Exhibit 10.1

 

NATERA, INC.

 

2007 STOCK PLAN

 

ADOPTED ON JANUARY 26, 2007 AND AMENDED ON JUNE 7, 2007

 











 

TABLE OF CONTENTS

 

	
 
    	
Page No.
    
	
 
    	
 
    
	
SECTION 1. ESTABLISHMENT AND PURPOSE
    	
1
    
	
 
    	
 
    
	
SECTION 2. ADMINISTRATION
    	
1
    
	
 
    	
 
    
	
(a)  Committees of the Board   of Directors
    	
1
    
	
(b)  Authority of the Board   of Directors
    	
1
    
	
 
    	
 
    
	
SECTION 3. ELIGIBILITY
    	
2
    
	
 
    	
 
    
	
(a)  General Rule
    	
2
    
	
(b)  Ten-Percent   Stockholders
    	
2
    
	
 
    	
 
    
	
SECTION 4. STOCK SUBJECT TO PLAN
    	
2
    
	
 
    	
 
    
	
(a)  Basic Limitation
    	
2
    
	
(b)  Additional Shares
    	
2
    
	
 
    	
 
    
	
SECTION 5. TERMS AND CONDITIONS OF AWARDS OR SALES
    	
3
    
	
 
    	
 
    
	
(a)  Stock Purchase   Agreement
    	
3
    
	
(b)  Duration of Offers and   Nontransferability of Rights
    	
3
    
	
(c)  Purchase Price
    	
3
    
	
(d)  Withholding Taxes
    	
3
    
	
(e)  Restrictions on   Transfer of Shares and Minimum Vesting
    	
4
    
	
 
    	
 
    
	
SECTION 6. TERMS AND CONDITIONS OF OPTIONS
    	
4
    
	
 
    	
 
    
	
(a)  Stock Option Agreement
    	
4
    
	
(b)  Number of Shares
    	
5
    
	
(c)  Exercise Price
    	
5
    
	
(d)  Exercisability
    	
5
    
	
(e)  Accelerated   Exercisability
    	
5
    
	
(f)  Basic Term
    	
6
    


 











 

	
(g) 
    	
Termination of Service (Except by   Death)
    	
6
    
	
(h) 
    	
Leaves of Absence
    	
7
    
	
(i) 
    	
Death of Optionee
    	
7
    
	
(j) 
    	
Restrictions on Transfer of   Shares and Minimum Vesting
    	
7
    
	
(k) 
    	
Transferability of Options
    	
8
    
	
(l) 
    	
Withholding Taxes
    	
8
    
	
(m) 
    	
No Rights as a Stockholder
    	
9
    
	
(n) 
    	
Modification, Extension and   Assumption of Options
    	
9
    
	
 
    	
 
    
	
SECTION 7. PAYMENT FOR SHARES
    	
9
    
	
 
    	
 
    
	
(a)  General Rule
    	
9
    
	
(b)  Surrender of Stock
    	
9
    
	
(c)  Services Rendered
    	
10
    
	
(d)  Promissory Note
    	
10
    
	
(e)  Exercise/Sale
    	
10
    
	
(f)  Exercise/Pledge
    	
10
    
	
 
    	
 
    
	
SECTION 8. ADJUSTMENT OF SHARES
    	
11
    
	
 
    	
 
    
	
(a)  General
    	
11
    
	
(b)  Mergers and   Consolidations
    	
11
    
	
(c)  Reservation of Rights
    	
12
    
	
 
    	
 
    
	
SECTION 9. SECURITIES LAW REQUIREMENTS
    	
12
    
	
 
    	
 
    
	
(a)  General
    	
12
    
	
(b)  Financial Reports
    	
12
    
	
 
    	
 
    
	
SECTION 10. NO RETENTION RIGHTS
    	
13
    
	
 
    	
 
    
	
SECTION 11. DURATION AND AMENDMENTS
    	
13
    
	
 
    	
 
    
	
(a)  Term of the Plan
    	
13
    
	
(b)  Right to Amend or   Terminate the Plan
    	
13
    
	
(c)  Effect of Amendment or   Termination
    	
14
    
	
 
    	
 
    
	
SECTION 12. DEFINITIONS
    	
14
    


 











 

NATERA, INC.
 2007 STOCK PLAN

 

SECTION 1.                                     ESTABLISHMENT AND PURPOSE.

 

The purpose of the Plan is to offer selected persons an opportunity to acquire a proprietary interest in the success of the Company, or to increase such interest, by purchasing Shares of the Company’s Stock.  The Plan provides both for the direct award or sale of Shares and for the grant of Options to purchase Shares.  Options granted under the Plan may include Nonstatutory Options as well as ISOs intended to qualify under Section 422 of the Code.

 

Capitalized terms are defined in Section 12.

 

SECTION 2.                                     ADMINISTRATION.

 

(a)           Committees of the Board of Directors.  The Plan may be administered by one or more Committees.  Each Committee shall consist of one or more members of the Board of Directors who have been appointed by the Board of Directors.  Each Committee shall have such authority and be responsible for such functions as the Board of Directors has assigned to it.  If no Committee has been appointed, the entire Board of Directors shall administer the Plan.  Any reference to the Board of Directors in the Plan shall be construed as a reference to the Committee (if any) to whom the Board of Directors has assigned a particular function.

 

(b)           Authority of the Board of Directors.  Subject to the provisions of the Plan, the Board of Directors shall have full authority and discretion to take any actions it deems necessary or advisable for the administration of the Plan.  All decisions, interpretations and other actions of the Board of Directors shall be final and binding on all Purchasers, all Optionees and all persons deriving their rights from a Purchaser or Optionee.

 

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SECTION 3.                                     ELIGIBILITY.

 

(a)           General Rule.  Only Employees, Outside Directors and Consultants shall be eligible for the grant of Nonstatutory Options or the direct award or sale of Shares.  Only Employees shall be eligible for the grant of ISOs.

 

(b)           Ten-Percent Stockholders.  A person who owns more than 10% of the total combined voting power of all classes of outstanding stock of the Company, its Parent or any of its Subsidiaries shall not be eligible for designation as an Optionee or Purchaser unless (i) the Exercise Price is at least 110% of the Fair Market Value of a Share on the date of grant, (ii) the Purchase Price (if any) is at least 100% of the Fair Market Value of a Share and (iii) in the case of an ISO, such ISO by its terms is not exercisable after the expiration of five years from the date of grant.  For purposes of this Subsection (b), in determining stock ownership, the attribution rules of Section 424(d) of the Code shall be applied.

 

SECTION 4.                                     STOCK SUBJECT TO PLAN.

 

(a)           Basic Limitation.  Not more than 12,541,766  (Twelve Million Five Hundred Forty One Thousand Seven Hundred Sixty Six) Shares may be issued under the Plan (subject to Subsection (b) below and Section 8).  The number of Shares that are subject to Options or other rights outstanding at any time under the Plan shall not exceed the number of Shares that then remain available for issuance under the Plan.  The Company, during the term of the Plan, shall at all times reserve and keep available sufficient Shares to satisfy the requirements of the Plan.  Shares offered under the Plan may be authorized but unissued Shares or treasury Shares.

 

(b)           Additional Shares.  In the event that Shares previously issued under the Plan are reacquired by the Company pursuant to a forfeiture provision, right of repurchase or right of first refusal, such Shares shall be added to the number of Shares then available for issuance under the Plan.  However, the aggregate number of Shares issued upon the exercise of ISOs (including Shares

 

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reacquired by the Company) shall in no event exceed 200% of the number specified in Subsection (a) above.  In the event that an outstanding Option or other right for any reason expires or is canceled, the Shares allocable to the unexercised portion of such Option or other right shall not reduce the number of Shares available for issuance under the Plan.

 

SECTION 5.                                     TERMS AND CONDITIONS OF AWARDS OR SALES.

 

(a)           Stock Purchase Agreement.  Each award or sale of Shares under the Plan (other than upon exercise of an Option) shall be evidenced by a Stock Purchase Agreement between the Purchaser and the Company.  Such award or sale shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions which are not inconsistent with the Plan and which the Board of Directors deems appropriate for inclusion in a Stock Purchase Agreement.  The provisions of the various Stock Purchase Agreements entered into under the Plan need not be identical.

 

(b)           Duration of Offers and Nontransferability of Rights.  Any right to acquire Shares under the Plan (other than an Option) shall automatically expire if not exercised by the Purchaser within 30 days after the grant of such right was communicated to the Purchaser by the Company.  Such right shall not be transferable and shall be exercisable only by the Purchaser to whom such right was granted.

 

(c)           Purchase Price.  The Purchase Price of Shares to be offered under the Plan shall not be less than 85% of the Fair Market Value of such Shares, and a higher percentage may be required by Section 3(b).  Subject to the preceding sentence, the Board of Directors shall determine the Purchase Price at its sole discretion.  The Purchase Price shall be payable in a form described in Section 7.

