware Limited Liability Company Act.
FIFTH:                                  The executed Merger Agreement is on file at a duly called annual or special meetingan office and place of stockholders and no action shallbusiness of the Surviving Entity, at 333 Ludlow Street, North Tower, 8th Floor, Stamford, Connecticut, 06902.
SIXTH:                                  A copy of the executed Merger Agreement will be takenfurnished by the stockholdersSurviving Entity, on request and without cost, to any member of Merger Sub II or any stockholder of the Corporation by written consent in lieu of a meeting.Company.
B-4A-131

2.Special MeetingSEVENTH:                                  The Merger shall become effective upon filing of Stockholders. Special meetingsthis Certificate of Merger with the Secretary of State of the stockholdersState of Delaware.
[Remainder of Page Intentionally Left Blank]
A-132

IN WITNESS WHEREOF, Merger Sub II has caused this Certificate of Merger to be executed by its duly authorized person as of the Corporation may be called onlydate first above written.
ORION MERGER SUB II, LLC
By:
Name:Eric Schadt
Title:Authorized Person
[SIGNATURE PAGE TO SECOND CERTIFICATE OF MERGER]


ANNEX B
CERTIFICATE OF AMENDMENT
TO
THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
THE UNDERSIGNED,being a duly appointed officer of Sema4 Holdings Corp. (the “Corporation”), a corporation organized and existing under and by the Chairpersonvirtue of the Board, the Chief Executive Officer, the Lead Independent Director (as defined in the Bylaws), the President, or the Board acting pursuant to a resolution adopted by a majority of the Whole Board and may not be called by the stockholders or any other person or persons.
3.Advance Notice of Stockholder Nominations and Business Transacted at Special Meetings. Advance notice of stockholder nominations for the election of directors of theDelaware General Corporation and of business to be brought by stockholders before any meeting of stockholders of the Corporation shall be given in the manner provided in the Bylaws. Business transacted at special meetings of stockholders shall be limited to the purpose or purposes stated in the notice of meeting.
ARTICLE IX: CHOICE OF FORUM
Unless the Corporation consents in writing to the selection of an alternative forum, the Court of ChanceryLaw of the State of Delaware shall,(the “DGCL”), for the purpose of amending the Corporation’s Third Amended and Restated Certificate of Incorporation, as amended to the fullest extent permitted by law, be the soledate hereof (the “Certificate of Incorporation”), hereby certifies, pursuant to Sections 242 and exclusive forum for: (a) any derivative action or proceeding brought on behalf103 of the Corporation; (b) any action asserting a claim of breach of a fiduciary duty owed by, or other wrongdoing by, any director, officer, stockholder, employee or agentDGCL, as follows:
FIRST: The name of the Corporation is Sema4 Holdings Corp.
SECOND: The amendment to the Corporation orCertificate of Incorporation set forth below was duly adopted in accordance with the Corporation’s stockholders; (c) any action asserting a claim againstprovisions of Section 228 and 242 of the DGCL.
THIRD: The Certificate of Incorporation is hereby amended by striking out Section 1 of Article IV thereof, and by substituting in lieu thereof, the following new Section 1:
"1.Total Authorized. The total number of shares of all classes of stock that the Corporation or any director, officer, stockholder, employee or agenthas authority to issue is 1,001,000,000 shares, consisting of two classes: 1,000,000,000 shares of Class A Common Stock, $0.0001 par value per share (the “Common Stock”); and 1,000,000 shares of Preferred Stock, $0.0001 par value per share (“Preferred Stock”).”
IN WITNESS WHEREOF, the Corporation arising pursuant to any provision of the General Corporation Law,undersigned has made and signed this Certificate of IncorporationAmendment this [     ] day of [     ], 2022 and affirms the statements contained herein as true under penalty of perjury.
Sema4 Holdings Corp.
By:
Name: Daniel Clark
Title: Secretary
B-1

ANNEX C
200 West Street | New York, NY 10282-2198
Tel: 212-902-1000 | Fax: 212-902-3000
goldmansachslogoa.jpg
PERSONAL AND CONFIDENTIAL
January 14, 2022
Board of Directors
Sema4 Holdings Corp.
333 Ludlow Street, North Tower, 8th Floor
Stamford, Connecticut 06902
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a financial point of view to Sema4 Holdings Corp., a Delaware corporation (the “Company”), of the (i) $150 million in cash, as adjusted pursuant to Section 2.6 of the Agreement (as defined below) for any net working capital surplus or shortfall, certain indebtedness of Target (as defined below) and HoldCo2 (as defined below) and their subsidiaries as of the closing date and certain transaction expenses not paid prior to closing (collectively, the “Adjustments”), (ii) 80 million shares of Class A common stock, par value $0.0001 per share (“Company Common Stock”), of the Company and (iii) up to $150 million of contingent payments (each, a “Contingent Payment,” and, collectively, the “Contingent Payments”), payable in cash or shares of Company Common Stock, based upon achievement of 2022 and 2023 revenue milestones, with the Contingent Payment based on the 2023 revenue milestone subject to potential acceleration in a change of control (collectively, the “Consideration”) to be paid to acquire all of the issued and outstanding shares of capital stock of GeneDx, Inc. (or its successor, the “Target”), from OPKO Health, Inc. (the “Seller”), pursuant to the Agreement and Plan of Merger and Reorganization, dated as of January 14, 2022 (the “Agreement”), by and among the Company; the Target; the Seller, GeneDx Holding 2 (“HoldCo2”), which, immediately prior to closing, will be a wholly owned subsidiary of the Seller and own 100% of the capital stock of the Target; Orion Merger Sub I, a wholly owned subsidiary of the Company (“Merger Sub I”); and Orion Merger Sub II, a wholly owned subsidiary of the Company (“Merger Sub II”), under which Merger Sub I will merge with and into HoldCo2, and then HoldCo2 will merge with and into Merger Sub II.
Goldman Sachs & Co. LLC and its affiliates are engaged in advisory, underwriting and financing, principal investing, sales and trading, research, investment management and other financial and non-financial activities and services for various persons and entities. Goldman Sachs & Co. LLC and its affiliates and employees, and funds or other entities they manage or in which they invest or have other economic interests or with which they co-invest, may at any time purchase, sell, hold or vote long or short positions and investments in securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments of the Company, the Seller and any of their respective affiliates and third parties, including the Icahn School of Medicine at Mount Sinai (“ISMMS”), a significant shareholder of the Company, and affiliates of Phillip Frost, a significant shareholder of the Seller, or any currency or commodity that may be involved in the transaction contemplated by the Agreement (the “Transaction”). We have acted as financial advisor to the Company in connection with, and have participated in certain of the negotiations leading to, the Transaction. We expect to receive fees for our services in connection with the Transaction, contingent upon consummation of the Transaction, and the Company has agreed to reimburse certain of our expenses arising, and indemnify us against certain liabilities that may arise, out of our engagement. We have provided certain financial advisory and/or underwriting services to the Company and/or its affiliates from time to time for which our Investment Banking Division has received, and may receive, compensation, including having acted as financial advisor to the Company in its de-SPAC transaction with CM Life Sciences, Inc. and as placement
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Board of Directors
Sema4 Holdings Corp.
January 14, 2022
Page 2
agent in its July 2020 Series C private placement. We also have provided certain financial advisory and/or underwriting services to ISMMS and/or its affiliates (collectively, “Mount Sinai”) from time to time for which our Investment Banking Division has received, and may receive, compensation, including having acted as co-manager in a 2020 $400 million fixed rate debt offering by Mount Sinai Health System, an affiliate of ISMMS. We may also in the future provide financial advisory and/or underwriting services to the Company, the Seller, Mount Sinai or Phillip Frost and their respective affiliates for which our Investment Banking Division may receive compensation.
In connection with this opinion, we have reviewed, among other things, the Agreement; the Company’s Registration Statement on Form S-1, including the prospectus contained therein dated August 12, 2021; certain Quarterly Reports on Form 10-Q of the Company; certain other communications from the Company and the Seller to their respective shareholders; certain publicly available research analyst reports for the Company and the Seller; audited financial statements for the Target for the two fiscal years ended December 31, 2020; unaudited financial statements for the Target for the twelve month period ended December 31, 2021; certain internal financial analyses and forecasts for the Target as prepared by the Seller; certain internal financial analyses and forecasts for the Company and certain internal financial analyses and forecasts for the Target, in each case, as prepared by the management of the Company and approved for our use by the Company (the “Forecasts”), including operating synergies projected to result from the Transaction, as prepared by the management of the Company and approved for our use by the Company (the “Synergies”); and certain estimates as to the amount of the Adjustments and the Contingent Payments, in each case, as prepared by the management of the Company and approved for our use by the Company (the “Estimates”). We have also held discussions with members of the senior managements of the Company, the Target and the Seller regarding their assessment of the strategic rationale for, and the potential benefits of, the Transaction and the past and current business operations, financial condition and future prospects of the Target and the Company; reviewed the reported price and trading activity for the Company Common Stock; compared certain financial information for the Target and certain financial and stock market information for the Company with similar financial and stock market information for certain other companies the securities of which are publicly traded; and performed such other studies and analyses, and considered such other factors, as we deemed appropriate.
For purposes of rendering this opinion, we have, with your consent, relied upon and assumed the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by, us, without assuming any responsibility for independent verification thereof. In that regard, we have assumed with your consent that the Forecasts, including the Synergies, and the Estimates have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of the Company. We have not made an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or other off-balance-sheet assets and liabilities) of the Company or the BylawsSeller or as to whichany of their respective subsidiaries, including the General Corporation Law confers jurisdictionTarget, and we have not been furnished with any such evaluation or appraisal. We have assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the Transaction will be obtained without any adverse effect on the Court of ChanceryCompany or the Target or on the expected benefits of the StateTransaction in any way meaningful to our analysis. We also have assumed that the Transaction will be consummated on the terms set forth in the Agreement, without the waiver or modification of Delaware; (d) any actionterm or condition the effect of which would be in any way meaningful to interpret, apply, enforce or determineour analysis.
Our opinion does not address the validityunderlying business decision of this Certificate of Incorporationthe Company to engage in the Transaction, or the Bylaws; or (e) any action asserting a claim against the Corporation or any director, officer, stockholder, employee or agentrelative merits of the Corporation governedTransaction as compared to any strategic alternatives that may be available to the Company; nor does it address any legal, regulatory, tax or accounting matters. This opinion addresses only the fairness from a financial point of view to the Company, as of the date hereof, of the Consideration to be paid by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring or holding any interest inCompany to acquire all of the issued and outstanding shares of capital stock of the Corporation shall be deemed to have notice of and to have consentedTarget pursuant to the provisionsAgreement. We do not express any view on, and our opinion does not address, any other term or aspect of this Article IX.
ARTICLE X: AMENDMENT OF CERTIFICATE OF INCORPORATION
Ifthe Agreement or Transaction or any provision of this Certificate of Incorporation shall be held to be invalid, illegal,term or unenforceable, then such provision shall nonetheless be enforced to the maximum extent possible consistent with such holding and the remaining provisions of this Certificate of Incorporation (including, without limitation, all portionsaspect of any sectionother agreement or instrument contemplated by the Agreement or entered into or amended in connection with the Transaction, including any allocation of this Certificatethe Consideration, any ongoing obligations of Incorporation containingthe Company or the Seller, any such provision held to be invalid, illegal, or unenforceable, which is not invalid, illegal, or unenforceable) shall remain in full force and effect.
The Corporation reservesprivate placement of Company Common Stock, the right to amend or repeal any provision contained in this Certificate of IncorporationPre-Closing Restructuring (as defined in the manner prescribed byAgreement), the lawsfairness of the State of Delaware and all rights conferred upon stockholders are granted subjectTransaction to, this reservation; provided, however, that, notwithstanding any other provision of this Certificate of Incorporation or any provision of law that might otherwise permit a lesser vote or no vote (but subject to the rights of any series of Preferred Stock set forthconsideration received in any Certificate of Designation), but in addition to any vote ofconnection therewith by, the holders of any class of securities, creditors or seriesother constituencies of the stockCompany; nor as to the fairness of the Corporation required by lawamount or by this Certificatenature of Incorporation, the affirmative voteany compensation to be paid or payable to any of the holders of at least two-thirdsofficers, directors or employees of the voting powerCompany, the Target or the Seller, or any class of such persons in connection with the Transaction, whether relative
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Board of Directors
Sema4 Holdings Corp.
January 14, 2022
Page 3
to the Consideration to be paid by the Company for all then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend or repeal this Article X or Article V, Article VI, Article VII or Article VIII; provided, further, that if two-thirds of the Whole Board has approved such amendment or repeal of any provisions of this Certificate of Incorporation, then only the affirmative vote of the holders of a majority of the voting power of all then-outstandingissued and outstanding shares of capital stock of the Corporation entitledTarget pursuant to vote generallythe Agreement or otherwise. We are not expressing any opinion as to the prices at which shares of Company Common Stock will trade at any time, as to the potential effects of volatility in the electioncredit, financial and stock markets on the Company, the Target or the Seller or the Transaction or as to the impact of directors, voting togetherthe Transaction on the solvency or viability of the Company, the Target or the Seller or the ability of the Company, the Target or the Seller to pay their respective obligations when they come due. Our opinion is necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to us as of, the date hereof, and we assume no responsibility for updating, revising or reaffirming this opinion based on circumstances, developments or events occurring after the date hereof. Our advisory services and the opinion expressed herein are provided for the information and assistance of the Board of Directors of the Company in connection with its consideration of the Transaction, and such opinion does not constitute a single class (in additionrecommendation as to how any holder of Company Common Stock should vote with respect to such Transaction or any other votematter. This opinion has been approved by a fairness committee of Goldman Sachs & Co. LLC.
Based upon and subject to the foregoing, it is our opinion that, as of the holdersdate hereof, the Consideration to be paid by the Company for all of any class or seriesthe issued and outstanding shares of capital stock of the Corporation required by law or by this CertificateTarget pursuant to the Agreement is fair from a financial point of Incorporation or any Certificate of Designation), shall be requiredview to amend or repeal such provisions of this Certificate of Incorporation.the Company.
* * * * * * * * * * *
Very truly yours,
/s/ Goldman Sachs & Co. LLC
(GOLDMAN SACHS & CO LLC)
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Execution version
ANNEX CD
SUBSCRIPTION AGREEMENT

