Tempus AI to Acquire Personalis in Stock and Cash Deal Valued at $16.25 Per Share

Transaction Structure and Merger Mechanics

The acquisition will be executed through a two-step merger process. In the first phase, Tempus's wholly-owned subsidiary Aviary Development, Inc. will merge with and into Personalis, with Personalis surviving as a wholly-owned subsidiary of Tempus. Immediately thereafter, Personalis will merge with and into Tempus's second subsidiary, Toucan Development, LLC, with Toucan surviving as Tempus's subsidiary holding the acquired business. This two-step structure is designed to preserve the intended tax treatment as a reorganization under federal tax law.

The filing indicates that all parties have structured the transaction with the intention that it qualify as a reorganization under Section 368(a) of the Internal Revenue Code. Both the Tempus board of directors and the Personalis board of directors have approved the Merger Agreement and the contemplated transactions. The Personalis Board of Directors has further resolved to recommend that Personalis stockholders adopt the Merger Agreement, subject to its terms and conditions.

Merger Consideration: Stock, Cash, and Exchange Ratio Mechanics

Personalis common stockholders will receive merger consideration consisting of Tempus Class A common stock, cash, fractional share adjustments, and any post-closing distributions. Each share of Personalis common stock will be converted into the right to receive the merger consideration, except for shares owned by Personalis or held in treasury, shares owned by Tempus or the merger subsidiaries, and shares subject to valid appraisal rights under Delaware law.

Tempus retains the discretion to elect to pay cash for up to 50% of the aggregate outstanding Personalis common stock, an option that may be automatically reduced to preserve the intended tax treatment. If Tempus makes this cash election, each shareholder will receive $16.25 in cash per share for their pro rata portion of eligible shares subject to the election, plus Tempus Class A common stock for the remaining shares. The exchange ratio for the stock consideration varies based on the Tempus stock price measured over the 15 trading days prior to the last trading day before closing.

Exchange Ratio Pricing Structure

The exchange ratio includes a floor price protection mechanism. If the Tempus stock price, measured as the volume-weighted average price on The Nasdaq Global Select Market for the 15 consecutive trading days prior to the last trading day before closing, equals or falls below $48.42, the exchange ratio will be fixed at 0.3356 shares of Tempus Class A common stock per Personalis share. Above the floor price, the exchange ratio will equal $16.25 divided by the Tempus stock price, creating a floating adjustment tied to Tempus valuation at closing.

The definition of "Tempus Stock Price" includes a contingency for corporate transactions. If Tempus enters into or consummates a "Tempus Transaction" prior to closing, the stock price calculation will instead be based on the per-share consideration payable in that transaction, rather than the market price calculation. The shares of Tempus Class A common stock issued as stock consideration will be listed for trading on Nasdaq following the transaction's completion.

Treatment of Personalis Employee and Director Equity Awards

The Merger Agreement specifies detailed treatment of outstanding Personalis equity awards at closing. In-the-money Personalis options held by former employees, non-employee directors, and vested options held by current service providers will be cancelled and converted into the right to receive stock consideration based on the number of net option shares subject to each option. Other in-the-money options will be assumed by Tempus and automatically converted into options to purchase Tempus Class A common stock, with the number of shares adjusted by the exchange ratio and the exercise price adjusted proportionally.

Out-of-the-money options will be cancelled without any consideration. Personalis restricted stock units held by non-employee directors will fully accelerate and vest immediately before closing, then be cancelled in exchange for stock consideration. Other RSUs will be assumed and converted into restricted stock units for Tempus Class A common stock, with the share count adjusted by the exchange ratio. The filing indicates these equity treatment provisions ensure that vested awards receive immediate consideration while unvested awards generally convert into equivalent Tempus-denominated instruments.

Performance Share Unit Acceleration and Vesting

The Merger Agreement addresses the treatment of Personalis performance share units by providing for accelerated vesting based on elapsed time within the applicable measurement period. The unvested portion of each outstanding performance share unit will accelerate and vest based on a calculation comparing the number of full calendar quarters that have elapsed from the start of the applicable measurement period through and including the closing date to the total number of quarters in the measurement period. The vested performance share units will then be automatically cancelled in exchange for stock consideration.

After the acceleration and vesting of performance share units based on the pro-rata time calculation, any remaining unvested portion of performance share units will continue under their original terms when converted to Tempus performance share unit equivalents. This approach ensures that Personalis holders receive credit for performance periods completed through closing while maintaining the incentive structure for the remainder of the original measurement period under the Tempus umbrella.

Fractional Shares and Post-Closing Distributions

Personalis shareholders will receive cash in lieu of any fractional shares of Tempus Class A common stock that would otherwise result from the exchange ratio calculation. The Merger Agreement also contemplates the possibility of post-closing distributions to Personalis shareholders, though the filing does not specify the nature, timing, or conditions for such distributions. These provisions address the mechanical aspects of converting Personalis equity positions into Tempus equivalents while ensuring fractional interests are resolved in cash.

The treatment of fractional shares is typical in merger transactions where the exchange ratio and varying stock prices could result in holders receiving non-whole share amounts. By providing cash in lieu of fractional shares, the transaction eliminates administrative complexity and ensures clean position conversion at closing. Post-closing distributions, if any, would be governed by the terms set forth in the full Merger Agreement.

Regulatory Approval and Tax Treatment Intentions

Both the Tempus board of directors and the Personalis board of directors have approved the execution and delivery of the Merger Agreement and the contemplated transactions. The Personalis Board of Directors has recommended to Personalis stockholders that they adopt the Merger Agreement, subject to its terms and conditions. This approval pathway indicates that the transaction has met the internal governance requirements of both acquiring and target companies and is progressing toward stockholder consideration at Personalis.

The filing confirms that the parties intend the transaction to qualify as a reorganization under Section 368(a) of the Internal Revenue Code, which would provide favorable tax treatment to participating shareholders. However, the filing does not provide detailed tax analysis or confirm that such treatment has been obtained through opinion or other external validation. Shareholders should consult with their individual tax advisors regarding the specific tax consequences of the transaction to their particular circumstances.

Cancelled Shares and Dissenting Stockholder Rights

The Merger Agreement excludes certain Personalis shares from merger consideration. Shares owned or held in treasury by Personalis itself, or owned by Tempus, the merger subsidiaries, or their controlled affiliates, will be cancelled without any consideration. These "cancelled shares" are typically reacquired shares or shares held by related entities and represent equity that will be eliminated through the merger process.

The agreement also provides for Delaware statutory appraisal rights. Shares held by stockholders who have exercised and perfected appraisal rights in accordance with Delaware General Corporation Law will be separately treated and excluded from conversion into merger consideration. These dissenting shares will be subject to appraisal proceedings under Delaware law, allowing dissenting shareholders to seek judicial determination of fair value if they follow required statutory procedures.

Nasdaq Listing and Outstanding Share Considerations

The merger agreement specifies that the Tempus Class A common stock to be issued as stock consideration in the transaction will be listed on Nasdaq, the national securities exchange where Tempus currently trades under the ticker symbol TEM. This provision ensures that Personalis shareholders receiving stock consideration will receive freely tradable shares on a major national exchange without requiring a separate listing process. The continued Nasdaq listing preserves liquidity and price discovery mechanisms for merged-entity shareholders.

The filing does not disclose the total number of Personalis shares outstanding immediately prior to the effective time of the merger, though this figure is incorporated into the calculation of the per-share consideration and the potential cash election mechanics. The exchange ratio adjustments and the cash consideration alternative are designed to provide Personalis shareholders with certainty regarding the per-share value received, even as the stock consideration component varies based on Tempus valuation at closing.