 

(d)           Withholding Taxes.  As a condition to the purchase of Shares, the Purchaser shall make such arrangements as

 

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the Board of Directors may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with such purchase.

 

(e)           Restrictions on Transfer of Shares and Minimum Vesting.  Any Shares awarded or sold under the Plan shall be subject to such special forfeiture conditions, rights of repurchase, rights of first refusal and other transfer restrictions as the Board of Directors may determine.  Such restrictions shall be set forth in the applicable Stock Purchase Agreement and shall apply in addition to any restrictions that may apply to holders of Shares generally.  In the case of a Purchaser who is not an officer of the Company, an Outside Director or a Consultant:

 

(i)            Any right to repurchase the Purchaser’s Shares at the original Purchase Price (if any) upon termination of the Purchaser’s Service shall lapse at least as rapidly as 20% per year over the five-year period commencing on the date of the award or sale of the Shares;

 

(ii)           Any such right may be exercised only for cash or for cancellation of indebtedness incurred in purchasing the Shares; and

 

(iii)          Any such right may be exercised only within 90 days after the termination of the Purchaser’s Service.

 

SECTION 6.                                     TERMS AND CONDITIONS OF OPTIONS.

 

(a)           Stock Option Agreement.  Each grant of an Option under the Plan shall be evidenced by a Stock Option Agreement between the Optionee and the Company.  The Option shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions which are not inconsistent with the Plan and which the Board of Directors deems appropriate for inclusion in a Stock Option Agreement.  The

 

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provisions of the various Stock Option Agreements entered into under the Plan need not be identical.

 

(b)           Number of Shares.  Each Stock Option Agreement shall specify the number of Shares that are subject to the Option and shall provide for the adjustment of such number in accordance with Section 8.  The Stock Option Agreement shall also specify whether the Option is an ISO or a Nonstatutory Option.

 

(c)           Exercise Price.  Each Stock Option Agreement shall specify the Exercise Price.  The Exercise Price of an ISO shall not be less than 100% of the Fair Market Value of a Share on the date of grant, and a higher percentage may be required by Section 3(b).  The Exercise Price of a Nonstatutory Option shall not be less than 85% of the Fair Market Value of a Share on the date of grant, and a higher percentage may be required by Section 3(b).  Subject to the preceding two sentences, the Exercise Price under any Option shall be determined by the Board of Directors at its sole discretion.  The Exercise Price shall be payable in a form described in Section 7.

 

(d)           Exercisability.  Each Stock Option Agreement shall specify the date when all or any installment of the Option is to become exercisable.  No Option shall be exercisable unless the Optionee has delivered an executed copy of the Stock Option Agreement to the Company.  In the case of an Optionee who is not an officer of the Company, an Outside Director or a Consultant, an Option shall become exercisable at least as rapidly as 20% per year over the five-year period commencing on the date of grant.  Subject to the preceding sentence, the Board of Directors shall determine the exercisability provisions of the Stock Option Agreement at its sole discretion.

 

(e)           Accelerated Exercisability.  Unless the applicable Stock Option Agreement provides otherwise, all of an Optionee’s Options shall become exercisable in full if (i) the Company is subject to a Change in Control before the Optionee’s Service terminates, (ii) such Options do not remain outstanding, (iii) such Options are not assumed by the surviving corporation or its

 

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parent and (iv) the surviving corporation or its parent does not substitute options with substantially the same terms for such Options.

 

(f)            Basic Term.  The Stock Option Agreement shall specify the term of the Option.  The term shall not exceed 10 years from the date of grant, and a shorter term may be required by Section 3(b).  Subject to the preceding sentence, the Board of Directors at its sole discretion shall determine when an Option is to expire.

 

(g)           Termination of Service (Except by Death).  If an Optionee’s Service terminates for any reason other than the Optionee’s death, then the Optionee’s Options shall expire on the earliest of the following occasions:

 

(i)            The expiration date determined pursuant to Subsection (f) above;

 

(ii)           The date three months after the termination of the Optionee’s Service for any reason other than Disability, or such later date as the Board of Directors may determine; or

 

(iii)          The date six months after the termination of the Optionee’s Service by reason of Disability, or such later date as the Board of Directors may determine.

 

The Optionee may exercise all or part of the Optionee’s Options at any time before the expiration of such Options under the preceding sentence, but only to the extent that such Options had become exercisable before the Optionee’s Service terminated (or became exercisable as a result of the termination) and the underlying Shares had vested before the Optionee’s Service terminated (or vested as a result of the termination).  The balance of such Options shall lapse when the Optionee’s Service terminates.  In the event that the Optionee dies after the termination of the Optionee’s Service but before the expiration of the Optionee’s Options, all or part of such Options may be exercised (prior to expiration) by the executors or

 

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administrators of the Optionee’s estate or by any person who has acquired such Options directly from the Optionee by beneficiary designation, bequest or inheritance, but only to the extent that such Options had become exercisable before the Optionee’s Service terminated (or became exercisable as a result of the termination) and the underlying Shares had vested before the Optionee’s Service terminated (or vested as a result of the termination).

 

(h)           Leaves of Absence.  For purposes of Subsection (g) above, Service shall be deemed to continue while the Optionee is on a bona fide leave of absence, if such leave was approved by the Company in writing and if continued crediting of Service for this purpose is expressly required by the terms of such leave or by applicable law (as determined by the Company).

 

(i)            Death of Optionee.  If an Optionee dies while the Optionee is in Service, then the Optionee’s Options shall expire on the earlier of the following dates:

 

(i)            The expiration date determined pursuant to Subsection (f) above; or

 

(ii)           The date 12 months after the Optionee’s death, or such later date as the Board of Directors may determine.

 

All or part of the Optionee’s Options may be exercised at any time before the expiration of such Options under the preceding sentence by the executors or administrators of the Optionee’s estate or by any person who has acquired such Options directly from the Optionee by beneficiary designation, bequest or inheritance, but only to the extent that such Options had become exercisable before the Optionee’s death (or became exercisable as a result of the death) and the underlying Shares had vested before the Optionee’s death (or vested as a result of the Optionee’s death).  The balance of such Options shall lapse when the Optionee dies.

 

(j)            Restrictions on Transfer of Shares and Minimum Vesting.  Any Shares issued upon exercise of an Option

 

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shall be subject to such special forfeiture conditions, rights of repurchase, rights of first refusal and other transfer restrictions as the Board of Directors may determine.  Such restrictions shall be set forth in the applicable Stock Option Agreement and shall apply in addition to any restrictions that may apply to holders of Shares generally.  In the case of an Optionee who is not an officer of the Company, an Outside Director or a Consultant:

 

(i)                                     Any right to repurchase the Optionee’s Shares at the original Exercise Price upon termination of the Optionee’s Service shall lapse at least as rapidly as 20% per year over the five-year period commencing on the date of the option grant;

 

(ii)                                  Any such right may be exercised only for cash or for cancellation of indebtedness incurred in purchasing the Shares; and

 

(iii)                               Any such right may be exercised only within 90 days after the later of (A) the termination of the Optionee’s Service or (B) the date of the option exercise.

 

(k)                                 Transferability of Options.  An Option shall be transferable by the Optionee only by (i) a beneficiary designation, (ii) a will or (iii) the laws of descent and distribution, except as provided in the next sentence.  If the applicable Stock Option Agreement so provides, an NSO shall also be transferable by the Optionee by (i) a gift to a member of the Optionee’s Immediate Family or (ii) a gift to an inter vivos or testamentary trust in which members of the Optionee’s Immediate Family have a beneficial interest of more than 50% and which provides that such NSO is to be transferred to the beneficiaries upon the Optionee’s death.  An ISO may be exercised during the lifetime of the Optionee only by the Optionee or by the Optionee’s guardian or legal representative.

 

(l)                                     Withholding Taxes.  As a condition to the exercise of an Option, the Optionee shall make such arrangements as

 

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the Board of Directors may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with such exercise.  The Optionee shall also make such arrangements as the Board of Directors may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with the disposition of Shares acquired by exercising an Option.

 

(m)                             No Rights as a Stockholder.  An Optionee, or a transferee of an Optionee, shall have no rights as a stockholder with respect to any Shares covered by the Optionee’s Option until such person becomes entitled to receive such Shares by filing a notice of exercise and paying the Exercise Price pursuant to the terms of such Option.

 

(n)                                 Modification, Extension and Assumption of Options.  Within the limitations of the Plan, the Board of Directors may modify, extend or assume outstanding Options or may accept the cancellation of outstanding Options (whether granted by the Company or another issuer) in return for the grant of new Options for the same or a different number of Shares and at the same or a different Exercise Price.  The foregoing notwithstanding, no modification of an Option shall, without the consent of the Optionee, impair the Optionee’s rights or increase the Optionee’s obligations under such Option.