This SUBSCRIPTION AGREEMENT (this “Subscription Agreement”) is entered into on February 9, 2021,January 14, 2022, by and between Sema4 Holdings Corp., a Delaware corporation (formerly, CM Life Sciences, Inc., a Delaware corporation) (the “Issuer”), and the subscriber party or parties set forth on the signature page hereto (“Subscriber”).
WHEREAS, the Issuer is concurrently with or immediately following the execution and delivery hereof entering into that certain Agreement and Plan of Merger and Reorganization (as amended or modified, the “Business CombinationMerger Agreement”; capitalized terms used herein without definition shall have the meanings ascribed thereto in the Business CombinationMerger Agreement), by and among the Issuer, S-IVOrion Merger Sub I, Inc., a Delaware corporation (“Merger Sub I”), Orion Merger Sub II, LLC, a Delaware limited liability company (“Merger Sub II” and Mount Sinai Genomics, Inc. (d/b/a Sema4) (togethertogether with its direct and indirect subsidiaries,Merger Sub I, the “TargetMerger Subs”), in substantially the same form provided to Subscriber prior to the date hereof,GeneDx Holding 2, Inc., a Delaware Corporation (“Holdco2”), OPKO Health, Inc., a Delaware corporation (the “Seller”), and GeneDx, Inc., a New Jersey corporation (the “Company”), pursuant to which, among other transactions, Merger Sub is to merge with and into Target, with Target continuing on as the surviving entity and a wholly owned subsidiary of Issuer will acquire the Company from the Seller, on the terms and conditions set forth therein (the “Transactions”);
WHEREAS, in connection with the Transactions and subject to the terms and conditions set forth herein, Subscriber desires to subscribe for and purchase from the Issuer that number of shares of the Issuer’s Class A common stock, par value $0.0001 per share (the “Class A Shares”), as set forth on the signature page hereto (the “Acquired Shares”), for a purchase price of $10.00$4.00 per share (the “Per Share Price”) and an aggregate purchase price set forth on the signature page hereto (the “Purchase Price”), and the Issuer desires to issue and sell to Subscriber the Acquired Shares in consideration of the payment of the Purchase Price by or on behalf of Subscriber to the Issuer on or prior to the Closing (as defined below);
WHEREAS, the Issuer and Subscriber are executing and delivering this Subscription Agreement in reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”);
WHEREAS, in connection with the Transactions, certain other “qualified institutional buyers” (as defined in Rule 144A under the Securities Act) or institutional “accredited investors” (as such term is defined in Rule 501 under the Securities Act) (each an “Other Subscriber”), have (severally and not jointly) entered into separate subscription agreements with the Issuer that are substantially similar to this Subscription Agreement (the “Other Subscription Agreements”), pursuant to which such investors have agreed to purchase Class A Shares on the Closing Date (as defined below) at the same Per Share Price as Subscriber (the “Other Acquired Shares”);
WHEREAS, the aggregate amount of Class A Shares to be sold by the Issuer pursuant to this Subscription Agreement and the Other Subscription Agreements equals 3550 million Class A Shares; and
WHEREAS, the aggregate amount of gross proceeds to the Issuer in connection with the purchase and sale of the Acquired Shares and the Other Acquired Shares equals $350 million.$200 million; and
WHEREAS, pursuant to the support agreements (in the form attached as Exhibit B to the Merger Agreement) (the “Support Agreements”) and certain of the Other Subscription Agreements, the Issuer has obtained from existing stockholders of the Issuer restrictions on transfer of, and voting obligations in respect of, all or a percentage of the Class A Shares held by such stockholders (the “Commitments”), as an inducement to Seller and the Issuer to enter into the Merger Agreement and to consummate the Transactions.
NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties and covenants, and subject to the conditions, herein contained, and intending to be legally bound hereby, the parties hereto hereby agree as follows:
1.Subscription. Subject to the terms and conditions hereof, Subscriber hereby agrees to subscribe for and purchase, and the Issuer hereby agrees to issue and sell to Subscriber, upon the payment of the Purchase Price, the Acquired Shares (such subscription and issuance, the “Subscription”).
2.Closing.
(a)The closing of the Subscription contemplated hereby (the “Closing”) is contingent upon the substantially concurrent consummation of the Transactions and shall occur immediately prior thereto. Not less than five (5) business days prior to the scheduled closing date of the Transactions (the “Closing Date”), the Issuer shall provide written notice to Subscriber (the “Closing Notice”) of such Closing Date. Subscriber shall deliver to the Issuer no later than one (1) business day before the Closing Date (as specified in the Closing Notice or such other date as otherwise agreed to by the Issuer and the Subscriber, the “Purchase Price Payment Date”) the Purchase Price
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Price for the Acquired Shares by wire transfer of U.S. dollars in immediately available funds (i) to the account specified by the Issuer in the Closing Notice, to be held in a third-party escrow account (the “Escrow Account”) designated by the Issuer prior to the Closing Date for the benefit of the Subscriber until the Closing Date or (ii) in the case of a Subscriber that is (1) an “investment company” registered under the Investment Company Act of 1940, as amended, (2) that is advised by an investment adviser subject to regulation under the Investment Advisors Act of 1940, as amended, or (3) that its internal compliance policies and procedures so require it, to an account specified by the Issuer otherwise mutually agreed by the Subscriber and the Issuer (“Alternative Settlement Procedures”). For the avoidance of doubt, mutually agreeable Alternative Settlement Procedures shall include, without limitation, the Subscriber delivering to the Issuer on the Closing Date the Purchase Price for the Acquired Shares by wire transfer of U.S. dollars in immediately available funds to the account specified by the Issuer in the Closing Notice against delivery to the undersigned of the Acquired Shares in book entry form as set forth in the following sentence. On the Closing Date, the Issuer shall deliver to Subscriber (1) the Acquired Shares in book entry form (or, if requested by the Subscriber in writing in advance of the Closing, in certificated form, duly executed on behalf of the Issuer and countersigned by the Issuer’s transfer agent (the “Transfer Agent”)), free and clear of any liens or other restrictions whatsoever (other than those arising under state or federal securities laws), in the name of Subscriber (or its nominee in accordance with its delivery instructions) or to a custodian designated by Subscriber, as applicable, and (2) a copy of the records of the Transfer Agent showing Subscriber as the owner of the Acquired Shares on and as of the Closing Date (the “Subscriber’s Deliveries”). Unless otherwise provided pursuant to Alternative Settlement Procedures, upon the transfer of the Subscriber’s Deliveries by the Issuer to the Subscriber (or its nominee in accordance with its delivery instructions), the Issuer shall, or shall cause the escrow agent for the Escrow Account to, on the Closing Date, release the Purchase Price from the Escrow Account to the Issuer. In the event the closing of the Transactions does not occur within two (2) business days of the Closing Date specified in the Closing Notice, unless otherwise agreed by the Issuer and the Subscriber, the Issuer shall, or shall cause the escrow agent for the Escrow Account to, promptly (but not later than two (2) business days thereafter) return the Purchase Price to Subscriber by wire transfer of U.S. dollars in immediately available funds to the account specified by Subscriber, and any book entries or sharestock certificates shall be deemed cancelled.
(b)The Closing shall be subject to the satisfaction, or valid waiver by each of the parties hereto, of the conditions that, on the Closing Date:
(i)solely with respect to Subscriber, (A) the representations and warranties made by the Issuer (other than the representations and warranties set forth in Section 3(b), Section 3(c) and Section 3(h)3(g)) in this Subscription Agreement shall be true and correct in all material respects as of the Closing Date (other than those representations and warranties expressly made as of an earlier date, which shall be true and correct in all material respects as of such date, and other than those representations and warranties that are qualified as to materiality or Material Adverse Effect (as defined below), which shall be true and correct in all respects as of the Closing Date)date), after giving effect to the consummation of the Transactions, except, in the case of this clause (B), for any failure of any such representation and warranty to be so true and correct (without giving effect to any qualification by materiality or Material Adverse Effect (as defined below) contained therein) that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect and (B) the representations and warranties made by the Issuer set forth in Section 3(b), Section 3(c) and Section 3(h)3(g) shall be true and correct in all respects as of the Closing Date (other than those representations and warranties expressly made as of an earlier date, which shall be true and correct in all respects as of such date)date and, solely in the case of Section 3(g), other than de minimis inaccuracies), in each case without giving effect to the consummation of the Transactions;
(ii)solely with respect to the Issuer, the representations and warranties made by the Subscriber in this Subscription Agreement shall be true and correct in all material respects as of the Closing Date (other than those representations and warranties expressly made as of an earlier date, which shall be true and correct in all material respects as of such date, and other than those representations and warranties that are qualified as to materiality or Material Adverse Effect, which shall be true and correct in all respects as of the Closing Date), in each case without giving effect to the consummation of the Transactions;
(iii)solely with respect to the Issuer, Subscriber shall have delivered the Purchase Price in compliance with the terms of this Subscription Agreement;
(iv)no governmental authority having applicable jurisdiction shall have enacted, issued, promulgated, enforced or entered any material judgment, order, law, rule or regulation (whether temporary, preliminary or permanent) which is then in effect and has the effect of restraining, enjoining or otherwise prohibiting or making illegal the consummation of the transactions contemplated by this Subscription Agreement;
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(v)no suspension of the qualification of the Class A Shares for offering or sale or trading in any applicable jurisdiction, no suspension or removal from listing of the Acquired Shares on The Nasdaq CapitalGlobal Select Market (“Nasdaq”Nasdaq”) and no initiation or threatening of any proceedings for any of such purposes or delisting, shall have occurred;
(vi)the Issuer’s stockholders shall have approved the issuance of the Acquired Shares and Other Acquired Shares as and if required by Nasdaq rules;
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(vii)solely with respect to Subscriber, the Issuer shall have filed with Nasdaq a true and complete Notification Form: Listing of Additional Shares covering the Acquired Shares and Other Acquired Shares;
(viii)all conditions precedent to the closing of the Transactions set forth in the Business CombinationMerger Agreement shall have been satisfied or waived (as determined by the Business CombinationMerger Agreement and related documentation)(other (other than those conditions that may only be satisfied at the closing of the Transactions, but subject to satisfaction or waiver by such party of such conditions as of the closing of the Transactions), and the closing of the Transactions shall be scheduled to occur substantially concurrently with or immediately following the Closing; and
(ix)solely with respect to the Subscriber, there shall have been no amendment, waiver or modification to the Other Subscription Agreements that materially benefits any Other SubscriberSubscribers thereunder unless the Subscriber has been offered substantially the same benefits.benefits; and
(x)solely with respect to Subscriber, there has been no amendment, modification or supplement to the Merger Agreement that increases the aggregate consideration payable by the Issuer by more than 5% unless Subscriber has consented to such amendment, modification or supplement in writing.
(c)In addition to the conditions set forth in Section 2(b), the obligation of Subscriber to consummate the Closing shall be subject to the satisfaction or valid waiver by Subscriber of the additional conditionscondition that, on the Closing Date:
(i)Date, the Issuer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Subscription Agreement to be performed, satisfied or complied with by the Issuer at or prior to the Closing, except where the failure of such performance or compliance would not reasonably be expected to prevent, materially delay, or materially impair the ability of the Issuer to consummate the Closing;Closing.
(ii)    since the date of this Subscription Agreement and as of the Closing Date, there has been no Company Material Adverse Effect (as such term is defined in the Business Combination Agreement)
(iii)    except to the extent consented to in writing by Subscriber, the Business Combination Agreement (as filed with the Commission on or immediately following the date hereof) shall not have been amended, modified, supplemented or waived in a manner that would reasonably be expected to materially and adversely affect the economic benefits that Subscriber would reasonably expect to receive under this Subscription Agreement; and
(d)Upon the terms and subject to the conditions set forth in this Subscription Agreement, Subscriber and the Issuer shall use commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to reasonably assist and cooperate with the other party hereto in doing, all things reasonably necessary, proper or advisable under applicable legal requirements to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Subscription Agreement.
3.Issuer Representations and Warranties. The Issuer represents and warrants to the Subscriber that:
(a)The Issuer has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware, with corporate power and authority to own, lease and operate its properties and conduct its business as presently conducted and to enter into, deliver and perform its obligations under this Subscription Agreement.
(b)The Acquired Shares have been duly authorized by the Issuer and, when issued and delivered to Subscriber against full payment for the Acquired Shares in accordance with the terms of this Subscription Agreement, the Acquired Shares will be validly issued, fully paid and non-assessable, free and clear of all liens or
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other restrictions except as otherwise stated herein and will not have been issued in violation of or subject to any preemptive or similar rights created under the Issuer’s certificate of incorporation, and bylaws (each, as amended concurrently with the Closing)Closing, and bylaws or under the laws of the State of Delaware or otherwise.
(c)This Subscription Agreement, the Business CombinationMerger Agreement and the Other Subscription Agreements (collectively, the “Transaction Documents”) have been duly authorized, executed and delivered by the Issuer and, assuming that the Transaction Documents have been duly authorized, executed and delivered by the other parties thereto, are valid and binding obligations of the Issuer, and are enforceable against it in accordance with their terms, except as may be limited or otherwise affected by (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other laws relating to or affecting the rights of creditors generally, and (ii) principles of equity, whether considered at law or equity.
(d)The execution, delivery and performance of this Subscription Agreement and the other Transaction Documents, including the issuance and sale of the Acquired Shares and the consummation of the Transactions and other transactions contemplated hereby and thereby, will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any of the property or assets of the Issuer pursuant to the terms of (i) any indenture, mortgage, deed of trust, loan agreement, lease, license or other agreement or instrument to which the Issuer or its subsidiaries is a party or by which the Issuer or its subsidiaries is bound or to which any of the property or assets of the Issuer or its subsidiaries is subject; (ii) the organizational documents of the Issuer; or (iii) any statute or any judgment, order, rule or regulation of any court or governmental agency, taxing authority or regulatory body, domestic or foreign, having jurisdiction over the Issuer or its subsidiaries or any of its or their properties, that, in the case of clause (i) or (iii), would reasonably be expected to have a Material Adverse Effect. For purposes of this Subscription Agreement, a “Material“Material Adverse Effect”Effect” means anany event, change, condition, circumstance, effect,
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development, occurrence condition or effect with respectstate of facts (whether specific to the Issuer and its subsidiaries, taken together as a whole (on a consolidated basis),applicable party or generally applicable to multiple parties) or other matter (“Effect”) that, individually or in the aggregate with all other Effects, has, or would reasonably be expected to have, a material adverse effect on or give rise to a material adverse change to (i) the business, properties, financial condition stockholders’ equity(financial or otherwise), business, results of operations, assets or liabilities of the Issuer and its subsidiaries or Target(ii) the ability of the Issuer to perform its obligations under this Subscription Agreement; provided that no Effect attributable to any of the following shall be taken into account in determining the existence of a Material Adverse Effect solely for purposes of clause (i) above: (A) conditions affecting the industry, financial markets or their respective subsidiaries individuallysecurities markets in, or takenthe economy as a whole and including the combined company after giving effect to the Transactions, or materially affects the Issuer’s ability to consummate the (i) transactions contemplated hereby, including the issuance and sale of, the Acquired SharesUnited States, (B) changes in applicable Law (as defined in the Merger Agreement) or (ii)Accounting Standards (as defined in the Transactions.
(e)    There are no securities or instruments issued by or to which the Issuer is a party containing anti-dilution or similar provisions that will be triggered by the issuance of (i) the Acquired Shares, (ii) the shares to be issued pursuant to any Other Subscription Agreement or (iii) the shares to be issued pursuant to the Transactions,Merger Agreement) (or, in each case, that have not been or will not be validly waived on or prior toany interpretation thereof) after the Closing Date, including such provisionsor (C) earthquakes, hostilities, acts of war, sabotage or terrorism or military actions, epidemic, public health event or pandemic (including COVID-19 (as defined in the Issuer’s Class B common stock, par value $0.0001 per share (the “Class B Shares”Merger Agreement) and any worsening thereof (including any COVID-19 Response (as defined in the Merger Agreement))), pursuantexcept, in the case of the forgoing clauses (A), (B) and (C), to the terms ofextent such conditions, changes or events disproportionately affect the Issuer’s certificate of incorporation.Issuer and its subsidiaries relative to similarly situated industry participants (in which case the incremental disproportionate impact or impacts may be taken into account in determining whether there has been a Material Adverse Effect).
(f)    (e)The Issuer isand its subsidiaries are not in default or violation (and no event has occurred which, with notice or the lapse of time or both, would constitute a default or violation) of any term, condition or provision of (i) the organizational documents of the Issuer, (ii) any loan or credit agreement, guarantee, note, bond, mortgage, indenture, lease or other agreement, permit, franchise or license to which, as of the date of this Subscription Agreement, the Issuer or its subsidiaries is a party or by which the Issuer’s or its subsidiaries’ properties or assets are bound or (iii) any statute or any judgment, order, rule or regulation of any court or governmental agency, taxing authority or regulatory body, domestic or foreign, having jurisdiction over the Issuer or its subsidiaries or any of its or their properties, except, in the case of clauses (ii) and (iii), for defaults or violations that have not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
(g)    (f)The Issuer is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority, self-regulatory organization or other person in connection with the execution, delivery and performance by the Issuer of this Subscription Agreement or the Transactions (including, without limitation, the issuance of the Acquired Shares), other than (i) the filing with the Securities and Exchange Commission (the “Commission”) of the Registration Statement (as defined below), (ii) filings required by applicable state securities laws, (iii) the filing of notification under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, if applicable; (iv) those required by Nasdaq, including with respect to obtaining approval of the Issuer’s stockholders; (v) those that will be obtained on
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or prior to the Closing, (vi) any filing, the failure of which to obtain would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; (vii) as set forth in the Business CombinationMerger Agreement; and (viii) the filing of a Notice of Exempt Offering of Securities on Form D with the Commission under Regulation D of the Securities Act.
(h)    (g)As of the date of this Subscription Agreement, and as of immediately prior to the Closing Date, the authorized capital stock of the Issuer consists of (i) 1,000,000 shares of preferred stock, par value $0.0001 per share (“Preferred Stock”) and (ii) 400,000,000 shares of common stock, par value $0.0001 per share (the “Common Stock”), including (1) 380,000,000 Class A Shares and (2) 20,000,000 Class B Shares. As of the date of this Subscription Agreement,December 31, 2021, (i) no shares of Preferred Stock are issued and outstanding, (ii) 44,275,000242,578,824 Class A Shares are issued and outstanding, (iii) 11,068,750 Class B Shares are issued and outstanding and (iv) 14,758,33314,758,305 redeemable warrants and 7,236,667 private placement warrants are outstanding, and (iv) (A) options to purchase 33,354,727 Class A shares are outstanding and (B) restricted stock units (“RSUs”) which may be settled for 12,600,859 shares of Class A Shares are outstanding. All (i) issued and outstanding Class A Shares and Class B Shares have been duly authorized and validly issued, are fully paid and are non-assessable and are not subject to and were not issued in violation of any preemptive rights, and (ii) outstanding warrants have been duly authorized and validly issued, are fully paid and are not subject to and were not issued in violation of any preemptive rights and (iii) outstanding options and RSUs have been duly authorized and validly issued and are not subject to and were not issued in violation of any preemptive rights. Except (i) as set forth above, (ii) for any Class A Shares and RSUs that may be issued pursuant to Article III of the Agreement and Plan of Merger, dated as of February 9, 2021 (as amended, the “Business Combination Agreement”), by and among the Issuer, S-IV Sub, Inc. and Mount Sinai Genomics, Inc. d/b/a Sema4 (“Legacy Sema4”), (iii) for any equity awards or purchase rights that may be issued pursuant to the Issuer’s 2021 Equity Incentive Plan or the Issuer’s 2021 Employee Stock Purchase Plan and (iv) pursuant to the Other Subscription Agreements and the Business CombinationMerger Agreement, there are no outstanding options, warrants or other rights to subscribe for, purchase or acquire from the Issuer any shares of Common StockClass A Shares or other equity interests in the Issuer, or securities convertible into or exchangeable or exercisable for such equity interests. As ofOther than Sema4 OpCo, Inc. and the date hereof, other than Merger Sub,Subs and as contemplated by the Merger Agreement, the Issuer has no subsidiaries and does not own, directly or indirectly, interests or investments (whether equity or debt) in any person, whether incorporated or unincorporated. There are no stockholder agreements, voting trusts or other agreements or understandings to which the Issuer is a party or by which it is bound relating to the voting of any securities of the Issuer, other than (i) as set forth inpursuant to this Subscription Agreement and the SEC ReportsOther Subscription
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Agreements, the Support Agreements and (ii) as contemplated by the Business Combination Agreement.Shareholder Agreements. Except as disclosed in the SEC Reports, as of the date hereof, the Issuer hadhas no outstanding indebtedness and will not have any outstanding long-term indebtedness as of the Closing Date.indebtedness.
(i)    (h)The Issuer isand its subsidiaries are in compliance with all applicable laws and hashave not received any written communication from a governmental entity that alleges that the Issuer or any of its subsidiaries is not in compliance with or is in default or violation of any applicable law, except where such non-compliance, default or violation would not, individually or in the aggregate, be reasonably likely to be material.have a Material Adverse Effect.
(j)    (i)The issued and outstanding Class A Shares are registered pursuant to Section 12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are listed for trading on Nasdaq under the symbol “CMLF” (it being understood that the trading symbol will be changed in connection with the Transaction)“SMFR”. There is no suit, action, proceeding or investigation pending or, to the knowledge of the Issuer, threatened against the Issuer by Nasdaq or the Commission with respect to any intention by such entity to deregister the Class A Shares or prohibit or terminate the listing of the Class A Shares on Nasdaq, excluding, for the purposes of clarity, the customary ongoing review by Nasdaq of the Issuer’s continued listing of additional shares application in connection with the Transactions. The Issuer has taken no action that is designed to terminate or is reasonably expected to result in the termination of the registration of the Class A Shares under the Exchange Act or the listing of the Class A Shares on Nasdaq and is in compliance in all material respects with the listing requirements of Nasdaq.
(k)    (j)Assuming the accuracy of Subscriber’s representations and warranties set forth in Section 4 of this Subscription Agreement and each of the Other Subscription Agreements of the Other Subscribers under their respective Other Subscription Agreement, no registration under the Securities Act is required for the offer and sale of the Acquired Shares or the Other Acquired Shares by the Issuer to Subscriber and to the Other Subscribers, as appropriate, in the manner contemplated by this Subscription Agreement and the Other Subscription Agreements. The Acquired Shares and the Other Acquired Shares (i) were not offered by any form of general solicitation or general advertising and (ii) are not being offered in a manner involving a public offering under, or in a distribution in violation of, the Securities Act, or any state securities laws.
(l)    (k)Each report, statement and form (including exhibits and other information incorporated therein) filed by the Issuer with the Commission under Sections 13(a), 14(a) or 15(d) of the Exchange Act or filed pursuant to the Securities Act since its initial registration of the Class A SharesJuly 22, 2021 (the “SEC Reports”) when filed complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and
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regulations of the Commission promulgated thereunder. None of the SEC Reports filed under the Exchange Act (except to the extent that information contained in any SEC Report has been superseded by a later timely filed SEC Report) contained, when filed, any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, in the case of any SEC Report that is a registration statement, or included, when filed, any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, in the case of all other SEC Reports; provided, that, with respect to any information related to the Company included in the proxy statement to be filed by the Issuer with respect to the Transactions, included in any other SEC Report or filed as an exhibit thereto, the representation and warranty in this sentence is made to the Issuer’s knowledge. The Issuer has timely filed each SEC Report that the Issuer was required to file with the Commission since its inception.July 22, 2021. There are no material outstanding or unresolved comments in comment letters from the Commission staff with respect to any of the Issuer’s SEC Reports. In addition, the Issuer has made available to Subscriber (including via the Commission’s EDGAR system) a copy of the SEC Reports since its initial registrationJuly 22, 2021. Except as disclosed in the SEC Reports, each of the Class A Shares with the Commission. Each of the financial statementsFinancial Statements (including, in each case, any notes thereto) contained in the SEC Reports was prepared in accordance with U.S. generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto or, in the case of unaudited statements, as permitted by Form 10-Q of the Commission), each complied in all material respects with the rules and regulations of the Commission with respect thereto as in effect at the time of filing and each fairly presents, in all material respects, the financial position, results of operations and cash flows of the Issuer or Legacy Sema4, as applicable, as at the respective dates thereof and for the respective periods indicated therein. For purposes of this Subscription Agreement, the “Financial Statements” means, to the extent contained in the SEC Reports, (i) the audited balance sheets of Legacy Sema4 as of December 31, 2020 and 2019, the related statements of operations and comprehensive loss, redeemable convertible preferred stock and stockholders’ deficit and cash flows for each of the three years in the period ended December 31, 2020, and the related notes, (ii) the unaudited condensed financial statements of Legacy Sema4 as of March 31, 2021 and for the three months ended March 31, 2021 and 2020 and the related notes, (iii) the unaudited condensed financial statements of Legacy Sema4 as of June 30, 2021 and for the three and six months ended June 30, 2021 and 2020 and the related notes, and (iv) the unaudited condensed consolidated financial statements of the Issuer as of September 30, 2021 and for the three months and nine months ended September 30, 2021 and 2020 and the related notes.
(m)    (l)Except for such matters as have not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, there is no (i) investigation, action, suit, claim or other
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proceeding, in each case by or before any governmental authority pending, or, to the knowledge of the Issuer, threatened against the Issuer or Targetits subsidiaries or (ii) judgment, decree, injunction, ruling or order of any governmental entity outstanding against the Issuer or Target.its subsidiaries.
(n)    (m)Except for placement fees payable to the Placement AgentAgents (as defined below), the Issuer has not paid, and is not obligated to pay, any brokerage, finder’s or other fee or commission in connection with its issuance and sale of the Acquired Shares, including, for the avoidance of doubt, any fee or commission payable to any stockholder or affiliate of the Issuer and such relationships shall not have any liability on the Subscriber. The Issuer is solely responsible for the payment of any fees, costs, expenses and commissions of the Placement Agent.Agents.
(o)    (n)Except as provided in this Subscription Agreement and the Other Subscription Agreements, none of the Issuer, its subsidiaries or any of their affiliates, nor any person acting on their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of the issuance of any of the Acquired Shares under the Securities Act, whether through integration with prior offerings pursuant to Rule 502(a) of the Securities Act or otherwise.
(p)    (o)Neither the Issuer nor any of its subsidiaries has taken any steps to seek protection pursuant to any law or statute relating to bankruptcy, insolvency, reorganization, receivership, liquidation, administration or winding up or failed to pay its debts when due, nor does the Issuer or any subsidiary have any knowledge or reason to believe that any of their respective creditors intend to initiate involuntary bankruptcy proceedings or seek to commence an administration.
(q)    (p)The Issuer has not entered into any side letter or similar agreement with any Other Subscriber relating to such Other Subscriber’s purchase of its respective Other Acquired Shares other than the Other Subscription Agreements the Registration Rights Agreement to the extent that aan Other Subscriber is party thereto, or any side letter or similar agreement unrelated to such Other Acquired Shares or whose terms (including as to restriction on transfer of, and voting obligations in respect of, securities held by such other Subscriber) are not materially more advantageous to such Other Subscriber than to Subscriber hereunder, other than the Subscriber hereunder. TheSupport Agreements, the Shareholder Agreements, any separate lock-up agreements entered into with the Issuer in connection with Other Subscribers’ evaluation of the transactions contemplated by the Other Subscription Agreements (and any amendments thereto) reflect(if applicable) (“Other Lock-Ups”), the same Per Share PriceAmended and Restated Registration Rights Agreement, dated as of July 22, 2021, among the Issuer, CMLS Holdings LLC and the other material terms with respectholders party thereto (the “Registration Rights Agreement”) or the subscription agreements, dated as of February 9, 2021, between the Issuer and the respective subscribers party thereto, in each case, to the purchaseextent that an Other Subscriber is a party thereto. To the extent Subscriber has entered into a separate lock-up agreement with the Issuer in connection with Subscriber’s evaluation of the Other Acquired Shares that are no more favorable to such Other Subscriber thereunder thantransactions contemplated by this Subscription Agreement, the terms of this Subscription Agreement otherany Other Lock-Up are not materially more advantageous to any Other Subscriber party thereto than terms particular to Subscriber under its lock-up agreement with the regulatory requirements of such subscriber or its affiliates or related funds.Issuer.
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(q)
(r)    The Issuer is not, and immediately after receipt of payment for the Acquired Shares, and consummation of the Transactions, will not be, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
(s)    (r)There has been no action taken by the Issuer, or, to the knowledge of the Issuer, any officer, director, equityholder, manager, employee, agent or representative of the Issuer, in each case, acting on behalf of the Issuer, in violation of any applicable Anti-Corruption Laws (as herein defined), (i) the Issuer has not been convicted of violating any Anti-Corruption Laws or subjected to any investigation by a governmental authority for violation of any applicable Anti-Corruption Laws, (ii) the Issuer has not conducted or initiated any internal investigation or made a voluntary, directed, or involuntary disclosure to any governmental authority regarding any alleged act or omission arising under or relating to any noncompliance with any Anti-Corruption Laws and (iii) the Issuer has not received any written notice or citation from a governmental authority for any actual or potential noncompliance with any applicable Anti-Corruption Laws. As used herein, “Anti-Corruption Laws” means any applicable laws relating to corruption and bribery, including the U.S. Foreign Corrupt Practices Act of 1977 (as amended) (“FCPA”), the UK Bribery Act 2010, and any similar law that prohibits bribery or corruption.
(t)    (s)The Class A Shares are eligible for clearing through The Depository Trust Company (the “DTC”), through its Deposit/Withdrawal At Custodian (DWAC) system, and the Issuer is eligible and participating in the Direct Registration System (DRS) of DTC with respect to the Class A Shares. The Transfer Agent is a participant in DTC’s Fast Automated Securities Transfer Program.
(u)    (t)The Issuer acknowledges that there have been no, and in issuing the Acquired Shares the Issuer is not relying on any, representations, warranties, covenants and agreements made to the Issuer by Subscriber, any of its officers, directors or representatives or any other person or entity, expressly or by implication, other than those representations, warranties, covenants and agreements expressly stated in this Subscription Agreement.
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(v)    (u)Following the Closing, the Acquired Shares will not be subject to any Transfer Restriction. The term “Transfer Restriction” means any condition to or restriction on the ability of Subscriber to pledge, sell, assign or otherwise transfer the Acquired Shares under any organizational document or agreement of, by or with the Issuer, but excluding the restrictions on transfer described in Section 4(f)4(g) hereof with respect to the status of the Acquired Shares as “restricted securities” pending their registration for resale under the Securities Act in accordance with the terms of this Subscription Agreement.
(v)No Other Subscription Agreement (excluding any Commitments agreed to therein) includes terms and conditions that are materially more advantageous to any such Other Subscriber than Subscriber hereunder, and the terms of such Other Subscription Agreements (excluding any such Commitments) have not been amended or modified following the date of this Subscription Agreement in any way that are materially more advantageous to any such Other Subscriber than Subscriber hereunder. Each Other Subscriber that alone or together with its Affiliates beneficially owns five percent (5%) of the outstanding Class A Shares as of the date of this Subscription Agreement is subject to Other Commitments, either pursuant to a Support Agreement or an Other Subscription Agreement. To the Registration Rightsextent Subscriber has entered into a Support Agreement, no other Commitments include terms and conditions that are materially more advantageous to any stockholder of the Issuer party thereto than Subscriber under its Support Agreement (it being understood that certain Other Commitments apply to all the Class A Shares held by the applicable stockholder and certain Other Commitments apply to 33% of the Class A Shares held by the applicable stockholder), and the terms of such other Commitments have not been amended, released, waived or otherwise modified following the date of this Subscription Agreement in any way that are materially more advantageous to any such other stockholder than Subscriber under its Support Agreement.
4.Subscriber Representations and Warranties. Subscriber represents and warrants that:
(a)If Subscriber is not an individual, Subscriber has been duly formed or incorporated and is validly existing and in good standing under the laws of its jurisdiction of incorporation or formation, with power and authority to enter into, deliver and perform its obligations under this Subscription Agreement. If Subscriber is an individual, Subscriber has the authority to enter into, deliver and perform its obligations under this Subscription Agreement.
(b)This Subscription Agreement has been duly authorized, executed and delivered by Subscriber and, assuming that this Subscription Agreement has been duly authorized, executed and delivered by the Issuer, this Subscription Agreement is the valid and binding obligation of Subscriber, enforceable against Subscriber in accordance with its terms, except as may be limited or otherwise affected by (i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other laws relating to or affecting the rights of creditors generally, and (ii) principles of equity, whether considered at law or equity.
(c)The execution, delivery and performance by Subscriber of this Subscription Agreement, including the consummation of the transactions contemplated hereby, have been duly authorized and approved by all necessary action. Subscriber acknowledges that Subscriber shall be responsible for any of Subscriber’s tax liabilities that may arise as a result of the transactions contemplated by this Subscription Agreement, and that neitherthat none of the Issuer, nor Target northe Seller or the Company, or any of their respective affiliates, have provided any tax advice or any other representation or guarantee, whether written or oral, regarding the tax consequences of the transactions contemplated by this Subscription Agreement.
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(d)
(d)    The execution, delivery and performance by Subscriber of this Subscription Agreement, including the consummation of the transactions contemplated hereby will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any of the property or assets of Subscriber or any of its subsidiaries pursuant to the terms of (i) any indenture, mortgage, deed of trust, loan agreement, lease, license or other agreement or instrument to which Subscriber or any of its subsidiaries is a party or by which Subscriber or any of its subsidiaries is bound or to which any of the property or assets of Subscriber or any of its subsidiaries is subject; (ii) Subscriber’s organizational documents or under any law, rule, regulation, agreement or other obligation by which Subscriber is bound; and (iii) any statute or any judgment, order, rule or regulation of any court or governmental agency or body, domestic or foreign, having jurisdiction over Subscriber or any of its subsidiaries or any of their respective properties, that, in the case of clauses (i) and (iii), would reasonably be expected to have a material adverse effect on the legal authority or ability of Subscriber to perform in any material respects its obligations hereunder.
(e)Subscriber (i) is a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act) or an institutional “accredited investor” (within the meaning of Rule 501(a) under the Securities Act) satisfying the applicable requirements set forth on Schedule A, (ii) is an “Institutional Account” as defined in FINRA Rule 4512(c), (iii) is acquiring the Acquired Shares only for its own account and not for the account of others, or if Subscriber is a “qualified institutional buyer” and is subscribing for the Acquired Shares as a fiduciary or agent for one or more investor accounts, each owner of such account is a “qualified institutional buyer” and Subscriber has full investment discretion with respect to each such account, and the full power and authority to make
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the acknowledgments,acknowledgements, representations and agreements herein on behalf of each owner of each such account, and (iii)(iv) is not acquiring the Acquired Shares with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act or any other securities laws of the United States or any other jurisdiction (and shall provide the requested information on Schedule A following the signature page hereto). Subscriber is not an entity formed for the specific purpose of acquiring the Acquired Shares, unless such newly formed entity is an entity in which all of the equity owners are “accredited investors” (within the meaning of Rule 501(a) under the Securities Act).
(f)Subscriber is a sophisticated institutional investor, experienced in investing in private equity transactions and capable of evaluating investment risks independently, both in general and with regard to all transactions and investment strategies involving a security or securities, including its participation in the Subscription. Subscriber has determined based on its own independent review and such professional advice as it deems appropriate that its purchase of the Acquired Shares and participation in the Subscription (i) are fully consistent with its financial needs, objectives and condition, (ii) comply and are fully consistent with all investment policies, guidelines and other restrictions applicable to it, (iii) have been duly authorized and approved by all necessary action, (iv) do not and will not violate or constitute a default under its charter, by-laws or other constituent document or under any law, rule, regulation, agreement or other obligation by which it is bound, and (v) are a fit, proper and suitable investment for it, notwithstanding the substantial risks inherent in investing in or holding the Acquired Shares. Subscriber is able to bear the substantial risks associated with your purchase of the Acquired Shares, including but not limited to loss of its entire investment therein.
(g)Subscriber understands that the Acquired Shares are being offered in a transaction not involving any public offering within the meaning of the Securities Act and that the Acquired Shares have not been registered under the Securities Act or any other securities laws of the United States or any other jurisdiction. Subscriber understands that it is acquiring its entire beneficial ownership interest in the Acquired Shares for Subscriber’s own account for investment purposes only and not with a view to any distribution of the Acquired Shares in any manner that would violate the securities laws of the United States or any other jurisdiction.States. Subscriber understands that the Acquired Shares may not be resold, transferred, pledged or otherwise disposed of by Subscriber absent an effective registration statement under the Securities Act, except (i) to the Issuer or a subsidiary thereof, (ii) pursuant to offers and sales that occur in an “offshore transaction” within the meaning of and in accordance with Regulation S under the Securities Act, (iii) pursuant to Rule 144 under the Securities Act, provided that all of the applicable conditions thereof (including those set out in Rule 144(i) which are applicable to the Issuer) have been met, or (iv) pursuant to another applicable exemption from the registration requirements of the Securities Act, including pursuant to a private sale effected under Section 4(a)(7) of the Securities Act or applicable formal or informal Commission interpretation or guidance, such as a so-called “4(a)(1) and a half” sale, and that any certificates or book-entry records representing the Acquired Shares shall contain a legend to such effect, which legend shall be subject to removal as set forth herein, and in the Amended and Restated Registration Rights Agreement, dated the date hereof, by and among the Issuer and other parties thereto (the “Registration Rights Agreement”) to the extent that Subscriber is party to the Registration Rights Agreement, in which case, notwithstanding anything else contained herein to the contrary, Section 5 and 8(c) hereof shall not apply and not be effective with respect to such Subscriber.Subscriber, or (v) otherwise except in compliance with applicable law. Subscriber understands and agrees that the Acquired Shares will be subject to the foregoing restrictions and, as a result, Subscriber may not be able to readily resell the Acquired Shares and may be required to bear the financial risk of an investment in the Acquired Shares for an indefinite period of time. Subscriber understands that it has been advised to consult legal counsel prior to making any offer, resale, pledge or transfer of any of the Acquired Shares. By making the representations herein, Subscriber does not agree to hold any of the Acquired Shares for any minimum or other specific term and reserves the right to assign, transfer or otherwise dispose of any of the Acquired Shares at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act.
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(h)
(g)    Subscriber understands and agrees that Subscriber is purchasing the Acquired Shares directly from the Issuer. Subscriber further acknowledges that there have been no, and in purchasing the Acquired Shares Subscriber is not relying on any, representations, warranties, covenants and agreements made to Subscriber by the Issuer, any of its officers, directors or representatives or any other person or entity, expressly or by implication, other than those representations, warranties, covenants and agreements expressly stated in this Subscription Agreement.
(h)    (i)To the extent applicable to it, Subscriber represents and warrants that its acquisition and holding of the Acquired Shares will not constitute or result in a non-exempt prohibited transaction under section 406 of the Employee Retirement Income Security Act of 1974, as amended, section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”), or any applicable similar law.
(i)    (j)In making its decision to purchase the Acquired Shares, Subscriber represents thathas (i) received and had the opportunity to review the offering materials made available to it hasin connection with the Subscription, as the case may be, (ii) had the opportunity to ask questions of and receive answers from the Issuer directly and (iii) conducted and completed its own independent due diligence with respect to the Subscription. Based on such information as Subscriber has deemed appropriate and without reliance upon any Placement Agent, Subscriber has independently made its own analysis and decision with respect to enter into the Subscription. Subscriber further represents that, exceptExcept for the representations,
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warranties, covenants and agreements made byof the Issuer herein, itexpressly set forth in this Subscription Agreement, Subscriber is relying exclusively on its own sources of information, investment analysis and due diligence (including professional advice Subscriber deemsit may deem appropriate) with respect to the Subscription, the Acquired Shares and the business, condition (financial and otherwise), management, operations, properties and prospects of the Issuer, including but not limited to all business, legal, regulatory, accounting, credit and tax matters. Subscriber acknowledges and agrees that it has received reviewed and understoodhad the opportunity to review the offering materials made available to it in connection with the Subscription and such other information as Subscriber deems necessary in order to make an investment decision with respect to the Acquired Shares, including with respect to the Issuer, Targetthe Company and the Transactions. Subscriber represents and agrees that Subscriber and Subscriber’s professional advisor(s), if any, have had the full opportunity to ask such questions, receive such answers and obtain such information from the Issuer directly as Subscriber and such Subscriber’s professional advisor(s), if any, have deemed necessary to make an investment decision with respect to the Acquired Shares. However, neither any such inquiries, nor any due diligence investigation conducted by Subscriber or any of Subscriber’s professional advisors nor anything else contained herein, shall modify, limit or otherwise affect Subscriber’s right to rely on the Issuer’s representations, warranties, covenants and agreements contained in this Subscription Agreement. Subscriber acknowledges that it is not relying upon, and has not relied upon, any statement, representation or warranty made by any person, firm or corporation (including, without limitation, the Issuer, Target, the Placement Agent,Seller, the Company, any of their respective affiliates or any control persons, officers, directors, employees, agents or representatives of any of the foregoing), other than the representations and warranties of the Issuer contained in Section 3 of this Subscription Agreement, in making its investment or decision to invest in the Issuer.
(j)    (k)Subscriber became aware of this offering of the Acquired Shares solely by means of direct contact between Subscriber and the Issuer or by means of contact from Jefferies LLC acting as placement agent for the Issuer (the “a Placement Agent,”), and the Acquired Shares were offered to Subscriber solely by direct contact between Subscriber and the Issuer or by contact between Subscriber and one or more Placement Agent.Agents. Subscriber did not become aware of this offering of the Acquired Shares, nor were the Acquired Shares offered to Subscriber, by any other means.
(k)    (l)Subscriber acknowledges and agrees that the Placement Agent is acting solely as the placement agent in connection with the Subscription andit is not acting as underwritersrelying upon, and has not relied upon, any statement, representation or in any other capacitywarranty made by Goldman Sachs & Co. LLC, Jefferies LLC, Cowen and is not and shall not be construed as a fiduciary for Subscriber, the IssuerCompany LLC, BTIG, LLC or any other personof their affiliates or entityany of their control persons, officers, directors or employees (each a “Placement Agent” and collectively, the “Placement Agents”) in connection withmaking its investment or decision to invest in the Subscription.Issuer.
(l)    (m)Subscriber acknowledges that it is aware that there are substantial risks incident to the purchase and ownership of the Acquired Shares, including those set forth in the SEC Reports. Subscriber has such knowledge and experience in financial, business and private equity matters as to be capable of evaluating the merits and risks of an investment, both in general and with regard to transactions and investment strategies involving a security or securities, including Subscriber’s investment in the Acquired Shares, and Subscriber has sought such accounting, legal and tax advice as Subscriber has considered necessary to make an informed investment decision.
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(n)
(m)    Subscriber represents and acknowledges that, alone, or together with any professional advisor(s), Subscriber has adequately analyzed and fully considered the risks of an investment in the Acquired Shares and determined that the Acquired Shares are a suitable investment for Subscriber and that Subscriber is able at this time and in the foreseeable future to bear the economic risk of a total loss of Subscriber’s investment in the Issuer. Subscriber acknowledges specifically that a possibility of total loss exists.
(n)    (o)Subscriber understands and agrees that no federal or state agency has passed upon or endorsed the merits of the offering of the Acquired Shares or made any findings or determination as to the fairness of this investment.
(o)    (p)Subscriber represents and warrants that Subscriber is not (i) a person or entity named on the List of Specially Designated Nationals and Blocked Persons, the Executive Order 13599 List, the Foreign Sanctions Evaders List, or the Sectoral Sanctions Identification List, each of which is administered by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) (collectively, “OFAC Lists”) (ii) owned or controlled by, or acting on behalf of, a person, that is named on an OFAC List; (iii) organized, incorporated, established, located, resident or born in, or a citizen, national, or the government, including any political subdivision, agency, or instrumentality thereof, of, Cuba, Iran, North Korea, Syria, the Crimea region of Ukraine, or any other country or territory embargoed or subject to substantial trade restrictions by the United States, (iv) a Designated National as defined in the Cuban Assets Control Regulations, 31 C.F.R. Part 515, or (v) a non-U.S. shell bank or providing banking services indirectly to a non-U.S. shell bank. Subscriber agrees to provide law enforcement agencies, if requested thereby, such records as required by applicable law, provided that Subscriber is permitted to do so under applicable law. Subscriber represents that if it is a financial institution subject to the Bank Secrecy Act (31 U.S.C. section 5311 et seq.) (the “BSA”), as amended by the USA PATRIOT Act of 2001 (the “PATRIOT Act”), and its implementing regulations (collectively, the “BSA/PATRIOT Act”), Subscriber maintains policies and procedures reasonably designed to comply with applicable obligations under the BSA/PATRIOT Act. Subscriber
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also represents that, to the extent required, it maintains policies and procedures reasonably designed to ensure compliance with OFAC-administered sanctions programs, including for the screening of its investors against the OFAC Lists. Subscriber further represents and warrants that, to the extent required, it maintains policies and procedures reasonably designed to ensure that the funds held by Subscriber and used to purchase the Acquired Shares were legally derived.
(p)    (q)If Subscriber is or is acting on behalf of (i) an employee benefit plan that is subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), (ii) a plan, an individual retirement account or other arrangement that is subject to Section 4975 of the Code, (iii) an entity whose underlying assets are considered to include "plan assets"“plan assets” of any such plan, account or arrangement described in clauses (i) and (ii) (each, an "“ERISA Plan"”), or (iv) an employee benefit plan that is a governmental plan (as defined in Section 3(32) of ERISA), a church plan (as defined in Section 3(33) of ERISA), a non-U.S. plan (as described in Section 4(b)(4) of ERISA) or other plan that is not subject to the foregoing clauses (i), (ii) or (iii) but may be subject to provisions under any other federal, state, local, non-U.S. or other laws or regulations that are similar to such provisions of ERISA or the Code (collectively, "“Similar Laws,"” and together with ERISA Plans, "“Plans"”), then Subscriber represents and warrants that it has not relied on the Issuer or any of its affiliates (the “Transaction Parties”) for investment advice or as the Plan’s fiduciary with respect to its decision to acquire and hold the Acquired Shares, and none of the Transaction Parties is or shall at any time be relied upon as the Plan’s fiduciary with respect to any decision to acquire and hold or transfer the Acquired Shares; and (B) its purchase of the Shares will not result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code, or any applicable Similar Law.
(q)    (r)At the Purchase Price Payment Date, Subscriber will have sufficient funds to pay the Purchase Price pursuant to Section 2(a).
5.Registration Rights.
(a)The Issuer agrees that, as soon as practicable, but in no event later than thirty (30) calendar days after the Closing Date (the “Filing DateDat”e”), the Issuer will file with the Commission (at the Issuer’s sole cost and expense) a registration statement registering the resale of the Acquired Shares (the “Registration StatementStatemen”t”), and
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the Issuer shall use its commercially reasonable efforts to cause the Registration Statement to be declared effective as soon as practicable after the filing thereof, but no later than the earlier of (i) the 60th calendar day (or 100th90th calendar day if the Commission notifies the Issuer that it will “review” the Registration Statement) following the Closing and (ii) the 10th5th business day after the date the Issuer is notified (orally or in writing, whichever is earlier) by the Commission that the Registration Statement will not be “reviewed” or will not be subject to further review (such earlier date, the “Effectiveness Date”); provided, however, that if the Commission is closed for operations due to a government shutdown or otherwise, the Effectiveness Date shall be extended by the same amount of days that the Commission remains closed for operations, provided, further, that the Issuer’s obligations to include the Acquired Shares in the Registration Statement are contingent upon Subscriber furnishing in writing to the Issuer such information regarding Subscriber, the securities of the Issuer held by Subscriber, the intended method of disposition of the Acquired Shares (which shall be limited to non-underwritten public offerings) and such other information as shall be reasonably requested by the Issuer to effect the registration of the Acquired Shares, and Subscriber shall execute such documents in connection with such registration as the Issuer may reasonably request that are customary of a selling stockholder in similar situations, including providing that the Issuer shall be entitled to postpone and suspend the effectiveness or use of the Registration Statement during any customary blackout or similar period or as permitted hereunder;under Section 5(c); provided, however, under no circumstances shall Subscriber be required to sign any type of lock-up agreement. Any failure by the Issuer to file the Registration Statement by the Filing Date or to effect such Registration Statement by the Effectiveness Date shall not otherwise relieve the Issuer of its obligations to file or effect the Registration Statement as set forth above in this Section 5. The Issuer will provide a draft of the Registration Statement to the undersigned for review at least two (2)three (3) business days in advance of filing the Registration Statement. In no event shall the undersigned be identified as a statutory underwriter in the Registration Statement unless requested by the Commission; provided, that, if the Commission requests that the undersigned be identified as a statutory underwriter in the Registration Statement, the undersigned will have an opportunity to withdraw its Acquired Shares from the Registration Statement. Notwithstanding the foregoing, if the Commission prevents the Issuer from including any or all of the shares proposed to be registered under the Registration Statement due to limitations on the use of Rule 415 of the Securities Act for the resale of the Acquired Shares by the applicable stockholders or otherwise, such Registration Statement shall register for resale such number of Acquired Shares which is equal to the maximum number of Acquired Shares as is permitted by the Commission. In such event, the number of Acquired Shares or other Acquired Shares to be registered for the undersigned and each selling shareholderOther Subscriber named in the Registration Statement shall be reduced pro rata among all such selling shareholders.shareholders (except to the extent otherwise required by the Commission). In the event the Issuer amends the Registration Statement in accordance with the foregoing, the Issuer will use its commercially reasonable efforts to file with the Commission, as promptly as allowed by the Commission, one or more registration statements to register the resale of those Registrable Securities (as defined below) that were not registered on the initial Registration Statement, as so amended. The Issuer will use its commercially reasonable efforts to maintain the
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continuous effectiveness of the Registration Statement until all such securities cease to be Registrable Securities (as defined below) or such shorter period upon which each undersigned party with Registrable Securities included in such Registration Statement have notified the Issuer that such Registrable Securities have actually been sold. The Issuer will provide all customary and commercially reasonable cooperation necessary to enable the undersigned to resell Registrable Securities pursuant to the Registration Statement or Rule 144 under the Securities Act (“Rule 144”144”), as applicable, qualify the Registrable Securities for listing on the primary stock exchange on which its Class A Shares are then listed, update or amend the Registration Statement as necessary to include Registrable Securities and provide customary notice to holders of Registrable Securities. “Registrable Securities”“Registrable Securities” shall mean, as of any date of determination, the Acquired Shares and any other equity security of the Issuer issued or issuable with respect to the Acquired Shares by way of share split, dividend, distribution, recapitalization, merger, exchange, replacement or similar event or otherwise. As to any particular Registrable Securities, once issued, such securities shall cease to be Registrable Securities at the earliest of: (A) when the undersigned ceases to hold any Registrable Securities; (B) the date all Registrable Securities held by the undersigned may be sold without restriction under Rule 144, including without limitation, any volume and manner of sale restrictions which may be applicable to affiliates under Rule 144, and without the requirement for the Issuer to be in compliance with the current public information required under Rule 144 or(including, for the avoidance of doubt, the requirements of Rule 144(i)(2)); (C) when they shall have ceased to be outstandingoutstanding; or three (3)(D) four (4) years from the date of effectiveness of the Registration Statement.
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(b)
(b)    In the case of the registration, qualification, exemption or compliance effected by the Issuer pursuant to this Subscription Agreement, the Issuer shall, upon reasonable request, inform Subscriber as to the status of such registration, qualification, exemption and compliance. At its expense the Issuer shall:
(i)except for such times as the Issuer is permitted hereunder to suspend the use of the prospectus forming part of a Registration Statement, use its commercially reasonable efforts to keep such registration, and any qualification, exemption or compliance under state securities laws which the Issuer determines to obtain, continuously effective with respect to Subscriber, and to keep the applicable Registration Statement or any subsequent shelf registration statement free of any material misstatements or omissions, for as long as Subscriber continues to hold Registrable Securities;
(ii)advise Subscriber, as promptly as practicable but in any event, within three (3)two (2) business days:
(1)when a Registration Statement or any amendment thereto has been filed with the Commission and when such Registration Statement or any post-effective amendment thereto has become effective;
(2)of the issuance by the Commission of any stop order suspending the effectiveness of any Registration Statement or the initiation of any proceedings for such purpose;
(3)of the receipt by the Issuer of any notification with respect to the suspension of the qualification of the Acquired Shares included therein for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and
(4)subject to the provisions in this Subscription Agreement, of the occurrence of any event that requires the making of any changes in any Registration Statement or prospectus included therein so that, as of such date, the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein (and in the case of a prospectus, in the light of the circumstances under which they were made) not misleading.
Notwithstanding anything to the contrary set forth herein, the Issuer shall not, when so advising Subscriber of such events, provide Subscriber with any material, nonpublic information regarding the Issuer other than to the extent that providing notice to Subscriber of the occurrence of the events listed in (1) through (4) above may constitute material, nonpublic information regarding the Issuer;
(iii)use its commercially reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of any Registration Statement as soon as reasonably practicable;
(iv)upon the occurrence of any event contemplated in Section 5(b)(ii)(4), except for such times as the Issuer is permitted hereunder to suspend, and has suspended, the use of a prospectus forming part of a Registration Statement, the Issuer shall use its commercially reasonable efforts to as soon as reasonably practicable prepare a post-effective amendment to such Registration Statement or a supplement to the related prospectus, or file any other required document so that, as thereafter delivered to purchasers of the Acquired Shares included therein, such prospectus will not include any untrue statement of a material fact or omit to state any
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material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;
(v)use its commercially reasonable efforts to cause all Acquired Shares to be listed on the primary securities exchange or market, if any, on which the Class A Shares issued by the Issuer have been listed; and
(vi)    allow Subscriber to review and consent to disclosure specifically regarding Subscriber in the Registration Statement on reasonable advance notice (which consent shall not be unreasonably withheld); and
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(vii)    use its commercially reasonable efforts to take all other steps reasonably necessary to effect the registration of the Acquired Shares contemplated hereby and, for so long as Subscriber holds Acquired Shares, to enable Subscriber to sell the Acquired Shares under Rule 144.
(c)Notwithstanding anything to the contrary in this Subscription Agreement, the Issuer shall be entitled to delay the filing or postpone the effectiveness of the Registration Statement, and from time to time to require Subscriber not to sell under the Registration Statement or to suspend the effectiveness thereof, if the negotiation or consummation of a transaction by the Issuer or its subsidiaries is pending or an event has occurred, which negotiation, consummation or event, the Issuer’s board of directors reasonably believes, would require additional disclosure by the Issuer in the Registration Statement of material information that the Issuer has a bona fide business purpose for keeping confidential and the non-disclosure of which in the Registration Statement would be expected, in the reasonable determination of the Issuer’s board of directors, would be expected to cause the Registration Statement to fail to comply with applicable disclosure requirements (each such circumstance, a “Suspension Event”); provided, however, that the Issuer may not delay or suspend the Registration Statement on more than two occasions or for more than forty five (45) consecutive calendar days, or more than ninety (90) total calendar days, in each case during any twelve (12)-month period. Upon receipt of any written notice from the Issuer of the happening of any Suspension Event during the period that the Registration Statement is effective or if as a result of a Suspension Event the Registration Statement or related prospectus contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made (in the case of the prospectus) not misleading, Subscriber agrees that (i) it will immediately discontinue offers and sales of the Acquired Shares under the Registration Statement (excluding, for the avoidance of doubt, sales conducted pursuant to Rule 144) until Subscriber receives copies of a supplemental or amended prospectus (which the Issuer agrees to promptly prepare) that corrects the misstatement(s) or omission(s) referred to above and receives notice that any post-effective amendment has become effective or unless otherwise notified by the Issuer that it may resume such offers and sales, and (ii) it will maintain the confidentiality of any information included in such written notice delivered by the Issuer unless otherwise required by law or subpoena. If so directed by the Issuer, Subscriber will deliver to the Issuer or, in Subscriber’s sole discretion destroy, all copies of the prospectus covering the Acquired Shares in Subscriber’s possession; provided, however, that this obligation to deliver or destroy all copies of the prospectus covering the Acquired Shares shall not apply (i) to the extent Subscriber is required to retain a copy of such prospectus (a) in order to comply with applicable legal, regulatory, self-regulatory or professional requirements or (b) in accordance with a bona fide pre-existing document retention policy or (ii) to copies stored electronically on archival servers as a result of automatic data back-up.
(d)Subscriber may deliver written notice (an(including via email in accordance with Section 9(n), an “Opt-Out Notice”) to the Issuer requesting that Subscriber not receive notices from the Issuer otherwise required by this Section 5; provided, however, that Subscriber may later revoke any such Opt-Out Notice in writing. Following receipt of an Opt-Out Notice from Subscriber (unless subsequently revoked), (i) the Issuer shall not deliver any such notices to Subscriber and Subscriber shall no longer be entitled to the rights associated with any such notice and (ii) each time prior to Subscriber’s intended use of an effective Registration Statement, Subscriber will notify the Issuer in writing at least two (2) business days in advance of such intended use, and if a notice of a Suspension Event was previously delivered (or would have been delivered but for the provisions of this Section 5(d)) and the related suspension period remains in effect, the Issuer will so notify Subscriber, within one (1) business day of Subscriber’s notification to the Issuer, by delivering to Subscriber a copy of such previous notice of Suspension Event, and thereafter will provide Subscriber with the related notice of the conclusion of such Suspension Event promptly following its availability.
(e)Indemnification.
(i)The Issuer shall, notwithstanding the termination of this Subscription Agreement, indemnify, defend and hold harmless, to the extent permitted by law, Subscriber, its directors, officers, employees, agents, trustees, partners, members, managers, stockholders, investment advisors and sub-advisors, each person who controls Subscriber (within the meaning of the Securities Act or the Exchange Act) and each affiliate of Subscriber (within the meaning of the Securities Act or the Exchange Act) to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs and expenses (including, without limitation, any reasonable attorneys’ fees and expenses incurred in connection with defending or investigating any such action or claim) (collectively, “Losses”), as incurred, that arise
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out of or are caused bybased upon (A) any untrue or alleged untrue statement of material fact contained in any Registration Statement (or incorporated by
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reference therein), prospectus included in any Registration Statement (“Prospectus”) or preliminary Prospectus or any amendment thereof or supplement thereto or document incorporated by reference therein or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the Issuer by or on behalf of such Subscriber expressly for use therein. The Issuer shall notify Subscriber promptly of the institution, threat or assertion (to the Issuer’s knowledge) of any proceeding arising from or in connection with the Transactions; provided, however, that the indemnification contained in this Section 5(e) shall not apply to amounts paid in settlement of any Losses if such settlement is effected without the consent of the Issuer (which consent shall not be unreasonably withheld, conditioned or delayed), nor shall the Issuer be liable for any Losses to the extent they arise out of or are based upon a violation which occurs (A) in connection with any failure of such person to deliver or cause to be delivered a Prospectus made available by the Issuer in a timely manner or (B) in connection with any offers or sales effected by or on behalf of Subscriber in violation of this Subscription Agreement.
(ii)In connection with any Registration Statement in which Subscriber is participating, Subscriber shall furnish to the Issuer in writing such information as the Issuer reasonably requests for use in connection with any such Registration Statement or Prospectus. In connection with any Registration Statement in which Subscriber is participating, Subscriber agrees, severally and not jointly with any Other Subscriber or other investor that is a party to the Other Subscription Agreements, to indemnify and hold harmless, to the extent permitted by law, the Issuer, its directors and officers and agents and employees and each person or entity who controls the Issuer (within the meaning of Section 15 of the Securities Act) against any Losses, resulting from or arising out of any untrue or alleged untrue statement of material fact contained in the Registration Statement, Prospectus or preliminary Prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, but only to the extent that such untrue statement or omission is contained (or not contained in the case of an omission) in and are based on any information or affidavit so furnished in writing by or on behalf of Subscriber expressly for use therein; provided, however, that in no event shall the aggregate liability of Subscriber (including, for the avoidance of doubt, under Section 5(e)(v)) be greater in amount than the dollar amount of the net proceeds received by Subscriber from the sale of Acquired Shares pursuant to such Registration Statement giving rise to such indemnification obligation.
(iii)Any person entitled to indemnification herein shall (1) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that the failure to give prompt notice shall not impair any person’s right to indemnification hereunder to the extent such failure has not prejudiced the indemnifying party) and (2) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party shall not be subject to any liability for any settlement made by the indemnified party without its consent.consent (such consent not to be unreasonably withheld, conditioned or delayed). An indemnifying party who elects not to assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel (plus local counsel) for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of legal counsel to any indemnified party a conflict of interest exists between such indemnified party and any other of such indemnified parties with respect to such claim. No indemnifying party shall, without the consent of the indemnified party, consent to the entry of any judgment or enter into any settlement which cannot be settled in all respects by the payment of money (and such money is so paid by the indemnifying party pursuant to the terms of such settlement) or which settlement does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation.litigation or includes any admission as to fault, culpability or failure to act on the party of such indemnified party.
(iv)The indemnification provided under this Subscription Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director, employee, agent, affiliate or controlling person of such indemnified party and shall survive the transfer of the Acquired Shares.
(v)If the indemnification provided under this Section 5(e) from the indemnifying party is unavailable or insufficient to hold harmless an indemnified party in respect of any Losses referred to herein, then the indemnifying party, in lieu of indemnifying the indemnified party, shall contribute to the amount paid or payable
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by the indemnified party as a result of such Losses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and indemnified party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, was made by (or not made by, in the case of an omission), or relates to information supplied by (or not supplied by, in the case of an omission), such indemnifying party or indemnified party, and the indemnifying party’s and indemnified party’s relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the Losses or other liabilities referred to above shall be deemed to include, subject to the limitations set forth in
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Sections 5(e)(i), 5(e)(ii), and 5(e)(iii), any legal or other fees, charges or expenses reasonably incurred by such party in connection with any investigation or proceeding. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution pursuant to this Section 5(e)(v) from any person who was not guilty of such fraudulent misrepresentation.
(f)Piggyback Rights. Subscriber agrees that each New Holder (as defined in the Registration Rights Agreement) and the Seller and each 5% Insider (as defined in the Shareholders Agreements) shall have piggyback registration rights in respect of any Registration Statement that is filed pursuant to this Section 5, pursuant to and in accordance with Section 5.6 of the Registration Rights Agreement and Section 8 of the Shareholder Agreements, respectively, and that the provisions of each of the Registration Rights Agreement and the Shareholder Agreements shall apply, mutatis mutandis, to the exercise of any such piggyback registration rights by any such New Holder, the Seller or any such 5% Insider in respect of any such Registration Statement.
6.Termination. This Subscription Agreement shall terminate and be void and of no further force and effect (except for those provisions expressly contemplated to survive termination of this Subscription Agreement), and all rights and obligations of the parties hereunder shall terminate without any further liability on the part of any party in respect thereof (except with respect to those provisions expressly contemplated to survive termination of this Subscription Agreement), upon the earlier to occur of (a) such date and time as the Business CombinationMerger Agreement is terminated in accordance with its terms, (b) upon the mutual written agreement of each of the parties hereto to terminate this Subscription Agreement, (c) if any of the conditions to Closing set forth in Section 2 of this Subscription Agreement are not satisfied (or waived, to the extent waivable) on or prior to the earlier of the Closing Date or November 9, 2021October 14, 2022 (the “Outside Date”), or become incapable of being satisfied on or prior to the earlier of the Closing Date or the Outside Date, and, as a result thereof, the transactions contemplated by this Subscription Agreement are not consummated at the Closing, or (d) the Outside Date; provided, that nothing herein will relieve any party from liability for any willful breach hereof prior to the time of termination, and each party will be entitled to any remedies at law or in equity to recover Losses, liabilities or damages arising from such breach.breach; provided, further, that Subscriber may, by written notice to the Issuer, extend the Outside Date beyond October 14, 2022. The Issuer shall promptly notify Subscriber in writing (with email being sufficient) of the termination of the Business CombinationMerger Agreement. Upon the termination hereof, any monies paid by Subscriber to the Issuer in connection herewith shall promptly (and in any event within one (1) business day) be returned in full to Subscriber by wire transfer of U.S. dollars in immediately available funds to the account specified by Subscriber, without any deduction for or on account of any tax withholding, charges or set-off, whether or not the Transactions shall have been consummated.
7.Additional Agreements and Waivers of Subscriber.
(a)Trust Account Waiver. Subscriber acknowledgesagrees that none of the Seller, the Company or any of the Placement Agents shall be liable to Subscriber for any action heretofore or hereafter taken or omitted to be taken by any of them or have any liability or obligation (including without limitation, for or with respect to any losses, claims, damages, obligations, penalties, judgments, awards, liabilities, costs, expenses or disbursements incurred by Subscriber, the Issuer or any other person or entity), whether in contract, tort or otherwise, to Subscriber, or to any person claiming through Subscriber, in respect of the Subscription.
(b)Subscriber hereby acknowledges and agrees that (a) each Placement Agent is a blank check companyacting solely as the Issuer’s placement agent in connection with the powersSubscription and privileges to effectis not acting as an underwriter or in any other capacity and is not and shall not be construed as a merger, asset acquisition, reorganization or similar business combination involvingfiduciary for Subscriber, the Issuer or any other person or entity in connection with the Subscription, (b) no Placement Agent has made or will make any representation or warranty, whether express or implied, of any kind or character and onehas not provided any advice or more businessesrecommendation in connection with the Subscription, and (c) no Placement Agent will have any responsibility with respect to (i) any representations, warranties or assets. Subscriber further acknowledges that, as describedagreements made by any person or entity under or in connection with the Issuer’s prospectus relating to its initial public offering dated September 1, 2020 (the “September 1, 2020 Prospectus”), available at sec.gov, substantially allSubscription or any of the Issuer’s assets consistdocuments furnished pursuant thereto or in connection therewith, or the execution, legality, validity or enforceability (with respect to any person) or any thereof, or (ii) the business, affairs, financial condition, operations, properties or prospects of, or any other matter concerning the cash proceeds ofIssuer or the Issuer’s initial public offeringSubscription.
(c)The Issuer hereby acknowledges and private placements of its securities, and substantially all of those proceeds have been deposited in a trust account (the “Trust Account”) for the benefit of its public stockholders and the underwriters of its initial public offering. The cash in the Trust Account may be disbursed only for the purposesagrees that, except as expressly set forth in Section 5(c) hereto (and except pursuant to any Support Agreement or separate lock-up agreement entered into with the September 1, 2020 Prospectus. For andIssuer in considerationconnection with Subscriber’s evaluation of the transactions contemplated by Subscription Agreement (if applicable)): (i) Subscriber has not been asked by the Issuer to agree, nor, to the knowledge of the Issuer, entering into this Subscription Agreement, the receipt and sufficiency of which are hereby acknowledged,has Subscriber hereby irrevocably waives any and all right, title and interest,agreed, to desist from purchasing or any claim of any kind they have selling, long and/or may have in the future as a result of, or arising out of, this Subscription Agreement, in or to any monies held in the Trust Account, and agrees not to seek recourse or make or bring any action, suit, claim or other proceeding against the Trust Account as a result of, or arising out of, this Subscription Agreement, the transactions contemplated hereby or the Acquired Shares, regardless of whether such claim arises based on contract, tort, equity or any other theory of legal liability; provided however, that nothing in this Section 5 shall be deemed to limit any Subscriber’s right, title, interest or claim to the Trust Account by virtue of such Subscriber’s record or beneficial ownership ofshort, securities of the Issuer, acquiredor “derivative” securities based on securities issued by the Issuer or to hold the Acquired Shares for any meansspecified term, (ii) past or future open market or other than pursuant totransactions by Subscriber, before or after the closing of this Subscription Agreement, including but not limited to any redemption right with respect to any such securitiesor future private placement transactions, may negatively impact the market price of the Issuer.Issuer’s publicly-traded securities, and (iii) Subscriber acknowledges and agrees that it shall not be deemed to have any redemption rightsaffiliation with respector control over any arm’s length counter-party in any “derivative” transaction.
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to the Acquired Shares pursuant to the Issuer’s certificate of incorporation in connection with the Transactions or any other business combination, any subsequent liquidation of the Trust Account or the Issuer or otherwise. In the event Subscriber has any claim against the Issuer as a result of, or arising out of, this Subscription Agreement, the transactions contemplated hereby or the Acquired Shares, it shall pursue such claim solely against the Issuer and its assets outside the Trust Account and not against the Trust Account or any monies or other assets in the Trust Account. This paragraph shall survive any termination of this Subscription Agreement.
(b)    No Hedging. Subscriber hereby agrees that neither it, nor any person or entity acting on its behalf or pursuant to any understanding with it, shall execute any short sales (as such term is defined in Regulation SHO under the Exchange Act, 17 CFR 242.200) or engage in other hedging transactions of any kind with respect to the Acquired Shares during the period from the date of this Subscription Agreement through the Closing (or such earlier termination of this Subscription Agreement). Notwithstanding anything to the contrary set forth herein, (i) nothing in this Section 7(b) shall prohibit any entities under common management or that share an investment advisor with the Subscriber that have no knowledge of this Subscription Agreement or of Subscriber’s participation in this transaction (including Subscriber’s controlled affiliates and/or affiliates) from entering into any short sales or engaging in other hedging transactions; and (ii) in the case of a Subscriber that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Subscriber’s assets and the portfolio managers have no knowledge of the investment decisions made by the portfolio managers managing other portions of such Subscriber’s assets, this Section 7(b) shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Subscription Amount covered by this Subscription Agreement. The Issuer acknowledges and agrees that, notwithstanding anything herein to the contrary, the Acquired Shares may be pledged by Subscriber in connection with a bona fide margin agreement, provided that such pledge shall be (i) pursuant to an available exemption from the registration requirements of the Securities Act or (ii) pursuant to, and in accordance with, a registration statement that is effective under the Securities Act at the time of such pledge, and Subscriber effecting a pledge of the Acquired Shares shall not be required to provide the Issuer with any notice thereof; provided, however, that neither the Issuer nor its counsel shall be required to take any action (or refrain from taking any action) in connection with any such pledge, other than providing any such lender of such margin agreement with an acknowledgment that the Acquired Shares are not subject to any contractual lock up or prohibition on pledging, the form of such acknowledgment to be subject to review and comment by the Issuer in all respects.
8.Issuer’s Covenants.
(a)Except as contemplated herein, the Issuer, its subsidiaries and their respective affiliates shall not, and shall cause any person acting on behalf of any of the foregoing to not, take any action or steps that would require registration of the issuance of any of the Acquired Shares under the Securities Act.
(b)With a view to making available to Subscriber the benefits of Rule 144 or any other similar rule or regulation of the Commission that may at any time permit Subscriber to sell securities of the Issuer to the public without registration, the Issuer agrees, for so long as Subscriber holds Registrable Securities to:
(i)make and keep public information available, as those terms are understood and defined in Rule 144;
(ii)file with the Commission in a timely manner all reports and other documents required of the Issuer under the Securities Act and the Exchange Act so long as the Issuer remains subject to such requirements and the filing of such reports and other documents is required for the applicable provisions of Rule 144; and
(iii)furnish to Subscriber so long as it owns Acquired Shares, promptly upon request, (x) a written statement by the Issuer, if true, that it has complied with the reporting requirements of Rule 144, the Securities Act and the Exchange Act, (y) a copy of the most recent annual or quarterly report of the Issuer and such other reports and documents so filed by the Issuer (public availability on the Commission’s EDGAR system (or successor system) being sufficient) and (z) such other information as may be reasonably requested to permit Subscriber to sell such securities pursuant to Rule 144 without registration.
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(c)The Issuer shall use its commercially reasonable efforts to remove the legend described in Section 4(f)4(g) and to issue a certificate or a book entry record without such legend to the holder of the Acquired Shares upon which it is stamped or issue to such holder by electronic delivery at the applicable balance account at The Depository Trust Company (“DTC,”), if (i) such Acquired Shares are registered for resale under the Securities Act, upon the sale thereof, if such holder provides customary paperwork in a form reasonably acceptable to the Issuer to the effect that it has sold such securities pursuant to an effective registration statement under the Securities Act and the plan of distribution set forth therein,Act; provided that the Issuer shall use its commercially reasonable efforts to cause its legal counsel to deliver the necessary legal opinions, if any, to the transfer agent in connection therewith, (ii) in connection with a sale, assignment or other transfer, such holder provides the Issuer with an opinion of counsel and other customary paperwork, in a form reasonably acceptable to the Issuer, to the effect that such sale, assignment or transfer of the Acquired Shares may be made without registration under the applicable requirements of the Securities Act and such holder agrees to sell, assign or otherwise transfer such securities in accordance with such valid exemption from the registration requirements of the Securities Act, or (iii) the Acquired Shares can be sold, assigned or transferred without restriction or current public information requirements pursuant to Rule 144, including without limitation, any volume and manner of sale restrictions which may be applicable to affiliates under Rule 144 and any requirement for the Issuer to be in compliance with the current public information required under Rule 144(c) or Rule 144(i), as applicable, and in each case, the holder provides the Issuer with customary paperwork including an undertaking to effect that any sales or other transfers will occur in accordance with Rule 144.144, or (iv) at any time on or after July 28, 2022, the holder of any Acquired Shares certifies that it is not an “affiliate” of the Issuer (as such term is used under Rule 144) and that the such holder’s holding period for purposes of Rule 144 and subsection (d)(3)(iii) thereof with respect to such Acquired Shares is at least six (6) months. The Issuer shall be responsible for the fees of the Transfer Agent and all DTC fees associated with such issuance and Subscriber shall be responsible for all other fees and expenses (including, without limitation, any applicable broker fees, fees and disbursements of their legal counsel and any applicable transfer taxes).
(d)The Issuer shall use its best efforts not, and shall use its best efforts not to permit any of its subsidiaries and Affiliates or any of its or their respective directors, officers or representatives to, promise, authorize or make any payment to, or otherwise contribute any item of value to, directly or indirectly, any non-U.S. government official, in each case, in violation of the FCPA or any other applicable anti-bribery or anti-corruption law. The Issuer shall, and shall cause each of its subsidiaries and Affiliates to, cease all of its or their respective activities, as well as remediate any actions taken by the Issuer, its subsidiaries or Affiliates or any of its or their respective directors, officers or representatives in violation of the FCPA or any other applicable anti-bribery or anti-corruption law. The Issuer shall, and shall cause each of its Affiliates and subsidiaries to, maintain systems or internal controls (including, but not limited to, accounting systems, purchasing systems and billing systems) to ensure compliance with the FCPA or any other applicable anti-bribery or anti-corruption law.
9.Miscellaneous.
(a)Each party hereto acknowledges that the other party hereto will rely on the acknowledgments, understandings, agreements, representations and warranties contained in this Subscription Agreement. Prior to the Closing, each party hereto agrees to promptly notify the other party hereto if any of the acknowledgments, understandings, agreements, representations and warranties set forth herein with respect to it are
D-15

