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 5, 2017
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) |
Registrants 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) |
☐ | 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 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Summary
On January 6, 2017, Foundation Medicine, Inc. (the Company), announced the appointment of Troy Cox as the new Chief Executive Officer of the Company, effective February 6, 2017 (the Commencement Date). Upon the recommendation of the Nominating and Corporate Governance Committee of the Board of Directors of the Company (the Board), the Board increased the size of the Board to 10 directors and elected Mr. Cox to become a member of the Board effective as of the Commencement Date, to serve until the Companys 2017 annual meeting of stockholders or his earlier death, resignation, retirement or removal. Michael Pellini, M.D. will resign as Chief Executive Officer of the Company, effective as of the Commencement Date. Dr. Pellini will remain a member of the Board and will serve as Chairman of the Board as of the Commencement Date. Alexis Borisy will relinquish his position as Chairman of the Board, but will continue to serve on the Board of Directors following the Commencement Date.
Troy Cox
Mr. Cox, age 52, joins the Company from Genentech, Inc. (Genentech) where he has worked since February 2010, most recently as a Senior Vice President, BioOncology Sales & Marketing. Before joining Genentech, Mr. Cox was employed by UCB S.A. (UCB BioPharma), as the President, CNS Operations with responsibility for developing and commercializing therapeutics for diseases primarily related to the central nervous system. Prior to UCB BioPharma, Mr. Cox held senior commercial leadership roles with Sanofi-Aventis and Schering-Plough. Mr. Cox received a bachelors degree in business administration in finance from the University of Kentucky, as well as a masters degree in business administration from the University of Missouri.
In connection with his appointment, the Company and Mr. Cox have entered into a written employment agreement (the Employment Agreement), which provides for the following compensation terms for Mr. Cox. Mr. Cox will receive a base salary of approximately $550,000 per year and will be eligible to participate in the Companys performance-based cash incentive bonus program, with a target annual bonus equal to 70% of his base salary. Mr. Cox will also receive a one-time sign-on payment of $324,000 and an equity award of restricted stock units of the Company with an aggregate value of $4,750,000 pursuant to the Companys 2013 Stock Option and Incentive Plan (the Plan). The equity award will vest over a four-year period as follows: 25% will vest on the first anniversary of the grant date, and an additional 6.25% will vest on the first day of each subsequent quarter thereafter until all of the restricted stock united have vested. Mr. Cox is eligible to participate in the Companys employee benefit plans as in effect from time to time on the same basis as generally made available to other senior executives of the Company.
In addition, the Employment Agreement also provides for certain payments and benefits in the event of a termination of his employment under specific circumstances. If Mr. Coxs employment is terminated by the Company without Cause at any time or by Mr. Cox for Good Reason within 18 months following a Change of Control (each as defined in the Employment Agreement), he would be entitled to (1) continuation of his base salary at the rate in effect immediately prior to the termination date for 18 months following the termination date, (2) continuation of coverage of medical insurance benefits that he would otherwise be eligible to receive as an active employee of the Company for 18 months following the termination date, and (3) a lump sum payment equal to a pro-rated portion of his annual bonus as calculated based on the number of days worked in the year in which termination occurs. If Mr. Cox becomes entitled to such termination payments within 18 months following a Change of Control, then any outstanding unvested time-based equity awards will also vest in full. Mr. Coxs receipt of such termination payments and benefits is contingent upon execution of a general release of claims in favor of the Company.
Other than the Employment Agreement, Mr. Cox is not a party to any transaction with the Company that would require disclosure under Item 404(a) of Regulation S-K, and there are no arrangements or understandings between Mr. Cox and any other persons pursuant to which he was selected as a director or as Chief Executive Officer; provided that Mr. Coxs appointment as Chief Executive Officer was approved in accordance with Section 2.05(a) of that certain Investor Rights Agreement between the Company, Roche Holdings, Inc. (Roche) and certain other parties, dated January 11, 2015 (the Rights Agreement).
Michael Pellini, M.D.
In connection with Mr. Coxs appointment, Michael Pellini, M.D. will resign as Chief Executive Officer of the Company, effective as of the Commencement Date. Dr. Pellini will remain a member of the Board and will serve as Chairman of the Board effective as of the Commencement Date. On January 5, 2017, the Company and Dr. Pellini entered into a letter agreement (the Chairman Agreement), which provides for the following compensation terms for Dr. Pellini. As of the Commencement Date, Dr. Pellini will no longer receive the salary or benefits referenced in his Amended and Restated Offer Letter, dated September 9, 2013, but he will be eligible to receive an annual performance bonus for calendar year 2016. For service pursuant to the Chairman Agreement, Dr. Pellini will receive $250,000 for the first year following the Commencement Date, and $125,000 for the second year following the Commencement Date. Dr. Pellinis performance-based restricted stock units will continue to vest as long as he serves on the Board. His restricted stock units that are not performance-based will continue to vest until the earlier of the date he no longer serves on the Board and December 31, 2017. Dr. Pellinis vested stock options will remain exercisable until the later of February 6, 2020 and one year after Dr. Pellini no longer serves on the Board. Commencing as of the Companys 2018 annual meeting of stockholders, Dr. Pellini will also be eligible to receive annual equity awards for Board members in accordance with the Companys Non-Employee Director Compensation Policy.
Steven Kafka, Ph.D.
On January 5, 2017, the Company entered into a letter agreement with Steven Kafka, Ph.D., the Companys President and Chief Operating Officer (the Retention Agreement) to provide cash and equity award retention payments to Dr. Kafka in order to further encourage Dr. Kafka to remain employed by the Company for at least 12 months following the Commencement Date (the Retention Period). Pursuant to the Retention Agreement, Dr. Kafka is eligible to receive a lump sum cash payment of up to $676,478 (the Cash Retention Payment), payable in two equal installments of $338,239 on the six month anniversary of the Commencement Date and the last day of the Retention Period, in each case so long as Dr. Kafka remains employed by the Company on such dates. Dr. Kafka will also receive an equity award of restricted stock units of the Company with an aggregate value of $1,000,000 pursuant to the Plan (the Retention Equity Award), which Retention Equity Award will vest in full on the last day of the Retention Period if Dr. Kafka is employed by the Company on that date. If Dr. Kafka is terminated by the Company without Cause (as defined in Dr. Kafkas employment agreement with the Company) during the Retention Period, he will receive any remaining unpaid amount of the Cash Retention Payment and the Retention Equity Award will vest in full, in each case contingent upon execution of a general release of claims by Dr. Kafka in favor of the Company.
Investor Rights Agreement
In connection with Mr. Coxs appointment as Chief Executive Officer and election to the Board, Dr. Pellinis appointment as Chairman of the Board and the increase in the size of the Board to 10 directors, the Company entered into a Waiver and Consent with Roche, the Companys majority stockholder (the Waiver and Consent) under the Rights Agreement. In the Waiver and Consent, Roche waived its right under Section 2.02(a) of the Rights Agreement to designate a minimum one-third of the directors of the Company, effective until the conclusion of the Companys 2017 annual meeting of stockholders, consented to the appointment of Mr. Cox as Chief Executive Officer under Section 2.05(a) of the Rights Agreement and consented to Dr. Pellinis appointment and continued service on the Board notwithstanding that Dr. Pellini will no longer be Chief Executive Officer and will not satisfy the criteria to qualify as an Independent Director (as defined in the Rights Agreement) under Section 2.02(a) of the Rights Agreement.