 

SECTION 7.                                     PAYMENT FOR SHARES.

 

(a)                                 General Rule.  The entire Purchase Price or Exercise Price of Shares issued under the Plan shall be payable in cash or cash equivalents at the time when such Shares are purchased, except as otherwise provided in this Section 7.

 

(b)                                 Surrender of Stock.  To the extent that a Stock Option Agreement so provides, all or any part of the Exercise Price may be paid by surrendering, or attesting to the ownership of, Shares that are already owned by the Optionee.  Such Shares shall be surrendered to the Company in good form for transfer and shall be valued at their Fair Market Value on the date when the Option is

 

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exercised.  The Optionee shall not surrender, or attest to the ownership of, Shares in payment of the Exercise Price if such action would cause the Company to recognize compensation expense (or additional compensation expense) with respect to the Option for financial reporting purposes.

 

(c)                                  Services Rendered.  At the discretion of the Board of Directors, Shares may be awarded under the Plan in consideration of services rendered to the Company, a Parent or a Subsidiary prior to the award.

 

(d)                                 Promissory Note.  To the extent that a Stock Option Agreement or Stock Purchase Agreement so provides, all or a portion of the Exercise Price or Purchase Price (as the case may be) of Shares issued under the Plan may be paid with a full-recourse promissory note.  However, the par value of the Shares, if newly issued, shall be paid in cash or cash equivalents.  The Shares shall be pledged as security for payment of the principal amount of the promissory note and interest thereon.  The interest rate payable under the terms of the promissory note shall not be less than the minimum rate (if any) required to avoid the imputation of additional interest under the Code.  Subject to the foregoing, the Board of Directors (at its sole discretion) shall specify the term, interest rate, amortization requirements (if any) and other provisions of such note.

 

(e)                                  Exercise/Sale.  To the extent that a Stock Option Agreement so provides, and if Stock is publicly traded, payment may be made all or in part by the delivery (on a form prescribed by the Company) of an irrevocable direction to a securities broker approved by the Company to sell Shares and to deliver all or part of the sales proceeds to the Company in payment of all or part of the Exercise Price and any withholding taxes.

 

(f)                                   Exercise/Pledge.  To the extent that a Stock Option Agreement so provides, and if Stock is publicly traded, payment may be made all or in part by the delivery (on a form prescribed by the Company) of an irrevocable direction to pledge Shares to a securities broker or lender approved by the Company, as security for a loan, and to deliver all or part of the loan proceeds to

 

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the Company in payment of all or part of the Exercise Price and any withholding taxes.

 

SECTION 8.                                     ADJUSTMENT OF SHARES.

 

(a)                                 General.  In the event of a subdivision of the outstanding Stock, a declaration of a dividend payable in Shares, a declaration of an extraordinary dividend payable in a form other than Shares in an amount that has a material effect on the Fair Market Value of the Stock, a combination or consolidation of the outstanding Stock into a lesser number of Shares, a recapitalization, a spin-off, a reclassification or a similar occurrence, the Board of Directors shall make appropriate adjustments in one or more of (i) the number of Shares available for future grants under Section 4, (ii) the number of Shares covered by each outstanding Option or (iii) the Exercise Price under each outstanding Option.

 

(b)                                 Mergers and Consolidations.  In the event that the Company is a party to a merger or consolidation, outstanding Options shall be subject to the agreement of merger or consolidation.  Such agreement shall provide for:

 

(i)                                     The continuation of such outstanding Options by the Company (if the Company is the surviving corporation);

 

(ii)                                  The assumption of the Plan and such outstanding Options by the surviving corporation or its parent;

 

(iii)                               The substitution by the surviving corporation or its parent of options with substantially the same terms for such outstanding Options;

 

(iv)                              The full exercisability of such outstanding Options and full vesting of the Shares subject to such Options, followed by the cancellation of such Options; or

 

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(v)                                 The settlement of the full value of such outstanding Options (whether or not then exercisable) in cash or cash equivalents, followed by the cancellation of such Options.

 

(c)                                  Reservation of Rights.  Except as provided in this Section 8, an Optionee or Purchaser shall have no rights by reason of (i) any subdivision or consolidation of shares of stock of any class, (ii) the payment of any dividend or (iii) any other increase or decrease in the number of shares of stock of any class.  Any issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or Exercise Price of Shares subject to an Option.  The grant of an Option pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, to merge or consolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets.

 

SECTION 9.                                     SECURITIES LAW REQUIREMENTS.

 

(a)                                 General.  Shares shall not be issued under the Plan unless the issuance and delivery of such Shares comply with (or are exempt from) all applicable requirements of law, including (without limitation) the Securities Act of 1933, as amended, the rules and regulations promulgated thereunder, state securities laws and regulations, and the regulations of any stock exchange or other securities market on which the Company’s securities may then be traded.

 

(b)                                 Financial Reports.  The Company each year shall furnish to Optionees, Purchasers and stockholders who have received Stock under the Plan its balance sheet and income statement, unless such Optionees, Purchasers or stockholders are key Employees whose duties with the Company assure them access to equivalent information.  Such balance sheet and income statement need not be audited.

 

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SECTION 10.                              NO RETENTION RIGHTS.

 

Nothing in the Plan or in any right or Option granted under the Plan shall confer upon the Purchaser or Optionee any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Parent or Subsidiary employing or retaining the Purchaser or Optionee) or of the Purchaser or Optionee, which rights are hereby expressly reserved by each, to terminate his or her Service at any time and for any reason, with or without cause.

 

SECTION 11.                              DURATION AND AMENDMENTS.

 

(a)                                 Term of the Plan.  The Plan, as set forth herein, shall become effective on the date of its adoption by the Board of Directors, subject to the approval of the Company’s stockholders.  If the stockholders fail to approve the Plan within 12 months after its adoption by the Board of Directors, then any grants, exercises or sales that have already occurred under the Plan shall be rescinded and no additional grants, exercises or sales shall thereafter be made under the Plan.  The Plan shall terminate automatically 10 years after the later of (i) its adoption by the Board of Directors or (ii) the most recent increase in the number of Shares reserved under Section 4 that was approved by the Company’s stockholders.  The Plan may be terminated on any earlier date pursuant to Subsection (b) below.

 

(b)                                 Right to Amend or Terminate the Plan.  The Board of Directors may amend, suspend or terminate the Plan at any time and for any reason; provided, however, that any amendment of the Plan shall be subject to the approval of the Company’s stockholders if it (i) increases the number of Shares available for issuance under the Plan (except as provided in Section 8) or (ii) materially changes the class of persons who are eligible for the grant of ISOs.  Stockholder approval shall not be required for any other amendment of the Plan.  If the stockholders fail to approve an increase in the number of Shares reserved under Section 4 within 12 months after its adoption by the Board of Directors, then any grants, exercises or sales that have already occurred in reliance on such

 

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increase shall be rescinded and no additional grants, exercises or sales shall thereafter be made in reliance on such increase.

 

(c)                                  Effect of Amendment or Termination.  No Shares shall be issued or sold under the Plan after the termination thereof, except upon exercise of an Option granted prior to such termination.  The termination of the Plan, or any amendment thereof, shall not affect any Share previously issued or any Option previously granted under the Plan.

 

SECTION 12.                              DEFINITIONS.

 

(a)                                 “Board of Directors” shall mean, as the case may be, (i) the managing member of the Company’s predecessor, Natera, Inc.or (ii) the Board of Directors of the Company, as constituted from time to time.

 

(b)                                 “Change in Control” shall mean:

 

(i)                                     The consummation of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, if persons who were not stockholders of the Company immediately prior to such merger, consolidation or other reorganization own immediately after such merger, consolidation or other reorganization 50% or more of the voting power of the outstanding securities of each of (A) the continuing or surviving entity and (B) any direct or indirect parent corporation of such continuing or surviving entity; or

 

(ii)                                  The sale, transfer or other disposition of all or substantially all of the Company’s assets.

 

A transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Company’s incorporation or to create a holding company that will be owned in substantially the

 

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same proportions by the persons who held the Company’s securities immediately before such transaction.

 

(c)                                  “Code” shall mean the Internal Revenue Code of 1986, as amended.

 

(d)                                 “Committee” shall mean a committee of the Board of Directors, as described in Section 2(a).

 

(e)                                  “Company” shall mean Natera, Inc., a Delaware corporation.

 

(f)                                   “Consultant” shall mean a person who performs bona fide services for the Company, a Parent or a Subsidiary as a consultant or advisor, excluding Employees and Outside Directors.

 

(g)                                  “Disability” shall mean that the Optionee is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment.

 

(h)                                 “Employee” shall mean any individual who is a common-law employee of the Company, a Parent or a Subsidiary.

 

(i)                                     “Exercise Price” shall mean the amount for which one Share may be purchased upon exercise of an Option, as specified by the Board of Directors in the applicable Stock Option Agreement.

