12.	Commitments and Contingencies

150 Second Street

In 2013, the Company signed a lease (the “Headquarters Lease”) for approximately 61,591 square feet of office and laboratory space (the “Existing Premises”) at 150 Second Street in Cambridge, Massachusetts (the “Headquarters Building”). The Headquarters Lease commenced in September 2013, and initially had an eight year expected term. The Headquarters Lease is subject to fixed rate escalation increases and the landlord waived the Company’s rent obligation for the first 10.5 months of the lease, having an initial value of $3,300,000. The landlord also agreed to fund up to $9,239,000 in tenant improvements. The Company recorded the tenant improvements as leasehold improvements and deferred rent on the consolidated balance sheet. Deferred rent is amortized as a reduction in rent expense over the term of the Headquarters Lease. The Company recognizes rent expense on a straight-line basis over the expected lease term. In connection with the Company’s termination of its prior lease at One Kendall Square, the rent abatement was reduced to approximately $1,841,000 and the expected term of the Headquarters Lease was reduced to 7.5 years. The Company began to record rent expense in April 2013 upon gaining access to and control of the space. Upon execution of the Headquarters Lease, the Company paid a security deposit of $1,725,000 which was reduced to approximately $864,000 in 2014. The security deposit is included in restricted cash in the accompanying balance sheet as of December 31, 2017 and December 31, 2016.

On June 30, 2014, the Company executed a Second Amendment to Lease amending the Headquarters Lease, resulting in the Company leasing 8,164 square feet of additional space in the Headquarters Building commencing in November 2014. The Company began recording rent expense upon gaining access to and control of the additional space in July 2014. The landlord also funded $1,020,500 in normal tenant improvements.

On September 30, 2016, the Company entered into three separate yet related agreements to expand its premises at the Headquarters Building. In connection with these agreements, on May 1, 2017 (“Effective Date”), bluebird bio, Inc. (“Bluebird”) surrendered approximately 53,455 square feet of space previously leased by Bluebird in the Headquarters Building (“Bluebird Premises”), and the Company became the sole tenant of the Headquarters Building, leasing approximately 123,210 square feet of office and laboratory space. The three agreements include a Third Amendment to Lease with the landlord to amend the Headquarters Lease (“Third Amendment”), an Assignment and Assumption of Lease (the “Assignment”) with Bluebird for the assignment of the lease dated as of June 3, 2013, as amended, between the landlord and Bluebird (the “Bluebird Lease”) to the Company, and a Consent to Assignment (the “Consent”), among the landlord, the Company and Bluebird, providing required consents for the assignment of the Bluebird Lease to the Company.

On the Effective Date, the Headquarters Lease was amended as provided in the Third Amendment. Pursuant to the Third Amendment: (i) the Company was entitled to a partial abatement of base rent payable under the Headquarters Lease for each of the first two calendar months following the Effective Date (provided the Company was not in default under the Third Amendment or the Bluebird Lease), (ii) the term of the Headquarters Lease was extended through April 30, 2024, (iii) the Company has the right to extend the term for one subsequent five-year period, (iv) the Company will pay annual base rent on the Existing Premises (ranging from $70.51 to $83.42 per square foot) in accordance with the rent schedule attached to the Third Amendment, with semi-annual adjustments beginning in January and July of each calendar year, and (v) the landlord provided $2,500,000 in tenant improvement allowances to improve the Headquarters Building, including the Existing Premises, the Bluebird Premises and the lobby. The Company recorded the tenant improvements as leasehold improvements and deferred rent on the consolidated balance sheet. Pursuant to the Assignment, the Company assumed the Bluebird Lease and will pay annual base rent on the Bluebird Premises (ranging from $62.83 to $72.84 per square foot) in accordance with the Bluebird Lease. The Third Amendment also requires the Company to increase its security deposit by amending the letter of credit for the Headquarters Lease to $1,771,009, and to amend the terms of the letter of credit to serve as security for both the Third Amendment and the Bluebird Lease.

The Company recorded rent expense of $5,983,000, $2,534,000, and $2,534,000 for the years ended December 31, 2017, 2016 and 2015, respectively, associated with the Headquarters Lease.

Ten Canal Park Lease

The Company signed a facility lease (the “Ten Canal Lease”) on March 11, 2015 for office space at Ten Canal Park in Cambridge, Massachusetts (the “Leased Space”). The Ten Canal Lease commenced on March 12, 2015, which was the date the landlord received the Letter of Credit (as defined in the Ten Canal Lease), and expires on August 31, 2020. The Company began paying rent of $172,850 per month, commencing in August 2015, for the first year with scheduled escalating rent payments thereafter, and received $1,995,550 from the landlord for tenant improvements to the Leased Space. In connection with the Ten Canal Lease, the Company provided a security deposit in the amount of $1,037,000, which was reduced to approximately $530,550 in June 2015. The security deposit is included in restricted cash in the accompanying balance sheets as of December 31, 2017 and 2016.

The Company recorded rent expense of $1,630,000, $1,630,000, and $1,279,000 for the years ended December 31, 2017, 2016 and 2015, respectively, associated with the Ten Canal Lease.

Research Triangle Park Lease Agreement

On April 18, 2016, the Company entered into a facility lease agreement (the “ARE Lease”) with ARE-7030 Kit Creek, LLC (the “Landlord”) for the lease of approximately 48,236 square feet of office and laboratory space located in a building at 7010 Kit Creek Road, Research Triangle Park, North Carolina (the “Premises”). The term of the ARE Lease commenced on April 18, 2016 and expires on January 31, 2022. Upon certain conditions set forth in the ARE Lease, the Company has the option to extend the ARE Lease for two additional five-year terms.

