UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): January 11, 2015

 

 

Foundation Medicine, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-36086   27-1316416

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

 

150 Second Street

Cambridge, MA

  02141
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code (617) 418-2200

Not Applicable

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

x   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 1.01. Entry into a Material Definitive Agreement.

Transaction Agreement

On January 11, 2015, Foundation Medicine, Inc., a Delaware corporation (the “Company” or “Foundation Medicine”), entered into a Transaction Agreement (the “Transaction Agreement”), by and between the Company and Roche Holdings, Inc., a Delaware corporation (together with its affiliates, the “Investor”), pursuant to which, among other things, (a) the Investor will make a primary investment of $250 million in cash to purchase 5 million newly issued shares (the “Issuance Shares”) of common stock of the Company, par value $0.0001 per share (the “Company Common Stock”), at a price of $50.00 per share (the “Issuance”), and (b) the Investor will commence a tender offer to purchase outstanding shares of Company Common Stock (the “Offer” and together with the Issuance, the “Investment”). The Offer will be for the purchase by the Investor of approximately 15.6 million shares of Company Common Stock at a price of $50.00 per share (the “Offer Price”) so that, when combined with the Issuance Shares and existing shares of Company Common Stock owned by Roche Holding Ltd and its subsidiaries, the Investor will own approximately 56.3% of the outstanding shares of Company Common Stock on a fully diluted basis at the closing of the transactions contemplated by the Transaction Agreement (the “Closing”). The Offer is conditioned upon the Company’s existing stockholders tendering sufficient shares of Company Common Stock in the Offer for the Investor to own at least 52.4% of the outstanding shares of Company Common Stock on a fully diluted basis at the Closing (taking into account the Issuance Shares and existing shares of Company Common Stock owned by Roche Holding Ltd and its subsidiaries). In the event of an over-subscription by stockholders in the Offer, shares validly tendered and not validly withdrawn prior to expiration of the Offer will be subject to proration.

Pursuant to the Transaction Agreement, effective as of the time at which shares of Company Common Stock are first accepted for payment under the Offer (such time, the “Acceptance Time”), subject to approval by the stockholders of the Company, the certificate of incorporation of the Company in effect immediately prior to the Acceptance Time will be amended to provide for, among other things, the declassification of the Board of Directors of the Company (the “Board of Directors”) and the waiver of the corporate opportunity doctrine with respect to the Investor and its affiliates (the “Company Charter Amendments”).

Each of the Company and the Investor has made customary representations, warranties and covenants in the Transaction Agreement, including, among others, covenants by the Company: (a) to conduct its business in the ordinary course, consistent with past practice, during the interim period between the execution of the Transaction Agreement and the closing of the Issuance; (b) not to solicit competing proposals during such period; (c) to convene and hold a meeting of the stockholders of the Company to approve the Company Charter Amendments, the Transaction Agreement and the transactions contemplated thereby (including the Issuance) and the Investor’s anti-dilution protection rights under the Investor Rights Agreement described below (the “Company Stockholder Approval”); and (d) that, subject to limited customary exceptions, the Board of Directors will recommend the Offer and the Company Stockholder Approval to the stockholders of the Company. If the Closing occurs, the Transaction Agreement also provides for the Company to indemnify the Investor for breaches of the Transaction Agreement by the Company subject to negotiated limitations.

The Investor’s obligation to consummate the Offer is subject to certain conditions, including, among other things, (a) that there shall have been validly tendered and not validly withdrawn prior to the Acceptance Time that number of shares of Company Common Stock that, when combined with the Issuance Shares and existing shares of Company Common Stock owned by Roche Holding Ltd and its subsidiaries, represents at least 52.4% of the outstanding shares of Company Common Stock on a fully diluted basis, (b) the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (c) receipt of the Company Stockholder Approval, (d) the Collaboration Agreements and Investor Rights Agreement described below continuing in full force and effect, and (e) the approval of the Issuance Shares for listing on the NASDAQ Global Select Market. Neither the Offer nor the Issuance is subject to a financing condition.

The Transaction Agreement also contains certain termination rights for both the Company and the Investor, including, among other things, for (a) the failure of the Acceptance Time to occur by October 11, 2015, (b) the enactment, adoption, enforcement, promulgation or application of any final and non-appealable applicable law, order, injunction or judgment that makes the consummation of the Offer or the Issuance illegal or otherwise prohibited or permanently enjoins either the Company or the Investor from consummating the Offer or the Issuance, (c) the failure to receive the Company Stockholder Approval, and (d) breaches of representations, warranties or


covenants by a party that, in the case of the Company, result in the failure of certain conditions to closing being satisfied, or, in the case of the Investor, would reasonably be expected to prevent the Investor from consummating the Offer or the Issuance. Prior to the Acceptance Time, the Company has the right to terminate the Transaction Agreement in connection with entering into a definitive agreement with respect to a superior proposal with a third party, subject to certain conditions, including the Company’s compliance with certain procedures set forth in the Transaction Agreement and payment of a termination fee of $30 million by the Company.

The Board of Directors of the Company unanimously adopted resolutions (a) determining and declaring that each of the Transaction Documents (as defined below) and the transactions contemplated thereby, including the Offer, the Issuance and the Company Charter Amendments, are advisable and in the best interests of the Company and its stockholders, (b) approving the Offer, the Issuance, the Company Charter Amendments and the transactions contemplated by the Transaction Documents in accordance with the requirements of the Delaware General Corporation Law, (c) approving and declaring advisable each of the Transaction Documents and the transactions contemplated thereby, including the Offer, the Issuance and the Company Charter Amendments and (d) consenting to the Offer and recommending that the stockholders of the Company accept the Offer and vote their shares in favor of the Company Stockholder Approval.

The foregoing description of the Transaction Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Transaction Agreement, a copy of which is filed as Exhibit 2.1 to this Current Report on Form 8-K and is incorporated herein by reference.

The Transaction Agreement has been included to provide investors and security holders with information regarding its terms. It is not intended to provide any other financial information about the Company, the Investor or their respective subsidiaries and affiliates. The representations, warranties and covenants contained in the Transaction Agreement were made only for purposes of that agreement and as of specific dates; were solely for the benefit of the parties to the Transaction Agreement; may be subject to limitations and indemnification obligations agreed upon by the parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Transaction Agreement instead of establishing these matters as facts; and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Stockholders of the Company and other investors are not third-party beneficiaries under the Transaction Agreement and should not rely on the representations, warranties and covenants or any description thereof as characterizations of the actual state of facts or condition of the Company, the Investor 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 Transaction Agreement, which subsequent information may or may not be fully reflected in public disclosures by the Company.

Collaboration Agreements

In connection with the Investment and simultaneously with the execution of the Transaction Agreement, the Company entered into a strategic collaboration with certain affiliates of the Investor to develop and commercialize comprehensive molecular information and genomic analysis products for the treatment of cancer patients (the “Collaboration”) pursuant to (a) a Collaboration Agreement (the “R&D Collaboration Agreement”), by and between F. Hoffmann-La Roche Ltd (“Roche Basel”), Hoffmann-La Roche Inc. (“Roche U.S.” and together with Roche Basel, “Roche”) and the Company, (b) a US Education Collaboration Agreement (the “U.S. Education Collaboration Agreement”), by and between Genentech, Inc. (“Genentech”) and the Company, (c) an Ex-US Commercialization Agreement (the “Ex-U.S. Commercialization Agreement”), by and between Roche Basel and the Company and (d) a Binding Term Sheet for an In Vitro Diagnostics (IVD) Agreement (the “IVD Term Sheet” and, collectively with the R&D Collaboration Agreement, the U.S. Education Collaboration Agreement and the Ex-U.S. Commercialization Agreement, the “Collaboration Agreements”), by and between Roche Basel and the Company, each of which will become effective at the Acceptance Time.

Pursuant to the R&D Collaboration Agreement, the Company and Roche will collaborate on multiple programs related to the use and development of products and services for use in molecular information, immunotherapy, circulating tumor DNA, and companion diagnostics. These programs will be conducted pursuant to agreed-upon work plans and be subject to the oversight of a joint research and development committee. Under


the molecular information platform program, Roche will pay the Company a guaranteed $85 million over five years for the molecular genomic profiling of a minimum number of cancer samples and to access the Company’s molecular information database. Roche will also pay the Company up to approximately $74 million for the currently contemplated scope of activities related to the immunotherapy testing platform program, the circulating tumor DNA platform program and the companion diagnostics platform program. In addition, Roche may purchase the Company’s products and services used in connection with the programs under the R&D Collaboration Agreement. Either the Company or Roche may terminate the R&D Collaboration Agreement in the event of a breach of the agreement by the other party.

Pursuant to the U.S. Education Collaboration Agreement, the Company and Genentech, a wholly-owned subsidiary of Roche, will jointly conduct an education support program for healthcare professionals in the United States regarding the use of next-generation sequencing and comprehensive genomic profiling technology. Genentech will develop education materials based upon information related to comprehensive genomic profiling provided by the Company, and the Company and Genentech will share the costs related to the development of such materials. In addition, in the event the Company seeks to promote any companion diagnostic product developed under the R&D Collaboration Agreement for use with a Genentech therapeutic in the United States, Genentech will have a right of first negotiation with respect to the co-promotion of such companion diagnostic product. The U.S. Education Collaboration Agreement will remain in effect for five years, and either party may terminate the agreement without cause upon six months’ written notice during the first year of the term and upon three months’ written notice thereafter, and either party may terminate in the event of a breach by the other party.

Pursuant to the Ex-U.S. Commercialization Agreement, Roche will have the right to commercialize the Company’s existing clinical diagnostic testing products, including FoundationOne and FoundationOne Heme, any clinical diagnostic products developed under the R&D Collaboration Agreement and any other products upon mutual agreement. Beginning one year after the execution of the Ex-U.S. Commercialization Agreement, Roche will have the exclusive right to commercialize such products worldwide, excluding the United States and any countries Roche elects to exclude during the first year of the term. Roche also holds a right of first negotiation with respect to the commercialization of the Company’s future clinical diagnostic products, excluding in vitro diagnostic tests and companion diagnostic products developed by the Company for third parties. Roche may pay the Company an agreed amount for the right to extend the launch timeline for FoundationOne and FoundationOne Heme by specified periods in specified countries. Roche will also pay agreed upon royalties and commercial milestones. Further, if Roche fails to meet certain minimum revenue requirements for FoundationOne or FoundationOne Heme tests in three consecutive years in a specified country, the Company has the right to terminate Roche’s exclusive commercialization rights in the applicable country. The Ex-U.S. Commercialization Agreement will remain in effect for five years and may be extended by Roche for additional two-year periods. Roche shall have the right to terminate the agreement without cause upon six months’ written notice after the initial five year term, and either party may terminate in the event of breach by the other party.

Pursuant to the IVD Term Sheet, the Company and Roche have agreed to use commercially reasonably efforts to negotiate and enter into a definitive agreement within one year after the closing of the Investment regarding a non-exclusive collaboration to develop and commercialize in vitro diagnostic versions of certain existing Company products, including FoundationOne and FoundationOne Heme, and future Company products, including those developed under the R&D Collaboration Agreement (the “IVD Kits”). Such definitive agreement will provide that the Company may not develop IVD Kits that use a sequencing platform owned or controlled by Roche for internal purposes or with third parties without the prior written consent of Roche. The IVD Term Sheet contemplates that Roche will bear all development costs related to the development of the Roche sequencing platform. The IVD Term Sheet will control this relationship between the parties for one year unless extended by mutual agreement or the parties enter into a definitive agreement.

The foregoing descriptions of the R&D Collaboration Agreement, the U.S. Education Collaboration Agreement, the Ex-U.S. Commercialization Agreement and the IVD Term Sheet and the transactions contemplated thereby do not purport to be complete and are subject to, and qualified in their entirety by, the full text of such agreements, redacted copies of which will be filed as exhibits to the Company’s reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and upon filing will be incorporated herein by reference. The Company intends to submit a FOIA Confidential Treatment Request to the SEC (as defined herein) pursuant to Rule 24b-2 under the Exchange Act, requesting that it be permitted to redact certain portions of the R&D Collaboration Agreement, the U.S. Education Collaboration Agreement, the Ex-U.S. Commercialization Agreement and the IVD Term Sheet. The omitted material will be included in the request for confidential treatment.


Investor Rights Agreement

In connection with the Investment and simultaneously with the execution of the Transaction Agreement, the Company, Roche Holdings, Inc. and certain existing stockholders of the Company (the “Existing VC Investors”) entered into an Investor Rights Agreement, which will become effective at the Acceptance Time (the “Investor Rights Agreement”). The Existing VC Investors include Third Rock Ventures, L.P., affiliates of KPBC Holdings, Inc. and Google Ventures 2011, L.P.

Board Representation . Under the terms of the Investor Rights Agreement, immediately following the Closing, the Board of Directors will consist of nine directors, consisting of (a) three directors designated by the Investor, who initially shall include Daniel O’Day, (b) two of the current independent directors affiliated with the Existing VC Investors, (c) three additional independent directors (the “Independent Directors”), who shall initially be current directors Evan Jones and David Schenkein and a third director to be agreed upon by the Company and the Investor prior to the Closing, and (d) Michael Pellini, the Chief Executive Officer of the Company (the foregoing, the “Board Composition”). It is expected that Alexis Borisy will remain as Chairman of the Board of Directors of the Company following the Closing.

Pursuant to the Investor Rights Agreement, following the Closing: (a) so long as the Investor beneficially owns at least 10% of the outstanding shares of Company Common Stock, it will be entitled to (i) the lesser of (A) the number of seats representing 33.34% of the Board of Directors and (B) proportionate representation on the Board of Directors, but in any event, at least one director designee and (b) so long as the Investor is entitled to appoint at least one director to the Board of Directors, it will be entitled to proportionate representation on each committee of the Board of Directors, but in any event, at least one director designee on each committee, subject to compliance with the applicable rules of the SEC and the NASDAQ Stock Market. Notwithstanding the foregoing, directors appointed by the Investor may be excluded from any discussions of the Board of Directors regarding any actual or potential collaboration agreement between the Company and any pharmaceutical, biotechnology or biopharmaceutical company that is at such time an actual competitor of the Investor and which is similar in scope, nature and value to the ordinary course collaboration agreements of the Company existing as of the date hereof ( i.e. , agreements pursuant to which the Company has agreed to provide genomic sequencing services to pharmaceutical, biotechnology and biopharmaceutical companies to support research and development or patient treatment, or to work with such companies to collect and use human molecular and other patient information for such company’s research, development and commercialization efforts).

Consent Rights . Until such time as the Investor beneficially owns less than a majority of the outstanding shares of Company Common Stock (subject to a cure period), the Company (and its subsidiaries) may not take certain actions without the Investor’s prior written consent, including any of the following: (a) appoint a new Chief Executive Officer of the Company; (b) incur any indebtedness (as defined in the Investor Rights Agreement) that would result in the outstanding aggregate principal amount of the indebtedness of the Company and its subsidiaries exceeding the lesser of (A) $200 million and (B) 20% of the Company’s aggregate market capitalization at the time of such incurrence; (c) issue or sell any equity securities (including any securities convertible or exercisable into such equity securities), other than (X) Company Common Stock issued pursuant to equity awards granted as of the Closing in accordance with their terms, (Y) equity awards granted after the Closing pursuant to the Company’s 2013 Stock Option and Incentive Plan or any permitted new equity incentive plan or equity incentive plan amendment and (Z) in connection with permitted acquisitions, certain shares of Company Common Stock issued as stock consideration as long as such issuance does not result in the Investor beneficially owning less than 50.5% of the outstanding shares of Company Common Stock on a fully diluted basis; (d) establish or amend any equity incentive plan of the Company, except for certain equity plans; (e) acquire any entity, business or assets if the aggregate consideration payable by the Company and its subsidiaries exceeds the lesser of (A) $200 million and (Y) 20% of the Company’s aggregate market capitalization at the time of such transaction, unless the Investor is separately contemplating acquiring the same entity, business or assets; (f) dispose of any entity, business or assets if the aggregate consideration payable to the Company and its subsidiaries exceeds $50 million; (g) change the scope and nature of the Company’s business; (h) amend the organizational documents of the Company or any of its subsidiaries; (i) take any action that would impair in any material respect the Company’s ability to perform its obligations under the Investor Rights Agreement or the Investor’s rights thereunder; or (j) voluntarily dissolve or liquidate or make any voluntary bankruptcy filings.


Voting Obligations . As long as the Investor is entitled to appoint at least one director to the Board of Directors, the Investor will be required to (a) cause all of its shares of Company Common Stock to be present for quorum purposes at any meeting of the stockholders of the Company, (b) vote all of its shares of Company Common Stock to approve any matter requiring approval by the Investor described in the preceding paragraph that the Investor has approved within the previous six months and (c) vote all of its shares of Company Common Stock in connection with the election of directors or the adoption of certain equity plans either (i) in accordance with the recommendation of the Board of Directors or (ii) in the same proportion as the votes cast by all stockholders of the Company other than the Investor and its affiliates.

Standstill Provisions . Under the terms of the Investor Rights Agreement, during the period following the Closing and ending on the date three years following the Closing (the “Restricted Period”), the Investor will be restricted from acquiring additional shares of Company Common Stock, except in order to offset dilution and maintain its aggregate percentage ownership in the Company at no less than 50.5% of the outstanding shares of Company Common Stock on a fully diluted basis. During the Restricted Period and for as long as the Investor has the right to designate a director, the Investor shall not make any proxy solicitations in connection with the election or removal of directors, or knowingly encourage or facilitate a third party to engage in any such solicitation, subject to certain limited exceptions.

Following the Restricted Period, the Investor will be permitted to make an offer to purchase all remaining shares of Company Common Stock held by the other stockholders of the Company (an “Investor Buyout Offer”). Prior to the fifth anniversary of the Closing, any Investor Buyout Offer shall be made on a confidential basis, subject to the review, evaluation and approval of a special committee of independent directors who are unaffiliated with the Investor and are not officers or employees of the Company (the “Disinterested Directors”) and subject to a non-waivable condition that a majority of the shares of Company Common Stock held by stockholders of the Company not affiliated with the Investor approve the Investor Buyout Offer. From and after the fifth anniversary of the Closing, any Investor Buyout Offer may be made directly to the stockholders of the Company without the review, evaluation or approval of the Board or the Disinterested Directors, as long as it is subject to the non-waivable condition that a majority of the shares of Company Common Stock held by stockholders of the Company not affiliated with the Investor approve the Investor Buyout Offer. If, from and after the fifth anniversary of the Closing, the Investor makes an Investor Buyout Offer, then at any subsequent annual meeting of the stockholders of the Company (or special meeting called for the purpose of electing directors), the Investor will be entitled to nominate any individuals who qualify as independent directors under the terms of the Investor Rights Agreement.

The standstill restrictions on the Investor will automatically terminate if the Company enters into a definitive agreement with respect to, or the Board recommends to the Company’s stockholders, a transaction pursuant to which any person or group would acquire, directly or indirectly, voting securities of the Company representing more than 20% of the aggregate voting power of all then-outstanding voting securities of the Company.

Anti-dilution Protections . The Company has agreed to establish and maintain a stock repurchase program at all times following the Closing and to repurchase shares of Company Common Stock in order to maintain the Investor’s aggregate percentage ownership in the Company following the Company’s issuance of the Issuance Shares at no less than 50.5% of the outstanding shares of Company Common Stock on a fully diluted basis, less any shares transferred by the Investor. The Company’s obligation to maintain such stock repurchase program will terminate upon the earlier of (a) any transfer by the Investor of shares of Company Common Stock, following which the Investor beneficially owns less than 40% of the outstanding shares of Company Common Stock on a fully diluted basis and (b) the Investor beneficially owning less than 30% of the outstanding shares of Company Common Stock.

Following the Closing and until the date on which the Investor beneficially owns less than 30% of the outstanding shares of Company Common Stock, the Investor also will hold a continuing option to purchase shares of Company Common Stock from the Company or in the open market, at prevailing market prices, in order to maintain the Investor’s aggregate percentage ownership in the Company at no less than 50.5% of the outstanding shares of Company Common Stock on a fully diluted basis, less any shares transferred by the Investor (the “Share Percentage


Cap”). If the Company fails to or is unable to satisfy its repurchase obligations under the stock repurchase program described above, and the Investor purchases shares of Company Common Stock from the Company or in the open market, the Share Percentage Cap will be increased by the percentage of the outstanding shares of Company Common Stock, on a fully diluted basis, represented by the shares of Company Common Stock that the Investor was required to purchase at its cost in order to maintain its aggregate percentage ownership in the Company.

In the event that the Company issues any securities and, as a result thereof, the Investor beneficially owns less than 50.1% of the outstanding shares of Company Common Stock on a fully diluted basis, the restrictions on the Investor under the Investor Rights Agreement (including with respect to the agreement to vote the Investor’s shares of Company Common Stock, the standstill restrictions and transfer restrictions), but not the rights of the Investor under the Investor Rights Agreement, will immediately terminate, and the Investor will thereafter have the ability to exercise in full its rights as a stockholder of the Company.

Restrictions on Transfer of Shares . The Investor may not transfer any shares of Company Common Stock for a period of three years after the Closing. Thereafter, subject to certain exceptions, the Investor may not transfer any shares of Company Common Stock to any person or group, if such person or group would beneficially own in excess of 10% of the outstanding shares of Company Common Stock following such transfer, without the prior consent of a special committee of Disinterested Directors. Following the fifth anniversary of the Closing, the Investor will be permitted to transfer all (but not less than all) of its shares of Company Common Stock to a third party that has made an offer to the Company or its stockholders (including pursuant to a tender offer) to purchase all of the outstanding shares of Company Common Stock if the price, form of consideration and other terms and conditions of the transfer offered to the Investor are the same (or no more favorable) than the price, form of consideration and other terms and conditions offered to all other stockholders of the Company, other than (a) fair market consideration payable in exchange for entering into restrictive covenants and (b) commercial agreements (including with respect to transition services) on arms’-length terms, in each case that the purchaser requires as a condition to the transaction.

Registration Rights . Following the third anniversary of the Closing, the Investor will be entitled to customary demand and piggyback registration rights, subject to customary underwriter cutbacks.

Matters Reserved for Approval of the Disinterested Directors . For as long as there is at least one director on the Board designated by the Investor, the following actions will require approval of a majority of the Disinterested Directors (or a special committee of Disinterested Directors): (a) any transaction between the Investor or any of its affiliates, on the one hand, and the Company or any of its subsidiaries, on the other hand; (b) any enforcement or waiver of the rights of the Company or any of its subsidiaries under any agreement between the Company or any of its subsidiaries, on the one hand, and the Investor or any of its affiliates, on the other hand; and (c) any purchase of shares of Company Common Stock by the Investor or any of its affiliates, except as otherwise expressly set forth in the Investor Rights Agreement.

Freedom to Pursue Opportunities . Neither the Investor nor the Company will be required to offer a corporate opportunity to the other, and except as agreed in connection with the Collaboration or as part of the Investor Rights Agreement, there will be no restrictions on the Company’s or the Investor’s ability to engage in similar activities or lines of business.

Termination . The Investor Rights Agreement will automatically terminate on the later of the date the Investor beneficially owns less than 10% of the outstanding shares of Company Common Stock or the date that the Investor owns no Registrable Securities (as defined in the Investor Rights Agreement).

The foregoing description of the Investor Rights Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Investor Rights Agreement, a copy of which is filed as Exhibit 4.1 to this Current Report on Form 8-K and is incorporated herein by reference.


Tax Sharing Agreement

Simultaneously with the execution of the Transaction Agreement, the Company entered into a Tax Sharing Agreement (the “Tax Sharing Agreement”) with the Investor to facilitate the inclusion of the Company with the Investor and/or one or more subsidiaries of the Investor in consolidated, combined or unitary income tax groups for certain state and local tax jurisdictions following the Closing. Pursuant to the Tax Sharing Agreement, the Company and the Investor have agreed to make payments such that the net amount paid by the Company on account of the Investor’s consolidated, combined or unitary taxes in respect of such state and local tax jurisdictions generally will be approximately as though the Company had filed separate, stand-alone income tax returns in such jurisdictions either on a stand-alone basis or as the common parent of a group of corporations, rather than as a consolidated subsidiary of the Investor. The Company will not be included in the Investor’s consolidated group for federal income tax purposes as a result of the Investment.

The foregoing description of the Tax Sharing Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Tax Sharing Agreement, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.

Tender and Support Agreements

Simultaneously with the execution of the Transaction Agreement, the Existing VC Investors also entered into separate tender and support agreements (the “Tender and Support Agreements” and, together with the Transaction Agreement, the Investor Rights Agreement, the Tax Sharing Agreement, the Existing IRA Amendment and the Collaboration Agreements, the “Transaction Documents”), pursuant to which the Existing VC Investors agreed, among other things, (a) to vote their respective shares of Company Common Stock in favor of the Company Stockholder Approval, (b) to tender at least 50% of their respective shares of Company Common Stock into the Offer and (c) if it would result in a higher participation in the Offer, to tender their respective shares of Company Common Stock in proportion to the other stockholders of the Company who are not parties to the Tender and Support Agreements. As of the date of the Tender and Support Agreements, the Existing VC Investors beneficially owned approximately 31% of the outstanding shares of Company Common Stock.

Pursuant to the Tender and Support Agreements, if the shares of Company Common Stock tendered in the Offer, when combined with the Issuance Shares and existing shares of Company Common Stock owned by Roche Holding Ltd and its subsidiaries, are not sufficient to result in the Investor owning at least 52.4% of the outstanding shares of Company Common Stock on a fully diluted basis immediately following the Closing, certain of the Existing VC Investors have agreed to tender up to 100% of their shares of Company Common Stock in order that tendered shares of Company Common Stock meet such threshold. The participation by the Existing VC Investors in the Offer is otherwise on the same terms and conditions as the other stockholders of the Company, including the Offer Price and proration provisions in the event that the Offer is oversubscribed.

Pursuant to the Investor Rights Agreement, so long as an Existing VC Investor has at least one representative on the Board of Directors, such Existing VC Investor will be required to (a) cause all of its shares of Company Common Stock to be present for quorum purposes at any meeting of the stockholders of the Company and (b) vote all of its shares of Company Common Stock in a manner consistent with the Board Composition described above.

The foregoing description of the Tender and Support Agreements and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Tender and Support Agreements, forms of which are filed as Exhibits 99.1, 99.2 and 99.3 to this Current Report on Form 8-K and are incorporated herein by reference.

Amendment to Existing Investors’ Rights Agreement

Simultaneously with the execution of the Transaction Agreement and effective at the Acceptance Time, the Company and certain stockholders of the Company entered into an Amendment (the “Amendment to Existing IRA”) to the Second Amended and Restated Investors’ Rights Agreement, dated as of June 20, 2013, by and among the


Company and the investors listed therein (the “Existing IRA”), pursuant to which such stockholders agreed to, among other things, grant additional registration rights to the Investor that are pari passu or senior to the registration rights of such stockholders under the Existing IRA and to subordinate certain registration rights in the Existing IRA to the registration rights of the Investor in the Investor Rights Agreement.

The foregoing description of the Amendment to Existing IRA and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Amendment to Existing IRA, a copy of which is filed as Exhibit 4.2 to this Current Report on Form 8-K and is incorporated herein by reference.

 

Item 3.02. Unregistered Sales of Equity Securities.

The information set forth in Item 1.01 of this Current Report on Form 8-K related to the Issuance and the Issuance Shares are hereby incorporated into this Item 3.02. The Company is relying on the exemption from the registration requirements of the Securities Act afforded by Section 4(2) thereof. The Investor represented that it is an “accredited investor” as defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”).

 

Item 3.03. Material Modification to Rights of Security Holder.

The information set forth in Item 1.01 of this Current Report on Form 8-K relating to the Investor Rights Agreement is hereby incorporated by reference into this Item 3.03.

The information set forth in Item 1.01 of this Current Report on Form 8-K relating to the Amendment to Existing IRA is hereby incorporated by reference into this Item 3.03.

 

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

The information set forth in Item 1.01 of this Current Report on Form 8-K relating to the Board Composition is hereby incorporated by reference into this Item 5.02.

 

Item 7.01 Regulation FD Disclosure.

On January 12, 2015, the Company issued a press release announcing the Transaction Documents and the Investment. A copy of the press release is attached hereto as Exhibit 99.1.

Pursuant to General Instruction B.2 of Form 8-K, this information filed under this item number and Exhibit 99.1 are not deemed to be “filed” for purposes of Section 18 of the Exchange Act, nor shall this item number and Exhibit 99.1 be incorporated by reference into the Company’s filings under the Securities Act or the Exchange Act, except as expressly set forth by specific reference in such future filing.

Important Information and Where To Find It

The tender offer described in this document (the “Offer”) has not yet commenced, and this document is neither an offer to purchase nor a solicitation of an offer to sell any shares of the common stock of Foundation Medicine or any other securities. On the commencement date of the Offer, a tender offer statement on Schedule TO, including an offer to purchase, a letter of transmittal and related documents, will be filed with the United States Securities and Exchange Commission (the “SEC”) by Roche Holdings, Inc., and a Solicitation/Recommendation Statement on Schedule 14D-9 will be filed with the SEC by Foundation Medicine. The offer to purchase shares of Foundation Medicine common stock will only be made pursuant to the offer to purchase, the letter of transmittal and related documents filed as a part of the Schedule TO. Also in connection with the proposed transactions, Foundation Medicine will file a proxy statement with the SEC. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE TENDER OFFER STATEMENT, THE SOLICITATION/RECOMMENDATION STATEMENT REGARDING THE OFFER AND THE PROXY STATEMENT, AS THEY MAY BE AMENDED FROM TIME TO TIME, WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Investors and security holders may obtain a free copy of these materials (when available) and


other documents filed with the SEC at the website maintained by the SEC at www.sec.gov or by directing such requests to the Information Agent for the tender offer which will be named in the tender offer statement. Copies of Foundation Medicine’s filings with the SEC may be obtained free of charge at the “Investors & Press” section of Foundation Medicine’s website at www.foundationmedicine.com or by contacting investor relations at 617-418-2283.

Certain Information Regarding Participants

Foundation Medicine and its directors, executive officers and other members of its management and employees may be deemed under SEC rules to be participants in the solicitation of proxies of Foundation Medicine’s stockholders in connection with the proposed transactions. Information concerning the interests of Foundation Medicine’s participants in the solicitation, which may, in some cases, be different than those of Foundation Medicine’s stockholders generally, is set forth in the materials filed by Foundation Medicine with the SEC, including in Foundation Medicine’s definitive proxy statement filed with the SEC on April 30, 2014, and will be set forth in the proxy statement relating to the transactions when they become available. These documents can be obtained free of charge from the sources indicated above.

Forward-Looking Statements

Statements in this Form 8-K may contain, in addition to historical information, certain statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Foundation Medicine has identified some of these forward-looking statements with words like “believe,” “may,” “could,” “would,” “might,” “possible,” “will,” “should,” “expect,” “intend,” “plan,” “anticipate,” or “continue,” the negative of these words, other terms of similar meaning or the use of future dates. Forward-looking statements in this Form 8-K include without limitation statements regarding the planned completion of the Offer, the Issuance, the planned meeting of the stockholders of the Company and the matters to be voted upon at such meeting. These statements are subject to risks and uncertainties that could cause actual results and events to differ materially from those anticipated, including, but not limited to, risks and uncertainties related to: uncertainties as to the timing of the transactions contemplated by the Transaction Documents; uncertainties as to the percentage of shares of Company Common Stock tendered in the Offer; the possibility that competing offers will be made; the possibility that various closing conditions for the transaction may not be satisfied or waived, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the transaction; the effects of disruption caused by the transaction making it more difficult for Foundation Medicine to maintain relationships with employees, collaborators, vendors and other business partners; the risk that stockholder litigation in connection with the transaction may result in significant costs of defense, indemnification and liability; the risks that any anticipated product launch or global expansion will be delayed, cancelled or unsuccessful; the unsuccessful realization of Foundation Medicine’s expectations and beliefs regarding the future conduct and growth of Foundation Medicine’s business and the markets in which it operates; and other risks and uncertainties discussed in Foundation Medicine’s filings with the SEC, including the “Risk Factors” sections of Foundation Medicine’s most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q, as well as the tender offer documents to be filed by Roche Holdings, Inc., the Solicitation/Recommendation Statement to be filed by Foundation Medicine and the proxy statement to be filed by Foundation Medicine. Foundation Medicine undertakes no obligation to update any forward-looking statements as a result of new information, future developments or otherwise, except as expressly required by law. All forward-looking statements in this Form 8-K are qualified in their entirety by this cautionary statement.

 

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

 

Exhibit
No.

  

Description

  2.1    Transaction Agreement, by and between Foundation Medicine, Inc. and Roche Holdings, Inc., dated January 11, 2015*
  4.1    Investor Rights Agreement, by and between Foundation Medicine, Inc. and Roche Holdings, Inc., dated January 11, 2015
  4.2    Amendment to Second Amended and Restated Investors’ Rights Agreement, by and between the Company and the Investors named therein, dated January 11, 2015


10.1    Tax Sharing Agreement, by and between Foundation Medicine, Inc. and Roche Holdings, Inc., dated January 11, 2015
99.1    Form of Tender and Support Agreement entered into by Roche Holdings, Inc. with Third Rock Ventures, L.P., dated January 11, 2015
99.2    Form of Tender and Support Agreement entered into by Roche Holdings, Inc. with affiliates of KPBC Holdings, Inc., dated January 11, 2015
99.3    Form of Tender and Support Agreement entered into by Roche Holdings, Inc. with Google Ventures 2011, L.P., dated January 11, 2015
99.4    Press Release, issued by the Company, dated January 12, 2015 (furnished herewith)

 

* The Company will furnish supplementally a copy of any omitted schedules to the SEC upon request; provided, however, that the Company may request confidential treatment pursuant to Rule 24b-2 under the Exchange Act for any schedule so furnished.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: January 12, 2015     FOUNDATION MEDICINE, INC.
    By:  

/s/ Robert W. Hesslein

      Robert W. Hesslein
      Senior Vice President, General Counsel and Secretary

Exhibit 2.1

EXECUTION VERSION                    

TRANSACTION AGREEMENT

dated as of

January 11, 2015

between

ROCHE HOLDINGS, INC.

and

FOUNDATION MEDICINE, INC.


TABLE OF CONTENTS

 

          P AGE  
ARTICLE 1   
D EFINITIONS  

Section 1.01 .

   Definitions      2  

Section 1.02 .

   Other Definitional and Interpretative Provisions      12  
ARTICLE 2   
T HE O FFER  

Section 2.01 .

   The Offer      13  

Section 2.02 .

   Company Action      15  

Section 2.03.

   Withholding Rights      17  
ARTICLE 3   
T HE I SSUANCE ; T HE C LOSING  

Section 3.01.

   The Issuance      17  

Section 3.02.

   Closing      17  

Section 3.03.

   Adjustments      17  
ARTICLE 4   
C HARTER ; B YLAWS ; B OARD OF D IRECTORS  

Section 4.01 .

   Certificate of Incorporation      18  

Section 4.02 .

   Company Board      18  
ARTICLE 5   
R EPRESENTATIONS AND W ARRANTIES OF THE C OMPANY  

Section 5.01 .

   Corporate Existence and Power      18  

Section 5.02 .

   Corporate Authorization      19  

Section 5.03 .

   Governmental Authorization      20  

Section 5.04 .

   Non-contravention      20  

Section 5.05 .

   Capitalization      20  

Section 5.06 .

   Subsidiaries      22  

Section 5.07 .

   SEC Filings and the Sarbanes-Oxley Act      23  

Section 5.08 .

   Financial Statements      24  

Section 5.09 .

   Disclosure Documents      24  

Section 5.10 .

   Absence of Certain Changes      25  

Section 5.11 .

   No Undisclosed Material Liabilities      25  

Section 5.12 .

   Compliance with Laws and Court Orders      26  

Section 5.13 .

   Regulatory Matters      26  

Section 5.14 .

   Litigation      27  

Section 5.15 .

   Properties      28  

Section 5.16.

   Intellectual Property      28  

 

i


Section 5.17.

   Taxes      29  

Section 5.18 .

   Employee Benefit Plans      31  

Section 5.19 .

   Labor Matters      33  

Section 5.20 .

   Environmental Matters      33  

Section 5.21 .

   Material Contracts      34  

Section 5.22.

   Foreign Corrupt Practices and International Trade Sanctions      37  

Section 5.23 .

   Finders’ Fees      38  

Section 5.24 .

   Opinion of Financial Advisor      38  

Section 5.25 .

   Antitakeover Statutes and Rights Agreement      39  

Section 5.26 .

   No Other Representations and Warranties      39  
ARTICLE 6   
R EPRESENTATIONS AND W ARRANTIES OF THE I NVESTOR  

Section 6.01 .

   Corporate Existence and Power      39  

Section 6.02 .

   Corporate Authorization      39  

Section 6.03 .

   Governmental Authorization      40  

Section 6.04 .

   Non-contravention      40  

Section 6.05 .

   Disclosure Documents      40  

Section 6.06 .

   Finders’ Fees      41  

Section 6.07 .

   Financing      41  

Section 6.08.

   Stock Ownership      41  

Section 6.09.

   Investor Status      42  
ARTICLE 7   
C OVENANTS OF THE C OMPANY  

Section 7.01 .

   Conduct of the Company      42  

Section 7.02 .

   Access to Information      45  

Section 7.03 .

   Company Stockholder Meeting      46  

Section 7.04 .

   No Solicitation; Other Offers      47  

Section 7.05 .

   Stock Exchange Listing      51  

Section 7.06 .

   Compensation Arrangements      51  

Section 7.07 .

   Takeover Statutes      51  

Section 7.08 .

   Stockholder Litigation      52  

Section 7.09 .

   Stop Orders      52  
ARTICLE 8   
C OVENANTS OF THE I NVESTOR AND THE C OMPANY  

Section 8.01 .

   Reasonable Best Efforts      52  

Section 8.02 .

   Certain Filings      54  

Section 8.03 .

   Company Proxy Statement      54  

Section 8.04 .

   Public Announcements      55  

Section 8.05 .

   Notice of Certain Events      56  

 

ii


ARTICLE 9  
C ONDITIONS TO THE C LOSING  

Section 9.01 .

   Conditions to the Obligations of Each Party      56  
ARTICLE 10   
T ERMINATION  

Section 10.01 .

   Termination      57  

Section 10.02 .

   Effect of Termination      59  
ARTICLE 11   
S URVIVAL , I NDEMNIFICATION  

Section 11.01 .

   Survival      59  

Section 11.02 .

   Indemnification of Investor Indemnified Parties      60   

Section 11.03 .

   Limitations on Indemnification by the Company      60  

Section 11.04 .

   Indemnification of Company Indemnified Parties      60  

Section 11.05 .

   Limitations on Indemnification by the Investor      61  

Section 11.06 .

   Other Limitations      61  

Section 11.07 .

   Third Party Claim Procedures      61  

Section 11.08 .

   Direct Claim Procedures      63  

Section 11.09 .

   Exclusive Remedy      63  

Section 11.10 .

   Purchase Price Adjustment      63  
ARTICLE 12   
M ISCELLANEOUS  

Section 12.01 .

   Notices      64  

Section 12.02 .

   Amendments and Waivers      65  

Section 12.03 .

   Expenses      65  

Section 12.04 .

   Disclosure Schedule and SEC Document References      67  

Section 12.05 .

   Binding Effect; Benefit; Assignment      67  

Section 12.06 .

   Governing Law      68  

Section 12.07 .

   Jurisdiction      68  

Section 12.08 .

   WAIVER OF JURY TRIAL      68  

Section 12.09 .

   Counterparts; Effectiveness      68  

Section 12.10 .

   Entire Agreement      69  

Section 12.11 .

   Severability      69  

Section 12.12.

   Specific Performance      69  
Annex I    Offer Conditions   
Exhibit A-1    Form of Tender and Support Agreement (KPCB and TRV)   
Exhibit A-2    Form of Tender and Support Agreement (GV)   
Exhibit B    Form of Existing Registration Rights Amendment   
Exhibit C    Charter Amendments   

 

iii


TRANSACTION AGREEMENT

TRANSACTION AGREEMENT (this “ Agreement ”) dated as of January 11, 2015 between Roche Holdings, Inc., a Delaware corporation (the “ Investor ”), and Foundation Medicine, Inc., a Delaware corporation (the “ Company ”).

W I T N E S S E T H :

WHEREAS, on the terms and subject to the conditions set forth herein, the Investor desires to acquire a number of shares of common stock of the Company, par value $0.0001 per share (“ Shares ”), that, when added to the Shares already owned by Roche Holding Ltd (“ Parent ”) and its Subsidiaries, will represent, immediately following the consummation of the transactions contemplated hereby and assuming completion of the Issuance and the Offer, an aggregate beneficial ownership interest in the Company by Parent and its Subsidiaries of at least 52.4% of the Fully Diluted Shares at such time;

WHEREAS, on the terms and subject to the conditions set forth herein, and in furtherance of the Investment, the Investor has agreed to invest $250,000,000 in the Company, and as consideration for such investment, the Company has agreed to issue and sell to the Investor (the “ Issuance ”) 5,000,000 Shares (subject to adjustment as set forth herein, the “ Issuance Shares ”) at a price of $50.00 per Share (the “ Issuance Price ”), without interest, net to the Company in cash;

WHEREAS, on the terms and subject to the conditions set forth herein, and in furtherance of the Investment, the Investor has agreed to commence a tender offer (other than to Parent and its Subsidiaries) to purchase up to 15,604,288 Shares (the “ Maximum Shares ”), representing, when added to the Shares already owned by Parent and its Subsidiaries and together with the Issuance Shares, approximately 56.3% of the Fully Diluted Shares at such time, at a price of $50.00 per Share (the “ Offer Price ”), without interest, net to the seller in cash (such tender offer, as it may be amended from time to time as permitted by this Agreement, the “ Offer ” and, together with the Issuance, the “ Investment ”);

WHEREAS, on the terms and subject to the conditions set forth herein, the Company Board has unanimously determined that the Investment, the Company Charter Amendment and the other transactions contemplated herein and in the other Transaction Documents are in the best interests of the Company and its stockholders, and the respective boards of directors of the Company and the Investor have approved this Agreement and the transactions contemplated hereby, including the Investment;

WHEREAS, concurrently with the execution of this Agreement, and as an inducement to and condition of the Investor’s willingness to enter into this Agreement and the other Transaction Documents, certain stockholders of the Company are entering into a tender and support agreement with the Investor substantially in the form attached as Exhibit A-1 or Exhibit A-2 , as applicable (as amended from time to time, the “ Tender and Support Agreements ”);


WHEREAS, concurrently with the execution of this Agreement, and as an inducement to and condition of the Investor’s willingness to enter into this Agreement and the other Transaction Documents, the Company and certain stockholders of the Company are entering into an amendment to the Existing Investors’ Rights Agreement substantially in the form attached as Exhibit B (the “ Existing Registration Rights Amendment ”); and

WHEREAS, concurrently with the execution of this Agreement, and as an inducement to and condition of the Investor’s willingness to enter into this Agreement and the other Transaction Documents, the parties are entering into each of the other Transaction Documents, each of which shall become effective at the Acceptance Time on the terms and subject to the conditions set forth therein.

NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements contained herein, the parties hereto agree as follows:

ARTICLE 1

D EFINITIONS

Section 1.01. Definitions .

(a) As used herein, the following terms have the following meanings:

Acquisition Proposal ” means, other than the transactions contemplated by this Agreement, any Third Party offer, proposal or inquiry relating to, or any Third Party indication of interest in, (i) any acquisition, purchase or exclusive license, directly or indirectly, of 15% or more of the consolidated assets of the Company and its Subsidiaries or 15% or more of any class of equity or voting securities of the Company or any of its Subsidiaries whose assets, individually or in the aggregate, constitute 15% or more of the consolidated assets of the Company, (ii) any tender offer or exchange offer that, if consummated, would result in such Third Party beneficially owning 15% or more of any class of equity or voting securities of the Company or any of its Subsidiaries whose assets, individually or in the aggregate, constitute 15% or more of the consolidated assets of the Company, or (iii) a merger, consolidation, share exchange, business combination, reorganization, recapitalization, liquidation, dissolution or other similar transaction involving the Company or any of its Subsidiaries whose assets, individually or in the aggregate, constitute 15% or more of the consolidated assets of the Company.

Affiliate ” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person; provided , that neither Chugai Pharmaceutical Co., Ltd. nor any of its Subsidiaries shall be considered an Affiliate of the Investor for purposes of this Agreement (unless the Investor elects, in a written notice delivered to the Company, to have any such Person considered an Affiliate of the Investor; provided that the Investor may not make such election for purposes of Section 11.02 hereof).

 

2


Antitrust Law ” means any Applicable Law designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization, restraint of trade or lessening of competition through acquisition or agreement.

Applicable Law ” means, with respect to any Person, any transnational, domestic or foreign federal, state or local law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar requirement enacted, adopted, promulgated, applied or enforced by a Governmental Authority that is binding upon or applicable to such Person, as amended unless expressly specified otherwise.

beneficially own ” or “ beneficial ownership ” has the meaning set forth in Rule 13d-3 promulgated under the Exchange Act.

Business Day ” means a day, other than Saturday, Sunday or other day on which commercial banks in New York, New York or Basel, Switzerland are authorized or required by Applicable Law to close.

CDX Contract ” means the Contract set forth in Section 1.01(c) of the Company Disclosure Schedule.

Code ” means the Internal Revenue Code of 1986.

Collaboration Agreements ” means (i) the US Education Collaboration Agreement, (ii) the Ex-US Commercialization Agreement, (iii) the Collaboration Agreement and (iv) the binding term sheet with respect to an in vitro diagnostics collaboration, in each case being entered into by the Company, on the one hand, and an Affiliate of the Investor, on the other hand, concurrently with the execution of this Agreement.

Collaboration Partner ” means any Third Party that manufactures, co-develops or co-markets (or has a license to manufacture, develop, market or sell) any product of the Company or any of its Subsidiaries.

Company 10-K ” means the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2013.

Company 10-Q ” means the Company’s quarterly report on Form 10-Q for the fiscal quarter ended September 30, 2014.

 

3


Company Balance Sheet ” means the audited consolidated balance sheet of the Company as of December 31, 2013 and the footnotes thereto set forth in the Company 10-K.

Company Balance Sheet Date ” means December 31, 2013.

Company Board ” means the board of directors of the Company.

Company Disclosure Schedule ” means the disclosure schedule dated the date hereof related to this Agreement that has been provided by the Company to the Investor.

Company Employee Plan ” means any (i) “employee benefit plan” as defined in Section 3(3) of ERISA (whether or not subject to ERISA), (ii) compensation, employment, individual consulting, severance, termination protection, change in control, transaction bonus, retention or similar plan, agreement, arrangement, program or policy or (iii) other plan, agreement, arrangement, program or policy providing for compensation, bonuses, profit-sharing, equity or equity-based compensation or other forms of incentive or deferred compensation, vacation benefits, insurance (including any self-insured arrangement), medical, dental, vision, prescription or fringe benefits, life insurance, relocation or expatriate benefits, perquisites, disability or sick leave benefits, employee assistance program, workers’ compensation, supplemental unemployment benefits or post-employment or retirement benefits (including compensation, pension, health, medical or insurance benefits), in each case, whether or not written and (x) that is sponsored, maintained, administered, contributed to or entered into by the Company or any of its Subsidiaries for the current or future benefit of any current or former Company Service Provider (or, solely with respect to any such plan, agreement, arrangement, program or policy that is subject to Title IV of ERISA, for the current or future benefit of any current or former employee or consultant of any entity that is, or in the last six years has been, an ERISA Affiliate of the Company) or (y) for which the Company or any of its Subsidiaries has any direct or indirect liability.

Company ESPP ” means the Foundation Medicine, Inc. 2013 Employee Stock Purchase Plan.

Company Material Adverse Effect ” means a material adverse effect on (i) the financial condition, business, assets or results of operations of the Company and its Subsidiaries, taken as a whole, excluding any such effect to the extent resulting from (A) changes in general economic or political conditions or the financial or capital markets in the United States or elsewhere in the world, (B) changes generally affecting the cancer molecular testing industry in which the Company and its Subsidiaries operate, including reimbursement coverage or payor rules or policies affecting products or services generally in such industry, (C) acts of war, sabotage or terrorism or natural or man-made disasters, (D) the announcement, pendency or performance of the transactions contemplated by this Agreement, including the impact thereof on relationships, contractual or otherwise, with customers, suppliers, distributors, licensors, licensees, partners or employees of the Company or any of its Subsidiaries (it being understood that this clause (D) shall not apply to the term “Company Material Adverse Effect” as used in, or as used in paragraph (c)(iii) of Annex I with respect to, any representation or warranty contained in this Agreement to the extent that such representation and warranty expressly addresses the consequences resulting from the execution and delivery of this Agreement, the announcement or pendency of this Agreement or any of the other Transaction Documents, the consummation of the transactions contemplated hereby or thereby, or the performance of obligations hereunder or thereunder), (E) the identity of the Investor as the investor in the Company or of the Investor or one of its Affiliates as party to the Transaction Documents or any facts or circumstances concerning the Investor or any of its Affiliates, including their respective relationships with any customers, suppliers, distributors, licensors, licensees or partners of the Company or any of its Subsidiaries, (F) changes or prospective changes in GAAP or Applicable Law (or interpretation or enforcement thereof), (G) changes in the market price or trading volume of the Shares ( provided that, to the extent not subject to any of the other exceptions herein, any fact, condition, change, development or event underlying or that contributed to such changes may be taken into account in determining whether there has been a Company Material Adverse Effect), (H) the failure of the Company and its Subsidiaries to meet internal or analysts’ expectations or projections, performance measures, operating statistics or revenue or earnings predictions ( provided that, to the extent not subject to any of the other exceptions herein, any fact, condition, change, development or event underlying or that contributed to such failure may be taken into account in determining whether there has been a Company Material Adverse Effect), or (I) any action taken by the Company or any of its Subsidiaries at the written direction of the Investor, or in accordance with the express terms of this Agreement or any other Transaction Document to which it is a party, other than, in the case of clause (A), (B), (C) or (F), for such changes or events that have a disproportionate effect on the Company and its Subsidiaries, taken as a whole, relative to other participants in the cancer molecular testing industry in which the Company and its Subsidiaries operate (which shall be taken into account in determining whether there has been a Company Material Adverse Effect but only to the extent of the incremental disproportionate effect thereof), or (ii) the Company’s ability to consummate the transactions contemplated by this Agreement or any of the other Transaction Documents to which it is a party.

 

4


Company Restricted Share ” means any Share awarded under any Company Stock Plan that is subject to satisfaction of vesting or other forfeiture conditions, including any such Share issued by the Company in connection with the “early-exercise” feature of a Company Stock Option.

Company RSU ” means each award of restricted stock units under any Company Stock Plan.

 

5


Company Service Provider ” means, at any time, any director, officer, employee, consultant or individual independent contractor of the Company or any of its Subsidiaries.

Company Stock Option ” means any option to purchase Shares awarded under any Company Stock Plan.

Company Stock Plan ” means each of the Foundation Medicine, Inc. 2013 Stock Option and Incentive Plan, the Foundation Medicine, Inc. Amended and Restated 2010 Stock Incentive Plan and any other equity or equity-based compensation plan, other than the Company ESPP, that is sponsored or maintained by the Company or any of its Subsidiaries that provides for awards of stock options, restricted shares, restricted stock units, stock appreciation rights, performance shares or units, contingent value rights, “phantom” stock or similar securities or rights that are derivative of, or provide economic benefits based, directly or indirectly, on the value or price of, any capital stock of or voting securities of the Company, in each case, as amended from time to time.

Confidentiality Agreement ” means the letter agreement dated as of September 4, 2014 between the Company and the Investor.

Contract ” means, with respect to any Person, any legally binding contract, agreement, lease, sublease, license, commitment, sale or purchase order, indenture, note, bond, loan, mortgage, deed of trust, instrument or other arrangement, whether written or oral, to which such Person is a party or by which such Person or such Person’s properties or assets are bound.

Delaware Law ” means the General Corporation Law of the State of Delaware.

Damages ” means any and all claims, costs, losses, liabilities, obligations, fines, penalties, awards, damages, diminution in value and expenses (including reasonable fees and expenses of counsel and other professionals and expenses of investigation); provided that, except for amounts actually paid in respect of Third Party Claims, Damages shall not include (i) any punitive or exemplary damages or (ii) any consequential damages (except, for the avoidance of doubt, diminution in value).

Environmental Laws ” means any Applicable Law or any agreement with any Person relating to human health or safety, the environment or any pollutant, contaminant, waste or chemical or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous substance or material.

Environmental Permits ” means all Permits relating to or required by Environmental Law.

ERISA ” means the Employee Retirement Income Security Act of 1974.

 

6


ERISA Affiliate ” of any entity means any other entity that, together with such entity, would be treated as a single employer under Section 414 of the Code.

Exchange Act ” means the Securities Exchange Act of 1934.

Existing Investors’ Rights Agreement ” means the Second Amended and Restated Investors’ Rights Agreement dated as of June 20, 2013 among the Company and the Persons listed on Schedule A thereto.

FDA ” means the United States Food and Drug Administration or any successor entity.

Filing ” means any registration, petition, statement, application, schedule, form, declaration, notice, notification, report, submission or information or other filing.

Fully Diluted Shares ” means, as of any time, the number of Shares outstanding, together with all Shares that the Company would be required to issue pursuant to any then-outstanding Company Securities, regardless of the conversion or exercise price, the vesting schedule or other terms and conditions thereof. For the avoidance of doubt, “Fully Diluted Shares” shall not include any Shares held by the Company as treasury stock.

GAAP ” means generally accepted accounting principles in the United States.

Governmental Authority ” means any transnational, domestic or foreign federal, state or local governmental, regulatory or administrative authority, department, court, agency or official, including any political subdivision thereof.

Hazardous Substance ” means any pollutant, contaminant, waste or chemical or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous substance, waste or material, or any substance, waste or material having any constituent elements displaying any of the foregoing characteristics, including any medical or biological waste, reagent, petroleum product, derivative or byproduct, asbestos, asbestos-containing materials, lead, polychlorinated biphenyls or any substance, waste or material regulated under any Environmental Law.

Health Authority ” means the Governmental Authorities that administer Health Laws, including the FDA and the European Medicines Agency.

Health Law ” means any Applicable Law applicable to the Company’s products, including any Applicable Law the purpose of which is to ensure the safety, efficacy and quality of medical, pharmaceutical, biotechnology, in vitro diagnostic and similar products by regulating the research, development, manufacturing and distribution of these products, including Applicable Law relating to good laboratory practices, good clinical practices, investigational use, product marketing authorization, manufacturing facilities compliance and approval, good manufacturing practices, labeling, advertising, promotional practices, safety surveillance, record keeping and filing of required reports. Without limiting the foregoing, Health Law includes (i) the Federal Food, Drug, and Cosmetic Act, (ii) the Public Health Service Act, (iii) the Clinical Laboratory Improvement Amendments of 1988, (iv) the Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)), (v) the Stark Law (42 U.S.C. 1395nn et seq .), (vi) the False Claims Act (31 U.S.C. § 3729 et seq .), (vii) the Exclusion Laws (42 U.S.C.§§ 1320a-7 and 1320a-7a), (viii) the Program Fraud Civil Remedies Act (31 U.S.C. §§ 3801-3812), (ix) the Civil Monetary Penalties Law (42 U.S.C. § 1320a-7a), (x) the Prohibition on Inducement of Beneficiaries Statute (42 U.S.C. § 1320a-7a(a)(5)), (xi) the Federal Health Care Fraud Law (18 U.S.C. § 1347), (xii) 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.), (xiii) Medicare (Title XVIII of the Social Security Act), (xiv) Medicaid (Title XIX of the Social Security Act) and (xv) 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.