no longer accurate in all material respects. Subscriber further acknowledges and agrees that the(i) each Placement Agent is a third-party beneficiary of the representations and warranties of the Subscriber contained in this Subscription Agreement.Agreement and (ii) each New Holder, the Seller and each 5% Insider is a third-party beneficiary of the piggyback registration rights provided in Section 5(f).
(b)Each of the Issuer and Subscriber is entitled to rely upon this Subscription Agreement and is irrevocably authorized to produce this Subscription Agreement or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. TheEach Placement Agent, in its capacity as such, is entitled to rely upon the representations, warranties, agreements and covenants of the Issuer and the representations and warranties of the Subscriber in this Subscription Agreement.
(c)This Subscription Agreement may not be transferred or assigned without the prior written consent of each of the other parties hereto. Notwithstanding the foregoing, (i) this Subscription Agreement and any of Subscriber’s rights and obligations hereunder may be assigned at any time to one or more affiliates of the Subscriber or to any fund or account managed by the same investment manager or investment advisor as Subscriber or by an affiliate of such investment manager or investor advisor, without the prior consent of the Issuer, provided that such assignee(s) agrees in writing to be bound by the terms hereof. Upon such assignment by a Subscriber, the assignee(s) shall become Subscriber hereunder and have the rights and obligations provided for herein to the extent of such assignment; provided further that, no assignment shall relieve the assigning party of any of its obligations hereunder, including any assignment to any fund or account managed by the same investment manager or investment advisor as Subscriber or by an affiliate of such investment manager or investment advisor, unless consented to in writing by the Issuer (such consent not to be unreasonably conditioned, delayed or withheld).; and (ii) at any time following the Closing, Subscriber’s rights (including under Section 5) in respect of any Acquired Shares may be assigned to any transferee of such Acquired Shares.
(d)All the representations and warranties made by each party hereto in this Subscription Agreement shall survive the Closing. All covenants made by each party hereto in this Subscription Agreement required to be performed after the Closing shall expire upon performance.
(e)The Issuer may request from Subscriber such additional information as the Issuer may deem reasonably necessary to evaluate the eligibility of Subscriber to acquire the Acquired Shares, and Subscriber shall
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provide such information as may be reasonably requested, to the extent readily available and to the extent consistent with its internal policies and procedures; provided, that, the Issuer agrees to keep any such information provided by Subscriber confidential; provided, further, that upon recipient of such additional information, the Issuer shall be allowed to convey such information to the Placement AgentAgents and sucheach Placement Agent shall have agreed to keep the information confidential (with Subscriber being any express third party beneficiary of such agreement), except as may be required by applicable law, rule, regulation or in connection with any legal proceeding or regulatory request.
(f)This Subscription Agreement may not be amended, modified, waived or terminated except by an instrument in writing, signed by each of the parties hereto. This Subscription Agreement may not be waived except by an instrument in writing, signed by the party against whom enforcement of such waiver is sought.
(g)This Subscription Agreement (including the schedule hereto) constitutes the entire agreement, and supersedes all other prior agreements, understandings, representations and warranties, both written and oral, among the parties, with respect to the subject matter hereof.
(h)Except as otherwise provided herein (including the provisions of Section 5(e), as to which the indemnified parties are express third party beneficiaries), this Subscription Agreement shall be binding upon, and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives, and permitted assigns, and the agreements, representations, warranties, covenants and acknowledgments contained herein shall be deemed to be made by, and be binding upon, such heirs, executors, administrators, successors, legal representatives and permitted assigns.
(i)If any provision of this Subscription Agreement shall be invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions of this Subscription Agreement shall not in any way be affected or impaired thereby and shall continue in full force and effect.
(j)This Subscription Agreement may be executed in two (2) or more counterparts (including by facsimile, electronic mail or in .pdf or other electronic means), all of which shall be considered one and the same agreement and shall become effective when signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart.
(k)Each party shall pay all of its own expenses in connection with this Subscription Agreement and the transactions contemplated by this Subscription Agreement.
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(l)The Issuer shall be solely responsible for the fees of the Placement Agent, Transfer Agent, the escrow agent, stamp taxes and all of DTC’s fees associated with the issuance of the Acquired Shares.
(m)Subscriber understands and agrees that (i) no disclosure or offering document has been prepared by the Placement AgentAgents or any of itstheir respective affiliates in connection with the offer and sale of the Acquired Shares; (ii) none of the Placement AgentAgents and itstheir respective directors, officers, employees, representatives and controlling persons has made noany independent investigation with respect to the Issuer, Target,the Company, the Transactions or the Acquired Shares or the accuracy, completeness or adequacy of any information supplied to Subscriber by the Issuer; and (iii) in connection with the issue and purchase of the Acquired Shares, the Placement Agent hasAgents have not acted as the Subscriber’s financial advisor, tax or fiduciary.
(n)Any notice or communication required or permitted hereunder shall be in writing and either delivered personally, emailed or telecopied, sent by overnight mail via a reputable overnight carrier, or sent by certified or registered mail, postage prepaid, and shall be deemed to be given and received (i) when so delivered personally, (ii) upon receipt of an appropriate electronic answerback or confirmation when so delivered by telecopy (to such number specified below or another number or numbers as such person may subsequently designate by notice given hereunder), (iii) when sent, with no mail undeliverable or other rejection notice, if sent by email, or
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(iv) five (5) business days after the date of mailing to the address below or to such other address or addresses as such person may hereafter designate by notice given hereunder:
if to Subscriber, to such address or addresses set forth on the signature page hereto;
if to the Issuer, to:
Sema4 Holdings Corp.
333 Ludlow Street, North Tower, 8th Floor
Stamford, Connecticut 06902
Attention: General Counsel
Email: legal@sema4.com
with a required copy to (which copy shall not constitute notice):
Fenwick & West LLP
902 Broadway
New York, NY 10010
Attention: Ethan Skerry, Per Chilstrom, Michael Pilo
Email: eskerry@fenwick.com; pchilstrom@fenwick.com;
mpilo@fenwick.com
and a required copy to (which copy shall not constitute notice):
Goldman Sachs & Co. LLC, 200 West Street, New York, New York 10282-2198
Jefferies LLC, 520 Madison Avenue, New York, New York 10022, Attention: General Counsel
Cowen and Company, LLC, 599 Lexington Avenue, New York, NY 10022, Attention: General Counsel, Fax: 646-562-1124, Bradley.friedman@cowen.com
BTIG, LLC, 65 E 55th Street, New York, New York 10022, Attention: Karen Koski, kkoski@btig.com; with a copy to: BTIG, LLC, 600 Montgomery Street, 6th Floor, San Francisco, CA 94111, Attention: General Counsel, IBlegal@BTIG.com
if to the Issuer, to:
c/o CM Life Sciences, Inc.
667 Madison Avenue
New York, NY 10065
Attention: Eli Casdin
Email: eli@casdincapital.com
with a required copy to (which copy shall not constitute notice):
White & Case LLP
1221 Avenue of the Americas
New York NY 10020
Attention: Joel Rubinstein, Matthew Kautz
Email: joel.rubinstein@whitecase.com; matthew.kautz@whitecase.com
and a required copy to (which copy shall not constitute notice):
Mount Sinai Genomics, Inc. d/b/a Sema4
333 Ludlow Street
Stamford, Connecticut 06902 Attention: General Counsel
Email: legal@sema4.com
Fenwick & West LLP
902 Broadway
New York, NY 10010
Attention: Ethan Skerry, Robert A. Freedman
Email:     eskerry@fenwick.com; rfreedman@fenwick.com  
(o)The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Subscription Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to seek an injunction or injunctions to prevent breaches of this Subscription Agreement and to enforce specifically the terms and provisions of this
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Subscription Agreement, this being in addition to any other remedy to which such party is entitled at law, in equity, in contract, in tort or otherwise.
(p)This Subscription Agreement, and any claim or cause of action hereunder based upon, arising out of or related to this Subscription Agreement (whether based on law, in equity, in contract, in tort or any other theory) or the negotiation, execution, performance or enforcement of this Subscription Agreement, shall be governed by and construed in accordance with the laws of the State of Delaware,New York, without giving regard to the principles of conflicts of laws that would otherwise require the application of the law of any other state.
THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURT OF CHANCERYCOURTS OF THE STATE OF DELAWARE (OR TO THE EXTENT SUCH COURT DOES NOT HAVE SUBJECT MATTER JURISDICTION, THE SUPERIOR COURT OF THE STATE OF DELAWARE),NEW YORK OR THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA LOCATED IN THE STATECITY OF DELAWARENEW YORK SOLELY IN RESPECT OF THE INTERPRETATION AND ENFORCEMENT OF THE PROVISIONS OF THIS SUBSCRIPTION AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY, AND HEREBY WAIVE, AND AGREE NOT TO ASSERT, AS A DEFENSE IN ANY ACTION, SUIT OR PROCEEDING FOR INTERPRETATION OR ENFORCEMENT HEREOF THAT SUCH ACTION, SUIT OR PROCEEDING MAY NOT BE BROUGHT OR IS NOT MAINTAINABLE IN SAID COURTS OR THAT
C-19