 

(j)                                    “Fair Market Value” shall mean the fair market value of a Share, as determined by the Board of Directors in good faith.  Such determination shall be conclusive and binding on all persons.

 

(k)                                 “Immediate Family” shall mean any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law and shall include adoptive relationships.

 

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(l)                                     “ISO” shall mean an employee incentive stock option described in Section 422(b) of the Code.

 

(m)                             “Nonstatutory Option” shall mean a stock option not described in Sections 422(b) or 423(b) of the Code.

 

(n)                                 “Option” shall mean an ISO or Nonstatutory Option granted under the Plan and entitling the holder to purchase Shares.

 

(o)                                 “Optionee” shall mean a person who holds an Option.

 

(p)                                 “Outside Director” shall mean a member of the Board of Directors who is not an Employee.

 

(q)                                 “Parent” shall mean any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.  A corporation that attains the status of a Parent on a date after the adoption of the Plan shall be considered a Parent commencing as of such date.

 

(r)                                    “Plan” shall mean this Natera, Inc. 2007 Stock Plan.

 

(s)                                   “Purchase Price” shall mean the consideration for which one Share may be acquired under the Plan (other than upon exercise of an Option), as specified by the Board of Directors.

 

(t)                                    “Purchaser” shall mean a person to whom the Board of Directors has offered the right to acquire Shares under the Plan (other than upon exercise of an Option).

 

(u)                                 “Service” shall mean service as an Employee, Outside Director or Consultant.

 

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(v)                                 “Share” shall mean one share of Stock, as adjusted in accordance with Section 8 (if applicable).

 

(w)                               “Stock” shall mean the Common Stock of the Company, with a par value of $ 0.0001per Share.

 

(x)                                 “Stock Option Agreement” shall mean the agreement between the Company and an Optionee that contains the terms, conditions and restrictions pertaining to the Optionee’s Option.

 

(y)                                 “Stock Purchase Agreement” shall mean the agreement between the Company and a Purchaser who acquires Shares under the Plan that contains the terms, conditions and restrictions pertaining to the acquisition of such Shares.

 

(z)                                  “Subsidiary” shall mean any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.  A corporation that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date.

 

17









 

NATERA, INC. AMENDED 2007 STOCK PLAN

 

NOTICE OF STOCK OPTION EXERCISE (INSTALLMENT EXERCISE)

 

You must sign this Notice on Page 3 before submitting it to the Company.

 

OPTIONEE INFORMATION:

 

	
Name:
    	
 
    	
 
    	
Social   Security Number:
    	
 
    
	
Address:
    	
 
    	
 
    	
Employee   Number:
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    


 

OPTION INFORMATION:

 

	
Date   of Grant:                                       , 20    
    	
 
    	
Type   of Stock Option:
    
	
 
    	
 
    	
 
    
	
Exercise   Price per Share:   $                      
    	
 
    	
o Nonstatutory   (NSO)
    
	
 
    	
 
    	
 
    
	
Total   number of shares of Common Stock of Natera, Inc. (the “Company”) covered   by the   option:                                             
    	
 
    	
o Incentive   (ISO)
    


 

EXERCISE INFORMATION:

 

Number of shares of Common Stock of the Company for which the option is being exercised now:                                 .  (These shares are referred to below as the “Purchased Shares.”)

 

Total Exercise Price for the Purchased Shares: $                        

 

Form of payment enclosed [check all that apply]:

 

o                  Check for $                        , payable to “Natera, Inc.”

 

o                  Certificate(s) for                                  shares of Common Stock of the Company.  These shares will be valued as of the date this notice is received by the Company.  [Requires Company consent.]

 

o                  Attestation Form covering                                  shares of Common Stock of the Company.  These shares will be valued as of the date this notice is received by the Company.  [Requires Company consent.]

 

Name(s) in which the Purchased Shares should be registered [please review the attached explanation of the available forms of ownership, and then check one box]:

 

	
o                  In my name   only
    	
 
    


 











 

	
o                  In the names   of my spouse and myself as community property
    	
 
    	
My   spouse’s name (if applicable):
    
	
 
    	
 
    	
 
    
	
o                  In the names   of my spouse and myself as community property with the right of survivorship
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
o                  In the names   of my spouse and myself as joint tenants with the right of survivorship
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
o                  In the name   of an eligible revocable trust [requires Stock Transfer   Agreement]
    	
 
    	
Full   legal name of revocable trust:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
The   certificate for the Purchased Shares should be sent to the following address:
    	
 
    	
 
    
	
 
    


 

REPRESENTATIONS AND ACKNOWLEDGEMENTS OF THE OPTIONEE:

 

1.                                      I represent and warrant to the Company that I am acquiring and will hold the Purchased Shares for investment for my account only, and not with a view to, or for resale in connection with, any “distribution” of the Purchased Shares within the meaning of the Securities Act of 1933, as amended (the “Securities Act”).

 

2.                                      I understand that the Purchased Shares have not been registered under the Securities Act by reason of a specific exemption therefrom and that the Purchased Shares must be held indefinitely, unless they are subsequently registered under the Securities Act or I obtain an opinion of counsel (in form and substance satisfactory to the Company and its counsel) that registration is not required.

 

3.                                      I acknowledge that the Company is under no obligation to register the Purchased Shares.

 

4.                                      I am aware of the adoption by the Securities and Exchange Commission of Rule 144 under the Securities Act, which permits limited public resales of securities acquired in a non-public offering, subject to the satisfaction of certain conditions.  These conditions may include (without limitation) that certain current public information about the issuer be available, that the resale occur only after a holding period required by Rule 144 has been satisfied, that the sale occur through an unsolicited “broker’s transaction” and that the amount of securities being sold during any three-month period not exceed specified limitations.  I understand that the conditions for resale set forth in Rule 144 have not been satisfied and that the Company is not required to take action to satisfy any conditions applicable to it.

 

5.                                      I will not sell, transfer or otherwise dispose of the Purchased Shares in violation of the Securities Act, the Securities Exchange Act of 1934, or the rules promulgated thereunder, including Rule 144 under the Securities Act.

 

19











 

6.                                      I acknowledge that I have received and had access to such information as I consider necessary or appropriate for deciding whether to invest in the Purchased Shares and that I had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the issuance of the Purchased Shares.

 

7.                                      I am aware that my investment in the Company is a speculative investment that has limited liquidity and is subject to the risk of complete loss.  I am able, without impairing my financial condition, to hold the Purchased Shares for an indefinite period and to suffer a complete loss of my investment in the Purchased Shares.

 

8.                                      I acknowledge that the Purchased Shares remain subject to the Company’s right of first refusal and the market stand-off (sometimes referred to as the “lock-up”), all in accordance with the applicable Notice of Stock Option Grant and Stock Option Agreement.

 

9.                                      I acknowledge that I am acquiring the Purchased Shares subject to all other terms of the Notice of Stock Option Grant and Stock Option Agreement.

 

10.                               I acknowledge that I have received a copy of the Company’s explanation of the forms of ownership available for my Purchased Shares.  I acknowledge that the Company has encouraged me to consult my own adviser to determine the form of ownership that is appropriate for me.  In the event that I choose to transfer my Purchased Shares to a trust, I agree to sign a Stock Transfer Agreement.  In the event that I choose to transfer my Purchased Shares to a trust that does not satisfy the requirements described in the attached explanation (i.e., a trust that is not an eligible revocable trust), I also acknowledge that the transfer will be treated as a “disposition” for tax purposes.  As a result, the favorable ISO tax treatment will be unavailable and other unfavorable tax consequences may occur.

 

11.                               I acknowledge that I have received a copy of the Company’s explanation of the federal income tax consequences of an option exercise.  I acknowledge that the Company has encouraged me to consult my own adviser to determine the tax consequences of acquiring the Purchased Shares at this time.

 

12.                               I agree that the Company does not have a duty to design or administer the Amended 2007 Stock Plan or its other compensation programs in a manner that minimizes my tax liabilities.  I will not make any claim against the Company or its Board of Directors, officers or employees related to tax liabilities arising from my options or my other compensation.  In particular, I acknowledge that my options are exempt from section 409A of the Internal Revenue Code only if the exercise price per share is at least equal to the fair market value per share of the Company’s Common Stock at the time the option was granted by the Company’s Board of Directors.  Since shares of the Company’s Common Stock are not traded on an established securities market, the determination of their fair market value was made by the Company’s Board of Directors or by an independent valuation firm retained by the Company.  I acknowledge that there is no guarantee in either case that the Internal Revenue Service will agree with the valuation, and I will not make any claim against the Company or its Board of Directors, officers or employees in the event that the Internal Revenue Service asserts that the valuation was too low.

 

20











 

13.                               I agree to seek the consent of my spouse to the extent required by the Company to enforce the foregoing.

