Item 1.01.
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Entry into a Material Definitive Agreement
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Agreement and Plan of Merger
On June 18, 2018, Foundation Medicine, Inc., a Delaware corporation (the Company or Foundation Medicine), entered
into an Agreement and Plan of Merger (the Merger Agreement) with Roche Holdings, Inc., a Delaware corporation (Parent or Roche Holdings), and 062018 Merger Subsidiary, Inc., a Delaware corporation and a wholly
owned subsidiary of Parent (Merger Sub), providing for the acquisition of the Company by Parent in a
two-step
all cash transaction, consisting of a tender offer (the Offer), followed by
a subsequent
back-end
merger of Merger Sub with and into the Company (the Merger), with the Company surviving the Merger as a wholly owned subsidiary of Parent. As of June 18, 2018, Parent and
its affiliates collectively beneficially owned 21,019,111 Shares of the Companys outstanding common stock, representing approximately 56.64% of the outstanding Shares.
The Companys Board of Directors (the Board), acting upon the recommendation of a Special Committee of the Board (the
Special Committee), determined that the transactions contemplated by the Merger Agreement, including the Offer and the Merger, are advisable and in the best interests of the Company and its stockholders (other than Roche Holding Ltd and
its affiliates), and approved the Merger Agreement and the transactions contemplated thereby, and recommended that the stockholders of the Company accept the Offer and tender their Shares (as defined below) pursuant to the Offer.
Pursuant to the Merger Agreement, and upon the terms and subject to the conditions described therein, Parent will cause Merger Sub to commence
the Offer for all of the Companys outstanding shares of common stock, par value $0.0001 per share (the Shares), at a purchase price of $137.00 per Share, net to the seller in cash (the Offer Price), without interest and
subject to any withholding taxes, and on the terms and conditions set forth in the Merger Agreement. The Offer will initially remain open for 20 business days from the date of commencement of the Offer, subject to extension under certain
circumstances.
The obligation of Merger Sub to purchase Shares tendered in the Offer is subject to customary closing conditions,
including (1) Shares that represent at least a majority of the then outstanding Shares not owned by Parent or its affiliates having been validly tendered and not properly withdrawn prior to the expiration of the Offer, (2) the absence of
any law, injunction, judgment or other legal restraint that prohibits the consummation of the Offer or the Merger, (3) the accuracy of the Companys representations and warranties contained in the Merger Agreement (generally subject to a
Company Material Adverse Effect (as defined in the Merger Agreement) and materiality qualifiers), (4) the Companys performance of its obligations under the Merger Agreement in all material respects and (5) the absence, since June 18,
2018, of any event, occurrence, development or state of circumstances or facts that, individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect.
Following the consummation of the Offer, subject to the satisfaction or waiver of certain customary conditions set forth in the Merger
Agreement, the Merger will be effected pursuant to the procedure provided for by Section 251(h) of the General Corporation Law of the State of Delaware (DGCL), without a meeting or vote of the Companys stockholders. The Merger
will be effected as soon as practicable following the acceptance of the Shares validly tendered and not validly withdrawn pursuant to the Offer (the Acceptance Time).
At the effective time of the Merger (the Effective Time), each Share issued and outstanding immediately prior to the Effective
Time (other than Shares owned by (i) Parent, Merger Sub or any other direct or indirect subsidiary of Parent, (ii) the Company or any direct or indirect subsidiary of the Company or (iii) stockholders who have perfected and not
withdrawn their demand for appraisal rights under the DGCL) will be automatically cancelled and converted into the right to receive the Offer Price (the Merger Consideration), without interest and subject to any withholding taxes.
Immediately prior to the Effective Time (i) each vested outstanding Company stock option, whether or not exercisable, will be cancelled
and converted into the right to receive an amount in cash equal to the product of (x) the excess, if any, of the Merger Consideration over the per Share exercise price applicable to such Company
stock option, multiplied by (y) the total number of Shares subject to such Company stock option, (ii) each outstanding unvested Company stock option will be cancelled and converted into
the right to receive, upon the satisfaction of the original vesting conditions applicable to the underlying Company stock option, an amount in cash equal to the product of (x) the excess, if any, of the Merger Consideration over the per Share
exercise price applicable to such Company stock option, multiplied by (y) the total number of Shares subject to such Company stock option and (iii) each Company restricted stock unit will be cancelled and converted into the right to
receive, upon the satisfaction of the original vesting conditions applicable to the underlying Company restricted stock unit, an amount in cash equal to the product of (x) the Merger Consideration, multiplied by (y) the number of Shares
underlying such award.