VENUE THEREOF MAY NOT BE APPROPRIATE OR THAT THIS SUBSCRIPTION AGREEMENT MAY NOT BE ENFORCED IN OR BY SUCH COURTS, AND THE PARTIES HERETO IRREVOCABLY AGREE THAT ALL CLAIMS WITH RESPECT TO SUCH ACTION, SUIT OR PROCEEDING SHALL BE HEARD AND DETERMINED BY SUCH A DELAWARENEW YORK STATE OR FEDERAL COURT. THE PARTIES HEREBY CONSENT TO AND GRANT ANY SUCH COURT JURISDICTION OVER THE PERSON OF SUCH PARTIES AND OVER THE SUBJECT MATTER OF SUCH DISPUTE AND AGREE THAT MAILING OF PROCESS OR OTHER PAPERS IN CONNECTION WITH SUCH ACTION, SUIT OR PROCEEDING IN THE MANNER PROVIDED IN SECTION 9(n) OR IN SUCH OTHER MANNER AS MAY BE PERMITTED BY LAW SHALL BE VALID AND SUFFICIENT SERVICE THEREOF.
EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS SUBSCRIPTION AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS SUBSCRIPTION AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS SUBSCRIPTION AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, PLACEMENT AGENTS OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER; (II) SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THE FOREGOING WAIVER; (III) SUCH PARTY MAKES THE FOREGOING WAIVER VOLUNTARILY AND (IV) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS SUBSCRIPTION AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THIS SECTION 9(p).
(q)The Issuer shall, by 9:00 a.m., New York City time, on the first (1st) business day immediately following the date of this Subscription Agreement, file with the Commission a Current Report on Form 8-K (collectively, the “Disclosure Document”) disclosing all material terms of the transactions contemplated hereby and by the Other Subscription Agreements, the Transactions and any other material, nonpublic information that the Issuer or its representatives has provided to Subscriber any time prior to the filing of the Disclosure Document, to the extent such information has not previously been publicly disclosed by the Issuer in a press release or filing with the Commission and the Issuer considers such information material at the time of the filing of the Disclosure Document. Upon the issuance of the Disclosure Document, to the Issuer’s knowledge, Subscriber shall not be in possession of any material, non-public information received from the Issuer or any of its officers, directors or employees or agents (including the Placement Agent)Agents) and Subscriber shall no longer be subject to any confidentiality or similar obligations under any current agreement, whether written or oral with the Issuer, the Placement AgentAgents or any of its affiliates. Notwithstanding anything in this Subscription Agreement to the contrary, the Issuer shall not publicly disclose the name of Subscriber or any of its affiliates or its investment adviser, or include the name of Subscriber or any of its affiliates or its investment adviser without the prior written consent of Subscriber (which consent shall not be unreasonably withheld, conditioned or delayed) (i) in any press releaserelease; or (ii) in any filing with the Commission or any regulatory agency or trading market, except (A) current reports on Form 8-K filed with the SEC by the Issuer in connection with the announcement of the execution of this Subscription Agreement and the announcement of the Closing of the Transactions or (B) as required by state or federal securities law, any governmental authority or stock exchange rule, in which case the Issuer shall provide Subscriber with prior written notice of such disclosure permitted under hereunder. The Issuer shall not, and shall cause each of its officers, directors, employees and agents, not to, provide Subscriber with any material, nonpublic information from and after the filing of the Disclosure Document and if and so long as Subscriber has not designated a representative on the Issuer’s board of directors, without the express prior written consent of Subscriber.
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(r)    Each partyThe Issuer hereto agrees, and the Subscriber acknowledges such agreement for the express benefit of the Placement Agent, its respective affiliates and its respective representatives that:
(i)neither the Placement AgentAgents nor any of itstheir affiliates or any of itstheir representatives (1) hashave any duties or obligations other than those specifically set forth herein or in the engagement letter among the Issuer and sucheach Placement Agent (an(each an “Engagement Letter”, and collectively, the “Engagement Letters”); (2) shall be liable for any improper payment made in accordance with the information provided by the Issuer; (3) makes any representation or warranty, or has any responsibilities as to the validity, accuracy, value or genuineness of any information, certificates or documentation delivered by or on behalf of the Issuer pursuant to this Subscription Agreement or the Business CombinationMerger Agreement or any agreement contemplated therein, or in connection with any of the Transactions; or (4) shall be liable (x) for any action taken, suffered or omitted by any of them in good faith and reasonably believed to be authorized or within the discretion or rights or powers conferred upon it by this Subscription Agreement, the Business CombinationMerger Agreement or any agreement contemplated therein, or (y) for anything which any of them may do or refrain from doing in connection with this Subscription Agreement, the Business CombinationMerger Agreement
C-20

or any agreement contemplated therein, except for such party’s own gross negligence, willful misconduct or bad faith; andfaith.
(ii)    (s)The Placement Agent, itsAgents, their affiliates and itstheir representatives shall be entitled to (1) rely on, and shall be protected in acting upon, any certificate, instrument, opinion, notice, letter or any other document or security delivered to any of them by or on behalf of the Issuer, and (2) be indemnified by the Issuer for acting as Placement AgentAgents hereunder pursuant the indemnification provisions set forth in the Engagement Letter.Letters.
(s)    (t)The obligations of Subscriber under this Subscription Agreement are several and not joint with the obligations of any Other Subscriber or any other investor under the Other Subscription Agreements, and Subscriber shall not be responsible in any way for the performance of the obligations of any Other Subscriber under any Other Subscription Agreement or other investor under the Other Subscription Agreements. The decision of Subscriber to purchase the Acquired Shares pursuant to this Subscription Agreement has been made by Subscriber independently of any Other Subscriber or any other investor and independently of any information, materials, statements or opinions as to the business, affairs, operations, assets, properties, liabilities, results of operations, condition (financial or otherwise) or prospects of the Issuer, the TargetCompany or any of their respective subsidiaries which may have been made or given by any Other Subscriber or investor or by any agent or employee of any Other Subscriber or investor, and neither Subscriber nor any of its agents or employees shall have any liability to any Other Subscriber or investor (or any other person) relating to or arising from any such information, materials, statements or opinions. The decision of each Other Subscriber to purchase Other Acquired Shares pursuant to an Other Subscription Agreement has been made by such Other Subscriber independently of Subscriber and independently of any information, materials, statements or opinions as to the business, affairs, operations, assets, properties, liabilities, results of operations, condition (financial or otherwise) or prospects of the Issuer, the TargetCompany or any of their respective subsidiaries which may have been made or given by Subscriber. Nothing contained herein or in any Other Subscription Agreement, and no action taken by Subscriber or investor pursuant hereto or thereto, shall be deemed to constitute Subscriber and any Other Subscribers or other investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that Subscriber and any Other Subscribers or other investors are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by this Subscription Agreement and the Other Subscription Agreements. Subscriber acknowledges that no Other Subscriber has acted as agent for Subscriber in connection with making its investment hereunder and no Other Subscriber will be acting as agent of Subscriber in connection with monitoring its investment in the Acquired Shares or enforcing its rights under this Subscription Agreement. Subscriber shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Subscription Agreement, and it shall not be necessary for any Other Subscriber or investor to be joined as an additional party in any proceeding for such purpose.
(t)    (u)In connection with all aspects of this Subscription Agreement, the transactions contemplated hereby and the Transaction, the Issuer acknowledges and agrees that: (i) the purchase and sale of the Acquired Shares constitute an arm’s-length commercial transaction between the Issuer, on the one hand, and Subscriber, on the other hand, and the Issuer is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated hereby, (ii) in connection with the process leading to this Subscription Agreement, the transactions contemplated hereby and the Transactions, Subscriber is and has been acting solely as a principal and not as a financial advisor, agent or fiduciary, for the Issuer or the Issuer’s affiliates, stockholders, directors, officers, employees or creditors or any other person, (iii) neither Subscriber nor any of its affiliates has assumed or will assume an advisory, agency or fiduciary responsibility in the Issuer or the Issuer’s affiliates’ favor with respect to any of this Subscription Agreement, the transactions contemplated hereby, the process leading hereto or the Transactions (irrespective of whether Subscriber or any of its affiliates have advised or are currently advising the Issuer or any of its affiliates on other matters) and neither Subscriber nor any of its affiliates has any obligation to the Issuer or any of the Issuer’s affiliates with respect to the Other Subscription Agreements or the Transactions, (iv) Subscriber and its affiliates may be engaged in a broad range of transactions that involve interests that differ from the Issuer and its affiliates and neither Subscriber nor any of its affiliates shall have any obligation to disclose any of such interests, and (v) neither Subscriber nor any of its affiliates has provided
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any legal, accounting, regulatory or tax advice with respect to this Subscription Agreement, any of the transactions contemplated hereby or the Transactions, and the Issuer has consulted its own legal, accounting, regulatory and tax
C-21

advisors to the extent the Issuer deemed appropriate. The Issuer waives and releases, to the fullest extent permitted by law, any claims that it may have against Subscriber and its affiliates with respect to any breach of fiduciary duty or alleged breach of fiduciary duty as a consequence of this Subscription Agreement, the transactions contemplated hereby or the Transactions.
(u)    (v)The headings herein are for convenience only, do not constitute a part of this Subscription Agreement and shall not be deemed to limit or affect any of the provisions hereof. The language used in this Subscription Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. Unless the context otherwise requires, (i) all references to Sections, Schedules or Exhibits are to Sections, Schedules or Exhibits contained in or attached to this Subscription Agreement, (ii) each accounting term not otherwise defined in this Subscription Agreement has the meaning assigned to it in accordance with GAAP, (iii) words in the singular or plural include the singular and plural and pronouns stated in either the masculine, the feminine or neuter gender shall include the masculine, feminine and neuter, (iv) the use of the word “including” in this Subscription Agreement shall be by way of example rather than limitation, and (v) the word “or” shall not be exclusive.
(v)    (w)If Subscriber is a Massachusetts Business Trust, a copy of the Agreement and Declaration of Trust of Subscriber or any affiliate thereof is on file with the Secretary of State of the Commonwealth of Massachusetts and notice is hereby given that the Subscription Agreement is executed on behalf of the trustees of Subscriber or any affiliate thereof as trustees and not individually and that the obligations of the Subscription Agreement are not binding on any of the trustees, officers or stockholders of Subscriber or any affiliate thereof individually but are binding only upon Subscriber or any affiliate thereof and its assets and property.
(w)    The Issuer agrees that from the date(x)This Subscription Agreement may only be enforced against, and a claim or cause of action based upon, arising out of, or related to this Subscription Agreement throughmay only be brought by the Closing, none of the terms offered to, or agreed with, any person or entityexpressly named party hereto and then only with respect to the Other Subscription Agreements is or will be more favorablespecific obligations set forth herein with respect to such personparty. Except to the extent a named party, no present, former or entity than thosefuture Affiliate, officer, director, employee, incorporator, member, partner, stockholder, agent, attorney or other Representative of Subscriberany party or their Affiliates shall have any Liability (whether in contract, in tort or otherwise) for any obligations or Liabilities of any party which is not otherwise expressly identified as a party, and no recourse shall be brought or granted against any of them, by virtue of or based upon any alleged misrepresentation or inaccuracy in or breach of any of the representations, warranties, agreements or covenants of any party under this Subscription Agreement.Agreement for any claim based upon, in respect of, or by reason of, the transactions contemplated by this Subscription Agreement or in respect of any representations made or alleged to have been made in connection therewith. The provisions of this Section 9(x) are intended to be for the benefit of, and enforceable by the Affiliates, officers, directors, employees, incorporators, members, partners, stockholders, agents, attorneys and other Representatives referenced in this Section 9(x) and each such Person shall be a third-party beneficiary of this Section 9(x).
[Signature pages follow.]
C-22D-20

IN WITNESS WHEREOF, each of the Issuer and Subscriber has executed or caused this Subscription Agreement to be executed by its duly authorized representative as of the date set forth below.
CM Life Sciences, Inc.Sema4 Holdings Corp.
By:
Name:
By:
Name:
Title:
Date: [●], 2021
Date: January 14, 2022
C-23
Signature Page to
Subscription Agreement

SUBSCRIBER:
Signature of Subscriber:Signature of Joint Subscriber, if applicable:
By: ___________________________________
Name:
Title:
By: ___________________________________
Name:
Title:
By:By:
Name:Name:
Title:Title:
Date:  [●], 2021January 14, 2022
Name of Subscriber:Name of Joint Subscriber, if applicable:

(Please print. Please indicate name and
capacity of person signing above)

(Please print. Please indicate name and
capacity of person signing above)

Name in which securities are to be registered
(if different)
Email Address:
If there are joint investors, please check one:
☐ Joint Tenants with Rights of Survivorship
☐ Tenants-in-Common
☐ Community Property
Subscriber’s EIN:  _______________
Joint Subscriber’s EIN:

Business Address-Street:Mailing Address-Street (if different):
______________________________________________________________________

City, State, Zip:

City, State, Zip:
Attn:Attn:
Telephone No.: ___________________Telephone No.: ___________________
Facsimile No.: ____________________Facsimile No.: ____________________
Aggregate Number of Acquired Shares subscribed for:
_________________
Aggregate Purchase Price: $_______________
Signature Page to
Subscription Agreement


You must pay the Purchase Price by wire transfer of United States dollars in immediately available funds to the account specified by the Issuer in the Closing Notice.
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Number of Acquired Shares subscribed for and aggregate Purchase Price accepted and agreed to as of this [●]14th day of [________], 2021,January, 2022, by:
Sema4 Holdings Corp.
CM Life Sciences, Inc.
By:Name: 
Name:Title:
Title:
C-25Signature Page to
Subscription Agreement

SCHEDULE A
ELIGIBILITY REPRESENTATIONS OF SUBSCRIBER
A.
QUALIFIED INSTITUTIONAL BUYER STATUS
(Please check the applicable subparagraphs):
1.☐ We are a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act (a “QIB”)).
2.☐ We are subscribing for the Acquired Shares as a fiduciary or agent for one or more investor accounts, and each owner of such account is a QIB.
*** OR ***
B.
INSTITUTIONAL ACCREDITED INVESTOR STATUS
(Please check each of the following subparagraphs):
1.☐ We are an “accredited investor” (within the meaning of Rule 501(a) under the Securities Act) or an entity in which all of the equity holders are accredited investors within the meaning of Rule 501(a) under the Securities Act and have marked and initialed the appropriate box on the following page indicating the provision under which we qualify as an “accredited investor”.
2.☐ We are not a natural person.
*** AND ***
C.
AFFILIATE STATUS
(Please check the applicable box)
SUBSCRIBER:
☐is:
☐is not:
an “affiliate” (as defined in Rule 144 under the Securities Act) of the Issuer or acting on behalf of an affiliate of the Issuer.
FINRA Rule 4512(c) states that an “institutional account” shall mean any person who comes within any of the below listed categories. Subscriber has indicated, by marking and initialing the appropriate box below, the provision(s) below which apply to Subscriber and under which Subscriber accordingly qualifies as an “institutional account.”
☐ a bank, savings and loan association, insurance company or registered investment company;
☐ an investment adviser registered either with the Commission under Section 203 of the Investment Advisers Act or with a state securities commission (or any agency or office performing like functions); or
☐ any other person (whether a natural person, corporation, partnership, trust or otherwise) with total assets of at least $50 million.