 

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HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

Intellectual Property ” means (i) trademarks, service marks, brand names, certification marks, trade dress, domain names and other indications of origin, the goodwill associated with the foregoing and registrations in any jurisdiction of, and applications in any jurisdiction to register, the foregoing, including any extension, modification or renewal of any such registration or application, (ii) national and multinational statutory invention registrations, patents and patent applications issued or applied for in any jurisdiction, including all certificates of invention, provisionals, nonprovisionals, substitutions, divisionals, continuations, continuations-in-part, reissues, extensions, supplementary protection certificates, reexaminations and the equivalents of any of the foregoing in any jurisdiction, and all inventions disclosed in each such registration, patent or patent application, (iii) trade secrets, confidential information and rights in any jurisdiction to limit the use or disclosure thereof by any Person, (iv) know-how, inventions, discoveries, data, specifications, processes, methods, knowledge, experience, formulae, skills, techniques, schematics, drawings, blue prints, utility models, designs, ideas and improvements, including manufacturing information and processes, engineering and other manuals and drawings, standard operating procedures, flow diagrams, chemical, pharmacological, toxicological, pharmaceutical, physical and analytical, safety, quality assurance, quality control and clinical data, technical information, research records and similar data and information, (v) writings and other works, whether copyrightable or not, in any jurisdiction, and any and all copyright rights, whether registered or not, and registrations or applications for registration of copyrights in any jurisdiction, and any renewals or extensions thereof, (vi) moral rights, technology, software, database rights, design rights, industrial property rights, publicity rights and privacy rights and (vii) any similar intellectual property or proprietary rights.

 

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Investor Material Adverse Effect ” means a material adverse effect on the Investor’s ability to consummate the transactions contemplated by this Agreement or any of the other Transaction Documents to which it is a party.

Investor Rights Agreement ” means the Investor Rights Agreement between the Investor and the Company being entered into by such parties concurrently with the execution of this Agreement, as amended from time to time.

IT Assets ” means computers, computer software, firmware, middleware, servers, workstations, routers, hubs, switches, data communications lines and all other information technology equipment, and all associated documentation owned by the Company or its Subsidiaries or licensed or leased by the Company or its Subsidiaries (excluding any public networks).

knowledge ” of the Company means the actual knowledge after reasonable inquiry of the persons listed in Section 1.01(a) of the Company Disclosure Schedule.

Lien ” means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest, encumbrance or other adverse claim of any kind in respect of such property or asset. For purposes of this Agreement, a Person shall be deemed to own subject to a Lien any property or asset that it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such property or asset.

NASDAQ ” means the NASDAQ Stock Market LLC.

Permits ” means governmental licenses, franchises, permits, certificates, consents, approvals, registrations, concessions or other authorizations of Governmental Authorities applicable to the assets or business of the Company or its Subsidiaries.

Permitted Liens ” means (i) any Liens for Taxes not yet due and payable or which are being contested in good faith by appropriate proceedings and for which adequate reserves have been recorded on the Company’s balance sheet in accordance with GAAP, (ii) landlords’, carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other similar Liens and security deposits incurred in the ordinary course of business consistent with past practice, in each case for sums not yet due and payable or due but not delinquent or being contested in good faith by appropriate proceedings, (iii) Liens incurred in the ordinary course of business consistent with past practice in connection with pledges or deposits in connection with workers’ compensation, unemployment insurance and other social security legislation that, in the aggregate, are not material in amount, and (iv) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business that, in the aggregate, are not material in amount and that do not, in any case, materially detract from the value or use of the property subject thereto.

 

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Person ” means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a Governmental Authority.

Proceeding ” means any claim, audit, action, suit, proceeding, arbitral action or investigation.

Sarbanes-Oxley Act ” means the Sarbanes-Oxley Act of 2002.

SEC ” means the Securities and Exchange Commission.

Securities Act ” means the Securities Act of 1933.

Specified Contract ” means the Contract set forth in Section 1.01(b) of the Company Disclosure Schedule.

Subsidiary ” means, with respect to any Person, any entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at any time directly or indirectly owned by such Person; provided that neither Chugai Pharmaceutical Co., Ltd. or any of its Subsidiaries shall be considered a Subsidiary of Parent, the Investor or any of their respective Affiliates for purposes of this Agreement (unless the Investor elects, in a written notice delivered to the Company, to have any such Person considered a Subsidiary of Parent, the Investor or any of their respective Affiliates; provided that the Investor may not make such election for purposes of Section 11.02 hereof).

Tax Sharing Agreement ” means the tax sharing agreement dated as of the date hereof between the Investor and the Company and entered into concurrently with the execution of this Agreement.

Third Party ” means any Person, including as defined in Section 13(d) of the Exchange Act, other than the Investor or any of its Affiliates.

Transaction Documents ” means this Agreement, the Investor Rights Agreement, the Existing Registration Rights Amendment, the Collaboration Agreements and the Tax Sharing Agreement.

 

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(b) Each of the following terms is defined in the Section set forth opposite such term:

 

Term

  

Section

    
Acceptance Time    2.01(d)   
Adverse Recommendation Change    7.04(a)   
Agreement    Preamble   
Alternative Acquisition Agreement    7.04(a)   
Closing    3.02   
Company    Preamble   
Company Board Recommendation    5.02(b)   
Company Charter Amendment    2.01   
Company Financial Advisor    2.02(c)   
Company Indemnified Parties    11.04   
Company Proxy Statement    5.09(b)   
Company SEC Documents    5.07(a)   
Company Securities    5.05(d)   
Company Stockholder Approval    5.02(a)   
Company Stockholder Meeting    7.03(a)   
Company Subsidiary Securities    5.06(b)   
Compensation Arrangement    5.18(i)   
Compensation Arrangement Approvals    5.18(i)   
Compensation Committee    5.18(i)   
End Date    10.01(b)(i)   
Existing Registration Rights Amendment    Preamble   
Expiration Date    11.01   
Expiration Time    2.01(c)(ii)   
FDA Fraud Policy    5.13(b)(iii)   
Fundamental Warranties    11.01   
Indemnified Party    11.07   
Indemnifying Party    11.07   
Intervening Event    7.04(b)(iii)   
Investment    Preamble   
Investor    Preamble   
Investor Indemnified Parties    11.02   
Issuance    Preamble   
Issuance Price    Preamble   
Issuance Shares    Preamble   
Material Contracts    5.21(a)   
Maximum Shares    Preamble   
Minimum Condition    Annex I   
Minimum Condition Shares    Annex I   
Multiemployer Plan    5.18(c)   
Negotiation Period    7.04(d)   
Offer    Preamble   
Offer Closing Date    2.01(d)   

 

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Term

  

Section

    
Offer Commencement Date    2.01(a)   
Offer Conditions    2.01(a)   
Offer Documents    2.01(f)   
Offer Price    Preamble   
Representatives    7.04(a)   
Sanctions    5.22(b)   
Schedule 14D-9    2.02(c)   
Schedule TO    2.01(f)   
Shares    Preamble   
Superior Proposal    7.04(e)   
Tax    5.17(h)   
Taxing Authority    5.17(h)   
Tax Return    5.17(h)   
Tender and Support Agreements    Preamble   
Termination Fee    12.03(b)   
Third Party Claim    11.07   
Warranty Breach    11.02   

Section 1.02. Other Definitional and Interpretative Provisions . The words “hereof,” “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Articles, Sections, Exhibits, Annexes and Schedules are to Articles, Sections, Exhibits, Annexes and Schedules of this Agreement unless otherwise specified. All Exhibits, Annexes and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized term used in any Exhibit, Annex or Schedule but not otherwise defined therein, shall have the meaning as defined in this Agreement. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation,” whether or not they are in fact followed by those words or words of like import. “Writing,” “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any statute, rule or regulation shall be deemed to refer to such statute, rule or regulation as amended or supplemented from time to time, including through the promulgation of applicable rules or regulations. References to any Contract are to that Contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof; provided that with respect to any Contract listed on any schedules hereto, all such amendments, modifications or supplements must also be listed in the appropriate schedule. References to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively. References to one gender include all genders. References to “law” or “laws” shall be deemed also to include any Applicable Law.

 

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ARTICLE 2

T HE O FFER

Section 2.01. The Offer .

(a) Provided that this Agreement shall not have been terminated in accordance with Section 10.01 and none of the events set forth in paragraph (c) of Annex I hereto shall exist or have occurred and be continuing (other than in the case of paragraph (c)(vi) and, with respect to paragraph (c)(iv), only with respect to covenants and obligations that the Company is required to comply with or to perform prior to such time), as promptly as practicable after the date hereof, but in no event later than 15 Business Days following the date of this Agreement, the Investor shall commence (within the meaning of Rule 14d-2 under the Exchange Act) the Offer. The Offer shall be subject to the conditions set forth in Annex I hereto (the “ Offer Conditions ”). The date on which the Investor commences the Offer is referred to as the “ Offer Commencement Date .”

(b) The Investor expressly reserves the right to waive any of the Offer Conditions and to make any change in the terms of or conditions to the Offer; provided that the Investor’s right to waive any Offer Condition is subject to the last paragraph of Annex I hereto; and provided , further , that, without the prior written consent of the Company, the Investor shall not:

(i) decrease the Offer Price;

(ii) change the form of consideration to be paid in the Offer;

(iii) change the Maximum Shares sought to be purchased in the Offer;

(iv) extend or otherwise change the Expiration Time of the Offer except as provided herein;

(v) impose conditions to the Offer other than the Offer Conditions;

(vi) change the Minimum Condition; or

(vii) otherwise amend, modify or supplement any of the terms or conditions of the Offer in a manner that adversely affects the holders of Shares.

(c) Unless extended as provided in this Agreement, the Offer shall expire at midnight, New York City time, on the date that is 20 business days (calculated as set forth in Rule 14d-1(g)(3) under the Exchange Act) after the Offer Commencement Date. Notwithstanding the foregoing, the Investor shall extend the Offer (i) for one or more consecutive increments of not more than ten Business Days from time to time if, at the then-scheduled expiration time of the Offer, any of the Offer Conditions shall not have been satisfied or waived; provided that the Investor shall not be required to extend the Offer pursuant to this clause (i) beyond the earlier of (A) the End Date and (B) the date that is 10 days after the date that all of the Offer Conditions (other than the Minimum Condition and those that by their nature are to be satisfied immediately prior to the Acceptance Time) have been satisfied and (ii) for any period required by (x) any applicable rule, regulation, interpretation or position of the SEC or the staff thereof or (y) the rules and regulations of NASDAQ or Applicable Law. The time when the Offer expires (taking into account any permitted or required extensions in accordance with this Section 2.01(c)) is referred to herein as the “ Expiration Time .” The Investor shall not terminate or withdraw the Offer prior to the then-scheduled expiration time of the Offer unless this Agreement is validly terminated in accordance with its terms. In the event that this Agreement is terminated, the Investor shall promptly, irrevocably and unconditionally terminate the Offer. In the event that the Offer is terminated, the Investor shall not acquire any Shares pursuant to the Offer and shall cause any depositary acting on its behalf to return, in accordance with Applicable Law, all tendered Shares to the registered holders thereof.

 

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(d) Subject to the terms and conditions set forth in this Agreement (including Section 2.01(e)) and to the satisfaction or waiver of the Offer Conditions, the Investor shall (i) accept for payment, as promptly as practicable (and in any event within one Business Day) after the Expiration Time, all Shares validly tendered and not withdrawn pursuant to the Offer (the time at which Shares are first accepted for payment under the Offer, the “ Acceptance Time ”, and the date on which the Acceptance Time occurs, the “ Offer Closing Date ”), and (ii) promptly thereafter pay for such Shares.

(e) If and to the extent that a number of Shares in excess of the Maximum Shares are validly tendered and not withdrawn pursuant to the Offer, then, in accordance with Section 14(d)(6) of the Exchange Act, the number of Shares validly tendered and not withdrawn by each tendering holder of Shares shall be deemed decreased on a pro rata basis based on the number of Shares validly tendered and not withdrawn by each tendering stockholder (with fractional Shares rounded to the nearest whole Share) such that the aggregate number of Shares accepted for payment, and paid for, by the Investor in the Offer shall be equal to the Maximum Shares. The parties acknowledge and agree that if such proration is necessary, the Investor shall determine the final proration factor promptly (and in any event within three Business Days) after the expiration of the period during which stockholders may satisfy Shares tendered into the Offer pursuant to a Notice of Guaranteed Delivery (such period to expire three NASDAQ Global Select Market trading days after the Offer Closing Date).

 

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(f) As soon as practicable on the Offer Commencement Date, the Investor shall (i) file with the SEC a Tender Offer Statement on Schedule TO with respect to the Offer (together with all amendments and supplements thereto, and including all exhibits thereto, the “ Schedule TO ”) that shall include the summary term sheet required thereby and, as exhibits, the Offer to Purchase, a form of letter of transmittal and a summary advertisement (collectively, together with any amendments or supplements thereto, the “ Offer Documents ”) and (ii) cause the Offer Documents to be disseminated to holders of Shares to the extent required by applicable U.S. federal securities laws. The Investor shall use its reasonable best efforts to ensure that the Schedule TO, and any amendments or supplements thereto, comply in all material respects with the rules and regulations promulgated by the SEC under the Exchange Act. Each of the Investor and the Company agrees promptly to correct any information provided by it or on its behalf for use in the Schedule TO and the Offer Documents if and to the extent that such information shall have become (or shall have become known to be) false or misleading in any material respect. The Investor shall use its reasonable best efforts to cause the Schedule TO as so corrected to be filed with the SEC and the Offer Documents as so corrected to be disseminated to holders of Shares, in each case to the extent required by applicable U.S. federal securities laws or the rules and regulations of NASDAQ. The Company shall furnish to the Investor the information relating to the Company required by the Exchange Act to be set forth in the Schedule TO and the Offer Documents. The Company and its counsel shall be given a reasonable opportunity to review and comment on the Schedule TO and any Offer Document each time before any such document is filed with the SEC, and the Investor shall give reasonable and good faith consideration to any comments made by the Company and its counsel. The Investor shall provide the Company and its counsel with (i) any comments or other communications, whether written or oral, that the Investor or its counsel may receive from time to time from the SEC or its staff with respect to the Schedule TO or the Offer Documents promptly after receipt of those comments or other communications and (ii) a reasonable opportunity to participate in the response of the Investor to those comments and to provide comments on that response (to which reasonable and good faith consideration shall be given), including by using reasonable best efforts to give the Company the opportunity to participate with the Investor and its counsel in any substantive discussions or meetings with the SEC. The Company hereby consents to the inclusion in the Offer Documents of the Company Board Recommendation as it may be amended or modified, and until but not after it is withdrawn in accordance with Section 7.04(b).

Section 2.02. Company Action .

(a) The Company hereby consents to the Offer.

(b) The Company shall, or shall cause its transfer agent to, as promptly as practicable, furnish the Investor with mailing labels containing the names and addresses of the record holders of Shares as of the most recent practicable date and of those Persons becoming record holders subsequent to such date, together with copies of all lists of stockholders, security position listings, participant lists from the Depository Trust Company and computer files and all other information in the Company’s possession or control regarding the beneficial owners of Shares (including a “non-objecting beneficial owners” list), and shall furnish to the Investor such information and assistance (including updated lists of stockholders, security position listings and computer files regarding the beneficial owners of Shares) as the Investor may reasonably request in communicating the Offer to holders of Shares. The Investor and its agents shall hold in confidence the information contained in any such labels, listings and files in accordance with the Confidentiality Agreement, shall use such information only in connection with the Offer and, if this Agreement is terminated, shall return or destroy all copies and any extracts or summaries of such information then in their possession or control; provided that the Investor and each of its agents may each retain one copy of any such information to the extent necessary to comply with Applicable Law.

 

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(c) On the Offer Commencement Date, as soon as practicable after the Schedule TO has been filed pursuant to Section 2.01(f), the Company shall (i) file with the SEC and (ii) to the extent required by applicable U.S. federal securities laws, disseminate to holders of Shares, a Solicitation/Recommendation Statement on Schedule 14D-9 (together with any amendments or supplements thereto, the “ Schedule 14D-9 ”) that, subject to Section 7.04(b), shall include the Company Board Recommendation. The Company shall also include in the Schedule 14D-9 the fairness opinion of Goldman, Sachs & Co., financial advisor to the Company (the “ Company Financial Advisor ”), in its entirety, and a description of such fairness opinion and the financial analysis relating thereto that provides the information called for by Item 1015(b) of Regulation M-A under the Exchange Act, subject to any required consent from the Company Financial Advisor. The Company shall use its reasonable best efforts to ensure that the Schedule 14D-9, and any amendments or supplements thereto, comply in all material respects with the rules and regulations promulgated by the SEC under the Exchange Act. Each of the Company and the Investor agrees promptly to correct any information provided by it or on its behalf for use in the Schedule 14D-9 if and to the extent that such information shall have become (or shall have become known to be) false or misleading in any material respect. The Company shall use reasonable best efforts to cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated to holders of Shares, in each case to the extent required by applicable U.S. federal securities laws or the rules and regulations of NASDAQ. The Investor shall furnish to the Company the information relating to the Investor required by the Exchange Act to be set forth in the Schedule 14D-9. The Investor and its counsel shall be given a reasonable opportunity to review and comment on the Schedule 14D-9 each time before it is filed with the SEC, and the Company shall give reasonable and good faith consideration to any comments made by the Investor and its counsel. The Company shall provide the Investor and its counsel with (i) any comments or other communications, whether written or oral, that the Company or its counsel may receive from time to time from the SEC or its staff with respect to the Schedule 14D-9 promptly after receipt of those comments or other communications and (ii) a reasonable opportunity to participate in the Company’s response to those comments and to provide comments on that response (to which reasonable and good faith consideration shall be given), including by using reasonable best efforts to give the Investor the opportunity to participate with the Company or its counsel in any substantive discussions or meetings with the SEC.

 

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Section 2.03. Withholding Rights . Notwithstanding any provision contained herein to the contrary, the Investor and the depositary for the Offer shall be entitled to deduct and withhold from the consideration otherwise payable to any Person pursuant to the Offer such amounts as it is required to deduct and withhold with respect to the making of such payment under any provision of Tax law. If the Investor or the depositary for the Offer so withholds amounts and remits such amounts to the applicable Governmental Authority, such amounts shall be treated for all purposes of this Agreement as having been paid to such Person in respect of which the Investor or the depositary for the Offer made such deduction and withholding.

ARTICLE 3

T HE I SSUANCE ; T HE C LOSING

Section 3.01. The Issuance . At the Closing, and upon the terms and subject to the conditions of this Agreement, the Company agrees to issue and sell to Investor, and Investor agrees to purchase from the Company, the Issuance Shares, at a price per share equal to the Issuance Price.

Section 3.02. Closing .

(a) The closing of the Issuance (the “ Closing ”) shall take place at the offices of Davis Polk & Wardwell LLP, 450 Lexington Avenue, New York, New York 10017 immediately following the Acceptance Time, upon the terms and subject to the conditions of this Agreement. At the Closing:

(b) the Investor shall deliver to the Company $250,000,000 in immediately available funds by wire transfer to an account of the Company with a bank in New York City designated by the Company, by notice to the Investor, which notice shall be delivered not less than five Business Days prior to the Offer Closing Date (or if not so designated, then by certified or official bank check payable in immediately available funds to the order of the Company in such amount); and

(c) the Company shall deliver to the Investor certificates for the Issuance Shares duly endorsed or accompanied by stock powers duly endorsed in blank, with any required transfer stamps affixed thereto.

Section 3.03. Adjustments . If, during the period between the date of this Agreement and the Closing, the outstanding Shares (or securities convertible or exchangeable into, or exercisable for, Shares) shall have been changed into a different number of shares or a different class (including by reason of any reclassification, recapitalization, stock split (including reverse stock split) or combination, exchange or readjustment of Shares, or stock dividend thereon with a record date during such period or otherwise, but excluding any change that results from any issuance of Shares permitted by Section 7.01(c)), the Maximum Shares, the Offer Price, the Issuance Price and any other amounts payable pursuant to this Agreement shall be appropriately adjusted. Nothing in this Section 3.03 shall be construed to permit any party to take any action that is otherwise prohibited or restricted by any other provision of this Agreement.

 

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ARTICLE 4

C HARTER ; B YLAWS ; B OARD OF D IRECTORS

Section 4.01. Certificate of Incorporation . The Company shall take all actions necessary (including pursuant to Section 7.03) so that, effective as of the Acceptance Time, the certificate of incorporation of the Company in effect immediately prior to the Acceptance Time shall be amended as set forth on Exhibit C hereto, until thereafter amended in accordance with Applicable Law (the “ Company Charter Amendment ”).

Section 4.02. Company Board . The Company shall take all actions necessary so that, effective as of the Closing, the Company Board shall be composed as set forth in Sections 2.01(a) and 2.01(b) of the Investor Rights Agreement, with the term of each director expiring at the next annual meeting of stockholders of the Company.

ARTICLE 5

R EPRESENTATIONS AND W ARRANTIES OF THE C OMPANY

Subject to Section 12.04, except (i) as disclosed in the Company 10-K, the Company 10-Q or any current reports on Form 8-K filed by the Company with the SEC after November 13, 2014 and prior to January 9, 2015 (other than with respect to the representations and warranties in Sections 5.01, 5.02, 5.05, 5.06, 5.23, 5.24 and 5.25) or (ii) as set forth in the Company Disclosure Schedule, the Company represents and warrants to the Investor as of the date hereof, the Acceptance Time and the Closing that:

Section 5.01. Corporate Existence and Power . The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has all corporate powers necessary to enable it to use its legal or other business name, to own, lease or otherwise hold and operate its properties and other assets and to carry on its business as presently conducted. The Company is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where such qualification is necessary, except for those jurisdictions where failure to be so qualified would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. The Company has heretofore made available to the Investor true and complete copies of the certificate of incorporation and bylaws of the Company as in effect as of the date hereof. Article 3 and Article 4 of the Second Amended and Restated Investors’ Rights Agreement dated June 20, 2013 among the Company and the stockholders party thereto (including the covenants of the Company and the other rights of the stockholders thereunder) have terminated.

 

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Section 5.02. Corporate Authorization .

(a) The execution, delivery and performance by the Company of this Agreement and each other Transaction Document to which the Company is a party, and the consummation by the Company of the transactions contemplated hereby and thereby, are within the Company’s corporate powers and, except for (i) the affirmative vote of seventy five percent (75%) of the outstanding Shares in connection with the Company Charter Amendment and (ii) the affirmative vote of the holders of a majority of the votes cast at the Company Stockholder Meeting in connection with (x) this Agreement and the transactions contemplated hereby, including the Issuance, and (y) the Investor’s rights under Section 4.03 of the Investor Rights Agreement (clauses (i) and (ii) collectively, the “ Company Stockholder Approval ”), have been duly authorized by all necessary corporate action on the part of the Company. The Company Stockholder Approval is the only vote of the holders of any of the Company’s capital stock necessary in connection with the consummation of the Investment or the other transactions contemplated hereby or by the other Transaction Documents. This Agreement and the other Transaction Documents to which the Company is a party each constitute a valid and binding agreement of the Company enforceable against the Company in accordance with its terms (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws affecting creditors’ rights generally and general principles of equity).

(b) At a meeting duly called and held, the Company Board has unanimously (i) determined that this Agreement, the other Transaction Documents and the transactions contemplated hereby and thereby, including the Offer, the Issuance and the Company Charter Amendment, are in the best interests of the Company’s stockholders, (ii) approved, adopted and declared advisable this Agreement and each other Transaction Document to which the Company is a party, and the transactions contemplated hereby and thereby, including the Offer, the Issuance and the Company Charter Amendment, (iii) resolved, subject to Section 7.04(b), to recommend (x) acceptance of the Offer and (y) approval and adoption by the Company’s stockholders of the Company Charter Amendment, this Agreement and the transactions contemplated hereby (including the Issuance) and the Investor’s rights under Section 4.03 of the Investor Rights Agreement (such recommendation, the “ Company Board Recommendation ”) and (iv) directed that the Company Charter Amendment, the Transaction Agreement and the transactions contemplated hereby (including the Issuance), and the Investor’s rights under Section 4.03 of the Investor Rights Agreement be submitted to its stockholders for consideration in accordance with this Agreement.

 

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Section 5.03. Governmental Authorization . The execution, delivery and performance by the Company of this Agreement and each other Transaction Document to which the Company is a party, and the consummation by the Company of the transactions contemplated hereby and thereby, require no action by or in respect of, or Filing with, any Governmental Authority, other than (i) compliance with any applicable requirements of the HSR Act, (ii) compliance with any applicable requirements of the Securities Act, the Exchange Act and any other applicable U.S. state or federal securities laws, (iii) compliance with any applicable requirements of NASDAQ, (iv) filing and recordation of the Company Charter Amendment as required by Delaware Law and (v) any other actions or Filings the absence of which would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

Section 5.04. Non-contravention . The execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby do not and will not (i) contravene, conflict with, or result in any violation or breach of any provision of the certificate of incorporation or bylaws of the Company, (ii) assuming compliance with the matters referred to in Section 5.03, contravene, conflict with or result in a violation or breach of any provision of any Applicable Law, (iii) assuming compliance with the matters referred to in Section 5.03, require any payment to or consent or other action by, or notice to, any Person under, constitute a breach or default (or constitute an event that, with or without notice or lapse of time or both, would constitute a breach or default) under, or cause or permit the termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit to which the Company or any of its Subsidiaries is entitled under any provision of any Contract binding on, or any Permit of, the Company or any of its Subsidiaries (or any Contract to which any of their respective assets is subject) or (iv) result in the creation or imposition of any Lien on any asset of the Company or any of its Subsidiaries, with only such exceptions, in the case of each of clauses (ii) through (iv), as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

Section 5.05. Capitalization .

(a) The authorized capital stock of the Company consists of 150,000,000 Shares and 5,000,000 shares of preferred stock, par value $0.0001 per share.

(b) As of January 9, 2015, there were outstanding (i) 28,374,903 Shares (including 150,697 Company Restricted Shares) and (ii) no shares of preferred stock. As of January 9, 2015, there were 1,373,547 Shares reserved and available for future issuance under the Company Stock Plans, and there were 788,503 Shares reserved and available for future issuance under the Company ESPP. All outstanding shares of capital stock of the Company have been, and all Issuance Shares will be, when issued at the Closing in accordance with Article 3, duly authorized and validly issued, fully paid and nonassessable, free and clear of any Liens and free of any preemptive or similar rights.

 

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(c) Section 5.05(c) of the Company Disclosure Schedule contains a complete and accurate list of each outstanding award of Company Stock Options, Company RSUs and Company Restricted Shares as of January 9, 2015, including, for each such award: (A) the name of the holder of such award, (B) the date each such award was granted, (C) the number of Shares subject to each such award, (D) with respect to any award of Company Stock Options, the price at which such Company Stock Option may be exercised, and (E) a description of the vesting conditions relating to such award, including any time-based vesting schedule and a description of any terms under any Company Employee Plan, Company Stock Plan or award agreement thereunder which provide for accelerated vesting with respect to such award as a result of the consummation of the transactions contemplated by this Agreement. Other than the Company Stock Options, Company RSUs and Company Restricted Shares listed in Section 5.05(c) of the Company Disclosure Schedule or that may be issued after the date hereof as permitted under Section 7.01(c), there are no equity or equity-based awards outstanding under any Company Stock Plan. The exercise price of each Company Stock Option is not less than the fair market value of a Share on the date of grant of such Company Stock Option.

(d) There are no outstanding bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of the Company may vote. Except as set forth in this Section 5.05 and for changes since January 9, 2015 resulting from the exercise of Company Stock Options or settlement of Company RSUs outstanding on such date, or the issuance of equity awards after the date hereof as permitted under Section 7.01(c), there are no issued, reserved for issuance or outstanding (i) shares of capital stock or other voting securities of or ownership interests in the Company, (ii) securities of the Company convertible into or exchangeable or exercisable for shares of capital stock or other voting securities of or ownership interests in the Company, (iii) warrants, calls, options or other rights to acquire from the Company, or other obligation of the Company to issue, any capital stock or other voting securities or ownership interests in or any securities convertible into or exchangeable or exercisable for capital stock or other voting securities or ownership interests in the Company or (iv) restricted shares, restricted stock units, stock appreciation rights, performance units, contingent value rights, “phantom” stock or similar securities or rights that are derivative of, or provide economic benefits based on, directly or indirectly, the value or price of, any capital stock or voting securities of the Company (the items in clauses (i) through (iv) being referred to collectively as the “ Company Securities ”). There are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any of the Company Securities. Neither the Company nor any of its Subsidiaries is a party to any voting agreement with respect to the voting of any Company Securities.

 

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(e) No (i) Shares or (ii) Company Securities are owned by any Subsidiary of the Company.

Section 5.06. Subsidiaries .

(a) Each Subsidiary of the Company has been duly organized, is validly existing and (where applicable) in good standing under the laws of its jurisdiction of organization, has all organizational powers necessary to enable it to use its legal or other business name, to own, lease or otherwise hold and operate its properties and other assets and to carry on its business as presently conducted. Each such Subsidiary is duly qualified to do business as a foreign entity and is in good standing in each jurisdiction where such qualification is necessary, except for those jurisdictions where failure to be so qualified would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. All Subsidiaries of the Company as of the date hereof and their respective jurisdictions of organization are identified in the Company 10-K.

(b) All of the outstanding capital stock or other voting securities of, or ownership interests in, each Subsidiary of the Company is owned by the Company, directly or indirectly, free and clear of any Lien and free of any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other voting securities or ownership interests). There are no issued, reserved for issuance or outstanding (i) securities of the Company or any of its Subsidiaries convertible into, or exchangeable or exercisable for, shares of capital stock or other voting securities of, or ownership interests in, any Subsidiary of the Company, (ii) warrants, calls, options or other rights to acquire from the Company or any of its Subsidiaries, or other obligations of the Company or any of its Subsidiaries to issue, any capital stock or other voting securities of, or ownership interests in, or any securities convertible into, or exchangeable or exercisable for, any capital stock or other voting securities of, or ownership interests in, any Subsidiary of the Company or (iii) restricted shares, restricted stock units, stock appreciation rights, performance units, contingent value rights, “phantom” stock or similar securities or rights that are derivative of, or provide economic benefits based on, directly or indirectly, the value or price of any capital stock or other voting securities of, or ownership interests in, any Subsidiary of the Company (the items in clauses (i) through (iii) being referred to collectively as the “ Company Subsidiary Securities ”). There are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any of the Company Subsidiary Securities. Except for the capital stock or other voting securities of, or ownership interests in, its Subsidiaries, the Company does not own, directly or indirectly, any capital stock or other voting securities of, or ownership interests in, any Person.

 

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Section 5.07. SEC Filings and the Sarbanes-Oxley Act .

(a) The Company timely has filed with or furnished to the SEC, and made available to the Investor (to the extent that full, complete and unredacted copies have not been published on the SEC’s EDGAR site), all reports, schedules, forms, statements, prospectuses, registration statements and other documents required to be filed with or furnished to the SEC by the Company (collectively, together with any exhibits and schedules thereto and other information incorporated therein, the “ Company SEC Documents ”). The Company has made available to the Investor true and complete copies of all comment letters from the staff of the SEC relating to the Company SEC Documents containing unresolved comments and all written responses of the Company thereto and, except as set forth therein, to the knowledge of the Company, no Company SEC Document is the subject of ongoing SEC review, comment or investigation and there are no outstanding or unresolved comments received from the SEC with respect to any Company SEC Document.

(b) As of its filing date (or, if amended or superseded by a filing prior to the date hereof, on the date of such filing), each Company SEC Document complied (and each Company SEC Document filed subsequent to the date hereof will comply) in all material respects with the applicable requirements of NASDAQ, the Securities Act, the Exchange Act and the Sarbanes-Oxley Act, as the case may be, and did not (and each Company SEC Document filed subsequent to the date hereof will not) contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

(c) The Company and its Subsidiaries have established and maintained disclosure controls and procedures (as defined in Rule 13a-15 under the Exchange Act). Such disclosure controls and procedures are designed to ensure that material information relating to the Company, including its consolidated Subsidiaries, is made known to the Company’s principal executive officer and its principal financial officer by others within those entities, particularly during the periods in which the periodic reports required under the Exchange Act are being prepared. Such disclosure controls and procedures are effective in timely alerting the Company’s principal executive officer and principal financial officer to material information required to be included in the Company’s periodic and current reports required under the Exchange Act. For purposes of this Agreement, “principal executive officer” and “principal financial officer” shall have the meanings given to such terms in the Sarbanes-Oxley Act.

 

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(d) The Company and its Subsidiaries have established and maintained a system of internal control over financial reporting (as defined in Rule 13a-15 under the Exchange Act) sufficient to provide reasonable assurance regarding the reliability of the Company’s financial reporting and the preparation of Company financial statements for external purposes in accordance with GAAP. The Company has disclosed, based on its most recent evaluation of internal controls prior to the date hereof, to the Company’s auditors and audit committee (i) any significant deficiencies and material weaknesses in the design or operation of internal controls which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in internal controls. The Company has made available to the Investor prior to the date of this Agreement a summary of any such disclosure made by management to the Company’s auditors and audit committee since January 1, 2011 through the date hereof.

Section 5.08. Financial Statements . The audited consolidated financial statements and unaudited consolidated interim financial statements of the Company (including the notes thereto) included or incorporated by reference in the Company SEC Documents (a) complied at the time they were filed as to form in all material respects with the applicable accounting requirements and the published rules and regulations of the SEC with respect thereto and (b) fairly present in all material respects, in conformity with GAAP applied on a consistent basis (except as may be indicated in the notes thereto), the consolidated financial position of the Company and its consolidated Subsidiaries as at the dates thereof and their consolidated results of operations and cash flows for the periods then ended (subject to normal year-end audit adjustments in the case of any unaudited interim financial statements).

Section 5.09. Disclosure Documents.

(a) The Schedule 14D-9, when filed, distributed or disseminated, as applicable, will comply as to form in all material respects with the applicable requirements of the Exchange Act and, at the time of such filing or the filing of any amendment or supplement thereto and the time of such distribution or dissemination thereof, will not contain any untrue statement of a material fact or omit 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, not misleading.

(b) At the time the proxy statement is to be filed with the SEC in connection with the solicitation of the Company Stockholder Approval (the “ Company Proxy Statement ”) or any amendment or supplement thereto is first mailed to stockholders of the Company, and at the time such stockholders vote on the matters set forth therein, the Company Proxy Statement, as supplemented or amended, if applicable, will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

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(c) The information with respect to the Company or any of its Subsidiaries that the Company supplies to the Investor specifically for use (or incorporation by reference) in the Schedule TO and the Offer Documents, at the time of the filing of the Schedule TO or any amendment or supplement thereto, at the time of any distribution or dissemination of the Offer Documents and at the time of the consummation of the Offer, will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

(d) The representations and warranties contained in this Section 5.09 will not apply to statements or omissions included or incorporated by reference in the Schedule TO, the Offer Documents, the Company Proxy Statement or the Schedule 14D-9 based upon information supplied by the Investor or on its behalf specifically for use or incorporation by reference therein.

Section 5.10. Absence of Certain Changes.

(a) Since the Company Balance Sheet Date until the date hereof, (i) the business of the Company and its Subsidiaries has been conducted in the ordinary course consistent with past practices and (ii) there has not been any event, occurrence, development or state of circumstances or facts that has had or would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

(b) From September 30, 2014 until the date hereof, there has not been any action taken by the Company or any of its Subsidiaries that, if taken during the period from the date of this Agreement through the Closing without the Investor’s consent, would constitute a breach of Section 7.01.

Section 5.11 . No Undisclosed Material Liabilities. There are no liabilities or obligations of the Company or any of its Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute, known, unknown, determined, determinable or otherwise, other than: (i) liabilities or obligations disclosed and reserved for in the Company Balance Sheet, (ii) liabilities or obligations incurred after the Company Balance Sheet Date in the ordinary course of business consistent with past practice (excluding liabilities arising out of any breach of or default under a Contract or violation of Applicable Law), (iii) obligations expressly contemplated by, and fees and expenses payable to its external Representatives for services rendered in connection with, this Agreement, the other Transaction Documents and the transactions contemplated hereby and thereby, (iv) liabilities or obligations under Contracts existing as of the date of this Agreement or entered into after the date hereof as permitted under Section 7.01 of this Agreement (excluding liabilities arising out of any breach or default under such Contracts), and (v) liabilities or obligations that would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

 

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Section 5.12 . Compliance with Laws and Court Orders . The Company and each of its Subsidiaries is, and since January 1, 2011, has been, in compliance with, has not been charged with or given written notice by any Governmental Authority of any violation of and, to the knowledge of the Company, is not under investigation with respect to and has not been threatened to be charged with any violation of, Applicable Law or the terms of any of its Permits, except for failures to comply or violations or alleged violations that have not had and, even if determined adversely to the Company, would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. There is no judgment, decree, injunction, rule or order of any arbitrator or Governmental Authority outstanding against or affecting the Company or any of its Subsidiaries that has had or would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect or that prevents, enjoins, alters or materially delays the Offer, the Issuance or any of the other transactions contemplated by this Agreement or any other Transaction Document. The Company and each of its Subsidiaries have all Permits necessary to enable it to use its legal or other business name, to own, lease or otherwise hold and operate its properties and other assets and to carry on its business as presently conducted, except for those Permits the absence of which would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

Section 5.13. Regulatory Matters.

(a) Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, (i) the Company and its Subsidiaries have obtained all Permits (including, for the avoidance of doubt, all establishment registrations, device listings and 510(k) clearances (or their foreign equivalents)) required by any Health Authority to permit the conduct of their respective businesses as currently conducted, (ii) all of such Permits are in full force and effect, (iii) the Company is in compliance with, and is not in default under, each such Permit and (iv) none of such Permits shall be terminated or impaired or become terminable, in whole or in part, as a result of the transactions contemplated by this Agreement or the other Transaction Documents.

(b) Since January 1, 2011, none of the Company, any of its Subsidiaries or, to the knowledge of the Company, any of their respective directors, officers, employees or Collaboration Partners (solely with respect to such Collaboration Partners’ activities with the Company and its Subsidiaries) have (i) made an untrue statement of a material fact or fraudulent statement to the FDA or any other Health Authority, (ii) failed to disclose a material fact required to be disclosed to the FDA or any other Health Authority, or (iii) committed any other act, made any statement or failed to make any statement, that (in any such case) establishes a reasonable basis for the FDA to invoke the policy respecting “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities,” set forth in 56 Fed. Reg. 46191 (September 10, 1991) (the “ FDA Fraud Policy ”) or for any other Health Authority to invoke a similar policy that may be applicable to the Company or any of its Subsidiaries in another jurisdiction. None of the Company, any of its Subsidiaries or, to the knowledge of the Company, any of their respective directors, officers, employees or Collaboration Partners (solely with respect to such Collaboration Partners’ activities with the Company and its Subsidiaries) are the subject of any pending or, to the Company’s knowledge, threatened investigation by the FDA under the FDA Fraud Policy, or the subject of any similar investigation by any other Health Authority.

 

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(c) Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, since January 1, 2011, the Company and each of its Subsidiaries and, to the knowledge of the Company, each Collaboration Partner (solely with respect to such Collaboration Partner’s activities with the Company and its Subsidiaries), has been in compliance in all material respects with all Health Laws, including those relating to laboratory developed tests. None of the Company, any of its Subsidiaries or, to the knowledge of the Company, any Collaboration Partner (solely with respect to such Collaboration Partner’s activities with the Company and its Subsidiaries) (i) have received any written notice or other written communication from any Health Authority (including a warning, untitled or notice of violation letter or Form FDA-483) alleging any violation of any Health Law, including any failure to maintain systems and programs adequate to ensure compliance with any such Health Laws, or contesting the premarket clearance or approval of, the uses of or the labeling and promotion of any product subject to any Health Law, or (ii) are subject to any enforcement, regulatory or administrative proceedings against or affecting the Company relating to or arising under any Health Law and, to the knowledge of the Company, no such enforcement, regulatory or administrative proceeding has been threatened.

(d) The Company and its Subsidiaries have filed with the applicable Health Authority all required and material Filings, including adverse event reports. All such Filings were in material compliance with Applicable Law when filed, and no deficiencies have been asserted in writing by any applicable Health Authority with respect to any such Filings.

(e) None of the Company or any of its Subsidiaries, any of their respective officers, directors or managing employees (as such terms are defined in 42 C.F.R. § 1001.1001) or, to the knowledge of the Company, any other Company Service Provider or agent (as such term is defined in 42 C.F.R. § 1001.1001) of the Company or any of its Subsidiaries has been disqualified, debarred or deregistered by any Governmental Authority.

(f) As of the date hereof, neither the Company nor any of its Subsidiaries have received any written coverage or reimbursement decision from any commercial third-party payor or government payor.

Section 5.14. Litigation . There is no Proceeding pending against or, to the knowledge of the Company, threatened against the Company, any of its Subsidiaries, any of their respective assets or properties, any of their respective present or former officers, directors or employees in their capacities as such, or any Person for whom the Company or any of its Subsidiaries may be liable before (or, in the case of threatened Proceedings, would be before) or by any Governmental Authority or arbitrator that, assuming such Proceedings were determined or resolved adversely in accordance with the opposing party’s demands, would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

 

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Section 5.15. Properties . Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, the Company and its Subsidiaries have good title to, or valid leasehold interests in, all property and assets reflected on the Company Balance Sheet, or acquired or leased after the Balance Sheet Date, except as have been disposed of since the Company Balance Sheet Date in the ordinary course of business consistent with past practice. Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, no such property or assets are subject to any Lien except Permitted Liens.

Section 5.16. Intellectual Property . Schedule 5.16 of the Company Disclosure Schedule sets forth a true and complete list of all material registrations and applications for registration of any Intellectual Property owned by the Company or any of its Subsidiaries, specifying as to each such item, as applicable (a) the owner of such item, (b) each jurisdiction in which such item is issued or registered or in which any application for issuance or registration has been filed, (c) the respective title and issuance, registration, or application number of such item and (d) the date of application and issuance or registration of such item. Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect: (i) the Company and each of its Subsidiaries is the sole and exclusive owner of, or has a valid and legally enforceable license to use (in each case, free and clear of any Liens other than Permitted Liens), all Intellectual Property used or held for use in, or necessary for, the conduct of its business as currently conducted; (ii) neither the Company nor any of its Subsidiaries has infringed, misappropriated or otherwise violated (A) any Intellectual Property rights of any Person other than such rights of any Person under any patent, and (B) to the knowledge of the Company, any Intellectual Property rights of any Person under a patent; (iii) to the knowledge of the Company, no Person has challenged, infringed, misappropriated or otherwise violated any Intellectual Property right owned by and/or exclusively licensed to the Company or any of its Subsidiaries; (iv) neither the Company nor any of its Subsidiaries has received any written notice or otherwise has knowledge of any pending or threatened Proceeding or order with respect to any Intellectual Property owned, used or held for use by the Company or any of its Subsidiaries or alleging that any services provided, processes used or products manufactured, used, imported, offered for sale or sold by the Company or any of its Subsidiaries infringes, misappropriates or otherwise violates any Intellectual Property rights of any Person; (v) none of the Intellectual Property owned by or licensed to the Company or any of its Subsidiaries has been adjudged invalid or unenforceable in whole or part, and, to the knowledge of the Company, all such Intellectual Property is valid and enforceable; (vi) the consummation of the transactions contemplated by this Agreement will not alter, encumber, impair or extinguish any Intellectual Property right of the Company or any of its Subsidiaries or impair the right of the Company or any of its Subsidiaries to develop, use, sell, license or dispose of, or to bring any action for the infringement of, any Intellectual Property right of the Company or any of its Subsidiaries; (vii) the Company and its Subsidiaries have taken reasonable steps in accordance with normal industry practice to maintain the confidentiality of all Intellectual Property of the Company or any of its Subsidiaries, the value of which is contingent upon maintaining the confidentiality thereof, and no such Intellectual Property has been disclosed other than to employees, representatives and agents of the Company or any of its Subsidiaries all of whom are bound by written confidentiality agreements; (viii) the Company and its Subsidiaries have at all times complied with all Applicable Laws relating to privacy, data protection and the collection and use of personal information and user information gathered or accessed in the course of their operations; (ix) neither the Company nor any of its Subsidiaries has received any written notice or otherwise has knowledge of any pending or threatened Proceeding alleging a violation of any Person’s privacy, personal or confidentiality rights under any Applicable Law; (x) the IT Assets operate and perform in a manner that permits the Company and its Subsidiaries to conduct their respective businesses as currently conducted and to the knowledge of the Company, no Person has gained unauthorized access to any IT Assets; (xi) the Company and each of its Subsidiaries have taken commercially reasonable actions, consistent with current industry standards, to protect the confidentiality, integrity and security of the IT Assets (and all information and transactions stored or contained therein or transmitted thereby) against any unauthorized use, access, interruption, modification or corruption, including but not limited to the implementation of commercially reasonable (A) data backup, (B) disaster avoidance and recovery procedures and (C) business continuity procedures, in each case consistent with industry practices; and (xii) no software distributed by the Company or any of its Subsidiaries contains any software code that is licensed under any terms or conditions that require that any software be (A) made available or distributed in source code form, (B) licensed for the purpose of making derivative works, (C) licensed under terms that allow reverse engineering, reverse assembly or disassembly of any kind or (D) redistributable at no charge.

 

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Section 5.17. Taxes .

(a) All material Tax Returns required by Applicable Law to be filed with any Taxing Authority by, or on behalf of, the Company or any of its Subsidiaries have been filed when due in accordance with all Applicable Law, and all such Tax Returns are true, correct and complete in all material respects.

(b) The Company and each of its Subsidiaries has paid (or has had paid on its behalf) all material Taxes due and payable (whether or not shown as due on any Tax Return), or, where payment is not yet due, has established (or has had established on its behalf and for its sole benefit and recourse) in accordance with GAAP an adequate accrual for all Taxes through the end of the last period for which the Company and its Subsidiaries ordinarily record items on their respective books. Since the end of the last period for which the Company and its Subsidiaries ordinarily record items on their respective books, neither the Company nor any of its Subsidiaries has engaged in any transaction, or taken any other action, other than in the ordinary course of business, that would materially impact any Tax asset or Tax liability of the Company or any of its Subsidiaries.

 

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(c) Neither the Company nor any of its Subsidiaries (or any member of any affiliated, consolidated, combined or unitary group of which the Company or any of its Subsidiaries is or has been a member) has granted any extension or waiver of the limitation period applicable to the assessment or collection of any Tax.

(d) There is no Proceeding pending or, to the Company’s knowledge, threatened against or with respect to the Company or its Subsidiaries in respect of any material amount of Taxes or material Tax asset.

(e) During the five-year period ending on the date hereof, neither the Company nor any of its Subsidiaries was a distributing corporation or a controlled corporation in a transaction intended to be governed by Section 355 of the Code.

(f) The Company and each of its Subsidiaries has properly withheld, and paid over to the appropriate Taxing Authority, all material Taxes that it was required to withhold from any payment (including any dividend or interest payment) to any employee, independent contractor, creditor, stockholder, vendor or other Person.

(g) Neither the Company nor any of its Subsidiaries has participated in any “listed transaction” within the meaning of Treasury Regulation Section 1.6011-4.

(h) “ Tax ” means (i) any tax, governmental fee or other like assessment or charge of any kind whatsoever (including withholding on amounts paid to or by any Person), together with any interest, penalty, addition to tax or additional amount imposed by any Governmental Authority (a “ Taxing Authority ”) responsible for the imposition of any such tax (domestic or foreign), and any liability for any of the foregoing as transferee, (ii) liability for the payment of any amount of the type described in clause (i) as a result of being or having been before the Offer Closing Date a member of an affiliated, consolidated, combined or unitary group, or a party to any agreement or arrangement, as a result of which liability of the Company or any of its Subsidiaries to a Taxing Authority is determined or taken into account with reference to the activities of any other Person and (iii) liability of the Company or any of its Subsidiaries for the payment of any amount as a result of being party to any tax sharing agreement or with respect to the payment of any amount imposed on any Person of the type described in clause (i) or (ii) as a result of any existing express or implied agreement or arrangement (including an indemnification agreement or arrangement, but other than any such agreement or arrangement entered into in the ordinary course of business, the primary purpose of which does not relate to Taxes). “ Tax Return ” means any report, return, document, declaration or other information or filing required to be supplied to any Taxing Authority with respect to Taxes, including information returns, any documents with respect to or accompanying payments of estimated Taxes, or with respect to or accompanying requests for the extension of time in which to file any such report, return, document, declaration or other information.

 

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Section 5.18. Employee Benefit Plans.

(a) Section 5.18(a) of the Company Disclosure Schedule contains a correct and complete list identifying each material Company Employee Plan. Copies of each material Company Employee Plan (and, if applicable, related trust or funding agreements or insurance policies) and all amendments thereto have been furnished to the Investor together with the most recent annual report (Form 5500 including, if applicable, Schedule B thereto) prepared in connection with any such plan or trust. No Company Employee Plan primarily covers Company Service Providers who are located outside the United States.

(b) Neither the Company nor any of its ERISA Affiliates nor any predecessor thereof sponsors, maintains or contributes to, or has in the past sponsored, maintained or contributed to, any Company Employee Plan subject to Title IV of ERISA. Neither the Company nor any of its ERISA Affiliates has incurred, or is reasonably expected to incur, any liability under Title IV of ERISA.

(c) Neither the Company nor any ERISA Affiliate nor any predecessor thereof contributes to, or has at any time in the past contributed to, any multiemployer plan, as defined in Section 3(37) of ERISA (a “ Multiemployer Plan ”).

(d) Each Company Employee Plan that is intended to be qualified under Section 401(a) of the Code has received a favorable determination or opinion letter, or has pending or has time remaining in which to file, an application for such determination from the Internal Revenue Service, and, to the knowledge of the Company, there is no reason why any such determination letter should be revoked or not be reissued. The Company has made available to the Investor copies of the most recent Internal Revenue Service determination or opinion letters with respect to each such Company Employee Plan. Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, since January 1, 2011, (i) each Company Employee Plan has been maintained in compliance with its terms and with the requirements prescribed by any and all statutes, orders, rules and regulations, including ERISA and the Code, which are applicable to such Company Employee Plan and (ii) no events have occurred with respect to any Company Employee Plan that could result in payment or assessment by or against the Company of any excise taxes under Sections 4972, 4975, 4976, 4977, 4979, 4980B, 4980D, 4980E or 5000 of the Code.

 

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(e) The consummation of the transactions contemplated by this Agreement will not (either alone or together with any other event) (i) entitle any current or former Company Service Provider to any payment or benefit, including any bonus, retention, severance, retirement or job security payment or benefit; (ii) accelerate the time of payment or vesting or trigger any payment or funding (through a grantor trust or otherwise) of compensation or benefits under, or increase the amount payable or trigger any other obligation under, any Company Employee Plan; (iii) limit or restrict the right of the Company or any of its Subsidiaries to merge, amend or terminate any Company Employee Plan; or (iv) result in the payment of any amount that would not be deductible under Section 280G or Section 162(m) of the Code. The Company has provided or made available to the Investor a list of all agreements, arrangements and other instruments which give rise to any of the obligations described in Section 5.18(e)(i), (ii), or (iii) above. Neither the Company nor any of its Subsidiaries has any obligation to gross-up, indemnify or otherwise reimburse any current or former Company Service Provider for any tax incurred by such Company Service Provider, including income taxes, or taxes incurred under Section 409A or 4999 of the Code.

(f) Neither the Company nor any of its Subsidiaries has any liability in respect of post-retirement health, medical or life insurance benefits for retired, former or current employees of the Company or its Subsidiaries except as required to avoid excise tax under Section 4980B of the Code.

(g) Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, all contributions and payments accrued under each Company Employee Plan, determined in accordance with prior funding and accrual practices, as adjusted to include proportional accruals for the period ending as of the date hereof, have been discharged and paid on or prior to the date hereof except to the extent reflected as a liability on the Company Balance Sheet.

(h) Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, there is, and since January 1, 2011, there has been no Proceeding pending against or, to the knowledge of the Company, threatened against any Company Employee Plan (or against the Company in respect of any Company Employee Plan) before any Governmental Authority.

(i) The Compensation Committee of the Company Board (the “ Compensation Committee ”) has (i) approved each Company Employee Plan pursuant to which consideration is payable to any officer, director or employee of the Company or any of its Subsidiaries (each, a “ Compensation Arrangement ”) as an “employment compensation, severance or other employee benefit arrangement” within the meaning of Rule 14d-10(d)(2) under the Exchange Act, and (ii) taken all other actions necessary or advisable to satisfy the requirements of the non-exclusive safe harbor with respect to such Compensation Arrangement in accordance with Rule 14d-10(d)(2) under the Exchange Act (the approvals and actions referred to in clauses (i) and (ii) above, the “ Compensation Arrangement Approvals ”). The Company Board has determined that the Compensation Committee is composed solely of “independent directors” in accordance with the requirements of Rule 14d-10(d)(2) under the Exchange Act and the instructions thereto.

 

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Section 5.19. Labor Matters.

(a) Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, the Company and its Subsidiaries are, and have been since January 1, 2011, in compliance with all Applicable Laws relating to labor and employment, including those relating to labor management relations, wages, hours, overtime, worker classification, discrimination, sexual harassment, civil rights, affirmative action, work authorization, immigration, safety and health, information privacy and security, workers compensation, continuation coverage under group health plans, wage payment and the payment and withholding of taxes.

(b) Neither the Company nor any of its Subsidiaries is or has been a party to or subject to, or is currently negotiating in connection with entering into, any collective bargaining agreement, and, to the Company’s knowledge, there has not been any organizational campaign, petition or other unionization activity seeking recognition of a collective bargaining unit relating to any Company Service Provider. There are no unfair labor practice complaints pending or, to the Company’s knowledge, threatened in writing against the Company or any of its Subsidiaries before the National Labor Relations Board or any other Governmental Authority or any current union representation questions involving Company Service Providers. There is no labor strike, slowdown, stoppage, picketing, interruption of work or lockout pending or, to the Company’s knowledge, threatened in writing against or affecting the Company or any of its Subsidiaries.

Section 5.20. Environmental Matters.

(a) Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect: (i) no notice, notification, demand, request for information, citation, summons or order has been received, no complaint has been filed, no penalty has been assessed, and no Proceeding is pending or, to the knowledge of the Company, is threatened by any Governmental Authority or other Person relating to the Company or any of its Subsidiaries and relating to or arising out of any Environmental Law; (ii) the Company and its Subsidiaries are and have been in compliance with all Environmental Laws and all Environmental Permits; and (iii) there are no liabilities or obligations of the Company or any of its Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute, known, unknown, determined, determinable or otherwise arising under or relating to any Environmental Law, Environmental Permit or any Hazardous Substance.

 

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(b) No environmental investigation, study, audit, test, review or other analysis has been conducted since January 1, 2012 through the date hereof by the Company or any of its Subsidiaries or otherwise is in the Company’s possession or control in relation to the current or prior business of the Company or any of its Subsidiaries or any property or facility now or previously owned or leased by the Company or any of its Subsidiaries that has not been delivered or made available to Investor at least five Business Days prior to the date hereof.

(c) Neither the Company nor any of its Subsidiaries owns, leases or operates or has owned, leased or operated any real property, or conducts or has conducted any operations, in New Jersey or Connecticut.