Each of the foregoing descriptions of the Employment Agreement, the Chairman Agreement, the Retention Agreement and the Waiver and Consent is a summary and is qualified in its entirety by reference to the Employment Agreement, the Chairman Agreement, the Retention Agreement and the Waiver and Consent, which are attached hereto as Exhibits 10.1, 10.2, 10.3 and 10.4, respectively, and are incorporated by reference herein. A copy of the press release issued by the Company announcing the foregoing activities is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. |
Description |
|
10.1 | Employment Agreement by and between Foundation Medicine, Inc. and Troy Cox, dated January 5, 2017 | |
10.2 | Letter Agreement by and between Foundation Medicine, Inc. and Michael Pellini, M.D., dated January 5, 2017 | |
10.3 | Retention Agreement by and between Foundation Medicine, Inc. and Steven Kafka, Ph.D., dated January 5, 2017 | |
10.4 | Waiver and Consent by and between Foundation Medicine, Inc. and Roche Holdings, Inc., dated January 5, 2017 | |
99.1 | Press release issued by Foundation Medicine, Inc. dated January 6, 2017, furnished hereto |
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 6, 2017 | FOUNDATION MEDICINE, INC. | |||||
By: |
/s/ Robert W. Hesslein |
|||||
Name: | Robert W. Hesslein | |||||
Title: | Senior Vice President and General Counsel |
EXHIBIT INDEX
Exhibit No. |
Description |
|
10.1 | Employment Agreement by and between Foundation Medicine, Inc. and Troy Cox, dated January 5, 2017 | |
10.2 | Letter Agreement by and between Foundation Medicine, Inc. and Michael Pellini, M.D., dated January 5, 2017 | |
10.3 | Retention Agreement by and between Foundation Medicine, Inc. and Steven Kafka, Ph.D., dated January 5, 2017 | |
10.4 | Waiver and Consent by and between Foundation Medicine, Inc. and Roche Holdings, Inc., dated January 5, 2017 | |
99.1 | Press release issued by Foundation Medicine, Inc. dated January 6, 2017, furnished hereto |
Exhibit 10.1
150 Second Street, 1st Floor
Cambridge Massachusetts 02141
TEL 617.418.2200
FAX 617.418.2201
January 5, 2017
Troy Cox
464 Tehama Street
San Francisco, CA 94103
Re: | Employment with Foundation Medicine, Inc. |
Dear Troy:
On behalf of Foundation Medicine, Inc. ( Foundation Medicine or the Company ), I am very pleased to offer you the position of Chief Executive Officer.
The terms of your position with the Company are as set forth below in this letter agreement ( Agreement ):
1. Position and Start Date. Your position at the Company will be as Chief Executive Officer ( CEO ). As CEO, you shall have supervision and control over and responsibility for the day-to-day business and affairs of the Company and shall have such other powers and duties as may from time to time be prescribed by the Board of Directors of the Company (the Board ). For so long as you serve as CEO, the Company shall nominate you for election to the Board by the Companys shareholders. Upon the ending of your employment as CEO, you shall immediately resign from the Board as well as from any other position(s) to which you were elected or appointed in connection with your position as CEO. You will begin your employment with the Company no later than February 6, 2017. For purposes of this Agreement, the actual first date of your employment shall be the Start Date .
2. | Compensation and Related Matters . |
a. Base Salary . You will be paid on a salary basis at a rate of $21,153.85 per bi-weekly pay period, representing payment for all hours worked by you for Foundation Medicine, equivalent to an annualized base salary of approximately $550,000 ( Base Salary ). The Base Salary will be paid in accordance with Foundation Medicines standard payroll practices and subject to customary deductions and withholdings as required by law. You will be eligible to participate in annual merit salary increases, in the discretion of the Board or the Compensation Committee of the Board (the Compensation Committee ), in accordance with the Companys compensation practices. To be eligible for a merit increase, you must be employed by September 30 of the previous year.
Troy Cox
January 5, 2017
Page 2
a. | Performance Incentives . |
i. | Annual Bonus. You will be eligible to participate in the Companys annual performance incentive program, subject to its terms and conditions and at the discretion of the Companys Board, with the potential to earn incentive compensation equivalent to a target of 70% of your then annual Base Salary ( Annual Performance Incentive Target ). The performance incentive is based upon the achievement of Company performance, department performance, and individual performance objectives. The Company may also increase the Annual Performance Incentive Target in connection with a promotion and otherwise in its discretion. Except in connection with the payment to you of a Severance Payment, you must be employed by the Company at the time a performance incentive is paid to earn any part of an incentive. |
ii. | Annual Equity Incentive. You will be eligible for annual equity awards under the Companys equity compensation plan. The CEOs annual award is currently in the range of an aggregate value of $1,000,000-$2,000,000 subject to vesting, provided and notwithstanding the foregoing, the equity award(s) shall be determined at the complete and total discretion of the Compensation Committee. |
b. | Expenses . The Company will reimburse your expenses related to your work in accordance with the Companys expense reimbursement policy. |
c. | Restricted Stock Units . Subject to approval by the Board of Directors or a committee thereof, as may be required by the Companys applicable governance rules, you will be granted an equity award of Restricted Stock Units ( RSUs ) with an aggregate value of $4,750,000 ( Equity Award ). The number of RSUs to be granted as part of the Equity Award will be calculated based on the 30-day average closing price of Foundation Medicine common stock preceding the Start Date. The effective date for the grant will be the Start Date ( Equity Grant Date ). The Equity Award will vest over a four-year period as follows: 25% will vest on the first anniversary of the Equity Grant Date, and an additional 6.25% will vest on the first day of each subsequent quarter thereafter until 100% of the RSUs have vested. As a condition to receiving each portion of the Equity Award, you must be an employee of Foundation Medicine as of the relevant vesting date and without any prior interruption of service. The Equity Award will be governed by a restricted stock unit award agreement that will not conflict with this Agreement but will be in the standard form approved by Foundation Medicines Board of Directors and shareholders, and will be subject to the provisions of Foundation Medicines then-current stock incentive plan (together with any other incentive equity plan(s), as may be amended from time to time, any associated award agreements, the Equity Documents ). |
Troy Cox
January 5, 2017
Page 3
d. | Other Benefits . As a regular, full-time employee, you will be eligible to participate in the employee benefit program that Foundation Medicine offers to its employees in comparable positions, which currently include Health, Dental, Life and Disability Insurance, matching 401(k) Plan, and Sick Time, subject to plan terms and generally applicable Foundation Medicine policies. You will be also be entitled to accrue up to fifteen (15) days of vacation each calendar year and to such other holidays as Foundation Medicine recognizes for employees having comparable responsibilities and duties. For any calendar year in which you are employed with the Company for only a portion of such year, the vacation time will be pro-rated. Notwithstanding the foregoing, however, you will be entitled to take a one week sabbatical in 2017 which will be in addition to your regular vacation days. Descriptions of the Companys benefits will be available upon request. The Company retains the right to amend, modify, or cancel any benefits program. Where a particular benefit is subject to a formal plan (for example, medical insurance or 401(k)), eligibility to participate in and receive any particular benefit is governed solely by the applicable plan document. |
e. | Sign-on bonus. You will receive a one-time payment of $324,000 (less required withholdings) within 30 days of the Start Date ( Payment Date ). If you resign from Foundation Medicine other than for Good Reason (defined below) within one (1) year of the Payment Date, or you are terminated by Foundation Medicine for Cause (defined below) within one (1) year of the Payment Date, you are required to repay Foundation Medicine for the total amount of the sign-on bonus within one week of your termination date, and to the maximum extent permitted by applicable law, you hereby authorize Foundation Medicine to deduct as a valid set-off of wages, any sign-on bonus owed to Foundation Medicine from your final wages and any accrued and unused vacation pay, any performance bonus/incentive compensation, outstanding expense report, and/or any other payments or compensation otherwise owed to you by Foundation Medicine. |
3. Living Assistance Allowance and Relocation Assistance . As a material condition of your employment, you are required to relocate to the greater Boston area within three months of the Start Date, unless a later date is expressly authorized by the Board. For purposes of this Agreement, the actual date of your relocation shall be the Relocation Date . During the period between the Start Date and the Relocation Date (the Pre-Relocation Period ), (i) you shall spend at least 85% of your working time at the Companys office in Cambridge, Massachusetts (exclusive of Foundation Medicine business travel) and (ii) the Company will reimburse you, in accordance with the Companys expense reimbursement policy, for apartment or hotel payments and
Troy Cox
January 5, 2017
Page 4
associated utilities ( Living Assistance Allowance ) of up to $5,000 per month. In addition to the Living Assistance Allowance, during the Pre-Relocation Period the Company shall reimburse you, in accordance with the Companys reimbursement policy, for travel between Boston and San Francisco. If the Relocation Date occurs within three months of the Start Date, the Company shall reimburse you for actual relocation expenses incurred and substantiated up to a maximum of $100,000 ( Relocation Assistance ). The Relocation Assistance shall be paid in a lump sum payment within ten days of the Companys receipt of final documented expenses (which you agree to submit promptly but in no later than November 30, 2017). If you resign from Foundation Medicine other than for Good Reason (defined below) within eighteen (18) months of receiving Relocation Assistance ( Relocation Payment Date ), or you are terminated by Foundation Medicine for Cause (defined below) within eighteen (18) months of the Relocation Payment Date, you are required to repay Foundation Medicine for the total amount of the Relocation Assistance within one week of your termination date, and to the maximum extent permitted by applicable law, you hereby authorize Foundation Medicine to deduct as a valid set-off of wages, any Relocation Assistance owed to Foundation Medicine from your final wages and any accrued and unused vacation pay, any performance bonus/incentive compensation, outstanding expense report, and/or any other payments or compensation otherwise owed to you by Foundation Medicine. The Company will determine in its reasonable, good faith judgment what, if any, of your reimbursed amounts pursuant to this Section 3 are for nondeductible expenses in accordance with applicable law and will comply with associated withholding and tax reporting obligations.