 

	
SIGNATURE:
    	
 
    	
DATE:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    


 

21











 

Explanation of Forms of Stock Ownership

 

PURPOSE OF THIS EXPLANATION

 

The purpose of this explanation is to provide you with a brief summary of the forms of legal ownership available for the shares that you are purchasing (the “Purchased Shares”).  For a number of reasons, this explanation is no substitute for personal legal advice:

 

·                  To make the explanation short and readable, only the highlights are covered.  Some legal rules are not addressed, even though they may be important in particular cases.

 

·                  While the summary attempts to deal with the most common situations, your own situation may well be different from the norm.

 

·                  The law may change, and the Company is not responsible for updating this summary.

 

·                  The form in which you own your shares may have a substantial impact on the estate tax treatment that applies to those shares when you die or the income tax treatment that applies when your survivors sell the shares after your death.

 

FOR THESE REASONS, THE COMPANY STRONGLY ENCOURAGES YOU TO CONSULT YOUR OWN ADVISER BEFORE EXERCISING YOUR OPTION AND BEFORE MAKING A DECISION ABOUT THE FORM OF OWNERSHIP FOR YOUR SHARES.

 

OVERVIEW

 

The Notice of Stock Option Exercise offers five forms of taking title to the Purchased Shares:

 

·                  In your name only,

 

·                  In your name and the name of your spouse as community property,

 

·                  In your name and the name of your spouse as community property with the right of survivorship,

 

·                  In your name and the name of your spouse as joint tenants with the right of survivorship, or

 

·                  In the name of an eligible revocable trust.

 

Title in the Purchased Shares depends upon (a) your marital status, (b) the marital property laws of your state of residence and (c) any agreement with your spouse altering the existing marital property laws of your state of residence.  If you are not married, you generally will take title in your name alone.  If you are married, title depends upon the marital property laws of your state of residence.  In general, states are classified either as “community property” states or as “common-law property” states.  (But individual state law may vary within these classifications.)

 

22











 

COMMUNITY PROPERTY AND JOINT TENANCY

 

Community property states include California, Texas, Washington, Arizona, Nevada, New Mexico, Idaho, Louisiana and Wisconsin.  In a community property state, property acquired during marriage by either spouse is presumed to be one-half owned by each spouse.  All other property is classified as the separate property of the spouse who acquires the property.  While either spouse has equal management and control over the community property and may sell, spend or encumber all community property, neither spouse may gift community property or partition his/her one-half interest without the consent of the other spouse.  Upon divorce, all community property is divided equally among the spouses and each spouse is entitled to retain all of his/her separate property.  Upon the death of a spouse, one-half of the community property (and all of the decedent spouse’s separate property) will pass to the decedent spouse’s heirs.  The other one-half of the community property remains the property of the surviving spouse.

 

Other states are common-law property states.  In a common-law property state, each spouse is generally deemed to own whatever he/she earns or acquires.

 

A married couple may elect to alter the marital property rules by mutually agreeing to take title to property in other forms.  For example, a couple residing in a community property state may generally enter into an agreement and transform what otherwise would be community property into the separate property of the spouse who earns or acquires the property.

 

In addition, many community property and common-law property states allow married couples to take joint title in property acquired during marriage.  For example, California allows a married couple to take title in a joint tenancy with the right of survivorship.  In a joint tenancy, each spouse owns a one-half interest in the property as separate property.  This means that each spouse may transfer or sell his/her one-half interest in the property while he/she is alive.  However, unlike traditional separate property, a spouse cannot transfer his/her one-half interest to heirs at death.  Instead, the surviving spouse automatically receives the decedent spouse’s one-half interest and becomes the full owner of the property.  (This is called the “right of survivorship.”)  Both spouses must consent to taking property in a joint tenancy in lieu of having the community property laws apply.

 

California also allows a married couple to take title in the shares as community property with the right of survivorship.  This means that the shares are treated like community property while both spouses are alive.  However, if one spouse dies, then the other spouse automatically receives the decedent spouse’s one-half interest and becomes the full owner of the shares.  In other words, the decedent spouse’s will or trust does not control the disposition of the shares.

 

If you have the Purchased Shares issued in a form other than those described above, then the transfer will be treated as a “disposition” for tax purposes.  This means that the effect, for tax purposes, will be the same as selling the Purchased Shares.  Please refer to the attached tax summary for additional information.

 

TRUSTS

 

A transfer to a trust generally should not be treated as a “disposition” of the Purchased Shares for tax purposes if the trust satisfies each of the following conditions:

 

·                  You are the sole grantor of the trust,

 

23











 

·                  You are the sole trustee, or you and your spouse are the sole co-trustees,

 

·                  The trustee or trustees are not required to distribute the income of the trust to any person other than you and/or your spouse while you are alive, and

 

·                 The trust permits you to revoke all or part of the trust and to have the trust’s assets returned to you, without the consent of any other person (including your spouse).

 

If you have the Purchased Shares issued to a trust that does not meet these requirements, then the transfer will be treated as a “disposition” for tax purposes.  This means that the effect, for tax purposes, will be the same as selling the Purchased Shares.  Please refer to the attached tax summary for additional information.

 

If you have the Purchased Shares issued to any trust, you will be required to sign a Stock Transfer Agreement in your capacity as trustee.  Under the Stock Transfer Agreement, the Purchased Shares remain subject to the Company’s right of first refusal in accordance with the applicable Notice of Stock Option Grant and Stock Option Agreement.

 

THE COMPANY WILL NOT CHECK TO DETERMINE WHETHER THE FORM OF OWNERSHIP THAT YOU ELECT IN YOUR NOTICE OF STOCK OPTION EXERCISE IS APPROPRIATE.  YOU SHOULD CONSULT YOUR OWN ADVISERS ON THIS SUBJECT.  IF AN INAPPROPRIATE ELECTION IS MADE, THE FORM OF OWNERSHIP MAY NOT WITHSTAND LEGAL SCRUTINY OR MAY HAVE ADVERSE TAX CONSEQUENCES.

 

24











 

EXPLANATION OF U.S. FEDERAL INCOME TAX CONSEQUENCES
  (Current as of May 2011)

 

PURPOSE OF THIS EXPLANATION

 

The purpose of this explanation is to provide you with a brief summary of the tax consequences of exercising your option.  For a number of reasons, this explanation is no substitute for personal tax advice:

 

·                  To make the explanation short and readable, only the highlights are covered.  Some tax rules are not addressed, even though they may be important in particular cases.

 

·                  While the summary attempts to deal with the most common situations, your own tax situation may well be different from the norm.

 

·                  State and foreign income taxes are not addressed at all, even though they could have a significant impact on your tax planning.  Likewise, federal gift and estate taxes and state inheritance taxes are not discussed.

 

·                  Tax planning involving incentive stock options is exceedingly complex, in part because of the possible application of the alternative minimum tax.

 

·                 This explanation assumes that your option is not subject to section 409A of the Internal Revenue Code.  However, the Company cannot be certain that section 409A is inapplicable to your option.  (Please refer to the last segment of this summary for more information about section 409A.)

 

·                  The tax rules change often, and the Company is not responsible for updating this summary.  (Please refer to the date at the top of this page.)

 

FOR THESE REASONS, THE COMPANY STRONGLY ENCOURAGES YOU TO CONSULT YOUR OWN TAX ADVISER BEFORE EXERCISING YOUR OPTION.

 

LIMIT ON ISO TREATMENT

 

The Notice of Stock Option Grant indicates whether your option is a nonstatutory stock option (NSO) or an incentive stock option (ISO).  The favorable tax treatment for ISOs is limited, regardless of what the Notice of Stock Option Grant indicates.  Of the options that become exercisable in any calendar year, only options covering the first $100,000 of stock are eligible for ISO treatment.  The excess over $100,000 automatically receives NSO treatment.  For this purpose, stock is valued at the time of grant.  This means that the value is generally equal to the exercise price.

 

For example, assume that you hold an option to buy 60,000 shares for $8 per share.  Assume further that the entire option becomes exercisable in four equal annual installments.  Only the first 50,000 shares qualify for ISO treatment.  (12,500 times $8 equals $100,000.)  The remaining 10,000 shares will be treated as if they had been acquired by exercising an NSO.  This is true regardless of when the option is actually exercised; what matters is when it first could have been exercised.

 

25











 

EXERCISE OF NSO

 

If you are exercising an NSO, you will be taxed now.  You will recognize ordinary income in an amount equal to the excess of (a) the fair market value of the Purchased Shares on the date of exercise over (b) the exercise price you are paying.  If you are an employee or former employee of the Company, this amount is subject to withholding for income and payroll taxes.  Your tax basis in the Purchased Shares (to calculate capital gain when you sell the shares) is equal to their fair market value on the date of exercise.