(d) For purposes of this Section 5.20 the terms “Company” and “Subsidiaries” shall include any entity that is, in whole or in part, a predecessor of the Company or any of its Subsidiaries.

Section 5.21. Material Contracts.

(a) As of the date of this Agreement, neither the Company nor any of its Subsidiaries is a party to or bound by:

(i) any lease (A) for real property or (B) for personal property, in the case of this clause (B), providing for annual rental payments in excess of $100,000;

(ii) any Contract (A) resulting in aggregate payments by the Company and its Subsidiaries in excess of $500,000 in either calendar year 2013 or 2014 or (B) under which the Company or any of its Subsidiaries is contractually obligated to make payments in excess of $1,000,000 in the aggregate;

(iii) any Contract (A) resulting in aggregate payments to the Company and its Subsidiaries in excess of $500,000 in either calendar year 2013 or 2014 or (B) under which the Company or any of its Subsidiaries is contractually entitled to receive payments in excess of $1,000,000 in the aggregate;

(iv) any Contract relating to the disposition of any business or material assets other than the sale of products or services in the ordinary course of business consistent with past practice (whether by merger, sale of stock, sale of assets or otherwise) by the Company or any of its Subsidiaries;

 

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(v) any Contract relating to the acquisition of any business or assets (whether by merger, sale of stock, sale of assets or otherwise), other than purchases of supplies, inventory and equipment in the ordinary course of business consistent with past practice, (A) entered into since January 1, 2011 or (B) that contains any outstanding non-competition, earn-out or other contingent payment obligations or any other outstanding material obligation of the Company or any of its Subsidiaries;

(vi) any Contract relating to indebtedness for borrowed money or the deferred purchase price of property (in either case, whether incurred, assumed, guaranteed or secured by any asset), any guarantees thereof or the granting of any Liens (other than Permitted Liens) over the property or assets of the Company or any of its Subsidiaries, other than Contracts solely among the Company and its wholly owned Subsidiaries;

(vii) any Contract for the formation of (A) any legal partnership, joint venture or similar arrangement or (B) any other partnership, joint venture, strategic alliance or similar arrangement, in the case of clause (B), that if terminated or not renewed would reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole, and in each case any material Contracts related thereto;

(viii) any stockholders’, investors rights’, registration rights or similar agreement or arrangement;

(ix) any Contract pursuant to which the Company or any of its Subsidiaries grants or is granted any material license, right or immunity (including any covenant not to sue) with respect to any Intellectual Property (other than licenses granted to the Company or any of its Subsidiaries for commercial off-the-shelf software generally available on nondiscriminatory pricing terms and other immaterial non-exclusive licenses granted by or to the Company or any of its Subsidiaries in the ordinary course of business consistent with past practice);

(x) any Contract with any (A) present or former officer or director of the Company or any of its Subsidiaries under which the Company has any continuing obligations, (B) beneficial owner of 5% or more of the outstanding Shares or (C) Affiliate or “associate” or any member of the “immediate family” (as such terms are respectively defined in Rules 12b-2 and 16a-1 of the Exchange Act) of any such officer, director, or beneficial owner;

(xi) any Contract (A) with any sole-source suppliers ( i.e ., suppliers for which there is no readily available alternate supplier at comparable cost) of material tangible products or services ( provided that, in the case of purchase orders for reagents in the ordinary course of business consistent with past practice, only the supplier need be scheduled on Section 5.21(a)(xi)(A) of the Company Disclosure Schedule) or (B) that includes any material “most favored nations” terms and conditions (including, without limitation, with respect to pricing) or minimum purchase arrangement;

 

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(xii) any Contract containing any provision or covenant that limits the freedom of the Company or any of its Subsidiaries (or that purports, after the Closing, to limit the freedom of the Investor or any of its Affiliates) to (A) sell any products or services of or to any other Person or in any geographic region, (B) engage in any line of business or (C) compete with or to obtain products or services from any Person or limiting the ability of any Person to provide products or services to the Company or any of its Affiliates, other than agreements with recruiting agencies pursuant to which such agencies are granted the exclusive right to identify candidates for employment;

(xiii) any Contract pursuant to which the Company or any of its Subsidiaries has continuing obligations or interests involving (A) milestone or similar payments, including upon the achievement of regulatory or commercial milestones, in excess of $1,000,000 in the aggregate, or (B) payment of royalties or other amounts calculated based upon any revenues or income of the Company or any of its Subsidiaries, in each case that cannot be terminated by the Company or its Subsidiaries without payment or penalty without more than 60 days’ notice;

(xiv) any “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC) other than any Employee Plan; or

(xv) any other Contract not made in the ordinary course of business that is material to the Company and the Subsidiaries, taken as a whole.

All Contracts of the type described in this Section 5.21(a) are referred to herein as “ Material Contracts ” (which term, for the avoidance of doubt, includes any Contract that would be a Material Contract if it had been entered into as of the date hereof).

(b) The Company has prior to the date of this Agreement made available to the Investor a true and complete copy of each Material Contract entered into on or prior to the date hereof (including all amendments, modifications, extensions and renewals thereto and waivers thereunder) . Except for breaches, violations or defaults which would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, (i) each Material Contract is valid, binding and in full force and effect and, to the Company’s knowledge, enforceable against the other party or parties thereto in accordance with its terms (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws affecting creditors’ rights generally and general principles of equity), and neither the Company nor any of its Subsidiaries have waived or failed to enforce any rights or benefits under any Material Contract, and (ii) neither the Company nor any of its Subsidiaries, nor, to the Company’s knowledge, any other party to a Material Contract, has breached or violated any provision of, or taken or failed to take any act which, with or without notice, lapse of time, or both, would constitute a default under the provisions of such Material Contract, or would give to any Third Party any right of termination, amendment or cancellation of any Material Contract or any license thereunder, and neither the Company nor any of its Subsidiaries has received written notice that it has breached, violated or defaulted under any Material Contract.

 

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(c) The CDX Contract does not (i) conflict with or otherwise limit any rights granted or contemplated to be granted to the Investor or any of its Affiliates under any of the Collaboration Agreements, (ii) impose or purport to impose any obligation or restriction on the Investor or any of its Affiliates (including any of the restrictions described in clause (iv) of this Section 5.21(c)), (iii) encumber or purport to encumber any Intellectual Property of the Investor or any of its Affiliates, or (iv) except as set forth on Section 5.21(a)(xii) of the Company Disclosure Schedule, limit the freedom of the Company or any of its Subsidiaries to (A) sell any products or services of or to any other Person or in any geographic region, (B) engage in any line of business or (C) compete with or obtain products or services from any Person or limit the ability of any Person to provide products or services to the Company or any of its Affiliates.

Section 5.22. Foreign Corrupt Practices and International Trade Sanctions.

(a) Neither the Company nor any of its Subsidiaries or Affiliates, nor any director, officer, or employee thereof, nor, to the Company’s knowledge, any agent or representative of the Company or of any of its Subsidiaries or Affiliates, has taken or will take any unlawful action in furtherance of an offer, payment, promise to pay, or authorization or approval of the payment or giving of money, property, gifts or anything else of value to (i) any “government official” (including any officer or employee of a government or government-owned or controlled entity or of a public international organization, or any person acting in an official capacity for or on behalf of any of the foregoing, or any political party or party official or candidate for political office) in order to influence official action, (ii) any person (whether or not a government official) to influence that person to act in breach of a duty of good faith, impartiality or trust (“acting improperly”), to reward the person for acting improperly, or in circumstances where the recipient would be acting improperly by receiving the thing of value; or (iii) any person while knowing or having reason to know that all or any portion of the money or other thing of value will be offered, promised or given to a government official in order to influence or reward official action or to any person to influence such person to act improperly or reward the person for doing so. The Company and its Subsidiaries and Affiliates have conducted their businesses in compliance in all material respects with all applicable anti-corruption laws, including, without limitation, the Foreign Corrupt Practices Act, and have instituted and maintain policies and procedures designed to promote and achieve compliance with such laws.

 

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(b) Neither the Company nor any of its Subsidiaries or Affiliates, nor, to the knowledge of the Company, any of their directors, officers or employees, is a Person that is, or is owned 50% or more or controlled by, a Person that is: (A) the subject of any sanctions administered by the U.S. Department of Treasury’s Office of Foreign Assets Control or the U.S. Department of State, the United Nations Security Council, the European Union, or other relevant sanctions authority (collectively, “ Sanctions ”), or (B) located, organized or resident in a country or territory that is the subject of Sanctions (including, without limitation, Burma/Myanmar, Cuba, Iran, North Korea, Sudan and Syria).

(c) Except as set forth on Section 5.22(c) of the Company Disclosure Schedule, for the past five years, neither the Company nor any of its Subsidiaries or Affiliates has engaged in, or is now engaged in, directly or indirectly, any unlawful dealings or transactions with any Person, or in any country or territory, that, at the time of the dealing or transaction, is or was the subject of Sanctions.

(d) The Company and its Subsidiaries and Affiliates are and, except as disclosed on Section 5.22(d) of the Company Disclosure Schedule, for the past five years have been in compliance in all material respects with, and, to the Company’s knowledge, have not been penalized for or under investigation with respect to and have not been threatened to be charged with or given notice of any violation of, any applicable Sanctions or export controls laws.

Section 5.23 . Finders’ Fees. Except for the Company Financial Advisor, a true and complete copy of whose engagement agreement has been provided to Investor prior to the date hereof, there is no investment banker, broker, finder or other intermediary who might be entitled to any fee or commission from the Company or any of its Subsidiaries in connection with the transactions contemplated by this Agreement or the other Transaction Documents.

Section 5.24. Opinion of Financial Advisor . The Company has received the opinion (to be confirmed in writing) of the Company Financial Advisor to the effect that, as of the date of this Agreement, and based upon and subject to the facts and assumptions set forth therein, the consideration to be paid by the Investor pursuant to the Offer is fair to the Company’s stockholders (other than the Investor and its Affiliates) from a financial point of view. The Company shall deliver a true and complete copy of the written opinion of the Company Financial Advisor to the Investor for informational purposes only promptly after receipt thereof by the Company.

 

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Section 5.25. Antitakeover Statutes and Rights Agreement . The Company has no “rights plan,” “rights agreement,” or “poison pill” in effect. The Company has taken all action necessary to exempt the execution, delivery and performance of this Agreement and the consummation of the Offer, the Issuance and any other transaction contemplated by this Agreement or any other Transaction Document from Section 203 of Delaware Law, and, accordingly, neither Section 203 of Delaware Law nor any other “control share acquisition,” “fair price,” “moratorium” or other antitakeover or similar Applicable Law enacted under U.S. state or federal laws apply to this Agreement or any other Transaction Document or any of the transactions contemplated hereby or thereby.

Section 5.26. No Other Representations and Warranties . Without limiting the Investor’s rights in the case of fraud, except as expressly set forth in this Article 5 or in any Transaction Document, neither the Company nor any Subsidiary of the Company has made any representation or warranty, express or implied, to the Investor in connection with this Agreement or any of the transactions contemplated hereby.

ARTICLE 6

R EPRESENTATIONS AND W ARRANTIES OF THE I NVESTOR

The Investor represents and warrants to the Company as of the date hereof, the Acceptance Time and the Closing that:

Section 6.01. Corporate Existence and Power . The Investor is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all corporate powers and all Permits necessary to enable it to use its legal or other business name, to own, lease or otherwise hold and operate its properties and other assets and to carry on its business as presently conducted, except for those Permits the absence of which would not reasonably be expected to have, individually or in the aggregate, an Investor Material Adverse Effect.

Section 6.02. Corporate Authorization . The execution, delivery and performance by the Investor of this Agreement, and the execution, delivery and performance by the Investor and its Affiliates of each other Transaction Document to which the Investor or any of such Affiliates is a party, and the consummation by the Investor and such Affiliates of the transactions contemplated hereby and thereby, are within the corporate powers of the Investor and such Affiliates and have been duly authorized by all necessary corporate action. This Agreement and each other Transaction Document to which the Investor or any such Affiliate is a party constitutes a valid and binding agreement of the Investor or such Affiliate, as applicable, enforceable against the Investor or such Affiliate in accordance with its terms (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws affecting creditors’ rights generally and general principles of equity).

 

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Section 6.03. Governmental Authorization . The execution, delivery and performance by the Investor of this Agreement, and the execution, delivery and performance by the Investor and its Affiliates of each other Transaction Document to which the Investor or any of such Affiliates is a party, and the consummation by the Investor and such Affiliates of the transactions contemplated hereby and thereby, require no action by or in respect of, or Filing with, any Governmental Authority, other than (i) compliance with any applicable requirements of the HSR Act, (ii) compliance with any applicable requirements of the Securities Act, the Exchange Act and any other U.S. state or federal securities laws, (iii) compliance with any national securities exchange on which the securities of Investor or any of its Affiliates are listed or any other applicable listing authority, (iv) filing and recordation of the Company Charter Amendment as required by Delaware law and (v) any actions or Filings the absence of which would not reasonably be expected to have, individually or in the aggregate, an Investor Material Adverse Effect.

Section 6.04. Non-contravention . The execution, delivery and performance by the Investor of this Agreement, and the execution, delivery and performance by the Investor and its Affiliates of each other Transaction Document to which the Investor or any of such Affiliates is a party, and the consummation by the Investor and such Affiliates of the transactions contemplated hereby and thereby, do not and will not (i) contravene, conflict with, or result in any violation or breach of any provision of the certificate of incorporation or bylaws of the Investor or such Affiliate, (ii) assuming compliance with the matters referred to in Section 6.03, contravene, conflict with or result in a violation or breach of any provision of any Applicable Law, (iii) assuming compliance with the matters referred to in Section 6.03, require any consent or other action by any Person under, constitute a default (or constitute an event that, with or without notice or lapse of time or both, would constitute a default) under, or cause or permit the termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit to which the Investor or any of its Affiliates is entitled under any provision of any Contract binding upon, or any Permit of, the Investor or any of its Affiliates (or any Contract to which any of their respective assets is subject) or (iv) result in the creation or imposition of any Lien on any asset of the Investor or any of its Affiliates, with only such exceptions, in the case of clauses (ii) through (iv), as would not reasonably be expected to have, individually or in the aggregate, an Investor Material Adverse Effect.

Section 6.05. Disclosure Documents.

(a) The Schedule TO, when filed, and the Offer Documents, when distributed or disseminated, will comply as to form in all material respects with the applicable requirements of the Exchange Act and, at the time of such filing or the filing of any amendment or supplement thereto, at the time of such distribution or dissemination and at the time of consummation of the Offer, will not contain any untrue statement of a material fact or omit 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, not misleading.

 

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(b) The information with respect to the Investor and any of its Affiliates that the Investor supplies to the Company specifically for use or incorporation by reference in the Schedule 14D-9 will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, at the time of the filing of such Schedule 14D-9 or any such supplement or amendment thereto and at the time of any distribution or dissemination thereof.

(c) The information with respect to the Investor and any of its Affiliates that the Investor supplies to the Company specifically for use or incorporation by reference in the Company Proxy Statement or any amendment or supplement thereto, at the time the Company Proxy Statement or any amendment or supplement thereto is first mailed to stockholders of the Company and at the time such stockholders vote on the matters set forth therein, will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

(d) The representations and warranties contained in this Section 6.05 will not apply to statements or omissions included or incorporated by reference in the Schedule TO, the Offer Documents, the Company Proxy Statement or the Schedule 14D-9 based upon information supplied to the Investor by the Company or on its behalf specifically for use or incorporation by reference therein

Section 6.06. Finders’ Fees . There is no investment banker, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of the Investor who might be entitled to any fee or commission from the Company or any of its Affiliates upon consummation of the transactions contemplated by this Agreement.

Section 6.07 . Financing. The Investor has, or will have prior to the expiration of the Offer, sufficient cash, available lines of credit or other sources of immediately available funds to enable it to consummate the Offer and the Issuance, in each case in accordance with the terms hereof.

Section 6.08. Stock Ownership . The Investor is not, nor at any time in the past three years has been, an “interested stockholder” of the Company as defined in Section 203 of Delaware Law. The Investor and its Affiliates beneficially own 414,823 Shares as of the date hereof and will beneficially own such same number of Shares as of the Acceptance Time.

 

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Section 6.09. Investor Status . The Shares to be acquired by the Investor pursuant hereto are being acquired by the Investor for its own account for the purpose of investment and not with a view to or for sale in connection with any public resale or distribution thereof in violation of Applicable Law. The Investor understands that such Shares may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, and the certificates representing such Shares will bear a legend to such effect and to the effect that such Shares are subject to restrictions on transfer under the terms of the Investor Rights Agreement. The Investor is an “accredited investor” within the meaning of Rule 501(a) promulgated under the Securities Act and is knowledgeable, sophisticated and experienced in business and financial matters, and fully understands the limitations on ownership, sale, transfer or other disposition of such Shares.

ARTICLE 7

C OVENANTS OF THE C OMPANY

The Company agrees that:

Section 7.01. Conduct of the Company . From the date hereof until the Closing, the Company shall, and shall cause each of its Subsidiaries to, conduct its business in the ordinary course consistent with past practice. Without limiting the generality of the foregoing, the Company shall, and shall cause each of its Subsidiaries to, use its commercially reasonable efforts to (i) preserve intact its present business organization, (ii) maintain in effect its Permits, (iii) keep available the services of its directors, officers, key employees and key consultants, and (iv) maintain satisfactory relationships with its customers, lenders, suppliers and others having significant business relationships with it. Without limiting the generality of the foregoing, from the date hereof until the Closing, except (x) as expressly required by this Agreement, (y) as set forth in the corresponding subsection of Section 7.01 of the Company Disclosure Schedule or (z) with the prior written consent of the Investor, the Company shall not, nor shall it permit any of its Subsidiaries to:

(a) amend (i) its certificate of incorporation, bylaws or other similar organizational documents (whether by merger, consolidation or otherwise) or (ii) the qualifications for directors set forth in the Company’s Corporate Governance Guidelines, which are attached as Section 7.01(a) of the Company Disclosure Schedule;

(b) (i) split, combine or reclassify any shares of its capital stock, (ii) declare, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of its capital stock, except for dividends payable by any of its wholly owned Subsidiaries or (iii) redeem, repurchase or otherwise acquire, or offer to redeem, repurchase or otherwise acquire, any Company Securities or any Company Subsidiary Securities, other than, in the case of this clause (iii), in connection with (A) the formation of any Subsidiary of the Company organized under the laws of any state of the United States or (B) (1) the satisfaction by the Company of tax withholding obligations upon exercise of Company Options and/or the vesting or settlement of any Company Restricted Shares or Company RSUs, (2) exercise price net settlements upon exercise of Company Stock Options, or (3) forfeiture of any Company Restricted Shares, in the case of this clause (B) in accordance with the applicable Company Stock Plan and the applicable award agreement;

 

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(c) (i) issue, sell or otherwise deliver any Company Securities or Company Subsidiary Securities, other than the issuance of (A) any Shares upon the exercise of Company Stock Options or settlement of Company RSUs, in each case that are outstanding on the date hereof in accordance with their terms, or (B) any Company Subsidiary Securities to the Company or any other wholly owned Subsidiary of the Company, (ii) amend any term of any Company Security or any Company Subsidiary Security (in each case, whether by merger, consolidation or otherwise) or (iii) issue any award (except as set forth in Section 7.01(c) of the Company Disclosure Schedule), or amend or modify the terms of any outstanding award, under any Company Stock Plan, or accelerate the vesting of any Company Stock Option, Company RSU or Company Restricted Share except as required by their terms on the date hereof;

(d) incur any capital expenditures or any obligations or liabilities in respect thereof, except up to the aggregate amount contemplated by the capital expenditure budget as set forth in Section 7.01(d) of the Company Disclosure Schedule and any unbudgeted capital expenditures not to exceed $1,000,000 individually or $2,000,000 in the aggregate;

(e) (i) merge or consolidate with any other Person, (ii) acquire (by merger, consolidation, acquisition of stock or assets or otherwise), directly or indirectly, any assets, securities, properties, interests in entities or businesses, other than, in the case of clause (ii), supplies, equipment or inventory in the ordinary course of business consistent with past practice, or (iii) adopt a plan of complete or partial liquidation, dissolution, recapitalization or restructuring;

(f) sell, lease, license or otherwise transfer or dispose of, create or incur any Lien (other than Permitted Liens) on, or otherwise abandon, permit to lapse or fail to maintain, any of the Company’s or its Subsidiaries’ assets, securities, properties, interests in entities or businesses (in each case, including any of the Company’s or its Subsidiaries’ Intellectual Property; provided that the Company shall not be required to make any filings, registrations or take any prosecution actions with respect to such Intellectual Property that it would not take in the ordinary course of business consistent with past practice), other than sales of inventory or obsolete equipment or non-exclusive licenses granted by the Company in the ordinary course of business consistent with past practice;

(g) make any loans, advances or capital contributions to, or investments in, any other Person, other than (i) loans, advances or capital contributions to, or investments in, wholly owned Subsidiaries of the Company or (ii) advances to its employees in respect of travel or other related business expenses, in each case in the ordinary course of business consistent with past practice;

 

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(h) create, incur, assume, suffer to exist or otherwise become liable with respect to any indebtedness for borrowed money or guarantees thereof (including through borrowings under any of the Company’s existing credit facilities), or issue or sell any debt securities or options, warrants, calls or other rights to acquire any debt securities of the Company or any of its Subsidiaries, other than (i) any indebtedness for borrowed money to finance working capital needs incurred in the ordinary course of business on terms consistent with past practice (and subject to prepayment without notice of a material duration, premium or penalty) in an aggregate amount not to exceed $20,000,000 and (ii) any indebtedness for borrowed money among the Company and its wholly owned Subsidiaries, or among the Company’s wholly owned Subsidiaries, in the ordinary course of business consistent with past practice;

(i) establish or amend any Company Stock Plan, except for any amendments as may be required under Applicable Law;

(j) (i) enter into (including by amendment of any Contract such that such Contract becomes a Material Contract), amend, modify in any material respect or renew any Material Contract of the types described in Section 5.21(a)(vii), (viii), (x), (xi)(B) or (xii) (taking into account in each case any materiality qualifiers set forth therein), (ii) waive, release or assign any material rights, claims or benefits of the Company or any of its Subsidiaries under any such Material Contract described in clause (i), or (iii) voluntarily accelerate, terminate or cancel, or fail to exercise a renewal option for, any such Material Contract described in clause (i);

(k) with respect to the senior management team of the Company as set forth on Schedule 7.01(k), (i) except as required under a Company Employee Plan or Applicable Law, grant or increase any severance, retention or termination pay (or amend any existing severance pay, retention or termination arrangement), (ii) enter into any employment, consulting, bonus, change in control, deferred compensation or other similar agreement (or amend any such existing agreement), (iii) except as required by Applicable Law, establish, adopt or amend, or otherwise increase benefits payable under, any Company Employee Plan or collective bargaining agreement or (iv) increase compensation, bonus or other benefits payable, except for increases in annual base compensation and target bonus of up to 10% in the ordinary course of business consistent with past practice;

(l) change the Company’s methods of accounting, except as required by concurrent changes in GAAP or in Regulation S-X of the Exchange Act, as agreed to by its independent public accountants;

 

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(m) pay, discharge, compromise, settle or satisfy (or cause any insurer to pay, discharge, compromise, settle or satisfy), or offer to pay, discharge, compromise, settle or satisfy, (i) any stockholder litigation or dispute against the Company, any of its Subsidiaries or any of their officers or directors (whether relating to this Agreement or otherwise) ( provided that the Investor’s consent to any such settlement shall not be unreasonably withheld, conditioned or delayed) or (ii) any Proceeding or any other liability or obligation (whether accrued, contingent, absolute, known, unknown, determined, determinable or otherwise), other than, in the case of this clause (ii), the payment, discharge, settlement or satisfaction (solely through payment of money) of (A) liabilities or obligations (other than with respect to Proceedings) incurred in the ordinary course of business consistent with past practice or in connection with the transactions contemplated hereby and (B) Proceedings, liabilities and obligations in amounts not to exceed $1,000,000 individually or $3,000,000 in the aggregate;

(n) withdraw or modify, or permit the withdrawal or modification of, the Compensation Arrangement Approvals;

(o) amend or modify the Company’s guidelines regarding Company Board approval, which are attached as Section 7.01(o) of the Company Disclosure Schedule; or

(p) authorize, agree, resolve or commit to do any of the foregoing.

Section 7.02. Access to Information . From the date hereof until the Closing, and subject to Applicable Law and the Confidentiality Agreement, the Company shall (i) give to the Investor, its counsel, financial advisors, auditors and other authorized representatives reasonable access to the offices, properties, assets, books and records of the Company and its Subsidiaries upon reasonable prior notice, (ii) furnish to the Investor, its counsel, financial advisors, auditors and other authorized representatives such financial and operating data and other information as such Persons may reasonably request and (iii) instruct the employees, counsel, financial advisors, auditors and other authorized representatives of the Company and its Subsidiaries to cooperate with the Investor and its authorized representatives in its investigation of the Company and its Subsidiaries; provided , however , that the Company may restrict the foregoing access and the disclosure of information pursuant to this Section 7.02 to the extent that (A) any Applicable Law requires the Company or its Subsidiaries to restrict or prohibit access to any such properties or information or (B) disclosure of any such information would result in the loss of attorney-client privilege (but in each case the Company shall use its commercially reasonable efforts to (1) develop an alternative to providing such information that is reasonably acceptable to the Investor or (2) enter into a joint defense agreement or implement such other techniques if the parties determine that doing so would permit the disclosure of such information without violating such Applicable Law or attorney-client privilege). Any investigation pursuant to this Section 7.02 shall be conducted in such manner as not to interfere unreasonably with the conduct of the business of the Company and its Subsidiaries. No information or knowledge obtained in any investigation pursuant to this Section 7.02 shall affect or be deemed to modify any representation or warranty made by the Company hereunder.

 

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Section 7.03. Company Stockholder Meeting.

(a) The Company shall cause a meeting of its stockholders (the “ Company Stockholder Meeting ”) to be duly called and held as soon as reasonably practicable after the SEC or its staff advises that it has no further comments on the Company Proxy Statement or that the Company may commence mailing of the Company Proxy Statement for the purpose of obtaining the Company Stockholder Approval and shall comply with all Applicable Law with respect to such meeting and the solicitation of proxies in connection therewith. The Company shall cause the Company Proxy Statement to be mailed to the stockholders of the Company as of the record date established for the Company Stockholders Meeting as promptly as reasonably practicable thereafter. Prior to any Adverse Recommendation Change permitted hereunder, the Company shall take all actions necessary or advisable to solicit from the Company’s stockholders proxies in favor of the proposals in respect of the Company Stockholder Approval and to secure the Company Stockholder Approval.

(b) Subject to Section 7.04(b), the Company Board shall make the Company Board Recommendation and not effect an Adverse Recommendation Change.

(c) Any adjournment, delay or postponement of the Company Stockholder Meeting shall require the prior written consent of the Investor; provided , however , that the Company shall be permitted to adjourn, delay or postpone the Company Stockholder Meeting (i) with the consent of the Investor (such consent not to be unreasonably withheld, conditioned or delayed), once for a period not to exceed 30 calendar days (but prior to the date that is two Business Days prior to the End Date), for the absence of a quorum and/or to solicit additional proxies if there are not sufficient votes to obtain the Company Stockholder Approval or (ii) after consultation with the Investor, solely to the extent necessary to ensure that any legally required supplement or amendment to the Company Proxy Statement is provided to the stockholders of the Company with adequate time to review. The Investor may require the Company to adjourn, delay or postpone the Company Stockholder Meeting once for a period not to exceed 30 calendar days (but prior to the date that is two Business Days prior to the End Date) for the absence of a quorum and/or to solicit additional proxies necessary to obtain the Company Stockholder Approval. Once the Company has established a record date for the Company Stockholder Meeting, the Company shall not change such record date or establish a different record date for the Company Stockholders Meeting without the prior written consent of the Investor, unless required to do so by Applicable Law. Without the prior written consent of the Investor, the proposals in respect of the Company Stockholder Approval shall be the only matters (other than matters of procedure and matters required by Applicable Law to be voted on by the Company’s stockholders in connection therewith) that the Company shall propose to be acted on by the stockholders of the Company at the Company Stockholder Meeting.

 

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Section 7.04. No Solicitation; Other Offers.

(a) General Prohibitions . Prior to the Closing, neither the Company nor any of its Subsidiaries shall, nor shall the Company or any of its Subsidiaries authorize or permit any of its or their officers, directors, employees, investment bankers, attorneys, accountants, consultants or other agents or advisors (“ Representatives ”) to, directly or indirectly, (i) solicit, initiate or take any action to knowingly assist, facilitate or encourage the submission of any Acquisition Proposal; (ii) enter into or participate in any discussions or negotiations with, furnish any information relating to the Company or any of its Subsidiaries or afford access to the business, properties, assets, books or records of the Company or any of its Subsidiaries to, otherwise cooperate in any way with, or knowingly assist, participate in, facilitate or encourage any effort by any Third Party that has made, is seeking to make or would be reasonably expected to make an Acquisition Proposal; (iii) fail to make, withdraw or modify in a manner adverse to the Investor the Company Board Recommendation (or recommend an Acquisition Proposal or make any public statement (or statement to any of its stockholders (other than, for the avoidance of doubt, to a director of the Company in his capacity as such)) inconsistent with the Company Board Recommendation (including publicly proposing to withdraw or modify the Company Board Recommendation)) (any of the foregoing in this clause (iii), an “ Adverse Recommendation Change ”); (iv) fail to enforce, or grant any waiver or release under, any standstill or similar agreement with respect to any class of equity securities of the Company or any of its Subsidiaries; (v) approve any transaction under, or any Person becoming an “interested stockholder” under, Section 203 of Delaware Law; or (vi) enter into any agreement in principle, letter of intent, term sheet, merger agreement, acquisition agreement, option agreement or other similar instrument relating to an Acquisition Proposal (any such agreement, an “ Alternative Acquisition Agreement ”). It is agreed that any violation of the restrictions on the Company set forth in this Section 7.04 by any Representative of the Company or any of its Subsidiaries shall be a breach of this Section 7.04 by the Company.

(b) Exceptions . Notwithstanding Section 7.04(a), at any time prior to the Acceptance Time:

(i) the Company, directly or indirectly through its Representatives, (A) provided that the Company has complied with Section 7.04(a), may engage in negotiations or discussions with any Third Party and its Representatives that has made after the date of this Agreement a bona fide , written Acquisition Proposal that the Company Board reasonably believes is or would reasonably be expected to lead to a Superior Proposal and (B) may furnish to such Third Party or its Representatives non-public information relating to the Company or any of its Subsidiaries pursuant to a confidentiality agreement (a copy of which shall be provided for informational purposes only to the Investor) with such Third Party with terms in all material respects no less favorable to the Company than those contained in the Confidentiality Agreement and other terms necessary to permit the Company to comply with its obligations to the Investor pursuant to this Section 7.04; provided that all such information (to the extent that such information has not been previously provided or made available to the Investor) is provided or made available to the Investor, as the case may be, prior to or substantially concurrently with the time it is provided or made available to such Third Party;

 

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(ii) subject to compliance with Section 7.04(d), if the Company has received a Superior Proposal, then the Company Board may make an Adverse Recommendation Change and/or cause the Company to terminate this Agreement pursuant to and in accordance with Section 10.01(d)(i) in order to enter into a definitive agreement providing for such Superior Proposal on the terms disclosed to the Investor pursuant to Section 7.04(d); and

(iii) subject to compliance with Section 7.04(d), the Company Board may make an Adverse Recommendation Change in response to a material event, change or development in circumstances arising after the date hereof that was neither known by nor reasonably foreseeable to the Company Board as of or prior to the date hereof and does not involve or relate to an Acquisition Proposal (an “ Intervening Event ”);

in each case referred to in the foregoing clauses (i), (ii) and (iii), only if the Company Board determines in good faith, after consultation with outside legal counsel, that the failure to take such action would be inconsistent with its fiduciary duties under Delaware Law. Notwithstanding anything to the contrary contained in this Agreement, provided that the Company has complied with Section 7.04(a), the Company and its Representatives may (x) following the receipt of an Acquisition Proposal from a Third Party, contact such Third Party solely to clarify the terms and conditions of an Acquisition Proposal made by such Third Party so as to determine whether such Acquisition Proposal is or would reasonably be expected to lead to a Superior Proposal or (y) direct any such Third Party to this Agreement, including the specific provisions of this Section 7.04.

 

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In addition, nothing contained herein shall prevent the Company Board from complying with Rule 14d-9 (including Item 1012(a) of Regulation M-A under the Exchange Act) or Rule 14e-2(a) under the Exchange Act with regard to an Acquisition Proposal; provided that (i) any such action taken or statement made shall be subject to and only taken in compliance with this Section 7.04 and (ii) any such action taken or statement made that relates to an Acquisition Proposal shall be deemed to be an Adverse Recommendation Change unless the Company Board reaffirms the Company Board Recommendation in such statement or in connection with such action; provided , further , that it is understood and agreed that any factually accurate public statement by the Company that merely describes the Company’s receipt of an Acquisition Proposal and the operation of this Agreement with respect thereto and contains a “stop, look and listen” communication pursuant to Rule 14d-9(f) promulgated under the Exchange Act shall not constitute an Adverse Recommendation Change.

(c) Required Notices . None of the Company Board, the Company, any Subsidiaries of the Company or any of their respective Representatives shall take any of the actions referred to in Section 7.04(b) unless the Company shall have delivered to the Investor a prior written notice advising the Investor that it intends to take such action, and, after taking any such action, the Company shall continue to advise the Investor on a reasonably current basis of the status and material terms of any discussions and negotiations with the Third Party. In addition, the Company shall notify the Investor promptly (but in no event later than 24 hours) after receipt by the Company (or any of its Representatives) of any Acquisition Proposal, any indication that a Third Party is considering making an Acquisition Proposal or any request for information relating to the Company or any of its Subsidiaries or for access to the business, properties, assets, books or records of the Company or any of its Subsidiaries by any Third Party that has made, is seeking to make or would reasonably be expected to make an Acquisition Proposal. The Company shall provide such notice orally and in writing and shall identify the Third Party making, and the material terms and conditions of, any such Acquisition Proposal, indication or request. The Company shall keep the Investor reasonably informed, on a reasonably current basis, of the status and material terms of any such Acquisition Proposal, indication or request, and shall promptly (but in no event later than 24 hours after receipt) provide to the Investor copies of all correspondence and written materials sent or provided to the Company or any of its Subsidiaries that describes any material terms or conditions of any Acquisition Proposal (as well as written summaries of any material oral communications addressing such matters). Any material amendment to any Acquisition Proposal will be deemed to be a new Acquisition Proposal for purposes of the Company’s compliance with this Section 7.04(c).

 

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(d) “ Last Look .” Further, the Company Board shall not make an Adverse Recommendation Change pursuant to Section 7.04(b)(ii) or Section 7.04(b)(iii) (or, in the case of an Adverse Recommendation Change to be made following receipt of a Superior Proposal pursuant to Section 7.04(b)(ii), terminate this Agreement pursuant to Section 10.01(d)(i) in order to enter into a definitive agreement in respect thereof), unless: (i) the Company promptly provides written notice to the Investor at least four Business Days before taking such action of its intention to do so (such four Business Day period, the “ Negotiation Period ”), (ii) (A) in the case of an Adverse Recommendation Change to be made following receipt of a Superior Proposal pursuant to Section 7.04(b)(ii), such notice specifies in reasonable detail the basis for the Adverse Recommendation Change and attaches the most current version of the proposed agreement under which such Superior Proposal is proposed to be consummated and the identity of the Third Party making the Superior Proposal or (B) in the case of an Adverse Recommendation Change to be made in response to an Intervening Event pursuant to Section 7.04(b)(iii), such notice includes a reasonably detailed description of the underlying facts giving rise to, and the reasons for taking, such Adverse Recommendation Change and (iii) during the Negotiation Period, the Company negotiates, and causes its Representatives to negotiate, in good faith with the Investor and its Representatives with respect to any proposed changes by the Investor to the terms and conditions of this Agreement and, if applicable, the other Transaction Documents or the transactions contemplated hereby or thereby (or with respect to other proposals made by the Investor) and (iv) the Investor does not make, prior to 11:59 p.m., New York City time, on the final day of the Negotiation Period, an offer that (A) in the case of an Adverse Recommendation Change to be made following receipt of a Superior Proposal pursuant to Section 7.04(b)(ii), is at least as favorable to the stockholders of the Company as such Superior Proposal (it being understood and agreed that any amendment to the financial terms or other material terms of such Acquisition Proposal shall require a new written notification from the Company and a new three-Business Day period under this Section 7.04(d), which shall also be deemed to be a “ Negotiation Period ” under this Section 7.04(d)) or (B) in the case of an Adverse Recommendation Change to be made in response to an Intervening Event pursuant to Section 7.04(b)(iii), eliminates the basis for such Adverse Recommendation Change under Section 7.04(b).

(e) Definition of Superior Proposal . For purposes of this Agreement, “ Superior Proposal ” means a bona fide , unsolicited written Acquisition Proposal for at least a majority of the outstanding Shares or a majority of the consolidated assets of the Company and its Subsidiaries on terms that the Company Board determines in good faith by a majority vote, after considering the advice of an outside financial advisor of nationally recognized reputation and outside legal counsel and taking into account all the terms and conditions of the Acquisition Proposal, including any break-up fees, expense reimbursement provisions, conditions to consummation and likelihood of satisfying all such conditions, are more favorable to the Company’s stockholders than as provided hereunder (taking into account any proposal by the Investor to amend the terms of this Agreement pursuant to Section 7.04(d)), which the Company Board determines is reasonably likely to be consummated and for which financing, if a cash transaction (whether in whole or in part), is then fully committed by reputable financing sources or reasonably determined to be available by the Company Board. For the avoidance of doubt, the parties agree that the Company Board may determine in good faith in accordance with the above that an Acquisition Proposal to acquire 100% of the outstanding Shares or consolidated assets of the Company and its Subsidiaries for a per share price (or aggregate consideration that equates to a per share price) less than the Offer Price constitutes a Superior Proposal (it being understood that any such Acquisition Proposal shall be subject to Section 7.01(d)).

 

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(f) Obligation of the Company to Terminate Existing Discussions . The Company shall, and shall cause its Subsidiaries and its and their Representatives to, cease immediately and cause to be terminated any and all existing activities, discussions or negotiations, if any, with any Third Party and its Representatives with respect to any Acquisition Proposal and shall use its reasonable best efforts to cause any such Third Party (together with its Representatives) that has executed a confidentiality agreement within the 24-month period prior to the date hereof and that is in possession of confidential information heretofore furnished by or on behalf of the Company or any of its Subsidiaries in connection with the consideration of an Acquisition Proposal (and all analyses and other materials prepared by or on behalf of such Person that contain, reflect or analyze that information) to return or destroy all such information as promptly as practicable. The Company represents and warrants to the Investor that, during the 24-month period prior to the date hereof, neither it nor any of its Subsidiaries has granted any waiver or release under any standstill or similar agreement with respect to any class of equity securities of the Company or any of its Subsidiaries.

Section 7.05. Stock Exchange Listing . The Company shall use its reasonable best efforts to cause the Issuance Shares to be issued at the Closing pursuant to Article 3 hereof to be listed on NASDAQ at such time of issuance, subject to official notice of issuance.

Section 7.06. Compensation Arrangements . Prior to the Closing, the Company (acting through its Compensation Committee) will take all steps that may be necessary or advisable to cause each Compensation Arrangement that has not previously been subject to the Compensation Arrangement Approvals described in Section 5.18(i) to be approved by the Compensation Committee (comprised solely of “independent directors” determined in the manner described in the last sentence of Section 5.18(i)) as an “employment compensation, severance or other employee benefit arrangement” within the meaning of Rule 14d-10(d)(2) under the Exchange Act and to satisfy the requirements of the non-exclusive safe harbor set forth in Rule 14d-10(d) of the Exchange Act.

Section 7.07 . Takeover Statutes. The Company shall: (a) take all actions necessary so that no “control share acquisition,” “fair price,” “moratorium” or other antitakeover or similar statute or regulation becomes applicable to the transactions contemplated or permitted by this Agreement or the other Transaction Documents and (b) if any such antitakeover or similar statute or regulation becomes applicable to the transactions contemplated or permitted by this Agreement or the other Transaction Documents, take all actions necessary so that such transactions may be consummated as promptly as practicable and otherwise to take all such other actions as are reasonably necessary to eliminate or minimize to the greatest extent possible the effects of any such statute or regulation on such transactions.

 

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Section 7.08 . Stockholder Litigation. From and after the date hereof, the Company shall promptly advise the Investor orally and in writing of any Proceedings (including derivative claims) commenced or, to the knowledge of the Company, threatened against the Company and/or its directors or executive officers relating to this Agreement, the Offer, the Issuance, the Company Charter Amendment and/or the other transactions contemplated hereby or the other Transaction Documents and shall keep the Investor promptly and reasonably informed regarding any such Proceeding. The Company shall give the Investor the opportunity to participate in the defense or settlement of any such Proceeding and shall give due consideration to the Investor’s views with respect thereto. The Company shall not agree to any settlement of any such Proceeding without the Investor’s prior written consent (such consent not to be unreasonably withheld, conditioned or delayed).

Section 7.09 . Stop Orders. The Company shall take all actions necessary to impose stop orders to prevent the Transfer of any Subject Shares (as defined in the Tender and Support Agreements) in violation of the Tender and Support Agreements.

ARTICLE 8

C OVENANTS OF THE I NVESTOR AND THE C OMPANY

The parties hereto agree that:

Section 8.01. Reasonable Best Efforts.

(a) Subject to the terms and conditions of this Agreement, the Company and the Investor shall use their reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under Applicable Law to consummate the transactions contemplated by this Agreement, including (i) preparing and filing as promptly as practicable with any Governmental Authority or other Third Party all documentation to effect all necessary Filings and (ii) obtaining and maintaining all approvals, consents, registrations, permits, authorizations and other confirmations required to be obtained from any Governmental Authority or other Third Party that are necessary, proper or advisable to consummate the transactions contemplated by this Agreement; provided that the parties hereto understand and agree that neither the Investor nor the Company shall be required to (and neither the Company nor any of its Subsidiaries shall without the Investor’s prior written consent) (A) divest or otherwise hold separate (including by establishing a trust or otherwise), or take, cause to be taken or refrain from taking any other action (or otherwise agreeing to do any of the foregoing) with respect to, any of its or the Company’s or any of their respective Affiliates’ businesses, assets or properties, (B) enter into any settlement, undertaking, consent decree, stipulation or agreement with any Governmental Authority in connection with the transactions contemplated hereby, (C) litigate, challenge or take any action with respect to any action or Proceeding by any Governmental Authority or (D) agree to do any of the foregoing.

 

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(b) In furtherance and not in limitation of the foregoing, each of the Investor and the Company shall make any appropriate Filings pursuant to any Antitrust Law (including a Notification and Report Form pursuant to the HSR Act) with respect to the transactions contemplated hereby as promptly as practicable (and in any event within ten Business Days) after the date hereof and subject to Section 8.01(a) use their reasonable best efforts (i) to supply as promptly as practicable any additional information and documentary material that may be requested pursuant to the HSR Act or such Antitrust Law and (ii) to take all other actions necessary to cause the expiration or termination of the applicable waiting periods under the HSR Act or such Antitrust Law, or the receipt of any requisite clearances and approvals under such Antitrust Law, as soon as practicable.

(c) To the extent permitted by Applicable Law, and subject to Section 8.01(a) each of the Investor and the Company shall use its reasonable best efforts to (i) cooperate in all respects with each other in connection with any Filing and in connection with any investigation or other inquiry, including any Proceeding initiated by a private party, (ii) promptly inform the other party of any Filing or communication received from, or intended to be given to, any Governmental Authority and of any material communication received or intended to be given in connection with any Proceeding by a private party, in each case regarding any of the transactions contemplated hereby, and prior to submitting any Filing, substantive written communication, correspondence or other information or response by such party to any Governmental Authority (or members of the staff of any Governmental Authority) or in connection with any Proceeding by a private party, the submitting party shall permit the other party and its counsel the opportunity to review as reasonably in advance as practicable under the circumstances, and consider in good faith the comments of the other party in connection with, any such Filing, communication or inquiry and further each of the Company and the Investor shall furnish each other with a copy of any Filing, communication or, if in written form, inquiry, it or any of its Affiliates makes to or receives from any Governmental Authority or in connection with any Proceeding by private party, in each case regarding any of the transactions contemplated hereby, and (iii) consult with each other in advance of any meeting or conference with any such Governmental Authority or, in connection with any Proceeding by a private party, with any other Person, and to the extent reasonably practicable, give the other party the opportunity to attend and participate in such meetings and conferences.

(d) The Company and the Investor shall use their respective reasonable best efforts to take all actions necessary, proper or advisable to consummate the actions contemplated by Article 1 of the Tender and Support Agreements, including (i) causing any VC Shareholder (as defined in the Tender and Support Agreements) to become the record holder of such VC Shareholder’s Subject Shares (as defined in the Tender and Support Agreements) and/or to hold such Subject Shares directly (rather than through the Depository Trust Company) and (ii) with respect to the Company, causing the removal of any transfer restrictions on such Subject Shares that would otherwise impede the tender of such Subject Shares into the Offer (including by delivering any opinion of counsel reasonably requested by the Company’s transfer agent).

 

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Section 8.02 . Certain Filings. The Company and the Investor shall cooperate with one another (i) in connection with the preparation of the Company Disclosure Documents and the Offer Documents, (ii) in determining whether any action by or in respect of, or Filing with, any Governmental Authority is required, or any actions, consents, approvals or waivers are required to be obtained from parties to any Contracts in connection with the consummation of the transactions contemplated by this Agreement and (iii) subject to Section 8.01(a), in taking such actions or making any such Filings, furnishing information required in connection therewith or with the Company Disclosure Documents or the Offer Documents and seeking timely to obtain any such actions, consents, approvals or waivers.

Section 8.03. Company Proxy Statement.

(a) As promptly as reasonably practicable (and in any event within 15 Business Days after the date hereof), the Company shall prepare and file the Company Proxy Statement with the SEC. The Company shall use its reasonable best efforts to cause the Company Proxy Statement to be cleared by the SEC as soon as reasonably practicable after the date hereof and to be mailed to its stockholders as promptly as practicable thereafter. The Company shall use its reasonable best efforts to ensure that the Company Proxy Statement, and any amendments or supplements thereto, comply in all material respects with the rules and regulations promulgated by the SEC under the Exchange Act. The Company shall include in the Company Proxy Statement (i) subject to any required consent of the Company Financial Advisor, the written opinion of the Company Financial Advisor referred to in Section 5.24, the description thereof and the financial analysis relating thereto and (ii) unless an Adverse Recommendation Change permitted hereunder shall have occurred, the Company Board Recommendation.

(b) The Investor and its counsel shall be given a reasonable opportunity to review and comment on the Company Proxy Statement (including the preliminary and definitive versions thereof) before the Company Proxy Statement (or any amendment thereto) is filed with the SEC, and the Company shall give reasonable and good faith consideration to any comments made by the Investor and its counsel. The Company shall provide the Investor and its counsel with (i) any comments or other communications, whether written or oral, that the Company or its counsel may receive from time to time from the SEC or its staff with respect to the Company Proxy Statement promptly after receipt of those comments or other communications and (ii) a reasonable opportunity to participate in the Company’s response to those comments and to provide comments on such response (to which reasonable and good faith consideration shall be given), including by participating with the Company or its counsel in any substantive discussions or meetings with the SEC.

 

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(c) The Company will advise the Investor, promptly after it receives notice thereof, of any request by the SEC for any amendment or supplement to the Company Proxy Statement or comments thereon and responses thereto or requests by the SEC for additional information. If, at any time prior to the Company Stockholder Meeting, any information relating to the Company or the Investor, or any of their respective Affiliates, officers or directors should be discovered by the Company or the Investor that should be set forth in an amendment or supplement to the Company Proxy Statement so that such document would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the party hereto that discovers such information shall promptly notify the other party hereto and the Company shall promptly file an appropriate amendment or supplement describing such information with the SEC and, to the extent required by Applicable Law, disseminate such amendment or supplement to the stockholders of the Company.

(d) Notwithstanding (x) any Adverse Recommendation Change, (y) the public proposal or announcement or other submission to the Company or any of its Representatives of an Acquisition Proposal or (z) anything in this Agreement to the contrary, unless this Agreement is terminated in accordance with its terms, the obligations of the Company under this Section 8.03 shall continue in full force and effect.

Section 8.04. Public Announcements . Promptly following the execution and delivery hereof, each party may issue a press release announcing the execution of this Agreement and the transactions contemplated hereby in the forms previously agreed upon by the Company and the Investor. Following such initial press release, (a) the Investor and the Company shall consult with each other before issuing any press release, having any communication with the press (whether or not for attribution), making any other public statement or scheduling any press conference or conference call with investors or analysts with respect to this Agreement, the other Transaction Documents or the transactions contemplated hereby or thereby and (b) neither the Investor nor the Company shall issue any such press release, make any such other public statement or schedule any such press conference or conference call without the consent of the Investor; provided , however , that the restrictions set forth in this Section 8.03 shall not apply to any release or public statement (i) required by Applicable Law or any applicable listing authority (in which case the parties shall use commercially reasonable efforts to (x) consult with each other prior to making any such disclosure and (y) cooperate (at the other party’s expense) in connection with the other party’s efforts to obtain a protective order), or (ii) made or proposed to be made by the Company in compliance with Section 7.04 with respect to the matters contemplated by Section 7.04 (or by the Investor in response thereto). Notwithstanding the foregoing, the parties may make oral or written public announcements, releases or statements without complying with the foregoing requirements if the substance of such announcements, releases or statements was publicly disclosed and previously subject to the foregoing requirements.

 

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Section 8.05. Notice of Certain Events . Each of the Company and the Investor shall promptly notify the other of:

(a) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement;

(b) any notice or other communication received by the Company or any of its Affiliates or the Investor or any of its Affiliates from any Governmental Authority in connection with the transactions contemplated by this Agreement;

(c) any Proceedings commenced or, to its knowledge, threatened against, relating to or involving or otherwise affecting the Company or any of its Subsidiaries or the Investor and any of its Subsidiaries, as the case may be, (i) that, if pending on the date of this Agreement, would have been required to have been disclosed by the Company pursuant to any Section of this Agreement or (ii) that relate to this Agreement or the consummation of the transactions contemplated hereby;

(d) any inaccuracy of any representation or warranty of such party contained in this Agreement at any time during the term hereof that could reasonably be expected to cause any Offer Condition not to be satisfied; and

(e) any failure of such party to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it hereunder;

provided that the delivery of any notice pursuant to this Section 8.05 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice.

ARTICLE 9

C ONDITIONS TO THE C LOSING

Section 9.01 . Conditions to the Obligations of Each Party . The obligations of the Company and the Investor to consummate the Closing are subject to the satisfaction or (to the extent permissible under Applicable Law) waiver of the following conditions:

(a) no Applicable Law shall prohibit or make illegal the consummation of the Closing; and

(b) the Acceptance Time shall have occurred on the terms and subject to the conditions set forth herein.

 

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ARTICLE 10

T ERMINATION

Section 10.01. Termination . This Agreement may be terminated and the Offer and Issuance may be abandoned at any time prior to the Closing (notwithstanding the receipt of the Company Stockholder Approval):

(a) by mutual written agreement of the Company and Investor;

(b) by either the Company or Investor, if:

(i) the Acceptance Time has not occurred on or before October 11, 2015 (the “ End Date ”); provided that the right to terminate this Agreement pursuant to this Section 10.01(b)(i) shall not be available to any party whose breach of any provision of this Agreement results in the failure of the Offer to be consummated by such time;

(ii) there shall be any Applicable Law that (A) makes consummation of the Offer or the Issuance illegal or otherwise prohibited or (B) permanently enjoins either the Company or the Investor from consummating the Offer or the Issuance, and in each case such Applicable Law shall have become final and nonappealable; provided that the right to terminate this Agreement pursuant to this Section 10.01(b)(ii) shall not be available to any party whose breach of any provision of this Agreement results in the existence of any fact or occurrence described in the foregoing clause (A) or (B); or

(iii) at the Company Stockholder Meeting (including any adjournment or postponement thereof), the Company Stockholder Approval shall not have been obtained;

(c) by the Investor, if, prior to the Acceptance Time:

(i) (A) an Adverse Recommendation Change shall have occurred ( provided that any written notice delivered by the Company to the Investor pursuant to Section 7.04(d) stating the Company’s intention to make an Adverse Recommendation Change in advance thereof shall not result in the Investor having any termination rights pursuant to this Section 10.01(c)(i)) or (B) at any time after receipt or public announcement of an Acquisition Proposal, the Company Board shall have failed to publicly reaffirm the Company Board Recommendation as promptly as practicable (but in any event within five Business Days) after receipt of any written request from the Investor to do so;

 

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(ii) there shall have been an intentional and material breach of Section 7.03 or Section 7.04; or

(iii) a breach of any representation or warranty or failure to perform any covenant or agreement on the part of the Company set forth in this Agreement shall have occurred that would cause the conditions set forth in clause (c)(iii) or (c)(iv) of Annex I to exist and such breach or failure is incapable of being cured by the End Date or, if curable by the End Date, the Company does not cure such breach or failure within 30 days after receipt by the Company of written notice from the Investor of such breach or failure;

(d) by the Company, if, prior to the Acceptance Time:

(i) the Company Board shall have made an Adverse Recommendation Change in compliance with the terms of this Agreement in order to enter into a definitive agreement in respect of a Superior Proposal in accordance with this Agreement, including Section 7.04(b)(ii); provided that, as a condition precedent to the effectiveness of any such termination, the Company shall have paid all amounts due pursuant to Section 12.03(b) in accordance with the terms, and at the times, specified therein;

(ii) following satisfaction (or, to the extent permissible under Applicable Law, waiver) of the conditions to the Investor’s obligation to consummate the Offer hereunder, (A) the Investor fails to consummate the Offer on or prior to the latest time permissible hereunder or (B) the consummation of the transactions contemplated by the Issuance will not occur immediately following the Acceptance Time as a result of a failure of the Investor to comply with its obligations hereunder; or

(iii) a breach of any representation or warranty or failure to perform any covenant or agreement on the part of the Investor set forth in this Agreement shall have occurred that would reasonably be expected to prevent the Investor from consummating the Offer or the Issuance and such breach or failure is incapable of being cured by the End Date or, if curable by the End Date, the Investor does not cure such breach or failure within 30 days after receipt by the Investor of written notice from the Company of such breach or failure.

The party desiring to terminate this Agreement pursuant to this Section 10.01 (other than pursuant to Section 10.01(a)) shall give written notice of such termination to the other party.

 

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Section 10.02 . Effect of Termination. If this Agreement is terminated pursuant to Section 10.01, this Agreement shall become void and of no effect without liability of any party (or any stockholder or Representative of such party) to the other party hereto; provided that, if such termination shall result from either party’s fraud or the willful (i) failure of either party to fulfill a condition to the performance of the obligations of the other party or (ii) breach of this Agreement, such party shall be fully liable for any and all liabilities and damages incurred or suffered by the other party as a result of such failure. The provisions of the Confidentiality Agreement, this Section 10.02, Section 8.04, Section 12.01, Section 12.03, Section 12.06, Section 12.07 and Section 12.08 shall survive any termination hereof pursuant to Section 10.01.

