March 7, 2013 Robert W. Hesslein
EXHIBIT 10.5
March 7, 2013
Xxxxxx X. Xxxxxxxx
| Re: | Employment with Foundation Medicine, Inc. |
Dear Xxx:
This letter agreement (this “Agreement”) sets forth the terms and conditions of your continued employment with Foundation Medicine, Inc. (“Foundation Medicine” or “the Company”). Upon your execution of this Agreement, this Agreement shall be effective as of the date set forth above. This Agreement shall fully supersede all prior agreements between you and the Company relating to the subject matter herein including, without limitation, any prior offer letter or agreement, plan or arrangement relating to severance pay or benefits. Defined terms used in this Agreement may be found generally within the provisions of this Agreement or specifically in the section of this Agreement entitled “Definitions.”
Your position will continue to be Senior Vice President & General Counsel, reporting to Xxxx Xxxxxxx, CEO. You will also continue to be a member of the Company’s Executive Management Team. In addition to performing duties and responsibilities associated with the position above, from time-to-time the Company may assign you other duties and responsibilities consistent with such position.
Salary, Annual Cash Bonus Opportunity and Expense Reimbursement. You will be paid on a salary basis at an annual rate of $309,000, payable twice per month in accordance with Foundation Medicine’s standard payroll practices, subject to customary deductions and withholdings and subject to adjustment by the Company in its discretion. You will be eligible for annual merit salary reviews in accordance with the Company’s compensation practices.
Additionally, as a member of the Company’s Executive Management Team, you will be eligible for participation in the Company’s bonus program. At the discretion of the Company’s Board of Directors (the “Board”) and in accordance with the terms and conditions of the bonus program, you will be considered for a bonus payment under the Company’s bonus program. If participation in a bonus program is provided, you shall be eligible to participate with a target of up to 35% of your then annual base salary, such target to be subject to adjustment by the
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Company in its discretion. You must be employed by the Company at the time a bonus is paid to earn any part of a bonus. Also, the Company will reimburse your reasonable out-of-pocket travel expenses and other expenses related to your work in accordance with the Company’s expense reimbursement policy.
Equity Awards. A list of all Equity Awards granted to you by the Company as of the date of this Agreement is attached as Exhibit A (the “Equity Schedule”). The Equity Awards are subject to the terms and conditions of the Company’s incentive equity plan(s), as may be amended from time to time, and associated award agreements (collectively, and together with the Equity Schedule, the “Equity Documents”).
Certain Equity Awards have been granted acceleration rights described below and are designated as Acceleration Equity Awards on the Equity Schedule (the “Acceleration Equity Awards”). Equity Awards not granted Acceleration Rights by the Company are designated as Non-Acceleration Equity Awards on the Equity Schedule (the “Non-Acceleration Equity Awards”). Any Equity Awards granted to you by the Company that are not listed on the Equity Schedule shall be considered Non-Acceleration Equity Awards, unless and until they are granted Acceleration Equity Award status by the Board. Consistent with the Equity Documents, the Equity Schedule may be amended from time to time by the Company to add Acceleration Equity Awards or to add Non-Acceleration Equity Awards, and to convert Non-Acceleration Equity Awards to Acceleration Equity Awards. Each amendment to the Equity Schedule shall be consecutively numbered and dated, shall make express reference to this Agreement, shall supersede the immediately preceding Equity Schedule, and following issuance shall be incorporated into this Agreement and shall constitute one of the Equity Documents.
Subject to the further provisions of this Agreement and the Equity Documents, including the Stock Option Agreement dated April 12, 2012, vesting of the option to purchase 316,500 shares of the Company’s common stock (the “Initial Grant”) shall accelerate with regard to the entire remaining unvested portion of the Initial Grant in the event that following a Change in Control (i) your employment is terminated by the Company without Cause, or (ii) you terminate your employment with the Company for Good Reason in accordance with the Good Reason Process.
Subject to the further provisions of this Agreement and the Equity Documents, vesting of the Acceleration Equity Awards (other than the Initial Grant) shall accelerate with regard to the entire remaining unvested portion of such Acceleration Equity Awards in the event that within 18 months following a Change in Control (i) your employment is terminated by the Company without Cause, or (ii) you terminate your employment with the Company for Good Reason in accordance with the Good Reason Process.