4. At-Will Employment . Your employment at all times shall remain at will, meaning that either you or the Company may terminate the employment relationship at any time, for any lawful reason, with or without cause.
5. Non-Competition, Non-Solicitation, Confidentiality and Assignment Agreement . As part of your employment with Foundation Medicine, you will be exposed to, and provided with, valuable confidential and/or trade secret information concerning Foundation Medicine and its present and future business plans and operations. As a result, in order to protect Foundation Medicines substantial investment of time and money in the creation and maintaining of its confidential information and good-will with its customers, clients, and collaborators, your offer of employment is contingent upon your signing the Companys Employee Non-Competition, Non-Solicitation, Confidentiality and Assignment Agreement (the Restrictive Covenant Agreement ), a copy of which is attached to this Agreement as Exhibit A and your continued willingness to abide by its terms.
By the same token, Foundation Medicine expects you to abide by and honor the terms of any agreements you may have with your present or prior employers. By signing below, you represent that you are not subject to any agreements which might restrict your conduct at the Company, and that you understand that if you become aware at any time
Troy Cox
January 5, 2017
Page 5
during your employment with the Company that you are subject to any agreements which might restrict your activities at Foundation Medicine, you are required to immediately inform the Companys General Counsel of the existence of such agreements. In the event of an irresolvable conflict, your employment by Foundation Medicine could be subject to termination and such termination would be deemed a for Cause termination for purposes of this Agreement and the Equity Documents.
Also, just as Foundation Medicine regards the protection of our confidential information as a matter of great importance, we also respect that you may have an obligation to your present and/or prior employers to safeguard the confidential information of those companies. Foundation Medicine respects these obligations, and expects you to honor them as well. To that end, we expect that you have not taken any documents or other confidential information from your employer. Further, we want to make it perfectly clear you should not bring with you to Foundation Medicine, or use in the performance of your duties for our Company, any proprietary business or technical information, materials or documents of a former employer, or otherwise disclose or use any former employers confidential information.
6. Work Authorization . This offer of employment is contingent on you being legally authorized to work in the United States, and you will need to complete an I-9 Employment Verification Form no later than your first day of work.
7. Termination of Employment.
a. Severance Payments . Without otherwise limiting the at will nature of your employment if: (i) your employment is terminated by the Company without Cause at any time, or (ii) within eighteen (18) months following a Change in Control you terminate your employment with the Company for Good Reason in accordance with the Good Reason Process, and, in either event, you enter into, do not revoke, and comply with a Release, the Company shall pay or provide you with: (a) Salary Continuation for eighteen (18) months following your termination date (the Salary Continuation Period ); (b) Health Care Continuation during the Salary Continuation Period; and (c) a Performance Incentive Payment equal to your current year Annual Performance Incentive Target, prorated based on the length of time that you have been employed with the Company during the calendar year in which your employment is terminated (collectively, the Severance Payments ); provided and notwithstanding the foregoing, if your employment is terminated in connection with a Change in Control and you immediately become reemployed by any direct or indirect successor to the business or assets of the Company, the termination of your employment upon the Change in Control shall not be considered a Termination without Cause for purposes of this Agreement.
b. Equity Acceleration . In the event that you become entitled to Severance Payments at any time within eighteen (18) months following a Change in Control, and you enter into, do not revoke, and comply with a Release, then all outstanding unvested time-based equity-based compensation awards that have been granted acceleration rights
Troy Cox
January 5, 2017
Page 6
and were granted to you under the Equity Documents prior to the Change in Control shall become exercisable and vested in full, and all restrictions thereon shall lapse, notwithstanding any vesting schedule or other provisions to the contrary in the agreements evidencing such awards or in the underlying equity plan, and the Company and you hereby agree that any agreements covering such awards are hereby, and will be deemed to be, amended to give effect to this provision.
c. Non-Eligibility for Severance Payments or Equity Award Acceleration . For the avoidance of doubt, you and the Company acknowledge that if your employment is terminated: (i) by the Company for Cause, (ii) by you without Good Reason, (iii) by you with Good Reason following a Change in Control but without complying with the Good Reason Process, or (iv) as a result of your death or disability, then, as a result of such termination, (w) you shall not be entitled to Severance Payments, (x) you shall be entitled to receive only base salary earned plus accrued but unused vacation pay through the date of termination, (y) the unvested portion of your Equity Awards will not accelerate, and (z) your Equity Awards shall expire or be forfeited in accordance with the terms of the Equity Documents.
8. Definitions . For purposes of this Agreement, the following terms shall have the following meanings:
Company means Foundation Medicine, Inc., and its successors and assigns.
Cause means one or more of the following events: (i) your conviction of, or the entry of a pleading of guilty or nolo contendere to, any crime involving (A) fraud or embezzlement, or (B) any felony; (ii) your willful failure to perform (other than by reason of disability), or gross negligence in the performance of, your duties and responsibilities as set forth in your job description; (iii) a material breach by you of any provision of this Agreement, the Restrictive Covenant Agreement, or any of the other agreements you have with the Company; or (iv) material fraudulent conduct by you with respect to the Company. Notwithstanding the foregoing, in no event shall Cause be deemed to exist unless you have been given an opportunity to be heard by the Board and a reasonable opportunity to cure the circumstances that give rise to Cause if doing so is reasonable.
Change in Control shall mean:
a. any person, as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the Act ) (other than the Company, any of its subsidiaries, or any trustee, fiduciary or other person or entity holding securities under any employee benefit plan or trust of the Company or any of its subsidiaries), together with all affiliates and associates (as such terms are defined in Rule 12b-2 under the Act) of such person, shall become the beneficial owner (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Company representing 50 percent or more of the combined voting power of the Companys then
Troy Cox
January 5, 2017
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outstanding securities having the right to vote in an election of the Board ( Voting Securities ) (in such case other than as a result of an acquisition of securities directly from the Company); or
b. the date when a majority of the members of the Board of Directors of the Company is replaced by individuals who, prior to their election, or nomination for election by the Companys shareholders, were not approved by a majority of the members of the Board of Directors in existence on the date immediately prior to such election, appointment or nomination (excluding any individuals nominated by any member of the Investor Group (as defined in that certain Investor Rights Agreement, dated as of January 11, 2015 (as amended from time to time), by and among the Company, Roche Holdings, Inc. and certain other stockholders of the Company named therein (the Investor Rights Agreement )) following the occurrence of a Material Breach (as defined in the Investor Rights Agreement)); or
c. the consummation of (A) any consolidation or merger of the Company where the stockholders of the Company, immediately prior to the consolidation or merger, would not, immediately after the consolidation or merger, beneficially own (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, shares representing in the aggregate more than 50 percent of the voting shares of the Company issuing cash or securities in the consolidation or merger (or of its ultimate parent corporation, if any), or (B) any sale or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of the assets of the Company; or
d. the consummation by any member of the Investor Group of any tender or exchange offer, merger, consolidation, business combination or other similar transaction involving the Company that results in the Investor Group collectively owning all of the outstanding Voting Securities of the Company.
Notwithstanding the foregoing, a Change in Control shall not be deemed to have occurred for purposes of the foregoing clause (a), (i) solely as the result of an acquisition of securities by the Company which, by reducing the number of shares of Voting Securities outstanding, increases the proportionate number of Voting Securities beneficially owned by any person to 50 percent or more of the combined voting power of all of the then outstanding Voting Securities; provided, however, that if any person referred to in this sentence shall thereafter become the beneficial owner of any additional shares of Voting Securities (other than pursuant to a stock split, stock dividend, or similar transaction or as a result of an acquisition of securities directly from the Company) and immediately thereafter beneficially owns 50 percent or more of the combined voting power of all of the then outstanding Voting Securities, then a Change in Control shall be deemed to have occurred for purposes of the foregoing clause (a); or (ii) as a result of Roches acquisition of Voting Securities as provided under Section 4.03(a) and/or 4.04(b) of the Investor Rights Agreement.