ARTICLE 11

S URVIVAL , I NDEMNIFICATION

Section 11.01 . Survival. The representations and warranties of the parties contained in this Agreement or in any certificate or other writing delivered pursuant hereto, and the covenants, agreements and obligations of the Company contained in Section 7.01, shall survive the Closing until the date that is 15 months after the Offer Closing Date (the “ Expiration Date ”); provided that the representations and warranties contained in Section 5.01, Section 5.02, Section 5.05, Section 5.06, Section 5.09, Section 5.21(a)(viii), Section 5.21(c), Section 5.23, Section 5.24, Section 5.25, Section 6.01, Section 6.02, Section 6.05, Section 6.06 and the second sentence of Section 6.08 (collectively, the “ Fundamental Warranties ”) shall survive until the latest date permitted by law. The covenants, agreements and obligations of the parties hereto contained in this Agreement (other than the covenants, agreements and obligations of the Company contained in Section 7.01) or in any certificate or other writing delivered pursuant hereto or in connection herewith shall survive the Closing until the latest date permitted by law or for the shorter period explicitly specified therein, except that for such covenants, agreements and obligations that survive for such shorter period, breaches thereof shall survive indefinitely or until the latest date permitted by law. Notwithstanding the preceding sentence, any breach of a representation, warranty, covenant or agreement in respect of which indemnity may be sought under this Agreement shall survive the time at which it would otherwise terminate pursuant to the foregoing sentences, if notice of the inaccuracy or breach thereof giving rise to such right of indemnity shall have been given in accordance with this Article 11 to the party against whom such indemnity may be sought prior to such time. For the avoidance of doubt, the Company and its Subsidiaries shall not be deemed Affiliates of the Investor, and the Investor shall not be deemed an Affiliate of the Company and its Subsidiaries for purposes of this Article 11.

 

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Section 11.02 . Indemnification of Investor Indemnified Parties. Effective at and after the Closing, the Company hereby agrees to indemnify the Investor, its Affiliates and their respective officers, directors, managers, employees, agents, successors and assigns (collectively, the “ Investor Indemnified Parties ”) against and agrees to hold each of them harmless from any and all Damages (whether involving a Third Party Claim or a claim solely between the parties hereto) incurred or suffered by the Investor Indemnified Parties (regardless of whether such Damages arise as a result of the negligence, strict liability or any other Liability under any theory of law or equity of any Investor Indemnified Party) arising out of or resulting from (a) any inaccuracy, misrepresentation or breach of any representation or warranty (each, a “ Warranty Breach ”) of the Company in this Agreement or in any certificate or other writing delivered pursuant hereto (determined, except with respect to Section 5.10(a)(ii), without regard to any qualification or exception contained therein relating to materiality or Material Adverse Effect or any similar qualification or standard), or (b) any breach of any covenant or agreement of the Company in this Agreement. The parties acknowledge and agree that the settlement of any Proceeding of the type described in Section 7.08 that includes disclosure by the Company shall not in and of itself evidence an inaccuracy, misrepresentation or breach of the representations and warranties set forth in Section 5.09.

Section 11.03 . Limitations on Indemnification by the Company. With respect to indemnification by the Company for Warranty Breaches under Section 11.02(a), except in respect of breaches of Fundamental Representations and for claims for fraud or intentional misrepresentation:

(a) the Company shall not be liable unless and until the aggregate amount of all Damages with respect to such Warranty Breaches shall exceed an amount equal to $15,000,000 and then only to the extent of such excess; and

(b) the Company’s maximum aggregate liability will be limited to $100,000,000.

Section 11.04. Indemnification of Company Indemnified Parties . Effective at and after the Closing, the Investor hereby agrees to indemnify the Company, its Affiliates and their respective officers, directors, managers, employees, agents, successors and assigns (collectively, the “ Company Indemnified Parties ”) against and agrees to hold each of them harmless from any and all Damages (whether involving a Third Party Claim or a claim solely between the parties hereto) incurred or suffered by the Company Indemnified Parties (regardless of whether such Damages arise as a result of the negligence, strict liability or any other liability under any theory of law or equity of any Company Indemnified Party) arising out of or resulting from (a) any Warranty Breach by the Investor of any representation or warranty of the Investor in this Agreement or in any certificate or other writing delivered pursuant hereto (determined without regard to any qualification or exception contained therein relating to materiality or Material Adverse Effect or any similar qualification or standard) or (b) any breach of any covenant or agreement of Investor in this Agreement.

 

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Section 11.05. Limitations on Indemnification by the Investor . With respect to indemnification by the Investor for Warranty Breaches under Section 11.04(a), except in respect of breaches of Fundamental Representations and for claims for fraud or intentional misrepresentation:

(a) the Investor shall not be liable unless and until the aggregate amount of all Damages with respect to such Warranty Breaches shall exceed an amount equal to $15,000,000 and then only to the extent of such excess; and

(b) the Investor’s maximum aggregate liability will be limited to $100,000,000.

Section 11.06 . Other Limitations. Notwithstanding anything to the contrary contained herein, any Damages otherwise indemnifiable under this Article 11 shall be reduced by the amount of insurance proceeds actually recovered by an Indemnified Party in respect of such Damages (net of costs of collection, deductibles and retro-premium adjustments). Damages shall be determined without duplication of recovery by reason of the state of facts giving rise to such Damages constituting a breach of more than one representation, warranty, covenant or agreement.

Section 11.07. Third Party Claim Procedures.

(a) The party seeking indemnification under Section 11.02 or 11.04 (the “ Indemnified Party ”) agrees to give prompt notice in writing to the party against whom indemnity is to be sought (the “ Indemnifying Party ”) of the assertion of any claim or the commencement of any Proceeding by any third party (excluding, in the case of the Investor Indemnified Parties, any such Proceeding against the Company or any of its Affiliates) (a “ Third Party Claim ”) in respect of which indemnity may be sought under such Section. Such notice shall set forth in reasonable detail such Third Party Claim and the basis for indemnification (taking into account the information then available to the Indemnified Party). The failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder, except to the extent such failure shall have materially and adversely prejudiced the Indemnifying Party.

(b) The Indemnifying Party shall be entitled to participate in the defense of any Third Party Claim and, subject to the limitations set forth in this Section 11.07(b) and Section 11.07(c), shall be entitled to control and appoint lead counsel for such defense, in each case at its own expense; provided that prior to assuming control of such defense, the Indemnifying Party must acknowledge that it would have an indemnity obligation for the Damages resulting from such Third Party Claim as provided under this Article 11.

 

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(c) The Indemnifying Party shall not be entitled to assume or maintain control of the defense of any Third Party Claim if (i) the Indemnifying Party does not deliver the acknowledgment referred to in Section 11.07(b) within 30 days of receipt of notice of the Third Party Claim pursuant to Section 11.07(a), (ii) the Third Party Claim relates to or arises in connection with any criminal proceeding, action, indictment, allegation or investigation involving the Indemnified Party or any of its Affiliates, (iii) the Third Party Claim relates to Taxes of the Indemnified Party or any of its Affiliates, (iv) the Indemnified Party reasonably believes an adverse determination with respect to the Third Party Claim would be detrimental in any material respect to the reputation or future business prospects of the Indemnified Party or any of its Affiliates, (v) the Third Party Claim seeks an injunction or equitable relief against the Indemnified Party or any of its Affiliates or (vi) the Indemnifying Party has failed or is failing to prosecute or defend vigorously the Third Party Claim.

(d) If the Indemnifying Party shall assume the control of the defense of any Third Party Claim in accordance with the provisions of this Section 11.07, the Indemnifying Party shall obtain the prior written consent of the Indemnified Party before entering into any settlement of such Third Party Claim; provided that consent of the Indemnified Party shall not be required for any such settlement if (i) the sole relief provided is monetary damages that are paid in full by the Indemnifying Party and (ii) such settlement includes an unconditional release of the Investor Indemnified Parties or the Company Indemnified Parties, as the case may be, from all liability on claims that are the subject matter of such Third Party Claim and does not include any statement as to or any admission of fault, culpability or failure to act by or on behalf of the Investor Indemnified Parties or the Company Indemnified Parties, as the case may be. If the Indemnified Party shall control of the defense of any Third Party Claim in accordance with the provisions of this Section 11.07, the Indemnified Party shall obtain the prior written consent of the Indemnifying Party before entering into any settlement of such Third Party Claim (such consent not to be unreasonably withheld, conditioned or delayed).

(e) In circumstances where the Indemnifying Party is controlling the defense of a Third Party Claim in accordance with the foregoing, the Indemnified Party shall be entitled to participate in the defense of any Third Party Claim and to employ separate counsel of its choice for such purpose, in which case the fees and expenses of such separate counsel shall be borne by the Indemnified Party; provided that the reasonable fees and expenses of such separate counsel shall constitute indemnifiable Damages hereunder (i) to the extent incurred by the Indemnified Party prior to the date that the Indemnifying Party assumes control of the defense of the Third Party Claim or (ii) if the Indemnified Party is advised by counsel that (A) there is a conflict of interest between the Indemnifying Party and the Indemnified Party in the conduct of the defense of such claim or (B) there may be one or more defenses or claims available to the Indemnified Party that are different from or additional to those available to the Indemnifying Party and that could be materially adverse to the Indemnifying Party; and provided further that in no event shall the Indemnifying Party be liable for the fees and expenses of more than one separate firm of attorneys for all Indemnified Parties in connection with any Third Party Claim, plus one firm of local counsel in each jurisdiction in which any such Third Party Claim is taking place. In the case of the foregoing clause (ii), the Indemnifying Party shall keep the Indemnified Party reasonably informed with respect to such Third Party Claim and cooperate with the Indemnified Party in connection therewith.

 

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(f) Each party shall cooperate, and cause its Affiliates to cooperate, in the defense or prosecution of any Third Party Claim and shall furnish or cause to be furnished such records, information and testimony, and attend such conferences, discovery proceedings, hearings, trials or appeals, as may be reasonably requested in connection therewith; provided that no party shall be required to disclose any such records or information that would result in the loss of attorney-client privilege, but such party shall use its commercially reasonable efforts to (1) develop an alternative to providing such records or information that is reasonably acceptable to the other party or (2) enter into a joint defense agreement or implement such other techniques if the parties determine that doing so would permit the disclosure of such records or information without violating such attorney-client privilege.

Section 11.08 . Direct Claim Procedures. In the event an Indemnified Party has a claim for indemnity under Section 11.02 or Section 11.04 against an Indemnifying Party that does not involve a Third Party Claim, the Indemnified Party agrees to give prompt notice in writing of such claim to the Indemnifying Party. Such notice shall set forth in reasonable detail such claim and the basis for indemnification (taking into account the information then available to the Indemnified Party). The failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder, except to the extent such failure shall have materially and adversely prejudiced the Indemnifying Party. If the Indemnifying Party does not notify the Indemnified Party in writing within 30 days following the receipt of a notice with respect to any such claim that the Indemnifying Party disputes its indemnity obligation to the Indemnified Party for any Damages with respect to such claim, such Damages shall be conclusively deemed a liability of the Indemnifying Party and the Indemnified Party shall be entitled to prompt payment of all Damages arising out of such claim to the extent provided in this Article 11. If the Indemnifying Party has timely disputed its indemnity obligation for any Damages with respect to such claim, the parties shall proceed in good faith to negotiate a resolution of such dispute and, if not resolved through negotiations, such dispute shall be resolved by litigation in an appropriate court of jurisdiction determined pursuant to Section 12.07.

Section 11.09 . Exclusive Remedy. Without limiting any claims arising out of the other Transaction Documents, after the Closing, except as otherwise expressly provided in this Agreement (including Section 12.03 and Section 12.12) or with respect to claims for fraud, intentional misrepresentation or intentional misconduct, the sole and exclusive recourse for any Damages or claim for Damages under this Agreement shall be the indemnity set forth in this Article 11.

Section 11.10 . Purchase Price Adjustment. To the extent permitted by Applicable Law, any amount paid under Article 11 will be treated as an adjustment to the purchase price in the Issuance.

 

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ARTICLE 12

M ISCELLANEOUS

Section 12.01 . Notices. All notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission or email, so long as a receipt of such facsimile transmission or email is requested and received) and shall be given,

if to Investor, to:

Roche Holdings, Inc.

1 DNA Way

South San Francisco, California 94080

Attention: General Counsel

Fax: (650) 225-6000

with copies (which shall not constitute notice) to:

F. Hoffmann-La Roche Ltd

Group Legal Department

Grenzacherstrasse 124

CH-4070 Basel, Switzerland

Attention: Dr. Beat Kraehenmann

Fax: +41 61 688 13 96

and

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, New York 10017

Attention:   Arthur F. Golden
  Marc O. Williams
Facsimile No.: (212) 701-5800
Email:   arthur.golden@davispolk.com
  marc.williams@davispolk.com

if to the Company, to:

Foundation Medicine, Inc.

150 Second Street

Cambridge, MA 02141

Attention: Michael J. Pellini, M.D., Chief Executive Officer
Facsimile No.: (617) 418-2201
Email:   mpellini@foundationmedicine.com

 

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with a copy (which shall not constitute notice) to:

Goodwin Procter LLP

53 State Street

Boston, Massachusetts 02109

Attention:   Stuart M. Cable
  Lisa R. Haddad
Facsimile No.: (617) 523-1231
Email:   scable@goodwinprocter.com
  lhaddad@goodwinprocter.com

or to such other address, facsimile number or email address as such party may hereafter specify for the purpose by notice to the other parties hereto. All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. on a business day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed to have been received on the next succeeding business day in the place of receipt.

Section 12.02. Amendments and Waivers.

(a) Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement or, in the case of a waiver, by each party against whom the waiver is to be effective; provided that (i) after the Acceptance Time, (x) no amendment shall be made that decreases the Offer Price and (y) any agreement by the Company to such amendment or waiver shall require the approval of a majority of the directors then in office who were not designated to the Company Board by the Investor, and (ii) there shall be no amendment or waiver that would require the approval of the stockholders of the Company under Applicable Law without such approval having first been obtained.

(b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by Applicable Law.

Section 12.03. Expenses.

(a) General . Except as otherwise provided herein, all costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense.

 

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(b) Termination Fee .

(i) If this Agreement is terminated (A) by the Investor pursuant to Section 10.01(c)(i) or Section 10.01(c)(ii) or (B) by the Company pursuant to Section 10.01(d)(i), then in each case the Company shall pay to Investor in immediately available funds $30,000,000 (the “ Termination Fee ”), in the case of a termination by the Investor, within one Business Day after such termination and, in the case of a termination by the Company, immediately before and as a condition to the effectiveness of such termination.

(ii) If (A) this Agreement is terminated by the Investor or the Company pursuant to Section 10.01(b)(i) or Section 10.01(b)(iii), or by the Investor pursuant to Section 10.01(c)(iii), (B) after the date of this Agreement and (x) prior to such termination (in the case of a termination pursuant to Section 10.01(b)(i) or Section 10.01(c)(iii)) or (y) prior to the Company Stockholder Meeting (in the case of a termination pursuant to Section 10.01(b)(iii)), an Acquisition Proposal shall have been publicly announced or otherwise communicated to the Company Board and not unconditionally withdrawn (and, if such Acquisition Proposal was publicly announced, publicly and unconditionally withdrawn) and (C) within 12 months following the date of such termination, the Company (x) enters into a definitive agreement with respect to an Acquisition Proposal, (y) recommends an Acquisition Proposal to its stockholders or (z) consummates an Acquisition Proposal, then the Company shall pay to the Investor in immediately available funds, concurrently with the occurrence of the applicable event described in clause (C), the Termination Fee. Solely for purposes of this Section 12.03(b)(ii), an “Acquisition Proposal” shall mean any transaction described in the definition of “Acquisition Proposal” in Section 1.01 of this Agreement except that all references to “15%” therein shall be deemed to be references to “35%”.

(c) Other Costs and Expenses . The Company acknowledges that the agreements contained in this Section 12.03 are an integral part of the transactions contemplated by this Agreement and that, without these agreements, the Investor would not enter into this Agreement. Accordingly, if the Company fails promptly to pay any amount due to the Investor pursuant to this Section 12.03, it shall also pay any costs and expenses incurred by the Investor and its Affiliates in connection with a legal action to enforce this Agreement that results in a judgment against the Company for such amount, together with interest on the amount of any unpaid fee, cost or expense at the higher of the publicly announced prime rate of Citibank, N.A. and the maximum legal interest rate then-applicable pursuant to Title 6, Chapter 23, § 2301 of the Delaware Code, in either case from the date such fee, cost or expense was required to be paid to (but excluding) the payment date. In the event that the Investor shall receive full payment pursuant to this Section 12.03, without limiting the Investor’s rights in the case of fraud or intentional misconduct, the receipt of the Termination Fee shall be deemed to be liquidated damages for any and all damages or losses suffered or incurred by the Investor or any of its Affiliates in connection with this Agreement and the termination hereof (or any matter forming the basis for such termination), and neither the Investor nor any of its Affiliates shall be entitled to bring any Proceeding against the Company or any of its Affiliates for damages or any equitable relief arising therefrom. For the avoidance of doubt, any payment made by the Company pursuant to this Section 12.03 shall be payable only once and not in duplication even though such payment may be payable under one or more provisions of Section 12.03.

 

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Section 12.04. Disclosure Schedule and SEC Document References.

(a) The parties hereto agree that any reference in a particular Section of either the Company Disclosure Schedule shall only be deemed to be an exception to (or, as applicable, a disclosure for purposes of) (i) the representations and warranties (or covenants, as applicable) of the relevant party that are contained in the corresponding Section of this Agreement and (ii) other than with respect to any reference in Section 5.21 of the Company Disclosure Schedule, any other representations and warranties of such party that are contained in this Agreement, but only if the relevance of that reference as an exception to (or a disclosure for purposes of) such other representations and warranties would be readily apparent to a reasonable person who has read that reference and such representations and warranties, without any independent knowledge on the part of the reader regarding the matter(s) so disclosed.

(b) The parties hereto agree that any information contained in any part of any Company SEC Document described in the first sentence of Article 5 shall only be deemed to be an exception to (or a disclosure for purposes of) the representations and warranties of the Company if the relevance of that information as an exception to (or a disclosure for purposes of) such representations and warranties would be readily apparent to a reasonable person who has read that information concurrently with such representations and warranties, without any independent knowledge on the part of the reader regarding the matter(s) so disclosed; provided that in no event shall any information contained in any part of any such Company SEC Document entitled “Risk Factors” or containing a description or explanation of “Forward-Looking Statements” or any other statements that are predictive, cautionary or forward-looking in nature, be deemed to be an exception to (or a disclosure for purposes of) any representations and warranties of the Company contained in this Agreement.

Section 12.05. Binding Effect; Benefit; Assignment.

(a) The provisions of this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. Except as set forth in Article 11, no provision of this Agreement is intended to confer any rights, benefits, remedies, obligations or liabilities hereunder upon any Person other than the parties hereto and their respective successors and assigns.

 

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(b) No party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of each other party hereto, except that the Investor may transfer or assign its rights and obligations under this Agreement, in whole or from time to time in part, to one or more of its Affiliates at any time; provided that such transfer or assignment shall not relieve the Investor of its obligations hereunder or enlarge, alter or change any obligation of any other party hereto or due to the Investor or prejudice the rights of tendering stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer.

Section 12.06 . Governing Law. This Agreement and all claims and causes of action arising out of or relating to this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of law rules of such state.

Section 12.07 . Jurisdiction. The parties hereto agree that any Proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby (whether brought by any party or any of its Affiliates or against any party or any of its Affiliates) shall be brought in the Delaware Court of Chancery or, if such court shall not have jurisdiction, any federal court located in the State of Delaware or other Delaware state court, and each of the parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such Proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such Proceeding in any such court or that any such Proceeding brought in any such court has been brought in an inconvenient forum. Process in any such Proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 12.01 shall be deemed effective service of process on such party.

Section 12.08 . WAIVER OF JURY TRIAL . EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 12.09 . Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by all of the other parties hereto. Until and unless each party has received a counterpart hereof signed by the other party hereto, this Agreement shall have no effect and no party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication).

 

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Section 12.10 . Entire Agreement. This Agreement, the other Transaction Documents and the Confidentiality Agreement constitute the entire agreement between the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter hereof and thereof.

Section 12.11 . Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other Governmental Authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated 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 a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

Section 12.12. 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 that, prior to the valid termination of this Agreement pursuant to Section 12.01, the parties shall 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 courts referred to in Section 12.07, in addition to any other remedy to which they are entitled at law or in equity.

[ The remainder of this page has been intentionally left blank; signature pages follow. ]

 

69


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date set forth on the cover page of this Agreement.

 

ROCHE HOLDINGS, INC.
By:  

/s/ Bruce Resnick

  Name:   Bruce Resnick
  Title:   Vice President and Tax Counsel

S IGNATURE P AGE TO T RANSACTION A GREEMENT


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date set forth on the cover page of this Agreement.

 

FOUNDATION MEDICINE, INC.
By:  

/s/ Steven J. Kafka

  Name:   Steven J. Kafka
  Title:   Chief Operating Officer

S IGNATURE P AGE TO T RANSACTION A GREEMENT


ANNEX I

OFFER CONDITIONS

Notwithstanding any other provision of the Offer, the Investor shall not be required to accept for payment or pay for any Shares pursuant to the Offer, if:

(a) this Agreement shall have been terminated in accordance with its terms;

(b) immediately prior to the Acceptance Time:

(i) there shall not have been validly tendered and not validly withdrawn in accordance with the terms of the Offer (excluding Shares tendered pursuant to notices of guaranteed delivery for which Shares have not been delivered) a number of Shares that, when added to the Shares already owned by Parent and its Subsidiaries, represents at least 52.4% of the Fully Diluted Shares at such time, assuming completion of the Issuance (the condition set forth in this clause (b)(i), the “ Minimum Condition ”, and such number of Shares, the “ Minimum Condition Shares ”);

(ii) (A) any applicable waiting period applicable to the Offer or the Issuance under the HSR Act or any other Antitrust Law shall not have expired or shall not have been terminated, or any other approval that is required to consummate the Offer or the Issuance under any Antitrust Law shall not have been obtained, or (B) in each case, any such waiting period shall have terminated or expired, or any such notice or approval shall have been obtained, subject to or conditioned upon (1) any limitation on the ability of the Investor or any of its Affiliates effectively to exercise full rights of ownership of the Shares to be acquired by the Investor in the Offer or the Issuance, including the right to vote any such Shares on all matters properly presented to the Company’s stockholders or exercise any of its rights under the Investor Rights Agreement, or (2) the requirement that the Investor, the Company or any of its Affiliates to take any action not required to be taken (or not permitted to be taken without the Investor’s consent) pursuant to the terms of this Agreement, including Section 8.01(a); or

(iii) the Company Stockholder Approval shall not have been obtained;

(iv) the events contemplated by Article 4 will not occur as of the Acceptance Time or the Closing, as applicable;

(v) the consummation of the transactions contemplated by the Issuance will not occur immediately following the Acceptance Time; or

(vi) the Issuance Shares to be issued at the Closing have not been approved for listing on NASDAQ, subject to official notice of issuance; or


(c) immediately prior to the Acceptance Time, any of the following conditions exists:

(i) any Applicable Law shall have been enacted, enforced, promulgated, issued or deemed applicable to the Offer or the Issuance, by any Governmental Authority, other than the application of the HSR Act and any other applicable Antitrust Law to the Offer or the Issuance, that directly or indirectly (A) renders illegal, delays materially or otherwise directly or indirectly restrains or prohibits the making of the Offer, the acceptance for payment of or payment for some or all of the Shares by the Investor or the consummation of the Issuance, (B) imposes or confirms any limitation on the ability of the Investor or any of its Affiliates effectively to exercise full rights of ownership of the Shares to be acquired by the Investor in the Offer or the Issuance, including the right to vote any such Shares on all matters properly presented to the Company’s stockholders or exercise any of its rights under the Investor Rights Agreement, or (C) compels the Investor, the Company or any of its Affiliates to take any action not required to be taken (or not permitted to be taken without the Investor’s consent) pursuant to the terms of this Agreement, including Section 8.01(a);

(ii) there shall be instituted or pending any Proceeding by any Governmental Authority that seeks any remedy described in clauses (A) through (C) of paragraph (c)(i);

(iii) (A) any of the representations and warranties of the Company contained in Section 5.05 shall not be true and correct in all but de minimis respects, (B) any of the representations and warranties of the Company contained in (x) Section 5.04(iii) with respect to the Specified Contract or (y) Section 5.21(c) (in each case disregarding all materiality and Company Material Adverse Effect qualifications contained therein) shall not be true and correct in all material respects, (C) any of the representations and warranties of the Company contained in any of Section 5.01, Section 5.02, Section 5.06, 5.21(a)(viii), Section 5.23, Section 5.24 or Section 5.25 that are qualified as to materiality or Company Material Adverse Effect shall not be true and correct in all respects and any such representations and warranties that are not so qualified shall not be true and correct in all material respects, (D) the representations and warranties of the Company contained in Section 5.10(a)(ii) shall not be true and correct in all respects or (E) any of the other representations and warranties of the Company contained in this Agreement or in any certificate or other writing delivered by the Company pursuant hereto (disregarding all materiality and Company Material Adverse Effect qualifications contained therein) shall not be true and correct with, in the case of this clause (E) only, only such exceptions as have not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, in the case of each of clauses (A) through (E) as of the date of the Agreement and at and as of immediately prior to the Acceptance Time as if made at and as of such time (other than any such representation and warranty that by its terms addresses matters only as of another specified time, which shall be true only as of such time);


(iv) the Company shall have breached or failed to perform in all material respects any of its obligations under this Agreement;

(v) there shall have occurred any event, occurrence, development or state of circumstances or facts which, individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect;

(vi) the Investor shall not have received a certificate executed by an authorized executive officer of the Company dated as of the date on which the Offer expires certifying that the Offer Conditions specified in paragraphs (c)(iii), (c)(iv) and (c)(v) do not exist; or

(vii) the Existing Registration Rights Amendment shall not be in full force and effect;

(viii) the Tax Sharing Agreement shall have terminated (or shall otherwise not be in full force and effect) or there shall have occurred any event, occurrence or other fact or circumstance which prevents or prohibits the Tax Sharing Agreement from becoming effective as of the Acceptance Time in accordance with the terms thereof; or

(ix) any of the other Transaction Documents shall have terminated (or shall otherwise not be in full force and effect) or there shall have occurred any event, occurrence or other fact or circumstance which prevents or prohibits any such Transaction Document from becoming effective as of the Acceptance Time in accordance with the terms thereof.

Subject to the terms and conditions of this Agreement, the Offer Conditions set forth in paragraphs (b)(ii)(B) (solely with respect to limitations on, or actions required to be taken by, the Investor or its Affiliates), (b)(iv), (b)(vi), (c)(i)(B), (c)(i)(C) (solely with respect to actions required to be taken by the Investor or its Affiliates), (c)(ii) (with respect to the remedies described in paragraphs (c)(i)(B) and (c)(i)(C) (and, with respect to paragraph (c)(i)(C), solely with respect to Proceedings seeking to require action to be taken by the Investor or its Affiliates), (c)(iii), (c)(iv), (c)(v), (c)(vi), (c)(vii) and (c)(viii) are for the sole benefit of the Investor and, subject to the terms and conditions of this Agreement and the applicable rules and regulations of the SEC, may be waived by the Investor, in whole or in part, at any time, at the sole discretion of the Investor. All other Offer Conditions may be waived by the Investor only with the prior written consent of the Company.


EXHIBIT A-1

FORM OF TENDER AND SUPPORT AGREEMENT

(KPCB AND TRV)

(As filed as Exhibits 99.1 and 99.2 to

the Company’s Current Report on Form 8-K filed on January 12, 2015)


EXHIBIT A-2

FORM OF TENDER AND SUPPORT AGREEMENT

(GV)

(As filed as Exhibit 99.3 to

the Company’s Current Report on Form 8-K filed on January 12, 2015)


EXHIBIT B

FORM OF EXISTING REGISTRATION RIGHTS AMENDMENT

(As filed as Exhibit 4.2 to

the Company’s Current Report on Form 8-K filed on January 12, 2015)


EXHIBIT C

CHARTER AMENDMENTS


CERTIFICATE OF AMENDMENT

TO

SIXTH AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

FOUNDATION MEDICINE, INC.

Foundation Medicine, Inc. (the “Corporation”), a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “DGCL”), hereby certifies as follows:

FIRST. Pursuant to Section 242 of the DGCL, this certificate amends the provisions of the Sixth Amended and Restated Certificate of Incorporation.

SECOND. This certificate has been approved and duly adopted by the Corporation’s Board of Directors and stockholders in accordance with the provisions of Sections 222 and 242 of the DGCL.

THIRD. Sections 3 and 4 of Article VI of the Sixth Amended and Restated Certificate of Incorporation of the Corporation are hereby amended and restated to read in their entirety as follows:

“3. Number of Directors; Term of Office; Other Matters . The number of Directors of the Corporation shall be fixed solely and exclusively by resolution duly adopted from time to time by the Board of Directors. Directors shall be elected at each annual meeting of stockholders of the Corporation to a term expiring at the next annual meeting of stockholders of the Corporation. Directors shall hold office until their successors are duly elected and qualified or until their earlier resignation, death or removal.

Notwithstanding the foregoing, whenever, pursuant to the provisions of Article IV of this Certificate, the holders of any one or more series of Undesignated Preferred Stock shall have the right, voting separately as a series or together with holders of other such series, to elect Directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of this Certificate and any certificate of designations applicable to such series.


4. Vacancies . Subject to the rights, if any, of the holders of any series of Undesignated Preferred Stock to elect Directors and to fill vacancies in the Board of Directors relating thereto, any and all vacancies in the Board of Directors, however occurring, including, without limitation, by reason of an increase in the size of the Board of Directors, or the death, resignation, disqualification or removal of a Director, shall be filled solely and exclusively by the affirmative vote of a majority of the remaining Directors then in office, even if less than a quorum of the Board of Directors, and not by the stockholders; provided that, for so long as the Investor Rights Agreement between the Corporation and Roche Holdings, Inc., dated as of January 11, 2015 (as the same may be amended and/or restated from time to time, the “ Investor Rights Agreement ”), is in effect, unless an express waiver is granted by Roche Holdings, Inc. thereunder, any vacancies or newly created directorships shall not be filled in contravention of the Investor Rights Agreement. Any Director appointed in accordance with the preceding sentence shall serve for a term expiring at the next annual meeting of stockholders following such appointment, and until such Director’s successor shall have been duly elected and qualified or until his or her earlier resignation, death or removal. No decrease in the number of Directors shall shorten the term of any incumbent Director. In the event of a vacancy in the Board of Directors, the remaining Directors, except as otherwise provided by law, shall exercise the powers of the full Board of Directors until the vacancy is filled.”


This Certificate of Amendment to Sixth Amended and Restated Certificate of Incorporation is executed as of this [    ] day of [            ], 2015.

 

FOUNDATION MEDICINE, INC.
By:  

 

Name:  
Title:  


CERTIFICATE OF AMENDMENT

TO

SIXTH AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

FOUNDATION MEDICINE, INC.

Foundation Medicine, Inc. (the “Corporation”), a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “DGCL”), hereby certifies as follows:

FIRST. Pursuant to Section 242 of the DGCL, this certificate amends the provisions of the Sixth Amended and Restated Certificate of Incorporation.

SECOND. This certificate has been approved and duly adopted by the Corporation’s Board of Directors and stockholders in accordance with the provisions of Sections 222 and 242 of the DGCL.

THIRD. Section 5 of Article VI of the Sixth Amended and Restated Certificate of Incorporation of the Corporation is hereby amended and restated to read in its entirety as follows:

“5. Removal . Subject to the rights, if any, of any series of Undesignated Preferred Stock to elect Directors and to remove any Director whom the holders of any such series have the right to elect, any Director (including persons elected by Directors to fill vacancies in the Board of Directors) may be removed from office, with or without cause, only by the affirmative vote of the holders of 75% or more of the voting power of the outstanding shares of capital stock entitled to vote thereon.”


This Certificate of Amendment to Sixth Amended and Restated Certificate of Incorporation is executed as of this [    ] day of [            ], 2015.

 

FOUNDATION MEDICINE, INC.
By:  

 

Name:  
Title:  


CERTIFICATE OF AMENDMENT

TO

SIXTH AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

FOUNDATION MEDICINE, INC.

Foundation Medicine, Inc. (the “Corporation”), a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “DGCL”), hereby certifies as follows:

FIRST. Pursuant to Section 242 of the DGCL, this certificate amends the provisions of the Sixth Amended and Restated Certificate of Incorporation.

SECOND. This certificate has been approved and duly adopted by the Corporation’s Board of Directors and stockholders in accordance with the provisions of Sections 222 and 242 of the DGCL.

THIRD. The Sixth Amended and Restated Certificate of Incorporation of the Corporation is hereby amended to insert a new Article XI to follow Article X and to read as follows:

“Without limiting the Corporation’s rights or obligations under any contract or agreement, the Corporation renounces, to the fullest extent permitted by law, any interest or expectancy of the Corporation in, or in being offered an opportunity to participate in, any Excluded Opportunity. An “ Excluded Opportunity ” is any potential transaction or matter that may be an opportunity for the Corporation that is presented to, or acquired, created or developed by, or which otherwise comes into the possession of (i) Roche Holdings, Inc. or (ii) any of its Affiliates (each a “ Covered Person ” and collectively, “ Covered Persons ”), unless such potential transaction or matter is presented to, or acquired, created or developed by, or otherwise comes into the possession of, a Covered Person expressly and solely in such Covered Person’s capacity as a Director. An “ Affiliate ” is, with respect to Roche Holdings, Inc., any other person directly or indirectly controlling, controlled by or under common control with such person, which shall include any Director (including in such person’s capacity as an observer on any committee of the Board of Directors) who has been designated by Roche Holdings, Inc., but shall not include either (i) Chugai Pharmaceutical Co., Ltd. or any of its subsidiaries (unless Roche Holdings, Inc. elects, in a written notice delivered to the Corporation, to have any such entity considered an Affiliate of Roche Holdings, Inc.), or (ii) the Corporation or any of its subsidiaries.”


This Certificate of Amendment to Sixth Amended and Restated Certificate of Incorporation is executed as of this [    ] day of [            ], 2015.

 

FOUNDATION MEDICINE, INC.
By:  

 

Name:  
Title:  

Exhibit 4.1

EXECUTION VERSION

INVESTOR RIGHTS AGREEMENT

dated as of

January 11, 2015

among

FOUNDATION MEDICINE, INC.,

ROCHE HOLDINGS, INC.

and

THE OTHER STOCKHOLDERS PARTY HERETO

(FOR THE LIMITED PURPOSES SET FORTH HEREIN)


TABLE OF CONTENTS

 

     P AGE  
ARTICLE 1   
D EFINITIONS   

Section 1.01. Definitions

     1   

Section 1.02. Other Definitional and Interpretative Provisions

     8   
ARTICLE 2   
C ORPORATE G OVERNANCE   

Section 2.01. Initial Board Composition

     9   

Section 2.02. Subsequent Board Composition

     10   

Section 2.03. Board Committees; Subsidiary Boards and Board Committees; Exclusion of Investor Designees

     13   

Section 2.04. Observer Rights

     14   

Section 2.05. Matters Reserved for Investor Approval

     14   

Section 2.06. Investor Agreement to Vote

     17   

Section 2.07. Matters Reserved for Approval of the Disinterested Directors

     17   
ARTICLE 3   
S TANDSTILL   

Section 3.01. Standstill

     17   

Section 3.02. Early Termination of Standstill

     19   
ARTICLE 4   
A NTI -D ILUTION R IGHTS   

Section 4.01. Share Repurchase Program

     20   

Section 4.02. Provision of Information

     21   

Section 4.03. Stock Purchase Option

     22   

Section 4.04. Notification of Aggregate Ownership Percentage; Disregarded Dilution

     23   

Section 4.05. Material Breach

     24   
ARTICLE 5   
R EGISTRATION R IGHTS   

Section 5.01. Demand Registration

     24   

Section 5.02. Piggyback Registration

     26   

Section 5.03. Lock-Up Agreements

     27   

Section 5.04. Registration Procedures

     28   

Section 5.05. Indemnification by the Company

     31   

 

i


Section 5.06. Indemnification by Registering Investors

     32   

Section 5.07. Conduct of Indemnification Proceedings

     32   

Section 5.08. Contribution

     33   

Section 5.09. Participation in Public Offering

     35   

Section 5.10. Other Indemnification

     35   

Section 5.11. Cooperation by the Company

     35   

Section 5.12. Transfer of Registration Rights

     35   
ARTICLE 6   
C ERTAIN C OVENANTS AND A GREEMENTS   

Section 6.01. Restrictions on Transfers of Shares

     35   

Section 6.02. Confidentiality

     36   

Section 6.03. Conflicting Agreements; Limitations on Subsequent Registration Rights

     38   

Section 6.04. Freedom to Pursue Opportunities

     38   

Section 6.05. Information Rights; Accounting

     39   

Section 6.06. No Restrictions on the Company or the Investor

     41   
ARTICLE 7   
E FFECTIVENESS ; T ERMINATION   

Section 7.01. Effectiveness

     42   

Section 7.02. Termination

     42   

Section 7.03. Effect of Termination

     42   
ARTICLE 8   
M ISCELLANEOUS   

Section 8.01. Successors and Assigns

     42   

Section 8.02. Notices

     43   

Section 8.03. Amendments and Waivers

     44   

Section 8.04. Governing Law

     44   

Section 8.05. Jurisdiction

     44   

Section 8.06. WAIVER OF JURY TRIAL

     45   

Section 8.07. Specific Enforcement

     45   

Section 8.08. Counterparts

     45   

Section 8.09. Entire Agreement

     45   

Section 8.10. Severability

     45   

Section 8.11. Compliance with Applicable Governance Rules

     45   

Annex A – Equity Plan Extension Methodology

 

ii


INVESTOR RIGHTS AGREEMENT

INVESTOR RIGHTS AGREEMENT (this “ Agreement ”) dated as of January 11, 2015 among Foundation Medicine, Inc., a Delaware corporation (the “ Company ”), Roche Holdings, Inc., a Delaware corporation (the “ Investor ”), and, solely for the purposes of Section 2.02(f), Section 6.03(a) and Section 6.04 hereof, the stockholders listed on the signature pages hereto under the heading “Existing VC Investors” (each, an “ Existing VC Investor ”).

W I T N E S S E T H :

WHEREAS, concurrently with the execution of this Agreement, the Company and the Investor are entering into the Transaction Agreement, pursuant to which, among other things, the Investor has agreed to acquire an aggregate number of Shares that, when added to the Shares already owned by Roche Holding Ltd and its Subsidiaries, will represent, immediately following the Closing and assuming completion of all transactions contemplated by the Transaction Agreement, at least 52.4% of the Fully Diluted Shares at such time, on the terms and subject to the conditions set forth therein; and

WHEREAS, in connection therewith, and as an inducement to the Investor’s and the Company’s willingness to enter into the Transaction Agreement and the other Transaction Documents and to consummate the transactions contemplated thereby, the parties hereto wish to enter into this Agreement, which shall become effective at the Acceptance Time in accordance with Section 7.01.

NOW, THEREFORE, in consideration of the covenants and agreements contained herein, the parties hereto agree as follows:

ARTICLE 1

D EFINITIONS

Section 1.01. Definitions. (a) As used herein, the following terms have the following meanings:

Acceptance Time ” has the meaning ascribed to such term in the Transaction Agreement.

Affiliate ” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person; provided that, for purposes of this Agreement, (i) neither Chugai Pharmaceutical Co., Ltd. nor any of its Subsidiaries shall be considered an Affiliate of the Investor (unless the Investor elects, in a written notice delivered to the Company, to have any such Person considered an Affiliate of the Investor) and (ii) neither the Company nor any of its Subsidiaries shall be considered an Affiliate of the Investor or any Existing VC Investor.

Aggregate Ownership Percentage ” means, with respect to any Person at any time, a fraction (expressed as a percentage) equal to (i) the aggregate number of Shares beneficially owned by such Person (together with his, her or its Affiliates) at such time divided by (ii) the aggregate number of all outstanding Shares at such time.


Applicable Governance Rules ” means the requirements of any applicable federal or state securities laws or the rules, regulations or listing standards promulgated by any national securities exchange on which the Shares are traded.

Applicable Law ” means, with respect to any Person, any transnational, domestic or foreign federal, state or local law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar requirement enacted, adopted, promulgated or applied by a Governmental Authority that is binding upon or applicable to such Person, as amended unless expressly specified otherwise.

beneficially own ” or “ beneficial ownership ” has the meaning set forth in Rule 13d-3 promulgated under the Exchange Act.

Board ” means the board of directors of the Company.

Business Day ” means any day except a Saturday, Sunday or other day on which commercial banks in New York City, New York or Basel, Switzerland are authorized or required by Applicable Law to close.

Closing ” has the meaning ascribed to such term in the Transaction Agreement.

Collaboration Agreements ” has the meaning ascribed to such term in the Transaction Agreement.

Common Equivalents ” means (i) with respect to Shares, the number of Shares, and (ii) with respect to any Company Securities that are convertible or subject to settlement into, or exchangeable for, Shares, the number of Shares issuable in respect of the conversion, settlement or exchange of such securities into Shares (regardless of the conversion or exercise price, the vesting schedule or other terms and conditions thereof).

Common Stock ” means the common stock, par value $0.0001 per share, of the Company and any other security into which such Common Stock may hereafter be converted or changed.

Company Securities ” means (i) the Common Stock, (ii) securities convertible or exercisable into, or exchangeable for, Common Stock, (iii) any other equity or equity-linked security issued by the Company and (iv) options, warrants or other rights to acquire any of the foregoing.

Disinterested Director ” means a director on the Board that (i) qualifies as “independent” under Applicable Governance Rules, (ii) is not a director, manager, principal, partner, officer or employee of, and otherwise has no material relationship with, the Investor or any of its Affiliates and (iii) is not an Investor Designee.

 

2


Disinterested Director Approval ” means the affirmative approval of at least a majority of the Disinterested Directors on the Board (or a special committee thereof), duly obtained in accordance with the applicable provisions of the Company’s organizational documents and Applicable Law.

Equity Plan Extension ” means, upon the expiration or termination of the Company’s then-existing Permitted Equity Plan, a new equity incentive plan, or an amendment to such Permitted Equity Plan, that (i) provides for a maximum number of Shares reserved for issuance (together with the number of Shares available for issuance under any other then-existing equity incentive plans that will continue to exist after the Equity Plan Extension) determined in the manner set forth on Annex A and (ii) is otherwise on reasonable terms and conditions (in light of then-current market practice for similarly situated companies).

Exchange Act ” means the Securities Exchange Act of 1934.

Existing Investors’ Rights Agreement ” means the Second Amended and Restated Investors’ Rights Agreement dated as of June 20, 2013 among the Company and the Persons listed on Schedule A thereto, as amended.

Existing VC Investor Group ” means, with respect to any Existing VC Investor, such Existing VC Investor and any Affiliate of such Existing VC Investor that, at the applicable time of determination, beneficially owns any Company Securities.

Existing VC Investor Group Member ” means, with respect to any Existing VC Investor, at the applicable time of determination, any Affiliate of such Existing VC Investor included within its Existing VC Investor Group.

Fully Diluted Aggregate Ownership Percentage ” means, with respect to any Person at any time, a fraction (expressed as a percentage) equal to (i) the aggregate number of Shares beneficially owned by such Person (together with his, her or its Affiliates) at such time divided by (ii) the Fully Diluted Shares at such time.

Fully Diluted Shares ” means, as of any time, the number of Shares outstanding, together with all Shares that the Company would be required to issue pursuant to any then-outstanding Company Securities, regardless of the conversion or exercise price, the vesting schedule or other terms and conditions thereof. For the avoidance of doubt, “Fully Diluted Shares” shall not include any Shares held by the Company as treasury stock.

Governmental Authority ” means any transnational, domestic or foreign, federal, state or local governmental, regulatory or administrative authority, department, court, agency or official, including any political subdivision thereof.

Indebtedness ” means, without duplication, all obligations of the Company or any of its Subsidiaries for any (a) liabilities for borrowed money or amounts owed or indebtedness issued in substitution for or in exchange of indebtedness for borrowed money, (b) obligations evidenced by notes, bonds, debentures or other similar instruments, (c) obligations for amounts (drawn or undrawn) under bankers’ acceptances, letters of credit or other financial guaranties, (d) obligations for the deferred purchase price of property or services (excluding any ordinary trade payables incurred in the ordinary course of business), (e) obligations as lessee under leases that are required to be recorded as capital leases in accordance with generally accepted accounting principles in the United States consistently applied (excluding real estate leases to the extent that such leases are not currently included under the definition of capital leases but would be required to be included on the Company’s consolidated balance sheet solely as a result of the application of proposed Accounting Standard Update Leases (Topic 842)), (f) outstanding obligations under any swap or hedge agreements and (g) guaranties and other contingent obligations in respect of the liabilities or obligations of any other Person for any of the items described in the foregoing clauses (a) through (f).

 

3


Independent Directors ” means each director of the Board who, as of the time of determination, (i) qualifies as “independent” under Applicable Governance Rules and (ii) is not a director, manager, principal, partner, officer or employee of, and otherwise has no material relationship with, the Investor, any of the Existing VC Investors, any other Person whose Aggregate Ownership Percentage is 2% or higher or any of their respective Affiliates.

Investor Designee ” means any director of the Board who has been designated by the Investor pursuant to Article 2 hereof.

Investor Group ” means the Investor and any Affiliate of the Investor that, at the applicable time of determination, beneficially owns any Company Securities.

Investor Group Member ” means, at the applicable time of determination, any Affiliate of the Investor included within the Investor Group.

Person ” means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a Governmental Authority.

Permitted Equity Plan ” means (i) the 2013 Stock Option and Incentive Plan as it exists on the date hereof (together with any amendments thereto that (x) did not require the Investor’s approval pursuant to Section 2.05(d) hereof (or, with respect to any amendment made prior to the Closing, would not have required such approval if such amendment had been made immediately following the Closing) or (y) were approved in writing by the Investor) and (ii) any other equity incentive plan established after the date hereof that (x) did not require the Investor’s approval pursuant to Section 2.05(d) hereof (or, with respect to any plan established prior to the Closing, would not have required such approval if such plan had been established immediately following the Closing) or (y) was approved in writing by the Investor.

Permitted Stock Consideration ” means Shares, options exercisable into Shares, or restricted stock units, performance stock units or stock appreciation rights that settle into Shares, in each case issued by the Company in connection with the acquisition by the Company or any of its Subsidiaries of assets, securities, properties, interests or businesses, up to an aggregate maximum number of Shares (taking into account any stock split, stock dividend, reverse stock split or similar event) with respect to all such acquisitions (assuming the payment in full of any contingent consideration in connection with all such acquisitions), calculated on a Common Equivalents basis, equal to (i) the Fully Diluted Shares as of immediately following the Closing multiplied by (ii) the Permitted Stock Consideration Percentage; provided that, after giving effect to such issuance (assuming the payment in full of any contingent consideration in connection with all such acquisitions), the Fully Diluted Aggregate Ownership Percentage of the Investor Group would not be less than 50.5%.

 

4


Permitted Stock Consideration Percentage ” means a percentage equal to (i) the Fully Diluted Aggregate Ownership Percentage of the Investor Group immediately following the Closing minus (ii) 52.4%.

Public Offering ” means any underwritten public offering of Registrable Securities pursuant to an effective registration statement under the Securities Act, other than pursuant to a registration statement on Form S-4, Form S-8 or any similar or successor form or a registration pursuant to Rule 145 promulgated by the SEC under the Securities Act.

Reference Market Capitalization ” means, on the date of determination, (a) the aggregate number of all outstanding Shares as of such date multiplied by (b) the volume-weighted average price of the Shares on NASDAQ (or the primary securities exchange upon which the Shares are then traded) over the ten consecutive trading day period ending on such date.

Registrable Securities ” means any Shares and any securities that may be issued or distributed or be issuable in respect of any Shares by way of conversion, dividend, stock split or other distribution, merger, consolidation, exchange, recapitalization or reclassification or similar transaction, in each case held by any member of the Investor Group; provided , that any such Registrable Securities shall cease to be Registrable Securities to the extent (i) a Registration Statement with respect to the sale of such Registrable Securities has become effective under the Securities Act and such Registrable Securities have been disposed of pursuant to such Registration Statement, (ii) such Registrable Securities have been sold pursuant to Rule 144 under the Securities Act (or any similar or analogous rule promulgated under the Securities Act), (iii) such Registrable Securities shall have been otherwise transferred and new certificates for them not bearing a legend restricting transfer under the Securities Act shall have been delivered by the Company and such securities may be publicly resold without registration under the Securities Act or (iv) the Investor Group ceases to have an Aggregate Ownership Percentage of at least 5% and the members of the Investor Group are able to dispose of all of their Registrable Securities in any 90-day period pursuant to Rule 144 (or any similar or analogous rule promulgated under the Securities Act) without volume or manner of sale restrictions.

Registration Expenses ” means any and all expenses incident to the performance of or compliance with any registration or marketing of securities, including all (i) registration and filing fees, and all other fees and expenses payable in connection with the listing of securities on any securities exchange or automated interdealer quotation system, (ii) fees and expenses of compliance with any securities or “blue sky” laws (including reasonable fees and disbursements of counsel in connection with “blue sky” qualifications of the securities registered), (iii) expenses in connection with the preparation, printing, mailing and delivery of any registration statements, prospectuses and other documents in connection therewith and any amendments or supplements thereto, (iv) security engraving and printing expenses, (v) internal expenses of the Company (including all salaries and expenses of its officers and employees performing legal or accounting duties), (vi) reasonable fees and disbursements of counsel for the Company and customary fees and expenses for independent certified public accountants retained by the Company (including the expenses relating to any comfort letters or costs associated with the delivery by independent certified public accountants of any “cold comfort” letters requested pursuant to Section 5.04(i)), (vii) reasonable fees and expenses of any special experts retained by the Company in connection with such registration, (viii) reasonable and documented fees, out-of-pocket costs and expenses of the Registering Investors, including one counsel for all of the Registering Investors participating in the offering selected by the Investor, (ix) fees and expenses in connection with any review by FINRA of the underwriting arrangements or other terms of the offering, and all fees and expenses of any “qualified independent underwriter,” including the fees and expenses of any counsel thereto, (x) fees and disbursements of underwriters customarily paid by issuers or sellers of securities, but excluding any underwriting fees, discounts and commissions attributable to the sale of Registrable Securities, (xi) costs of printing and producing any agreements among underwriters, underwriting agreements, any “blue sky” or legal investment memoranda and any selling agreements and other documents in connection with the offering, sale or delivery of the Registrable Securities, (xii) transfer agents’ and registrars’ fees and expenses and the fees and expenses of any other agent or trustee appointed in connection with such offering, (xiii) expenses relating to any analyst or investor presentations or any “road shows” undertaken in connection with the registration, marketing or selling of the Registrable Securities, (xiv) fees and expenses payable in connection with any ratings of the Registrable Securities, including expenses relating to any presentations to rating agencies and (xv) all out-of-pocket costs and expenses incurred by the Company or its appropriate officers in connection with their compliance with Section 5.04(m).

 

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Rule 144 ” means Rule 144 (or any successor provisions) under the Securities Act.

SEC ” means the Securities and Exchange Commission.

Securities Act ” means the Securities Act of 1933.

Share Percentage Cap ” means a fraction (expressed as a percentage), (i) the numerator of which is equal to (x) 50.5% of the Fully Diluted Shares at such time minus (y) the number of Shares Transferred by the Investor Group following the Closing, and (ii) the denominator of which is equal to the Fully Diluted Shares at such time; provided that if the Company fails to or, as a result of the application of Applicable Law, is unable to repurchase the number of Shares otherwise contemplated by Section 4.01(a), the Share Percentage Cap shall be increased by the percentage of the Fully Diluted Shares (following the consummation of the purchases described immediately following this parenthetical) represented by any Shares that the Investor Group subsequently purchases in accordance with its rights under Section 4.03 in order to maintain the Fully Diluted Aggregate Ownership Percentage of the Investor Group prior to any applicable New Equity Issuance(s). For the sake of illustration, if a New Equity Issuance causes the Fully Diluted Aggregate Ownership Percentage of the Investor Group to decrease from 50.5% to 50.1%, and, following the Company’s inability or failure to meet its repurchase obligations under Section 4.01(a), the Investor purchases Shares in accordance with Section 4.03 to increase the Fully Diluted Aggregate Ownership Percentage of the Investor Group up to 50.5%, the Share Percentage Cap would be increased by 0.4% to 50.9%.

 

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Shares ” means shares of Common Stock.

Subsidiary ” means, with respect to any Person, any entity of which securities or other ownership interests having voting power to elect a majority of the board of directors or other persons performing similar functions are directly or indirectly owned by such Person; provided that none of Chugai Pharmaceutical Co., Ltd., the Company or any of their respective Subsidiaries shall be considered a Subsidiary of the Investor or any of its Affiliates for purposes of this Agreement.

Subsidiary Securities ” means (i) shares of capital stock of any Subsidiary of the Company, (ii) securities convertible or exercisable into, or exchangeable for, such capital stock, (iii) any other equity or equity-linked security issued by any Subsidiary of the Company and (iv) options, warrants or other rights to acquire any of the foregoing.

Transaction Agreement ” means the Transaction Agreement between the Company and the Investor being entered into concurrently with the execution of this Agreement.

Transaction Documents ” has the meaning ascribed to such term in the Transaction Agreement.

Transfer ” means, with respect to any Company Securities, (i) when used as a verb, to sell, assign, dispose of, exchange, pledge or otherwise transfer such Company Securities or any economic participation or interest therein, whether directly or indirectly (including pursuant to a derivative transaction), or agree or commit to do any of the foregoing, and (ii) when used as a noun, a direct or indirect sale, assignment, disposition, exchange, pledge or other transfer of such Company Securities or any participation or interest therein or any agreement or commitment to do any of the foregoing.

2013 Stock and Option Incentive Plan ” means the Foundation Medicine, Inc. 2013 Stock and Option Incentive Plan.

 

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(b) Each of the following terms is defined in the Section set forth opposite such term:

 

Term

   Section
Agreement    Preamble
Company    Preamble
Confidential Information    6.02(c)
Damages    5.05
Demand Registration    5.01(a)
Disclosing Party    6.02(b)
e-mail    8.02
Existing VC Investor    Preamble
Existing VC Representative    2.02(f)
FGAR Guidelines    6.05(b)
Indemnified Party    5.07
Indemnifying Party    5.07
Initial Board    2.01(a)
Inspectors    5.04(h)
Investor    Preamble
Investor Buyout Offer    3.01(c)(i)
Investor Option    4.03(a)(i)
Lock-Up Period    5.03
Market Price    4.03(b)
Material Breach    4.05
Maximum Offering Size    5.01(e)
New Equity Issuance    4.01(a)
Observer    2.04
Option Exercise Notice    4.03(b)
Option Purchase Price    4.03(b)
Original Standstill Period    3.01(a)
Piggyback Registration    5.02(a)
Receiving Party    6.02(b)
Records    5.04(h)
Registering Investor    5.01(a)
Representatives    6.02(c)
Share Information    4.05
Share Issuance Notification    4.02(a)(ii)
Share Repurchase Program    4.01(a)
Share Transaction Notification    4.02(b)
Shelf Registration    5.01(g)

Section 1.02. Other Definitional and Interpretative Provisions. The words “hereof,” “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Articles, Sections, Exhibits and Schedules are to Articles, Sections, Exhibits and Schedules of this Agreement unless otherwise specified. All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein.

 

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Any capitalized terms used in any Exhibit or Schedule but not otherwise defined therein, shall have the meaning as defined in this Agreement. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation,” whether or not they are in fact followed by those words or words of like import. “Writing,” “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any statute shall be deemed to refer to such statute as amended from time to time and to any rules or regulations promulgated thereunder. References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively. References to one gender include all genders.