C-26D-24

This page should be completed by Subscriber
and constitutes a part of the Subscription Agreement.
Schedule A-1
Rule 501(a), in relevant part, states that an “accredited investor” shall mean any person who comes within any of the below listed categories, or who the Issuer reasonably believes comes within any of the below listed categories, at the time of the sale of the securities to that person. Subscriber has indicated, by marking and initialing the appropriate box below, the provision(s) below that apply to Subscriber and under which Subscriber accordingly qualifies as an “accredited investor.”
☐ Any bank as defined in section 3(a)(2) of the Securities Act, or any savings and loan association or other institution as defined in section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity;
☐ Any broker or dealer registered pursuant to section 15 of the Exchange Act;
☐ An investment adviser registered pursuant to section 203 of the Investment Advisers Act of 1940 or registered pursuant to the laws of a state;
☐ An investment adviser relying on the exemption from registering with the Securities and Exchange Commission under section 203(l) or (m) of the Investment Advisers Act of 1940;
☐ Any insurance company as defined in section 2(a)(13) of the Securities Act;
☐ Any investment company registered under the Investment Company Act of 1940 or a business development company as defined in section 2(a)(48) of the Securities Act;
☐ Any Small Business Investment Company licensed by the U.S. Small Business Administration under section 301(c) or (d) of the Small Business Investment Act of 1958;
☐ A Rural Business Investment Company as defined in section 384A of the Consolidated Farm and Rural Development Act;
☐ Any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000;
☐ Any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors;
☐ Any private business development company as defined in section 202(a)(22) of the Investment Advisers Act of 1940;
☐ Any organization described in section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, partnership or limited liability company, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000;



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This page should be completed by Subscriber
and constitutes a part of the Subscription Agreement.
Schedule A-2
☐ Any trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) of the Securities Act;
☐ An entity, of a type not listed in any of the foregoing paragraphs, not formed for the specific purpose of acquiring the securities offered, owning investments in excess of $5,000,000;
☐ A “family office,” as defined in rule 202(a)(11)(G)-1 under the Investment Advisers Act of 1940 (17 CFR 275.202(a)(11)(G)-1): (i) with assets under management in excess of $5,000,000, (ii) that is not formed for the specific purpose of acquiring the securities offered, and (iii) whose prospective investment is directed by a person who has such knowledge and experience in financial and business matters that such family office is capable of evaluating the merits and risks of the prospective investment;
☐ A “family client,” as defined in rule 202(a)(11)(G)-1 under the Investment Advisers Act of 1940 (17 CFR 275.202(a)(11)(G)-1), of a family office meeting the requirements in the foregoing paragraph and whose prospective investment in the issuer is directed by such family office pursuant to clause (iii) in the foregoing paragraph;
☐ Any natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of his purchase exceeds $1,000,000. For purposes of calculating a natural person’s net worth: (a) the person’s primary residence must not be included as an asset; (b) indebtedness secured by the person’s primary residence up to the estimated fair market value of the primary residence must not be included as a liability (except that if the amount of such indebtedness outstanding at the time of calculation exceeds the amount outstanding 60 days before such time, other than as a result of the acquisition of the primary residence, the amount of such excess must be included as a liability); and (c) indebtedness that is secured by the person’s primary residence in excess of the estimated fair market value of the residence must be included as a liability;
☐ Any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year; or
☐ Any entity in which all of the equity owners are accredited investors meeting one or more of the above tests.



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This page should be completed by Subscriber
and constitutes a part of the Subscription Agreement.
Schedule A-3
C-29D-26