Troy Cox
January 5, 2017
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Equity Award means all incentive stock options, non-statutory stock options, shares of restricted stock, restricted stock units or other incentive equity awards in respect of shares of the Companys equity securities that have been or will be granted to you by the Company.
Good Reason means that you have complied with the Good Reason Process (hereinafter defined) following the occurrence of any of the following events in connection with a Change in Control:
(i) a material diminution in your responsibilities, authority or duties;
(ii) a material diminution in your Base Salary, except for across-the-board salary reductions based on the Companys financial performance similarly affecting all or substantially all senior management employees of the Company;
(iii) your principal work location is moved to a principal work location that is located more than fifty (50) miles from the work location at which you were principally working as of the effective date of the Change in Control; or
(iv) the material breach of this Agreement by the Company.
Good Reason Process means that (i) you reasonably determine that a Good Reason condition has occurred, (ii) you notify the Company in writing of the first occurrence of the Good Reason condition within sixty (60) days of the first occurrence of such condition, (iii) you cooperate in good faith with the Companys efforts (if such efforts are taken) for a period of not less than thirty (30) days following such notice (the Cure Period ) to remedy the Good Reason condition, (iv) notwithstanding such efforts a material element of at least one Good Reason condition continues to exist, and (v) you terminate your employment within sixty (60) days after the end of the Cure Period. If the Company claims in a written notice to you to have fully cured the Good Reason condition during the Cure Period, and you have not contested the cure within sixty (60) days after receiving such notice, Good Reason shall be deemed not to have occurred. The Companys success at curing a Good Reason condition shall not bar or preclude your right to notify the Company of the occurrence of another Good Reason condition and to proceed with the Good Reason Process.
Health Care Continuation means that if you are participating in the Companys group health plan immediately prior to the date of your termination, then subject to your timely election and eligibility for benefits under the law known as COBRA, and any law that is the successor to COBRA, the Company shall continue to pay the employer portion of your health benefits until the earlier of the end of the Salary Continuation Period and the date you become re-employed or otherwise ineligible for COBRA.
Troy Cox
January 5, 2017
Page 9
Release shall mean a separation agreement in a form prescribed by the Company that includes, without limitation, (i) a general release of claims and non-disparagement covenant, both in favor of the Company and related persons and entities, (ii) reaffirmation of your obligations under the Employee Agreement, the terms of which will be incorporated by reference into the Release, and (iii) a provision stating that, if you breach any of the material provisions of Release, in addition to all other rights and remedies, the Company shall have the right to receive reimbursement for, or to terminate or cease payment of, Severance Payments paid or payable to you.
Salary Continuation means that the Company shall continue to pay you your base salary at the rate in effect on the date of termination during the Salary Continuation Period. The first payment of Salary Continuation shall be paid within sixty (60) days after the date of termination and shall be made on the Companys regular payroll dates; provided, however, that if the sixty (60) day period begins in one calendar year and ends in a second calendar year, the first payment of Salary Continuation shall be paid in the second calendar year. In the event you miss one or more regular payroll periods between the date of termination and the first Salary Continuation payment, the first Salary Continuation payment shall include a catch up payment of accrued but unpaid Salary Continuation payments.
9. Section 409A Compliance . To the extent that any Severance Payments or other benefits to you constitute non-qualified deferred compensation under Section 409A of the Internal Revenue Code of 1986 (as amended or replaced) (the Code ), then such Severance Payments or benefits shall begin only upon or after the date of your separation from service (within the meaning of Section 409A of the Code), which may occur on or after the date of the termination of your employment. Neither the Company nor you shall have the right to accelerate or defer the delivery of any such payments except to the extent specifically permitted or required by Section 409A. Anything to the contrary notwithstanding, if at the time of your separation from service within the meaning of Section 409A of the Code, the Company determines that you are a specified employee within the meaning of Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit that you become entitled to under this Agreement on account of your separation from service would be considered deferred compensation otherwise subject to the twenty percent (20%) additional tax imposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(a)(2)(B)(i) of the Code, such payment shall not be payable and such benefit shall not be provided until the date that is the earlier of (i) six (6) months and one day after your separation from service, or (ii) your death. If any such delayed cash payment is otherwise payable on an installment basis, the first payment shall include a catch-up payment covering amounts that would otherwise have been paid during the six (6)-month period but for the application of this provision, and the balance of the installments shall be payable in accordance with their original schedule. The determination of whether and when your separation from service from the Company has occurred shall be made in a manner consistent with, and based on the presumptions set forth in, Treasury Regulation Section 1.409A-l(h). Solely for purposes of this Section, Company shall include all persons with whom the Company would be considered a single employer under Sections 414(b) and 414(c) of the Code.
Troy Cox
January 5, 2017
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All in-kind benefits provided and expenses eligible for reimbursement under this Agreement shall be provided by the Company or incurred by you during the time periods set forth in this Agreement. All reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the expense was incurred. The amount of in-kind benefits provided or reimbursable expenses incurred in one taxable year shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year (except for any lifetime or other aggregate limitation applicable to medical expenses). Such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.
The parties intend that this Agreement will be administered in accordance with Section 409A. To the extent that any provision of this Agreement is ambiguous as to its compliance with Section 409A, the provision shall be read in such a manner so that all payments hereunder comply with Section 409A. Each payment pursuant to this Agreement is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2). The parties agree that this Agreement may be amended, as reasonably requested by either party, and as may be necessary to fully comply with Section 409A and all related rules and regulations in order to preserve the payments and benefits provided hereunder without additional cost to either party. The Company shall have no liability to you or to any other person if any provisions of this Agreement that are intended to be exempt from or compliant with Section 409A are not so exempt or compliant.
10. Section 280G Limitation .
(a) Anything in this Agreement to the contrary notwithstanding, in the event that the amount of the Severance Payments, and any additional compensation, payment or distribution by the Company to or for the benefit of you, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, calculated in a manner consistent with Section 280G of the Code and the applicable regulations thereunder (the Total Severance Payments ), would be subject to the excise tax imposed by Section 4999 of the Code, the following provisions shall apply:
(i) If the Total Severance Payments, reduced by the sum of (1) the Excise Tax and (2) the total of the Federal, state, and local income and employment taxes payable by you on the amount of the Total Severance Payments which are in excess of the Threshold Amount, are greater than or equal to the Threshold Amount, you shall be entitled to the full benefits payable under this Agreement.
(ii) If the Threshold Amount is less than (x) the Total Severance Payments, but greater than (y) the Total Severance Payments reduced by the sum of (1) the Excise
Troy Cox
January 5, 2017
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Tax and (2) the total of the Federal, state, and local income and employment taxes on the amount of the Total Severance Payments which are in excess of the Threshold Amount, then the Total Severance Payments shall be reduced (but not below zero) to the extent necessary so that the sum of all Total Severance Payments shall not exceed the Threshold Amount. In such event, the Total Severance Payments shall be reduced in the following order: (1) cash payments not subject to Section 409A of the Code; (2) cash payments subject to Section 409A of the Code; (3) equity-based payments and acceleration; and (4) non-cash forms of benefits. To the extent any payment is to be made over time (e.g., in installments, etc.), then the payments shall be reduced in reverse chronological order.
(b) For the purposes of this Section 10, Threshold Amount shall mean three times the your base amount within the meaning of Section 280G(b)(3) of the Code and the regulations promulgated thereunder less one dollar ($1.00); and Excise Tax shall mean the excise tax imposed by Section 4999 of the Code, and any interest or penalties incurred by you with respect to such excise tax.
(c) The determination as to which of the alternative provisions of Section 10(a) shall apply to you shall be made by a nationally recognized accounting firm selected by the Company (the Accounting Firm ), which shall provide detailed supporting calculations both to the Company and you within fifteen (15) business days of the termination date, if applicable, or at such earlier time as is reasonably requested by the Company or you. For purposes of determining which of the alternative provisions of Section 10(a) shall apply, you shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation applicable to individuals for the calendar year in which the determination is to be made, and state and local income taxes at the highest marginal rates of individual taxation in the state and locality of your residence on the date of termination, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. Any determination by the Accounting Firm shall be binding upon the Company and you.