ARTICLE 2

C ORPORATE G OVERNANCE

Section 2.01. Initial Board Composition. (a) Effective as of the Closing and at all times thereafter, subject to Section 2.02(c), the size of the Board shall be fixed at nine directors. Effective as of the Closing, the Board (the “ Initial Board ”) shall be comprised of:

(i) three directors designated by the Investor as Investor Designees, who initially shall be (A) Daniel O’Day and (B) two other individuals designated in writing by the Investor to the Company prior to the Closing;

(ii) two Existing VC Representatives agreed in writing by the Company and the Investor prior to the Closing;

(iii) three Independent Directors, who initially shall be (A) David Schenkein, MD, (B) Evan Jones and (C) the other individual agreed in writing by the Company and the Investor prior to the Closing, unless otherwise agreed in writing by the Company and the Investor prior to the Closing; and

(iv) the Chief Executive Officer of the Company.

(b) If any of the individuals listed in Section 2.01(a)(i) shall be unwilling or unable to serve as a director of the Company as of the Closing, then the Investor shall have the right to designate another individual to fill such seat and serve as a director on the Board effective as of the Closing. If any of the individuals listed in Section 2.01(a)(ii) or (iii) shall be unwilling or unable to serve as a director of the Company as of the Closing, then the Company and the Investor shall in each case mutually agree in writing upon an Independent Director to fill any such seat prior to the Closing.

 

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(c) The Company agrees to take all other necessary actions, including those set forth in Article 4 of the Transaction Agreement, to ensure that, effective as of the Closing, the composition of the Board is as set forth in Section 2.01(a).

Section 2.02. Subsequent Board Composition . (a) After the appointment of the Initial Board as set forth above, at all applicable times following the Closing and until such time as the Aggregate Ownership Percentage of the Investor Group is less than 10%, the Company shall take all actions necessary, subject to Applicable Law and Applicable Governance Rules, to cause the Board to be comprised of the following members:

(i) a number of individuals designated by the Investor as Investor Designees that is equal to the lesser of (A) seats representing 33.34% of the Board and (B) a number equal to (x) the number of seats on the Board multiplied by (y) the Aggregate Ownership Percentage of the Investor Group at such time (in each case rounded to the nearest whole number, but not less than one);

(ii) the Chief Executive Officer of the Company;

(iii) such directors initially designated pursuant to Section 2.01(a)(ii) or, following the vacancy of any such seat caused by the death, disability, retirement, resignation or removal of any such director, an Independent Director; and

(iv) such number of Independent Directors as is necessary to fill all then-remaining seats on the Board.

Subject to the foregoing, the director nominees to be presented to the stockholders at any annual or special meeting called for the purpose of electing directors shall be selected by the nominating committee of the Board (it being understood and agreed that the nominating committee shall be comprised at all times of a majority of Independent Directors).

(b) The Company agrees to cause each individual designated pursuant to this Section 2.02 to be nominated for election as a director on the Board, and to take all other necessary actions, subject to Applicable Law and Applicable Governance Rules, to ensure that the composition of the Board is as set forth in this Section 2.02, including by calling a special meeting of the nominating committee, the Board and/or the Company stockholders, recommending to Company stockholders the election of the designees selected pursuant to this Section 2.02, and using its reasonable best efforts to solicit proxies in favor of the election of any such individuals to the Board from the stockholders of the Company eligible to vote for the election of directors as of the record date for such meeting; provided that, notwithstanding anything in this Article 2 to the contrary, any director on the Board shall be required to meet the minimum qualifications for directors set forth in the Company’s Corporate Governance Guidelines then in effect (which qualifications shall not be amended without the prior written consent of a majority of the Investor Designees, other than to comply with Applicable Governance Requirements based on the written advice of outside counsel to the Company). Without limiting the foregoing, at any annual or special meeting of stockholders of the Company at which directors are to be elected (including any special meeting called by the Company pursuant to the preceding sentence), the Company shall either re-nominate for election each then-serving Investor Designee ( provided that, if at such time the Investor shall be entitled to nominate fewer Investor Designees pursuant to Section 2.02(a)(i) than the number of then-serving Investor Designees, the Investor shall notify the Company in writing of the Investor Designee(s) that shall not be nominated for subsequent election) or such other Investor Designee(s) as the Investor may designate to the Company in writing. In connection with any designation by the Investor of an Investor Designee pursuant to the preceding sentence, the Investor agrees to provide to the Company all information concerning such Investor Designee(s) reasonably required and requested by the Company to the extent necessary for the Company to comply with Applicable Governance Rules and applicable disclosure rules. If at any time the Aggregate Ownership Percentage of the Investor Group decreases by such amount that the Investor shall be entitled to fewer Investor Designees pursuant to Section 2.02(a)(i) than the number of then-serving Investor Designees, then, at the request of the Company, the Investor shall cause the resignation of a number of Investor Designee(s) necessary so that, following such resignations, the number of Investor Designees is equal to the number of Investor Designees that the Investor is entitled to designate pursuant to Section 2.02(a)(i), if any.

 

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(c) The size of the Board as provided for in Section 2.02(a) may be expanded following the Closing as approved by the Board, but may only be reduced if and to the extent (x) required by Applicable Governance Rules or (y) approved by a majority of the Investor Designees. If the size of the Board is expanded in accordance with this Section 2.02(c), (i) any additional Investor Designees shall be designated by the Investor in accordance with Section 2.02(a)(i) and (ii) any necessary additional Independent Directors shall be initially selected by the nominating committee of the Board. If the size of the Board is reduced in accordance with this Section 2.02(c), (i) if as a result of such reduction the Investor would be entitled to designate fewer Investor Designees pursuant to Section 2.02(a)(i), the Investor shall cause the resignation of a number of Investor Designee(s) necessary so that, following such resignations, the number of Investor Designees is equal to the number of Investor Designees that the Investor is entitled to designate pursuant to Section 2.02(a)(i), and (ii) the Company shall cause the resignation of the appropriate number of Independent Directors. In furtherance of the foregoing, the Company and the Investor shall cooperate to ensure that, after taking into account any modification to the size of the Board, the composition of the Board continues to reflect, as closely as practicable, the intended Board composition under this Article 2.

(d) Except as otherwise set forth in Section 2.02(b), if, as a result of death, disability, retirement, resignation, removal (with or without Cause) or otherwise, there shall exist or occur any vacancy of a seat on the Board previously occupied by an Investor Designee, the Investor shall have the right to designate another individual to fill such vacancy and serve as a director on the Board pursuant to Section 2.02(a). Any other vacancy on the Board shall be filled with a director candidate selected by the nominating committee; provided that, in the event that a vacancy shall result in the nominating committee no longer having a majority of Independent Directors, a majority of the Independent Directors then in office shall have the right, subject to Section 2.02(a), to designate an individual to fill such vacancy.

 

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(e) The Investor agrees that, if at any time the Investor has the right to designate at least one Investor Designee on the Board pursuant to Section 2.02(a)(i), the Investor shall, and shall cause each Investor Group Member to, subject to Section 3.01(c)(iii), (A) cause their respective Shares to be present for quorum purposes at any stockholder meeting called for the purpose of electing directors, and (B) if at any time it or any Investor Group Member is then entitled to vote for the election or removal of directors, vote such Shares or execute proxies or written consents, as the case may be, on a director-by-director basis, either (1) in accordance with the recommendation of the Board or (2) in the same proportion as the votes cast by all stockholders of the Company other than the Investor Group; provided that (i) the obligations of the Investor Group in this Section 2.02(e) shall not apply in connection with any director election if the Company’s nominees are not consistent with the agreed Board composition set forth in this Section 2.02, and (ii) in no event may any member of the Investor Group vote any of its Shares for any director candidate nominated by any other stockholder of the Company if such nominee (x) is a director, manager, principal, partner, officer or employee of the Investor or any of its Affiliates, or (y) would otherwise not qualify as an “Independent Director” of the Investor as a result of the specific, objective criteria set forth in NASDAQ Listing Rule 5605(a)(2)(A)-(G) (determined for this purpose as if such rule applied to the Investor); and provided , further , that, if there has been a breach by the Investor of Section 3.01(b), and such breach results in the nomination of a director candidate by any other stockholder of the Company, then the Investor shall, and shall cause each Investor Group Member to, vote all of its Shares solely in accordance with the recommendation of the Board in connection with such director election.

(f) Each of the Existing VC Investors agrees that, if at any time any director on the Board is a director, manager, principal, partner, officer, employee or other representative of such Existing VC Investor or any of its Affiliates (an “ Existing VC Representative ”), such Existing VC Investor shall, and shall cause each of its Existing VC Investor Group Members to, (A) cause their respective Shares to be present for quorum purposes at any stockholder meeting called for the purpose of electing directors, (B) if at any time it or any of its Existing VC Investor Group Members is then entitled to vote for the election of directors, vote such Shares or execute proxies or written consents, as the case may be, and take all other necessary action in order to ensure that the composition of the Board is as set forth in this Section 2.02, and (C) not vote any of its Shares in favor of the removal of any director who shall have been designated pursuant to this Section 2.02; provided that, if the Person or Persons entitled to designate any director pursuant to this Section 2.02 shall request in writing the removal of such director, such Existing VC Investor shall vote its Shares in favor of such removal.

(g) For the avoidance of doubt, the Company acknowledges and agrees that any Investor Designee may, at the Investor’s discretion, be an existing director, officer, employee or consultant of the Investor or any of its Affiliates, or any other individual that has a relationship (material or otherwise) with the Investor or any of its Affiliates.

 

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Section 2.03. Board Committees; Subsidiary Boards and Board Committees; Exclusion of Investor Designees. (a) Effective as of the Closing, and at all times thereafter, the Board shall establish and maintain, as applicable, an audit committee, compensation committee, and nominating and corporate governance committee, and such other Board committees as the Board deems appropriate or as required by any Applicable Governance Rules, having such duties and responsibilities as are customary for such committees or as are required by any Applicable Governance Rules. For as long as there is at least one Investor Designee on the Board, the Company shall provide for the Investor Designees to have the same proportional representation (rounded to the nearest whole number, but not less than one) on each Board committee (other than any special committee of Disinterested Directors established for the sole purpose of considering any matter requiring Disinterested Director Approval hereunder) as the Investor Designees have on the Board; provided that, to the extent that such proportional representation is not permissible under the independence requirements of Applicable Governance Rules (based on the written advice of outside counsel to the Company), the maximum number of Investor Designees permissible under such independence requirements shall be included on such committee, subject to the Investor’s right to appoint an Observer to such committee pursuant to Section 2.04. From and after the Closing, subject to Applicable Law and Applicable Governance Rules (based on the written advice of outside counsel to the Company), the Company agrees to take all other necessary actions to ensure that the composition of each Board committee is as set forth in this Section 2.03.

(b) From and after the Closing, and at all times thereafter, if so requested by the Investor, the Company shall, and shall cause each applicable Subsidiary of the Company to, take all necessary actions to ensure that the composition of each such Subsidiary’s board of directors (or analogous governing body) and each committee thereof shall be proportionate to the composition of the Board and Board committees, such that the Investor Designees shall have the same proportional representation (rounded to the nearest whole number, but not less than one) on each such Subsidiary board of directors and committee thereof as the Investor Designees have on the Board and each committee thereof; provided , however , that the Company’s obligations under this Section 2.03(b) shall be subject in all cases to Applicable Law in the jurisdiction of such Subsidiary of the Company.

(c) Each Investor Designee may be excluded from any portion of any Board meeting during which the Board discusses any actual or potential collaboration agreement that is (i) between the Company or any of its Subsidiaries, on the one hand, and any pharmaceutical, biotechnology or biopharmaceutical company that is at such time an actual competitor of the Investor Group, on the other hand, and (ii) similar in scope, nature and value to the ordinary course collaboration agreements of the Company as of the date hereof ( i.e. , pursuant to which the Company has agreed to provide genomic sequencing services to pharmaceutical, biotechnology and biopharmaceutical companies to support research and development or patient treatment, or to work with such companies to collect and use human molecular and other patient information for such company’s research, development and commercialization efforts); provided that the foregoing shall not apply to, and the full Board shall be required to consider for approval, any strategic alliance, partnership, joint venture or exclusive outbound license agreement proposed to be entered into by the Company or any of its Subsidiaries that would require consideration or approval of the Board in accordance with the Company’s guidelines regarding Board approval then in effect (which guidelines shall not be amended without the prior written consent of a majority of the Investor Designees, other than to comply with Applicable Governance Requirements based on the written advice of outside counsel to the Company).

 

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Section 2.04. Observer Rights. To the extent that, due to the independence requirements of Applicable Governance Rules (based on the written advice of outside counsel to the Company), any Board committee or Subsidiary board committee may not include the full number of Investor Designees as set forth in Section 2.03(a) or Section 2.03(b), the Investor may, at its election and upon written notice to the Company, appoint an Investor Designee to serve as a non-voting “observer” (an “ Observer ”) on such committee in addition to the Investor Designees serving on such committee. Each Observer shall (i) be provided by the Company with all notices of meetings, consents, minutes and other written materials that are provided to the directors serving on such Board committee or Subsidiary board committee at the same time as such materials are provided to such directors and (ii) be entitled to attend all meetings of the applicable Board committee or Subsidiary board committee. The Company shall reimburse each Observer for all travel and lodging expenses in connection with the attendance by the Observer at any Board committee or Subsidiary board committee meeting on the same terms, and subject to the same policies, as shall apply to the other directors of the Company serving on such Board committee.

Section 2.05. Matters Reserved for Investor Approval. Until such time as the Aggregate Ownership Percentage of the Investor Group ceases to be more than 50%, the Company agrees that it shall not take any action, and shall cause each of its Subsidiaries not to take any action, in each case without the prior written approval of the Investor, with respect to any of the following matters:

(a) appointment of a new Chief Executive Officer;

(b) creation, incurrence or assumption of any Indebtedness if, after giving effect thereto, the aggregate outstanding principal amount of Indebtedness of the Company and its Subsidiaries would exceed the lesser of (i) $200 million and (ii) 20% of the Company’s Reference Market Capitalization as of (x) the close of business on the fifth trading day prior to the incurrence of such Indebtedness or (y) in the case of an offering of debt securities, as of the close of business on the fifth trading day prior to the commencement of such offering (provided that such offering is consummated within 60 days of its commencement) (for the avoidance of doubt, the parties agree that any Indebtedness under a revolving credit facility or similar arrangement providing for the drawdown of funds at the Company’s election shall not be deemed to be incurred until the time of such drawdown);

(c) any (i) issuance, delivery or sale (or any authorization of such an issuance, delivery or sale) of any Company Securities or Subsidiary Securities, other than (A) Shares issued upon the exercise or settlement of Company Securities granted under an equity incentive plan that are outstanding on the date hereof in accordance with their terms, (B) Company Securities (x) issued or granted after the date hereof pursuant to a Permitted Equity Plan and (y) that are exercisable or subject to settlement into cash or Shares, and, if applicable, any Shares issued upon the exercise or settlement of such Company Securities in accordance with their terms, (C) Company Securities issued as Permitted Stock Consideration, (D) Subsidiary Securities issued to the Company or any other wholly owned Subsidiary of the Company or (E) Subsidiary Securities sold in a disposition not otherwise requiring the Investor’s approval under Section 2.05(f); (ii) adoption of a stockholder rights plan; (iii) split, combination or reclassification of any Shares or other Company Securities; or (iv) amendment to the terms of any Company Security or Subsidiary Security (whether by merger, consolidation or otherwise), other than, in the case of this clause (iv), an amendment to any Company Security (x) granted under an equity incentive plan that is outstanding as of the date hereof or (y) issued or granted after the date hereof pursuant to a Permitted Equity Plan, in each case to the extent that such amendment is permissible under the terms of the applicable plan and, after giving effect to such amendment, such Company Security would have been permitted to be issued or granted without the Investor’s consent;

 

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(d) any establishment of, or amendment to, any equity incentive plan or arrangement, except for (i) any Equity Plan Extension or (ii) any amendment to any Permitted Equity Plan on reasonable terms and conditions (in light of then-current market practice for similarly situated companies) that (x) does not increase the number of Shares reserved for issuance under such Permitted Equity Plan, (y) is adopted by the Board or its compensation committee and (z) does not require the approval of the Company’s stockholders under Applicable Law or Applicable Governance Rules;

(e) any acquisition (by merger, consolidation, acquisition of stock or assets, license, lease or otherwise), directly or indirectly, of any assets, securities, properties, interests in an entity, or businesses, or any capital contributions to, or investments in, any other Person (other than a wholly owned Subsidiary of the Company), if the aggregate consideration payable by the Company and its Subsidiaries in such acquisition, capital contribution or investment (including seller financing, assumed Indebtedness and potential contingent or royalty payments) exceeds the lesser of (i) $200 million and (ii) 20% of the Company’s Reference Market Capitalization as of the close of business on the fifth trading day prior to the entry into binding documentation with respect thereto; provided that the parties agree that the foregoing threshold shall be measured on a transaction-by-transaction basis with any substantially related, associated or linked acquisitions, capital contributions and investments constituting one transaction for this purpose (it being agreed that acquisitions shall not be deemed to be substantially related, associated or linked solely due to the fact that they relate to the same field or business segment); and provided , further , that the Investor shall not have any such consent right if the Investor Group is simultaneously evaluating the acquisition of the same assets, securities, properties, interests in an entity, or businesses, or capital contribution or investment, for its own account;

(f) any disposition (by merger, consolidation, sale of stock or assets, license or otherwise), directly or indirectly, of any assets, securities, properties, interests in an entity, or businesses of the Company or any of its Subsidiaries (including any disposition to any non-wholly owned Subsidiary of the Company) if the aggregate consideration payable to the Company and its Subsidiaries in such disposition (including seller financing, assigned indebtedness and potential contingent or royalty payments) exceeds $50 million; provided that the parties agree that the foregoing threshold shall be measured on a transaction-by-transaction basis with any substantially related, associated or linked dispositions constituting one transaction for this purpose (it being agreed that dispositions shall not be deemed to be substantially related, associated or linked solely due to the fact that they relate to the same field or business segment); and provided , further , that any non-exclusive license or other transaction that does not impair in any material respect the Company’s or any of its Subsidiaries’ ongoing access to, or use of, any of its assets shall not be deemed to be a disposition for the purposes of this Section 2.05(f);

 

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(g) any engagement by the Company or any of its Subsidiaries in any business or activity other than (i) human molecular information or human molecular diagnostics, excluding human forensics, and (ii) any business or activity incidental thereto, which incidental business or activity includes working with pharmaceutical, biotechnology or biopharmaceutical companies to collect and use human molecular and other patient information for such companies’ research, development and commercialization efforts;

(h) any amendment to the certificate of incorporation or bylaws of the Company or similar organizational documents of any of its Subsidiaries, except as required by Applicable Law or Applicable Governance Rules (in each case based on the written advice of outside counsel to the Company); provided that any such required amendment shall be drafted and implemented in a manner designed to preserve the Investor’s rights hereunder, and the other arrangements described herein, to the maximum extent possible;

(i) (i) any dissolution or liquidation, or adoption of any plan of dissolution or liquidation, (ii) any filing of a petition or consent to a petition under any existing or future law of any jurisdiction relating to bankruptcy, insolvency, reorganization of relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding up, liquidation, dissolution, composition or other relief with respect to it, or seeking appointment of a receiver, liquidator, assignee, trustee, custodian or other similar official for it or all or any substantial part of its assets, (iii) any assignment for the benefit of creditors or (iv) any admission in writing of its inability to pay its debts generally as they become due;

(j) any action (including any entry into, or amendment to, any agreement or arrangement with a third party), that would impair in any material respect the Company’s ability to perform its obligations under this Agreement or that would otherwise impair in any material respect the Investor’s or any of its Affiliates’ rights hereunder (or the exercise thereof); or

(k) any agreement, resolution (that is not subject to receipt of the Investor’s consent for the underlying action) or commitment to do any of the foregoing.

 

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Section 2.06. Investor Agreement to Vote. The Investor agrees that, for as long as the Investor has the right to designate at least one Investor Designee on the Board pursuant Section 2.02(a)(i), the Investor shall, and shall cause each Investor Group Member to, (a) cause their respective Shares to be present for quorum purposes at any stockholder meeting, (b) if any stockholder vote is required, vote such Shares or execute proxies or written consents, as the case may be, approving any matter as to which the Investor has previously provided its written approval pursuant to Section 2.05 within the previous six months (unless the Board or a committee thereof changes its recommendation with respect to such matter), and (c) with respect to any Equity Plan Extension, vote such Shares or execute proxies or written consents, as the case may be, either (i) in accordance with the recommendation of the Board or (ii) in the same proportion as the votes cast by all stockholders of the Company other than the Investor Group.

Section 2.07. Matters Reserved for Approval of the Disinterested Directors. For as long as there is at least one Investor Designee on the Board, the following actions shall require Disinterested Director Approval:

(a) any transaction between the Investor or any of its Affiliates, on the one hand, and the Company or any of its Subsidiaries, on the other hand;

(b) any enforcement or waiver of the rights of the Company or any of its Subsidiaries under any agreement between the Company or any of its Subsidiaries, on the one hand, and the Investor or any of its Affiliates, on the other hand; and

(c) any purchase of Shares by the Investor or any of its Affiliates, other than in accordance with Section 3.01(c)(iii), Section 4.03 or Section 4.04(b).

ARTICLE 3

S TANDSTILL

Section 3.01. Standstill.

(a) Subject to Section 3.01(d), for a period of three years following the Closing (such three-year period, the “ Original Standstill Period ”), or such shorter period as may apply in accordance with Section 3.02, the Investor shall not, and shall not permit any of its Representatives (acting at the Investor’s direction) or Affiliates to, directly or indirectly, in any manner, effect or seek, offer or propose (whether publicly or otherwise) to effect, or announce any intention to effect or otherwise participate in, any acquisition of Company Securities (including in derivative form) or any tender or exchange offer, merger, consolidation, business combination or other similar transaction involving the Company or any of its Subsidiaries.

(b) Except as provided in Section 3.01(c)(iii), during the Original Standstill Period and for so long thereafter as the Investor has the right to designate at least one Investor Designee on the Board pursuant to Section 2.02(a)(i), or such shorter period as may apply in accordance with Section 3.02, the Investor shall not, and shall not permit any of its Representatives (acting at the Investor’s direction) or Affiliates to, directly or indirectly, in any manner, (i) effect or seek, offer or propose (whether publicly or otherwise) to effect, or announce any intention to effect or otherwise participate in, any “solicitation” of “proxies” (as such terms are used in the proxy rules of the SEC) to vote any Shares in connection with the election of directors or the removal of any director, (ii) solicit, knowingly encourage or knowingly facilitate, directly or indirectly, any third party to engage in any such solicitation, or (iii) make any public statement (or statement to another stockholder of the Company) in support of any such third-party solicitation or against any of the Company’s director nominees.

 

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(c) Without limiting Section 3.01(a) or Section 3.01(b), the Investor agrees that, subject to Section 3.01(d), for as long as the Aggregate Ownership Percentage of the Investor Group is at least 20%:

(i) the Investor shall not, and shall not permit any of its Affiliates or Representatives (acting at the Investor’s direction) to, directly or indirectly, in any manner, effect or seek, offer or propose (whether publicly or otherwise) to effect, or announce any intention to effect or otherwise participate in, any acquisition of Company Securities (including in derivative form) or any tender or exchange offer, merger, consolidation, business combination or other similar transaction involving the Company or any of its Subsidiaries, in each case unless the Investor (through itself or one of its Affiliates) offers to purchase all of the outstanding Shares held by stockholders of the Company other than the Investor Group (an “ Investor Buyout Offer ”);

(ii) prior to the fifth anniversary of the Closing, any Investor Buyout Offer shall be (A) made solely on a confidential basis to the Company and/or the Board, (B) subject to Disinterested Director Approval and (C) subject to a non-waivable condition requiring receipt of the approval of stockholders holding a majority of the Shares not beneficially owned by the Investor Group (or, in the event that the Investor Buyout Offer is proposed as a tender or exchange offer, a condition requiring that a majority of the Shares held by stockholders other than the Investor Group are validly tendered and not withdrawn); and

(iii) from and after the fifth anniversary of the Closing, (A) any Investor Buyout Offer shall be subject to a non-waivable condition requiring receipt of the approval of stockholders holding a majority of the Shares not beneficially owned by the Investor Group (or, in the event that the Investor Buyout Offer is proposed as a tender or exchange offer, a condition requiring that a majority of Shares held by stockholders other than the Investor Group are validly tendered and not withdrawn), and (B) if the Investor or any of its Affiliates makes an Investor Buyout Proposal, notwithstanding anything in this Agreement to the contrary, at any subsequent annual stockholder meeting of the Company (or special meeting called for the purpose of electing directors), the Investor Group will be entitled to nominate, in lieu of any member(s) of the Board, individual(s) who would be Independent Directors and the restrictions set forth in Section 3.01(b) shall not apply in connection with such election of directors; provided that, in connection with such election, the Investor Group shall vote its Shares in the same proportion as the votes cast by all stockholders of the Company other than the Investor Group. For the avoidance of doubt, any Investor Buyout Offer made after the fifth anniversary of the Closing may be made publicly and/or directly to the stockholders of the Company (including pursuant to a tender offer) without the review, evaluation or approval of the Board or the Disinterested Directors.

 

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(d) Nothing in this Section 3.01 shall restrict, prevent or otherwise limit (i) any acquisition of beneficial ownership of Shares by the Investor or any of its Affiliates as permitted by Section 4.03 or Section 4.04(b), (ii) subject to Section 2.07, activities relating to existing or potential licensing, development, cooperation or other commercial agreements between the Company on the one hand, and the Investor or any of its Affiliates on the other hand, including any activities under or relating to the Collaboration Agreements, (iii) any Investor Designee from taking any action in connection with the satisfaction of his or her fiduciary duties as a director of the Board, voting on matters put to the Board or any committee thereof, influencing officers, employees, agents, management or the other directors of the Company in connection with his or her Board directorship, taking any action or making any statement at any meeting of the Board or any committee thereof, or otherwise acting in his or her capacity as a director of the Board, (iv) any disclosure or statements required to be made by any Investor Designee, the Investor or any of its Affiliates under Applicable Law or under applicable stock exchange rules on which the capital stock of the Investor or any of its Affiliates is traded; provided that such disclosure requirement does not arise from a breach of this Section 3.01; and provided , further , that the Investor provides the Company with prior notice of any such required disclosure, to the extent practicable and legally permitted, so that the Company may seek confidential treatment, an applicable protective order or similar relief, and the Investor shall reasonably cooperate (at the Company’s expense) with such efforts by the Company, (v) the Investor Group’s right to exercise the voting rights with respect to their Shares in their discretion on any matter (subject to Section 2.02(e) and Section 2.06), (vi) any action that the Investor or any of its Affiliates is expressly required to take pursuant to any provision of this Agreement or any other Transaction Document or (vii) any action by the Investor or any of its Affiliates, taken at the election of the Investor or such Affiliate, upon the request of a majority of the Disinterested Directors or a committee thereof.

(e) The Investor shall not request that the Company amend or waive any provision of this Article 3, including this Section 3.01(e); provided that nothing in this Agreement shall prevent the Investor or any of its Affiliates from making confidential requests to the Board to amend or waive any provision of this Article 3, including this Section 3.01(e), that would require the Company, or the Investor or any of its Affiliates, to make any public disclosure with respect thereto.

Section 3.02. Early Termination of Standstill . Notwithstanding anything to the contrary set forth herein, the restrictions set forth in the preceding Section 3.01 shall automatically terminate, without any further action being required by any party hereto, and shall have no further force or effect, upon the Company entering into a definitive agreement with respect to, or the Board recommending to the Company’s stockholders, a transaction whereby any Person or group (as defined in Section 13(d)(3) of the Exchange Act) would acquire, directly or indirectly, voting securities of the Company representing more than 20% of the aggregate voting power of all then-outstanding voting securities of the Company (it being understood that share repurchases by the Company that are not consummated for the purpose of increasing any person’s or group’s percentage ownership of the Company shall not be deemed to trigger the termination of this Section 3.01).

 

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ARTICLE 4

A NTI -D ILUTION R IGHTS

Section 4.01. Share Repurchase Program .

(a) Effective at the Closing until the earlier of (i) the date of the first Transfer of Shares by the Investor Group where, after giving effect to such Transfer, the Fully Diluted Aggregate Ownership Percentage of the Investor Group is less than 40% and (ii) the date on which the Aggregate Ownership Percentage of the Investor Group ceases to be at least 30%, the Company shall adopt and implement, and thereafter shall maintain, a long-term Share repurchase program (the “ Share Repurchase Program ”) pursuant to which, unless the Investor has delivered to the Company an Option Exercise Notice pursuant to Section 4.03, prior to or concurrently with any New Equity Issuance that would result in the Fully Diluted Aggregate Ownership Interest of the Investor Group (assuming issuance in full of any remaining Permitted Stock Consideration (including payment in full of any contingent consideration)) ceasing to be at least equal to the Share Percentage Cap at such time, the Company shall repurchase a number of Shares such that, immediately following such New Equity Issuance, the Fully Diluted Aggregate Ownership Percentage of the Investor Group remains at least equal to the Share Percentage Cap at such time; provided that, in the event of a New Equity Issuance by the Company that inadvertently results in the Fully Diluted Aggregate Ownership Interest of the Investor Group (assuming issuance in full of any remaining Permitted Stock Consideration (including payment in full of any contingent consideration)) ceasing to be at least equal to the Share Percentage Cap at such time, the Company shall have a period of 90 days from the date that the Company has knowledge of such inadvertent failure to consummate the repurchases of Shares required by this Section 4.01(a). For the purposes of this Agreement, a “ New Equity Issuance ” means, after the Closing, (i) any new issuance of Shares by the Company (other than (x) issuances of Permitted Stock Consideration, (y) Shares issued in accordance with the terms of any Company Securities issued or granted in a New Equity Issuance of the type described in clause (ii) of this definition, or (z) Shares issued upon the exercise or settlement of Company Securities granted under an equity incentive plan that are outstanding as of the Closing) or (ii) the issuance or grant, as the case may be, by the Company of any Company Securities (other than Shares or Permitted Stock Consideration) that are convertible or exercisable into, or exchangeable for, Shares.

(b) Without limiting the Investor’s rights under Sections 4.03, 4.04 and 4.05, (x) the Company shall not be obligated to repurchase any Shares under the Share Repurchase Program if such repurchase would violate Applicable Law, and (y) if as a result of the application of Applicable Law the Company is not able to repurchase the number of Shares otherwise contemplated by Section 4.01(a), then the Company’s obligations under Section 4.01(a) shall survive until such time as the Company is able to repurchase such Shares under Applicable Law.

 

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Section 4.02. Provision of Information .

(a) In connection with the rights granted to the Investor pursuant to this Article 4, the Company shall provide to the Investor, in writing:

(i) within five Business Days following the end of each calendar month, and at such other times as the Investor may reasonably request, information as to (A) the total number of Shares repurchased by the Company in the last month and on a year-to-date basis, (B) the total number of Company Securities issued and granted by the Company in the last month and on a year-to-date basis, (C) the Company’s current forecast as to the total number of Company Securities it expects to issue or grant during the next month and during the remainder of the calendar year, and (D) such other information as the Investor may reasonably request in connection with the Investor’s ownership, tax and accounting objectives; and

(ii) notification of any New Equity Issuance, which shall be provided at least 10 Business Days prior to the applicable proposed New Equity Issuance (or, if notice within such time period is not practicable, then within one Business Day following the date on which the Company becomes aware of the pending New Equity Issuance) (any such notification, a “ Share Issuance Notification ”). Any Share Issuance Notification shall specify (A) the number of Company Securities that the Company intends to issue, (B) the issuance date and all other material terms and conditions of the issuance, (C) the number of Shares to be repurchased in connection with such New Equity Issuance under the Share Repurchase Program and (D) after giving effect to such repurchases and the consummation of the New Equity Issuance, (x) the number of Shares outstanding on a primary basis and the Fully Diluted Shares, (y) the number of Shares underlying the Investor Option in connection with such New Equity Issuance and (z) the number of Shares the Investor may purchase in the market pursuant to Section 4.03(a)(ii) in connection with such New Equity Issuance. Any purchases made by the Investor consistent with the information provided in any Share Issuance Notification shall be deemed not to be in breach of this Agreement (including Article 3) and, to the extent any such information was inaccurate, the Company shall notify the Investor in writing as promptly as practicable following the Company becoming aware of any such inaccuracy and the Company shall use its reasonable best efforts to put the Investor in the position the Investor would have been in had the Share Issuance Notification been accurate.

(b) In connection with the obligations of the Company pursuant to this Article 4, the Investor shall provide to the Company, in writing, notification of any Transfer or purchase of Shares by the Investor Group (other than Transfers among the Investor and its Affiliates), which shall be provided no later than three Business Days after any such Transfer or purchase (any such notification, a “ Share Transaction Notification ”). Any Share Transaction Notification shall specify, as applicable, (A) the number of Shares Transferred or purchased by the Investor or Investor Group Member in the relevant transaction, (B) the date of such Transfer or purchase and (C) the number of Shares beneficially owned by the Investor Group following consummation of such Transfer or purchase. Any actions taken by the Company consistent with the information provided in any Share Transaction Notification shall be deemed not to be in breach of this Agreement and, to the extent any such information was inaccurate, the Investor shall notify the Company in writing as promptly as practicable following the Investor becoming aware of any such inaccuracy.

 

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Section 4.03. Stock Purchase Option . (a) Without limiting the Company’s obligations set forth in Section 4.01 (but taking into account the effect of any repurchases by the Company pursuant to the Share Repurchase Program), effective at the Closing until the date on which the Aggregate Ownership Percentage of the Investor Group ceases to be at least 30%, in connection with any New Equity Issuance by the Company:

(i) the Company hereby grants to the Investor a continuing option (the “ Investor Option ”) to purchase from the Company at the Option Purchase Price (as defined below) and on the terms and subject to the conditions set forth in this Section 4.03, up to such number of Shares as may be necessary for the Fully Diluted Aggregate Ownership Percentage of the Investor Group to equal the Share Percentage Cap; and

(ii) as an alternative to exercising the Investor Option, the Investor Group shall have the right to purchase up to such number of Shares on the secondary market such that the Fully Diluted Aggregate Ownership Percentage of the Investor Group shall equal the Share Percentage Cap.

(b) To the extent that the Investor wishes to exercise the Investor Option, it shall deliver a written exercise notice (an “ Option Exercise Notice ”) to the Company specifying (i) the number of Shares in respect of which the Investor is exercising the Investor Option and (ii) a calculation of the Option Purchase Price and the aggregate Option Purchase Price. The purchase price for each Share to be purchased pursuant to the Investor Option (the “ Option Purchase Price ”) shall be equal to the Market Price of the Shares as of the date on which the Investor delivers to the Company the applicable Option Exercise Notice. “ Market Price ” means, as of the applicable date of determination, the volume-weighted average closing price of the Shares on NASDAQ (or the primary securities exchange upon which the Shares are then traded) over the five consecutive trading day period immediately preceding such date of determination.

(c) The consummation of any purchase of Shares by the Investor pursuant to the Investor Option shall take place promptly (and in no event more than three Business Days) following delivery by the Investor of an Option Exercise Notice. Upon the consummation of any such purchase of Shares by the Investor pursuant to the Investor Option, (i) the Company shall deliver to the Investor certificates for such Shares duly endorsed or accompanied by stock powers duly endorsed in blank, with any required transfer stamps affixed thereto, and (ii) the Investor shall deliver to the Company the aggregate Option Purchase Price in respect of such Shares by wire transfer of immediately available funds to an account designated by the Company at least two Business Days prior to such consummation.

 

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(d) Neither the failure of the Investor to exercise the Investor Option in respect of any New Equity Issuance by the Company nor any exercise by the Investor of the Investor Option for less than all Shares that it is then entitled to purchase thereunder shall affect the Investor’s right to exercise the Investor Option in connection with such New Equity Issuance or any subsequent New Equity Issuance, subject to (i) the effect of any subsequent repurchases of Shares by the Company under the Stock Repurchase Program and (ii) the termination of the Investor Option in accordance with Section 4.03(a). The Investor Option shall be assignable, in whole or in part, to any Affiliate of the Investor at the Investor’s discretion.

Section 4.04. Notification of Aggregate Ownership Percentage; Disregarded Dilution . Notwithstanding anything herein to the contrary:

(a) The Company and the Investor agree that, with respect to (i) any rights of the Investor hereunder or any rights of the Investor or any of its Affiliates under the Collaboration Agreements, in each case that terminate if the Aggregate Ownership Percentage, the Fully Diluted Aggregate Ownership Percentage or any other measure of the Investor Group’s ownership percentage in the Company falls below a certain threshold, or (ii) Section 7.02(b)(i), the calculations of the Aggregate Ownership Percentage, the Fully Diluted Aggregate Ownership Percentage and any such other ownership percentage of the Investor Group for such purpose shall in each case disregard any reduction in the Aggregate Ownership Percentage, the Fully Diluted Aggregate Ownership Percentage or such other ownership percentage of the Investor Group, as applicable, that results from the Company’s (i) failure to repurchase Shares as required by Section 4.01, (ii) inability to repurchase Shares in accordance with Section 4.01 as a result of the application of Applicable Law or (iii) provision of inaccurate information under Section 4.02(a).

(b) The Company and the Investor agree that, in the event the Aggregate Ownership Percentage of the Investor Group ceases to be more than 50%, no termination of the Investor’s rights under Section 2.05 shall occur unless (i) the Company has provided the Investor with written notice that the Aggregate Ownership Percentage of the Investor Group has ceased to be more than 50% and (ii) the Investor Group fails to increase its Aggregate Ownership Percentage to more than 50% within 20 Business Days following receipt of such notice (or, in the event that the Investor Group is unable to purchase Shares at any time during such 20-Business Day period as a result of the application of any applicable securities laws (including as a result of the possession by the Investor or any of its Affiliates of any non-public information) and the Investor has provided written notice to the Company during such period of its intention to purchase Shares, the 20-Business Day period following the lapse of any such restrictions). The Company agrees that, without limiting any of the Investor’s other rights under this Article 4, during any such 20-Business Day period the Investor Group shall have the right to purchase on the secondary market a number of Shares such that the Aggregate Ownership Percentage of the Investor Group is no more than 50% plus one Share.

 

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Section 4.05. Material Breach . In the event the Company issues any Company Securities and, as a result thereof, the Fully Diluted Aggregate Ownership Percentage of the Investor Group ceases to be at least equal to 50.1% (a “ Material Breach ”), the restrictions on the Investor Group described herein (including Section 2.02(e), Section 2.03(c), Section 2.06, Article 3, Section 6.01 and Section 6.03, but excluding Section 6.02 and Section 6.04), but not the Investor Group’s rights described herein, shall immediately terminate, and the Investor and each Investor Group Member shall thereafter have the ability to exercise in full its rights as a shareholder of the Company. The Company shall notify the Investor promptly of any Material Breach and, for the avoidance of doubt, shall have no ability to cure a Material Breach. For the avoidance of doubt, if the Investor Group Transfers an aggregate number of Shares in excess of 0.4% of the Fully Diluted Shares as of immediately following the Closing (taking into account any stock split, stock dividend, reverse stock split or similar event), this provision shall no longer have any force or effect.

ARTICLE 5

R EGISTRATION R IGHTS

Section 5.01. Demand Registration . (a) At any time following the third anniversary of the Closing (or, if earlier, the termination of the restrictions set forth in Section 6.01(a)(i)) and prior to the later of (x) the tenth anniversary of the Closing and (y) the date on which the Aggregate Ownership Percentage of the Investor Group ceases to be at least 10%, the Company shall effect the registration under the Securities Act of all or any portion of the Registrable Securities of the Investor Group in connection with which the Company has received a request (a registration pursuant to any such request, a “ Demand Registration ”) from the Investor. Any such request shall specify the intended method of disposition thereof, and the Company shall use commercially reasonable efforts to effect, as soon as reasonably practicable thereafter, the registration under the Securities Act of all Registrable Securities for which the Investor has requested registration under this Section 5.01(a) to the extent necessary to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities so to be registered; provided that the Company shall not be obligated to effect more than one Demand Registration hereunder within any twelve-month period (other than (i) Demand Registrations to be effected pursuant to a Registration Statement on Form S-3 (or any successor form), which shall not exceed two Demand Registrations within any twelve-month period, or (ii) Demand Registrations pursuant to the Shelf Registration, for which an unlimited number of Demand Registrations shall be permitted); and provided , further , that the Company shall not be obligated to effect a Demand Registration unless the aggregate proceeds expected to be received from the sale of the Registrable Securities requested to be included in such Demand Registration equals or exceeds $5,000,000. “ Registering Investor ” means the Investor or any Investor Group Member on whose behalf such Registrable Securities are to be registered pursuant to Section 5.01 or Section 5.02 hereof.

 

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(b) At any time prior to the effective date of the registration statement relating to such registration, the Investor may revoke such request, without liability to the Company or any other Registering Investor, by providing a written notice to the Company revoking such request. A request, so revoked, shall be considered to be a Demand Registration unless (i) such revocation arose out of the fault of the Company (in which case the Company shall be obligated to pay all Registration Expenses in connection with such revoked request), or (ii) the Investor reimburses the Company, or causes the Company to be reimbursed, for all Registration Expenses of such revoked request.

(c) The Company shall be liable for and pay all Registration Expenses in connection with any Demand Registration, regardless of whether such Registration is effected, except as set forth in Section 5.01(b)(ii).

(d) A Demand Registration shall not be deemed to have occurred:

(i) unless the registration statement relating thereto (A) has become effective under the Securities Act and (B) has remained effective for a period of at least 180 days (or such shorter period in which all Registrable Securities of the Investor Group included in such registration have actually been sold thereunder); provided that such registration statement shall not be considered a Demand Registration if, after such registration statement becomes effective, (1) such registration statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other Governmental Authority and (2) less than 75% of the Registrable Securities included in such registration statement have been sold thereunder; or

(ii) as set forth in Section 5.01(b).

(e) If a Demand Registration involves an underwritten Public Offering and the managing underwriter advises the Company and the Registering Investors that, in its view, the number of Registrable Securities requested to be included in such registration (together with any Company Securities that the Company proposes to be included) exceeds the largest number of shares that can be sold without having an adverse effect on such offering, including the price at which such shares can be sold (the “ Maximum Offering Size ”), the Company shall include in such registration, in the priority listed below, up to the Maximum Offering Size:

(i) first , all Registrable Securities of the Registering Investors requested to be included in such registration by the Investor (allocated, if necessary for the offering not to exceed the Maximum Offering Size, among the Registering Investors in the manner directed by the Investor); and

(ii) second , any securities proposed to be registered by any other Persons (including the Company), with such priorities among them as the Company shall determine.

 

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(f) Upon notice to the Investor, the Company may postpone effecting a registration pursuant to this Section 5.01 on one occasion during any period of twelve consecutive months for a reasonable time specified in the notice but not exceeding 90 days (which period may not be extended or renewed), if (i) such registration would materially and adversely interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company, (ii) an investment banking firm of recognized national standing shall advise the Company and the Investor in writing that effecting such registration would materially and adversely affect an offering of securities of such Company the preparation of which had then been commenced or (iii) the Company is in possession of material non-public information the disclosure of which during the period specified in such notice the Company reasonably believes would not be in the best interests of the Company.

(g) At any time following the third anniversary of the Closing (or, if earlier, the termination of the restrictions set forth in Section 6.01(a)(i)) and prior to the later of (x) the tenth anniversary of the Closing and (y) the date on which the Aggregate Ownership Percentage of the Investor Group ceases to be at least 10%, upon the written request of the Investor, if the Company is eligible, the Company shall use commercially reasonable efforts to file a “shelf” registration statement (the “ Shelf Registration ”) with respect to the Registrable Securities on an appropriate form pursuant to Rule 415 (or any similar provision that may be adopted by the SEC) under the Securities Act and to cause such Shelf Registration to become effective and use commercially reasonable efforts to keep such Shelf Registration in effect until the Investor Group no longer holds any Registrable Securities. Any offer or sale of Registrable Securities pursuant to the Shelf Registration in any Public Offering shall be deemed to be a Demand Registration subject to the provisions of Section 6.01(a).

Section 5.02. Piggyback Registration . (a) At any time following the third anniversary of the Closing (or, if earlier, the termination of the restrictions set forth in Section 6.01(a)(i)) and prior to the later of (x) the tenth anniversary of the Closing and (y) the date on which the Aggregate Ownership Percentage of the Investor Group ceases to be at least 10%, if the Company proposes to register any Company Securities under the Securities Act (other than a registration on Form S-8, S-4 or any successor forms or a registration pursuant to Rule 145 promulgated by the SEC under the Securities Act), whether or not for sale for its own account, the Company shall each such time give prompt notice at least 30 Business Days prior to the anticipated filing date of the registration statement relating to such registration to the Investor, which notice shall set forth the Investor’s rights under this Section 5.02 and shall offer the Investor the opportunity to include in such registration statement the number of Registrable Securities of any member of the Investor Group of the same class or series as those proposed to be registered as the Investor may request (a “ Piggyback Registration ”), subject to the provisions of Section 5.02(b). Upon the request of the Investor made within 15 Business Days after the receipt of notice from the Company (which request shall specify the number of Registrable Securities intended to be registered by any Registering Investor), the Company shall use commercially reasonable efforts to effect, as soon as reasonably practicable, the registration under the Securities Act of all Registrable Securities of each Registering Investor that the Company has been so requested to register by the Investor to the extent necessary to permit the disposition of the Registrable Securities so to be registered; provided that (i) if such registration involves a Public Offering, all Registering Investors must sell their Registrable Securities to the underwriters selected as provided in Section 5.04(g)(i) on the same terms and conditions as apply to the Company, and (ii) if, at any time after giving notice of its intention to register any Company Securities pursuant to this Section 5.02(a) and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register such securities, the Company shall give notice to the Investor and, thereupon, shall be relieved of its obligation to register any Registrable Securities in connection with such registration. No registration effected under this Section 5.02 shall relieve the Company of its obligations to effect a Demand Registration to the extent required by Section 5.01. The Company shall pay all Registration Expenses in connection with each Piggyback Registration.

 

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(b) If a Piggyback Registration involves a Public Offering (other than pursuant to any Demand Registration, in which case the provisions with respect to priority of inclusion set forth in Section 5.01(e) shall apply) and the managing underwriter advises the Company that, in its view, the number of Company Securities that the Company and the Registering Investors intend to include in such registration exceeds the Maximum Offering Size, the Company shall include in such registration, in the following priority, up to the Maximum Offering Size:

(i) first , so much of the Company Securities proposed to be registered for the account of the Company as would not cause the offering to exceed the Maximum Offering Size;

(ii) second , (x) all Registrable Securities of the Registering Investors requested to be included in such registration by the Investor and (y) all “Registrable Securities” requested to be included in such registration by any “Holder” (each as defined in the Existing Investors’ Rights Agreement) pursuant to the Existing Investors’ Rights Agreement (allocated between (x) and (y), if necessary for the offering not to exceed the Maximum Offering Size, pro rata among such Registrable Securities and such “Registrable Securities” (as defined in the Existing Investors’ Rights Agreement) requested to be included in such registration by the Registering Investors and the “Holders” (as defined in the Existing Investors’ Rights Agreement), respectively); and

(iii) third , any securities proposed to be registered for the account of any other Persons, with such priorities among them as the Company shall determine.

Section 5.03. Lock-Up Agreements . If any registration of Registrable Securities shall be effected in connection with a Public Offering, neither the Company nor the Investor shall, and the Investor shall cause each other Registering Investor not to, effect any public sale or distribution, including any sale pursuant to Rule 144, of any Registrable Securities or other security of the Company (except as part of such Public Offering) during the period beginning 14 days prior to the effective date of the applicable registration statement until the earlier of (i) such time as the Company and the lead managing underwriter shall agree and (ii) 90 days following the date of the final prospectus related to such Public Offering (such period, the “ Lock-Up Period ” for the applicable registration statement).

 

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Section 5.04. Registration Procedures . (a) Whenever the Investor requests that any Registrable Securities be registered pursuant to Sections 5.01 or 5.02, subject to the provisions of such Sections, the Company shall use commercially reasonable efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of disposition thereof as soon as reasonably practicable, and, in connection with any such request:

(b) The Company shall as soon as reasonably practicable prepare and file with the SEC a registration statement on any form for which the Company then qualifies or that counsel for the Company shall deem appropriate and which form shall be available for the sale of the Registrable Securities to be registered thereunder in accordance with the intended method of distribution thereof, and use commercially reasonable efforts to cause such filed registration statement to become and remain effective for a period of not less than 180 days, or in the case of the Shelf Registration, one year (or such shorter period in which all of the Registrable Securities of the Registering Investors included in such registration statement shall have actually been sold thereunder).

(c) Prior to filing a registration statement or prospectus or any amendment or supplement thereto, the Company shall, if requested, furnish to each Registering Investor and each underwriter, if any, of the Registrable Securities covered by such registration statement copies of such registration statement as proposed to be filed, and thereafter the Company shall furnish to such Registering Investors and underwriter, if any, such number of copies of such registration statement, each amendment and supplement thereto (in each case including all exhibits thereto and documents incorporated by reference therein), the prospectus included in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 or Rule 430A, Rule 430B or Rule 430C under the Securities Act and such other documents as the Investor (for itself and on behalf of any other applicable Registering Investor) or underwriter may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Registering Investor. The Company shall give the Investor (on behalf of itself and any other Registering Investor), the underwriter in a Public Offering and their respective counsel and accountants the opportunity to participate in the preparation of any registration statement or prospectus, or any amendment or supplement thereto. The Investor shall have the right to request that the Company modify any information contained in such registration statement, amendment and supplement thereto pertaining to any Registering Investor, any other member of the Investor Group or any of their respective Affiliates and the Company shall use commercially reasonable efforts to comply with such request; provided , however , that the Company shall not have any obligation so to modify any information if the Company reasonably expects that so doing would cause the prospectus to contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading.

 

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(d) After the filing of the registration statement, the Company shall (i) cause the related prospectus to be supplemented by any required prospectus supplement, and, as so supplemented, to be filed pursuant to Rule 424 under the Securities Act, (ii) comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such registration statement during the applicable period in accordance with the intended methods of disposition by the Registering Investors thereof set forth in such registration statement or supplement to such prospectus and (iii) promptly notify the Investor of any stop order issued or threatened by the SEC or any state securities commission and take reasonable actions required to prevent the entry of such stop order or to remove it if entered.

(e) The Company shall use commercially reasonable efforts to (i) register or qualify the Registrable Securities of any Registering Investor covered by such registration statement under such other securities or “blue sky” laws of such jurisdictions in the United States as the Investor reasonably (in light of the applicable Registering Investor’s intended plan of distribution) requests and (ii) cause such Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company and perform other acts and things that may be reasonably necessary to enable such Registering Investor to consummate the disposition of the Registrable Securities owned by such Registering Investor; provided that the Company shall not be required to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 5.04(e), (B) subject itself to taxation in any such jurisdiction or (iii) consent to general service of process in any such jurisdiction.

(f) The Company shall promptly notify each Registering Investor, at any time when a prospectus relating to any Registrable Securities covered by such registration statement is required to be delivered under the Securities Act, of the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and promptly prepare and make available to each Registering Investor and file with the SEC any such supplement or amendment.

(g) (i) The Company and the Investor shall jointly select an underwriter or underwriters in connection with any Public Offering resulting from the exercise by the Investor of a Demand Registration and (ii) the Company shall select an underwriter or underwriters in connection with any other Public Offering. In connection with any Public Offering, the Company shall enter into customary agreements (including an underwriting agreement in customary form) and take such other actions as are required in order to expedite or facilitate the disposition of such Registrable Securities in any such Public Offering, including the engagement of a “qualified independent underwriter” in connection with the qualification of the underwriting arrangements with FINRA.

 

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(h) Upon execution of confidentiality agreements in form and substance reasonably satisfactory to the Company, the Company shall make available for inspection by any Registering Investor and any underwriter participating in any disposition pursuant to a registration statement being filed by the Company pursuant to this Section 5.04 and any attorney, accountant or other professional retained by any such Registering Investor or underwriter (collectively, the “ Inspectors ”), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the “ Records ”) as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company’s officers, directors and employees to supply all information reasonably requested by any Inspectors in connection with such registration statement. Records that the Company determines, in good faith, to be confidential and that it notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such registration statement or (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction. The Investor agrees, on its behalf and on behalf of each other Registering Investor, that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it or any such other Registering Investor as the basis for any market transactions in the Company Securities unless and until such information is made generally available to the public. The Investor further agrees that, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, it shall, and shall cause each other Registering Investor, to the extent applicable, to give prompt notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential.

(i) In connection with any Public Offering of Registrable Securities, the Company shall enter into such customary agreements and take all such other actions in connection therewith (including those requested by the Investor) in order to expedite or facilitate the disposition of such Registrable Securities, and in such connection, (i) to the extent possible make such representations and warranties to the underwriters of such Registrable Securities with respect to the business of the Company and the Subsidiaries, the registration statement, prospectus and documents incorporated by reference or deemed incorporated by reference, if any, with respect to such underwritten offering, in each case, in form, substance and scope as are customarily made by issuers to underwriters in similar underwritten offerings and confirm the same if and when requested, (ii) provide indemnities to the effect and to the extent provided in Section 5.05, (iii) obtain opinions of counsel to the Company (which counsel and opinions, in form, scope and substance, shall be reasonably satisfactory to the underwriters and their counsel) addressed to each underwriter of Registrable Securities and each Registering Investor, covering the matters customarily covered in opinions requested in similar underwritten offerings, (iv) obtain “comfort letters” letters from the independent certified public accountants of the Company (and, if necessary, any other certified public accountant of any Subsidiary, or of any business acquired by the Company for which financial statements and financial data are or are required to be included in the Registration Statement) addressed to each underwriter of Registrable Securities and each Registering Investor, such letters to be in customary form and covering matters of the type customarily covered in “comfort letters” in connection with similar underwritten offerings, and (v) deliver such documents and certificates as may be reasonably requested by the underwriters, and which are customarily delivered in similar underwritten offerings, to evidence the continued validity of the representations and warranties of the Company made pursuant to clause (i) above and to evidence compliance with any customary conditions contained in an underwriting agreement;

 

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(j) The Company may require the Investor promptly to furnish in writing to the Company such information regarding the distribution of the Registrable Securities of any Registering Investor as the Company may from time to time reasonably request and such other information as may be legally required in connection with such registration.

(k) The Investor agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 5.04(f), the Investor shall, and shall cause each other Registering Investor to, forthwith discontinue disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such Registering Investor’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 5.04(f), and, if so directed by the Company, the Investor shall, and shall cause each such other Registering Investor to, deliver to the Company all copies, other than any permanent file copies then in such Registering Investor’s possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice. If the Company shall give such notice, the Company shall extend the period during which such registration statement shall be maintained effective (including the period referred to in Section 5.04(b)) by the number of days during the period from and including the date of the giving of notice pursuant to Section 5.04(f) to the date when the Company shall make available to such Registering Investor a prospectus supplemented or amended to conform with the requirements of Section 5.04(f).

(l) The Company shall use commercially reasonable efforts to list all Registrable Securities covered by such registration statement on any securities exchange or quotation system on which any of the Registrable Securities are then listed or traded.