ANNEX DPROXY CARD
[PubCo]sema4holdingscorp_prxyxg001.jpg
2021 EQUITY INCENTIVE PLAN
(Adopted [_____], 2021)slide1
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLYTHIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. D74082-S42575 1.PURPOSE. The purposeStock Consideration Issuance Proposal - For purposes of this Plan iscomplying with applicable Nasdaq Stock Market (the "Nasdaq") listing rules (the "Nasdaq Listing Rules"), to provide incentives to attract, retain and motivate eligible persons whose present and potential contributions are important toapprove the success of the Company, and any Parents, Subsidiaries and Affiliates that exist now or in the future, by offering them an opportunity to participate in the Company’s future performance through the grant of Awards. Capitalized terms not defined elsewhere in the text are defined in Section 28.
2.SHARES SUBJECT TO THE PLAN.
2.1.Number of Shares Available. Subject to Sections 2.6 and 21 and any other applicable provisions hereof, the total number of Shares reserved and available for grant and issuance pursuant to this Plan as of the date of adoption of the Plan by the Board is [[●] ([●])] Shares plus (a) any reserved shares not issued or subject to outstanding grants under the Company’s 2017 Stock Incentive Plan (the “Prior Plan”) on the Effective Date (determined after giving effect to the conversion of the Class B Common Stock pursuant to the Mandatory Conversion Notice under the Company Organizational Documents, in each case within the meaning of the Business Combination Agreement), plus (b) shares that are subject to stock options or other awards granted under the Prior Plan, that cease to be subject to such stock options or other awards, by forfeiture or otherwise, after the Effective Date, (c) shares issued under the Prior Plan before or after the Effective Date pursuant to the exercise of stock options that are forfeited after the Effective Date, (d) shares issued under the Prior Plan that are repurchased by the Company at the original issue price or are otherwise forfeited and (e) shares that are subject to stock options or other awards under the Prior Plan that are used to pay the Exercise Price of an option or withheld to satisfy the tax withholding obligations related to any award.
2.2.Lapsed, Returned Awards. Shares subject to Awards, and Shares issued under the Plan under any Award, will again be available for grant and issuance in connection with subsequent Awards under this Plan to the extent such Shares: (a) are subject to issuance upon exercise of an Option or SAR granted under this Plan but which cease to be subject to the Option or SAR for any reason other than exercise of the Option or SAR; (b) are subject to Awards granted under this Plan that are forfeited or are repurchased by the Company at the original issue price; (c) are subject to Awards granted under this Plan that otherwise terminate without such Shares being issued; or (d) are surrendered pursuant to an Exchange Program. To the extent an Award under the Plan is paid out in cash or other property rather than Shares, such cash payment will not result in reducing the number of Shares available for issuance under the Plan. Shares used to pay the Exercise Price of an Award or withheld to satisfy the tax withholding obligations related to an Award will become available for future grant or issuance in connection with subsequent Awards under the Plan. For the avoidance of doubt, Shares that otherwise become available for grant and issuance because of the provisions of this Section 2.2 shall not include Shares subject to Awards that initially became available because of the substitution clause in Section 21.2 hereof.
2.3.Minimum Share Reserve. At all times the Company shall reserve and keep available a sufficient number of Shares as shall be required to satisfy the requirements of all outstanding Awards granted under this Plan.
2.4.Automatic Share Reserve Increase. The number of Shares available for grant and issuance under the Plan shall be increased on January 1 of each of 2022 through 2031, by the lesser of (a) five percent (5%) of the total number of shares of all classes of the Company’s Class A common stock, issued and outstanding on the immediately preceding December 31 (rounded down to the nearest whole share)par value $0.0001 per share (the "Class A common stock"), or (b) such lesser number of shares determined by the Board.
2.5.ISO Limitation. No more than [[●] ([●])] Shares shall be issued pursuant to the exercise of ISOs.
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2.6.Adjustment of Shares. If the number or class of outstanding Shares are changed by a stock dividend, extraordinary dividend or distribution (whether in cash, shares or other property, other than a regular cash dividend), spin-off, recapitalization, stock split, reverse stock split, subdivision, combination, consolidation, reclassification or similar change in the capital structure of the Company, without consideration, then (a) the number and class of Shares reserved for issuance and future grant under the Plan set forth in Section 2.1, including Shares reserved under sub-clauses (a)-(e) of Section 2.1, (b) the Exercise Prices of and number and class of Shares subject to outstanding Options and SARs, (c) the number and class of Shares subject to other outstanding Awards, and (d) the maximum number and class of Shares that may be issued as ISOs set forth in Section 2.5, shall be proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and in compliance with applicable securities or other laws; provided that fractions of a Share will not be issued. If, by reason of an adjustment pursuant to this Section 2.6, a Participant’s Award Agreement or other agreement related to any Award or the Shares subject to such Award covers additional or different shares of stock or securities, then such additional or different shares, and the Award Agreement or such other agreement in respect thereof, shall be subject to all of the terms, conditions and restrictions which were applicable to the Award or the Shares subject to such Award prior to such adjustment.
3.ELIGIBILITY. ISOs may be granted only to Employees. All other Awards may be granted to Employees, Consultants, Directors and Non-Employee Directors; provided such Consultants, Directors and Non-Employee Directors render bona fide services not in connection with the offer and sale of securities in a capital-raising transaction. Nothing in this Plan creates an entitlement or right of any Employee, Consultant, Director or Non-Employee Director to any Award unless and until such Award is granted as provided in the Plan.
4.    ADMINISTRATION.
4.1.Committee Composition; Authority. This Plan will be administered by the Committee or by the Board acting as the Committee. Subject to the general purposes, terms and conditions of this Plan, and to the direction of the Board, the Committee will have full power to implement and carry out this Plan, except, however, the Board shall establish the terms for the grant of an Award to Non-Employee Directors. The Committee will have the authority to:
(a)    construe and interpret this Plan, any Award Agreement and any other agreement or document executed pursuant to this Plan;
(b)    prescribe, amend and rescind rules and regulations relating to this Plan or any Award;
(c)    select persons to receive Awards;
(d)    determine the form and terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder. Such terms and conditions include, but are not limited to, the Exercise Price, the time or times when Awards may vest (which may be based on performance criteria) and be exercised or settled, any vesting acceleration or waiver of forfeiture restrictions, the method to satisfy tax withholding obligations or any other tax liability legally due and any restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such factors as the Committee will determine;
(e)    determine the number of Shares or other consideration subject to Awards;
(f)    determine the Fair Market Value in good faith and interpret the applicable provisions of this Plan and the definition of Fair Market Value in connection with circumstances that impact the Fair Market Value, if necessary;
(g)    determine whether Awards will be granted singly, in combination with, in tandem with, in replacement of, or as alternatives to, other Awards under this Plan or any other incentive or compensation plan of the Company or any Parent, Subsidiary or Affiliate;
(h)    grant waivers of Plan or Award conditions;
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(i)    determine the vesting, exercisability and payment of Awards;
(j)    correct any defect, supply any omission or reconcile any inconsistency in this Plan, any Award or any Award Agreement;
(k)    determine whether an Award has been earned or has vested;
(l)    determine the terms and conditions of any, and to institute any Exchange Program;
(m)    reduce or modify any criteria with respect to Performance Factors;
(n)    adjust Performance Factors to take into account changes in law and accounting or tax rules as the Committee deems necessary or appropriate to reflect the impact of extraordinary or unusual items, events or circumstances to avoid windfalls or hardships;
(o)    adopt rules and/or procedures (including the adoption of any subplan under this Plan) relating to the operation and administration of the Plan to accommodate requirements of local law and procedures outside of the United States or qualify Awards for special tax treatment under laws of jurisdictions other than the United States;
(p)    exercise discretion with respect to Performance Awards;
(q)    make all other determinations necessary or advisable for the administration of this Plan; and
(r)    delegate any of the foregoing to a subcommittee or to one or more officers pursuant to a specific delegation as permitted by applicable law, including Section 157(c) of the Delaware General Corporation Law.
4.2.Committee Interpretation and Discretion. Any determination made by the Committee with respect to any Award shall be made in its sole discretion at the time of grant of the Award or, unless in contravention of any express term of the Plan or Award, at any later time, and such determination shall be final and binding on the Company and all persons having an interest in any Award under the Plan. Any dispute regarding the interpretation of the Plan or any Award Agreement shall be submitted by the Participant or Company to the Committee for review. The resolution of such a dispute by the Committee shall be final and binding on the Company and the Participant. The Committee may delegate to one or more executive officers the authority to review and resolve disputes with respect to Awards held by Participants who are not Insiders, and such resolution shall be final and binding on the Company and the Participant.
4.3.Section 16 of the Exchange Act. Awards granted to Participants who are subject to Section 16 of the Exchange Act must be approved by two or more “non-employee directors”Acquisition (as defined in the regulations promulgated under Section 16 of the Exchange Act).
4.4.Documentation. The Award Agreement for a given Award, the Plan and any other documents may be delivered to, and accepted by, a Participant or any other person in any manner (including electronic distribution or posting) that meets applicable legal requirements.
4.5.Foreign Award Recipients. Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws and practices in other countries in which the Company and its Subsidiaries and Affiliates operate or have employees or other persons eligible for Awards, the Committee, in its sole discretion, shall have the power and authority to: (a) determine which Subsidiaries and Affiliates shall be covered by the Plan; (b) determine which individuals outside the United States are eligible to participate in the Plan, which may include individuals who provide services to the Company, Subsidiary or Affiliate under an agreement with a foreign nation or agency; (c) modify the terms and conditions of any Award granted to individuals outside the United States or foreign nationals to comply with applicable foreign laws, policies, customs and practices; (d) establish subplans and modify exercise procedures, vesting conditions, and other terms and procedures, to the extent the Committee determines such actions to be necessary or advisable (and such subplans and/or modifications shall be attached to
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this Plan as appendices, if necessary); and (e) take any action, before or after an Award is made, that the Committee determines to be necessary or advisable to obtain approval or comply with any local governmental regulatory exemptions or approvals; provided, however, that no action taken under this Section 4.5 shall increase the share limitations contained in Section 2.1 or Section 2.5 hereof. Notwithstanding the foregoing, the Committee may not take any actions hereunder, and no Awards shall be granted, that would violate the Exchange Act or any other applicable United States securities law, the Code, or any other applicable United States governing statute or law.
5.OPTIONS. An Option is the right but not the obligation to purchase a Share, subject to certain conditions. The Committee may grant Options to eligible Employees, Consultants and Directors and will determine whether such Options will be Incentive Stock Options within the meaning of the Code (“ISOs”) or Nonqualified Stock Options (“NSOs”), the number of Shares subject to the Option, the Exercise Price of the Option, the period during which the Option may vest and be exercised, and all other terms and conditions of the Option, subject to the following terms of this section.
5.1.Option Grant. Each Option granted under this Plan will identify the Option as an ISO or an NSO. An Option may be, but need not be, awarded upon satisfaction of such Performance Factors during any Performance Period as are set out in advance in the Participant’s individual Award Agreement. If the Option is being earned upon the satisfaction of Performance Factors, then the Committee will: (a) determine the nature, length and starting date of any Performance Period for each Option; and (b) select from among the Performance Factors to be used to measure the performance, if any. Performance Periods may overlap and Participants may participate simultaneously with respect to Options that are subject to different performance goals and other criteria.
5.2.Date of Grant. The date of grant of an Option will be the date on which the Committee makes the determination to grant such Option, or a specified future date. The Award Agreement will be delivered to the Participant within a reasonable time after the granting of the Option.
5.3.Exercise Period. Options may be vested and exercisable within the times or upon the conditions as set forth in the Award Agreement governing such Option; provided, however, that no Option will be exercisable after the expiration of ten (10) years from the date the Option is granted; and provided further that no ISO granted to a person who, at the time the ISO is granted, directly or by attribution owns more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any Parent or Subsidiary (“Ten Percent Stockholder”), will be exercisable after the expiration of five (5) years from the date the ISO is granted. The Committee also may provide for Options to become exercisable at one time or from time to time, periodically or otherwise, in such number of Shares or percentage of Shares as the Committee determines.
5.4.Exercise Price. The Exercise Price of each Option will be determined by the Committee when the Option is granted; provided that: (a) the Exercise Price of an Option will be not less than one hundred percent (100%) of the Fair Market Value of the Shares subject to the Option on the date of grant and (b) the Exercise Price of any ISO granted to a Ten Percent Stockholder will not be less than one hundred ten percent (110%) of the Fair Market Value of the Shares subject to the ISO on the date of grant. Payment for the Shares purchased may be made in accordance with Section 11 and the Award Agreement and in accordance with any procedures established by the Company.
5.5.Method of Exercise. Any Option granted hereunder will be vested and exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Committee and set forth in the Award Agreement. An Option may not be exercised for a fraction of a Share. An Option will be deemed exercised when the Company receives: (a) notice of exercise (in such form as the Committee may specify from time to time) from the person entitled to exercise the Option (and/or via electronic execution through an authorized third-party administrator) and (b) full payment for the Shares with respect to which the Option is exercised together with applicable withholding taxes. Full payment may consist of any consideration and method of payment authorized by the Committee and permitted by the Award Agreement and the Plan. Shares issued upon exercise of an Option will be issued in the name of the Participant. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the Shares, notwithstanding the exercise of the Option. The Company will issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment
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will be made for any dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 2.6 of the Plan. Exercising an Option in any manner will decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.
5.6.Termination of Service. If a Participant’s Service terminates for any reason other than for Cause or because of the Participant’s death, Disability, or retirement, then the Participant may exercise his or her Options only to the extent that such Options would have been exercisable by the Participant on the date the Participant’s Service terminates no later than three (3) months after the date the Participant’s Service terminates (or such shorter or longer time period as may be determined by the Committee, with any exercise of an ISO beyond three (3) months after the date Participant’s employment terminates deemed to be the exercise of an NSO), but in any event no later than the expiration date of the Options, except as required by applicable law.
(a)    Death. If a Participant’s Service terminates because of the Participant’s death (or the Participant dies within three (3) months after the Participant’s Service terminates other than for Cause or because of the Participant’s Disability), then the Participant’s Options may be exercised only to the extent that such Options would have been exercisable by the Participant on the date the Participant’s Service terminates and must be exercised by the Participant’s legal representative, or authorized assignee, no later than twelve (12) months after the date the Participant’s Service terminates (or such shorter or longer time period as may be determined by the Committee), but in any event no later than the expiration date of the Options, except as required by applicable law.
(b)    Disability. If a Participant’s Service terminates because of the Participant’s Disability, then the Participant’s Options may be exercised only to the extent that such Options would have been exercisable by the Participant on the date the Participant’s Service terminates and must be exercised by the Participant (or the Participant’s legal representative or authorized assignee) no later than twelve (12) months after the date the Participant’s Service terminates (or such shorter or longer time period as may be determined by the Committee, with any exercise of an ISO beyond (a) three (3) months after the date the Participant’s employment terminates when the termination of Service is for a Disability that is not a “permanent and total disability” as defined in Section 22(e)(3) of the Code, or (b) twelve (12) months after the date the Participant’s employment terminates when the termination of Service is for a Disability that is a “permanent and total disability” as defined in Section 22(e)(3) of the Code, deemed to be exercise of an NSO), but in any event no later than the expiration date of the Options.
(c)    Retirement. If a Participant’s Service terminates because of such Participant’s retirement (consistent with the Company’s policies regarding retirement), then the Participant may exercise his or her Options only to the extent that such Options would have been exercisable by the Participant on the date the Participant’s Service terminates no later than twenty-four (24) months after the date the Participant’s Service terminates (with any exercise of an ISO beyond three (3) months after the date Participant’s employment terminates deemed to be the exercise of an NSO), but in any event no later than the expiration date of the Options, except as required by applicable law.
(d)    Cause. If a Participant’s Service is terminated for Cause, then the Participant’s Options shall expire on the Participant’s date of termination of Service if the Committee has reasonably determined in good faith that such cessation of Services has resulted in connection with an act or failure to act constituting Cause (or such Participant’s Service could have been terminated for Cause (without regard to the lapsing of any required notice or cure periods in connection therewith) at the time such Participant terminated Service), or at such later time and on such conditions as are determined by the Committee, but in any event no later than the expiration date of the Options. Unless otherwise provided in an employment agreement, the Award Agreement or other applicable agreement between the Participant and the Company or any Parent or Subsidiary, Cause shall have the meaning set forth in the Plan.
5.7.Limitations on ISOs. With respect to Awards granted as ISOs, to the extent that the aggregate Fair Market Value of the Shares with respect to which such ISOs are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds one hundred thousand dollars ($100,000), such Options will be treated as NSOs. For purposes of this Section 5.7, ISOs will be
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taken into account in the order in which they were granted. The Fair Market Value of the Shares will be determined as of the time the Option with respect to such Shares is granted. In the event that the Code or the regulations promulgated thereunder are amended after the Effective Date to provide for a different limit on the Fair Market Value of Shares permitted to be subject to ISOs, such different limit will be automatically incorporated herein and will apply to any Options granted after the effective date of such amendment.
5.8.Modification, Extension or Renewal. The Committee may modify, extend or renew outstanding Options and authorize the grant of new Options in substitution therefor, provided that any such action may not, without the written consent of a Participant, impair any of such Participant’s rights under any Option previously granted, unless for the purpose of complying with applicable laws and regulations. Any outstanding ISO that is modified, extended, renewed or otherwise altered will be treated in accordance with Section 424(h) of the Code. Subject to Section 18 of this Plan, by written notice to affected Participants, the Committee may reduce the Exercise Price of outstanding Options without the consent of such Participants; provided, however, that the Exercise Price may not be reduced below the minimum Exercise Price that would be permitted under Section 5.4 for Options granted on the date the action is taken to reduce the Exercise Price.
5.9.No Disqualification. Notwithstanding any other provision in this Plan, no term of this Plan relating to ISOs will be interpreted, amended or altered, nor will any discretion or authority granted under this Plan be exercised, so as to disqualify this Plan under Section 422 of the Code or, without the consent of the Participant, to disqualify any Participant’s ISO under Section 422 of the Code.
6.RESTRICTED STOCK AWARDS. A Restricted Stock Award is an offer by the Company to sell to an eligible Employee, Consultant or Director Shares that are subject to restrictions (“Restricted Stock”). The Committee will determine to whom an offer will be made, the number of Shares the Participant may purchase, the Purchase Price, the restrictions under which the Shares will be subject and all other terms and conditions of the Restricted Stock Award, subject to the Plan.
6.1.    Restricted Stock Purchase Agreement. All purchases under a Restricted Stock Award will be evidenced by an Award Agreement. Except as may otherwise be provided in an Award Agreement, a Participant accepts a Restricted Stock Award by signing and delivering to the Company an Award Agreement with full payment of the Purchase Price, within thirty (30) days from the date the Award Agreement was delivered to the Participant. If the Participant does not accept such Award within thirty (30) days, then the offer to purchase such Restricted Stock Award will terminate, unless the Committee determines otherwise.
6.2.Purchase Price. The Purchase Price for Shares issued pursuant to a Restricted Stock Award will be determined by the Committee on the date the Restricted Stock Award is granted and, if permitted by law, no cash consideration will be required in connection with the payment for the Purchase Price where the Committee provides that payment shall be in the form of services rendered. Payment of the Purchase Price must be made in accordance with Section 11 of the Plan, the Award Agreement and any procedures established by the Company.
6.3.Terms of Restricted Stock Awards. Restricted Stock Awards will be subject to such restrictions as the Committee may impose or are required by law. These restrictions may be based on completion of a specified number of years of service with the Company or upon completion of Performance Factors, if any, during any Performance Period as set out in advance in the Participant’s Award Agreement. Prior to the grant of a Restricted Stock Award, the Committee shall: (a) determine the nature, length and starting date of any Performance Period for the Restricted Stock Award; (b) select from among the Performance Factors to be used to measure performance goals, if any; and (c) determine the number of Shares that may be awarded to the Participant. Performance Periods may overlap and a Participant may participate simultaneously with respect to Restricted Stock Awards that are subject to different Performance Periods and having different performance goals and other criteria.
6.4.Termination of Service. Except as may be set forth in any Participant’s Award Agreement, vesting ceases on the date the Participant’s Service terminates (unless determined otherwise by the Committee).
7.    STOCK BONUS AWARDS. A Stock Bonus Award is an award to an eligible Employee, Consultant, or Director of Shares for Services to be rendered or for past Services already rendered to the Company or any
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Parent, Subsidiary or Affiliate. All Stock Bonus Awards shall be made pursuant to an Award Agreement. No payment from the Participant will be required for Shares awarded pursuant to a Stock Bonus Award.
7.1.Terms of Stock Bonus Awards. The Committee will determine the number of Shares to be awarded to the Participant under a Stock Bonus Award and any restrictions thereon. These restrictions may be based upon completion of a specified number of years of service with the Company or upon satisfaction of performance goals based on Performance Factors during any Performance Period as set out in advance in the Participant’s Stock Bonus Agreement. Prior to the grant of any Stock Bonus Award the Committee shall: (a) determine the restrictions to which the Stock Bonus Award is subject, including the nature, length and starting date of any Performance Period for the Stock Bonus Award; (b) select from among the Performance Factors, if any, to be used to measure performance goals; and (c) determine the number of Shares that may be awarded to the Participant. Performance Periods may overlap and a Participant may participate simultaneously with respect to Stock Bonus Awards that are subject to different Performance Periods and different performance goals and other criteria.
7.2.Form of Payment to Participant. Payment may be made in the form of cash, whole Shares, or a combination thereof, based on the Fair Market Value of the Shares earned under a Stock Bonus Award on the date of payment, as determined in the sole discretion of the Committee.
7.3.Termination of Service. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on the date the Participant’s Service terminates (unless determined otherwise by the Committee).
8.    STOCK APPRECIATION RIGHTS. A Stock Appreciation Right (“SAR”) is an award to an eligible Employee, Consultant, or Director that may be settled in cash, or Shares (which may consist of Restricted Stock), having a value equal to (a) the difference between the Fair Market Value on the date of exercise over the Exercise Price multiplied by (b) the number of Shares with respect to which the SAR is being settled (subject to any maximum number of Shares that may be issuable as specified in an Award Agreement). All SARs shall be made pursuant to an Award Agreement.
8.1.Terms of SARs. The Committee will determine the terms of each SAR including, without limitation: (a) the number of Shares subject to the SAR; (b) the Exercise Price and the time or times during which the SAR may be exercised and settled; (c) the consideration to be distributed on settlement of the SAR; and (d) the effect of the Participant’s termination of Service on each SAR. The Exercise Price of the SAR will be determined by the Committee when the SAR is granted, and may not be less than Fair Market Value of the Shares subject to the SAR on the date of grant. A SAR may be subject to satisfaction of Performance Factors, if any, during any Performance Period as are set out in advance in the Participant’s individual Award Agreement. If the SAR is being earned upon the satisfaction of Performance Factors, then the Committee will: (i) determine the nature, length and starting date of any Performance Period for each SAR; and (ii) select from among the Performance Factors to be used to measure the performance, if any. Performance Periods may overlap and Participants may participate simultaneously with respect to SARs that are subject to different Performance Factors and other criteria.
8.2.Exercise Period and Expiration Date. A SAR will be exercisable within the times or upon the occurrence of events determined by the Committee and set forth in the Award Agreement governing such SAR. The SAR Agreement shall set forth the expiration date; provided that no SAR will be exercisable after the expiration of ten (10) years from the date the SAR is granted. The Committee may also provide for SARs to become exercisable at one time or from time to time, periodically or otherwise (including, without limitation, upon the attainment during a Performance Period of performance goals based on Performance Factors), in such number of Shares or percentage of the Shares subject to the SAR as the Committee determines. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on the date Participant’s Service terminates (unless determined otherwise by the Committee). Notwithstanding the foregoing, the rules of Section 5.6 also will apply to SARs.
8.3.Form of Settlement. Upon exercise of a SAR, a Participant will be entitled to receive payment from the Company in an amount determined by multiplying (a) the difference between the Fair Market Value of a Share on the date of exercise over the Exercise Price; times (b) the number of Shares with respect to which the SAR is exercised. At the discretion of the Committee, the payment from the Company for the SAR
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exercise may be in cash, in Shares of equivalent value, or in some combination thereof. The portion of a SAR being settled may be paid currently or on a deferred basis with such interest, if any, as the Committee determines, provided that the terms of the SAR and any deferral satisfy the requirements of Section 409A of the Code to the extent applicable.
8.4.Termination of Service. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on the date the Participant’s Service terminates (unless determined otherwise by the Committee).
9.    RESTRICTED STOCK UNITS. A Restricted Stock Unit (“RSU”) is an award to an eligible Employee, Consultant, or Director covering a number of Shares that may be settled in cash or by issuance of those Shares (which may consist of Restricted Stock). No Purchase Price shall apply to an RSU settled in Shares. All RSUs shall be made pursuant to an Award Agreement.
9.1.Terms of RSUs. The Committee will determine the terms of an RSU including, without limitation: (a) the number of Shares subject to the RSU; (b) the time or times during which the RSU may be vested and settled; (c) the consideration to be distributed on settlement; and (d) the effect of the Participant’s termination of Service on each RSU; provided that no RSU shall have a term longer than ten (10) years. An RSU may be subject to satisfaction of such performance goals based on Performance Factors during any Performance Period as are set out in advance in the Participant’s Award Agreement. If the RSU is being earned upon satisfaction of Performance Factors, then the Committee will: (i) determine the nature, length and starting date of any Performance Period for the RSU; (ii) select from among the Performance Factors to be used to measure the performance, if any; and (iii) determine the number of Shares deemed subject to the RSU. Performance Periods may overlap and Participants may participate simultaneously with respect to RSUs that are subject to different Performance Periods and different performance goals and other criteria.
9.2.Form and Timing of Settlement. Payment of earned RSUs shall be made as soon as practicable after the date(s) determined by the Committee and set forth in the Award Agreement. The Committee, in its sole discretion, may settle earned RSUs in cash, Shares or a combination of both. The Committee may also permit a Participant to defer payment under a RSU to a date or dates after the RSU is earned provided that the terms of the RSU and any deferral satisfy the requirements of Section 409A of the Code to the extent applicable.
9.3.Termination of Service. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on the date the Participant’s Service terminates (unless determined otherwise by the Committee).
9.4.Dividend Equivalent Payments.  The Committee may permit Participants holding RSUs to receive dividend equivalent payments on outstanding RSUs if and when dividends are paid to stockholders on Shares.  In the discretion of the Committee, such dividend equivalent payments may be paid in cash or Shares and they may be either paid at the same time as dividend payments are made to stockholders or delayed until Shares are issued pursuant to the RSU grants and may be subject to the same vesting or performance requirements as the RSUs.  If the Committee permits dividend equivalent payments to be made on RSUs, the terms and conditions for such dividend equivalent payments will be set forth in the RSU Agreement.
10.PERFORMANCE AWARDS. A Performance Award is an award to an eligible Employee, Consultant or Director that is based upon the attainment of performance goals, as established by the Committee, and other terms and conditions specified by the Committee, and may be settled in cash, Shares (which may consist of, without limitation, Restricted Stock), other property or any combination thereof. Grants of Performance Awards shall be made pursuant to an Award Agreement that cites Section 10 of the Plan.
10.1.Types of Performance Awards. Performance Awards shall include Performance Shares, Performance Units and cash-based Awards as set forth in Sections 10.1(a), 10.1(b) and 10.1(c) below.
(a)    Performance Shares. The Committee may grant Awards of Performance Shares, designate the Participants to whom Performance Shares are to be awarded and determine the number of Performance Shares and the terms and conditions of each such Award.
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(b)    Performance Units. The Committee may grant Awards of Performance Units, designate the Participants to whom Performance Units are to be awarded and determine the number of Performance Units and the terms and conditions of each such Award.
(c)    Cash-Settled Performance Awards. The Committee may also grant cash-settled Performance Awards to Participants under the terms of this Plan.
The amount to be paid under any Performance Award may be adjusted on the basis of such further consideration as the Committee shall determine in its sole discretion.
10.2.Terms of Performance Awards. Performance Awards will be based on the attainment of performance goals using the Performance Factors within this Plan that are established by the Committee for the relevant Performance Period. The Committee will determine, and each Award Agreement shall set forth, the terms of each Performance Award including, without limitation: (a) the amount of any cash bonus, (b) the number of Shares deemed subject to an award of Performance Shares; (c) the Performance Factors and Performance Period that shall determine the time and extent to which each award of Performance Shares shall be settled; (d) the consideration to be distributed on settlement, and (e) the effect of the Participant’s termination of Service on each Performance Award. In establishing Performance Factors and the Performance Period the Committee will: (i) determine the nature, length and starting date of any Performance Period; (ii) select from among the Performance Factors to be used; and (z) determine the number of Shares deemed subject to the award of Performance Shares. Each Performance Share will have an initial value equal to the Fair Market Value of a Share on the date of grant. Prior to settlement the Committee shall determine the extent to which Performance Awards have been earned. Performance Periods may overlap and Participants may participate simultaneously with respect to Performance Awards that are subject to different Performance Periods and different performance goals and other criteria.
10.3.Termination of Service. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on the date the Participant’s Service terminates (unless determined otherwise by the Committee).
11.    PAYMENT FOR SHARE PURCHASES. Payment from a Participant for Shares acquired pursuant to this Plan may be made in cash or cash equivalents or, where expressly approved for the Participant by the Committee and where permitted by law (and to the extent not otherwise set forth in the applicable Award Agreement):
(a)    by cancellation of indebtedness of the Company owed to the Participant;
(b)    by surrender of shares of the Company’s common stock held by the Participant that are clear of all liens, claims, encumbrances or security interests that have a Fair Market Value on the date of surrender equal to the aggregate Exercise Price of the Shares as to which the Award will be exercised or settled;
(c)    by waiver of compensation due or accrued to the Participant for services rendered or to be rendered to the Company or a Parent, Subsidiary or Affiliate;
(d)    by consideration received by the Company pursuant to a broker-assisted or other form of cashless exercise program implemented by the Company in connection with the Plan;
(e)    by any combination of the foregoing; or
(f)    by any other method of payment as is permitted by applicable law.
The Committee may limit the availability of any method of payment, to the extent the Committee determines, in its discretion, that such limitation is necessary or advisable to comply with applicable law or facilitate the administration of the Plan.
12.    GRANTS TO NON-EMPLOYEE DIRECTORS. Non-Employee Directors are eligible to receive any type of Award offered under this Plan except ISOs. Awards pursuant to this Section 12 may be automatically made pursuant to policy adopted by the Board, or made from time to time as determined in the discretion of the Board. No Non-Employee Director may receive Awards under the Plan with an aggregate grant date fair value that,
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when combined with cash compensation received for service as a Non-Employee Director, exceeds $750,000 in a calendar year, increased to $1,000,000 in the calendar year of his or her initial services as a non-employee director. Grant date fair value for purposes of Awards to Non-Employee Directors under the Plan will be determined as follows: (a) for Options and SARs, grant date fair value will be calculated using the Company’s regular valuation methodology for determining the grant date fair value of such Options or SARs for reporting purposes and (b) for all other Awards, grant date fair value will be determined by either (i) calculating the product of the Fair Market Value per Share on the date of grant and the aggregate number of Shares subject to the Award or (ii) calculating the product using an average of the Fair Market Value over a number of trading days and the aggregate number of Shares subject to the Award as determined by the Committee. Awards granted to an individual while he or she was serving in the capacity as an Employee or while he or she was a Consultant but not a Non-Employee Director will not count for purposes of the limitations set forth in this Section 12.
12.1.Eligibility. Awards pursuant to this Section 12 shall be granted only to Non-Employee Directors. A Non-Employee Director who is elected or re-elected as a member of the Board will be eligible to receive an Award under this Section 12.
12.2.Vesting, Exercisability and Settlement. Except as set forth in Section 21, Awards shall vest, become exercisable and be settled as determined by the Board. With respect to Options and SARs, the exercise price for such Awards granted to Non-Employee Directors will not be less than the Fair Market Value of the Shares at the time that such Option or SAR is granted.
12.3.Election to Receive Awards in Lieu of Cash. A Non-Employee Director may elect to receive his or her annual retainer payments and/or meeting fees from the Company in the form of cash or Awards or a combination thereof, if permitted,accompanying Proxy Statement) and as determined,contemplated by the Committee. Such Awards will be issued under the Plan. An election under this Section 12.3 will be filed with the Company on the form prescribed by the Company.
13.WITHHOLDING TAXES.
13.1.Withholding Generally. Prior to any relevant taxable or tax withholding events in connection with the Awards under this Plan, the Company or the Parent, Subsidiary, or Affiliate, as applicable, employing the Participant, may require the Participant to pay or make adequate arrangements satisfactory to the Company with respect to any or all applicable U.S. federal, state, local, and international income tax, social insurance, payroll tax, fringe benefits tax, payment on account and other tax-related items related to the Participant’s participation in this Plan and legally applicable to the Participant (collectively, “Tax-Related Obligations”) prior to the delivery of Shares pursuant to exercise or settlement of any Award. Whenever payments in satisfaction of Awards granted under this Plan are to be made in cash, such payment will be net of an amount sufficient to satisfy applicable withholding obligations for Tax-Related Obligations. Unless otherwise determined by the Committee, the Fair Market Value of the Shares will be determined as of the date that the taxes are required to be withheld.
13.2.Stock Withholding. The Committee, or its delegate(s), as permitted by applicable law, may, in its sole discretion and pursuant to such procedures as it may specify from time to time, require or permit a Participant to satisfy withholding obligations for such Tax-Related Obligations, in whole or in part by (without limitation) (a) paying cash, (b) having the Company withhold otherwise deliverable cash or Shares having a Fair Market Value equal to the Tax-Related Obligations to be withheld, (c) delivering to the Company already-owned Shares having a Fair Market Value equal to the Tax-Related Obligations to be withheld, or (d) withholding from proceeds of the sale of Shares issued pursuant to an Award either through a voluntary sale or through a mandatory sale arranged by the Company, provided that, in all instances, the satisfaction of the Tax-Related Obligations will not result in any adverse accounting consequence to the Company, as the Committee may determine in its sole discretion. The Company may withhold or account for these Tax-Related Obligations by considering applicable statutory withholding rates or other applicable withholding rates, including maximum rates for the applicable tax jurisdiction to the extent consistent with applicable laws. Unless otherwise determined by the Committee, the Fair Market Value of the Shares will be determined as of the date that the taxes are required to be withheld and such Shares shall be valued based on the value of the actual trade or, if there is none, the Fair Market Value of the Shares as of the previous trading day.
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14.    TRANSFERABILITY.
14.1.Transfer Generally. Unless determined otherwise by the Committee or pursuant to Section 15.2, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution. If the Committee makes an Award transferable, including, without limitation, by instrument to an inter vivos or testamentary trust in which the Awards are to be passed to beneficiaries upon the death of the trustor (settlor) or by gift or by domestic relations order to a Permitted Transferee, such Award will contain such additional terms and conditions as the Committee deems appropriate and such transfer will be for no consideration. All Awards shall be exercisable: (a) during the Participant’s lifetime only by (i) the Participant, or (ii) the Participant’s guardian or legal representative; (b) after the Participant’s death, by the legal representative of the Participant’s heirs or legatees; and (c) in the case of all awards except ISOs, by a Permitted Transferee.
15.PRIVILEGES OF STOCK OWNERSHIP; RESTRICTIONS ON SHARES.
15.1Voting and Dividends. No Participant will have any of the rights of a stockholder with respect to any Shares until the Shares are issued to the Participant, except for any Dividend Equivalent Rights permitted by an applicable Award Agreement. Any Dividend Equivalent Rights will be subject to the same vesting or performance conditions as the underlying Award. In addition, the Committee may provide that any Dividend Equivalent Rights permitted by an applicable Award Agreement shall be deemed to have been reinvested in additional Shares or otherwise reinvested. After Shares are issued to the Participant, the Participant will be a stockholder and have all the rights of a stockholder with respect to such Shares, including the right to vote and receive all dividends or other distributions made or paid with respect to such Shares; provided, that if such Shares are Restricted Stock, then any new, additional or different securities the Participant may become entitled to receive with respect to such Shares by virtue of a stock dividend, stock split or any other change in the corporate or capital structure of the Company will be subject to the same restrictions as the Restricted Stock; provided, further, that the Participant will have no right to retain or receive such Dividend Equivalent Rights with respect to Unvested Shares, and any such dividends or stock distributions will be accrued and paid only at such time, if any, as such Unvested Shares become vested Shares. However, the Committee, in its discretion, may provide in the Award Agreement evidencing any Award that the Participant shall be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on Shares underlying an Award during the period beginning on the date the Award is granted and ending, with respect to each Share subject to the Award, on the earlier of the date on which the Award is exercised or settled or the date on which it is forfeited provided, that no Dividend Equivalent Right will be paid with respect to Unvested Shares, and such dividends or stock distributions will be accrued and paid only at such time, if any, as such Unvested Shares become vested Shares. Such Dividend Equivalent Rights, if any, shall be credited to the Participant in the form of additional whole Shares as of the date of payment of such cash dividends on Shares. Notwithstanding the foregoing, in no event shall Dividend Equivalent Rights be paid with respect to Options or SARs.
15.2.Restrictions on Shares. At the discretion of the Committee, the Company may reserve to itself and/or its assignee(s) a right to repurchase (a “Right of Repurchase”) a portion of any or all Unvested Shares held by a Participant following such Participant’s termination of Service at any time within ninety (90) days (or such longer or shorter time determined by the Committee) after the later of the date Participant’s Service terminates and the date the Participant purchases Shares under this Plan, for cash and/or cancellation of purchase money indebtedness, at the Participant’s Purchase Price or Exercise Price, as the case may be.
16.CERTIFICATES. All Shares or other securities whether or not certificated, delivered under this Plan will be subject to such stock transfer orders, legends and other restrictions as the Committee may deem necessary or advisable, including restrictions under any applicable U.S. federal, state or foreign securities law, or any rules, regulations and other requirements of the SEC or any stock exchange or automated quotation system upon which the Shares may be listed or quoted and any non-U.S. exchange controls or securities law restrictions to which the Shares are subject.
17.    ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a Participant’s Shares, the Committee may require the Participant to deposit all written or electronic certificate(s) representing Shares, together
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with stock powers or other instruments of transfer approved by the Committee, appropriately endorsed in blank, with the Company or an agent designated by the Company to hold in escrow until such restrictions have lapsed or terminated, and the Committee may cause a legend or legends referencing such restrictions to be placed on the certificate(s). Any Participant who is permitted to execute a promissory note as partial or full consideration for the purchase of Shares under this Plan will be required to pledge and deposit with the Company all or part of the Shares so purchased as collateral to secure the payment of Participant’s obligation to the Company under the promissory note; provided, however, that the Committee may require or accept other or additional forms of collateral to secure the payment of such obligation and, in any event, the Company will have full recourse against the Participant under the promissory note notwithstanding any pledge of the Participant’s Shares or other collateral. In connection with any pledge of the Shares, Participant will be required to execute and deliver a written pledge agreement in such form as the Committee will from time to time approve. The Shares purchased with the promissory note may be released from the pledge on a pro rata basis as the promissory note is paid.
18.REPRICING; EXCHANGE AND BUYOUT OF AWARDS. Without prior stockholder approval, the Committee may (a) reprice Options or SARs (and where such repricing is a reduction in the Exercise Price of outstanding Options or SARs, the consent of the affected Participants is not required provided written notice is provided to them, notwithstanding any adverse tax consequences to them arising from the repricing), and (b) with the consent of the respective Participants (unless not required pursuant to Section 5.8 of the Plan), pay cash or issue new Awards in exchange for the surrender and cancellation of any, or all, outstanding Awards.
19.SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not be effective unless such Award is in compliance with all applicable U.S. and foreign federal and state securities and exchange control and other laws, rules and regulations of any governmental body, and the requirements of any stock exchange or automated quotation system upon which the Shares may then be listed or quoted, as they are in effect on the date of grant of the Award and also on the date of exercise or other issuance. Notwithstanding any other provision in this Plan, the Company will have no obligation to issue or deliver written or electronic certificates for Shares under this Plan prior to: (a) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and/or (b) completion of any registration or other qualification of such Shares under any state or federal or foreign law or ruling of any governmental body that the Company determines to be necessary or advisable. The Company will be under no obligation to register the Shares with the SEC or to effect compliance with the registration, qualification or listing requirements of any foreign, national or state securities laws, exchange control laws, stock exchange or automated quotation system, and the Company will have no liability for any inability or failure to do so.
20.NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted under this Plan will confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or any Parent, Subsidiary or Affiliate or limit in any way the right of the Company or any Parent, Subsidiary or Affiliate to terminate Participant’s employment or other relationship at any time.
21.    CORPORATE TRANSACTIONS.
21.1.Assumption or Replacement of Awards by Successor. In the event that the Company is subject to a Corporate Transaction, outstanding Awards acquired under the Plan shall be subject to the agreement evidencing the Corporate Transaction, which need not treat all outstanding Awards in an identical manner. Such agreement, without the Participant’s consent, shall provide for one or more of the following with respect to all outstanding Awards as of the effective date of such Corporate Transaction:
(a)    The continuation of an outstanding Award by the Company (if the Company is the successor entity).
(b)    The assumption of an outstanding Award by the successor or acquiring entity (if any) of such Corporate Transaction (or by its parents, if any), which assumption, will be binding on all selected Participants; provided that the Exercise Price and the number and nature of shares issuable upon exercise of any such Option or SAR, or any award that is subject to Section 409A of the Code, will be adjusted appropriately pursuant to Section 424(a) of the Code and/or Section 409A of the Code, as applicable.
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(c)    The substitution by the successor or acquiring entity in such Corporate Transaction (or by its parents, if any) of equivalent awards with substantially the same terms for such outstanding Awards (except that the Exercise Price and the number and nature of shares issuable upon exercise of any such Option or SAR, or any award that is subject to Section 409A of the Code, will be adjusted appropriately pursuant to Section 424(a) of the Code and/or Section 409A of the Code, as applicable).
(d)    The full or partial acceleration of exercisability or vesting and accelerated expiration of an outstanding Award and lapse of the Company’s right to repurchase or re-acquire shares acquired under an Award or lapse of forfeiture rights with respect to shares acquired under an Award.
(e)    The settlement of the full value of such outstanding Award (whether or not then vested or exercisable) in cash, cash equivalents, or securities of the successor entity (or its parent, if any) with a Fair Market Value equal to the required amount, followed by the cancellation of such Awards; provided however, that such Award may be cancelled if such Award has no value, as determined by the Committee, in its discretion. Subject to Section 409A of the Code, such payment may be made in installments and may be deferred until the date or dates the Award would have become exercisable or vested. Such payment may be subject to vesting based on the Participant’s continued service, provided that the vesting schedule shall not be less favorable to the Participant than the schedule under which the Award would have become vested or exercisable. For purposes of this Section 21.1(e), the Fair Market Value of any security shall be determined without regard to any vesting conditions that may apply to such security.
(f)    The cancellation of outstanding Awards in exchange for no consideration.
The Board shall have full power and authority to assign the Company’s right to repurchase or re-acquire or forfeiture rights to such successor or acquiring entity. In addition, in the event such successor or acquiring entity (if any) refuses to assume, convert, replace or substitute Awards, as provided above, pursuant to a Corporate Transaction, the Committee will notify the Participant in writing or electronically that such Award will, if exercisable, be exercisable for a period of time determined by the Committee in its sole discretion, and such Award will terminate upon the expiration of such period. Awards need not be treated similarly in a Corporate Transaction and treatment may vary from Award to Award and/or from Participant to Participant.
21.2.Assumption of Awards by the Company. The Company, from time to time, also may substitute or assume outstanding awards granted by another company, whether in connection with an acquisition of such other company or otherwise, by either; (a) granting an Award under this Plan in substitution of such other company’s award; or (b) assuming such award as if it had been granted under this Plan if the terms of such assumed award could be applied to an Award granted under this Plan. Such substitution or assumption will be permissible if the holder of the substituted or assumed award would have been eligible to be granted an Award under this Plan if the other company had applied the rules of this Plan to such grant. In the event the Company assumes an award granted by another company, the terms and conditions of such award will remain unchanged (except that the Purchase Price or the Exercise Price, as the case may be, and the number and nature of Shares issuable upon exercise or settlement of any such Award will be adjusted appropriately pursuant to Section 424(a) of the Code and/or Section 409A of the Code, as applicable). In the event the Company elects to grant a new Option in substitution rather than assuming an existing option, such new Option may be granted with a similarly adjusted Exercise Price. Substitute Awards shall not be deducted from the number of Shares authorized for grant under the Plan or authorized for grant to a Participant in a calendar year.
21.3Non-Employee Directors’ Awards. Notwithstanding any provision to the contrary herein, in the event of a Corporate Transaction, the vesting of all Awards granted to Non-Employee Directors shall accelerate and such Awards shall become exercisable (as applicable) in full prior to the consummation of such event at such times and on such conditions as the Committee determines.
22.    ADOPTION AND STOCKHOLDER APPROVAL. This Plan shall be submitted for the approval of the Company’s stockholders, consistent with applicable laws, within twelve (12) months before or after the date this Plan is adopted by the Board.
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23.TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided herein, this Plan will become effective on the Effective Date and will terminate ten (10) years from the date this Plan is adopted by the Board. This Plan and all Awards granted hereunder shall be governed by and construed in accordance with the laws of the State of Delaware (excluding its conflict of law rules).
24.AMENDMENT OR TERMINATION OF PLAN. The Board may at any time terminate or amend this Plan in any respect, including, without limitation, amendment of any form of Award Agreement or instrument to be executed pursuant to this Plan; provided, however, that the Board will not, without the approval of the stockholders of the Company, amend this Plan in any manner that requires such stockholder approval; provided further, that a Participant’s Award shall be governed by the version of this Plan then in effect at the time such Award was granted. No termination or amendment of the Plan shall affect any then-outstanding Award unless expressly provided by the Committee; in any event, no termination or amendment of the Plan or any outstanding Award may materially adversely affect any then outstanding Award without the consent of the Participant, unless such termination or amendment is necessary to comply with applicable law, regulation or rule.
25.NON-EXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by the Board, the submission of this Plan to the stockholders of the Company for approval, nor any provision of this Plan will be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including, without limitation, the granting of stock options and other equity awards and bonuses otherwise than under this Plan, and such arrangements may be either generally applicable or applicable only in specific cases.
26.INSIDER TRADING POLICY. Each Participant who receives an Award shall comply with any policy adopted by the Company from time to time covering transactions in the Company’s securities by Employees, officers and/or directors of the Company, as well as with any applicable insider trading or market abuse laws to which the Participant may be subject.
27.ALL AWARDS SUBJECT TO COMPANY CLAWBACK OR RECOUPMENT POLICY. All Awards shall, subject to applicable law, be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or the Committee or required by law during the term of Participant’s employment or other service with the Company that is applicable to executive officers, employees, directors or other service providers of the Company, and in addition to any other remedies available under such policy and applicable law, may require the cancelation of outstanding Awards and the recoupment of any gains realized with respect to Awards.
28.DEFINITIONS. As used in this Plan, and except as elsewhere defined herein, the following terms will have the following meanings:
28.1.    “Affiliate” means (a) any entity that, directly or indirectly, is controlled by, controls, or is under common control with, the Company, and (b) any entity in which the Company has a significant equity interest, in either case as determined by the Committee, whether now or hereafter existing.
28.2.    “Award” means any award under the Plan, including any Option, Performance Award, Restricted Stock, Stock Bonus, Stock Appreciation Right, or Restricted Stock Unit.
28.3.    “Award Agreement” means, with respect to each Award, the written or electronic agreement between the Company and the Participant setting forth the terms and conditions of the Award, and country-specific appendix thereto for grants to non-U.S. Participants, which shall be in substantially a form (which need not be the same for each Participant) that the Committee (or in the case of Award agreements that are not used for Insiders, the Committee's delegate(s)) has from time to time approved, and will comply with and be subject to the terms and conditions of this Plan.
28.4.    “Board” means the Board of Directors of the Company.
28.5.    “Business Combination” means the business combination effected pursuant to the Business Combination Agreement.
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28.6.    “Business Combination Agreement” means the Agreement and Plan of Merger and Reorganization dated January 14, 2022 (the "Merger Agreement"), by and among CM Life Sciences,the Company, GeneDx, Inc. ("GeneDx"), a wholly-owned subsidiary of OPKO Health, Inc. ("OPKO"), OPKO, Orion Merger Sub I, Inc. ("Merger Sub I"), a wholly-owned subsidiary of the Company, Orion Merger Sub II, LLC ("Merger Sub II" and together with Merger Sub I, "Merger Subs"), a wholly-owned subsidiary of the Company, and certain other parties thereto, dated asGeneDx Holding 2, Inc., which will own 100% of February 9, 2021.
28.7.    “Cause” means [Participant’s (a) willful failure substantiallyGeneDx at the Effective Time (as defined in the accompanying Proxy Statement); 3. The Special Designee Director Election Proposal - Assuming the Stock Consideration Issuance Proposal and the Charter Amendment Proposal are approved and adopted and the Acquisition is consummated, to perform his or her duties and responsibilities to the Company or deliberate violation of a Company policy or code of conduct; (b) commission of, or plea of guilty or no contest to, a felony or other crime involving dishonesty or moral turpitude or commission of any act of fraud, embezzlement, dishonesty or any other willful misconduct or breach of fiduciary duty that has caused or is reasonably expected to result in material injury to the Company; (c) unauthorized use or disclosure of any proprietary information or trade secretsappoint two directors who will become directors of the Company or any other party to whom the Participant owes an obligation of nondisclosure as a result of his or her relationship with the Company; (d) misappropriation of a business opportunity of the Company; (e) provision of material aid to a competitor of the Company; or (f) willful breach of any of his or her obligations under any written agreement or covenant with the Company, including with respect to any restrictive covenants. The determination as to whether a Participant’s Service is being terminated for Cause shall be made in good faith by the Company and shall be final and binding on the Participant. The foregoing definition does not in any way limit the Company’s ability to terminate a Participant’s employment or consulting relationship at any time as provided in Section 20 above, and the term “Company” will be interpreted to include any Subsidiary or Parent, as appropriate. Notwithstanding the foregoing, the definition of “Cause” may, in part or in whole, be modified or replaced in each individual employment agreement, Award Agreement or other applicable agreement with any Participant, provided that such document supersedes the definition provided in this Section 28.7].
28.8.    “Code” means the United States Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.
28.9.     “Committee” means the Compensation Committee of the Board or those persons to whom administration of the Plan, or part of the Plan, has been delegated as permitted by law.
28.10.    “Company” means [PubCo] or any successor corporation.
28.11.    “Consultant” means any natural person, including an advisor or independent contractor, engaged by the Company or a Parent, Subsidiary or Affiliate to render services to such entity.
28.12.    “Corporate Transaction” means the occurrence of any of the following events:
(a)    any “Person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total voting power represented by the Company’s then-outstanding voting securities; provided, however, that for purposes of this subclause (a) the acquisition of additional securities by any one Person who is considered to own more than fifty percent (50%) of the total voting power of the securities of the Company will not be considered a Corporate Transaction;
(b)effective upon the consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets;
(c)    the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation;
(d)    any other transaction which qualifies as a “corporate transaction” under Section 424(a) of the Code wherein the stockholders of the Company give up all of their equity interest in the Company (except for the acquisition, sale or transfer of all or substantially all of the outstanding shares of the capital stock of the Company) or
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(e)    a change in the effective control of the Company that occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by members of the Board whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election.Acquisition; 2. The PIPE Investment Proposal - For purpose of this subclause (e), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Corporate Transaction.
For purposes of this definition, Persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company. Notwithstanding the foregoing, to the extent that any amount constituting deferred compensation (as defined in Section 409A of the Code) would become payable under this Plan by reason of a Corporate Transaction, such amount shall become payable only if the event constituting a Corporate Transaction would also qualify as a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company, each as defined within the meaning of Code Section 409A, as it has been and may be amended from time to time, and any proposed or final Treasury Regulations and IRS guidance that has been promulgated or may be promulgated thereunder from time to time. Notwithstanding the foregoing, the foregoing definition of “Corporate Transaction” may, in part or in whole, be modified or replaced in each individual employment agreement, Award Agreement, or other applicable agreement with any Participant provided that such document specifically references this definition.