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) | following a Change in Control you terminate your employment with the Company for Good Reason in accordance with the Good Reason Process, |
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and, in either event, you enter into and comply with a Release, the Company shall pay or provide you:
| (y) | Salary Continuation, subject to the mitigation described below, and |
| (z) | Health Care Continuation (collectively, the “Severance Payments”); |
in each instance for a period of nine (9) months following your termination date (the “Salary Continuation Period”).
Mitigation and Compliance. Notwithstanding the foregoing, if you are entitled to Salary Continuation as set forth above and you commence any employment or self-employment during the Salary Continuation Period on terms and conditions in the aggregate that are comparable to the terms and conditions of your employment at the Company immediately prior to your termination date, the amount of your Salary Continuation after you commence such employment or self-employment shall be decreased by the amount received pursuant to such employment or self-employment from and following the date you commence such employment. You shall give prompt notice to the Company if you commence such employment or self-employment during the Salary Continuation Period and you shall respond promptly to any reasonable inquiries from the Company concerning such employment or self-employment during such Salary Continuation Period. In addition, if you breach the terms of the Release, the Company shall have the right to terminate or cease payment of the Salary Continuation. Notwithstanding the foregoing, this mitigation provision shall not be construed to affect your right to receive Health Care Continuation during the Salary Continuation Period so long as you are not eligible for health benefits through another employer.
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.
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.
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Anything to the contrary notwithstanding, if at the time of the 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 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 months and one day after your separation from service, or (ii) the 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-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. All reimbursements and in-kind benefits provided under this Agreement shall be made or provided in accordance with the requirements of Section 409A to the extent that such reimbursements or in-kind benefits are subject to Section 409A. 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.
Notice of Termination. 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. However, you agree to provide the Company with fourteen (14) days’ written notice if you decide to terminate the employment relationship (except in the event of a Good Reason termination, in which case the Good Reason Process shall apply).
Non-Competition, Non-Solicitation, Confidentiality and Assignment Agreement. You hereby reaffirm the effectiveness of, and your obligations pursuant to, your Employee Non-Competition, Non-Solicitation, Confidentiality and Assignment Agreement (the “Employee Agreement”), a copy of which is attached to this Agreement as Exhibit B. You and the Company agree that the terms of the Employee Agreement are incorporated into this Agreement.
Xxxxxx X. Xxxxxxxx
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No Conflicting Agreements. 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 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 Company’s Vice President, Human Resources and/or its 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.
Governing Law. The interpretation of this Agreement will be governed by the laws of Massachusetts, without regard to the conflicts of laws principles thereof.
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 Employee Agreement, or any of the other agreements you have with the Company, which breach continues or remains uncured after thirty (30) days’ notice setting forth in reasonable detail the nature of such breach; or (iv) material fraudulent conduct by you with respect to the Company.
“Change in Control” means:
(i) prior to the completion of an initial public offering by the Company, an event that (a) is a Deemed Liquidation Event within the meaning of such term as set forth in the Company’s Amended and Restated Certificate of Incorporation, as amended and/or restated from time to time and (b) results in the payment of proceeds to the stockholders of the Company; and
(ii) following the completion of an initial public offering by the Company, any of the following:
(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
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Company representing 50 percent or more of the combined voting power of the Company’s then 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 during any consecutive twenty-four month period by individuals who, prior to their election, or nomination for election by the Company’s 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; 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.
Notwithstanding the foregoing, a “Change in Control” shall not include (1) an initial public offering and (2) shall not be deemed to have occurred for purposes of the foregoing clause (ii)(a) 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 (ii)(a).
“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 Company’s equity securities that have been or will be granted to you by the Company.
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“Good Reason” means the occurrence of one or more of the following events or circumstances following a Change in Control without your written consent; provided, that you have complied with the Good Reason Process:
(i) a material diminution in your responsibilities, authority, duties or base salary;
(ii) your work location is located more than fifty (50) miles from the Company’s office location at which you were principally working as of the effective date of the Change in Control; or
(iii) a material breach by the Company of this Agreement or any of the agreements you have with the Company relating to the Equity Awards or other equity of the Company, which breach continues or remains uncured after thirty (30) days’ notice setting forth in reasonable detail the nature of such breach.