11. Litigation and Regulatory Cooperation . During and after your employment, you agree to cooperate fully with the Company in the defense or prosecution of any claims or actions now in existence or which may be brought in the future against or on behalf of the Company which relate to events or occurrences that transpired while you were employed by the Company. Your full cooperation in connection with such claims or actions shall include, but not be limited to, being available to meet with counsel to prepare for discovery or trial and to act as a witness on behalf of the Company at mutually convenient times. During and after your employment, you also agree to cooperate fully with the Company in connection with any investigation or review of any federal, state or local regulatory authority as any such investigation or review relates to events or occurrences that transpired while you were employed by the Company. The Company shall reimburse you for any reasonable out-of-pocket expenses incurred in connection with your performance of obligations pursuant to this Section 11.
Troy Cox
January 5, 2017
Page 12
12. Relief . If you breach, or propose to breach, any portion of this Agreement, including any of the provisions of the Restrictive Covenant Agreement, or, if applicable, the Release Agreement, the Company shall be entitled, in addition to all other remedies that it may have, to an injunction or other appropriate equitable relief to restrain any such breach, and, if applicable, the Company shall have the right to suspend or terminate payment of the Severance Payments or any other payments, benefits and or accelerated vesting pursuant to Section 7 of this Agreement. Such suspension or termination shall not limit the Companys other options with respect to relief for such breach and shall not relieve you of duties under this Agreement, the Restrictive Covenant Agreement, the Equity Documents or the Release Agreement.
13. Miscellaneous.
a. This Agreement, including the Restrictive Covenant Agreement and the Equity Documents constitute the entire agreement as to your employment relationship with the Company and will supersede any prior agreements or understandings, whether in writing or oral.
b. This Agreement shall remain in effect if you are transferred, promoted, or reassigned to work in functions other than your current functions at the Company. Your obligations under this Agreement shall survive the termination of your employment with the Company regardless of the manner or the reasons for such termination.
c. This Agreement may not be modified or amended unless agreed to in writing by you and an expressly authorized representative of the Company.
d. No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of any party to require the performance of any term or obligation of this Agreement, or the waiver by any party of any breach of this Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.
e. All forms of compensation referred to in this Agreement are subject to reduction to reflect applicable withholding and payroll taxes and other deductions required by law.
f. This Agreement shall inure to the benefit of, and be binding upon, the Company and you, and our respective heirs, legal representatives, successors and assigns. This Agreement may be assigned by the Company without your consent to any successor entity in the event of a merger, acquisition, change of control, or sale of all or substantially all of the business or assets of the Company. Foundation Medicine and Company shall also mean any such successor entity as the context requires.
Troy Cox
January 5, 2017
Page 13
g. The resolution of any disputes as to the meaning, effect, performance or validity of this Agreement, the Restrictive Covenant Agreement or arising out of, related to, or in any way connected with your employment with the Company or any other relationship between you and the Company will be governed by the law of the Commonwealth of Massachusetts, excluding laws relating to conflicts or choice of law. Any dispute arising under this Agreement, except those under the Restricted Covenant Agreement, shall be resolved exclusively by arbitration conducted before a single arbitrator in accordance with the Employment Arbitration Rules of the American Arbitration Association in effect at the time such arbitration is conducted. All hearings shall be held in Boston, Massachusetts. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The parties shall bear equally the costs of arbitration, including the costs of the arbitrator.
h. If any portion or provision of this Agreement shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision hereof shall be valid and enforceable to the fullest extent permitted by law.
i. The Company shall reimburse you for your reasonable and documented attorneys fees associated with the negotiation and review of this Agreement up to $15,000.
j. This Agreement may be executed in two counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument.
Troy, I look forward to you joining the Company. If you have further questions or require additional information, please feel free to contact me.
Sincerely, | ||
FOUNDATION MEDICINE, INC. | ||
/s/ Alexis Borisy |
||
By: | Alexis Borisy | |
Title: | Chairman, Board of Directors |
Please confirm your acceptance of this offer by signing this letter and emailing the signed letter to Alexis Borisy (alexis.borisy@thirdrockventures.com) or Robert W. Hesslein (rhesslein@foundationmedicine.com) by close of business on Thursday, January 5, 2017.
Troy Cox
January 5, 2017
Page 14
YOU ACKNOWLEDGE THAT YOU HAVE CAREFULLY READ THIS AGREEMENT, INCLUDING EXHIBIT A, AND UNDERSTAND AND AGREE TO ALL OF THE PROVISIONS IN THIS AGREEMENT AND ITS EXHIBITS. 3 FACIMILE AND PDF SIGNATURES SHALL HAVE THE SAME LEGAL EFFECT AS ORIGINALS.
Accepted and agreed by:
/s/ Troy Cox |
Employee Signature |
Troy Cox |
Date: 1/5/2017 |
Exhibit 10.2
January 5, 2017
Michael Pellini, M.D.
33841 Niguel Shores Drive
Dana Point, CA 92629
Dear Dr. Pellini:
This letter is intended to memorialize the understanding regarding the ending of your employment with Foundation Medicine, Inc. (Foundation Medicine or the Company) and your continuing role as an active member of the Companys Board of Directors (the Board).
1. | Resignation from CEO Position. The Company accepts your voluntary resignation as Chief Executive Officer effective February 6, 2017 (the CEO Resignation Date). Your employment with Foundation Medicine shall terminate on the CEO Resignation Date. Accordingly, your salary, benefits and other compensation referenced in your Amended and Restated Offer Letter, dated September 9, 2013 (the Employment Agreement), shall cease as of the CEO Resignation Date. Notwithstanding the foregoing, for calendar year 2016, you will be eligible to receive an annual performance bonus up to 60% of your final annual salary rate pursuant to your Employment Agreement. The actual bonus percentage is discretionary and will be subject to the Board or Compensation Committees assessment of your performance, as well as business conditions at the Company (the 2016 Bonus). The 2016 Bonus shall be paid at the time bonus payments are made to the Companys other executives but in no event later than March 15, 2017. You acknowledge and agree that you are not entitled to any severance pay or post-employment benefits in connection with the ending of your employment with Foundation Medicine pursuant to the Employment Agreement or otherwise. |
2. | Continuing Role as Chairman. To facilitate the transition to the Companys recently hired Chief Executive Officer (the New CEO), you have agreed that during the Term of this Agreement (as defined below), if you are elected by the Board to serve as the Chairman of the Board (Chairman), you will agree to serve as an active Chairman. If elected Chairman, subject to Section 3 of this Agreement, you shall commit up to two (2) days per week in 2017 and up to one (1) day per week in 2018 to Chairman activities and responsibilities, inclusive of ordinary Board activities but excluding service as a member of any committees of the Board. The scope and nature of your activities as Chairman shall be determined by the Board in its reasonable discretion, with advice from the New CEO, in consultation with you. |
3. | Term. This Agreement shall commence on the CEO Resignation Date and shall expire on the second anniversary of the CEO Resignation Date (the Second Anniversary), provided this Agreement shall end on an earlier date if you are no longer serving as a member of the Board (the Term). After the Second Anniversary, your service and compensation as Chairman and/or as member of the Board, including any service on committees of the Board, to the extent applicable, shall be governed by the Companys then effective standard compensation plan for non-employee directors (the Director Compensation Policy). |
Michael Pellini, M.D.
January 5, 2017
Page 2
4. | Base Compensation; Expense Reimbursement. From the CEO Resignation Date to the first anniversary of the CEO Resignation Date (the First Anniversary), you will be paid base compensation at a rate of $250,000 per year, and from First Anniversary to the Second Anniversary you will be paid at a rate of $125,000 per year (the Base Compensation), prorated as necessary for any partial month, provided and notwithstanding anything to the contrary in this Agreement, if you are removed from the Board without cause pursuant to applicable law and the Companys charter prior to the Second Anniversary (a Without Cause Board Removal), the Company shall continue to pay your Base Compensation through the Second Anniversary. You may eligible for additional compensation for your service, if any, as a member of any committees of the Board in accordance with Director Compensation Policy. The Base Compensation will be paid in monthly installments and reported to taxing authorities on Form 1099. Payment for service on committees of the Board, if any, shall be paid in accordance with the schedule set forth in the Director Compensation Policy. You will be entitled to expense reimbursement consistent with the Companys then effective standard compensation plan for non-employee directors and in connection with your other service as Chairman in accordance with the Companys expense reimbursement policy. |
5. | COBRA. Due to the resignation of your employment, you will no longer qualify for continued participation in employee benefit plans. However, to the extent that you are eligible to continue to participate in the Companys medical and dental plans under COBRA and you elect to continue such benefits, the Company will continue to contribute toward such benefits at the employer rate in effect as of the CEO Resignation Date in accordance with the benefit plans until the earlier of (i) the end of the Term or, in the event of a Without Cause Board Removal, the Second Anniversary, in either event to the extent permissible under the Companys health and dental plans, (ii) your eligibility for group medical care coverage through other employment, or (iii) the end of your eligibility under COBRA for continuation coverage (the COBRA Continuation Period). You will be responsible for paying the employee portion of the COBRA premiums. |
6. | Equity. The plans and agreements governing your awards of stock options, restricted stock units subject to time-based vesting criteria and restricted stock units subject to performance-based vesting criteria are collectively referred to as the Equity Documents. |
a) Stock Options . Pursuant to the Foundation Medicine Amended and Restated 2010 Stock Incentive Plan (the 2010 Plan), you were granted nonstatutory stock options of: (i) 550,000 shares of Company Common Stock on February 9, 2011, (ii) 148,158 shares of Company Common Stock on January 10, 2012, (iii) 97,748 shares of Company Common Stock on March 27, 2012, (iv) 87,500 shares of Company Common Stock on March 7, 2013, and (v) 87,500 shares of Company Common Stock on May 21, 2013
Michael Pellini, M.D.