28.13.    “Director” means a member of the Board.
28.14.    “Disability” means in the case of ISOs, total and permanent disability as defined in Section 22(e)(3) of the Code and in the case of other Awards, that the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.
28.15.    “Dividend Equivalent Right” means the right of a Participant, granted at the discretion of the Committee or as otherwise provided by the Plan, to receive a credit for the account of such Participant in an amount equal to the cash, stock or other property dividends for each Share represented by an Award held by such Participant.
28.16.    “Effective Date” shall mean the closing date of the Business Combination, subject to approval of the Plan by the Company’s stockholders.
28.17.    “Employee” means any person, including Officers and Directors, employed by the Company or any Parent, Subsidiary or Affiliate. For the avoidance of doubt, neither service as a Director nor payment of a director’s fee by the Company will be sufficient to constitute “employment” by the Company and the definition of “Employee” herein shall not include Non-Employee Directors.
28.18.    “Exchange Act” means the United States Securities Exchange Act of 1934, as amended.
28.19.    “Exchange Program” means a program pursuant to which (a) outstanding Awards are surrendered, cancelled or exchanged for cash, the same type of Award or a different Award (or combination thereof) or (b) the Exercise Price of an outstanding Award is increased or reduced.
28.20.    “Exercise Price” means, with respect to an Option, the price at which a holder may purchase the Shares issuable upon exercise of an Option and with respect to a SAR, the price at which the SAR is granted to the holder thereof.
28.21.    “Fair Market Value” means, as of any date, the value of a share of the Company’s common stock determined as follows:
(a)    if such common stock is publicly traded and is then listed on a national securities exchange, its closing price on the date of determination on the principal national securities exchange on which the
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common stock is listed or admitted to trading as reported in The Wall Street Journal or such other source as the Committee may determine;
(b)    if such common stock is publicly traded but is neither listed nor admitted to trading on a national securities exchange, the average of the closing bid and asked prices on the date of determination as reported in The Wall Street Journal or such other source as the Committee deems reliable; or
(c)    if none of the foregoing is applicable, by the Board or the Committee in good faith.
28.22.    “Insider” means an officer or director of the Company or any other person whose transactions in the Company’s common stock are subject to Section 16 of the Exchange Act.
28.23.    “IRS” means the United States Internal Revenue Service.
28.24.    “Non-Employee Director” means a Director who is not an Employee of the Company or any Parent, Subsidiary or Affiliate.
28.25.    “Option” means an award of an option to purchase Shares pursuant to Section 5 or Section 12.
28.26.    “Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if each of such corporations other than the Company owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
28.27.    “Participant” means a person who holds an Award under this Plan.
28.28.    “Performance Award” means an award covering cash, Shares or other property granted pursuant to Section 10 or Section 12 of the Plan.
28.29.    “Performance Factors” means any of the factors selected by the Committee and specified in an Award Agreement, from among the following objective measures, either individually, alternatively or in any combination, applied to the Company as a whole or any business unit or Subsidiary, either individually, alternatively, or in any combination, on a GAAP or non-GAAP basis, and measured, to the extent applicable on an absolute basis or relative to a pre-established target, to determine whether the performance goals established by the Committee with respect to applicable Awards have been satisfied:
(a)    profit before tax;
(b)    billings;
(c)    revenue;
(d)    net revenue;
(e)    earnings (which may include earnings before interest and taxes, earnings before taxes, net earnings, stock-based compensation expenses, depreciation, and amortization);
(f)    operating income;
(g)    operating margin;
(h)    operating profit;
(i)    controllable operating profit or net operating profit;
(j)    net profit;
(k)    gross margin;
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(l)    operating expenses or operating expenses as a percentage of revenue;
(m)    net income;
(n)    earnings per share;
(o)    total stockholder return;
(p)    market share;
(q)    return on assets or net assets;
(r)    the Company’s stock price;
(s)    growth in stockholder value relative to a pre-determined index;
(t)    return on equity;
(u)    return on invested capital;
(v)    cash flow (including free cash flow or operating cash flows);
(w)    cash conversion cycle;
(x)    economic value added;
(y)    individual confidential business objectives;
(z)    contract awards or backlog;
(aa)    overhead or other expense reduction;
(bb)    credit rating;
(cc)    strategic plan development and implementation;
(dd)    succession plan development and implementation;
(ee)    improvement in workforce diversity;
(ff)    customer indicators and/or satisfaction;
(gg)    new product invention or innovation;
(hh)    attainment of research and development milestones;
(ii)    improvements in productivity;
(jj)    bookings;
(kk)    attainment of objective operating goals and employee metrics;
(ll)    sales;
(mm)    expenses;
(nn)    balance of cash, cash equivalents, and marketable securities;
(oo)    completion of an identified special project;
(pp)    completion of a joint venture or other corporate transaction;
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(qq)    employee satisfaction and/or retention;
(rr)    research and development expenses;
(ss)    working capital targets and changes in working capital; and
(tt)    any other metric that is capable of measurement as determined by the Committee.
The Committee may provide for one or more equitable adjustments to the Performance Factors to preserve the Committee’s original intent regarding the Performance Factors at the time of the initial award grant, such as, but not limited to, in recognition of unusual or non-recurring items such as acquisition-related activities or changes in applicable accounting rules. It is within the sole discretion of the Committee to make or not make any such equitable adjustments.
28.30.    “Performance Period” means one or more periods of time, which may be of varying and overlapping durations, as the Committee may select, over which the attainment of one or more Performance Factors will be measured for the purpose of determining a Participant’s right to, and the payment of, a Performance Award.
28.31.    “Performance Share” means an Award granted pursuant to Section 10 of the Plan, consisting of a unit valued by reference to a designated number of Shares, the value of which may be paid to the Participant by delivery of Shares or, if set forth in the instrument evidencing the Award, of such property as the Committee shall determine, including, without limitation, cash, other property, or any combination thereof, upon the attainment of performance goals, as established by the Committee, and other terms and conditions specified by the Committee.
28.32.    “Performance Unit” means an Award granted pursuant to Section 10 of the Plan, consisting of a unit valued by reference to a designated amount of property other than Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including, without limitation, cash, Shares, other property, or any combination thereof, upon the attainment of performance goals, as established by the Committee, and other terms and conditions specified by the Committee.
28.33.    “Permitted Transferee” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law (including adoptive relationships) of the Employee, any person sharing the Employee’s household (other than a tenant or employee), a trust in which these persons (or the Employee) have more than 50% of the beneficial interest, a foundation in which these persons (or the Employee) control the management of assets, and any other entity in which these persons (or the Employee) own more than 50% of the voting interests.
28.34.    “Plan” means this [PubCo] 2021 Equity Incentive Plan.
28.35.    “Purchase Price” means the price to be paid for Shares acquired under the Plan, other than Shares acquired upon exercise of an Option or SAR.
28.36.    “Restricted Stock Award” means an award of Shares pursuant to Section 6 or Section 12 of the Plan, or issued pursuant to the early exercise of an Option.
28.37.    “Restricted Stock Unit” means an Award granted pursuant to Section 9 or Section 12 of the Plan.
28.38.    “SEC” means the United States Securities and Exchange Commission.
28.39.    “Securities Act” means the United States Securities Act of 1933, as amended.
28.40.    “Service” shall mean service as an Employee, Consultant, Director or Non-Employee Director, subject to such further limitations as may be set forth in the Plan or the applicable Award Agreement. An Employee will not be deemed to have ceased to provide Service in the case of any leave of absence approved by the Company. In the case of any Employee on an approved leave of absence or a reduction in hours worked (for
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illustrative purposes only, a change in schedule from that of full-time to part-time), the Committee may make such provisions respecting suspension of or modification to vesting of the Award while on leave from the employ of the Company or a Parent, Subsidiary or Affiliate or during such change in working hours as it may deem appropriate, except that in no event may an Award be exercised after the expiration of the term set forth in the applicable Award Agreement. In the event of military or other protected leave, if required by applicable laws, vesting shall continue for the longest period that vesting continues under any other statutory or Company approved leave of absence and, upon a Participant’s returning from such leave, he or she shall be given vesting credit with respect to Awards to the same extent as would have applied had the Participant continued to provide Service to the Company throughout the leave on the same terms as he or she was providing Service immediately prior to such leave. An employee shall have terminated employment as of the date he or she ceases to provide Service (regardless of whether the termination is in breach of local employment laws or is later found to be invalid) and employment shall not be extended by any notice period or garden leave mandated by local law, provided, however, that a change in status between an Employee, Consultant, Director or Non-Employee Director shall not terminate the service provider’s Service, unless determined by the Committee, in its discretion or to the extent set forth in the applicable Award Agreement. The Committee will have sole discretion to determine whether a Participant has ceased to provide Service and the effective date on which the Participant ceased to provide Service.
28.41.    “Shares” means shares of the common stock of the Company and the common stock of any successor entity.
28.42.    “Stock Appreciation Right” means an Award granted pursuant to Section 8 of the Plan.
28.43.    “Stock Bonus” means an Award granted pursuant to Section 7 of the Plan.
28.44.    “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
28.45.    “Treasury Regulations” means regulations promulgated by the United States Treasury Department.
28.46.    “Unvested Shares” means Shares that have not yet vested or are subject to a right of repurchase in favor of the Company (or any successor thereto).
29.CODE SECTION 409A. This Plan and Awards granted hereunder are intended to comply with Section 409A of the Code and the regulations and guidance promulgated thereunder (collectively, “Section 409A”) to the extent subject thereto, or otherwise be exempt from Section 409A, and, accordingly, to the maximum extent permitted, the Plan shall be interpreted and administered to be in compliance therewith. Any payments described in the Plan that are due within the “short-term deferral period” as defined in Section 409A shall not be treated as deferred compensation unless required by applicable law. Notwithstanding anything to the contrary in the Plan, to the extent required to avoid accelerated taxation and tax penalties under Section 409A, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to the Plan or any Award Agreement granted pursuant hereto during the six-month period immediately following the Participant’s termination of Service (the “Deferred Amounts”) shall instead be paid on the first payroll date after the earlier of (i) the six-month anniversary of the Participant’s “separation from service” (as defined in Section 409A) or (ii) the Participant’s death (such date, the “Section 409A Payment Date”), with any portion of the Deferred Amounts that would otherwise be payable prior to the Section 409A Payment Date aggregated and paid in a lump sum without interest on the Section 409A Payment Date. Notwithstanding the foregoing, none of the Company, the Committee or any of their respective affiliates shall have any obligation to take any action to prevent the assessment of any additional tax or penalty on any Participant under Section 409A and, by accepting an Award granted hereunder, the Participant acknowledges and agrees that none of the Company, the Committee or any of their respective affiliates will have any liability to the Participant for any such tax or penalty.
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ANNEX E
[PubCo]
2021 EMPLOYEE STOCK PURCHASE PLAN
1.PURPOSE. [PubCo] adopted the Plan effective as of the Effective Date. The purpose of this Plan is to provide eligible employees of the Company and the Participating Corporations with a means of acquiring an equity interest in the Company, to enhance such employees’ sense of participation in the affairs of the Company. Capitalized terms not defined elsewhere in the text are defined in Section 28.
2.ESTABLISHMENT OF PLAN. The Company proposes to grant rights to purchase shares of Common Stock to eligible employees of the Company and its Participating Corporations pursuant to this Plan. The Company intends this Plan to qualify as an “employee stock purchase plan” under Section 423 of the Code (including any amendments to or replacements of such Section), and this Plan shall be so construed, although the Company makes no undertaking or representation to maintain such qualification. Any term not expressly defined in this Plan but defined for purposes of Section 423 of the Code shall have the same definition herein. In addition, with regard to offers of options to purchase shares of Common Stock under the Plan to employees working for a Subsidiary or an Affiliate outside the United States, this Plan authorizes the grant of options under a Non-Section 423 Component that is not intended to meet Section 423 requirements, provided, to the extent necessary under Section 423 of the Code, the other terms and conditions of the Plan are met.
Subject to Section 14, a total of [[l] ([l])] shares of Common Stock are reserved for issuance under this Plan. In addition, on each January 1 of each of [2022 through 2031], the aggregate number of shares of Common Stock reserved for issuance under the Plan shall be increased automatically by the number of shares equal to one percent (1%) of the total number of shares of all classes of Common Stock issued and outstanding on the immediately preceding December 31 (rounded down to the nearest whole share); provided, that the Board or the Committee may in its sole discretion reduce the amount of the increase in any particular year. Subject to Section 14, no more than [[l] ([l])] shares of Common Stock may be issued over the term of this Plan. The number of shares initially reserved for issuance under this Plan and the maximum number of shares that may be issued under this Plan shall be subject to adjustments effected in accordance with Section 14. Any or all such shares may be granted under the Section 423 Component.
3.    ADMINISTRATION. The Plan will be administered by the Committee. Subject to the provisions of this Plan and the limitations of Section 423 of the Code or any successor provision in the Code, all questions of interpretation or application of this Plan shall be determined by the Committee and its decisions shall be final and binding upon all eligible employees and Participants. The Committee will have full and exclusive discretionary authority to construe, interpret and apply the terms of the Plan, to determine eligibility, to designate the Participating Corporations, to determine whether Participating Corporations shall participate in the Section 423 Component or Non-Section 423 Component and to decide upon any and all claims filed under the Plan. Every finding, decision and determination made by the Committee will, to the full extent permitted by law, be final and binding upon all parties. Notwithstanding any provision to the contrary in this Plan, the Committee may adopt rules, sub-plans, and/or procedures relating to the operation and administration of the Plan designed to comply with local laws, regulations or customs or to achieve tax, securities law or other objectives for eligible employees outside of the United States. The Committee will have the authority to determine the Fair Market Value of the Common Stock (which determination shall be final, binding and conclusive for all purposes) in accordance with Section 8 below and to interpret Section 8 of the Plan in connection with circumstances that impact the Fair Market Value. Members of the Committee shall receive no compensation for their services in connection with the administration of this Plan, other than standard fees as established from time to time by the Board for services rendered by Board members serving on Board committees. All expenses incurred in connection with the administration of this Plan shall be paid by the Company. For purposes of this Plan, the Committee may designate separate offerings under the Plan (the terms of which need not be identical) in which eligible employees of one or more Participating Corporations will participate, and the provisions of the Plan will separately apply to each such separate offering even if the dates of the applicable Offering Periods of each such offering are identical. To the extent permitted by Section 423 of the Code, the terms of each separate offering under the Plan need not be identical, provided that the rights and privileges established with respect to a particular offering are applied in an identical manner to all employees of every Participating Corporation whose employees are granted options under that particular offering. The Committee may
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establish rules to govern the terms of the Plan and the offering that will apply to Participants who transfer employment between the Company and Participating Corporations or between Participating Corporations, in accordance with requirements under Section 423 of the Code to the extent applicable.
4.    ELIGIBILITY.
(a)    Any employee of the Company or the Participating Corporations is eligible to participate in an Offering Period under this Plan, except that one or more of the following categories of employees may be excluded from coverage under the Plan by the Committee (other than where such exclusion is prohibited by applicable law):
(b)    employees who do not meet eligibility requirements that the Committee may choose to impose (within the limits permitted by the Code);
(c)    employees who are not employed by the Company or a Participating Corporation prior to the beginning of such Offering Period or prior to such other time period as specified by the Committee;
(d)    employees who are customarily employed for twenty (20) or less hours per week;
(e)    employees who are customarily employed for five (5) months or less in a calendar year;
(f)    (i) employees who are “highly compensated employees” of the Company or any Participating Corporation (within the meaning of Section 414(q) of the Code), or (ii) any employees who are “highly compensated employees” with compensation above a specified level, who is an officer and/or is subject to the disclosure requirements of Section 16(a) of the Exchange Act;
(g)    employees who are citizens or residents of a foreign jurisdiction (without regard to whether they are also a citizen of the United States or a resident alien (within the meaning of Section 7701(b)(1)(A) of the Code)) if either (i) such employee’s participation is prohibited under the laws of the jurisdiction governing such employee, or (ii) compliance with the laws of the foreign jurisdiction would violate the requirements of Section 423 of the Code; and
(h)    individuals who provide services to the Company or any of its Participating Corporations who are reclassified as common law employees for any reason except for federal income and employment tax purposes.
The foregoing notwithstanding, an individual shall not be eligible if his or her participation in the Plan is prohibited by the law of any country that has jurisdiction over him or her, if complying with the laws of the applicable country would cause the Plan to violate Section 423 of the Code, or if he or she is subject to a collective bargaining agreement that does not provide for participation in the Plan.
(i)    No employee who, together with any other person whose stock would be attributed to such employee pursuant to Section 424(d) of the Code, owns stock or holds options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or its Parent or Subsidiary or who, as a result of being granted an option under this Plan with respect to such Offering Period, would own stock or hold options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or its Parent or Subsidiary shall be granted an option to purchase Common Stock under the Plan. Notwithstanding the foregoing, the rules of Section 424(d) of the Code shall apply in determining share ownership and the extent to which shares held under outstanding equity awards are to be treated as owned by the employee.
5.    OFFERING DATES.
(a)    Each Offering Period of this Plan may be of up to twenty-seven (27) months duration and shall commence and end at the times designated by the Committee. Each Offering Period shall consist of one or more Purchase Periods during which Contributions made by Participants are accumulated under this Plan.
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6.    PARTICIPATION IN THIS PLAN.
(a)    Any employee who is an eligible employee determined in accordance with Section 4 will be eligible to participate in this Plan, subject to the requirement of Section 6(b) hereof and the other terms and provisions of this Plan.
(b)    A Participant may elect to participate in this Plan by submitting an enrollment agreement prior to the commencement of the Offering Period (on such date as the Committee may determine) to which such agreement relates.
(c)    Once an employee becomes a Participant in an Offering Period, then such Participant will automatically participate in each subsequent Offering Period commencing immediately following the last day of the prior Offering Period unless the Participant withdraws or is deemed to withdraw from this Plan or terminates further participation in an Offering Period as set forth in Section 11 below. A Participant who is continuing participation pursuant to the preceding sentence is not required to file any additional enrollment agreement in order to continue participation in this Plan. A Participant who is not continuing participation pursuant to the preceding sentence is required to file an enrollment agreement prior to the commencement of the Offering Period (or such earlier date as the Committee may determine) to which such agreement relates.
7.    GRANT OF OPTION ON ENROLLMENT. Becoming a Participant with respect to an Offering Period will constitute the grant (as of the Offering Date) by the Company to such Participant of an option to purchase on the Purchase Date up to that number of shares of Common Stock determined by a fraction, the numerator of which is the amount accumulated in such Participant’s Contribution account during such Purchase Period and the denominator of which is the lower of (i) eighty-five percent (85%) of the Fair Market Value of a share of Common Stock on the Offering Date (but in no event less than the par value of a share of the Common Stock), or (ii) eighty-five percent (85%) of the Fair Market Value of a share of the Common Stock on the Purchase Date; provided,however, that the number of shares of Common Stock subject to any option granted pursuant to this Plan shall not exceed the lesser of (x) the maximum number of shares set by the Committee pursuant to Section 10(b) below with respect to the applicable Purchase Date, or (y) the maximum number of shares which may be purchased pursuant to Section 10(a) below with respect to the applicable Purchase Date.
8.    PURCHASE PRICE. The Purchase Price per share at which a share of Common Stock will be sold in any Offering Period shall be eighty-five percent (85%) of the lesser of:
(a)    The Fair Market Value on the Offering Date; or
(b)    The Fair Market Value on the Purchase Date.
9.    PAYMENT OF PURCHASE PRICE; CONTRIBUTION CHANGES; SHARE ISSUANCES.
(a)    The Purchase Price shall be accumulated by regular payroll deductions made during each Offering Period, unless the Committee determines that contributions may be made in another form (including but not limited to with respect to categories of Participants outside the United States that Contributions may be made in another form due to local legal requirements). The Contributions are made as a percentage of the Participant’s Compensation in one percent (1%) increments not less than one percent (1%), nor greater than fifteen percent (15%) or such lower limit set by the Committee. “Compensation” shall mean base salary or regular hourly wages; however, the Committee shall have discretion to adopt a definition of Compensation from time to time of all cash compensation reported on the employee's Form W-2 or corresponding local country tax return, including without limitation base salary or regular hourly wages, bonuses, incentive compensation, commissions, overtime, shift premiums, pay during leaves of absence, and draws against commissions (or in foreign jurisdictions, equivalent cash compensation). For purposes of determining a Participant’s Compensation, any election by such Participant to reduce his or her regular cash remuneration under Sections 125 or 401(k) of the Code (or in foreign jurisdictions, equivalent deductions) shall be treated as if the Participant did not make such election. Contributions shall commence on the first payday following the beginning of any Offering Period and shall continue to the end of the
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Offering Period unless sooner altered or terminated as provided in this Plan. Notwithstanding the foregoing, the terms of any sub-plan may permit matching shares without the payment of any purchase price.
(b)    A Participant may decrease the rate of Contributions during an Offering Period by filing with the Company or a third party designated by the Company a new authorization for Contributions, with the new rate to become effective no later than the second payroll period commencing after the Company’s receipt of the authorization and continuing for the remainder of the Offering Period unless changed as described below. A decrease in the rate of Contributions may be made once during an Offering Period or more frequently under rules determined by the Committee. A Participant may increase or decrease the rate of Contributions for any subsequent Offering Period by filing with the Company or a third party designated by the Company a new authorization for Contributions prior to the beginning of such Offering Period, or such other time period as specified by the Committee.
(c)    A Participant may reduce his or her Contribution percentage to zero during an Offering Period by filing with the Company or a third party designated by the Company a request for cessation of Contributions. Such reduction shall be effective beginning no later than the second payroll period after the Company’s receipt of the request and no further Contributions will be made for the duration of the Offering Period. Contributions credited to the Participant’s account prior to the effective date of the request shall be used to purchase shares of Common Stock in accordance with Subsection (e) below. A reduction of the Contribution percentage to zero shall be treated as such Participant’s withdrawal from such Offering Period and the Plan, effective as of the day after the next Purchase Date following the filing date of such request with the Company.
(d)    All Contributions made for a Participant are credited to his or her book account under this Plan and are deposited with the general funds of the Company, except to the extent local legal restrictions outside the United States require segregation of such Contributions. No interest accrues on the Contributions, except to the extent required due to local legal requirements. All Contributions received or held by the Company may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such Contributions, except to the extent necessary to comply with local legal requirements outside the United States.
(e)    On each Purchase Date, so long as this Plan remains in effect and provided that the Participant has not submitted a signed and completed withdrawal form before that date which notifies the Company that the Participant wishes to withdraw from that Offering Period under this Plan and have all Contributions accumulated in the account maintained on behalf of the Participant as of that date returned to the Participant, the Company shall apply the funds then in the Participant’s account to the purchase of whole shares of Common Stock reserved under the option granted to such Participant with respect to the Offering Period to the extent that such option is exercisable on the Purchase Date. The Purchase Price per share shall be as specified in Section 8 of this Plan. Any fractional share, as calculated under this Subsection (e), shall be rounded down to the next lower whole share, unless the Committee determines with respect to all Participants that any fractional share shall be credited as a fractional share. Any amount remaining in a Participant’s account on a Purchase Date which is less than the amount necessary to purchase a full share of the Common Stock shall be carried forward without interest into the next Purchase Period; however, the Committee may from time to time provide that such amounts shall be refunded without interest (except to the extent necessary to comply with local legal requirements outside the United States). In the event that this Plan has been oversubscribed, all funds not used to purchase shares on the Purchase Date shall be returned to the Participant, without interest (except to the extent required due to local legal requirements outside the United States). No Common Stock shall be purchased on a Purchase Date on behalf of any employee whose participation in this Plan has terminated prior to such Purchase Date, except to the extent required due to local legal requirements outside the United States.
(f)    As promptly as practicable after the Purchase Date, the Company shall issue shares for the Participant’s benefit representing the shares purchased upon exercise of his or her option.
(g)    During a Participant’s lifetime, his or her option to purchase shares hereunder is exercisable only by him or her. The Participant will have no interest or voting right in shares covered by his or her option until such option has been exercised.
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(h)    To the extent required by applicable federal, state, local or foreign law, a Participant shall make arrangements satisfactory to the Company and the Participating Corporation employing the Participant for the satisfaction of any withholding tax obligations that arise in connection with the Plan. The Company or any Subsidiary or Affiliate, as applicable, may withhold, by any method permissible under the applicable law, the amount necessary for the Company or Subsidiary or Affiliate, as applicable, to meet applicable withholding obligations, including any withholding required to make available to the Company or Subsidiary or Affiliate, as applicable, any tax deductions or benefits attributable to the sale or early disposition of shares of Common Stock by a Participant. The Company shall not be required to issue any shares of Common Stock under the Plan until such obligations are satisfied.
10.    LIMITATIONS ON SHARES TO BE PURCHASED.
(a)    Any other provision of the Plan notwithstanding, no Participant shall purchase Common Stock with a Fair Market Value in excess of the following limit:
(i)    In the case of Common Stock purchased during an Offering Period that commenced in the current calendar year, the limit shall be equal to (A) $25,000 minus (B) the Fair Market Value of the Common Stock that the Participant previously purchased in the current calendar year (under this Plan and all other employee stock purchase plans of the Company or any Parent or Subsidiary).
(ii)    In the case of Common Stock purchased during an Offering Period that commenced in the immediately preceding calendar year, the limit shall be equal to (A)  $50,000 minus (B) the Fair Market Value of the Common Stock that the Participant previously purchased (under this Plan and all other employee stock purchase plans of the Company or any Parent or Subsidiary) in the current calendar year and in the immediately preceding calendar year.
For purposes of this Subsection (a), the Fair Market Value of Common Stock shall be determined in each case as of the beginning of the Offering Period in which such Common Stock is purchased. Employee stock purchase plans not described in Section 423 of the Code shall be disregarded. If a Participant is precluded by this Subsection (a) from purchasing additional Common Stock under the Plan, then his or her Contributions shall automatically be discontinued and shall automatically resume at the beginning of the earliest Purchase Period that will end in the next calendar year (if he or she then is an eligible employee), provided that when the Company automatically resumes such Contributions, the Company must apply the rate in effect immediately prior to such suspension.
(b)    In no event shall a Participant be permitted to purchase more than 2,500 shares on any one Purchase Date or such lesser number as the Committee shall determine. If a lower limit is set under this Subsection (b), then all Participants will be notified of such limit prior to the commencement of the next Offering Period for which it is to be effective.
(c)    If the number of shares to be purchased on a Purchase Date by all Participants exceeds the number of shares then available for issuance under this Plan, then the Company will make a pro rata allocation of the remaining shares in as uniform a manner as shall be reasonably practicable and as the Committee shall determine to be equitable. In such event, the Company will give notice of such reduction of the number of shares to be purchased under a Participant’s option to each Participant affected.
(d)    Any Contributions accumulated in a Participant’s account which are not used to purchase stock due to the limitations in this Section 10, and not covered by Section 9(e), shall be returned to the Participant as soon as practicable after the end of the applicable Purchase Period, without interest (except to the extent required due to local legal requirements outside the United States).
11.    WITHDRAWAL.
(a)    Each Participant may withdraw from an Offering Period under this Plan pursuant to a method specified for such purpose by the Company. Such withdrawal may be elected at any time prior to the end of an Offering Period, or such other time period as specified by the Committee.
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(b)    Upon withdrawal from this Plan, the accumulated Contributions shall be returned to the withdrawn Participant, without interest (except to the extent required due to local legal requirements outside the United States), and his or her interest in this Plan shall terminate. In the event a Participant voluntarily elects to withdraw from this Plan, he or she may not resume his or her participation in this Plan during the same Offering Period, but he or she may participate in any Offering Period under this Plan which commences on a date subsequent to such withdrawal by filing a new authorization for Contributions in the same manner as set forth in Section 6 above for initial participation in this Plan.
(c)    To the extent applicable, if the Fair Market Value on the first day of the current Offering Period in which a participant is enrolled is higher than the Fair Market Value on the first day of any subsequent Offering Period, the Company will automatically enroll such participant in the subsequent Offering Period. Any funds accumulated in a Participant’s account prior to the first day of such subsequent Offering Period will be applied to the purchase of shares on the Purchase Date immediately prior to the first day of such subsequent Offering Period, if any.
12.    TERMINATION OF EMPLOYMENT. Termination of a Participant’s employment for any reason, including retirement, death, disability, or the failure of a Participant to remain an eligible employee of the Company or of a Participating Corporation, immediately terminates his or her participation in this Plan (except as required due to local legal requirements outside the United States). In such event, accumulated Contributions credited to the Participant’s account will be returned to him or her or, in the case of his or her death, to his or her legal representative, without interest (except to the extent required due to local legal requirements outside the United States). For purposes of this Section 12, an employee will not be deemed to have terminated employment or failed to remain in the continuous employ of the Company or of a Participating Corporation in the case of sick leave, military leave, or any other leave of absence approved by the Company; provided that such leave is for a period of not more than ninety (90) days or reemployment upon the expiration of such leave is guaranteed by contract or statute. The Company will have sole discretion to determine whether a Participant has terminated employment and the effective date on which the Participant terminated employment, regardless of any notice period or garden leave required under local law.
13.    RETURN OF CONTRIBUTIONS. In the event a Participant’s interest in this Plan is terminated by withdrawal, termination of employment or otherwise, or in the event this Plan is terminated by the Board, the Company shall deliver to the Participant all accumulated Contributions credited to such Participant’s account. No interest shall accrue on the Contributions of a Participant in this Plan (except to the extent required due to local legal requirements outside the United States).
14.    CAPITAL CHANGES. If the number or class of outstanding shares is changed by a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company, without consideration, then the Committee shall adjust the number and class of Common Stock that may be delivered under the Plan, the Purchase Price per share and the number of shares of Common Stock covered by each option under the Plan which has not yet been exercised, and the numerical limits of Section 2 shall be proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and in compliance with the applicable securities laws; provided that fractions of a share will not be issued.
15.    NONASSIGNABILITY. Neither Contributions credited to a Participant’s account nor any rights with regard to the exercise of an option or to receive shares under this Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or as provided in Section 22 below) by the Participant. Any such attempt at assignment, transfer, pledge or other disposition shall be void and without effect.
16.    USE OF PARTICIPANT FUNDS AND REPORTS. The Company may use all Contributions received or held by it under the Plan for any corporate purpose, and the Company will not be required to segregate Participant Contributions (except to the extent required due to local legal requirements outside the United States). Until shares are issued, Participants will only have the rights of an unsecured creditor unless otherwise required under local law. Each Participant shall receive, or have access to, promptly after the end of each Purchase Period a report of his or her account setting forth the total Contributions accumulated, the number of shares purchased, the
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per share price thereof and the remaining cash balance, if any, carried forward to the next Purchase Period or Offering Period, as the case may be.
17.    NOTICE OF DISPOSITION. Each U.S. taxpayer Participant shall notify the Company in writing if the Participant disposes of any of the shares purchased in any Offering Period pursuant to this Plan if such disposition occurs within two (2) years from the Offering Date or within one (1) year from the Purchase Date on which such shares were purchased (the “Notice Period”). The Company may, at any time during the Notice Period, place a legend or legends on any certificate representing shares acquired pursuant to this Plan requesting the Company’s transfer agent to notify the Company of any transfer of the shares. The obligation of the Participant to provide such notice shall continue notwithstanding the placement of any such legend on the certificates.
18.    NO RIGHTS TO CONTINUED EMPLOYMENT. Neither this Plan nor the grant of any option hereunder shall confer any right on any employee to remain in the employ of the Company or any Participating Corporation or restrict the right of the Company or any Participating Corporation to terminate such employee’s employment.
19.    EQUAL RIGHTS AND PRIVILEGES. All eligible employees granted an option under the Section 423 Component of this Plan shall have equal rights and privileges with respect to this Plan or within any separate offering under the Plan so that this Plan qualifies as an “employee stock purchase plan” within the meaning of Section 423 or any successor provision of the Code and the related regulations. Any provision of this Plan which is inconsistent with Section 423 or any successor provision of the Code, without further act or amendment by the Company, the Committee or the Board, shall be reformed to comply with the requirements of Section 423. This Section 19 shall take precedence over all other provisions in this Plan.
20.    NOTICES. All notices or other communications by a Participant to the Company under or in connection with this Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.
21.    TERM; STOCKHOLDER APPROVAL. This Plan will become effective on the Effective Date. This Plan shall be approved by the stockholders of the Company, in any manner permitted by applicable corporate law, within twelve (12) months before or after the date this Plan is adopted by the Board. No purchase of shares that are subject to such stockholder approval before becoming available under this Plan shall occur prior to stockholder approval of such shares and the Board or Committee may delay any Purchase Date and postpone the commencement of any Offering Period subsequent to such Purchase Date as deemed necessary or desirable to obtain such approval (provided that if a Purchase Date would occur more than six (6) months after commencement of the Offering Period to which it relates, then such Purchase Date shall not occur and instead such Offering Period shall terminate without the purchase of such shares and Participants in such Offering Period shall be refunded their Contributions without interest). This Plan shall continue until the earlier to occur of (a) termination of this Plan by the Board (which termination may be effected by the Board at any time pursuant to Section 25 below), (b) issuance of all of the shares of Common Stock reserved for issuance under this Plan, or (c) the tenth anniversary of the Effective Date.
22.    DESIGNATION OF BENEFICIARY.
(a)    If authorized by the Committee, a Participant may file a written designation of a beneficiary who is to receive any cash from the Participant’s account under this Plan in the event of such Participant’s death prior to a Purchase Date. Such form shall be valid only if it was filed with the Company at the prescribed location before the Participant’s death.
(b)    If authorized by the Company, such designation of beneficiary may be changed by the Participant at any time by written notice filed with the Company at the prescribed location before the Participant’s death. If no such beneficiary has been designated (to the knowledge of the Company), then, in the event of the death of a Participant the Company, in its discretion, may deliver such cash to the Participant’s estate or legal heirs, or if no such estate or legal heirs are known to the Company, then to the Participant’s spouse or, if no estate, legal heir, or spouse is known to the Company, then to any one or more dependents or relatives of the Participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.
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23.    CONDITIONS UPON ISSUANCE OF SHARES; LIMITATION ON SALE OF SHARES. Shares shall not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the U.S. Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange or automated quotation system upon which the shares may then be listed, exchange control restrictions and/or securities law restrictions outside the United States, and shall be further subject to the approval of counsel for the Company with respect to such compliance. Shares may be held in trust or subject to further restrictions as permitted by any subplan.
24.    APPLICABLE LAW. The Plan shall be governed by the substantive laws (excluding the conflict of laws rules) of the State of [Delaware].
25.    AMENDMENT OR TERMINATION. The Committee, in its sole discretion, may amend, suspend or terminate the Plan, or any part thereof, at any time and for any reason. Unless otherwise required by applicable law, if the Plan is terminated, the Committee, in its discretion, may elect to terminate all outstanding Offering Periods either immediately or upon completion of the purchase of shares of Common Stock on the next Purchase Date (which may be sooner than originally scheduled, if determined by the Committee in its discretion), or may elect to permit Offering Periods to expire in accordance with their terms (and subject to any adjustment pursuant to Section 14). If an Offering Period is terminated prior to its previously-scheduled expiration, all amounts then credited to Participants’ accounts for such Offering Period, which have not been used to purchase shares of Common Stock, shall be returned to those Participants (without interest thereon, except as otherwise required under local laws) as soon as administratively practicable. Further, the Committee will be entitled to change the Purchase Periods and Offering Periods, limit the frequency and/or number of changes in the amount contributed during an Offering Period, establish the exchange ratio applicable to amounts contributed in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a Participant in order to adjust for delays or mistakes in the administration of the Plan, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each Participant properly correspond with amounts contributed from the Participant’s base salary and other eligible compensation, and establish such other limitations or procedures as the Committee determines in its sole discretion advisable which are consistent with the Plan. Such actions will not require stockholder approval or the consent of any Participants. However, no amendment shall be made without approval of the stockholders of the Company (obtained in accordance with Section 21 above) within twelve (12) months of the adoption of such amendment (or earlier if required by Section 21) if such amendment would: (a) increase the number of shares that may be issued under this Plan; or (b) change the designation of the employees (or class of employees) eligible for participation in this Plan. In addition, in the event the Board or Committee determines that the ongoing operation of the Plan may result in unfavorable financial accounting consequences, the Board or Committee may, in its discretion and, to the extent necessary or desirable, modify, amend or terminate the Plan to reduce or eliminate such accounting consequences including, but not limited to: (i) amending the definition of compensation, including with respect to an Offering Period underway at the time; (ii) altering the Purchase Price for any Offering Period including an Offering Period underway at the time of the change in Purchase Price; (iii) shortening any Offering Period by setting a Purchase Date, including an Offering Period underway at the time of the Committee’s action; (iv) reducing the maximum percentage of Compensation a participant may elect to set aside as Contributions; and (v) reducing the maximum number of shares a Participant may purchase during any Offering Period. Such modifications or amendments will not require approval of the stockholders of the Company or the consent of any Participants.
26.    CORPORATE TRANSACTIONS. In the event of a Corporate Transaction, the Offering Period for each outstanding right to purchase Common Stock will be shortened by setting a new Purchase Date and will end on the new Purchase Date. The new Purchase Date shall occur on or prior to the consummation of the Corporate Transaction, as determined by the Board or Committee, and the Plan shall terminate on the consummation of the Corporate Transaction.
27.    CODE SECTION 409A; TAX QUALIFICATION.
(a)    Options granted under the Plan generally are exempt from the application of Section 409A of the Code. However, options granted to U.S. taxpayers which are not intended to meet the Code Section 423
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requirements are intended to be exempt from the application of Section 409A of the Code under the short-term deferral exception and any ambiguities shall be construed and interpreted in accordance with such intent. Subject to Subsection (b), options granted to U.S. taxpayers outside of the Code Section 423 requirements shall be subject to such terms and conditions that will permit such options to satisfy the requirements of the short-term deferral exception available under Section 409A of the Code, including the requirement that the shares of Common Stock subject to an option be delivered within the short-term deferral period. Subject to Subsection (b), in the case of a Participant who would otherwise be subject to Section 409A of the Code, to the extent the Committee determines that an option or the exercise, payment, settlement or deferral thereof is subject to Section 409A of the Code, the option shall be granted, exercised, paid, settled or deferred in a manner that will comply with Section 409A of the Code, including Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Effective Date. Notwithstanding the foregoing, the Company shall have no liability to a Participant or any other party if the option that is intended to be exempt from or compliant with Section 409A of the Code is not so exempt or compliant or for any action taken by the Committee with respect thereto.
(b)    Although the Company may endeavor to (i) qualify an option for favorable tax treatment under the laws of the United States or jurisdictions outside of the United States or (ii) avoid adverse tax treatment (e.g., under Section 409A of the Code), the Company makes no representation to that effect and expressly disavows any covenant to maintain favorable or avoid unfavorable tax treatment, notwithstanding anything to the contrary in this Plan, including Subsection (a). The Company shall be unconstrained in its corporate activities without regard to the potential negative tax impact on Participants under the Plan.
28.    DEFINITIONS.
(a)    “Affiliate” means any entity, other than a Subsidiary or Parent, (i) that, directly or indirectly, is controlled by, controls or is under common control with, the Company and (ii) in which the Company has a significant equity interest, in either case as determined by the Committee, whether now or hereafter existing.
(b)    “Board” shall mean the Board of Directors of the Company.
(c)    “Business Combination” means the business combination effected pursuant to the Business Combination Agreement.
(d)    “Business Combination Agreement” means the means the Agreement and Plan of Merger, by and among CM Life Sciences, Inc., Mount Sinai Genomics, Inc., and certain other parties thereto, dated as of February 9, 2021.
(e)    “Code” shall mean the U.S. Internal Revenue Code of 1986, as amended.
(f)    “Committee” shall mean the Compensation Committee of the Board that consists exclusively of one or more members of the Board appointed by the Board.
(g)    “Common Stock” shall mean the common stock of the Company.
(h)    “Company” shall mean [PubCo].
(i)    “Contributions” means payroll deductions taken from a Participant's Compensation and used to purchase shares of Common Stock under the Plan and, to the extent payroll deductions are not permitted by applicable laws (as determined by the Committee in its sole discretion) contributions by other means, provided, however, that allowing such other contributions does not jeopardize the qualification of the Plan as an “employee stock purchase plan” under Section 423 of the Plan.
(j)    “Corporate Transaction” means the occurrence of any of the following events: (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities; or (ii) the consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets;
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or (iii) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation.
(k)    “Effective Date” shall mean the closing date of the Business Combination.
(l)    “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.
(m)    “Fair Market Value” shall mean, as of any date, the value of a share of Common Stock determined as follows:
i.    if such Common Stock is then quoted on the Nasdaq Global Select Market, the Nasdaq Global Market or the Nasdaq Capital Market (collectively, the “Nasdaq Market”), its closing price on the Nasdaq Market on the date of determination, or if there are no sales for such date, then the last preceding business day on which there were sales, as reported in The Wall Street Journal or such other source as the Board or the Committee deems reliable;
ii.    if such Common Stock is publicly traded and is then listed on a national securities exchange, its closing price on the date of determination on the principal national securities exchange on which the Common Stock is listed or admitted to trading as reported in The Wall Street Journal or such other source as the Board or the Committee deems reliable;
iii    if such Common Stock is publicly traded but is neither quoted on the Nasdaq Market nor listed or admitted to trading on a national securities exchange, the average of the closing bid and asked prices on the date of determination as reported in The Wall Street Journal or such other source as the Board or the Committee deems reliable; or
iv.    if none of the foregoing is applicable, by the Board or the Committee in good faith.
(n)    “Non-Section 423 Component” means the part of the Plan which is not intended to meet the requirements set forth in Section 423 of the Code.
(o)    “Notice Period” shall mean within two (2) years from the Offering Date or within one (1) year from the Purchase Date on which such shares were purchased.
(p)    “Offering Date” shall mean the first business day of each Offering Period.
(q)    “Offering Period” shall mean a period with respect to which the right to purchase Common Stock may be granted under the Plan, as determined by the Committee pursuant to Section 5(a).
(r)    “Parent” shall have the same meaning as “parent corporation” in Sections 424(e) and 424(f) of the Code.
(s)    “Participant” shall mean an eligible employee who meets the eligibility requirements set forth in Section 4 and who elects to participate in this Plan pursuant to Section 6(b).
(t)    “Participating Corporation” shall mean any Parent, Subsidiary or Affiliate that the Committee designates from time to time as eligible to participate in this Plan. For purposes of the Section 423 Component, only the Parent and Subsidiaries may be Participating Corporations, provided, however, that at any given time a Parent or Subsidiary that is a Participating Corporation under the Section 423 Component shall not be a Participating Corporation under the Non-Section 423 Component. The Committee may provide that any Participating Corporation shall only be eligible to participate in the Non-Section 423 Component.
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(u)    “Plan” shall mean this [PubCo] 2021 Employee Stock Purchase Plan, as may be amended from time to time.
(v)    “Purchase Date” shall mean the last business day of each Purchase Period.
(w)    “Purchase Period” shall mean a period during which Contributions may be made toward the purchase of Common Stock under the Plan, as determined by the Committee pursuant to Section 5(b).
(x)    “Purchase Price” shall mean the price at which Participants may purchase shares of Common Stock under the Plan, as determined pursuant to Section 8.
(y)    “Section 423 Component” means the part of the Plan, which excludes the Non-Section 423 Component, pursuant to which options to purchase shares of Common Stock under the Plan that satisfy the requirements for “employee stock purchase plans” set forth in Section 423 of the Code may be granted to eligible employees.
(z)    “Subsidiary” shall have the same meaning as “subsidiary corporation” in Sections 424(e) and 424(f) of the Code.
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Preliminary Proxy Card
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CM LIFE SCIENCES, INC. FOLD HERE • DO NOT SEPARATE • INSERT IN ENVELOPE PROVIDED 18251_CM Life Sciences Proxy Card REV5 Front PLEASE DO NOT RETURN THE PROXY CARD IF YOU ARE VOTING ELECTRONICALLY. INTERNET – www.cstproxyvote.com Use the Internet to vote your proxy. Have your proxy card available when you access the above website. Follow the prompts to vote your shares. Vote at the Meeting – If you plan to attend the virtual online annual meeting, you will need your 12 digit control number to vote electronically at the annual meeting. To attend the annual meeting, visit: https://www.cstproxy.com/cmls/sm2021 MAIL – Mark, sign and date your proxy card and return it in the postage-paid envelope provided. Your Internet vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card. Votes submitted electronically over the Internet must be received by 11:59 p.m., Eastern Time, on [•], 2021. YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY. IMMEDIATE - 24 Hours a Day, 7 Days a Week or by Mail Vote by Internet - Q U I C K E A S Y CM LIFE SCIENCES, INC. SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON [●], 2021 PROXY THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS The undersigned appoints Keith Meister, Eli Casdin and Brian Emes, and each of them independently, as proxies, each with the power to appoint his substitute, and authorizes each of them to represent and to vote, as designated on the reverse hereof, all of the shares of common stock of CM Life Sciences, Inc. (the “Company”) held of record by the undersigned at the close of business on June 21, 2021 at the Special Meeting of Stockholders of the Company to be held virtually at https://www.cstproxy.com/cmls/sm2021 on XXXXX XX, 201X at XX:00 a.m., or at any adjournment thereof. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS INDICATED. IF NO CONTRARY INDICATION IS MADE, THE PROXY WILL BE VOTED IN FAVOR OF ALL PROPOSALS, AND IN ACCORDANCE WITH THE JUDGMENT OF THE PERSONS NAMED AS PROXY HEREIN ON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE SPECIAL MEETING. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. (Continued, and to be marked, dated and signed, on the other side)
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Preliminary Proxy Card
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18251_CM Life Sciences Proxy Card REV5_Back Important Notice Regarding the Availability of Proxy Material for the Special Meeting of Stockholders to be held on, 2021 are available at: https://www.cstproxy.com/cmls/sm2021 Signature__________________________________Signature, if held jointly____________________________________ Date_____________, 2021 Signature should agree with name printed hereon. If stock is held in the name of more than one person, EACH joint owner should sign. Executors, administrators, trust- ees, guardians, and attorneys should indicate the capacity in which they sign. Attorneys should submit powers of attorney. Please mark your votes like this X CONTROL NUMBER PROXY Proposals at the Special Meeting At the Special Meeting, Company stockholders will vote on the following proposals: Proposal No. 1 — The Business Combination Proposal — To approve and adopt the Agreement and Plan of Merger, dated as of February 9, 2021 (as it may be amended and/or restated from time to time, the “Merger Agreement”), by and among CM Life Sciences, Inc., (the “Company”), S-IV Sub, Inc., (“Merger Sub”) and Mount Sinai Genomics, Inc. d/b/a Sema4, a copy of which is attached to the proxy statement as Annex A, and to approve the transactions contemplated thereby, including the merger of Merger Sub with and into Sema4, with Sema4 surviving the merger as a wholly owned subsidiary of the Company (the “Business Combination”), and the issuance of common stock to holders of Sema4 capital stock as merger consideration; Proposal No. 2 — The Nasdaq Stock Issuance Proposal — To approve, assuming the Business Combination Proposal is approved, and for purposes of complying with applicable listing rules of the Nasdaq Stock Market,Listing Rules, to approve the issuance of more than 20% of the Company’s outstandingClass A common stock in connection with the Business CombinationPIPE Investment (as defined in the accompanying proxy statement) and as contemplated by the Subscription Agreements with certain institutional investors (including affiliates(as defined in the accompanying proxy statement); 6. The Auditor Ratification Proposal - To ratify the appointment of Ernst & Young LLP as the Company’s sponsorindependent registered public accounting firm for the fiscal year ending December 31, 2022; and existing investors in Sema44. The Charter Amendment Proposal - To adopt an Amendment (the “PIPE Investors”"Amendment"), each dated as of February 9, 2021 (the “Subscription Agreements”), including up to 35,000,000 shares of our common stock to the PIPE Investors, which includes affiliates of our Sponsor that subscribed for 9,500,000 shares of common stock, and up to 147,922,735 shares of our common stock to holders of Sema4 capital stock; Proposal No. 3 — The Charter Approval Proposal — To consider and vote upon a proposal to approve, assuming the Business Combination Proposal and the Nasdaq Stock Issuance Proposal are approved and adopted, the proposedThird Amended and Restated Certificate of Incorporation of the Company, in the form attached hereto as Annex B to the proxy statement; Proposal No. 4 — Governance Proposal — To approve, on a non-binding advisory basis, a separate proposal, which would change the stockholder vote required to amend the certificate of incorporation of the post-combination company from a simple majority to an affirmative vote of at least two-thirds of the shareholders of the post-combination company, as further detailed in the proxy statement; Proposal No. 5 — Incentive Plan Proposal — To consider and vote upon a proposal to approve, assuming the Business Combination Proposal, the Nasdaq Stock Issuance Proposal and Charter Approval Proposal are approved and adopted, the Incentive Plan, including the authorization of the initial share reserve under the 2021 Equity Incentive Plan, a copy of which is attached to the proxy statement as Annex D; Proposal No. 6 — ESPP Proposal — To consider and vote upon a proposal to approve, assuming the Business Combination Proposal, the Nasdaq Stock Issuance Proposal, the Charter Approval Proposal and Incentive Plan Proposal are approved and adopted, the 2021 Employee Stock Purchase Plan (the “ESPP”"Charter"), includingwhich increases the authorizationnumber of the initial share reserve under the ESPP, a copyauthorized shares of which is attached as Annex EClass A common stock from 380,000,000 to the proxy statement; Proposal No. 7 —1,000,000,000; 5. The Class I Director Election Proposal —- To consider and vote upon a proposal to approve, assumingelect three Class I directors of the Business Combination Proposal, the Nasdaq Stock Issuance Proposal, the Charter Approval Proposal, the Incentive Plan Proposal and ESPP Proposal (the “Condition Precedent Proposals”) are approved and adopted, the election of nine (9) directorsCompany, each to serve on the post-combination company’s board of directors, each for a three-year term expiring at the Company’s 2025 annual meeting of stockholders orand until such director’s successor has beenis duly elected and qualified, or until such director’s earlier death, resignation, retirement or removal; alternatively, in the event the Condition Precedent Proposals, are not approved, to elect two directors as Class I directors on the Company’s board of directors, each to serve for a term of three years expiring at the annual meeting of stockholders to be held in 2024 or until such director’s successor has been duly elected and qualified, or until such director’s earlier death, resignation, retirement or removal; Proposal No. 8 —qualified; 7. Adjournment Proposal —- To approve, if necessary, the adjournment of the Special Meeting to a later date or dates to permit further solicitation and votes of proxies in the event that there are insufficient votes for, or otherwise in connection with the approvalany of the Business Combination Proposal, the Nasdaq Stock Issuance Proposal, the Charter Approval Proposal, the Incentive Plan Proposal or the ESPP Proposal. This proposal will only beproposals presented at the Special Meeting. For Against Abstain ! !! ! !! ! !! ! !! ! !! ! !! ! !! Signature should agree with name printed hereon. If stock is held in the name of more than one person, EACH joint owner should sign. Executors, administrators, trustees, guardians, and attorneys should indicate the capacity in which they sign. Attorneys should submit powers of attorney. SEMA4 HOLDINGS CORP. The Board of Directors recommends you vote FOR the following proposals: SEMA4 HOLDINGS CORP. 333 LUDLOW STREET NORTH TOWER, 8TH FLOOR STAMFORD, CT 06902 VOTE BY INTERNET Before The Meeting if there are not sufficient votes- Go to approvewww.proxyvote.com Use the Business Combination Proposal,Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the Nasdaq Stock Issuance Proposal,day before the Charter Approval Proposal,cut-off date or meeting date. Have your proxy card in hand when you access the Incentive Plan Proposalweb site and follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting - Go to www.virtualshareholdermeeting.com/SMFR2022SM You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903 If you hold your shares in street name, you must submit voting instructions to your broker, bank or other nominee. In most instances, you will be able to do this over the ESPP Proposal;Internet, by telephone or by mail. Please refer to information from your bank, broker, or other nominee on how to submit voting instructions. VOTE BY MAIL Mark, sign and Proposal No. 9 — Auditor Ratification Proposal — The ratificationdate your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. SCAN TO VIEW MATERIALS & VOTEw