(m) The Company shall have appropriate officers of the Company (i) prepare and make presentations at any customary “road shows” and before analysts and rating agencies, as the case may be, (ii) take other actions to obtain ratings for any Registrable Securities and (iii) otherwise cooperate as reasonably requested by the underwriters in the offering, marketing or selling of the Registrable Securities.

Section 5.05. Indemnification by the Company . The Company agrees to indemnify and hold harmless each Registering Investor holding Registrable Securities covered by a registration statement, its officers, directors, employees, partners and agents, and each Person, if any, who controls such Registering Investor within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages, liabilities and expenses (including reasonable expenses of investigation and reasonable attorneys’ fees and expenses) (“ Damages ”) caused by or relating to any untrue statement or alleged untrue statement of a material fact contained in any registration statement or prospectus relating to the Registrable Securities (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or any preliminary prospectus or free writing prospectus (as defined in Rule 405 under the Securities Act), or caused by or relating to any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such Damages are caused by or related to any such untrue statement or omission or alleged untrue statement or omission so made based upon information furnished in writing to the Company by such Registering Investor or on such Registering Investor’s behalf expressly for use therein. The Company also agrees to indemnify any underwriters of the Registrable Securities, their officers and directors and each Person who controls such underwriters within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act on substantially the same basis as that of the indemnification of the Registering Investors provided in this Section 5.05.

 

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Section 5.06. Indemnification by Registering Investors . The Investor agrees to, and agrees to cause each Registering Investor holding Registrable Securities included in any registration statement to, severally but not jointly, indemnify and hold harmless the Company, its officers, directors and agents and each Person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to such Registering Investor, but only with respect to information furnished in writing by such Registering Investor or on such Registering Investor’s behalf expressly for use in any registration statement or prospectus relating to the Registrable Securities, or any amendment or supplement thereto, or any preliminary prospectus. The Investor also agrees to, and to cause each other Registering Investor to, indemnify and hold harmless underwriters of the Registrable Securities, their officers and directors and each Person who controls such underwriters within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act on substantially the same basis as that of the indemnification of the Company provided in this Section 5.06. As a condition to including Registrable Securities in any registration statement filed in accordance with Article 5, the Company may require that it shall have received an undertaking reasonably satisfactory to it from any underwriter to indemnify and hold it harmless to the extent customarily provided by underwriters with respect to similar securities. No Registering Investor shall be liable under this Section 5.06 for any Damages in excess of the net proceeds realized by such Registering Investor in the sale of Registrable Securities of such Registering Investor to which such Damages relate.

Section 5.07. Conduct of Indemnification Proceedings . If any proceeding (including any investigation by any Governmental Authority) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to Section 5.05 or 5.06, such Person (an “ Indemnified Party ”) shall promptly notify the Person against whom such indemnity may be sought (the “ Indemnifying Party ”) in writing and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Party, and shall assume the payment of all fees and expenses; provided that the failure of any Indemnified Party so to notify the Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder except to the extent that the Indemnifying Party is materially prejudiced by such failure to notify. In any such proceeding, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel, or (ii) in the reasonable judgment of such Indemnified Party, representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that, in connection with any proceeding or related proceedings in the same jurisdiction, the Indemnifying Party shall not be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) at any time for all such Indemnified Parties, and that all such fees and expenses shall be reimbursed as they are incurred. In the case of any such separate firm for the Indemnified Parties, such firm shall be designated in writing by the Indemnified Parties. The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent, or if there be a final judgment for the plaintiff, the Indemnifying Party shall indemnify and hold harmless such Indemnified Parties from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment. Without the prior written consent of the Indemnified Party, no Indemnifying Party shall effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability arising out of such proceeding.

 

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Section 5.08. Contribution . (a) If the indemnification provided for in Section 5.05 or 5.06 is unavailable to the Indemnified Parties in respect of any Damages, then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Damages,

(i) as between the Company and the Registering Investors holding Registrable Securities covered by a registration statement on the one hand and the underwriters on the other, in such proportion as is appropriate to reflect the relative benefits received by the Company and such Registering Investors on the one hand and the underwriters on the other, from the offering of the Registrable Securities, or if such allocation is not permitted by Applicable Law, in such proportion as is appropriate to reflect not only the relative benefits but also the relative fault of the Company and such Registering Investors on the one hand and of such underwriters on the other in connection with the statements or omissions that resulted in such Damages, as well as any other relevant equitable considerations; and

(ii) as between the Company on the one hand and each such Registering Investor on the other, in such proportion as is appropriate to reflect the relative fault of the Company and of each such Registering Investor in connection with such statements or omissions, as well as any other relevant equitable considerations. The relative benefits received by the Company and such Registering Investors on the one hand and such underwriters on the other shall be deemed to be in the same proportion as the total proceeds from the offering (net of underwriting discounts and commissions but before deducting expenses) received by the Company and such Registering Investors bear to the total underwriting discounts and commissions received by such underwriters, in each case as set forth in the table on the cover page of the prospectus. The relative fault of the Company and such Registering Investors on the one hand and of such underwriters on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and such Registering Investors or by such underwriters. The relative fault of the Company on the one hand and of each such Registering Investor on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

 

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(b) The Company and the Investor (for itself and on behalf of each other Registering Investor) agree that it would not be just and equitable if contribution pursuant to this Section 5.08 were determined by pro rata allocation (even if the underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in Section 5.08(a). The amount paid or payable by an Indemnified Party as a result of the Damages referred to in Section 5.08(a) shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 5.08, no underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any Damages that such underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, and no Registering Investor shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities of such Registering Investor were offered to the public (less underwriters’ discounts and commissions) exceeds the amount of any Damages that such Registering Investor has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. Each Registering Investor’s obligation to contribute pursuant to this Section 5.08 is several in the proportion that the proceeds of the offering received by such Registering Investor bears to the total proceeds of the offering received by all such Registering Investors and not joint. The Investor agrees to take all actions necessary to ensure the compliance by each other Registering Investor with the indemnification and contribution provisions applicable to them pursuant to Section 5.06 and Section 5.08.

 

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Section 5.09. Participation in Public Offering . No member of the Investor Group may participate in any Public Offering hereunder unless such Person (a) agrees to sell its Registrable Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements and the provisions of this Agreement in respect of registration rights.

Section 5.10. Other Indemnification . Indemnification similar to that specified herein (with appropriate modifications) shall be given by the Company and each Registering Investor participating therein with respect to any required registration or other qualification of securities under any federal or state law or regulation or Governmental Authority other than the Securities Act.

Section 5.11. Cooperation by the Company . If the Investor or any other Investor Group Member shall Transfer any Registrable Securities pursuant to Rule 144, the Company shall cooperate, to the extent commercially reasonable, with such Investor Group Member and shall provide to such Investor Group Member such information as such Investor Group Member shall reasonably request.

Section 5.12. Transfer of Registration Rights . Any member of the Investor Group may assign all or a portion of its rights under this Article 5 in connection with any permitted Transfer of Registrable Securities by such Person, except in connection with any Transfers pursuant to a Public Offering or pursuant to Rule 144. Any assignments in violation of this Section 5.12 shall be null and void.

ARTICLE 6

C ERTAIN C OVENANTS AND A GREEMENTS

Section 6.01. Restrictions on Transfers of Shares .

(a) The Investor agrees that it shall not, and shall not permit the Investor Group Members to, Transfer any Shares (or solicit any offers in respect of any Transfer of any Shares) (i) during the Original Standstill Period, except among the Investor and its Affiliates, or (ii) thereafter, without Disinterested Director Approval, to a Person or group (as defined in Section 13(d)(3) of the Exchange Act) if such Person or group would beneficially own in excess of 10% of the outstanding Shares following such Transfer; provided that (A) the foregoing clause (ii) shall not apply to (x) sales pursuant to Public Offerings, (y) sales structured as regular sales over NASDAQ or any other securities exchange on which the Shares are traded or (z) block sales to broker-dealers, and (B) after the fifth anniversary of the Closing, the Investor Group shall be permitted to Transfer all (but not less than all) of its Shares to a third party that has made an offer to the Company or its stockholders (including pursuant to a tender offer) to purchase all of the outstanding Shares; provided that, in the case of this clause (B), the price, form of consideration and other terms and conditions of the Transfer offered to the Investor Group are the same (or no more favorable) than the price, form of consideration and other terms and conditions offered to all other stockholders of the Company, other than (i) fair market consideration payable in exchange for entering into restrictive covenants and (ii) commercial agreements (including with respect to transition services) on arms’-length terms, in each case that the purchaser requires as a condition to the transaction (an offer meeting the criteria of this clause (B), a “ Third Party Buyout Offer ”).

 

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(b) The Investor agrees that it shall not Transfer any Shares (or solicit any offers in respect of any Transfer of any Shares) except in compliance with the Securities Act, any other applicable securities or “blue sky” laws. Except as set forth in this Section 6.01, neither the Investor nor any Investor Group Member shall be subject to any restriction on its ability to Transfer Shares or to solicit offers in respect of any such Transfer.

Section 6.02. Confidentiality .

(a) Each of the Company and the Investor agrees that, effective immediately as of the Acceptance Time, and without any further action being required on the part of any Person, the Confidentiality Agreement (as defined in the Transaction Agreement) shall terminate in its entirety and shall be of no further force and effect.

(b) In connection with the Investor’s investment in the Company, each of the Company and the Investor (as applicable, the “ Disclosing Party ”) has furnished, and expects to continue to furnish, the other party (the “ Receiving Party ”) with certain Confidential Information (as defined below) of the Disclosing Party. Each Receiving Party acknowledges and agrees that it shall not disclose any Confidential Information to any Person, except that Confidential Information may be disclosed:

(i) to its Representatives who need to know such information with respect to any matters relating hereto; provided that the Receiving Party shall be responsible for any breach by such Representatives of the confidentiality obligations under this Section 6.02;

(ii) to the extent required by any oral or written questions, interrogatories, requests for information or documents, subpoena, civil investigative demand or similar legal process to which the Receiving Party or any of its Representatives is subject, or as may be required in connection with the assertion, prosecution or defense by such Receiving Party or any of its Representatives of any claim, demand, action, suit or proceeding with respect to any matters related hereto; provided that the Receiving Party or its applicable Representative shall provide the Disclosing Party with prompt notice of any such request, to the extent practicable and legally permitted, so that the Disclosing Party may seek confidential treatment, an appropriate protective order or similar relief, and the Receiving Party or its applicable Representative shall reasonably cooperate (at the Disclosing Party’s expense) with such efforts by the Disclosing Party;

 

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(iii) in the case of the Investor, to any Person to whom the Investor is contemplating a Transfer of its Company Securities; provided that (A) such Transfer would not be in violation of the provisions of this Agreement, (B) such potential transferee is advised of the confidential nature of such information and agrees to be bound by a confidentiality agreement (1) that contains terms no less favorable to the Company than the Confidentiality Agreement ( provided that the standstill provisions in such confidentiality agreement may permit a Third Party Buyout Offer) and (2) to which the Company is made an express third-party beneficiary, and (C) the Investor provides the Company with prior written notice of the identity of the proposed transferee, the Confidential Information proposed to be shared with such proposed transferee, and the form of confidentiality agreement with such proposed transferee at least five Business Days before entering into such confidentiality agreement; provided , further , that, without the written consent of the Company (not to be unreasonably withheld, conditioned or delayed), no such disclosure may be made to any actual competitor of the Company or any Affiliate of such competitor; and

(iv) to the extent required to permit such Receiving Party or any of its Representatives to comply with Applicable Law or applicable rules or regulations of any stock exchange on which securities of such Receiving Party or its Affiliates are listed; provided that, in the case of the Investor, such disclosure requirement does not arise from a breach of Section 3.01 of this Agreement; and provided , further , that the Receiving Party or its applicable Representative shall provide the Disclosing Party with prior notice of any such required disclosure, to the extent practicable and legally permitted, so that the Disclosing Party may seek confidential treatment, an appropriate protective order or similar relief, and the Receiving Party or its applicable Representative shall reasonably cooperate (at the Disclosing Party’s expense) with such efforts by the Disclosing Party.

(c) “ Confidential Information ” means any nonpublic information received by any Receiving Party (which shall include, in the case of the Investor, Confidential Information of the Company that may be shared with the Investor by any Investor Designee or Observer pursuant to the following clause (d)) concerning the Disclosing Party, its Affiliates, or its or their respective financial condition, business, operations or prospects; provided that “Confidential Information” does not include information that (i) is or becomes generally available to the public other than as a result of a disclosure by the Receiving Party or its directors, officers, employees, counsel, investment advisers or other agents or representatives (including, in the case of the Investor, any Affiliate of the Investor) (all such persons being collectively referred to as “ Representatives ”) in violation of this Agreement, (ii) is or was available to the Receiving Party on a non-confidential basis prior to its disclosure to the Receiving Party by the Disclosing Party, (iii) was or becomes available to the Receiving Party on a non-confidential basis from a source other than the Disclosing Party, which source is or was (at the time of receipt of the relevant information) not, to the best of the Receiving Party’s knowledge, bound by a confidentiality agreement with (or other confidentiality obligation to) the Disclosing Party, (iv) is independently developed by the Receiving Party without violating any confidentiality agreement with, or other obligation of secrecy to, the Disclosing Party or (v) that the Investor or the Company is permitted to disclose under the Collaboration Agreements).

 

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(d) Nothing in this Agreement shall restrict or prevent any Investor Designee or Observer designated by the Investor from sharing with the Investor and its Affiliates any Confidential Information of the Company or any of its Affiliates; provided that, with respect to any such Confidential Information, the Investor and such Affiliates shall be subject to the confidentiality obligations set forth in this Section 6.02 as a “Receiving Party” hereunder and the Investor shall be responsible for any breach of such provisions by its Affiliates.

Section 6.03. Conflicting Agreements; Limitations on Subsequent Registration Rights .

(a) The Company, the Investor and each Existing VC Investor (for as long as it has an Existing VC Representative on the Board) represents and agrees that it shall not (i) grant any proxy, (ii) enter into or agree to be bound by any voting trust or agreement with respect to the Company Securities or (iii) enter into any agreement or arrangement of any kind with any Person, in each case if any such proxy, voting trust, agreement or arrangement is (x) inconsistent with the provisions of this Agreement or (y) for the purpose or with the effect of denying or reducing the rights of any party under this Agreement.

(b) The Company agrees that it shall not enter into any agreement with any holder or prospective holder of any securities of the Company (i) that would allow such holder or prospective holder to include such securities in any Demand Registration or Piggyback Registration unless, under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that their inclusion would not reduce the amount of the Registrable Securities of the Investor Group included therein or (ii) on terms otherwise more favorable than this Agreement. The Company also represents and warrants to the Investor that (i) it has not previously entered into any agreement with respect to any of its securities granting any registration rights to any Person, other than pursuant to the Existing Investors’ Rights Agreement as filed with the SEC on July 29, 2013, and (ii) the rights granted under the Existing Investors’ Rights Agreement do not conflict with the rights of the Investor Group set forth in Article 5 of this Agreement.

Section 6.04. Freedom to Pursue Opportunities .

(a) The parties expressly acknowledge and agree that (i) the Investor and each of its Affiliates (including any Investor Designee or Observer) has the right to, and shall have no duty (contractual or otherwise) not to, directly or indirectly engage in the same or similar business activities or lines of business as the Company or any of its Subsidiaries, on its own account or in partnership with, or as an employee, officer, director or stockholder of, any other Person, including those lines of business deemed to be competing with the Company or any of its Subsidiaries, (ii) none of the Company, any of its Subsidiaries or any Existing VC Investor shall have any rights in and to the business ventures of the Investor or any of its Affiliates (including any Investor Designee or Observer), or the income or profits derived therefrom (other than in its capacity as a stockholder of the Company), and (iii) in the event that the Investor or any of its Affiliates (including any Investor Designee or Observer) acquires knowledge of a potential transaction or matter that may be an opportunity for the Company, except to the extent that any such transaction or opportunity comes to such Person’s attention solely through the role of any Investor Designee or Observer, neither the Investor nor any of its Affiliates (including any Investor Designee or Observer) shall have any duty (contractual or otherwise) to communicate or present such opportunity to the Company, any of its Subsidiaries or any Existing VC Investor and, notwithstanding any provision of this Agreement to the contrary, shall not be liable to the Company, any of its Subsidiaries or any Existing VC Investor (or any of their respective Affiliates) for breach of any duty (contractual or otherwise) by reason of the fact that the Investor or any of its Affiliates (including any Investor Designee or Observer), directly or indirectly, pursues or acquires such opportunity for itself, directs such opportunity to another Person or does not present such opportunity to the Company, any of its Subsidiaries or any Existing VC Investor; provided that the foregoing shall not be deemed to limit Section 6.02 hereof or amend or modify the terms of the Collaboration Agreements.

 

38


(b) The parties expressly acknowledge and agree that, without limiting the Investor’s rights hereunder (including pursuant to Section 2.05), (i) the Company and each of its Affiliates and each Existing VC Investor and its Affiliates has the right to, and shall have no duty (contractual or otherwise) not to, directly or indirectly engage in the same or similar business activities or lines of business as the Investor or its Affiliates, on its own account or in partnership with, or as an employee, officer, director or stockholder of, any other Person, including those lines of business deemed to be competing with the Investor or any of its Affiliates, (ii) none of the Investor or any of its Affiliates shall have any rights in and to the business ventures of the Company or any of its Affiliates or any Existing VC Investor or any of its Affiliates or the income or profits derived therefrom (other than in its capacity as a stockholder of the Company), and (iii) in the event that the Company or any of its Affiliates or any Existing VC Investor or any of its Affiliates acquires knowledge of a potential transaction or matter that may be an opportunity for the Investor or any of its Affiliates, neither the Company nor the Existing VC Investor shall have any duty (contractual or otherwise) to communicate or present such opportunity to the Investor and, notwithstanding any provision of this Agreement to the contrary, shall not be liable to the Investor for breach of any duty (contractual or otherwise) by reason of the fact that the Company or any of its Affiliates or the Existing VC Investor or any of its Affiliates, directly or indirectly, pursues or acquires such opportunity for itself, directs such opportunity to another Person or does not present such opportunity to the Investor; provided that the foregoing shall not be deemed to limit Section 6.02 hereof or amend or modify the terms of the Collaboration Agreements.

 

39


Section 6.05. Information Rights; Accounting .

(a) The Company shall provide to the Investor such other information (and, during reasonable business hours, access to such information and to relevant personnel) as may reasonably be requested by the Investor or as is otherwise required by Applicable Law or any securities exchange on which the capital stock of the Investor or any of its Affiliates is traded, including in connection with the Investor Group’s accounting, consolidation, compliance, audit and public reporting functions. In furtherance of the foregoing, upon the Investor’s request, (i) the Company shall keep the Investor informed, on a reasonably current basis, of (x) any criminal or regulatory investigation or action involving the Company or any of its Subsidiaries (and shall reasonably cooperate with the Investor Group in connection therewith (including by giving the Investor the opportunity to review written submissions in advance (and considering the Investor’s comments thereto in good faith) and, to the extent permissible under Applicable Law, attending meetings with authorities and regulators)), and (y) any security or data breach of any kind in any jurisdiction involving or affecting the Company or any of its Subsidiaries (and shall reasonably cooperate with the Investor Group in connection therewith), and (ii) the Company shall, on an annual basis, permit the Investor to audit the Company’s information technology and data privacy policies, procedures and architecture (or provide to the Investor a third-party audit prepared on behalf of the Company with respect thereto), and consider in good faith the Investor’s comments in connection therewith. For the avoidance of doubt, the Company agrees that it shall remain fully responsible for compliance by the Company and its Subsidiaries with Applicable Law. The Company may restrict the foregoing access and the disclosure of information pursuant to this Section 6.05 (other than Section 6.05(b)) to the extent that (A) any Applicable Law requires the Company or its Subsidiaries to restrict or prohibit access to any such information or (B) disclosure of any such information would result in the loss of attorney-client privilege (but in each case the Company shall use its commercially reasonable efforts to (1) develop an alternative to providing such information that is reasonably acceptable to the Investor or (2) enter into a joint defense agreement or implement such other techniques if the parties determine that doing so would permit the disclosure of such information without violating such Applicable Law or attorney-client privilege).

(b) The Company shall report financial information (including forecasts) to the Investor in accordance with the Investor’s Financial Group Accounting and Reporting Guidelines as they exist from time to time (the “ FGAR Guidelines ”) based on International Financial Reporting Standards as issued by the International Accounting Standards Board, as may be amended from time to time, and in accordance with the Investor’s internal reporting timetables and guidelines; provided that the Investor will provide reasonable assistance and training to the Company’s finance and accounting personnel in connection therewith.

(c) The Company shall reasonably cooperate with the Investor, and promptly provide the Investor with information requested with respect to, (A) external and internal audit risk assessment, (B) material non-recurring events that could have accounting or financial reporting implications and (C) proposed external disclosure of financial results, including regulatory filings. The Company shall also reasonably cooperate with the Investor’s auditors in connection with matters relevant to the audit of the Investor’s consolidated financial statements.

 

40


(d) In furtherance of the foregoing, senior employees responsible for financing and accounting functions at the Company and the Investor will meet at least twice per calendar year to discuss their respective finance and accounting activities (including foreign exchange risk management, cash management, portfolio exposure management and taxation and accounting issues).

Section 6.06. No Restrictions on the Company or the Investor .

(a) Without the prior written consent of the Company, after the date hereof, the Investor shall not, and shall cause its Affiliates not to, take any action (other than, for the avoidance of doubt, the exercise of the Investor’s rights under Section 2.05) or execute any agreement that would purport to bind the Company or any of its Subsidiaries as a “subsidiary,” “affiliate” or similar related party of the Investor or any of its Affiliates, including any provision or covenant that would purport to limit the freedom of the Company or any of its Subsidiaries to (i) sell any products or services to any Person or in any geographic region, (ii) engage in any line of business or compete with any other Person, (iii) obtain products or services from any Person, (iv) solicit for employment, employ or otherwise engage any Persons as a service provider, or (v) disclose or use the confidential information of any Person (other than with respect to confidential information of a third party provided to the Company or any of its Subsidiaries by the Investor or any of its Affiliates). The Investor agrees to indemnify and hold harmless the Company and its Subsidiaries and their respective officers, directors, employees, partners and agents from and against any and all Damages (as defined in the Transaction Agreement) caused by or relating to the existence of any Contract entered into by the Investor or any of its Affiliates that purports to subject the Company or any of its Subsidiaries to any of the restrictions set forth in clauses (i) through (v) of the preceding sentence.

(b) Without the prior written consent of the Investor, after the date hereof, the Company shall not, and shall cause its Affiliates not to, take any action or execute any agreement that would purport to bind the Investor or any of its Affiliates (including for this purpose Chugai Pharmaceutical Co., Ltd. and its Subsidiaries) as an “affiliate,” “shareholder” or similar related party of the Company or any of its Subsidiaries, including any provision or covenant that would purport to limit the freedom of the Investor or any of its Affiliates (including for this purpose Chugai Pharmaceutical Co., Ltd. and its Subsidiaries) to (i) sell any products or services to any Person or in any geographic region, (ii) engage in any line of business or compete with any other Person, (iii) obtain products or services from any Person, (iv) solicit for employment, employ or otherwise engage any Persons as a service provider, or (v) disclose or use the confidential information of any Person (other than with respect to confidential information of a third party provided to the Investor or any of its Affiliates by the Company or any of its Subsidiaries). The Company agrees to indemnify and hold harmless the Investor and its Affiliates is and their respective officers, directors, employees, partners and agents from and against any and all Damages (as defined in the Transaction Agreement) caused by or relating to the existence of any Contract entered into by the Company or any of its Subsidiaries that purports to subject the Investor or any of its Affiliates to any of the restrictions set forth in clauses (i) through (v) of the preceding sentence.

 

41


ARTICLE 7

E FFECTIVENESS ; T ERMINATION

Section 7.01. Effectiveness . Unless terminated earlier in accordance with Section 7.02(a), this Agreement shall automatically and immediately become effective, without any further action by any Person, at the Acceptance Time.

Section 7.02. Termination. (a) Prior to the consummation of the Acceptance Time, this Agreement shall automatically terminate without any further action by any Person, upon the earlier of (i) the termination of the Transaction Agreement in accordance with its terms and (ii) the written agreement of each party hereto to terminate this Agreement.

(b) This Agreement shall automatically terminate, without any further action by any Person, upon the later of (i) subject to Section 4.04, the date on which the Aggregate Ownership Percentage of the Investor Group is less than 10% and (ii) the date on which the Investor Group no longer owns any Registrable Securities; provided that this Agreement (A) may be terminated at any time upon the written agreement of each party hereto and (B) may be terminated by the Investor at such time as the Investor Group’s Aggregate Ownership Percentage is equal to 100%.

Section 7.03. Effect of Termination . Upon any termination of this Agreement in accordance with the provisions of Section 7.02 hereof, this Agreement shall become void and of no further effect; provided that (i) Section 6.02 (in the case of any termination under Section 7.02(b)) shall survive any such termination for a period of five years from the date of termination, (ii) this Section 7.03 and Article 8 shall survive any such termination and (iii) any breach of this Agreement prior to such termination shall survive such termination.

ARTICLE 8

M ISCELLANEOUS

Section 8.01. Successors and Assigns . (a) This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, successors, legal representatives and permitted assigns.

(b) Except as expressly provided herein, neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by any party hereto pursuant to any Transfer of Company Securities or otherwise.

(c) Except as expressly set forth in this Agreement (including Section 5.12), no provision of this Agreement is intended to confer any rights, benefits, remedies, obligations, or liabilities hereunder upon any Person other than the parties hereto and their respective successors and assigns.

 

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Section 8.02. Notices . All notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission and electronic mail (“ email ”) transmission, so long as a receipt of such email is requested and received) and shall be given,

if to the Company, to:

Foundation Medicine, Inc.

150 Second Street

Cambridge, MA 02141

Attention: Michael J. Pellini, M.D., Chief Executive Officer

Facsimile No.: (617) 418-2201

Email: mpellini@foundationmedicine.com

with a copy (which shall not constitute notice) to:

Goodwin Procter LLP

53 State Street

Boston, Massachusetts 02109

Attention:    Stuart M. Cable
   Lisa R. Haddad

Facsimile No.: (617) 523-1231

Email:    scable@goodwinprocter.com
   lhaddad@goodwinprocter.com

if to Investor, to:

Roche Holdings, Inc.

1 DNA Way

South San Francisco, California 94080

Attention: General Counsel

Fax: (650) 225-6000

with copies (which shall not constitute notice) to:

F. Hoffmann-La Roche Ltd

Group Legal Department

Grenzacherstrasse 124

CH-4070 Basel, Switzerland

Attention: Dr. Beat Kraehenmann

Fax: +41 61 688 13 96

and

 

43


Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, New York 10017

Attention:    Arthur F. Golden
   Marc O. Williams

Facsimile No.:(212) 701-5800

Email:    arthur.golden@davispolk.com
   marc.williams@davispolk.com

if to an Existing VC Investor, as set forth in the signature page hereof,

or such other address, facsimile number or email address as such party may hereafter specify for the purpose by notice to the other parties hereto. All notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. in the place of receipt and such day is a business day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding Business Day in the place of receipt.

Section 8.03. Amendments and Waivers . Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement, or in the case of a waiver, by the party against whom the waiver is to be effective; provided that any material amendment or waiver that is effected after the Acceptance Time shall also require Disinterested Director Approval. No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by Applicable Law.

Section 8.04. Governing Law . This Agreement and all claims and causes of action arising out of or relating to this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of law rules of such state.

Section 8.05. Jurisdiction . The parties hereby agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought in the Delaware Court of Chancery or, if such court shall not have jurisdiction, any federal court located in the State of Delaware or other Delaware state court, and each of the parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 8.02 shall be deemed effective service of process on such party.

 

44


Section 8.06. WAIVER OF JURY TRIAL . EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 8.07. Specific Enforcement . Each party hereto acknowledges that the remedies at law of the other parties for a breach or threatened breach of this Agreement would be inadequate and, in recognition of this fact, any party to this Agreement, without posting any bond, and in addition to all other remedies that may be available, shall be entitled to obtain equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction or any other equitable remedy that may then be available.

Section 8.08. Counterparts . This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

Section 8.09. Entire Agreement . This Agreement, the Transaction Agreement and the other Transaction Documents constitute the entire agreement among the parties with respect to the subject matter of this Agreement and supersedes all prior agreements and understandings, both oral and written, among the parties hereto with respect to the subject matter hereof and thereof.

Section 8.10. Severability . If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated 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 a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner so that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

Section 8.11. Compliance with Applicable Governance Rules . It is the intent of the Investor and the Company that (i) the provisions of this Agreement comply, and following the date hereof continue to comply, with the Applicable Governance Rules, as the same may be amended from time to time, and (ii) the Company not rely on any “controlled company exemption” or similar provision under the Applicable Governance Rules. In furtherance of the foregoing, if any term, covenant or restriction included in this Agreement fails at any time to comply with the Applicable Governance Rules (without regard to any “controlled company exemption” or similar provision) (including, for the avoidance of doubt, the Investor’s rights hereunder), the parties agree to negotiate in good faith to modify this Agreement so as to comply with the Applicable Governance Rules while retaining the original intent as closely as possible in an acceptable manner so that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

 

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[ Remainder of Page Intentionally Left Blank ]

 

46


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

 

FOUNDATION MEDICINE, INC.
By:  

/s/ Steven J. Kafka

  Name:   Steven J. Kafka
  Title:   Chief Operating Officer

 

S IGNATURE P AGE TO I NVESTOR R IGHTS A GREEMENT


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

 

ROCHE HOLDINGS, INC.
By:  

/s/ Bruce Resnick

  Name:   Bruce Resnick
  Title:   Vice President and Tax Counsel

 

S IGNATURE P AGE TO I NVESTOR R IGHTS A GREEMENT


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

 

EXISTING VC INVESTORS :

(solely for purposes of Section 2.02(f), Section 6.03(a) and Section 6.04)

KLEINER PERKINS CAUFIELD & BYERS XIV, LLC
By:  

/s/ Paul M. Vronsky

  Name:   Paul M. Vronsky
  Title:   General Counsel
KPCB XIV FOUNDERS FUND, LLC
By:  

/s/ Paul M. Vronsky

  Name:   Paul M. Vronsky
  Title:   General Counsel

 

S IGNATURE P AGE TO I NVESTOR R IGHTS A GREEMENT


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

 

EXISTING VC INVESTORS :

(solely for purposes of Section 2.02(f), Section 6.03(a) and Section 6.04)

KPCB HOLDINGS, INC., AS NOMINEE
By:  

/s/ Paul M. Vronsky

  Name:   Paul M. Vronsky
  Title:   General Counsel

 

S IGNATURE P AGE TO I NVESTOR R IGHTS A GREEMENT


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

 

EXISTING VC INVESTORS :

(solely for purposes of Section 2.02(f), Section 6.03(a) and Section 6.04)

THIRD ROCK VENTURES, L.P.
By:   Third Rock Ventures GP, L.P., its general partner
By:   TRV GP, LLC, its general partner
By:  

/s/ Kevin Gillis

  Name:   Kevin Gillis
  Title:   Partner and CFO

 

S IGNATURE P AGE TO I NVESTOR R IGHTS A GREEMENT


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

 

EXISTING VC INVESTORS :

(solely for purposes of Section 2.02(f), Section 6.03(a) and Section 6.04)

GOOGLE VENTURES 2011, L.P.
By:   Google Ventures 2011 GP, L.L.C., its General Partner
By:  

/s/ Jennifer L. Kercher

  Name:   Jennifer L. Kercher
  Title:   Authorized Signatory

 

S IGNATURE P AGE TO I NVESTOR R IGHTS A GREEMENT


Annex A – Equity Plan Extension Methodology

An Equity Plan Extension may provide for up to a maximum number of Shares reserved for issuance equal to the sum of: (x) the number of Shares reserved for issuance under the Company’s then-existing Permitted Equity Plan (other than the 2013 Stock Option and Incentive Plan) at the end of its 10-year term, plus (y) the number of Shares underlying any equity awards outstanding under the Company’s then-existing Permitted Equity Plan that are forfeited after the expiration or termination of such Permitted Equity Plan, plus (z) an additional number of Shares equal to 15% of the outstanding Shares upon the adoption of such Equity Plan Extension. For the avoidance of doubt, an Equity Plan Extension may only be consummated once every 10 years.

Exhibit 4.2

EXECUTION VERSION

FOUNDATION MEDICINE, INC.

AMENDMENT TO

SECOND AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

This Amendment to Second Amended and Restated Investors’ Rights Agreement (this “ Amendment ”), is executed as of January 11, 2015, by the undersigned Investors (as defined herein) and Foundation Medicine, Inc., a Delaware corporation (the “ Company ”). Reference is hereby made to that certain Second Amended and Restated Investors’ Rights Agreement, dated as of June 20, 2013 (the “ Existing Rights Agreement ”), by and among the Company and the investors listed on Schedule A thereto (each, an “ Investor ”). Capitalized terms used herein that are not otherwise defined shall have the meaning ascribed thereto in the Existing Rights Agreement.

WHEREAS, Section 2.2 of the Existing Rights Agreement provides that in the event the Company determines to register any of its securities either for its own account or the account of a security holder or holders, the Company shall, subject to the terms and limitations in the Existing Rights Agreement, include in such registration Registrable Securities owned by each Investor to the extent requested by such Investor;

WHEREAS, Section 2.13 of the Existing Rights Agreement provides that the Company shall not, without the prior written consent of the Holders of at least two-thirds of the Registrable Securities (the “ Requisite Holders ”), enter into any agreement with any holder or prospective holder of any securities of the Company giving such holder or prospective holder any registration rights (i) if such registration rights would be pari passu with, or senior to, any registration rights of the Investors provided under the Existing Rights Agreement or (ii) such holder or prospective holder would not be bound by obligations similar to the obligations of the Holders set forth in Sections 2.4 (regarding forfeiture of rights), 2.6, 2.7, 2.10 and 2.11 of the Existing Rights Agreement;

WHEREAS, the Company is proposing to enter into a series of transactions (the “ Transactions ”) with Roche Holdings, Inc. (“ Roche ”) and certain of its affiliates;

WHEREAS, if the Transactions are consummated, the Company shall grant registration rights to Roche and its affiliates (the “ Roche Rights ”) pursuant to an Investor Rights Agreement, by and among the Company, Roche and certain other stockholders of the Company, dated on or about the date hereof, in substantially the form attached hereto as Exhibit A (the “ Roche Agreement ”);

WHEREAS, in connection with the grant of the Roche Rights to Roche and its affiliates under the Roche Agreement, the Company is requesting that the Investors consent to the Company’s grant of the Roche Rights and amend the Existing Rights Agreement to incorporate the Roche Rights where applicable;

WHEREAS, the Existing Rights Agreement and any term thereof may be amended, waived, discharged or terminated by an instrument signed by the Company and the Requisite Holders; and

WHEREAS, the undersigned Investors, representing the Requisite Holders, on behalf of themselves and all other Investors, wish to consent to the Company’s grant of the Roche Rights and amend the Existing Rights Agreement to incorporate the Roche Rights under the Roche Agreement.


NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, effective as of the Acceptance Time (as defined in the Roche Agreement), the undersigned agree as follows:

1. The Existing Rights Agreement be, and hereby is, amended to insert a new Section 2.3A to follow Section 2.3 and to read as follows:

“2.3A Alternative Company Registration . Notwithstanding any other provision of Sections 2.1, 2.2 or 2.3 herein, if, at any time prior to the termination of each Holder’s registration rights pursuant to Section 2.14 hereof, (i) the Company shall determine to register any of its securities either for its own account or the account of a security holder or holders (including any Holder or Holders), other than a registration pursuant to an Exempted Registration, (ii) Roche is offered the opportunity to include in such registration securities pursuant to Section 5.02 of the Roche Agreement, and (iii) the number of shares included in such registration is reduced to the Maximum Offering Size (as defined in the Roche Agreement) pursuant to Section 5.02(b) of the Roche Agreement, the Company shall include in such registration, in the following priority, up to the Maximum Offering Size (as defined in the Roche Agreement):

 

  (i) first , so much of the Company Securities (as defined in the Roche Agreement) proposed to be registered for the account of the Company as would not cause the offering to exceed the Maximum Offering Size (as defined in the Roche Agreement);

 

  (ii) second , (x) all Registrable Securities (as defined in the Roche Agreement) of the Registering Investors (as defined in the Roche Agreement) requested to be included in such registration by Roche pursuant to the Roche Agreement and (y) all Registrable Securities requested to be included in such registration by any Holder pursuant to this Agreement (allocated between (x) and (y), if necessary for the offering not to exceed the Maximum Offering Size (as defined in the Roche Agreement), pro rata among such Registrable Securities (as defined in the Roche Agreement) and such Registrable Securities requested to be included in such registration by the Registering Investors (as defined in the Roche Agreement) and the Holders, respectively); and

 

  (iii) third , any securities proposed to be registered for the account of any other Persons (as defined in the Roche Agreement), with such priorities among them as the Company shall determine.”

 

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2. The Existing Rights Agreement be, and hereby is, amended to insert a new Section 2.3B to follow Section 2.3A and to read as follows:

“2.3B Cutback Provision . Notwithstanding any other provision of this Agreement, in the event Roche elects to commence a Demand Registration (as defined in the Roche Agreement) at any time prior to the termination of each Holder’s registration rights pursuant to Section 2.14 hereof, and the number of shares included in such registration is reduced to the Maximum Offering Size (as defined in the Roche Agreement), Registrable Securities requested to be included in such registration by any Holder shall only be included after all Registrable Securities (as defined in the Roche Agreement) of the Registering Investors (as defined in the Roche Agreement) requested to be included in such registration by Roche are so included in accordance with Section 5.01(e) of the Roche Agreement. The securities described in Section 5.01(e)(ii) of the Roche Agreement shall be included in such registration in accordance with Section 2.2 of this Agreement.”

3. The undersigned, representing the Requisite Holders, on behalf of themselves and all other Investors, hereby consent to the Company’s grant of the Roche Rights for all purposes of the Existing Rights Agreement, including Section 2.13 of the Existing Rights Agreement, and hereby waive, and agree to waive, on behalf of themselves and all other Holders, any and all related rights with respect to the Roche Rights and the Roche Agreement, other than as set forth herein.

4. In the event the Acceptance Time (as defined in the Roche Agreement) does not occur or the Roche Agreement is terminated pursuant to Section 7.02 of the Roche Agreement prior to the Acceptance Time, this Amendment shall not become effective and shall have no force or effect.

5. This Amendment may be executed in any number of counterparts, each of which shall be enforceable against the parties that execute such counterparts, and all of which together shall constitute one instrument. A facsimile, telecopy or other reproduction of this Amendment may be executed by one or more parties hereto and delivered by such party by facsimile or any similar electronic transmission device pursuant to which the signature of or on behalf of such party can be seen. Such execution and delivery shall be considered valid, binding and effective for all purposes.

6. This Amendment shall be governed by and construed in accordance with the General Corporation Law of the State of Delaware as to matters within the scope thereof, and as to all other matters shall be governed by and construed in accordance with the internal laws of the Commonwealth of Massachusetts, in each case without regard to its principles of conflicts of laws.

 

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Acknowledged and Agreed as of this

11 th day of January, 2015

 

FOUNDATION MEDICINE, INC.
By:  

/s/ Steven J. Kafka

Name:   Steven J. Kafka
Title:   Chief Operating Officer

 

S IGNATURE P AGE TO A MENDMENT TO

S ECOND A MENDED AND R ESTATED I NVESTORS ’ R IGHTS A GREEMENT


IN WITNESS WHEREOF, the parties hereto have executed this Amendment to Second Amended and Restated Investors’ Rights Agreement as of the date first written above.

 

INVESTOR :
JVEN CAPITAL, LLC
By:  

/s/ Evan Jones

Name:   Evan Jones
Title:   Managing Member

 

S IGNATURE P AGE TO A MENDMENT TO

S ECOND A MENDED AND R ESTATED I NVESTORS ’ R IGHTS A GREEMENT


IN WITNESS WHEREOF, the parties hereto have executed this Amendment to Second Amended and Restated Investors’ Rights Agreement as of the date first written above.

 

INVESTOR :
DAVID P. SCHENKEIN 2004 REVOCABLE TRUST

/s/ David Schenkein

David Schenkein, Trustee

 

S IGNATURE P AGE TO A MENDMENT TO

S ECOND A MENDED AND R ESTATED I NVESTORS ’ R IGHTS A GREEMENT


IN WITNESS WHEREOF, the parties hereto have executed this Amendment to Second Amended and Restated Investors’ Rights Agreement as of the date first written above.

 

INVESTOR :
AMY P. SCHENKEIN 2004 REVOCABLE TRUST

/s/ Amy P. Schenkein

Amy P. Schenkein, Trustee

 

S IGNATURE P AGE TO A MENDMENT TO

S ECOND A MENDED AND R ESTATED I NVESTORS ’ R IGHTS A GREEMENT


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

 

INVESTOR :
KPCB HOLDING, INC., AS NOMINEE
By:  

/s/ Paul M. Vronsky

Name:   Paul M. Vronsky
Title:   General Counsel

 

S IGNATURE P AGE TO A MENDMENT TO

S ECOND A MENDED AND R ESTATED I NVESTORS ’ R IGHTS A GREEMENT


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

 

INVESTOR :
THIRD ROCK VENTURES, L.P.
By:   Third Rock Ventures, GP, L.P., its general partner
By:   TRV GP, LLC, its general partner
By:  

/s/ Kevin Gillis

Name:   Kevin Gillis
Title:   Partner and CFO

 

S IGNATURE P AGE TO A MENDMENT TO

S ECOND A MENDED AND R ESTATED I NVESTORS ’ R IGHTS A GREEMENT


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

 

INVESTOR :
GOOGLE VENTURES 2011, L.P.
By:   Google Ventures 2011 GP, L.L.C., its General Partner
By:  

/s/ Jennifer L. Kercher

Name:   Jennifer L. Kercher
Title:   Authorized Signatory

 

S IGNATURE P AGE TO A MENDMENT TO

S ECOND A MENDED AND R ESTATED I NVESTORS ’ R IGHTS A GREEMENT

Exhibit 10.1

EXECUTION VERSION

TAX SHARING AGREEMENT

TAX SHARING AGREEMENT (the “ Agreement ”) dated as of January 11, 2015, and effective as of the Effective Date (as defined in Section 15.01 of this Agreement), by and between Roche Holdings, Inc., a Delaware corporation, hereinafter referred to as “RHI”, and Foundation Medicine, Inc., a Delaware corporation, hereinafter referred to as “HERMES”.

W I T N E S S E T H:

WHEREAS, concurrently herewith, RHI and HERMES have entered into a transaction agreement dated as of the date hereof (the “ Transaction Agreement ”) pursuant to which, on the terms and subject to the conditions set forth therein, RHI has agreed to acquire an aggregate beneficial ownership interest in the Company of at least 52.4%, and no more than 56.3%, of the then-outstanding shares of common stock of HERMES, par value $0.0001 per share, on a Fully Diluted Basis (as defined in the Transaction Agreement); and

WHEREAS, RHI and/or one or more of its Affiliates (as defined below) may, from or after the Effective Date (as defined below), be required to include the taxable income, gain, deduction, losses, credits, etc. of the HERMES Combined Group (as defined below) as an affiliate in some or all of its combined or unitary state and local tax filings, payments, estimates, and other matters as are required by law; and

WHEREAS, by reason of RHI’s beneficial ownership of shares of common stock of HERMES, certain U.S. federal income tax items will be required under applicable provisions of the Code (as defined below) and the Treasury regulations promulgated thereunder to be determined with reference to the activities of RHI and/or one or more of its Affiliates (other than members of the HERMES Group), and HERMES and/or one or more members of the HERMES Group on a collective basis;

NOW, THEREFORE, in consideration of the foregoing and the mutual promises and agreements contained herein, RHI and HERMES hereby agree as follows:

ARTICLE 1

D EFINED T ERMS ; P REPARATION OF T AX R ETURNS AND T AX E STIMATES

Section 1.01. Defined Terms . As used in this Agreement:

Affiliate ” means, with respect to any person, any other person directly or indirectly controlling, controlled by or under common control with such person; provided , that neither Chugai Pharmaceutical Co. Ltd. nor any of its subsidiaries shall be considered an Affiliate of RHI for purposes of this Agreement (unless RHI elects, in a written notice to HERMES, to have any such person considered an Affiliate of RHI).

Code ” means the Internal Revenue Code of 1986, as amended.


Combined Return ” means any Tax Return, other than with respect to United States federal income taxes, required to be filed on a consolidated, combined (including nexus combination, worldwide combination, domestic combination, line of business combination or any other form of combination) or unitary basis wherein any member of the HERMES Group joins in the filing of such Tax Return (for any taxable period or portion thereof) with any member of the RHI Group.

HERMES Combined Group ” means, for state or local tax purposes, the member or members of the HERMES Group that are includible in a group that (i) also includes RHI or at least one subsidiary of RHI (other than a member of the HERMES Group) as a member and (ii) files a Combined Return.

HERMES Group ” means HERMES and its subsidiaries (direct or indirect and past, current or future).

RHI Group ” means, for U.S. federal tax purposes, the affiliated group (within the meaning of IRC Section 1504(a)) filing a consolidated return of which RHI (or any successor corporation) is the common parent, and for state and local tax purposes, RHI and/or any subsidiaries of RHI (direct or indirect and past, current or future) includible in a group filing a Combined Return.

Tax Return ” means any return, report, certificate, form or similar statement or document (including any related or supporting information or schedule attached thereto and any information return, amended tax return, claim for refund or declaration of estimated tax) required to be supplied to, or filed with, a taxing authority in connection with the determination, assessment or collection of any tax or the administration of any laws, regulations or administrative requirements relating to any tax.

Section 1.02. Preparation of Proforma Tax Returns .

(a) After the date hereof, RHI will promptly notify HERMES of (i) each state and local jurisdiction with respect to which RHI determines that any member of the RHI Group is required to file a Combined Return with any member or members of the HERMES Combined Group, or (ii) each state or local jurisdiction with respect to which RHI determines that a Combined Return is no longer required to be filed. The parties will cooperate to determine tax filing requirements and to implement tax planning strategies. Each party agrees to bear its own costs and expenses incurred in connection with respect to such cooperation; provided that HERMES shall not be required under this Agreement to incur any expense for third-party advisory services in connection with such cooperation in respect of tax planning strategies unless RHI agrees to reimburse HERMES for such expenses.

(b) With respect to each of the Combined Returns described in Section 1.02(a), HERMES will be responsible for the preparation of proforma Tax Returns for the HERMES Combined Group for each such Combined Return, reporting on such proforma return the HERMES Combined Group’s items of income, gain, expense, deduction, loss, credit, carryforwards, carrybacks and other such tax reporting items pursuant to the Stand-Alone Method (as defined below); provided , that RHI shall reimburse HERMES for reasonable

 

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expenses for third-party services incurred by HERMES in connection with the preparation of any proforma Tax Return in respect of a taxing jurisdiction in which no member of the HERMES Combined Group would be required to file a Tax Return if HERMES and RHI were unrelated by stock ownership. Once prepared, such proforma returns will be delivered by HERMES to RHI for its approval or recomputation in accordance with the provisions of Article 4 of this Agreement.

Section 1.03. Preparation of State/Local Tax Estimates . HERMES will be responsible for the computation pursuant to the Stand-Alone Method (as defined below) and submission to RHI for its approval or recomputation (in accordance with Article 4 of this Agreement) of the HERMES Combined Group’s quarterly estimated tax liability (including the estimate of any final amount due on the Tax Return extension due dates), based on the HERMES Combined Group’s items of income, gain, deduction, loss, credit, etc.

ARTICLE 2

S TAND -A LONE M ETHOD

Section 2.01. Stand-Alone Method . HERMES shall prepare all of the proforma Tax Returns of the HERMES Combined Group, and except as provided in Article VIII, RHI and HERMES shall make all other computations and determinations under this Agreement relating to the HERMES Combined Group or any of its members, using the “Stand-Alone Method.” The Stand-Alone Method is the method that would apply to the HERMES Combined Group if it never were a part of the RHI Group, but instead filed its own consolidated, combined, unitary or other return under the applicable provisions of state or local tax law and regulations dealing with such returns. Under the Stand-Alone Method, (a) the income, gains, expenses, deductions, losses, credits and other items in any taxable period of any member of the RHI Group that is not a member of the HERMES Combined Group shall be disregarded; (b) the income, gains, expenses, deductions, losses, credits, and other items in any taxable period of all members of the HERMES Combined Group shall be taken into account; (c) all computations shall be made in conformity with the positions, elections and accounting methods used by RHI in preparing the Combined Returns; provided that such positions, elections, and accounting methods to be applied to the HERMES Combined Group are consistent with those to be applied to the remainder of the RHI Group; and (d) subject to (c), all computations and other determinations shall be made in accordance with the state and local tax laws and regulations applying to consolidated, combined or unitary groups (including, in the case of any company that becomes or ceases to be a member of the HERMES Combined Group, the laws and regulations applicable to a company that becomes or ceases to be a member of a consolidated, combined or unitary group), as well as all other relevant state and local tax laws and regulations. The parties shall negotiate in good faith to resolve any disagreement over the proper interpretation and application of the Stand-Alone Method as it relates to any and all items and calculations reflected in the computation of the HERMES Combined Group’s proforma tax liability, an overpayment or refund of such liability, a recomputation of such liability (together with any related interest and any penalty or additional amount for which HERMES bears liability under Section 5.03) upon a subsequent adjustment of the RHI Group’s tax liability, or a carryforward or carryback of a loss, credit or other tax attribute of the HERMES Combined Group or any member thereof to a taxable period beginning prior to the Effective Date or to a separate return year. If the parties are unable to resolve any such disagreement, the disagreement shall be referred to the Independent Firm for resolution in accordance with Article 9.

 

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ARTICLE 3

P AYMENT OF T AX L IABILITIES AND R ECEIPT OF R EFUNDS

Section 3.01. Payment of Tax Liabilities . After the initial computation by HERMES of a HERMES Combined Group tax liability and the approval or recomputation of such tax liability pursuant to Article 4, HERMES will remit to RHI by federal bank wire the amount of such tax liability as so approved or recomputed.

Section 3.02. Date of Payment . HERMES shall remit to RHI the amounts necessary under Section 3.01 of this Agreement at least three business days prior to the applicable state/local due dates as required by the specific state/local law which necessitated the computation.

Section 3.03. Tax Overpayments and Refunds . If HERMES determines that it has overpaid a HERMES Combined Group tax liability to RHI or is entitled to a refund from RHI of such a tax liability on account of a carryback of a tax attribute, HERMES may request a refund or the offset of such overpayment against future tax liabilities. Upon approval or recomputation in accordance with Article 4 of the amount requested as a refund or offset, RHI will refund or allow as an offset the amount so approved or recomputed (and, in the case of a refund, will pay interest thereon computed pursuant to the Stand-Alone Method (which method includes the applicable state or local tax laws and regulations which govern the computation of such interest)). Refund claims made by HERMES under Section 6.03 shall be governed by principles corresponding to those set forth in the previous sentence.

Section 3.04. Limitation to HERMES of RHI Group Tax Liabilities/Benefits . Except as provided in Article VIII, (a) the liability of the members of the HERMES Group to RHI for payments of tax under this Agreement shall include, and be exclusively limited to, tax liabilities of the HERMES Combined Group computed pursuant to the Stand-Alone Method; (b) the ability of the members of the HERMES Group to claim tax benefits from RHI is exclusively limited to tax benefits of the HERMES Combined Group computed pursuant to the Stand-Alone Method; (c) no member of the HERMES Group shall be held liable for the tax liability of the RHI Group, or of any of its individual members (and RHI shall indemnify the HERMES Group for any such tax liability asserted by any Governmental Authority), except that a HERMES Group member may be held liable for a tax of the RHI Group to the extent that such tax is attributable (determined using the Stand-Alone Method) to the members of the HERMES Combined Group and HERMES has not previously made a payment to RHI equal to such attributable portion of such tax (determined using the Stand-Alone Method); and (d) no member of the HERMES Group shall be entitled to any tax benefits which accrue to any member of the RHI Group that is not a member of the HERMES Group, or to the RHI Group as a whole as a result of the RHI Group’s consolidated/combined tax filings, other than any such benefits a member of the Hermes Group is determined to be entitled to under the Stand-Alone Method.

Section 3.05. Massachusetts Life Sciences Tax Incentive Program . (a) Notwithstanding anything to the contrary in this Agreement, if for any taxable year, (1) a member of the HERMES Group would be entitled to receive a refund from the Commonwealth of Massachusetts in respect of the refundable life science credit provided for under M.G.L. Ch. 63, sec. 38M (or any successor provision) (the “ MLS credit ”) if RHI and HERMES were unrelated by stock ownership, and (2) the RHI Group actually realizes (in cash or as a reduction of taxes otherwise due) a benefit for such taxable year in respect of such credit that is attributable to the inclusion of members of the HERMES Group in the RHI Group, then RHI shall pay to HERMES an amount equal to the product of (x) the amounts described in clause (1) for such taxable year and (y) a fraction the numerator of which is the amount of the credit (attributable to the inclusion of members of the HERMES Group in the RHI Group) in respect of which the RHI Group actually realized a benefit for such taxable year and the denominator of which is the amount of the credit (attributable to the inclusion of members of the HERMES Group in the RHI Group) that the RHI Group was entitled to claim for such taxable year.

 

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(b) RHI shall not, and shall not permit any of its Affiliates (other than members of the HERMES Group) to, take any action to terminate the eligibility of any member of the HERMES Group to claim the MLS credit, other than any action (x) expressly contemplated by the Transaction Agreement or (y) taken under the direction of HERMES. At the written request of HERMES, RHI shall take such actions as are permitted by applicable law and necessary to enable any member of the HERMES Group to preserve its eligibility to claim the MLS credit; provided, however, that (i) HERMES shall reimburse RHI for all third-party costs and expenses incurred by RHI in connection with its performance of such actions and (ii) RHI shall not be required to take any such action if RHI determines that such action would result in a material detriment to RHI or its Affiliates, unless HERMES agrees to indemnify and hold RHI harmless for such action on terms that (1) are mutually agreeable to RHI and HERMES and (2) take into account the effects of any indemnity payment by HERMES on the value of RHI’s equity investment in HERMES.

Section 3.06. Prompt Performance . All actions required to be taken (including payments) by any party under this Agreement shall be performed within the time prescribed for performance in this Agreement, or if no period is prescribed, such actions shall be performed promptly.

Section 3.07. Interest . Payments pursuant to this Agreement that are not made within the period prescribed in this Agreement (the “ Payment Period ”) shall bear interest for the period from and including the date immediately following the last date of the Payment Period through and including the date of payment at a per annum rate equal to the late payment rate applicable under the tax laws of the jurisdiction imposing the tax to which the applicable payment pursuant to this agreement relates. Such interest will be payable at the same time as the payment to which it relates and shall be calculated on the basis applicable under the tax laws of the jurisdiction imposing the tax to which the applicable payment pursuant to this agreement relates.

Section 3.08. Treatment of Payments . Each of RHI and HERMES hereby agrees for all tax purposes to treat, and to cause their respective Affiliates to treat, any payment received or made pursuant to this Article 3 as a payment, or offset of a payment, in respect of a liability for taxes made to the taxing jurisdiction to which such payment relates.