The Company will pay rent of $86,423 per month, beginning in January 2017, subject to annual 3% increases beginning February 1, 2018, throughout the term of the ARE Lease. The Company is entitled to an abatement of fixed rent for the first nine months of the term. In addition, the Company, at its election, shall receive up to $1,205,900 from the Landlord for tenant improvements to the Premises, a certain portion of which may be repayable to the Landlord as specified in the ARE Lease. The Company was not obligated to provide a security deposit in connection with signing the ARE Lease.

The Company recorded rent expense of $923,000 and $675,000 for the years ended December 31, 2017 and 2016, respectively, associated with the ARE Lease.

Palo Alto, CA Lease

On April 21, 2017, the Company entered into a Second Amendment to Lease (the “Palo Alto Amendment”) with PAOC, LLC (“PAOC”) amending the lease between the Company and PAOC for the lease of approximately 1,975 square feet of office space located in a building at 525 University Avenue, Palo Alto, California. The Palo Alto Amendment extended the term of the lease for a period of 60 months, expiring on April 30, 2022.

The Company will pay rent of $17,775 per month, beginning in June 2017, subject to annual 3% increases beginning May 1, 2018, throughout the term of the amended lease. The Company is entitled to an abatement of fixed rent for the month of May 2017.

The Company recorded rent expense of $220,000 for the year ended December 31, 2017, associated with the Palo Alto Amendment.

Penzberg, Germany Lease

On September 9, 2016, the Company entered into a facility lease agreement (the “Penzberg Lease”) with Roche Diagnostics, GmbH (“Roche Diagnostics”) for the lease of office and laboratory space located in Penzberg, Germany (the “Leased Premises”). The initial term of the Penzberg Lease commenced on September 9, 2016 and expires on September 8, 2021. Upon certain conditions set forth in the Penzberg Lease, the Company has the option to extend the term of the Penzberg Lease for additional two-year terms. Commencing March 1, 2017, but not later than May 1, 2017, at the request of the Company, the Penzberg Lease shall be expanded to include additional space as described in the Penzberg Lease.

The Company began paying rent of approximately $22,000 per month in September 2016 (“Base Rent”). Base Rent will increase upon the Company exercising its option to take possession of the additional space in 2017, but the rate of the Base Rent is fixed through December 31, 2017. Commencing January 1, 2018, Base Rent may be adjusted by Roche Diagnostics up to a maximum increase of 2% per annum, compared with Base Rent for the immediately preceding year. The Company is not obligated to provide a security deposit in connection with the Penzberg Lease.

The Company recorded rent expense of $286,000 and $79,000 for the years ended December 31, 2017 and 2016, respectively, associated with the Penzberg Lease.

As of December 31, 2017, the minimum future rent payments under the Company’s lease agreements were as follows:

2018	$	12,218
2019		12,550
2020		11,947
2021		10,893
2022		9,748
Thereafter		13,242
Total minimum lease payments	$	70,598

Supply Agreement

In July 2013, the Company entered into a five-year supply, service and support agreement, which was most recently amended in April 2017 (the “Supply Agreement”), with Illumina, Inc. (“Illumina”) for Illumina to provide products and services that support and can be used for the gene sequencing component of its molecular testing activities. During the term of the Supply Agreement, Illumina will supply the Company and our German subsidiary with sequencers, reagents and other consumables for use with the Illumina sequencers, and service contracts for the maintenance and repair of the sequencers.

During the term of the Supply Agreement, the Company is required to make a rolling forecast of its expected needs for reagents and other consumables, and it may place purchase orders for reagents and other consumables that conform to such forecast. Illumina may not unreasonably reject conforming purchase orders and will, in its reasonable discretion, accept additional purchase orders for quantities of reagents and other consumables beyond the Company’s forecast requirements. During each six-month period the Company has a binding obligation to purchase an amount of reagents and other consumables equal to the greater of a percentage of its six-month forecast and a fixed minimum amount. Subject to discounts that vary depending on the volume of hardware and reagents and other consumables ordered, the price for sequencers and for service contracts is based on Illumina list prices, and the price for reagents and other consumables is based on contract prices that are fixed for a set period of time and may increase thereafter subject to limitations. The Supply Agreement does not require the Company to order minimum amounts of hardware, or to use exclusively the Illumina platform for conducting its sequencing. As of December 31, 2017, the Company’s minimum remaining purchase commitment for the remainder of the term of the Supply Agreement was not lower than approximately $11,743,000.

Legal Matters

From time to time, the Company is party to litigation arising in the ordinary course of its business. As of December 31, 2017, the Company was not currently a party to any significant litigation. On July 28, 2017, a purported stockholder of the Company filed a putative class action in the U.S. District Court for the District of Massachusetts, against the Company and certain of its current and former executives, captioned Mahoney v. Foundation Medicine, Inc., et al., No. 1:17-cv-11394. The complaint alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder based on allegedly false and misleading statements when providing 2015 financial guidance. The lawsuit seeks among other things, unspecified compensatory damages in connection with the Company’s allegedly inflated stock price between February 26, 2014 and November 3, 2015, interest, attorneys’ fees and costs, and unspecified equitable/injunctive relief. On December 22, 2017, the plaintiffs filed an amended class action complaint alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder based on allegedly false and misleading statements concerning certain of the Company’s tests. On February 20, 2018, the Company moved to dismiss the complaint for failure to state a claim. We believe this case is without merit and, therefore, continue to vigorously defend ourselves against the allegations.