“Good Reason Process” means:
(i) you reasonably determine that a Good Reason condition has occurred following a Change in Control;
(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 Company’s efforts, 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 fully cures the Good Reason condition during the Cure Period, Good Reason shall be deemed not to have occurred.
The Company’s success at curing a Good Reason condition shall not bar or preclude your right to notify the Company of the occurrence within 18 months following a Change in Control of another Good Reason condition and to proceed with the Good Reason Process.
“Health Care Continuation” means that if you are participating in the Company’s group health plan immediately prior to the date of your termination, then subject to your 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.
“Release” means 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
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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, subject to mitigation, during the Salary Continuation Period. The first payment of Salary Continuation shall be paid within 60 days after the date of termination and shall be made on the Company’s regular payroll dates; provided, however, that if the 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.
Survival. 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. 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.
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Entire Agreement. Upon execution, this Agreement, including Exhibits A and B, and the Equity Documents, as amended from time to time, will constitute the entire agreement as to your employment relationship with Foundation Medicine and will supersede any prior agreements or understandings, whether in writing or oral.
We are looking forward to your continued contributions as a member of the Foundation Medicine team.
| Sincerely, | ||
| FOUNDATION MEDICINE, INC. | ||
| /s/ Xxxxx Xxxxxx | ||
| By: | Xxxxx Xxxxxx | |
| Title: | Vice President, Human Resources | |
YOU ACKNOWLEDGE THAT YOU HAVE CAREFULLY READ THIS LETTER, INCLUDING EXHIBIT A AND EXHIBIT B, AND UNDERSTAND AND AGREE TO ALL OF THE PROVISIONS IN THIS LETTER AND ITS EXHIBITS. FACSIMILE AND PDF SIGNATURES SHALL HAVE THE SAME LEGAL EFFECT AS ORIGINALS.
| Accepted and agreed by: | ||
| /s/ Xxxxxx X. Xxxxxxxx | ||
| Employee Signature | ||
| Xxxxxx X. Xxxxxxxx | ||
| Print Employee’s Name | ||
| Date: | June 21, 2013 | |
EXHIBIT A
Equity Schedule
The table below contains information regarding stock option awards. Except for information regarding the designation of a stock option award as an Acceleration Equity Award or Non-Acceleration Equity Award, the information furnished is for reference purposes only. In the event of a conflict between the information furnished in this table and the Stock Option Agreement for such stock option award, the terms and conditions of the Stock Option Agreement shall govern. You should refer to each Stock Option Agreement for the individual terms and conditions of such stock option award.
| Xxxxx |
Xxxxx Date |
Acceleration Rights | ||
| 316,500 |
6/5/2012 | Yes | ||
| 100,000 |
3/7/2013 | Yes | ||
| *50,000 |
5/21/2013 | Yes |
| * | Grant is subject to conditional vesting terms which are defined in the Stock Option Agreement |
EXHIBIT B
Employee Non-Competition, Non-Solicitation, Confidentiality and Assignment Agreement
Non-Competition, Non-Solicitation,
Confidentiality and Assignment Agreement
In consideration and as a condition of my employment or continued employment by Foundation Medicine, Inc. (the “Company”), I hereby agree as follows:
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EXHIBIT A
| TO: | Foundation Medicine, Inc. | |||
| FROM: | ||||
| DATE: | ||||
| SUBJECT: | Prior Inventions | |||
| The following is a complete list of all inventions or improvements relevant to the subject matter of my employment by the Company that have been made or conceived or first reduced to practice by me alone or jointly with others prior to my engagement by the Company: | ||||
| ¨ | No inventions or improvements | |||
| ¨ | See below: | |||
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| ¨ | Additional sheets attached | |||
| The following is a list of all patents, patent applications and other patent rights that I have invented: | ||||
| ¨ | None | |||
| ¨ | See below: | |||
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