 

DISPOSITION OF NSO SHARES

 

When you dispose of the Purchased Shares, you will recognize a capital gain equal to the excess of (a) the sale proceeds over (b) your tax basis in the Purchased Shares.  As described above, your tax basis in the Purchased Shares is equal to their fair market value on the date of exercise.  If the sale proceeds are less than your tax basis, you will recognize a capital loss.  The capital gain or loss will be long-term if you held the Purchased Shares for more than 12 months.  The holding period starts when you exercise your NSO.  In general, the maximum marginal federal income tax rate on long-term capital gains is 15% under current law.

 

EXERCISE OF ISO AND ISO HOLDING PERIODS

 

If you are exercising an ISO, you will not be taxed under the regular tax rules until you dispose of the Purchased Shares.  (The alternative minimum tax rules are described below.)  The tax treatment at the time of disposition depends on how long you hold the shares.  You will satisfy the ISO holding periods if you hold the Purchased Shares until the later of the following dates:

 

·                  The date two years after the ISO was granted, and

 

·                  The date one year after the ISO is exercised.

 

DISPOSITION OF ISO SHARES

 

If you dispose of the Purchased Shares after satisfying both of the ISO holding periods, then you will recognize only a long-term capital gain at the time of disposition.  The amount of the capital gain is equal to the excess of (a) the sale proceeds over (b) the exercise price.  In general, the maximum marginal federal income tax rate on long-term capital gains is 15% under current law.

 

If you dispose of the Purchased Shares before either or both of the ISO holding periods are met, then you will recognize ordinary income at the time of disposition.  The amount of ordinary income will be equal to the excess of (a) the fair market value of the Purchased Shares on the date of exercise over (b) the exercise price.  But if the disposition is an arm’s length sale to an unrelated party, the amount of ordinary income will not exceed the total gain from the sale.  Under current IRS rules, the ordinary income amount will not be subject to withholding for income or payroll taxes.

 

Your tax basis in the Purchased Shares will be equal to their fair market value on the date of exercise.  Any gain in excess of your basis will be taxed as a capital gain—either long-term or short-term, depending on how long you held the Purchased Shares after the date of exercise.

 

26











 

SUMMARY OF ALTERNATIVE MINIMUM TAX

 

The alternative minimum tax (AMT) must be paid if it exceeds your regular income tax.  The AMT is equal to 26% of your alternative minimum tax base up to $175,000 and 28% of the excess over $175,000.  (In the case of married individuals filing separately, the breakpoint is $87,500 rather than $175,000.)  Your alternative minimum tax base is equal to your alternative minimum taxable income (AMTI) minus your exemption amount.

 

·                  Alternative Minimum Taxable Income.  Your AMTI is equal to your regular taxable income, subject to certain adjustments and increased by items of tax preference.  Among the many adjustments made in computing AMTI are the following:

 

·                  State and local income and property taxes are not allowed as a deduction.

 

·                  Miscellaneous itemized deductions are not allowed.

 

·                  Medical expenses are not allowed as a deduction until they exceed 10% of adjusted gross income (as opposed to the 7.5% floor that applies to regular income taxes).

 

·                  Certain interest deductions are not allowed.

 

·                  The standard deduction and personal exemptions are not allowed.

 

·                  When an ISO is exercised, the spread is treated as if the option were an NSO.  (See discussion below.)

 

·                  Exemption Amount.  Before AMT is calculated, AMTI is reduced by the exemption amount.  Under current law, the exemption amount is as follows:

 

	
Year:
    	
 
    	
Joint Returns:
    	
 
    	
Single Returns:
    	
 
    	
Separate Returns:
    	
 
    
	
2011
    	
 
    	
$
    	
74,450
    	
 
    	
$
    	
48,450
    	
 
    	
$
    	
37,225
    	
 
    
	
After 2011
    	
 
    	
$
    	
45,000
    	
 
    	
$
    	
33,750
    	
 
    	
$
    	
22,500
    	
 
    


 

The exemption amount is phased out by 25 cents for each $1 by which AMTI exceeds the following levels:

 

	
Joint Returns: $150,000
    	
Single Returns: $112,500
    	
Separate Returns: $75,000
    


 

This means, for example, that the entire $74,450 exemption amount disappears for married individuals filing joint returns when AMTI reaches $447,800.

 

APPLICATION OF AMT WHEN ISO IS EXERCISED

 

As noted above, when an ISO is exercised, the spread is treated for AMT purposes as if the option were an NSO.  In other words, the spread is included in AMTI at the time of exercise.

 

27









 

A special rule applies if you dispose of the Purchased Shares in the same year in which you exercised the ISO.  If the amount you realize on the sale is less than the value of the stock at the time of exercise, then the amount includible in AMTI on account of the ISO exercise is limited to the gain realized on the sale.

 

To the extent that your AMT is attributable to the spread on exercising an ISO (and certain other items), you may be able to apply the AMT that you paid as a credit against your income tax liability in future years.  But the rules on calculating the available tax credits were amended frequently in recent years and have become extraordinarily complex.  On this issue in particular, you must consult your own tax adviser.

 

When Purchased Shares are sold, your basis for purposes of computing the capital gain or loss under the AMT system is increased by the option spread that exists at the time of exercise.  Again, an ISO is treated under the AMT system much like an NSO is treated under the regular tax system.  But your basis in the ISO shares for purposes of computing gain or loss under the regular tax system is equal to the exercise price; it does not reflect any AMT that you pay on the spread at exercise.  Therefore, if you pay AMT in the year of the ISO exercise and regular income tax in the year of selling the Purchased Shares, you could pay tax twice on the same gain (except to the extent that you can use the AMT credit described above).

 

SECTION 409A OF THE INTERNAL REVENUE CODE

 

The preceding summary assumes that section 409A of the Internal Revenue Code does not apply to your option.  In general, your option is exempt from section 409A if the exercise price per share is at least equal to the fair market value per share of the Company’s Common Stock at the time the option was granted by the Board of Directors.  Since shares of Common Stock are not traded on an established securities market, the determination of their fair market value generally is made by the Board of Directors or by an independent appraisal firm retained by the Company.  In either case, there is no guarantee that the Internal Revenue Service will agree with the valuation.

 

If your option were found to be subject to section 409A, then you would be required to recognize ordinary income whenever a portion of your option vests (i.e. becomes exercisable).  The amount of ordinary income would be equal to the fair market value of the shares at the time of vesting minus the exercise price of the shares.  This amount would also be subject to a 20% federal tax in addition to the federal income tax at your usual marginal rate for ordinary income.

 

DISCLAIMER UNDER IRS CIRCULAR 230

 

To comply with IRS rules, you are hereby notified that the foregoing summary was not intended or written in order to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer.  In addition, if the foregoing summary would otherwise be considered a “marketed opinion” under the IRS rules, you are hereby notified that the advice was written to support the promotion or marketing of the transactions or matters addressed by the summary.  The tax consequences of options will vary depending on the specific circumstances of each taxpayer.  Therefore, each taxpayer should seek advice from an independent tax adviser.

 

28











 

Natera, Inc. Amended 2007 Stock Plan

 

NOTICE OF STOCK OPTION GRANT (INSTALLMENT EXERCISE)

 

The Optionee has been granted the following option to purchase shares of the Common Stock of Natera, Inc.:

 

	
Name of Optionee:
    	
«Name»
    
	
 
    	
 
    
	
Total   Number of Shares:
    	
«TotalShares»
    
	
 
    	
 
    
	
Type   of Option:
    	
«ISO»
    	
Incentive   Stock Option (ISO)
    
	
 
    	
 
    
	
 
    	
«NSO»
    	
Nonstatutory   Stock Option (NSO)
    
	
 
    	
 
    
	
Exercise   Price per Share:
    	
$«PricePerShare»
    
	
 
    	
 
    
	
Date of Grant:
    	
«DateGrant»
    


 

Date Exercisable:  This option may be exercised with respect to the first «Percent»% of the Shares subject to this option when the Optionee completes «CliffPeriod» months of continuous Service beginning with the Vesting Commencement Date set forth below.  This option may be exercised with respect to an additional «Fraction»% of the Shares subject to this option when the Optionee completes each month of continuous Service thereafter.

 

	
Vesting Commencement Date:
    	
«VestComDate»
    
	
 
    	
 
    
	
Expiration   Date:
    	
«ExpDate». [10 yrs from date of grant if NSO, 5 yrs   from date grant if ISO granted to 10% Stockholder] This option expires   earlier if the Optionee’s Service terminates earlier, as provided in   Section 6 of the Stock Option Agreement.
    


 

By signing below, the Optionee and the Company agree that this option is granted under, and governed by the terms and conditions of, the Amended 2007 Stock Plan and the Stock Option Agreement.  Both of these documents are attached to, and made a part of, this Notice of Stock Option Grant.  Section 13 of the Stock Option Agreement includes important acknowledgements of the Optionee.

 

29











 

	
OPTIONEE:
    	
 
    	
NATERA, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    


 

THE OPTION GRANTED PURSUANT TO THIS AGREEMENT AND THE SHARES ISSUABLE UPON THE EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.