 

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ARTICLE 4

S UBMISSION OF T AX D ATA TO R HI ; R HI A PPROVAL AND R ECOMPUTATION R IGHTS

Section 4.01. Submission of Data; RHI Approval and Recomputation Rights . HERMES will submit to RHI for its review the proforma HERMES Combined Group Tax Returns, quarterly estimates and refund or carryback claims (including refund claims made under Section 6.03) prepared by HERMES under this Agreement. Any such proforma filing will include all official forms, consents, elections, riders, and other such documents that may be required or appropriate for such proforma filing. RHI shall have 21 days with respect to any such proforma HERMES Combined Group Tax Returns to approve, or propose adjustments or modifications of any of the computations reflected on such proforma filing submitted by HERMES, provided that if no action is taken by RHI within 21 days with respect to any such proforma HERMES Combined Group Tax Returns, RHI shall have been deemed to approve such submission by HERMES and with respect to any other document prepared by HERMES and described in this Section 4.01, RHI may approve, or may propose adjustments or modifications of any of the computations reflected on such proforma filing submitted by HERMES within 14 days. In the case of any such proposed adjustment or modification, RHI shall recompute HERMES’s liability to RHI, or RHI’s liability to HERMES, in accordance with such adjustment or modification, and such recomputation shall be binding on HERMES unless HERMES objects to such proposed adjustment or modification within 21 days with respect to any such proforma HERMES Combined Group Tax Returns and 14 days with respect to any other document prepared by HERMES and described in this Section 4.01 in which case (a) the parties will negotiate in good faith to resolve the dispute, and (b) if the parties are unable to resolve the dispute, the matter will be referred to the Independent Firm for resolution in accordance with Article 9; provided, however, that, in the event of any ongoing dispute with respect to any such recomputation, (i) HERMES shall pay to RHI the amount of the HERMES Combined Group tax liability as recomputed by RHI no later than the date provided in Section 3.02 of this Agreement, and (ii) any necessary true-up payments shall be made by Hermes or RHI, as applicable, as promptly as practicable after such dispute is resolved. RHI, at its expense, will prepare the final RHI Group returns or estimated tax filings utilizing the data and proforma filings submitted by HERMES (as adjusted or modified pursuant to this Section 4.01 or Section 4.02) and by RHI’s other includible subsidiaries, and thereafter RHI will submit such returns or filings directly to the appropriate taxing authority.

Section 4.02. Adjustment of Tax Data . Notwithstanding anything to the contrary in this Agreement, in order to comply with applicable laws and regulations or for any other reason which RHI, in its sole discretion, deems to be necessary, RHI reserves the right to adjust and change the tax data as submitted by HERMES on the HERMES Combined Group proforma returns prior to, and for purposes of, inclusion of that data in any Combined Return. This right of adjustment of RHI includes, but is not limited to, any or all income, gain, expense, deduction, loss or credit items as shown on the HERMES proforma returns, and may be made by RHI for any reason which it deems necessary. For the avoidance of doubt, any action by RHI pursuant to this Section 4.02 shall not alter any calculations or rights to payments of the parties in connection with the use of the Stand-Alone Method.

 

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Section 4.03. Timeliness of Submission . In order to permit RHI sufficient time to prepare the final group Tax Returns and estimates, HERMES will submit the data under Section 4.01 of this Agreement to RHI no later than the following dates:

(a) Tax Returns: 60 days prior to the governmental due date after taking into account any applicable extensions of time to file such Tax Returns;

(b) Estimated Tax Returns: 7 days prior to the tax payment due date.

Section 4.04. Group Tax Planning and Strategies . HERMES agrees to provide to RHI upon its reasonable request any and all financial, tax and other documents and data relating to any HERMES Group member that is necessary in order to allow RHI to develop filing methodologies, tax planning opportunities and overall tax strategies for the RHI Group. Upon reasonable request, HERMES will participate in tax planning meetings and discussions with RHI from time to time, it being understood that HERMES shall not be required in connection with such meetings and discussions to incur any expense for third-party advisory services.

Section 4.05. Representation to Outside Governmental Bodies . RHI will develop and oversee implementation of all positions on behalf of the RHI Group regarding state and local tax legislation, regulations and all other related governmental actions which could affect the RHI Group. All direct and indirect contacts with any state and local official or agency which could affect the RHI Group shall be coordinated by RHI. Any expenses incurred in connection with this Section 4.05 shall be borne by RHI and the RHI Group, and not any member of the Hermes Group.

Section 4.06. Access to Consolidated and Combined Tax Returns . HERMES shall not be entitled to receive copies of, or access to, the RHI Group’s Combined Returns or any other Tax Return of the RHI Group. Upon reasonable request, RHI shall provide each member or former member of the HERMES Group with information included in any such Tax Return to the extent the provision of such information is necessary to permit such member to comply with any applicable law or otherwise prepare any Tax Return. If a member or former member of the HERMES Group is required by applicable law to furnish a copy of any such Tax Return to any governmental authority, RHI shall, upon reasonable request, deliver to such member or, at the option of RHI, the applicable governmental authority a redacted (solely to the extent permitted under applicable law) copy of such Tax Return.

Section 4.07. Confidentiality . Each party shall hold and cause its directors, officers, employees, advisors and consultants to hold in strict confidence, unless compelled to disclose by judicial or administrative process or, in the opinion of its counsel, by other requirements of law, all information (other than any such information relating solely to the business or affairs of such party) concerning the other parties hereto furnished it by such other party or its representatives pursuant to this Agreement (except to the extent that such information can be shown to have been (1) in the public domain through no fault of such party or (2) later lawfully acquired from other sources not under a duty of confidentiality by the party to which it was furnished), and each party shall not release or disclose such information to any other person, except its directors, officers, employees, auditors, attorneys, financial advisors, bankers and other consultants who shall be advised of and agree to be bound by the provisions of this Section 4.07. Each party shall be deemed to have satisfied its obligation to hold confidential information concerning or supplied by the other party if it exercises the same care as it takes to preserve confidentiality for its own similar information.

 

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Section 4.08. Agent . Subject to the other applicable provisions of this Agreement, HERMES hereby irrevocably designates, and agrees to cause each HERMES Affiliate to so designate, RHI as its sole and exclusive agent and attorney-in-fact to take such action (including execution of documents) as RHI, in its sole discretion, may deem appropriate in any and all matters (including examinations) relating to any Tax Return described in Section 4.01 of this Agreement.

ARTICLE 5

T AX E XAMINATIONS

Section 5.01. Pre-Acquisition Year Tax Examinations . For any state and/or local tax examinations of one or more members of the HERMES Group for tax periods beginning prior to the Effective Date of this Agreement, HERMES will conduct or cause the applicable HERMES Group member to conduct such examinations with the applicable taxing authority, provided that HERMES will timely notify RHI of the commencement of any such examination and, with respect to any examination which RHI determines may adversely affect an issue relating to a computation reflected on a return of the RHI Group or a member thereof, will (or, as applicable, will cause the applicable member of the HERMES Group to) (x) timely and fully inform RHI of developments relating to such examination, (y) consult regularly with RHI as to the conduct of such examination, and (z) not settle, fail to appeal, or otherwise compromise any issue raised in such examination without RHI’s prior consent (such consent not to be unreasonably withheld).

Section 5.02. Post-Acquisition Year Tax Examinations . In accordance with any state and/or local tax examination conducted of the RHI Group in which a HERMES Group member was a member of the Combined Return, HERMES and the applicable HERMES Group member or members will cooperate fully with RHI and/or its representatives to provide any additional tax data, requested documentation, physical access, and/or financial information which, in the discretion of RHI, is necessary to provide to governmental personnel. RHI will have the sole authority to select and close such Post-Acquisition year tax examinations for all state and/or local RHI Group Combined Returns.

Section 5.03. HERMES Tax Examination Adjustments . If any adjustment is made to a Combined Return of the RHI Group, after the filing thereof, in which income or loss of the members of the HERMES Combined Group is included, then at the time of the Final Determination of such adjustment, HERMES shall pay to RHI or RHI shall pay to HERMES, as the case may be, (x) the difference between (I) all payments of tax liability of the HERMES Combined Group actually made by HERMES under Article 3 with respect to the taxable period covered by such Combined Return (less any related refunds previously paid by RHI), and (II) all payments that would have been made under Article 3 taking such adjustment into account, together with (y) any applicable interest, penalty or additional amounts, computed pursuant to the Stand-Alone Method; provided that in the case of penalties and additional amounts, HERMES shall bear liability for such items only to the extent the adjustment to which such penalties and additional amounts relate was made in respect of (i) a position, election or accounting method selected by HERMES in the absence of a controlling position, election or accounting method applicable to members of the RHI Group (other than members of the HERMES Group) or (ii) an item which was not properly reflected (in accordance with the Stand-Alone Method) on the related proforma Tax Return prepared by HERMES pursuant to Section 1.02(b). “Final Determination” means (1) any final determination of liability in respect of a tax that, under applicable law, is not subject to further appeal, review or modification through proceedings or otherwise (including the expiration of a statute of limitations or a period for the filing of claims for refunds, amended returns or appeals from adverse determinations) or (2) the payment of tax by any member of the RHI Group with respect to any item disallowed or adjusted by a taxing authority (including, without limitation, a court or other judicial body), provided that RHI determines that no action should be taken to recoup such payment.

 

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ARTICLE 6

C ARRYFORWARDS AND C ARRYBACKS OF A TTRIBUTES TO AND FROM S EPARATE R ETURN Y EARS

Section 6.01. Pre-Effective Date Tax Attribute Carryforwards . Any deduction, loss, credit or tax attribute incurred by the HERMES Combined Group in a tax period beginning prior to the Effective Date, a carryforward of which is still available to the HERMES Combined Group as of that date, shall be carried forward by the HERMES Combined Group to the extent and in the manner dictated by the Stand-Alone Method for purposes of computing HERMES’s tax liability payable to RHI under Article 3 of this Agreement.

Section 6.02. Tax Attribute Carrybacks to Pre-Effective Date Periods . Any deduction, loss, credit or tax attribute incurred by the HERMES Combined Group in a period beginning after the Effective Date shall be carried back to taxable periods of the HERMES Combined Group beginning before the Effective Date to the extent and in the manner dictated by the Stand-Alone Method. Section 3.03 shall govern any claim by HERMES for a refund from RHI on account of such a carryback; provided, that HERMES shall be entitled to such a refund from RHI only once HERMES has taken all available steps under state or local law, which it is permitted to take under the provisions of this Agreement, to obtain such refund from the applicable taxing authority and, in such a case, only to the extent of the excess of (x) the refund as computed pursuant to the Stand-Alone Method over (y) any refund actually received by HERMES from the applicable taxing authority; and provided further, that at the time HERMES requests such a refund from RHI, HERMES shall provide RHI with appropriate information (including copies of correspondence with the applicable taxing authority) relating to HERMES’s entitlement to a refund under this sentence, and HERMES shall thereafter provide such additional related information as RHI requests.

Section 6.03. Carrybacks and Carryforwards of Tax Attributes to Separate Return Years . In the case of any company that becomes or ceases to be a member of the HERMES Combined Group, the portion of any deduction, loss, credit or tax attribute incurred by the HERMES Combined Group in a taxable period in which such company is a member of the group that is attributable to such company shall be carried back or forward to taxable periods of such company in which it is not a member of such group to the extent and in the manner dictated by the Stand-Alone Method. HERMES may, on behalf of such company, file with RHI a proforma refund claim on account of such a carryback or carryforward, provided, however, that HERMES’s entitlement to receive such a refund from RHI on behalf of such company shall be limited as set forth in the next two sentences. In the case of a carryback, HERMES shall be entitled to a refund only once the applicable company has taken all available steps under state or local law, which it is permitted to take under the provisions of this Agreement, to obtain a refund from the applicable taxing authority and, in such a case, only to the extent of the excess of (x) the refund as computed pursuant to the Stand-Alone Method over (y) any refund actually received by the company from the applicable taxing authority. In the case of a carryforward, HERMES shall be entitled to a refund only to the extent of the excess of (1) the applicable company’s actual tax liability reflected on the return that the company files with the applicable taxing authority for the relevant taxable period (as such liability is adjusted by RHI upon a review by it of the computations reflected on such return, subject to referral to the Independent Firm for resolution of any dispute regarding such adjustments) over (2) the company’s tax liability for such taxable period, as computed pursuant to the Stand-Alone Method. At the time that HERMES requests a refund from RHI under this Section 6.03, HERMES shall provide RHI with appropriate information (including, in the case of a carryback, copies of correspondence with the applicable taxing authority regarding a refund, and in the case of a carryforward, the applicable company’s return for the applicable period and supporting workpapers) relating to HERMES’s entitlement to such refund, and HERMES shall thereafter provide such additional related information as RHI requests. In addition to the rules set forth in this Section, Section 3.03 shall govern any such refund claimed by HERMES from RHI.

 

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ARTICLE 7

C ARRYFORWARDS AND C ARRYBACKS OF A TTRIBUTES ,

O THER THAN TO AND FROM S EPARATE R ETURN Y EARS

Section 7.01. Carryforwards and Carrybacks of HERMES Combined Group Tax Attributes for Purposes of Proforma Returns . In the event a HERMES Combined Group proforma return includes losses, deductions, credits or other tax attributes which were limited to the HERMES Combined Group on its proforma return (and hence can only be carried back or carried forward), that tax attribute shall remain the property of the HERMES Combined Group for utilization in a future HERMES Combined Group proforma return as a carryforward, or for utilization in a prior HERMES Combined Group return as a carryback, in conformity with the Stand-Alone Method. Section 3.3 shall govern any claim by HERMES of a refund on account of such a carryback.

Section 7.02. Utilization of Tax Attributes by RHI on RHI Group Return . Notwithstanding Section 7.01 of this Agreement, RHI is entitled to fully utilize currently any tax attributes arising from a HERMES Combined Group proforma return on the corresponding RHI Group Combined Return, and RHI will separately track whether that tax attribute may be carried back or carried forward on an RHI Group-wide basis. Under no circumstances, however, will the utilization by RHI of a HERMES Combined Group tax attribute affect the HERMES Combined Group’s ability to utilize that attribute on the HERMES Combined Group’s own proforma return. For example, a current HERMES Combined Group tax loss which RHI is able to utilize currently on an RHI Group Combined Return, will be refunded by RHI to HERMES at such time when the HERMES Combined Group is able to utilize that loss as either a carryforward or carryback on a proforma return.

 

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ARTICLE 8

C ERTAIN U.S. F EDERAL I NCOME T AX M ATTERS AND C ERTAIN O THER T AX M ATTERS

Section 8.01. U.S. Federal Income Tax Items Required to Be Determined Jointly . RHI and HERMES agree that, in the case of any U.S. federal income tax item of RHI or HERMES that, under applicable sections of the Code and the Treasury regulations promulgated thereunder, is required to be determined by or allocated among members of the HERMES Group, on the one hand, and RHI and/or any of its Affiliates (other than members of the HERMES Group), on the other hand, with reference to the activities of RHI, HERMES and/or any of their respective Affiliates on a collective basis, (a) such determination and/or allocation shall be made pursuant to the rules set forth in the relevant provisions of the Code and Treasury regulations; (b) RHI and HERMES will cooperate in good faith to make such determination and/or allocation; (c) in connection with such cooperation, RHI and HERMES each will use its respective best efforts to provide to the other party, no later than 60 days prior to the due date (after taking into account any applicable extensions) to file an applicable U.S. federal income Tax Return, such information in respect of any such item as is necessary to allow the other party to timely prepare and file any such U.S. federal income Tax Return; (d) neither RHI nor HERMES shall have any obligation to pay any amount to the other party in respect of any difference between (x) the amount of any such item as so determined and/or allocated and (y) the amount of any such item that RHI or HERMES or their respective Affiliates would have been entitled to claim if determined without reference to the activities of RHI, HERMES and/or any of their respective Affiliates on a collective basis; (e) if, under applicable sections of the Code and the Treasury regulations promulgated thereunder, RHI, its Affiliates (other than members of the HERMES Group) and the HERMES Group are entitled to elect among several alternative methods for determining the amount of any such item, RHI will notify HERMES of the method it intends to elect in respect of such item, and HERMES shall elect, and shall cause the members of the HERMES Group to elect, the same method of determination in respect of such item; and (f) if, under applicable sections of the Code and the Treasury regulations promulgated thereunder, RHI, its Affiliates (other than members of the HERMES Group) and the HERMES Group are entitled to elect among several alternative methods for allocating any such item among RHI, its Affiliates (other than members of the HERMES Group) and the HERMES Group, RHI and HERMES shall elect, and shall cause their respective Affiliates to elect, the allocation method the expected results of which most closely approximate the relative entitlements in respect of such item which would have resulted if RHI and HERMES were unrelated by stock ownership.

ARTICLE 9

D ISPUTE R ESOLUTION

Section 9.01. In the event that RHI and HERMES disagree as to the amount or calculation of any payment to be made under this Agreement, or the interpretation or application of any provision under this Agreement, the parties shall attempt in good faith to resolve such dispute. If such dispute is not resolved within sixty (60) business days following the commencement of the dispute, RHI and HERMES shall jointly retain a law or accounting firm with recognized expertise in the subject matter of such dispute, which firm is independent of both parties (the “ Independent Firm ”), to resolve the dispute. The Independent Firm shall act as an arbitrator to resolve all points of disagreement, and its decision shall be final and binding upon all parties involved. Following the decision of the Independent Firm, RHI and HERMES shall each take or cause to be taken any action necessary to implement the decision of the Independent Firm. The fees and expenses relating to the Independent Firm shall be borne equally by RHI and HERMES, except that if the Independent Firm determines that the position advanced by either party is frivolous, has not been asserted in good faith or is not supported by substantial authority, one hundred percent (100%) of the fees and expenses of the Independent Firm shall be borne by such party.

 

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ARTICLE 10

S UCCESSORS

Section 10.01. Successors . This agreement shall be binding on and inure to the benefit of any successor, by merger, acquisition of assets or otherwise, to any current or future member of the RHI Group and/or the HERMES Group (including, but not limited to, any successor to such a member succeeding to the tax attributes of such member under Section 381 of the Code), to the same extent as if such successor had been an original party hereto.

ARTICLE 11

A UTHORIZATION , E TC .

Section 11.01. Authorization, etc . RHI is entering into this Agreement on behalf of itself and the other members (current and future) of the RHI Group (other than those RHI Group members that are also members of the HERMES Group), and HERMES is entering into this Agreement on behalf of itself and the other members (current and future) of the HERMES Group. RHI and HERMES each hereby represents and warrants that it has the power and authority, on behalf of itself and (i) in the case of RHI, the other members (current and future) of the RHI Group (other than those RHI Group members that are also members of the HERMES Group), and (ii) in the case of HERMES, the other members (current and future) of the HERMES Group, to execute, deliver and perform this Agreement, that this Agreement has been duly authorized by all necessary corporate action on the part of such party, that this Agreement constitutes a legal, valid and binding obligation of each such party and that the execution, delivery and performance of this Agreement by such party does not contravene or conflict with any provision of Applicable Law (as defined in the Transaction Agreement), its charter or bylaws, or any agreement, instrument or order binding on such party.

ARTICLE 12

G OVERNING L AW

Section 12.01. Governing Law . This Agreement and all claims and causes of action arising out of or relating to this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of law rules of such state.

 

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ARTICLE 13

C OUNTERPARTS

Section 13.01. Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement.

ARTICLE 14

W AIVERS AND A MENDMENTS

Section 14.01. Waivers and Amendments . This Agreement shall not be waived, amended or otherwise modified except in writing, duly executed by all of the parties hereto.

ARTICLE 15

E FFECTIVE D ATE ; T ERMINATION

Section 15.01. Effective Date . This Agreement shall become effective as of the Offer Closing Date (as defined in the Transaction Agreement (such date, the “ Effective Date ”)) and shall govern all taxable periods of the members of the RHI Group and/or the HERMES Group with respect to which a Combined Return is required to be filed.

Section 15.02. Termination . Prior to the occurrence of the Acceptance Time (as defined in the Transaction Agreement), this Agreement shall automatically terminate without any further action by any person, upon the earlier of (a) the termination of the Transaction Agreement in accordance with its terms and (b) the written agreement of each party hereto to terminate this Agreement.

Section 15.03. Effect of Termination . Upon any termination of this agreement in accordance with the provisions of Section 15.02 hereof, this Agreement shall become void and of no further effect.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

 

ROCHE HOLDINGS, INC.
By:  

/s/ Bruce Resnick

  By:   Bruce Resnick
  Title:   Vice President and Tax Counsel
FOUNDATION MEDICINE, INC.
By:  

/s/ Steven J. Kafka

  By:   Steven J. Kafka
  Title:   Chief Operating Officer

Exhibit 99.1

EXECUTION

TENDER AND SUPPORT AGREEMENT

TENDER AND SUPPORT AGREEMENT (this “ Agreement ”) dated as of January 11, 2015 by and among Roche Holdings, Inc., a Delaware corporation (the “ Investor ”), and the entity listed on Schedule A hereto (the “ VC Shareholder ”).

WHEREAS , as of the date hereof, the VC Shareholder is the beneficial owner (as defined in Rule 13d-3 promulgated under the Exchange Act) of shares (“ Shares ”) of common stock, par value $0.0001 per share, of Foundation Medicine, Inc., a Delaware corporation (the “ Company ”) (all Shares beneficially owned by such VC Shareholder (including those set forth opposite such VC Shareholder’s name on Schedule A ) and any additional Shares with respect to which such VC Shareholder becomes the beneficial owner after the date hereof, but excluding any Shares Transferred by such VC Shareholder in compliance with Section 5.01 hereof, such VC Shareholder’s “ Subject Shares ”);

WHEREAS , the Investor and the Company are concurrently herewith entering into a Transaction Agreement dated as of the date hereof (as it may be amended from time to time, the “ Transaction Agreement ”), which provides, among other things, for the Investor to commence the Offer upon the terms and subject to the conditions set forth in the Transaction Agreement (capitalized terms used but not otherwise defined herein having the meanings ascribed to such terms in the Transaction Agreement);

WHEREAS , as an inducement to and condition of the Investor’s willingness to enter into the Transaction Agreement and the other Transaction Documents, the VC Shareholder has agreed to enter into this Agreement.

NOW, THEREFORE , in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, do hereby agree as follows:

ARTICLE 1

A GREEMENT TO T ENDER

Section 1.01. Agreement to Tender . (a) Upon the terms and subject to the conditions of this Agreement, (i) the VC Shareholder agrees to validly tender or cause to be tendered in the Offer (pursuant to and in accordance with the terms of the Offer and provided that the Offer Price does not decrease), a number of such VC Shareholder’s Subject Shares, free and clear of all Liens (other than applicable transfer restrictions under the Securities Act), at least equal to such VC Shareholder’s Minimum Tender Amount (it being agreed that such VC Shareholder’s Subject Shares that are covered by clause (i) of the definition of Minimum Tender Amount shall be validly tendered prior to 4:00 p.m., New York City time, on the Expiration Date) and (ii) the VC Shareholder agrees to validly tender or cause to be tendered in the Offer (pursuant to and in accordance with the terms of the Offer and provided that the Offer Price does not


decrease), a number of such VC Shareholder’s Subject Shares (for clarity, in addition to the Subject Shares tendered by such VC Shareholder pursuant to clause (i)), free and clear of all Liens (other than applicable transfer restrictions under the Securities Act), equal to such VC Shareholder’s Backstop Tender Shares.

(b) For purposes of this Agreement:

(i) “ Backstop Tender Amount ” means, assuming completion of the Issuance, the number of Shares, if any, by which (i) the number of Minimum Condition Shares exceeds (ii) the sum of the Tendered Share Amount and the aggregate Minimum Tender Amount of the VC Shareholder (or, if higher, the number of Shares validly tendered into the Offer and not validly withdrawn by such VC Shareholder as reflected on the Tender Statement);

(ii) “ Backstop Tender Shares ” means, with respect to the VC Shareholder, a number of Shares equal to the Backstop Tender Amount, multiplied by a fraction, the numerator of which is such VC Shareholder’s Remaining Shares and the denominator of which is the aggregate Remaining Shares (together with the aggregate Remaining Shares (as defined in the other Tender and Support Agreements));

(iii) “ Expiration Date ” means the date on which the Expiration Time occurs;

(iv) “ Minimum Tender Amount ” means the higher of (i) (x) the total number of the applicable VC Shareholder’s Subject Shares multiplied by (y) the percentage set forth opposite such VC Shareholder’s name on Schedule A under the heading “Minimum Tender Percentage,” and (ii) in the event the Investor delivers a Tender Statement (as defined below) from the depositary designated in the Offer (the “ Depositary ”) prior to 9:00 p.m., New York City time, on the Expiration Date (as defined below), (x) the total number of such VC Shareholder’s Subject Shares multiplied by (y) the Tendered Share Ratio (as defined below);

(v) “ Remaining Shares ” means, with respect to the VC Shareholder, such VC Shareholder’s Subject Shares less such VC Shareholder’s Minimum Tender Amount (or, if higher, the number of Shares validly tendered into the Offer and not validly withdrawn by such VC Shareholder as reflected on the Tender Statement);

(vi) “ Tender Statement ” means a statement, based on information provided by the Depositary, setting forth the Tendered Share Amount and the Tendered Share Ratio;

(vii) “ Tendered Share Amount ” means the number of Shares validly tendered into the Offer and not validly withdrawn by the shareholders of the Company (excluding Shares tendered pursuant to notices of guaranteed delivery for which Shares have not been delivered) other than the VC Shareholders (as

 

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defined in each of the Tender and Support Agreements) (collectively, the “ VC Funds ”) as of no earlier than 6:00 p.m., New York City time, on the Expiration Date; and

(viii) “ Tendered Share Ratio ” means a fraction, (i) the numerator of which is the Tendered Share Amount and (ii) the denominator of which is the total number of outstanding Shares at the close of trading on the trading day prior to the Expiration Date (or as close to such time as is reasonably practicable) held by shareholders of the Company other than (x) the VC Funds and (y) the Investor or any of its Affiliates.

(c) In furtherance of the foregoing, at the time of any tender by a VC Shareholder as required by Section 1.01(a), such VC Shareholder shall (i) deliver to the Depositary (A) a letter of transmittal complying with the terms of the Offer with respect to the Subject Shares that such VC Shareholder is required to tender pursuant to Section 1.01(a), as applicable, (B) a certificate or certificates representing such Subject Shares or, in the case of a book-entry transfer of such Subject Shares, an “agent’s message” (or such other evidence of transfer as the Depositary may reasonably request) and (C) all other documents or instruments, to the extent applicable, required to be delivered by other shareholders of the Company pursuant to the terms of the Offer, and/or (ii) instruct its broker or such other Person that is the holder of record of such Subject Shares to tender such Subject Shares pursuant to and in accordance with the terms of the Offer. The VC Shareholder agrees that once such Subject Shares are tendered, such VC Shareholder will not withdraw or cause to be withdrawn any of such Subject Shares from the Offer, unless and until this Agreement shall have been terminated in accordance with Section 6.02. No VC Shareholder shall tender any Subject Shares pursuant to a notice of guaranteed delivery.

ARTICLE 2

V OTING A GREEMENT ; G RANT OF P ROXY

Section 2.01. Voting Agreement .

(a) From the date hereof until termination of this Agreement in accordance with Section 6.02, the VC Shareholder hereby agrees:

(i) to vote or exercise its right to consent with respect to all Subject Shares that such VC Shareholder is entitled to vote at the time of any vote or action by written consent in favor of any proposal (A) to approve and adopt the Transaction Agreement and the other Transaction Documents (including the Investor’s rights under Section 4.03 of the Investor Rights Agreement) (or in each case any amended version thereof; provided that such amendment is not materially adverse to such VC Shareholder and does not increase the obligations of such VC Shareholder), the Company Charter Amendment, the Issuance and all agreements related to the Investment and any actions related thereto at any meeting of the shareholders of the Company (each, a “ Company Shareholders Meeting ”), and at any adjournment thereof, at which such matters, or such other

 

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actions, are submitted for the consideration and vote of the shareholders of the Company and (B) to adjourn or postpone such meeting to a later date if there are not sufficient votes for adoption of any such matters or actions at any Company Shareholders Meeting; and

(ii) that it will not vote any of its Subject Shares in favor of, or consent to, and will vote against and not consent to, the approval of any (A) reorganization, recapitalization, liquidation or winding-up of the Company or any other extraordinary transaction involving the Company (other than the Investment) or (B) action or Contract that would reasonably be expected to frustrate the purposes of, impede, hinder, interfere with, prevent, delay or materially and adversely affect the consummation of the transactions contemplated by the Transaction Agreement or any other Transaction Document, including any Contract related to an Acquisition Proposal.

Section 2.02. Irrevocable Proxy . The VC Shareholder hereby revokes any and all previous proxies granted with respect to its Subject Shares in connection with any of the matters covered by Section 2.01(a). By entering into this Agreement, the VC Shareholder hereby grants a proxy appointing the Investor as such VC Shareholder’s attorney-in-fact and proxy, with full power of substitution, for and in such VC Shareholder’s name, to vote, express consent or dissent, or otherwise to utilize such voting power, in each case solely to the extent and in the manner specified in Section 2.01(a). The foregoing proxy shall be deemed to be a proxy coupled with an interest, is irrevocable and shall not be terminated by operation of law or upon the occurrence of any event; provided that the proxy granted by the VC Shareholder in accordance with this Section 2.02 shall be deemed revoked automatically upon termination of this Agreement in accordance with its terms. The VC Shareholder hereby affirms that the irrevocable proxy set forth in this Section 2.02 is given in connection with and granted in consideration of, and as an inducement to, the Investor entering into the Transaction Agreement and the other Transaction Documents.

ARTICLE 3

R EPRESENTATIONS AND W ARRANTIES OF THE VC S HAREHOLDER

The VC Shareholder represents and warrants to the Investor as to such VC Shareholder as of the date hereof, the date of any Company Shareholders Meeting and the Acceptance Time (other than representations and warranties expressly stated to be given or made as of a specific time, which shall only be made as of such time) that:

Section 3.01. Organization; Authorization; Binding Agreement . Such VC Shareholder is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and the consummation of the transactions contemplated hereby are within such VC Shareholder’s corporate or organizational powers and have been duly authorized by all necessary corporate or organizational actions on the part of such VC Shareholder. Such VC Shareholder has full corporate or organizational power and authority to execute, deliver and perform this Agreement. This Agreement has been

 

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duly and validly executed and delivered by such VC Shareholder, and constitutes a legal, valid and binding obligation of such VC Shareholder enforceable against such VC Shareholder in accordance with its terms, subject to the effects of applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally and general equitable principles.

Section 3.02. Non-Contravention . The execution, delivery and performance by such VC Shareholder of this Agreement and the consummation of the transactions contemplated hereby do not and will not (i) contravene, conflict with, or result in any violation or breach of any provision of the organizational documents of such VC Shareholder, (ii) contravene, conflict with or result in a violation or breach of any provision of any Applicable Law, (iii) require any payment to or consent or other action by any Person under, constitute a breach or default, or an event that, with or without notice or lapse of time or both, would constitute a breach or default, under, or cause or permit the termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit to which such VC Shareholder is entitled under any provision of any Contract binding on, or any Permit of, such VC Shareholder or any Contract or Permit affecting, or relating in any way to, the assets or business of such VC Shareholder or (iv) result in the creation or imposition of any Lien on any of the Subject Shares, with only such exceptions, in the case of each of clauses (ii) and (iii), for such matters as would not reasonably be expected to, individually or in the aggregate, prevent or materially delay or impair the consummation by such VC Shareholder of the transactions contemplated by this Agreement or otherwise adversely impact such VC Shareholder’s ability to perform its obligations hereunder in any material respect or on a timely basis.

Section 3.03. Ownership of Subject Shares .

(a) Except for Subject Shares Transferred after the date hereof in accordance with Section 5.01, such VC Shareholder is the beneficial owner (as defined in Rule 13d-3 promulgated under the Exchange Act) of such VC Shareholder’s Subject Shares and has good and marketable title to such Subject Shares free and clear of any Liens, claims, options, rights, understandings or arrangements or any other encumbrances, limitations or restrictions whatsoever (including, but not limited to, any restriction on the right to vote or dispose of such Subject Shares), except as set forth herein or pursuant to any applicable restrictions on transfer under the Securities Act. Except for the Investor pursuant to this Agreement, no Person has any contractual or other right or obligation to purchase or otherwise acquire any of such VC Shareholder’s Subject Shares. Except for this Agreement, none of such VC Shareholder’s Subject Shares are subject to any voting agreement, voting trust or other agreement or arrangement, including, but not limited to, any proxy, consent or power of attorney.

(b) Except for any Subject Shares acquired after the date hereof, other than the Subject Shares set forth opposite such VC Shareholder’s name on Schedule A , neither such VC Shareholder nor, to such VC Shareholder’s knowledge after reasonable inquiry, any of its controlled Affiliates (other than (i) any portfolio company of any fund entity to which such VC Shareholder or one of its Affiliates serves as an advisor or (ii) any

 

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individual that may be an Affiliate of such VC Shareholder that owns shares in his/her individual capacity) beneficially owns any (i) shares of capital stock or other voting securities of, or ownership interests in, the Company, (ii) securities of the Company convertible or exchangeable into, or exercisable for, shares of capital stock or other voting securities of or ownership interests in the Company or (iii) warrants, calls, options or other rights to acquire from the Company any of the foregoing.

Section 3.04. Reliance . Such VC Shareholder has had the opportunity to review this Agreement, the Transaction Agreement and the other Transaction Documents with counsel of such VC Shareholder’s own choosing. Such VC Shareholder understands and acknowledges that the Investor and the Company are entering into the Transaction Agreement and the other Transaction Documents in reliance upon such VC Shareholder’s execution, delivery and performance of this Agreement.

Section 3.05 . Absence of Litigation. There is no Proceeding pending against or, to the knowledge of such VC Shareholder, threatened against or affecting (i) such VC Shareholder or any of its properties or assets (including such VC Shareholder’s Subject Shares) or (ii) to such VC Shareholder’s knowledge after reasonable inquiry, any of its controlled Affiliates or any of their respective properties or assets, in each case before or by any Governmental Authority or arbitrator that would reasonably be expected to prevent or materially delay or impair the consummation by such VC Shareholder of the transactions contemplated by this Agreement or otherwise adversely impact such VC Shareholder’s ability to perform its obligations hereunder in any material respect or on a timely basis.

Section 3.06. Brokers . There is no investment banker, broker, finder or other intermediary who might be entitled to any fee or commission from the Investor, the Company or any of their respective Affiliates in respect of this Agreement, the Transaction Agreement or any of the other Transaction Documents based upon any arrangement or agreement made by or on behalf of such VC Shareholder or any of its Affiliates.

ARTICLE 4

R EPRESENTATIONS AND W ARRANTIES OF T HE I NVESTOR

The Investor represents and warrants to the VC Shareholder, as of the date hereof and as of the Acceptance Time, that:

Section 4.01. Organization; Authorization; Binding Agreement . The Investor is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. The consummation of the transactions contemplated hereby is within the Investor’s corporate powers and has been duly authorized by all necessary corporate actions on the part of the Investor. The Investor has full corporate power and authority to execute, deliver and perform this Agreement. This Agreement has been duly authorized, executed and delivered by the Investor and constitutes a legal, valid and binding obligation of the Investor enforceable against the Investor in accordance with its terms, subject to the effects of applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally and general equitable principles.

 

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Section 4.02. Non-Contravention . The execution, delivery and performance by the Investor of this Agreement and the consummation of the transactions contemplated hereby do not and will not (i) contravene, conflict with, or result in any violation or breach of any provision of the organizational documents of the Investor, (ii) contravene, conflict with or result in a violation or breach of any provision of any Applicable Law, (iii) require any payment to or consent or other action by any Person under, constitute a breach or default, or an event that, with or without notice or lapse of time or both, would constitute a breach or default, under, or cause or permit the termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit to which the Investor is entitled under any provision of any Contract binding on, or any Permit of, the Investor or any Contract or Permit affecting, or relating in any way to, the assets or business of the Investor or (iv) result in the creation or imposition of any Lien on any assets of properties of the Investor, with only such exceptions, in the case of each of clauses (ii) through (iv), for such matters as would not reasonably be expected to, individually or in the aggregate, prevent or materially delay or impair the consummation by the Investor of the transactions contemplated by this Agreement or otherwise adversely impact the Investor’s ability to perform its obligations hereunder in any material respect or on a timely basis.

ARTICLE 5

A DDITIONAL C OVENANTS OF THE VC S HAREHOLDER

The VC Shareholder hereby covenants and agrees that, until the termination of this Agreement in accordance with its terms:

Section 5.01. No Transfer; No Inconsistent Arrangements . Except pursuant to the express terms of this Agreement, such VC Shareholder shall not (and shall not permit any Person under such VC Shareholder’s control to), without the prior written consent of the Investor, directly or indirectly, (i) grant any proxies, powers of attorney, rights of first offer or refusal or enter into any voting trust with respect to any of such VC Shareholder’s Subject Shares, (ii) sell (including short sell), assign, transfer, tender, pledge, encumber, grant a participation interest in, hypothecate or otherwise dispose of (including by gift) (each, a “ Transfer ”) any of such VC Shareholder’s Subject Shares, (iii) otherwise permit any Liens to be created on any of such VC Shareholder’s Subject Shares, (iv) enter into any contract, agreement, option, instrument or other arrangement or understanding with respect to the direct or indirect Transfer of, any of such VC Shareholder’s Subject Shares, or (v) take any other action that would restrict, limit or interfere in any material respect with the performance of such VC Shareholder’s obligations hereunder or the transactions contemplated hereby or, subject to the following sentence, otherwise make any representation or warranty of such VC Shareholder herein untrue or incorrect in any material respect. If any involuntary Transfer of any of such VC Shareholder’s Subject Shares shall occur (including, but not limited to, a sale by such VC Shareholder’s trustee in any bankruptcy, or a sale to a purchaser at any creditor’s or court

 

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sale), the transferee (which term, as used herein, shall include any and all transferees and subsequent transferees of the initial transferee) shall take and hold such VC Shareholder’s Subject Shares subject to all of the restrictions, liabilities and rights under this Agreement as a VC Shareholder for all purposes hereunder. Such VC Shareholder agrees that it shall not, and shall cause each of its controlled Affiliates not to, become a member of a “group” (as defined under Section 13(d) of the Exchange Act) with respect to any equity interests in the Company for the purpose of opposing or competing with or taking any actions inconsistent with the transactions contemplated by the Transaction Agreement. The VC Shareholder hereby authorizes the Investor to direct the Company to impose stop orders to prevent the Transfer of any of such VC Shareholder’s Subject Shares in violation of this Agreement.

Section 5.02. Actions . Such VC Shareholder hereby agrees not to commence or participate in, and agrees to take all actions necessary to opt out of any class in any class action with respect to, any claim, whether derivative or otherwise, against the Investor, the Company or any of their respective Affiliates, or their respective boards of directors, relating to the negotiation, execution or delivery of this Agreement, the Transaction Agreement or the other Transaction Documents, or the consummation of the transactions contemplated hereby or thereby, including any such claim (A) challenging the validity of, or seeking to enjoin the operation of, any provision of this Agreement or (B) alleging a breach of any fiduciary duty of the Company Board in connection with the Transaction Agreement or the transactions contemplated thereby. For the avoidance of doubt, nothing in this Section 5.02 shall prevent such VC Shareholder from commencing or participating in any action or claim against the Investor for breaches of this Agreement.

Section 5.03. Documentation and Information . Except as required by Applicable Law (including the filing of a Schedule 13D with the SEC, which may include this Agreement as an exhibit thereto), such VC Shareholder shall not make any public announcement regarding this Agreement, the Transaction Agreement, the other Transaction Documents or the transactions contemplated hereby and thereby without the prior written consent of the Investor. The VC Shareholder (i) consents to and authorizes the publication and disclosure by the Investor of such VC Shareholder’s identity and holding of such VC Shareholder’s Subject Shares, the nature of such VC Shareholder’s commitments, arrangements and understandings under this Agreement (including, for the avoidance of doubt, the disclosure of this Agreement) and any other information regarding such VC Shareholder, in each case, that the Investor reasonably determines is required to be disclosed by Applicable Law in the Offer Documents, the Company Proxy Statement (including all schedules and documents filed with the SEC), or any other disclosure document in connection with the Offer (including a Schedule 13D), the Issuance and any other transaction contemplated by the Transaction Agreement, and the inclusion of any such information in any press release; provided , however , that the Investor shall provide such VC Shareholder with the right to review any such disclosure document or press release that contains the name of or information specific to such VC Shareholder as soon as reasonably practicable prior to filing or publication and will consider the comments of such VC Shareholder in good faith, and (ii) agrees promptly to give the Investor any information it may reasonably request in connection with the preparation of any such disclosure documents; provided that the Investor may only use

 

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such information for the purpose for which it is explicitly provided by such VC Shareholder. The VC Shareholder agrees to promptly notify the Investor of any required corrections with respect to any information supplied by or on behalf of such VC Shareholder specifically for use in any such disclosure document, if and to the extent that any such information shall have become false or misleading in any material respect.

Section 5.04. No Solicitation . Such VC Shareholder shall not, and such VC Shareholder shall not authorize or permit any of its Representatives to, directly or indirectly, (i) solicit, initiate or take any action to knowingly assist, facilitate or encourage the submission of any Acquisition Proposal, or (ii) (A) enter into or participate in any discussions or negotiations with or furnish any information relating to the Company or any of its Subsidiaries or afford access to the business, properties, assets, books or records of the Company or any of its Subsidiaries to, or (B) otherwise cooperate in any way with, or knowingly assist, participate in, facilitate or encourage any effort by any Third Party that has made, is seeking to make or would be reasonably expected to make an Acquisition Proposal.

Section 5.05. Notice of Certain Events . Such VC Shareholder shall notify the Investor of any fact, change or development occurring or arising after the date hereof that causes, or would reasonably be expected to cause, any breach in any material respect of any representation, warranty, covenant or agreement of such VC Shareholder hereunder.

Section 5.06. Adjustments . In the event of any stock split, stock dividend, merger, reorganization, recapitalization, reclassification, combination, exchange of shares or the like of the capital stock of the Company on, of or affecting the Subject Shares, then the terms of this Agreement shall apply to the Shares received in respect of the Subject Shares by such VC Shareholder immediately following the effectiveness of the events described in this Section 5.06, as though they were Subject Shares hereunder.

Section 5.07. Directors and Officers . Notwithstanding any provision of this Agreement to the contrary, nothing contained in this Agreement shall limit, restrict or otherwise affect any Representative of any VC Shareholder, in such individual’s capacity as a director of the Company, from acting in such capacity, subject to the applicable provisions in the Transaction Agreement.

Section 5.08. Reasonable Best Efforts. From the date hereof until the Closing Date, the VC Shareholder shall (a) use its reasonable best efforts to prepare and file as promptly as practicable with any Governmental Authority or other Third Party all documentation to effect all necessary Filings in connection with the transactions contemplated by this Agreement or the Transaction Agreement, and provide the Investor as promptly as practicable with any information that is necessary in connection with the preparation and filing of such Filings; provided that the Investor may only use such information for the purpose for which it is explicitly provided by such VC Shareholder, and (b) at the Investor’s request, reasonably cooperate with the Investor in connection with the Investor’s efforts to obtain and maintain all approvals, consents, registrations, permits, authorizations and other confirmations required to be obtained from any Governmental Authority or other Third Party that are necessary to consummate the

 

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transactions contemplated by this Agreement; provided that the Investor shall reimburse the VC Shareholder for its reasonable, documented, out-of-pocket expenses incurred by such VC Shareholder in connection with such cooperation.

ARTICLE 6

M ISCELLANEOUS

Section 6.01. Notices . All notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission or email, so long as a receipt of such facsimile transmission or email is requested and received) and shall be given,

if to the Investor, to:

 

Roche Holdings, Inc.
1 DNA Way
South San Francisco, California 94080
Attention:   General Counsel
Fax: (650) 225-6000
with a copy to:
F. Hoffmann-La Roche Ltd
Group Legal Department
Grenzacherstrasse 124
CH-4070 Basel, Switzerland
Attention:   Dr. Beat Kraehenmann
Fax: +41 61 688 13 96

with a copy (which shall not constitute notice) to:

 

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, New York 10017

Attention:   Arthur F. Golden
  Marc O. Williams
Facsimile No.: (212) 701-5800
Email:   arthur.golden@davispolk.com
  marc.williams@davispolk.com

if to a VC Shareholder, as set forth in the signature page hereof,

 

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or to such other address or facsimile number as such party may hereafter specify for the purpose by notice to the other parties hereto. All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. on a business day in the place of receipt (other than a Tender Statement, which shall be deemed received by the VC Shareholder on the Expiration Date as long as it is delivered prior to 9:00 p.m., New York City time, on the Expiration Date). Otherwise, any such notice, request or communication shall be deemed to have been received on the next succeeding business day in the place of receipt.

Section 6.02. Termination . This Agreement shall terminate automatically, without any notice or other action by any Person, upon the first to occur of (i) the termination of the Transaction Agreement in accordance with its terms, (ii) the Acceptance Time and (iii) the mutual written consent of all of the parties hereto. In addition, this Agreement may be terminated with respect to any VC Shareholder at any time following any reduction to the Offer Price upon written notice by such VC Shareholder to the Investor. Upon termination of this Agreement, no party shall have any further obligations or liabilities under this Agreement. Notwithstanding the foregoing, the provisions of this Article 6 shall survive any termination of this Agreement and no termination of this Agreement shall relieve any party from liability for any breach of this Agreement prior to termination hereof or such party’s fraud.

Section 6.03. Further Assurances .

(a) The Investor and the VC Shareholder will each execute and deliver, or cause to be executed and delivered, all further documents and instruments as the other party may reasonably request and use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things required under Applicable Law to consummate and make effective the transactions contemplated by this Agreement.

(b) The Investor and each VC Shareholder shall use their respective reasonable best efforts to take all actions necessary and advisable to consummate the actions contemplated by Article 1, including causing such VC Shareholder to become the record holder of such VC Shareholder’s Subject Shares and/or to hold such Subject Shares directly (rather than through the Depository Trust Company).

Section 6.04. Other Definitional and Interpretative Provisions . Unless specified otherwise, in this Agreement the obligations of any party consisting of more than one person are joint and several. The words “hereof,” “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Articles and Sections are to Articles and Sections of this Agreement unless otherwise specified. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation,” whether or not they are in fact followed by those words or words of like import. “Writing,” “written” and comparable terms refer

 

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to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any statute, rule or regulation shall be deemed to refer to such statute, rule or regulation as amended or supplemented from time to time, including through the promulgation of applicable rules or regulations. References to any Contract are to that Contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. References to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively. References to one gender include all genders.

Section 6.05. No Ownership Interest . Except pursuant to the terms of this Agreement and in connection with the consummation of the Offer, (i) nothing contained in this Agreement shall be deemed to vest in the Investor any direct or indirect ownership or incidence of ownership of or with respect to any Subject Shares and (ii) all rights, ownership and economic benefits of and relating to the Subject Shares shall remain vested in and belong to the applicable VC Shareholder, and the Investor shall have no authority to direct such VC Shareholder in the voting or disposition of any of the Subject Shares, except as otherwise provided herein.

Section 6.06. Amendments and Waivers .

(a) Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by the Investor and the VC Shareholder or, in the case of a waiver, by each party against whom the waiver is to be effective.

(b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

Section 6.07. Expenses . Except as set forth in Section 5.08(b), all costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense.

Section 6.08. Binding Effect; Benefit; Assignment .

(a) The provisions of this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. No provision of this Agreement is intended to confer any rights, benefits, remedies, obligations or liabilities hereunder upon any Person other than the parties hereto and their respective successors and assigns.

(b) No party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other parties hereto, except that the Investor may transfer or assign its rights and obligations to any Affiliate of the Investor; provided that any such transfer or assignment prior to the Offer Closing Date shall not relieve the Investor of its obligations under this Agreement.

 

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Section 6.09. Governing Law . This Agreement and all claims and causes of action arising out of or relating to this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of law rules of such state.

Section 6.10. Jurisdiction . The parties hereto agree that any Proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby (whether brought by any party or any of its Affiliates or against any party or any of its Affiliates) shall be brought in the Delaware Court of Chancery or, if such court shall not have jurisdiction, any federal court located in the State of Delaware or other Delaware state court, and each of the parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such Proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such Proceeding in any such court or that any such Proceeding brought in any such court has been brought in an inconvenient forum. Process in any such Proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 6.01 shall be deemed effective service of process on such party.

Section 6.11. WAIVER OF JURY TRIAL . EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 6.12. Counterparts; Effectiveness . This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by all of the other parties hereto; provided that this Agreement shall not be effective until the Transaction Agreement is executed by all parties thereto. Until and unless each party has received a counterpart hereof signed by the other party hereto, this Agreement shall have no effect and no party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication).

Section 6.13. Entire Agreement . This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter hereof and thereof.

Section 6.14. Severability . If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other Governmental Authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants

 

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and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated 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 a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

Section 6.15. 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 that the non-breaching party shall 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 courts referred to in Section 6.10, in addition to any other remedy to which they are entitled at law or in equity.

Section 6.16 Reserved .

Section 6.17 No Agreement Until Executed . Irrespective of negotiations among the parties or the exchanging of drafts of this Agreement, this Agreement shall not constitute or be deemed to evidence a contract, agreement, arrangement or understanding between the parties hereto unless and until (a) the Transaction Agreement is executed by all parties thereto and (b) this Agreement is executed by all parties hereto (which the parties agree has occurred immediately following the execution of the Transaction Agreement by all parties thereto).

Section 6.18. Equal Treatment . It is acknowledged that, in connection with the transactions contemplated by the Transaction Agreement, the Investor may enter, or has entered, into the Tender and Support Agreements with the VC Funds other than the VC Shareholder. To the extent that any such Tender and Support Agreement grants to any VC Fund rights thereunder that are more favorable to such VC Fund than the rights of the VC Shareholder set forth herein (other than with respect to Section 1.01(a)(ii)) or waives a material obligation of such VC Fund that is also set forth herein, the Investor agrees that it shall offer the same rights or waiver, as applicable, to the VC Shareholder; provided, however , the Investor’s obligation with respect to Section 1.01(a)(ii) only applies to the extent Affiliates of KPCB Holdings, Inc. are granted more favorable rights, or receive a waiver of the obligations of such VC Fund, in each case with respect to the subject matter covered by Section 1.01(a)(ii). Each such offer shall be made by the Investor’s prompt delivery to the VC Shareholder of the text of the applicable rights or waiver, as applicable, and such offer shall be deemed declined by a VC Shareholder if not accepted by such VC Shareholder in writing within 10 Business Days after such offer is delivered. The Investor shall attach a schedule to this Agreement that reflects any such rights or waivers, as applicable, that are accepted by the VC Shareholder, and such schedule shall become a part of this Agreement. All determinations with respect to the VC Shareholder’s rights under this paragraph shall be made by the Investor taking into account all facts and circumstances applicable at the time of determination.

[ Signature Page Follows ]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

 

ROCHE HOLDINGS, INC.
By:  

 

  Name:
  Title:

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

 

THIRD ROCK VENTURES, L.P.
By:   Third Rock Ventures GP, L.P., its general partner
By:   TRV GP, LLC, its general partner
By:  

 

Name:  
Title:  


EXECUTION

Schedule A

 

Name of VC Shareholder

   # of Subject Shares      Minimum Tender
Percentage
 

Third Rock Ventures, L.P.

     4,927,234         50

Exhibit 99.2

EXECUTION

TENDER AND SUPPORT AGREEMENT

TENDER AND SUPPORT AGREEMENT (this “ Agreement ”) dated as of January 11, 2015 by and among Roche Holdings, Inc., a Delaware corporation (the “ Investor ”), and the entities listed on Schedule A hereto (the “ VC Shareholders ” and each a “ VC Shareholder ”).

WHEREAS , as of the date hereof, each VC Shareholder is the beneficial owner (as defined in Rule 13d-3 promulgated under the Exchange Act) of shares (“ Shares ”) of common stock, par value $0.0001 per share, of Foundation Medicine, Inc., a Delaware corporation (the “ Company ”) (all Shares beneficially owned by such VC Shareholder (including those set forth opposite such VC Shareholder’s name on Schedule A ) and any additional Shares with respect to which such VC Shareholder becomes the beneficial owner after the date hereof, but excluding any Shares Transferred by such VC Shareholder in compliance with Section 5.01 hereof, such VC Shareholder’s “ Subject Shares ”);

WHEREAS , the Investor and the Company are concurrently herewith entering into a Transaction Agreement dated as of the date hereof (as it may be amended from time to time, the “ Transaction Agreement ”), which provides, among other things, for the Investor to commence the Offer upon the terms and subject to the conditions set forth in the Transaction Agreement (capitalized terms used but not otherwise defined herein having the meanings ascribed to such terms in the Transaction Agreement);

WHEREAS , as an inducement to and condition of the Investor’s willingness to enter into the Transaction Agreement and the other Transaction Documents, each VC Shareholder has agreed to enter into this Agreement.

NOW, THEREFORE , in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, do hereby agree as follows:

ARTICLE 1

A GREEMENT TO T ENDER

Section 1.01. Agreement to Tender . (a) Upon the terms and subject to the conditions of this Agreement, (i) each VC Shareholder agrees to validly tender or cause to be tendered in the Offer (pursuant to and in accordance with the terms of the Offer and provided that the Offer Price does not decrease), a number of such VC Shareholder’s Subject Shares, free and clear of all Liens (other than applicable transfer restrictions under the Securities Act), at least equal to such VC Shareholder’s Minimum Tender Amount (it being agreed that such VC Shareholder’s Subject Shares that are covered by clause (i) of the definition of Minimum Tender Amount shall be validly tendered prior to 4:00 p.m., New York City time, on the Expiration Date) and (ii) each VC Shareholder agrees to validly tender or cause to be tendered in the Offer (pursuant to and in accordance with the terms of the Offer and provided that the Offer Price does not decrease), a number of such VC Shareholder’s Subject Shares (for clarity, in addition to the Subject Shares tendered by such VC Shareholder pursuant to clause (i)), free and clear of all Liens (other than applicable transfer restrictions under the Securities Act), equal to each such VC Shareholder’s Backstop Tender Shares.


(b) For purposes of this Agreement:

(i) “ Backstop Tender Amount ” means, assuming completion of the Issuance, the number of Shares, if any, by which (i) the number of Minimum Condition Shares exceeds (ii) the sum of the Tendered Share Amount and the aggregate Minimum Tender Amount of each VC Shareholder (or, if higher, the number of Shares validly tendered into the Offer and not validly withdrawn by such VC Shareholder as reflected on the Tender Statement);

(ii) “ Backstop Tender Shares ” means, with respect to each VC Shareholder, a number of Shares equal to the Backstop Tender Amount, multiplied by a fraction, the numerator of which is such VC Shareholder’s Remaining Shares and the denominator of which is the aggregate Remaining Shares (together with the aggregate Remaining Shares (as defined in the other Tender and Support Agreements));

(iii) “ Expiration Date ” means the date on which the Expiration Time occurs;

(iv) “ Minimum Tender Amount ” means the higher of (i) (x) the total number of the applicable VC Shareholder’s Subject Shares multiplied by (y) the percentage set forth opposite such VC Shareholder’s name on Schedule A under the heading “Minimum Tender Percentage,” and (ii) in the event the Investor delivers a Tender Statement (as defined below) from the depositary designated in the Offer (the “ Depositary ”) prior to 9:00 p.m., New York City time, on the Expiration Date (as defined below), (x) the total number of such VC Shareholder’s Subject Shares multiplied by (y) the Tendered Share Ratio (as defined below);

(v) “ Remaining Shares ” means, with respect to each VC Shareholder, such VC Shareholder’s Subject Shares less such VC Shareholder’s Minimum Tender Amount (or, if higher, the number of Shares validly tendered into the Offer and not validly withdrawn by such VC Shareholder as reflected on the Tender Statement);

(vi) “ Tender Statement ” means a statement, based on information provided by the Depositary, setting forth the Tendered Share Amount and the Tendered Share Ratio;

(vii) “ Tendered Share Amount ” means the number of Shares validly tendered into the Offer and not validly withdrawn by the shareholders of the Company (excluding Shares tendered pursuant to notices of guaranteed delivery for which Shares have not been delivered) other than the VC Shareholders (as defined in each of the Tender and Support Agreements) (collectively, the “ VC Funds ”) as of no earlier than 6:00 p.m., New York City time, on the Expiration Date; and

(viii) “ Tendered Share Ratio ” means a fraction, (i) the numerator of which is the Tendered Share Amount and (ii) the denominator of which is the total number of outstanding Shares at the close of trading on the trading day prior to the Expiration Date (or as close to such time as is reasonably practicable) held by shareholders of the Company other than (x) the VC Funds and (y) the Investor or any of its Affiliates.