January 5, 2017
Page 3
(collectively, the Stock Options). All of the Stock Options are fully vested as of the CEO Resignation Date. You and the Company acknowledge and agree that your continued service as a member of the Board shall constitute service as a director and an advisor to the Company and, therefore, you will continue to be an Eligible Participant as defined in the 2010 Plan. Further, (subject to Sections 3(d) and (e) of the Stock Option Agreements) your right to exercise the Stock Options shall continue until the later of (A) the third anniversary of the CEO Resignation Date and (B) one year after your cession of service as a director, but in no event later than the Final Exercise Date, as those terms defined in the Equity Documents. In furtherance of the foregoing, Section 3(c) of each respective Stock Option Agreement is, effective as of the CEO Resignation Date, hereby amended so that, the right to exercise shall terminate three months after such cessation (but in no event after the Final Exercise Date) is deleted and replaced with the right to exercise shall terminate on the later of (A) February 6, 2020 and (B) one year after such cession (but in no event after the Final Exercise Date).
b) RSUs . Pursuant to the Foundation Medicine 2013 Stock Option and Incentive Plan (the 2013 Plan), you were granted awards of: (i) 59,365 Restricted Stock Units (RSUs) on July 15, 2015; and (ii) 90,000 RSUs on April 1, 2016 (collectively, the RSU Grants). As of the CEO Resignation Date, 61,680 RSUs have vested and 87,685 are unvested. Notwithstanding Section 3 of the respective RSU award agreements, upon the effectiveness of this Agreement, you and the Company acknowledge and agree that the termination of your employment shall not cause the RSUs to be terminated and forfeited and that your continued service as a member of the Board shall constitute sufficient service in lieu of employment to prevent such termination and forfeiture of the unvested RSUs, provided in no event shall vesting of the RSUs continue beyond December 31, 2017. In furtherance of the foregoing, Section 3 of the RSU award agreements is, effective as of the CEO Resignation Date, hereby amended so that, employment with Company and Subsidiaries is deleted and replaced with, service as a director of the Company and any Restricted Stock Units that have not vested as of such date is deleted and replaced with any Restricted Stock Units that have not vested as such date or December, 31, 2017, whichever is earlier, provided if the Grantee is removed from the Board without cause pursuant to applicable law and the Companys charter prior to December 31, 2017 (a Without Cause Board Removal), the Restricted Stock Units that would have vested had the Grantee remained on the Board through December 31, 2017 shall accelerate and become vested as of the effective date of the Without Cause Board Removal. All other terms of the RSU award agreements and the RSUs are governed by the Equity Documents.
c) |
PSUs . Pursuant to the 2013 Plan, you were granted 86,034 Restricted Stock Units on December 15, 2015 that were subject to performance-based vesting (the PSUs). Notwithstanding Section 3 of the PSU award agreement, upon the effectiveness of this Agreement, you and the Company acknowledge and agree that the termination of your employment shall not cause the PSUs to be terminated and forfeited and that your continued service as a member of the Board shall constitute sufficient service in lieu of |
Michael Pellini, M.D.
January 5, 2017
Page 4
employment to prevent such termination and forfeiture of the unvested PSUs. In furtherance of the foregoing, Section 3 of the PSU award agreement is, effective as of the CEO Resignation Date, hereby amended so that, employment with Company and Subsidiaries is deleted and replaced with, service as a director of the Company. Except as may hereafter be expressly amended in writing (including potential amendments to Section 2 thereof), all other terms of the PSU award agreement and the PSUs are governed by the Equity Documents. |
d) Board-Level Equity Grants . Commencing as of the Companys 2018 annual stockholders meeting, you will be eligible receive annual equity awards for Board members pursuant to the Director Compensation Policy. For the sake of clarity, you will not receive the Initial Equity Grant under the Director Compensation Policy.
7. | Restrictive Covenants. On the CEO Resignation Date, your employment with the Company shall terminate, and all provisions of the Employee Non-Competition, Nonsolicitation, Confidentiality and Assignment Agreement attached to the Employment Agreement as Exhibit C (the Restrictive Covenants) that are intended to survive and to apply to you following your termination shall continue to be in full force and effect. You reaffirm the Restrictive Covenants are not modified, rescinded or waived in any respect by this Agreement, and are incorporated by reference into this Agreement. |
8. | Taxes. You shall perform all services contemplated herein as an independent contractor and not as an employee or agent of the Company. Other than as set forth in Section 5 above, you acknowledge and agree that you have no right to participate in any of the Companys employee benefit plans or perquisites. Nothing herein shall create, expressly or by implication, a partnership, joint venture or other association between you and the Company. You acknowledge that you have not relied on any statements or representations by the Company or its attorneys with respect to the tax treatment of any compensation due under this Agreement. You understand that the Company will not be responsible for withholding or paying any federal or state income, social security or other taxes in connection with Base Compensation paid under this Agreement, and you agree that you are solely responsible for any such tax payments that are his responsibility under applicable law. The Company shall undertake to make deductions, withholdings and tax reports with respect to payments and benefits under this Agreement to the extent that it reasonably and in good faith determines that it is required to make such deductions, withholdings and tax reports. Nothing in this Agreement shall be construed to require the Company to make any payments to compensate you for any adverse tax effect associated with any payments or benefits or for any deduction or withholding from any payment or benefit. |
9. |
Entire Agreement. For the avoidance of any doubt, this Agreement, the Restrictive Covenants, the Equity Agreements, as amended in this Agreement, the Director Compensation Policy, the Companys Statement of Company Policy on Insider Trading and Disclosure, and Code of Business Conduct and Ethics constitute the entire agreement |
Michael Pellini, M.D.
January 5, 2017
Page 5
as to your role with the Company and will supersede any prior agreements or understandings, whether in writing or oral with respect to the subject matter herein. This Agreement may not be amended, varied, modified or changed (in whole or in part), except by a formal, definitive written agreement expressly referring to this Agreement, which agreement is executed by both of the parties to this Agreement. |
10. | Miscellaneous. Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver. Each party recognizes that this Agreement is a legally binding contract and acknowledges that such party has had the opportunity to consult with his legal counsel of choice. In any construction of the terms of this Agreement, the same shall not be construed against either party on the basis of that party being the drafter of such terms. |
11. | Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be deemed an original as against any Party whose signature appears thereon, and all of which together shall constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. |
12. | Governing Law. The interpretation of this Agreement will be governed by the laws of Massachusetts, without regard to the conflicts of laws principles thereof. |
Michael Pellini, M.D.
January 5, 2017
Page 6
Please acknowledge, by signing below, that you agree and accept the terms of this Agreement.