 

NATERA, INC. AMENDED 2007 STOCK PLAN:

STOCK OPTION AGREEMENT (INSTALLMENT EXERCISE)

 

SECTION 13.                              GRANT OF OPTION.

 

(a)                                 Option.  On the terms and conditions set forth in the Notice of Stock Option Grant and this Agreement, the Company grants to the Optionee on the Date of Grant the option to purchase at the Exercise Price the number of Shares set forth in the Notice of Stock Option Grant.  The Exercise Price is agreed to be at least 100% of the Fair Market Value per Share on the Date of Grant (110% of Fair Market Value if this option is designated as an ISO in the Notice of Stock Option Grant and Section 3(b) of the Plan applies).  This option is intended to be an ISO or an NSO, as provided in the Notice of Stock Option Grant.

 

(b)                                 $100,000 Limitation.  Even if this option is designated as an ISO in the Notice of Stock Option Grant, it shall be deemed to be an NSO to the extent (and only to the extent) required by the $100,000 annual limitation under Section 422(d) of the Code.

 

(c)                                  Stock Plan and Defined Terms.  This option is granted pursuant to the Plan, a copy of which the Optionee acknowledges having received.  The provisions of the Plan are incorporated into this Agreement by this reference.  Capitalized terms are defined in Section 14 of this Agreement.

 

SECTION 14.                              RIGHT TO EXERCISE.

 

(a)                                 Exercisability.  Subject to Subsection (b) below and the other conditions set forth in this Agreement, all or part of this option may be exercised prior to its expiration at the time or times set forth in the Notice of Stock Option Grant.

 

(b)                                 Stockholder Approval.  Any other provision of this Agreement notwithstanding, no portion of this option shall be exercisable at any time prior to the approval of the Plan by the Company’s stockholders.

 

30











 

SECTION 15.                              NO TRANSFER OR ASSIGNMENT OF OPTION.

 

Except as otherwise provided in this Agreement, this option and the rights and privileges conferred hereby shall not be sold, pledged or otherwise transferred (whether by operation of law or otherwise) and shall not be subject to sale under execution, attachment, levy or similar process.

 

SECTION 16.                              EXERCISE PROCEDURES.

 

(a)                                 Notice of Exercise.  The Optionee or the Optionee’s representative may exercise this option by giving written notice to the Company pursuant to Section 12(c).  The notice shall specify the election to exercise this option, the number of Shares for which it is being exercised and the form of payment.  The person exercising this option shall sign the notice.  In the event that this option is being exercised by the representative of the Optionee, the notice shall be accompanied by proof (satisfactory to the Company) of the representative’s right to exercise this option.  The Optionee or the Optionee’s representative shall deliver to the Company, at the time of giving the notice, payment in a form permissible under Section 5 for the full amount of the Purchase Price.

 

(b)                                 Issuance of Shares.  After receiving a proper notice of exercise, the Company shall cause to be issued one or more certificates evidencing the Shares for which this option has been exercised.  Such Shares shall be registered (i) in the name of the person exercising this option, (ii) in the names of such person and his or her spouse as community property or as joint tenants with the right of survivorship or (iii) with the Company’s consent, in the name of a revocable trust.  The Company shall cause such certificates to be delivered to or upon the order of the person exercising this option.

 

(c)                                  Withholding Taxes.  In the event that the Company determines that it is required to withhold any tax as a result of the exercise of this option, the Optionee, as a condition to the exercise of this option, shall make arrangements satisfactory to the Company to enable it to satisfy all withholding requirements.  The Optionee shall also make arrangements satisfactory to the Company to enable it to satisfy any withholding requirements that may arise in connection with the disposition of Shares purchased by exercising this option.

 

SECTION 17.                              PAYMENT FOR STOCK.

 

(a)                                 Cash.  All or part of the Purchase Price may be paid in cash or cash equivalents.

 

(b)                                 Surrender of Stock.  At the discretion of the Board of Directors, all or any part of the Purchase Price may be paid by surrendering, or attesting to the ownership of, Shares that are already owned by the Optionee.  Such Shares shall be surrendered to the Company in good form for transfer and shall be valued at their Fair Market Value as of the date when this option is exercised.

 

(c)                                  Exercise/Sale.  All or part of the Purchase Price and any withholding taxes may be paid by the delivery (on a form prescribed by the Company) of an irrevocable direction to a securities broker approved by the Company to sell Shares and to deliver all or part of the sales proceeds to the Company.  However, payment pursuant to this Subsection (c) shall be permitted only if (i) Stock then is publicly traded and (ii) such payment does not violate applicable law.

 

(d)                                 Promissory Note. Subject to the Board of Directors’ authority to refuse at any time in its sole discretion to allow payment under this paragraph, all or part of the Purchase Price may be paid with full-recourse promissory note in accordance with the requirements of Section 7(c) of the Plan.

 

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(e)                                  Net Exercise.  Subject to the Board of Directors’ authority to refuse, in whole or in part, at any time in its sole discretion to allow payment under this Subsection (e), payment of the Purchase Price may be satisfied by a “net exercise” arrangement pursuant to which the Company will reduce the number of Shares issued upon exercise of the option by the largest whole number of Shares with a Fair Market Value that does not exceed the aggregate Purchase Price; provided, however, the Company shall accept a cash or other payment from the Optionee to the extent of any remaining balance of the aggregate Purchase Price not satisfied by such reduction in the number of whole Shares to be issued; provided, further, that Shares will no longer be subject to the option and will not be exercisable thereafter to the extent that (i) Shares issuable upon exercise are reduced to pay the Purchase Price pursuant to the “net exercise” arrangement, (ii) Shares are delivered to the Optionee as a result of such exercise, and (iii) Shares are withheld to satisfy any tax withholding obligations under Section 4(c) above.

 

SECTION 18.                              TERM AND EXPIRATION.

 

(a)                                 Basic Term.  This option shall in any event expire on the expiration date set forth in the Notice of Stock Option Grant, which date is 10 years after the Date of Grant (five years after the Date of Grant if this option is designated as an ISO in the Notice of Stock Option Grant and Section 3(b) of the Plan applies).

 

(b)                                 Termination of Service (Except by Death).  If the Optionee’s Service terminates for any reason other than death, then this option shall expire on the earliest of the following occasions:

 

(i)                                     The expiration date determined pursuant to Subsection (a) above;

 

(ii)                                  The date three months after the termination of the Optionee’s Service for any reason other than Disability; or

 

(iii)                               The date six months after the termination of the Optionee’s Service by reason of Disability.

 

The Optionee may exercise all or part of this option at any time before its expiration under the preceding sentence, but only to the extent that this option had become exercisable before the Optionee’s Service terminated.  When the Optionee’s Service terminates, this option shall expire immediately with respect to the number of Shares for which this option is not yet exercisable.  In the event that the Optionee dies after termination of Service but before the expiration of this option, all or part of this option may be exercised (prior to expiration) by the executors or administrators of the Optionee’s estate or by any person who has acquired this option directly from the Optionee by beneficiary designation, bequest or inheritance, but only to the extent that this option had become exercisable before the Optionee’s Service terminated.

 

(c)                                  Death of the Optionee.  If the Optionee dies while in Service, then this option shall expire on the earlier of the following dates:

 

(i)                                     The expiration date determined pursuant to Subsection (a) above; or

 

(ii)                                  The date 12 months after the Optionee’s death.

 

All or part of this option may be exercised at any time before its expiration under the preceding sentence by the executors or administrators of the Optionee’s estate or by any person who has acquired this option directly from the Optionee by beneficiary designation, bequest or inheritance, but only to the extent that

 

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this option had become exercisable before the Optionee’s death.  When the Optionee dies, this option shall expire immediately with respect to the number of Shares for which this option is not yet exercisable.

 

(d)                                 Part-Time Employment and Leaves of Absence.  If the Optionee commences working on a part-time basis, then the Company may adjust the vesting schedule set forth in the Notice of Stock Option Grant.  If the Optionee goes on a leave of absence, then the Company may adjust the vesting schedule set forth in the Notice of Stock Option Grant in accordance with the Company’s leave of absence policy or the terms of such leave.  Except as provided in the preceding sentence, Service shall be deemed to continue for any purpose under this Agreement while the Optionee is on a bona fide leave of absence, if (i) such leave was approved by the Company in writing and (ii) continued crediting of Service for such purpose is expressly required by the terms of such leave or by applicable law (as determined by the Company).  Service shall be deemed to terminate when such leave ends, unless the Optionee immediately returns to active work.