 

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(c) In furtherance of the foregoing, at the time of any tender by a VC Shareholder as required by Section 1.01(a), such VC Shareholder shall (i) deliver to the Depositary (A) a letter of transmittal complying with the terms of the Offer with respect to the Subject Shares that such VC Shareholder is required to tender pursuant to Section 1.01(a), as applicable, (B) a certificate or certificates representing such Subject Shares or, in the case of a book-entry transfer of such Subject Shares, an “agent’s message” (or such other evidence of transfer as the Depositary may reasonably request) and (C) all other documents or instruments, to the extent applicable, required to be delivered by other shareholders of the Company pursuant to the terms of the Offer, and/or (ii) instruct its broker or such other Person that is the holder of record of such Subject Shares to tender such Subject Shares pursuant to and in accordance with the terms of the Offer. Each VC Shareholder agrees that once such Subject Shares are tendered, such VC Shareholder will not withdraw or cause to be withdrawn any of such Subject Shares from the Offer, unless and until this Agreement shall have been terminated in accordance with Section 6.02. No VC Shareholder shall tender any Subject Shares pursuant to a notice of guaranteed delivery.

ARTICLE 2

V OTING A GREEMENT ; G RANT OF P ROXY

Section 2.01. Voting Agreement .

(a) From the date hereof until termination of this Agreement in accordance with Section 6.02, each VC Shareholder hereby agrees:

(i) to vote or exercise its right to consent with respect to all Subject Shares that such VC Shareholder is entitled to vote at the time of any vote or action by written consent in favor of any proposal (A) to approve and adopt the Transaction Agreement and the other Transaction Documents (including the Investor’s rights under Section 4.03 of the Investor Rights Agreement) (or in each case any amended version thereof; provided that such amendment is not materially adverse to such VC Shareholder and does not increase the obligations of such VC Shareholder), the Company Charter Amendment, the Issuance and all agreements related to the Investment and any actions related thereto at any meeting of the shareholders of the Company (each, a “ Company Shareholders Meeting ”), and at any adjournment thereof, at which such matters, or such other actions, are submitted for the consideration and vote of the shareholders of the Company and (B) to adjourn or postpone such meeting to a later date if there are not sufficient votes for adoption of any such matters or actions at any Company Shareholders Meeting; and

(ii) that it will not vote any of its Subject Shares in favor of, or consent to, and will vote against and not consent to, the approval of any (A) reorganization, recapitalization, liquidation or winding-up of the Company or any other extraordinary transaction involving the Company (other than the Investment) or (B) action or Contract that would reasonably be expected to frustrate the purposes of, impede, hinder, interfere with, prevent, delay or materially and adversely affect the consummation of the transactions contemplated by the Transaction Agreement or any other Transaction Document, including any Contract related to an Acquisition Proposal.

 

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Section 2.02. Irrevocable Proxy . Each VC Shareholder hereby revokes any and all previous proxies granted with respect to its Subject Shares in connection with any of the matters covered by Section 2.01(a). By entering into this Agreement, each VC Shareholder hereby grants a proxy appointing the Investor as such VC Shareholder’s attorney-in-fact and proxy, with full power of substitution, for and in such VC Shareholder’s name, to vote, express consent or dissent, or otherwise to utilize such voting power, in each case solely to the extent and in the manner specified in Section 2.01(a). The foregoing proxy shall be deemed to be a proxy coupled with an interest, is irrevocable and shall not be terminated by operation of law or upon the occurrence of any event; provided that the proxy granted by each VC Shareholder in accordance with this Section 2.02 shall be deemed revoked automatically upon termination of this Agreement in accordance with its terms. Each VC Shareholder hereby affirms that the irrevocable proxy set forth in this Section 2.02 is given in connection with and granted in consideration of, and as an inducement to, the Investor entering into the Transaction Agreement and the other Transaction Documents.

ARTICLE 3

R EPRESENTATIONS AND W ARRANTIES OF THE VC S HAREHOLDERS

Each VC Shareholder represents and warrants to the Investor as to such VC Shareholder, severally and not jointly, as of the date hereof, the date of any Company Shareholders Meeting and the Acceptance Time (other than representations and warranties expressly stated to be given or made as of a specific time, which shall only be made as of such time) that:

Section 3.01. Organization; Authorization; Binding Agreement . Such VC Shareholder is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and the consummation of the transactions contemplated hereby are within such VC Shareholder’s corporate or organizational powers and have been duly authorized by all necessary corporate or organizational actions on the part of such VC Shareholder. Such VC Shareholder has full corporate or organizational power and authority to execute, deliver and perform this Agreement. This Agreement has been duly and validly executed and delivered by such VC Shareholder, and constitutes a legal, valid and binding obligation of such VC Shareholder enforceable against such VC Shareholder in accordance with its terms, subject to the effects of applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally and general equitable principles.

 

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Section 3.02. Non-Contravention . The execution, delivery and performance by such VC Shareholder of this Agreement and the consummation of the transactions contemplated hereby do not and will not (i) contravene, conflict with, or result in any violation or breach of any provision of the organizational documents of such VC Shareholder, (ii) contravene, conflict with or result in a violation or breach of any provision of any Applicable Law, (iii) require any payment to or consent or other action by any Person under, constitute a breach or default, or an event that, with or without notice or lapse of time or both, would constitute a breach or default, under, or cause or permit the termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit to which such VC Shareholder is entitled under any provision of any Contract binding on, or any Permit of, such VC Shareholder or any Contract or Permit affecting, or relating in any way to, the assets or business of such VC Shareholder or (iv) result in the creation or imposition of any Lien on any of the Subject Shares, with only such exceptions, in the case of each of clauses (ii) and (iii), for such matters as would not reasonably be expected to, individually or in the aggregate, prevent or materially delay or impair the consummation by such VC Shareholder of the transactions contemplated by this Agreement or otherwise adversely impact such VC Shareholder’s ability to perform its obligations hereunder in any material respect or on a timely basis.

Section 3.03. Ownership of Subject Shares .

(a) Except for Subject Shares Transferred after the date hereof in accordance with Section 5.01, such VC Shareholder is the beneficial owner (as defined in Rule 13d-3 promulgated under the Exchange Act) of such VC Shareholder’s Subject Shares and has good and marketable title to such Subject Shares free and clear of any Liens, claims, options, rights, understandings or arrangements or any other encumbrances, limitations or restrictions whatsoever (including, but not limited to, any restriction on the right to vote or dispose of such Subject Shares), except as set forth herein or pursuant to any applicable restrictions on transfer under the Securities Act. Except for the Investor pursuant to this Agreement, no Person has any contractual or other right or obligation to purchase or otherwise acquire any of such VC Shareholder’s Subject Shares. Except for this Agreement, none of such VC Shareholder’s Subject Shares are subject to any voting agreement, voting trust or other agreement or arrangement, including, but not limited to, any proxy, consent or power of attorney.

 

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(b) Except for any Subject Shares acquired after the date hereof, other than the Subject Shares set forth opposite such VC Shareholder’s name on Schedule A , neither such VC Shareholder nor, to such VC Shareholder’s knowledge after reasonable inquiry, any of its controlled Affiliates (other than (i) any portfolio company of any fund entity to which such VC Shareholder or one of its Affiliates serves as an advisor or (ii) any individual that may be an Affiliate of such VC Shareholder that owns shares in his/her individual capacity) beneficially owns any (i) shares of capital stock or other voting securities of, or ownership interests in, the Company, (ii) securities of the Company convertible or exchangeable into, or exercisable for, shares of capital stock or other voting securities of or ownership interests in the Company or (iii) warrants, calls, options or other rights to acquire from the Company any of the foregoing.

Section 3.04. Reliance . Such VC Shareholder has had the opportunity to review this Agreement, the Transaction Agreement and the other Transaction Documents with counsel of such VC Shareholder’s own choosing. Such VC Shareholder understands and acknowledges that the Investor and the Company are entering into the Transaction Agreement and the other Transaction Documents in reliance upon such VC Shareholder’s execution, delivery and performance of this Agreement.

Section 3.05 . Absence of Litigation. There is no Proceeding pending against or, to the knowledge of such VC Shareholder, threatened against or affecting (i) such VC Shareholder or any of its properties or assets (including such VC Shareholder’s Subject Shares) or (ii) to such VC Shareholder’s knowledge after reasonable inquiry, any of its controlled Affiliates or any of their respective properties or assets, in each case before or by any Governmental Authority or arbitrator that would reasonably be expected to prevent or materially delay or impair the consummation by such VC Shareholder of the transactions contemplated by this Agreement or otherwise adversely impact such VC Shareholder’s ability to perform its obligations hereunder in any material respect or on a timely basis.

Section 3.06. Brokers . There is no investment banker, broker, finder or other intermediary who might be entitled to any fee or commission from the Investor, the Company or any of their respective Affiliates in respect of this Agreement, the Transaction Agreement or any of the other Transaction Documents based upon any arrangement or agreement made by or on behalf of such VC Shareholder or any of its Affiliates.

ARTICLE 4

R EPRESENTATIONS AND W ARRANTIES OF T HE I NVESTOR

The Investor represents and warrants to each VC Shareholder, as of the date hereof and as of the Acceptance Time, that:

Section 4.01. Organization; Authorization; Binding Agreement . The Investor is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. The consummation of the transactions contemplated hereby is within the Investor’s corporate powers and has been duly authorized by all necessary corporate actions on the part of the Investor. The Investor has full corporate power and authority to execute, deliver and perform this Agreement. This Agreement has been duly authorized, executed and delivered by the Investor and constitutes a legal, valid and binding obligation of the Investor enforceable against the Investor in accordance with its terms, subject to the effects of applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally and general equitable principles.

 

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Section 4.02. Non-Contravention . The execution, delivery and performance by the Investor of this Agreement and the consummation of the transactions contemplated hereby do not and will not (i) contravene, conflict with, or result in any violation or breach of any provision of the organizational documents of the Investor, (ii) contravene, conflict with or result in a violation or breach of any provision of any Applicable Law, (iii) require any payment to or consent or other action by any Person under, constitute a breach or default, or an event that, with or without notice or lapse of time or both, would constitute a breach or default, under, or cause or permit the termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit to which the Investor is entitled under any provision of any Contract binding on, or any Permit of, the Investor or any Contract or Permit affecting, or relating in any way to, the assets or business of the Investor or (iv) result in the creation or imposition of any Lien on any assets of properties of the Investor, with only such exceptions, in the case of each of clauses (ii) through (iv), for such matters as would not reasonably be expected to, individually or in the aggregate, prevent or materially delay or impair the consummation by the Investor of the transactions contemplated by this Agreement or otherwise adversely impact the Investor’s ability to perform its obligations hereunder in any material respect or on a timely basis.

ARTICLE 5

A DDITIONAL C OVENANTS OF THE VC S HAREHOLDERS

Each VC Shareholder hereby covenants and agrees, severally and not jointly, that, until the termination of this Agreement in accordance with its terms:

Section 5.01. No Transfer; No Inconsistent Arrangements . Except pursuant to the express terms of this Agreement, such VC Shareholder shall not (and shall not permit any Person under such VC Shareholder’s control to), without the prior written consent of the Investor, directly or indirectly, (i) grant any proxies, powers of attorney, rights of first offer or refusal or enter into any voting trust with respect to any of such VC Shareholder’s Subject Shares, (ii) sell (including short sell), assign, transfer, tender, pledge, encumber, grant a participation interest in, hypothecate or otherwise dispose of (including by gift) (each, a “ Transfer ”) any of such VC Shareholder’s Subject Shares, (iii) otherwise permit any Liens to be created on any of such VC Shareholder’s Subject Shares, (iv) enter into any contract, agreement, option, instrument or other arrangement or understanding with respect to the direct or indirect Transfer of, any of such VC Shareholder’s Subject Shares, or (v) take any other action that would restrict, limit or interfere in any material respect with the performance of such VC Shareholder’s obligations hereunder or the transactions contemplated hereby or, subject to the following sentence, otherwise make any representation or warranty of such VC Shareholder herein untrue or incorrect in any material respect. If any involuntary Transfer of any of such VC Shareholder’s Subject Shares shall occur (including, but not limited to, a sale by such VC Shareholder’s trustee in any bankruptcy, or a sale to a purchaser at any creditor’s or court sale), the transferee (which term, as used herein, shall include any and all transferees and subsequent transferees of the initial transferee) shall take and hold such VC Shareholder’s Subject Shares subject to all of the restrictions, liabilities and rights under this Agreement as a VC Shareholder for all purposes hereunder. Such VC Shareholder agrees that it shall not, and shall cause each of its controlled Affiliates not to, become a member of a “group” (as defined under Section 13(d) of the Exchange Act) with respect to any equity interests in the Company for the purpose of opposing or competing with or taking any actions inconsistent with the transactions contemplated by the Transaction Agreement. Each VC Shareholder hereby authorizes the Investor to direct the Company to impose stop orders to prevent the Transfer of any of such VC Shareholder’s Subject Shares in violation of this Agreement.

 

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Section 5.02. Actions . Such VC Shareholder hereby agrees not to commence or participate in, and agrees to take all actions necessary to opt out of any class in any class action with respect to, any claim, whether derivative or otherwise, against the Investor, the Company or any of their respective Affiliates, or their respective boards of directors, relating to the negotiation, execution or delivery of this Agreement, the Transaction Agreement or the other Transaction Documents, or the consummation of the transactions contemplated hereby or thereby, including any such claim (A) challenging the validity of, or seeking to enjoin the operation of, any provision of this Agreement or (B) alleging a breach of any fiduciary duty of the Company Board in connection with the Transaction Agreement or the transactions contemplated thereby. For the avoidance of doubt, nothing in this Section 5.02 shall prevent such VC Shareholder from commencing or participating in any action or claim against the Investor for breaches of this Agreement.

Section 5.03. Documentation and Information . Except as required by Applicable Law (including the filing of a Schedule 13D with the SEC, which may include this Agreement as an exhibit thereto), such VC Shareholder shall not make any public announcement regarding this Agreement, the Transaction Agreement, the other Transaction Documents or the transactions contemplated hereby and thereby without the prior written consent of the Investor. Each VC Shareholder (i) consents to and authorizes the publication and disclosure by the Investor of such VC Shareholder’s identity and holding of such VC Shareholder’s Subject Shares, the nature of such VC Shareholder’s commitments, arrangements and understandings under this Agreement (including, for the avoidance of doubt, the disclosure of this Agreement) and any other information regarding such VC Shareholder, in each case, that the Investor reasonably determines is required to be disclosed by Applicable Law in the Offer Documents, the Company Proxy Statement (including all schedules and documents filed with the SEC), or any other disclosure document in connection with the Offer (including a Schedule 13D), the Issuance and any other transaction contemplated by the Transaction Agreement, and the inclusion of any such information in any press release; provided , however , that the Investor shall provide such VC Shareholder with the right to review any such disclosure document or press release that contains the name of or information specific to such VC Shareholder as soon as reasonably practicable prior to filing or publication and will consider the comments of such VC Shareholder in good faith, and (ii) agrees promptly to give the Investor any information it may reasonably request in connection with the preparation of any such disclosure documents; provided that the Investor may only use such information for the purpose for which it is explicitly provided by such VC Shareholder. Each VC Shareholder agrees to promptly notify the Investor of any required corrections with respect to any information supplied by or on behalf of such VC Shareholder specifically for use in any such disclosure document, if and to the extent that any such information shall have become false or misleading in any material respect.

 

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Section 5.04. No Solicitation . Such VC Shareholder shall not, and such VC Shareholder shall not authorize or permit any of its Representatives to, directly or indirectly, (i) solicit, initiate or take any action to knowingly assist, facilitate or encourage the submission of any Acquisition Proposal, or (ii) (A) enter into or participate in any discussions or negotiations with or furnish any information relating to the Company or any of its Subsidiaries or afford access to the business, properties, assets, books or records of the Company or any of its Subsidiaries to, or (B) otherwise cooperate in any way with, or knowingly assist, participate in, facilitate or encourage any effort by any Third Party that has made, is seeking to make or would be reasonably expected to make an Acquisition Proposal.

Section 5.05. Notice of Certain Events . Such VC Shareholder shall notify the Investor of any fact, change or development occurring or arising after the date hereof that causes, or would reasonably be expected to cause, any breach in any material respect of any representation, warranty, covenant or agreement of such VC Shareholder hereunder.

Section 5.06. Adjustments . In the event of any stock split, stock dividend, merger, reorganization, recapitalization, reclassification, combination, exchange of shares or the like of the capital stock of the Company on, of or affecting the Subject Shares, then the terms of this Agreement shall apply to the Shares received in respect of the Subject Shares by such VC Shareholder immediately following the effectiveness of the events described in this Section 5.06, as though they were Subject Shares hereunder.

Section 5.07. Directors and Officers . Notwithstanding any provision of this Agreement to the contrary, nothing contained in this Agreement shall limit, restrict or otherwise affect any Representative of any VC Shareholder, in such individual’s capacity as a director of the Company, from acting in such capacity, subject to the applicable provisions in the Transaction Agreement.

Section 5.08. Reasonable Best Efforts. From the date hereof until the Closing Date, each VC Shareholder shall (a) use its reasonable best efforts to prepare and file as promptly as practicable with any Governmental Authority or other Third Party all documentation to effect all necessary Filings in connection with the transactions contemplated by this Agreement or the Transaction Agreement, and provide the Investor as promptly as practicable with any information that is necessary in connection with the preparation and filing of such Filings; provided that the Investor may only use such information for the purpose for which it is explicitly provided by such VC Shareholder, and (b) at the Investor’s request, reasonably cooperate with the Investor in connection with the Investor’s efforts to obtain and maintain all approvals, consents, registrations, permits, authorizations and other confirmations required to be obtained from any Governmental Authority or other Third Party that are necessary to consummate the transactions contemplated by this Agreement; provided that the Investor shall reimburse each VC Shareholder for its reasonable, documented, out-of-pocket expenses incurred by such VC Shareholder in connection with such cooperation.

 

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ARTICLE 6

M ISCELLANEOUS

Section 6.01. Notices . All notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission or email, so long as a receipt of such facsimile transmission or email is requested and received) and shall be given,

if to the Investor, to:

Roche Holdings, Inc.

1 DNA Way

South San Francisco, California 94080

Attention: General Counsel

Fax: (650) 225-6000

with a copy to:

F. Hoffmann-La Roche Ltd

Group Legal Department

Grenzacherstrasse 124

CH-4070 Basel, Switzerland

Attention: Dr. Beat Kraehenmann

Fax: +41 61 688 13 96

with a copy (which shall not constitute notice) to:

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, New York 10017

Attention:   Arthur F. Golden
  Marc O. Williams

Facsimile No.: (212) 701-5800

Email:   arthur.golden@davispolk.com
  marc.williams@davispolk.com

if to a VC Shareholder, as set forth in the signature page hereof,

 

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or to such other address or facsimile number as such party may hereafter specify for the purpose by notice to the other parties hereto. All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. on a business day in the place of receipt (other than a Tender Statement, which shall be deemed received by the VC Shareholders on the Expiration Date as long as it is delivered prior to 9:00 p.m., New York City time, on the Expiration Date). Otherwise, any such notice, request or communication shall be deemed to have been received on the next succeeding business day in the place of receipt.

Section 6.02. Termination . This Agreement shall terminate automatically, without any notice or other action by any Person, upon the first to occur of (i) the termination of the Transaction Agreement in accordance with its terms, (ii) the Acceptance Time and (iii) the mutual written consent of all of the parties hereto. In addition, this Agreement may be terminated with respect to any VC Shareholder at any time following any reduction to the Offer Price upon written notice by such VC Shareholder to the Investor. Upon termination of this Agreement, no party shall have any further obligations or liabilities under this Agreement. Notwithstanding the foregoing, the provisions of this Article 6 shall survive any termination of this Agreement and no termination of this Agreement shall relieve any party from liability for any breach of this Agreement prior to termination hereof or such party’s fraud.

Section 6.03. Further Assurances .

(a) The Investor and each VC Shareholder will each execute and deliver, or cause to be executed and delivered, all further documents and instruments as the other party may reasonably request and use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things required under Applicable Law to consummate and make effective the transactions contemplated by this Agreement.

(b) The Investor and each VC Shareholder shall use their respective reasonable best efforts to take all actions necessary and advisable to consummate the actions contemplated by Article 1, including causing such VC Shareholder to become the record holder of such VC Shareholder’s Subject Shares and/or to hold such Subject Shares directly (rather than through the Depository Trust Company).

Section 6.04. Other Definitional and Interpretative Provisions. Unless specified otherwise, in this Agreement the obligations of any party consisting of more than one person are joint and several. The words “hereof,” “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Articles and Sections are to Articles and Sections of this Agreement unless otherwise specified. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation,” whether or not they are in fact followed by those words or words of like import. “Writing,” “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any statute, rule or regulation shall be deemed to refer to such statute, rule or regulation as amended or supplemented from time to time, including through the promulgation of applicable rules or regulations. References to any Contract are to that Contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. References to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively. References to one gender include all genders.

 

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Section 6.05. No Ownership Interest . Except pursuant to the terms of this Agreement and in connection with the consummation of the Offer, (i) nothing contained in this Agreement shall be deemed to vest in the Investor any direct or indirect ownership or incidence of ownership of or with respect to any Subject Shares and (ii) all rights, ownership and economic benefits of and relating to the Subject Shares shall remain vested in and belong to the applicable VC Shareholder, and the Investor shall have no authority to direct such VC Shareholder in the voting or disposition of any of the Subject Shares, except as otherwise provided herein.

Section 6.06. Amendments and Waivers .

(a) Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by the Investor and each VC Shareholder or, in the case of a waiver, by each party against whom the waiver is to be effective.

(b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

Section 6.07. Expenses . Except as set forth in Section 5.08(b), all costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense.

Section 6.08. Binding Effect; Benefit; Assignment .

(a) The provisions of this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. No provision of this Agreement is intended to confer any rights, benefits, remedies, obligations or liabilities hereunder upon any Person other than the parties hereto and their respective successors and assigns.

(b) No party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other parties hereto, except that the Investor may transfer or assign its rights and obligations to any Affiliate of the Investor; provided that any such transfer or assignment prior to the Offer Closing Date shall not relieve the Investor of its obligations under this Agreement.

 

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Section 6.09. Governing Law. This Agreement and all claims and causes of action arising out of or relating to this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of law rules of such state.

Section 6.10. Jurisdiction . The parties hereto agree that any Proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby (whether brought by any party or any of its Affiliates or against any party or any of its Affiliates) shall be brought in the Delaware Court of Chancery or, if such court shall not have jurisdiction, any federal court located in the State of Delaware or other Delaware state court, and each of the parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such Proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such Proceeding in any such court or that any such Proceeding brought in any such court has been brought in an inconvenient forum. Process in any such Proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 6.01 shall be deemed effective service of process on such party.

Section 6.11 . WAIVER OF JURY TRIAL . EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 6.12 . Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by all of the other parties hereto; provided that this Agreement shall not be effective until the Transaction Agreement is executed by all parties thereto. Until and unless each party has received a counterpart hereof signed by the other party hereto, this Agreement shall have no effect and no party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication).

Section 6.13 . Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter hereof and thereof.

 

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Section 6.14. Severability . If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other Governmental Authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated 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 a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

Section 6.15. 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 that the non-breaching party shall 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 courts referred to in Section 6.10, in addition to any other remedy to which they are entitled at law or in equity.

Section 6.16 Shareholder Obligations Several and Not Joint . The obligations of each VC Shareholder hereunder shall be several and not joint and no VC Shareholder shall be liable for any breach of the terms of this Agreement by any other VC Shareholder.

Section 6.17 No Agreement Until Executed . Irrespective of negotiations among the parties or the exchanging of drafts of this Agreement, this Agreement shall not constitute or be deemed to evidence a contract, agreement, arrangement or understanding between the parties hereto unless and until (a) the Transaction Agreement is executed by all parties thereto and (b) this Agreement is executed by all parties hereto (which the parties agree has occurred immediately following the execution of the Transaction Agreement by all parties thereto).

Section 6.18. Equal Treatment . It is acknowledged that, in connection with the transactions contemplated by the Transaction Agreement, the Investor may enter, or has entered, into the Tender and Support Agreements with the VC Funds other than the VC Shareholders. To the extent that any such Tender and Support Agreement grants to any VC Fund rights thereunder that are more favorable to such VC Fund than the rights of the VC Shareholders set forth herein (other than with respect to Section 1.01(a)(ii)) or waives a material obligation of such VC Fund that is also set forth herein, the Investor agrees that it shall offer the same rights or waiver, as applicable, to the VC Shareholders; provided , however , the Investor’s obligation with respect to Section 1.01(a)(ii) only applies to the extent Affiliates of Third Rock Ventures, L.P. are granted more favorable rights, or receive a waiver of the obligations of such VC Fund, in each case with respect to the subject matter covered by Section 1.01(a)(ii). Each such offer shall be made by the Investor’s prompt delivery to the VC Shareholders of the text of the applicable rights or waiver, as applicable, and such offer shall be deemed declined by the VC Shareholders if not accepted by such VC Shareholders in writing within 10 Business Days after such offer is delivered. The Investor shall attach a schedule to this Agreement that reflects any such rights or waivers, as applicable, that are accepted by the VC Shareholders, and such schedule shall become a part of this Agreement. All determinations with respect to the VC Shareholders’ rights under this paragraph shall be made by the Investor taking into account all facts and circumstances applicable at the time of determination.

 

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[ Signature Page Follows ]

 

15


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

 

ROCHE HOLDINGS, INC.
By:  

 

  Name:
  Title:

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

 

KLEINER PERKINS CAUFIELD & BYERS XIV, LLC
By:  

 

Name:  
Title:  
KPCB XIV FOUNDERS FUND, LLC
By:  

 

Name:  
Title:  

 

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Schedule A

 

Name of VC Shareholder

   # of Subject Shares      Minimum Tender
Percentage
 

Kleiner Perkins Caufield & Byers XIV, LLC

     2,602,637         50

KPCB XIV Founders Fund, LLC

     220,179         50

 

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Exhibit 99.3

EXECUTION

TENDER AND SUPPORT AGREEMENT

TENDER AND SUPPORT AGREEMENT (this “ Agreement ”) dated as of January 11, 2015 by and among Roche Holdings, Inc., a Delaware corporation (the “ Investor ”), and the entity listed on Schedule A hereto (the “ VC Shareholder ”).

WHEREAS , as of the date hereof, the VC Shareholder is the beneficial owner (as defined in Rule 13d-3 promulgated under the Exchange Act) of shares (“ Shares ”) of common stock, par value $0.0001 per share, of Foundation Medicine, Inc., a Delaware corporation (the “ Company ”) (all Shares beneficially owned by such VC Shareholder (including those set forth opposite such VC Shareholder’s name on Schedule A ) and any additional Shares with respect to which such VC Shareholder becomes the beneficial owner after the date hereof, but excluding any Shares Transferred by such VC Shareholder in compliance with Section 5.01 hereof, such VC Shareholder’s “ Subject Shares ”);

WHEREAS , the Investor and the Company are concurrently herewith entering into a Transaction Agreement dated as of the date hereof (as it may be amended from time to time, the “ Transaction Agreement ”), which provides, among other things, for the Investor to commence the Offer upon the terms and subject to the conditions set forth in the Transaction Agreement (capitalized terms used but not otherwise defined herein having the meanings ascribed to such terms in the Transaction Agreement);

WHEREAS , as an inducement to and condition of the Investor’s willingness to enter into the Transaction Agreement and the other Transaction Documents, the VC Shareholder has agreed to enter into this Agreement.

NOW, THEREFORE , in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, do hereby agree as follows:

ARTICLE 1

A GREEMENT TO T ENDER

Section 1.01. Agreement to Tender . (a) Upon the terms and subject to the conditions of this Agreement, the VC Shareholder agrees to validly tender or cause to be tendered in the Offer (pursuant to and in accordance with the terms of the Offer and provided that the Offer Price does not decrease), a number of such VC Shareholder’s Subject Shares, free and clear of all Liens (other than applicable transfer restrictions under the Securities Act), at least equal to such VC Shareholder’s Minimum Tender Amount (it being agreed that such VC Shareholder’s Subject Shares that are covered by clause (i) of the definition of Minimum Tender Amount shall be validly tendered prior to 4:00 p.m., New York City time, on the Expiration Date).

(b) For purposes of this Agreement:

(i) “ Expiration Date ” means the date on which the Expiration Time occurs;


(ii) “ Minimum Tender Amount ” means the higher of (i) (x) the total number of the applicable VC Shareholder’s Subject Shares multiplied by (y) the percentage set forth opposite such VC Shareholder’s name on Schedule A under the heading “Minimum Tender Percentage,” and (ii) in the event the Investor delivers a Tender Statement (as defined below) from the depositary designated in the Offer (the “ Depositary ”) prior to 9:00 p.m., New York City time, on the Expiration Date (as defined below), (x) the total number of such VC Shareholder’s Subject Shares multiplied by (y) the Tendered Share Ratio (as defined below);

(iii) “ Tender Statement ” means a statement, based on information provided by the Depositary, setting forth the Tendered Share Amount and the Tendered Share Ratio;

(iv) “ Tendered Share Amount ” means the number of Shares validly tendered into the Offer and not validly withdrawn by the shareholders of the Company (excluding Shares tendered pursuant to notices of guaranteed delivery for which Shares have not been delivered) other than the VC Shareholders (as defined in each of the Tender and Support Agreements) (collectively, the “ VC Funds ”) as of no earlier than 6:00 p.m., New York City time, on the Expiration Date; and

(v) “ Tendered Share Ratio ” means a fraction, (i) the numerator of which is the Tendered Share Amount and (ii) the denominator of which is the total number of outstanding Shares at the close of trading on the trading day prior to the Expiration Date (or as close to such time as is reasonably practicable) held by shareholders of the Company other than (x) the VC Funds and (y) the Investor or any of its Affiliates.

(c) In furtherance of the foregoing, at the time of any tender by a VC Shareholder as required by Section 1.01, such VC Shareholder shall (i) deliver to the Depositary (A) a letter of transmittal complying with the terms of the Offer with respect to the Subject Shares that such VC Shareholder is required to tender pursuant to Section 1.01, as applicable, (B) a certificate or certificates representing such Subject Shares or, in the case of a book-entry transfer of such Subject Shares, an “agent’s message” (or such other evidence of transfer as the Depositary may reasonably request) and (C) all other documents or instruments, to the extent applicable, required to be delivered by other shareholders of the Company pursuant to the terms of the Offer, and/or (ii) instruct its broker or such other Person that is the holder of record of such Subject Shares to tender such Subject Shares pursuant to and in accordance with the terms of the Offer. The VC Shareholder agrees that once such Subject Shares are tendered, such VC Shareholder will not withdraw or cause to be withdrawn any of such Subject Shares from the Offer, unless and until this Agreement shall have been terminated in accordance with Section 6.02. No VC Shareholder shall tender any Subject Shares pursuant to a notice of guaranteed delivery.

 

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ARTICLE 2

V OTING A GREEMENT ; G RANT OF P ROXY

Section 2.01. Voting Agreement .

(a) From the date hereof until termination of this Agreement in accordance with Section 6.02, the VC Shareholder hereby agrees:

(i) to vote or exercise its right to consent with respect to all Subject Shares that such VC Shareholder is entitled to vote at the time of any vote or action by written consent in favor of any proposal (A) to approve and adopt the Transaction Agreement and the other Transaction Documents (including the Investor’s rights under Section 4.03 of the Investor Rights Agreement) (or in each case any amended version thereof; provided that such amendment is not materially adverse to such VC Shareholder and does not increase the obligations of such VC Shareholder), the Company Charter Amendment, the Issuance and all agreements related to the Investment and any actions related thereto at any meeting of the shareholders of the Company (each, a “ Company Shareholders Meeting ”), and at any adjournment thereof, at which such matters, or such other actions, are submitted for the consideration and vote of the shareholders of the Company and (B) to adjourn or postpone such meeting to a later date if there are not sufficient votes for adoption of any such matters or actions at any Company Shareholders Meeting; and

(ii) that it will not vote any of its Subject Shares in favor of, or consent to, and will vote against and not consent to, the approval of any (A) reorganization, recapitalization, liquidation or winding-up of the Company or any other extraordinary transaction involving the Company (other than the Investment) or (B) action or Contract that would reasonably be expected to frustrate the purposes of, impede, hinder, interfere with, prevent, delay or materially and adversely affect the consummation of the transactions contemplated by the Transaction Agreement or any other Transaction Document, including any Contract related to an Acquisition Proposal.

Section 2.02. Irrevocable Proxy . The VC Shareholder hereby revokes any and all previous proxies granted with respect to its Subject Shares in connection with any of the matters covered by Section 2.01(a). By entering into this Agreement, the VC Shareholder hereby grants a proxy appointing the Investor as such VC Shareholder’s attorney-in-fact and proxy, with full power of substitution, for and in such VC Shareholder’s name, to vote, express consent or dissent, or otherwise to utilize such voting power, in each case solely to the extent and in the manner specified in Section 2.01(a). The foregoing proxy shall be deemed to be a proxy coupled with an interest, is irrevocable and shall not be terminated by operation of law or upon the occurrence of any event; provided that the proxy granted by the VC Shareholder in accordance with this

 

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Section 2.02 shall be deemed revoked automatically upon termination of this Agreement in accordance with its terms. The VC Shareholder hereby affirms that the irrevocable proxy set forth in this Section 2.02 is given in connection with and granted in consideration of, and as an inducement to, the Investor entering into the Transaction Agreement and the other Transaction Documents.

ARTICLE 3

R EPRESENTATIONS AND W ARRANTIES OF THE VC S HAREHOLDER

The VC Shareholder represents and warrants to the Investor as to such VC Shareholder as of the date hereof, the date of any Company Shareholders Meeting and the Acceptance Time (other than representations and warranties expressly stated to be given or made as of a specific time, which shall only be made as of such time) that:

Section 3.01. Organization; Authorization; Binding Agreement . Such VC Shareholder is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and the consummation of the transactions contemplated hereby are within such VC Shareholder’s corporate or organizational powers and have been duly authorized by all necessary corporate or organizational actions on the part of such VC Shareholder. Such VC Shareholder has full corporate or organizational power and authority to execute, deliver and perform this Agreement. This Agreement has been duly and validly executed and delivered by such VC Shareholder, and constitutes a legal, valid and binding obligation of such VC Shareholder enforceable against such VC Shareholder in accordance with its terms, subject to the effects of applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally and general equitable principles.

Section 3.02. Non-Contravention . The execution, delivery and performance by such VC Shareholder of this Agreement and the consummation of the transactions contemplated hereby do not and will not (i) contravene, conflict with, or result in any violation or breach of any provision of the organizational documents of such VC Shareholder, (ii) contravene, conflict with or result in a violation or breach of any provision of any Applicable Law, (iii) require any payment to or consent or other action by any Person under, constitute a breach or default, or an event that, with or without notice or lapse of time or both, would constitute a breach or default, under, or cause or permit the termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit to which such VC Shareholder is entitled under any provision of any Contract binding on, or any Permit of, such VC Shareholder or any Contract or Permit affecting, or relating in any way to, the assets or business of such VC Shareholder or (iv) result in the creation or imposition of any Lien on any of the Subject Shares, with only such exceptions, in the case of each of clauses (ii) and (iii), for such matters as would not reasonably be expected to, individually or in the aggregate, prevent or materially delay or impair the consummation by such VC Shareholder of the transactions contemplated by this Agreement or otherwise adversely impact such VC Shareholder’s ability to perform its obligations hereunder in any material respect or on a timely basis.

 

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Section 3.03. Ownership of Subject Shares .

(a) Except for Subject Shares Transferred after the date hereof in accordance with Section 5.01, such VC Shareholder is the beneficial owner (as defined in Rule 13d-3 promulgated under the Exchange Act) of such VC Shareholder’s Subject Shares and has good and marketable title to such Subject Shares free and clear of any Liens, claims, options, rights, understandings or arrangements or any other encumbrances, limitations or restrictions whatsoever (including, but not limited to, any restriction on the right to vote or dispose of such Subject Shares), except as set forth herein or pursuant to any applicable restrictions on transfer under the Securities Act. Except for the Investor pursuant to this Agreement, no Person has any contractual or other right or obligation to purchase or otherwise acquire any of such VC Shareholder’s Subject Shares. Except for this Agreement, none of such VC Shareholder’s Subject Shares are subject to any voting agreement, voting trust or other agreement or arrangement, including, but not limited to, any proxy, consent or power of attorney.

(b) Except for any Subject Shares acquired after the date hereof, other than the Subject Shares set forth opposite such VC Shareholder’s name on Schedule A , neither such VC Shareholder nor, to such VC Shareholder’s knowledge after reasonable inquiry, any of its controlled Affiliates (other than (i) any portfolio company of any fund entity to which such VC Shareholder or one of its Affiliates serves as an advisor or (ii) any individual that may be an Affiliate of such VC Shareholder that owns shares in his/her individual capacity) beneficially owns any (i) shares of capital stock or other voting securities of, or ownership interests in, the Company, (ii) securities of the Company convertible or exchangeable into, or exercisable for, shares of capital stock or other voting securities of or ownership interests in the Company or (iii) warrants, calls, options or other rights to acquire from the Company any of the foregoing.

Section 3.04. Reliance . Such VC Shareholder has had the opportunity to review this Agreement, the Transaction Agreement and the other Transaction Documents with counsel of such VC Shareholder’s own choosing. Such VC Shareholder understands and acknowledges that the Investor and the Company are entering into the Transaction Agreement and the other Transaction Documents in reliance upon such VC Shareholder’s execution, delivery and performance of this Agreement.

Section 3.05 . Absence of Litigation. There is no Proceeding pending against or, to the knowledge of such VC Shareholder, threatened against or affecting (i) such VC Shareholder or any of its properties or assets (including such VC Shareholder’s Subject Shares) or (ii) to such VC Shareholder’s knowledge after reasonable inquiry, any of its controlled Affiliates or any of their respective properties or assets, in each case before or by any Governmental Authority or arbitrator that would reasonably be expected to prevent or materially delay or impair the consummation by such VC Shareholder of the transactions contemplated by this Agreement or otherwise adversely impact such VC Shareholder’s ability to perform its obligations hereunder in any material respect or on a timely basis.

 

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Section 3.06. Brokers . There is no investment banker, broker, finder or other intermediary who might be entitled to any fee or commission from the Investor, the Company or any of their respective Affiliates in respect of this Agreement, the Transaction Agreement or any of the other Transaction Documents based upon any arrangement or agreement made by or on behalf of such VC Shareholder or any of its Affiliates.

ARTICLE 4

R EPRESENTATIONS AND W ARRANTIES OF T HE I NVESTOR

The Investor represents and warrants to the VC Shareholder, as of the date hereof and as of the Acceptance Time, that:

Section 4.01. Organization; Authorization; Binding Agreement . The Investor is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. The consummation of the transactions contemplated hereby is within the Investor’s corporate powers and has been duly authorized by all necessary corporate actions on the part of the Investor. The Investor has full corporate power and authority to execute, deliver and perform this Agreement. This Agreement has been duly authorized, executed and delivered by the Investor and constitutes a legal, valid and binding obligation of the Investor enforceable against the Investor in accordance with its terms, subject to the effects of applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally and general equitable principles.

Section 4.02. Non-Contravention . The execution, delivery and performance by the Investor of this Agreement and the consummation of the transactions contemplated hereby do not and will not (i) contravene, conflict with, or result in any violation or breach of any provision of the organizational documents of the Investor, (ii) contravene, conflict with or result in a violation or breach of any provision of any Applicable Law, (iii) require any payment to or consent or other action by any Person under, constitute a breach or default, or an event that, with or without notice or lapse of time or both, would constitute a breach or default, under, or cause or permit the termination, cancellation, acceleration or other change of any right or obligation or the loss of any benefit to which the Investor is entitled under any provision of any Contract binding on, or any Permit of, the Investor or any Contract or Permit affecting, or relating in any way to, the assets or business of the Investor or (iv) result in the creation or imposition of any Lien on any assets of properties of the Investor, with only such exceptions, in the case of each of clauses (ii) through (iv), for such matters as would not reasonably be expected to, individually or in the aggregate, prevent or materially delay or impair the consummation by the Investor of the transactions contemplated by this Agreement or otherwise adversely impact the Investor’s ability to perform its obligations hereunder in any material respect or on a timely basis.

 

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ARTICLE 5

A DDITIONAL C OVENANTS OF THE VC S HAREHOLDER

The VC Shareholder hereby covenants and agrees that, until the termination of this Agreement in accordance with its terms:

Section 5.01. No Transfer; No Inconsistent Arrangements . Except pursuant to the express terms of this Agreement, such VC Shareholder shall not (and shall not permit any Person under such VC Shareholder’s control to), without the prior written consent of the Investor, directly or indirectly, (i) grant any proxies, powers of attorney, rights of first offer or refusal or enter into any voting trust with respect to any of such VC Shareholder’s Subject Shares, (ii) sell (including short sell), assign, transfer, tender, pledge, encumber, grant a participation interest in, hypothecate or otherwise dispose of (including by gift) (each, a “ Transfer ”) any of such VC Shareholder’s Subject Shares, (iii) otherwise permit any Liens to be created on any of such VC Shareholder’s Subject Shares, (iv) enter into any contract, agreement, option, instrument or other arrangement or understanding with respect to the direct or indirect Transfer of, any of such VC Shareholder’s Subject Shares, or (v) take any other action that would restrict, limit or interfere in any material respect with the performance of such VC Shareholder’s obligations hereunder or the transactions contemplated hereby or, subject to the following sentence, otherwise make any representation or warranty of such VC Shareholder herein untrue or incorrect in any material respect. If any involuntary Transfer of any of such VC Shareholder’s Subject Shares shall occur (including, but not limited to, a sale by such VC Shareholder’s trustee in any bankruptcy, or a sale to a purchaser at any creditor’s or court sale), the transferee (which term, as used herein, shall include any and all transferees and subsequent transferees of the initial transferee) shall take and hold such VC Shareholder’s Subject Shares subject to all of the restrictions, liabilities and rights under this Agreement as a VC Shareholder for all purposes hereunder. Such VC Shareholder agrees that it shall not, and shall cause each of its controlled Affiliates not to, become a member of a “group” (as defined under Section 13(d) of the Exchange Act) with respect to any equity interests in the Company for the purpose of opposing or competing with or taking any actions inconsistent with the transactions contemplated by the Transaction Agreement. The VC Shareholder hereby authorizes the Investor to direct the Company to impose stop orders to prevent the Transfer of any of such VC Shareholder’s Subject Shares in violation of this Agreement.

Section 5.02. Actions . Such VC Shareholder hereby agrees not to commence or participate in, and agrees to take all actions necessary to opt out of any class in any class action with respect to, any claim, whether derivative or otherwise, against the Investor, the Company or any of their respective Affiliates, or their respective boards of directors, relating to the negotiation, execution or delivery of this Agreement, the Transaction Agreement or the other Transaction Documents, or the consummation of the transactions contemplated hereby or thereby, including any such claim (A) challenging the validity of, or seeking to enjoin the operation of, any provision of this Agreement or (B) alleging a breach of any fiduciary duty of the Company Board in connection with the Transaction Agreement or the transactions contemplated thereby. For the avoidance of doubt, nothing in this Section 5.02 shall prevent such VC Shareholder from commencing or participating in any action or claim against the Investor for breaches of this Agreement.

 

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Section 5.03. Documentation and Information . Except as required by Applicable Law (including the filing of a Schedule 13D with the SEC, which may include this Agreement as an exhibit thereto), such VC Shareholder shall not make any public announcement regarding this Agreement, the Transaction Agreement, the other Transaction Documents or the transactions contemplated hereby and thereby without the prior written consent of the Investor. The VC Shareholder (i) consents to and authorizes the publication and disclosure by the Investor of such VC Shareholder’s identity and holding of such VC Shareholder’s Subject Shares, the nature of such VC Shareholder’s commitments, arrangements and understandings under this Agreement (including, for the avoidance of doubt, the disclosure of this Agreement) and any other information regarding such VC Shareholder, in each case, that the Investor reasonably determines is required to be disclosed by Applicable Law in the Offer Documents, the Company Proxy Statement (including all schedules and documents filed with the SEC), or any other disclosure document in connection with the Offer (including a Schedule 13D), the Issuance and any other transaction contemplated by the Transaction Agreement, and the inclusion of any such information in any press release; provided, however, that the Investor shall provide such VC Shareholder with the right to review any such disclosure document or press release that contains the name of or information specific to such VC Shareholder as soon as reasonably practicable prior to filing or publication and will consider the comments of such VC Shareholder in good faith, and (ii) agrees promptly to give the Investor any information it may reasonably request in connection with the preparation of any such disclosure documents; provided that the Investor may only use such information for the purpose for which it is explicitly provided by such VC Shareholder. The VC Shareholder agrees to promptly notify the Investor of any required corrections with respect to any information supplied by or on behalf of such VC Shareholder specifically for use in any such disclosure document, if and to the extent that any such information shall have become false or misleading in any material respect.

Section 5.04. No Solicitation . Such VC Shareholder shall not, and such VC Shareholder shall not authorize or permit any of its Representatives to, directly or indirectly, (i) solicit, initiate or take any action to knowingly assist, facilitate or encourage the submission of any Acquisition Proposal, or (ii) (A) enter into or participate in any discussions or negotiations with or furnish any information relating to the Company or any of its Subsidiaries or afford access to the business, properties, assets, books or records of the Company or any of its Subsidiaries to, or (B) otherwise cooperate in any way with, or knowingly assist, participate in, facilitate or encourage any effort by any Third Party that has made, is seeking to make or would be reasonably expected to make an Acquisition Proposal.

Section 5.05. Notice of Certain Events . Such VC Shareholder shall notify the Investor of any fact, change or development occurring or arising after the date hereof that causes, or would reasonably be expected to cause, any breach in any material respect of any representation, warranty, covenant or agreement of such VC Shareholder hereunder.

 

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Section 5.06. Adjustments . In the event of any stock split, stock dividend, merger, reorganization, recapitalization, reclassification, combination, exchange of shares or the like of the capital stock of the Company on, of or affecting the Subject Shares, then the terms of this Agreement shall apply to the Shares received in respect of the Subject Shares by such VC Shareholder immediately following the effectiveness of the events described in this Section 5.06, as though they were Subject Shares hereunder.

Section 5.07. Directors and Officers . Notwithstanding any provision of this Agreement to the contrary, nothing contained in this Agreement shall limit, restrict or otherwise affect any Representative of the VC Shareholder, in such individual’s capacity as a director of the Company, from acting in such capacity, subject to the applicable provisions in the Transaction Agreement.

Section 5.08. Reasonable Best Efforts. From the date hereof until the Closing Date, the VC Shareholder shall (a) use its reasonable best efforts to prepare and file as promptly as practicable with any Governmental Authority or other Third Party all documentation to effect all necessary Filings in connection with the transactions contemplated by this Agreement or the Transaction Agreement, and provide the Investor as promptly as practicable with any information that is necessary in connection with the preparation and filing of such Filings; provided that the Investor may only use such information for the purpose for which it is explicitly provided by such VC Shareholder, and (b) at the Investor’s request, reasonably cooperate with the Investor in connection with the Investor’s efforts to obtain and maintain all approvals, consents, registrations, permits, authorizations and other confirmations required to be obtained from any Governmental Authority or other Third Party that are necessary to consummate the transactions contemplated by this Agreement; provided that the Investor shall reimburse the VC Shareholder for its reasonable, documented, out-of-pocket expenses incurred by such VC Shareholder in connection with such cooperation.

ARTICLE 6

M ISCELLANEOUS

Section 6.01. Notices . All notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission or email, so long as a receipt of such facsimile transmission or email is requested and received) and shall be given,

if to the Investor, to:

Roche Holdings, Inc.

1 DNA Way

South San Francisco, California 94080

Attention: General Counsel

Fax: (650) 225-6000

 

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with a copy to:

F. Hoffmann-La Roche Ltd

Group Legal Department

Grenzacherstrasse 124

CH-4070 Basel, Switzerland

Attention: Dr. Beat Kraehenmann

Fax: +41 61 688 13 96

with a copy (which shall not constitute notice) to:

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, New York 10017

Attention:   Arthur F. Golden
  Marc O. Williams

Facsimile No.: (212) 701-5800

Email:   arthur.golden@davispolk.com
  marc.williams@davispolk.com

if to a VC Shareholder, as set forth in the signature page hereof,

or to such other address or facsimile number as such party may hereafter specify for the purpose by notice to the other parties hereto. All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. on a business day in the place of receipt (other than a Tender Statement, which shall be deemed received by the VC Shareholder on the Expiration Date as long as it is delivered prior to 9:00 p.m., New York City time, on the Expiration Date). Otherwise, any such notice, request or communication shall be deemed to have been received on the next succeeding business day in the place of receipt.

Section 6.02. Termination . This Agreement shall terminate automatically, without any notice or other action by any Person, upon the first to occur of (i) the termination of the Transaction Agreement in accordance with its terms, (ii) the Acceptance Time and (iii) the mutual written consent of all of the parties hereto. In addition, this Agreement may be terminated with respect to the VC Shareholder at any time following any reduction to the Offer Price upon written notice by such VC Shareholder to the Investor. Upon termination of this Agreement, no party shall have any further obligations or liabilities under this Agreement. Notwithstanding the foregoing, the provisions of this Article 6 shall survive any termination of this Agreement and no termination of this Agreement shall relieve any party from liability for any breach of this Agreement prior to termination hereof or such party’s fraud.

Section 6.03. Further Assurances .

(a) The Investor and the VC Shareholder will each execute and deliver, or cause to be executed and delivered, all further documents and instruments as the other party may reasonably request and use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things required under Applicable Law to consummate and make effective the transactions contemplated by this Agreement.

 

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(b) The Investor and each VC Shareholder shall use their respective reasonable best efforts to take all actions necessary and advisable to consummate the actions contemplated by Article 1, including causing such VC Shareholder to become the record holder of such VC Shareholder’s Subject Shares and/or to hold such Subject Shares directly (rather than through the Depository Trust Company).

Section 6.04. Other Definitional and Interpretative Provisions . Unless specified otherwise, in this Agreement the obligations of any party consisting of more than one person are joint and several. The words “hereof,” “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Articles and Sections are to Articles and Sections of this Agreement unless otherwise specified. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation,” whether or not they are in fact followed by those words or words of like import. “Writing,” “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any statute, rule or regulation shall be deemed to refer to such statute, rule or regulation as amended or supplemented from time to time, including through the promulgation of applicable rules or regulations. References to any Contract are to that Contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. References to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively. References to one gender include all genders.

Section 6.05. No Ownership Interest . Except pursuant to the terms of this Agreement and in connection with the consummation of the Offer, (i) nothing contained in this Agreement shall be deemed to vest in the Investor any direct or indirect ownership or incidence of ownership of or with respect to any Subject Shares and (ii) all rights, ownership and economic benefits of and relating to the Subject Shares shall remain vested in and belong to the applicable VC Shareholder, and the Investor shall have no authority to direct such VC Shareholder in the voting or disposition of any of the Subject Shares, except as otherwise provided herein.

Section 6.06. Amendments and Waivers .

(a) Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by the Investor and the VC Shareholder or, in the case of a waiver, by each party against whom the waiver is to be effective.

 

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(b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

Section 6.07. Expenses . Except as set forth in Section 5.08(b), all costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense.

Section 6.08. Binding Effect; Benefit; Assignment .

(a) The provisions of this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. No provision of this Agreement is intended to confer any rights, benefits, remedies, obligations or liabilities hereunder upon any Person other than the parties hereto and their respective successors and assigns.

(b) No party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other parties hereto, except that the Investor may transfer or assign its rights and obligations to any Affiliate of the Investor; provided that any such transfer or assignment prior to the Offer Closing Date shall not relieve the Investor of its obligations under this Agreement.

Section 6.09. Governing Law . This Agreement and all claims and causes of action arising out of or relating to this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of law rules of such state.

Section 6.10. Jurisdiction . The parties hereto agree that any Proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby (whether brought by any party or any of its Affiliates or against any party or any of its Affiliates) shall be brought in the Delaware Court of Chancery or, if such court shall not have jurisdiction, any federal court located in the State of Delaware or other Delaware state court, and each of the parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such Proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such Proceeding in any such court or that any such Proceeding brought in any such court has been brought in an inconvenient forum. Process in any such Proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 6.01 shall be deemed effective service of process on such party.

Section 6.11. WAIVER OF JURY TRIAL . EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

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Section 6.12. Counterparts; Effectiveness . This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by all of the other parties hereto; provided that this Agreement shall not be effective until the Transaction Agreement is executed by all parties thereto. Until and unless each party has received a counterpart hereof signed by the other party hereto, this Agreement shall have no effect and no party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication).

Section 6.13. Entire Agreement . This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter hereof and thereof.

Section 6.14. Severability . If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other Governmental Authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated 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 a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

Section 6.15. 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 that the non-breaching party shall 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 courts referred to in Section 6.10, in addition to any other remedy to which they are entitled at law or in equity.

Section 6.16 Reserved .

Section 6.17 No Agreement Until Executed . Irrespective of negotiations among the parties or the exchanging of drafts of this Agreement, this Agreement shall not constitute or be deemed to evidence a contract, agreement, arrangement or understanding between the parties hereto unless and until (a) the Transaction Agreement is executed by all parties thereto and (b) this Agreement is executed by all parties hereto (which the parties agree has occurred immediately following the execution of the Transaction Agreement by all parties thereto).

 

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Section 6.18 Equal Treatment . It is acknowledged that, in connection with the transactions contemplated by the Transaction Agreement, the Investor may enter, or has entered, into the Tender and Support Agreements with the VC Funds other than the VC Shareholder. To the extent that any such Tender and Support Agreement grants to any VC Fund rights thereunder that are more favorable to such VC Fund than the rights of the VC Shareholder set forth herein, or waives a material obligation of such VC Fund that is also set forth herein, the Investor agrees that it shall offer the same rights or waiver, as applicable, to the VC Shareholder. Each such offer shall be made by the Investor’s prompt delivery to the VC Shareholder of the text of the applicable rights or waiver, as applicable, and such offer shall be deemed declined by a VC Shareholder if not accepted by such VC Shareholder in writing within 10 Business Days after such offer is delivered. The Investor shall attach a schedule to this Agreement that reflects any such rights or waivers, as applicable, that are accepted by the VC Shareholder, and such schedule shall become a part of this Agreement. All determinations with respect to the VC Shareholder’s rights under this paragraph shall be made by the Investor taking into account all facts and circumstances applicable at the time of determination.

[Signature Page Follows]

 

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EXECUTION

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.