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Important Notice Regarding the Availability of Withum as the Company’s independent registered public accounting firmProxy Materials for the fiscal year ending DecemberSpecial Meeting to be held on April 27, 2022 The Notice and Proxy Statement are available at: www.proxyvote.com. D74083-S42575 Sema4 Holdings Corp. SPECIAL MEETING OF STOCKHOLDERS April 27, 2022 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF Sema4 Holdings Corp. The undersigned, revoking any previous proxies relating to these shares, hereby acknowledges receipt of the Notice of Special Meeting of Stockholders of Sema4 Holdings Corp. (the "Special Meeting") and accompanying Proxy Statement dated March 31, 2020. FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN2022 in connection with the Special Meeting to be held on April 27, 2022 at 9:00 a.m. Eastern Time virtually at www.virtualshareholdermeeting.com/SMFR2022SM and hereby appoints Jason Ryan and Daniel Clark, and each of them (with full power to act alone), the attorneys-in-fact and proxies of the undersigned, with full power of substitution to each, to vote all shares of the Class A common stock, of Sema4 Holdings Corp., registered in the name provided, which the undersigned is entitled to vote at the Special Meeting, and at any adjournments thereof, with all the powers the undersigned would have if personally present. Without limiting the general authorization hereby given, said proxies are, and each of them is, instructed to vote or act as follows on the proposals set forth in the accompanying Proxy Statement. THIS PROXY, WHEN EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" ALL PROPOSALS. PLEASE RETURN THIS PROXY AS SOON AS POSSIBLE.
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