The Merger Agreement contains representations and warranties and covenants of the parties customary for a
transaction of this nature, including an agreement that, subject to certain exceptions, the parties will use reasonable best efforts to cause the Offer and the Merger to be consummated. Until the earlier of the Effective Time and the
termination of the Merger Agreement, the Company has agreed to operate its business in the ordinary course of business consistent with past practice and has agreed to certain other negative operating covenants, as set forth more fully in the Merger
Agreement.
The Offer and Merger are not subject to a financing contingency, and Parent has represented to the Company that it has
sufficient cash, available lines of credit or other sources of immediately available funds to enable it to consummate the Offer and the Merger.
The Merger Agreement also contains certain termination rights for both the Company and Parent, including, among other things, for (a) the
failure of the Acceptance Time to occur by November 18, 2018, (b) the enactment, adoption, enforcement, promulgation or application of any final and
non-appealable
applicable law, order, injunction
or judgment that makes the consummation of the Offer or the Merger illegal or otherwise prohibits or permanently enjoins the consummation of the Offer or the Merger, and (c) breaches of representations, warranties or covenants by a party that,
in the case of the Company, result in the failure of certain conditions to closing being satisfied, or, in the case of Parent, would reasonably be expected to prevent Parent from consummating the Offer or the Merger. Prior to the Acceptance Time,
the Company has the right to terminate the Merger Agreement in connection with a change in the Boards recommendation to stockholders to tender their Shares pursuant to the Offer in respect of a superior proposal with a third party, subject to
certain conditions. Upon termination of the Merger Agreement under specified circumstances, the Company will be required to pay Parent a termination fee of $34,500,000.
The foregoing description of the Merger Agreement is qualified in its entirety by the terms of the Merger Agreement, a copy of which
accompanies this filing to provide investors and security holders with information regarding its terms. It is not intended to provide any other financial information about the Company, Parent or their respective subsidiaries and affiliates. The
representations, warranties and covenants of the Company contained in the Merger Agreement have been made solely for the benefit of Parent and Merger Sub. In addition, such representations, warranties and covenants (a) have been made only for
purposes of the Merger Agreement, (b) have been qualified by (i) matters disclosed in certain reports filed by the Company with the SEC prior to the date of the Merger Agreement (subject to certain exceptions) and (ii) confidential
disclosures made by the Company to Parent and Merger Sub in a disclosure letter delivered in connection with the Merger Agreement, (c) are subject to materiality qualifications contained in the Merger Agreement which may differ from what may be
viewed as material by investors, (d) were made only as of the date of the Merger Agreement or such other date as is specified in the Merger Agreement and (e) have been included in the Merger Agreement for the purpose of allocating risk
between the contracting parties rather than establishing matters as fact. Accordingly, the Merger Agreement is included with this filing only to provide investors with information regarding the terms of the Merger Agreement, and not to provide
investors with any other factual information regarding the Company or its business. In addition, certain confidential disclosures contain information that modifies, qualifies and creates exceptions to the representations and warranties set forth in
the Merger Agreement. Investors should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the Company or any of its subsidiaries or affiliates.
Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the Companys public disclosures. The
Merger Agreement should not be read alone, but should instead be read in conjunction with the other information regarding the Company that is or will be contained in, or
incorporated by reference into, the
Forms 10-K,
Forms 10-Q
and other documents that the Company files
with the SEC.
If the Merger is consummated, the Shares will be delisted from The NASDAQ Stock Market and deregistered under the
Securities Exchange Act of 1934, as amended.
The foregoing description of the Merger Agreement and the transactions contemplated thereby
does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Merger Agreement attached hereto as Exhibit 2.1, which is incorporated into this Item 1.01 by reference.