Very truly yours, | ||
FOUNDATION MEDICINE, INC. | ||
By: |
/s/ Alexis Borisy |
|
Alexis Borisy | ||
Chairman of the Board of Directors |
ACKNOWLEDGED AND AGREED: |
/s/ Michael Pellini |
Michael Pellini, M.D. |
1/5/2017 |
Date |
Exhibit 10.3
January 5, 2017
Steven Kafka
Re: Retention Bonus
Dear Steve:
As you know, Foundation Medicine, Inc. (Foundation Medicine or the Company) has hired a new Chief Executive Officer who is expected to begin his employment at Foundation Medicine on February 6, 2017 (the New CEO Commencement Date). At this time, the Company believes that your assistance during the one year period that will follow the New CEOs Commencement Date is important to the Company and its business goals. To incent you to remain actively employed with the Company at least through the end of this period, the Company is offering you the opportunity to receive a Retention Bonus as set forth in this letter agreement (the Letter Agreement). This Retention Bonus opportunity is supplemental to and not in lieu of your and the Companys rights and obligations pursuant to the December 10, 2012 Non-Competition, Non-Solicitation, Confidentiality and Assignment Agreement (the Restrictive Covenants), the May 21, 2013 Employment Offer Letter as amended by the September 10, 2013 First Amendment to the Employment Offer Letter (collectively, the Employment Agreement) (including, without limitation, salary, annual cash bonus opportunity and equity awards in accordance with the Employment Agreement), and the Equity Documents. Capitalized terms referenced in this Letter Agreement and not defined or amended herein shall have the same definition as stated in the Employment Agreement. With those understandings, the terms of this Retention Bonus opportunity are as follows:
1. | Cash Retention Bonus Requirements and Terms |
In exchange for your continued employment and your contributions during the twelve (12) months beginning on and immediately following the New CEO Commencement Date (the Retention Bonus Period), you will be eligible to receive a cash retention bonus of $676,478 (the Retention Bonus), in two (2) equal payments (each a Retention Bonus Installment), subject to the following conditions.
To earn the first Retention Bonus Installment, you must be employed by the Company on the date six (6) months following the New CEO Commencement Date. To earn the second Retention Bonus Installment, you must be employed by the Company on the last day of the Retention Bonus Period. The Company will pay you each Retention Bonus Installment on the Companys next regular payroll date following the date it is earned. Notwithstanding the
January 5, 2017
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foregoing, if you are terminated by the Company without Cause before you receive the entire Retention Bonus, the unpaid portion of the Retention Bonus will be paid to you in a lump sum on the date of the first Salary Continuation payment, provided you enter into a Release and comply with the other conditions in the Employment Agreement applicable to Severance Payments. Once earned, a Retention Bonus Installment is not subject to claw back.
2. | Equity Retention Bonus Requirements and Terms |
Subject to approval by the Companys Board of Directors (the Board) or a committee thereof, as may be required by the Companys applicable governance rules, you will be granted a supplemental equity award of Restricted Stock Units (RSUs) with an aggregate value of $1,000,000 (Retention Equity Award). The number of RSUs to be granted as part of the Retention Equity Award will be calculated based on the 30-day average closing price of Foundation Medicine common stock preceding the New CEO Commencement Date. The effective date for the grant will be the New CEO Commencement Date (Retention Equity Grant Date). The Retention Equity Award will vest on the last day of the Retention Bonus Period if you are an employee of Foundation Medicine on that date (the Retention Equity Award Vesting Date), provided and notwithstanding the foregoing, if you are terminated by the Company without Cause during the Retention Bonus Period and before the Retention Equity Award Vesting Date and you enter into a Release and comply with the other conditions in the Employment Agreement applicable to Severance Payments, the vesting of the Retention Equity Award shall be accelerated and shall be fully vested as of the date of the termination of your employment (or if the date of your without Cause termination is prior to the Retention Equity Grant Date, in lieu of Retention Equity Award you will be issued unrestricted shares of the Companys stock with an aggregate value of $1,000,000). The Retention Equity Award will be governed by a restricted stock unit award agreement in the standard form approved by the Board and shareholders, and will be subject to the provisions of Foundation Medicines Amended and Restated 2013 Stock Incentive Plan (together with any other incentive equity plan(s), as may be amended from time to time, any associated award agreements, the Equity Documents).
3. | Preservation of At-Will Employment and Employment Agreement |
Nothing in this Letter Agreement alters the at-will nature of your employment with the Company, meaning either you or the Company can end your employment at any time, with or without Cause, subject to the terms of the Employment Agreement. Notwithstanding anything to the contrary in the Employment Agreement, if you resign from your employment on or after October 1, 2017 but prior to earning an annual performance bonus for 2017, you will be eligible to receive a pro-rated annual performance bonus for 2017 subject to the Board or Compensation Committees assessment of your performance, as well as business conditions at the Company (the 2017 Pro-rated Bonus). If earned, the 2017 Pro-rated Bonus shall be paid at the time 2017 bonus payments are made to the Companys other executives but in no event later than March 15, 2018.
January 5, 2017
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4. | Section 409A |
This Letter Agreement is unfunded and the Retention Bonus payments and the Retention Equity Award are subject to a substantial risk of forfeiture and thus are not intended to qualify as deferred compensation for purposes of Section 409A of the Code. Furthermore, the payments of the Retention Bonus and the Retention Equity Award are intended to be exempt from the requirements of Section 409A of the Code as a short-term deferral as described in Section 409A of the Code, and the provisions regarding such payment shall be interpreted accordingly. To the extent that any provision of the Letter Agreement is ambiguous as to its compliance with Section 409A of the Code, the provision shall be read in such a manner so that all payments hereunder are exempt from or comply with Section 409A of the Code.
5. | Miscellaneous |
This Letter Agreement constitutes the entire agreement between you and the Company with respect to the subject matter hereof and supersedes all prior oral and written agreements and understandings between you and the Company with respect to any related subject matter, provided however, the Employment Agreement, the Restrictive Covenants, and the Equity Documents remain in full force and effect. This Letter Agreement will be deemed to be made and entered into in the Commonwealth of Massachusetts and will in all respects be interpreted, enforced and governed under the laws of the Commonwealth of Massachusetts. This Letter Agreement may be amended or modified only by a formal written instrument signed by you and by a duly authorized representative of the Company. This Letter Agreement shall inure to the benefit of and be binding upon the Company and its successors and permitted assigns.
January 5, 2017
Page 4
We hope that it this arrangement encourages your continued effective commitment to the Company.
Sincerely, |
/s/ Michael Pellini |
Michael Pellini |
CEO |
FOUNDATION MEDICINE, INC. |
Acknowledged and Agreed: |
/s/ Steven Kafka |
Steven Kafka, PhD. |
Exhibit 10.4
WAIVER AND CONSENT
January 5, 2017
WHEREAS, the Board of Directors (the Board ) of Foundation Medicine, Inc. (the Company ) desires to appoint Troy Cox as the Companys Chief Executive Officer, to increase the size of the Board to ten (10) directors (the Proposed Increase ) and to elect Mr. Cox as a director of the Company, in each case as of February 6, 2017 (the New CEO Start Date );
WHEREAS, the Company and Roche Holdings, Inc. (the Investor ) are parties to that certain Investor Rights Agreement, dated as of January 11, 2015, as may be amended or restated from time to time (the Rights Agreement );
WHEREAS, the Fully Diluted Aggregate Ownership Percentage of the Investor Group (as each term is defined in the Rights Agreement) exceeds 10% of the Company;
WHEREAS, pursuant to Section 2.02(a)(i) of the Rights Agreement, the Investor has the right to designate a number of individuals as directors of the Company 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 (as defined in the Rights Agreement) at such time (the Designation Right );
WHEREAS, as of the New CEO Start Date, it is proposed that Mr. Cox shall be elected to the Board as the Companys Chief Executive Officer in accordance with Section 2.02(a)(ii) of the Rights Agreement;
WHEREAS, pursuant to Section 2.02(a)(iv) of the Rights Agreement, any remaining seats on the Board not filled pursuant to Sections 2.02(a)(i)-(iii) of the Rights Agreement shall be filled by Independent Directors (as defined in the Rights Agreement) (the Independence Requirement );
WHEREAS, following the Proposed Increase, it is further proposed that Michael Pellini, M.D. will remain on the Board as a director appointed pursuant to Section 2.02(a)(iv) of the Rights Agreement notwithstanding that he will not satisfy the criteria to qualify as an Independent Director (as defined in the Rights Agreement);
WHEREAS, pursuant to Section 2.05(a) of the Rights Agreement, the Company may not appoint a new Chief Executive Officer without the Investors prior written approval; and
WHEREAS, pursuant to Section 8.03 of the Rights Agreement, the Investor desires to (i) effective until the conclusion of the Companys 2017 annual meeting of stockholders, waive the Designation Right solely with respect to the Proposed Increase, (ii) consent to Dr. Pellinis continued service on the Board notwithstanding that Dr. Pellini will not satisfy the criteria to qualify as an Independent Director, and (iii) approve the appointment of Mr. Cox as the Companys Chief Executive Officer as of the New CEO Start Date.
