RELATIONSHIP WITH ROCHE
Arrangements between Foundation Medicine and Roche
On January 12, 2015, we announced a broad strategic collaboration with Roche Holdings, Inc. and certain of its affiliates (collectively, Roche) to further advance our leadership position in genomic analysis and molecular information solutions in oncology. The transaction, which is a broad multi-part arrangement that includes a research and development collaboration, an ex-U.S. commercial collaboration, a U.S. educational support collaboration and an equity investment with certain governance provisions, closed on April 7, 2015 (the Closing).
At the Closing, Roche acquired 15,604,288 shares of the Companys common stock, par value $0.0001 per share (each a Share), at a purchase price of $50.00 per Share, in a tender offer for aggregate consideration of approximately $780.2 million (the Tender Offer Shares) and completed its primary investment in the Company of $250 million in cash to purchase 5,000,000 newly issued Shares at a price of $50.00 per Share (the Issuance and together with the Tender Offer Shares, the Investment). Immediately following the Closing, Roche owned approximately 61.3% of the outstanding Shares. As of April 23, 2018, Roche beneficially owned approximately 56.8% of the outstanding Shares.
Notwithstanding the Investment, the Company remains an independent public company with Roche having the right to designate a minority of the directors on the Board pursuant to the Investor Rights Agreement described below.
Investor Rights Agreement
On April 7, 2015, in connection with the Closing, that certain Investor Rights Agreement, dated as of January 11, 2015, by and among the Company, Roche and certain other stockholders of the Company (the Existing VC Investors) (the Investor Rights Agreement) became effective. The Investor Rights Agreement includes, without limitation, the following provisions:
Composition of our Board of Directors.
Immediately following the Closing and pursuant to the Investor Rights Agreement, the Board was increased to nine directors and reconstituted to include three directors designated by Roche (Daniel ODay, Sandra Horning, M.D. and Michael Varney, Ph.D.) (the Roche Designees), two representatives affiliated with the Existing VC Investors (Alexis Borisy (then Chairman) and Krishna Yeshwant, M.D.), our Chief Executive Officer at the time (Michael Pellini, M.D.), two independent directors (Evan Jones and David Schenkein, M.D.) and one vacancy to be filled by an independent director to be agreed upon by the Company and Roche. In October 2016, Michael Dougherty was appointed as a member of the Board. In February 2017, the Board was increased to ten members when Troy Cox succeeded Michael Pellini as our Chief Executive Officer and became a member of the Board. At that time, Michael Pellini became Chairman of the Board. In June 2017, the Board was decreased to nine members when David Schenkein, M.D. retired from the Board at our 2017 annual meeting of stockholders.
Roches Right to Proportional Representation.
So long as Roche beneficially owns at least 10% of the outstanding Shares, Roche will be entitled to 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. In addition, so long as there is at least one Roche Designee on the Board of Directors, Roche will be entitled to proportionate representation on each committee of the Board of Directors, but in any event, at least one director or observer 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 Roche 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 Roche and which is similar in scope, nature and value to the ordinary course collaboration agreements of the Company existing as of January 11, 2015 (
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 companys research, development and commercialization efforts).
The Roche Designees have observation rights with respect to the Board committees pursuant to the terms of the Investor Rights Agreement, which rights include (a) the provision with all notices of meetings, consents,