NOW, THEREFORE, the Investor, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, hereby agrees:
1. The Investor hereby irrevocably (A) effective until the conclusion of the Companys 2017 annual meeting of stockholders, waives the Designation Right solely with respect to the Proposed Increase, and (B) consents to Dr. Pellinis continued service on the Board, notwithstanding that Dr. Pellini will not satisfy the criteria to qualify as an Independent Director. In addition, the Investor hereby consents to the appointment of Mr. Cox as the Companys Chief Executive Officer, effective as of the New CEO Start Date, in accordance with Section 2.05(a) of the Rights Agreement. For the avoidance of doubt, such waiver and consent is limited to the
Proposed Increase, Dr. Pellinis continued service on the Board and the appointment of Mr. Cox as the Companys Chief Executive Officer and does not limit, modify, amend or waive the Investors rights with respect to the appointment of any other chief executive officer, any additional increase in the size of the Board, the requirement that other new directors designated pursuant to Section 2.02(a)(iv) of the Rights Agreement meet the Independence Requirement or any of the Investors other rights under the Rights Agreement.
2. This Waiver and Consent shall be effective immediately after its due execution by the undersigned; provided, that this Waiver and Consent shall terminate and no longer be effective if Mr. Cox does not assume his duties as the Companys Chief Executive Officer and as a member of the Board on or about the New CEO Start Date. This Waiver and Consent may be executed in any number of counterparts, each such counterpart shall be deemed an original instrument, and all such counterparts together shall constitute but one agreement. This Waiver and Consent may be executed and delivered by facsimile or email (.pdf), and upon such delivery the facsimile or email (.pdf) signature will be deemed to have the same effect as if the original signature had been delivered. This Waiver and Consent shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its principles of conflicts of laws.
3. Except as expressly waived, amended or approved hereby, the provisions of the Rights Agreement are and will remain in full force and effect.
[ SIGNATURE PAGES FOLLOW ]
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IN WITNESS WHEREOF , the undersigned have executed this Waiver and Consent to be effective as of the date first written above.
ROCHE HOLDINGS, INC. | ||
By: |
/s/ Frederick C. Kentz III |
|
Name: | Frederick C. Kentz III | |
Title: | Vice President |
AGREED AND ACKNOWLEDGED:
FOUNDATION MEDICINE, INC. | ||
By: |
/s/ Alexis Borisy |
|
Name: | Alexis Borisy | |
Title: | Chairman of the Board of Directors |
Exhibit 99.1
NEWS RELEASE
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Foundation Medicine Announces Executive Leadership Transition
Proven biopharma executive and commercial leader, Troy Cox, named as chief executive officer to succeed Michael Pellini, M.D.
Dr. Pellini named chairman of the companys Board of Directors
CAMBRIDGE, Mass. January 6, 2017 - Foundation Medicine, Inc. (NASDAQ:FMI) today announced that, as part of the succession of its executive leadership, the Board of Directors has appointed Troy Cox, a highly regarded global biopharma leader, as chief executive officer to succeed Michael Pellini, M.D. Dr. Pellini, who has served as chief executive officer of the company since 2011, has been appointed chairman of the companys Board of Directors. Alexis Borisy, founding chief executive officer and current chairman of the board for Foundation Medicine, will continue to serve on the Board of Directors. Mr. Cox will also join the Board of Directors. All of these changes will become effective by February 6, 2017.
Dr. Pellini commented, On behalf of Foundation Medicines Board of Directors, were delighted to welcome Troy to the Foundation Medicine team, and we look forward to his leadership of the company through this next, important phase of growth and progress across our molecular information portfolio. In the coming years, Foundation Medicine will face a series of key catalysts for company growth, and Troys strategic, commercial and organizational acumen will be particularly critical as we proceed through the FDAs parallel review process and, if approved, prepare for the launch of the first FDA-approved universal companion diagnostic assay for cancer. My decision to change roles at Foundation Medicine has been made easier by the presence of an experienced senior management team, and our ability to attract Troy, who has a proven track record of achievement, to Foundation Medicine. I look forward to collaborating with Troy and the senior management team in transitioning the chief executive officer role, as we jointly work towards the achievement of the companys objectives and its overall mission to transform cancer care.
Mr. Cox brings nearly three decades of proven performance in global, strategic, and operational biopharma leadership and expertise to Foundation Medicine. Hes led or contributed to dozens of successful product launches in the U.S. and abroad. Mr. Cox joins Foundation Medicine from Roche-Genentech, where hes led one of the largest oncology portfolios in the U.S., with more than 1,400 people delivering unprecedented growth.
Before joining Genentech, Mr. Cox held global P&L business unit responsibility within UCB BioPharma, with responsibility for developing and commercializing medicines that serve patients across diverse specialty therapy areas. During his tenure at UCB BioPharma, Mr. Cox shaped corporate strategy, led M&A initiatives and implemented commercial strategies that accelerated the business units growth and profitability. Prior to UCB BioPharma, Mr. Cox led a large U.S. primary care business unit for Sanofi-Aventis. His diverse experience includes senior roles in European country general management, U.S. managed care sales leadership, and U.S. marketing with Schering-Plough.
NEWS RELEASE
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Mr. Cox received a bachelors degree in business administration in finance from the University of Kentucky, as well as a masters of business administration from the University of Missouri. He currently serves on the Board of Directors of the Dream Foundation, the only national non-profit organization serving terminally-ill adults and their families by providing end-of-life dreams that offer inspiration, comfort and closure. Troy has also been a long-term supporter and advisor to the Healthcare Businesswomens Association (HBA).
Mr. Borisy commented, Mikes dedication, and his numerous contributions to Foundation Medicine, its employees, investors, partners and patients, are unmistakable. The past six years have constituted the transformation of the company from its pre-commercial phase to a growing enterprise with global operations, more than 500 employees, and a fully integrated suite of molecular information products. Mike has positioned Foundation Medicine as a market leader in comprehensive genomic profiling, which we believe is now broadly recognized as a critical element in the oncology ecosystem. Mike will continue to play an important role as Board Chairman as the leadership of Foundation Medicine transitions to Troys capable hands.
About Foundation Medicine
Foundation Medicine (NASDAQ:FMI) is a molecular information company dedicated to a transformation in cancer care in which treatment is informed by a deep understanding of the genomic changes that contribute to each patients unique cancer. The company offers a full suite of comprehensive genomic profiling assays to identify the molecular alterations in a patients cancer and match them with relevant targeted therapies, immunotherapies and clinical trials. Foundation Medicines molecular information platform aims to improve day-to-day care for patients by serving the needs of clinicians, academic researchers and drug developers to help advance the science of molecular medicine in cancer. For more information, please visit http://www.FoundationMedicine.com or follow Foundation Medicine on Twitter (@FoundationATCG).
Cautionary Note Regarding Forward-Looking Statements for Foundation Medicine
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding the transition of leadership at Foundation Medicine; potential catalysts for growth by Foundation Medicine (including the potential approval and launch of the first FDA-approved universal companion diagnostic assay for cancer) and Mr. Coxs abilities to facilitate the companys achievement of these catalysts; the continuing roles of Dr. Pellini and Mr. Borisy at the company; the appointment of Mr. Cox as chief executive officer and director; and the ability of the company to achieve its business objectives. All such forward-looking statements are based on managements current expectations of future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially and adversely from those set forth in or implied by such forward-looking statements. These risks and uncertainties include the risks that the executive and Board transitions as announced are not completed as planned; the
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NEWS RELEASE
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catalysts for growth do not occur, are delayed or occur in manner not currently anticipated; Mr. Cox is not able to facilitate achievement of these catalysts effectively; and the risks described under the caption Risk Factors in Foundation Medicines Annual Report on Form 10-K for the year ended December 31, 2015, which is on file with the Securities and Exchange Commission, as well as other risks detailed in Foundation Medicines subsequent filings with the Securities and Exchange Commission. All information in this press release is as of the date of the release, and Foundation Medicine undertakes no duty to update this information unless required by law.
Media Contact:
Dan Budwick, Pure Communications, Inc.
973-271-6085
dan@purecommunicationsinc.com
Investor Contact:
Kimberly Brown, Foundation Medicine, Inc.
617-418-2215
ir@foundationmedicine.com
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