 

(e)                                  Notice Concerning ISO Treatment.  Even if this option is designated as an ISO in the Notice of Stock Option Grant, it ceases to qualify for favorable tax treatment as an ISO to the extent that it is exercised:

 

(i)                                     More than three months after the date when the Optionee ceases to be an Employee for any reason other than death or permanent and total disability (as defined in Section 22(e)(3) of the Code);

 

(ii)                                  More than 12 months after the date when the Optionee ceases to be an Employee by reason of permanent and total disability (as defined in Section 22(e)(3) of the Code); or

 

(iii)                               More than three months after the date when the Optionee has been on a leave of absence for 3 months, unless the Optionee’s reemployment rights following such leave were guaranteed by statute or by contract.

 

SECTION 19.                              RIGHT OF FIRST REFUSAL.

 

(a)                                 Right of First Refusal.  In the event that the Optionee proposes to sell, pledge or otherwise transfer to a third party any Shares acquired under this Agreement, or any interest in such Shares, the Company shall have the Right of First Refusal with respect to all (and not less than all) of such Shares.  If the Optionee desires to transfer Shares acquired under this Agreement, the Optionee shall give a written Transfer Notice to the Company describing fully the proposed transfer, including the number of Shares proposed to be transferred, the proposed transfer price, the name and address of the proposed Transferee and proof satisfactory to the Company that the proposed sale or transfer will not violate any applicable federal, State or foreign securities laws.  The Transfer Notice shall be signed both by the Optionee and by the proposed Transferee and must constitute a binding commitment of both parties to the transfer of the Shares.  The Company shall have the right to purchase all, and not less than all, of the Shares on the terms of the proposal described in the Transfer Notice (subject, however, to any change in such terms permitted under Subsection (b) below) by delivery of a notice of exercise of the Right of First Refusal within 30 days after the date when the Transfer Notice was received by the Company.

 

(b)                                 Transfer of Shares.  If the Company fails to exercise its Right of First Refusal within 30 days after the date when it received the Transfer Notice, the Optionee may, not later than 90 days following receipt of the Transfer Notice by the Company, conclude a transfer of the Shares subject to the Transfer Notice on the terms and conditions described in the Transfer Notice, provided that

 

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any such sale is made in compliance with applicable federal, State and foreign securities laws and not in violation of any other contractual restrictions to which the Optionee is bound.  Any proposed transfer on terms and conditions different from those described in the Transfer Notice, as well as any subsequent proposed transfer by the Optionee, shall again be subject to the Right of First Refusal and shall require compliance with the procedure described in Subsection (a) above.  If the Company exercises its Right of First Refusal, the parties shall consummate the sale of the Shares on the terms set forth in the Transfer Notice within 60 days after the date when the Company received the Transfer Notice (or within such longer period as may have been specified in the Transfer Notice); provided, however, that in the event the Transfer Notice provided that payment for the Shares was to be made in a form other than cash or cash equivalents paid at the time of transfer, the Company shall have the option of paying for the Shares with cash or cash equivalents equal to the present value of the consideration described in the Transfer Notice.

 

(c)                                  Additional or Exchanged Securities and Property.  In the event of a merger or consolidation of the Company with or into another entity, any other corporate reorganization, a stock split, the declaration of a stock dividend, the declaration of an extraordinary dividend payable in a form other than stock, a spin-off, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company’s outstanding securities, any securities or other property (including cash or cash equivalents) that are by reason of such transaction exchanged for, or distributed with respect to, any Shares subject to this Section 7 shall immediately be subject to the Right of First Refusal.  Appropriate adjustments to reflect the exchange or distribution of such securities or property shall be made to the number and/or class of the Shares subject to this Section 7.

 

(d)                                 Termination of Right of First Refusal.  Any other provision of this Section 7 notwithstanding, in the event that the Stock is readily tradable on an established securities market when the Optionee desires to transfer Shares, the Company shall have no Right of First Refusal, and the Optionee shall have no obligation to comply with the procedures prescribed by Subsections (a) and (b) above.

 

(e)                                  Permitted Transfers.  This Section 7 shall not apply to (i) a transfer by beneficiary designation, will or intestate succession or (ii) a transfer to one or more members of the Optionee’s Immediate Family or to a trust established by the Optionee for the benefit of the Optionee and/or one or more members of the Optionee’s Immediate Family, provided in either case that the Transferee agrees in writing on a form prescribed by the Company to be bound by all provisions of this Agreement.  If the Optionee transfers any Shares acquired under this Agreement, either under this Subsection (e) or after the Company has failed to exercise the Right of First Refusal, then this Agreement shall apply to the Transferee to the same extent as to the Optionee.

 

(f)                                   Termination of Rights as Stockholder.  If the Company makes available, at the time and place and in the amount and form provided in this Agreement, the consideration for the Shares to be purchased in accordance with this Section 7, then after such time the person from whom such Shares are to be purchased shall no longer have any rights as a holder of such Shares (other than the right to receive payment of such consideration in accordance with this Agreement).  Such Shares shall be deemed to have been purchased in accordance with the applicable provisions hereof, whether or not the certificate(s) therefor have been delivered as required by this Agreement.

 

(g)                                  Assignment of Right of First Refusal.  The Board of Directors may freely assign the Company’s Right of First Refusal, in whole or in part.  Any person who accepts an assignment of the Right of First Refusal from the Company shall assume all of the Company’s rights and obligations under this Section 7.

 

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SECTION 20.                              LEGALITY OF INITIAL ISSUANCE.

 

No Shares shall be issued upon the exercise of this option unless and until the Company has determined that:

 

a.                                      It and the Optionee have taken any actions required to register the Shares under the Securities Act or to perfect an exemption from the registration requirements thereof;

 

b.                                      Any applicable listing requirement of any stock exchange or other securities market on which Stock is listed has been satisfied; and

 

c.                                       Any other applicable provision of federal, State or foreign law has been satisfied.

 

SECTION 21.                              NO REGISTRATION RIGHTS.

 

The Company may, but shall not be obligated to, register or qualify the sale of Shares under the Securities Act or any other applicable law.  The Company shall not be obligated to take any affirmative action in order to cause the sale of Shares under this Agreement to comply with any law.

 

SECTION 22.                              RESTRICTIONS ON TRANSFER OF SHARES.

 

(a)                                 Securities Law Restrictions.  Regardless of whether the offering and sale of Shares under the Plan have been registered under the Securities Act or have been registered or qualified under the securities laws of any State, the Company at its discretion may impose restrictions upon the sale, pledge or other transfer of such Shares (including the placement of appropriate legends on stock certificates or the imposition of stop-transfer instructions) if, in the judgment of the Company, such restrictions are necessary or desirable in order to achieve compliance with the Securities Act, the securities laws of any State or any other law.

 

(b)                                 Market Stand-Off.  In connection with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Securities Act, including the Company’s initial public offering, the Optionee or a Transferee shall not directly or indirectly sell, make any short sale of, loan, hypothecate, pledge, offer, grant or sell any option or other contract for the purchase of, purchase any option or other contract for the sale of, or otherwise dispose of or transfer, or agree to engage in any of the foregoing transactions with respect to, any Shares acquired under this Agreement without the prior written consent of the Company or its managing underwriter.  Such restriction (the “Market Stand-Off”) shall be in effect for such period of time following the date of the final prospectus for the offering as may be requested by the Company or such underwriter.  In no event, however, shall such period exceed 180 days plus such additional period as may reasonably be requested by the Company or such underwriter to accommodate regulatory restrictions on (i) the publication or other distribution of research reports or (ii) analyst recommendations and opinions, including (without limitation) the restrictions set forth in Rule 2711(f)(4) of the National Association of Securities Dealers and Rule 472(f)(4) of the New York Stock Exchange, as amended, or any similar successor rules.  The Market Stand-Off shall in any event terminate two years after the date of the Company’s initial public offering.  In the event of the declaration of a stock dividend, a spin-off, a stock split, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company’s outstanding securities without receipt of consideration, any new, substituted or additional securities which

 

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are by reason of such transaction distributed with respect to any Shares subject to the Market Stand-Off, or into which such Shares thereby become convertible, shall immediately be subject to the Market Stand-Off.  In order to enforce the Market Stand-Off, the Company may impose stop-transfer instructions with respect to the Shares acquired under this Agreement until the end of the applicable stand-off period.  The Company’s underwriters shall be beneficiaries of the agreement set forth in this Subsection (b).  This Subsection (b) shall not apply to Shares registered in the public offering under the Securities Act.

 

(c)                                  Investment Intent at Grant.  The Optionee represents and agrees that the Shares to be acquired upon exercising this option will be acquired for investment, and not with a view to the sale or distribution thereof.

 

(d)                                 Investment Intent at Exercise.  In the event that the sale of Shares under the Plan is not registered under the Securities Act but an exemption is available that requires an investment representation or other representation, the Optionee shall represent and agree at the time of exercise that the Shares being acquired upon exercising this option are being acquired for investment, and not with a view to the sale or distribution thereof, and shall make such other representations as are deemed necessary or appropriate by the Company and its counsel.

 

(e)                                  Legends.  All certificates evidencing Shares purchased under this Agreement shall bear the following legend:

 

“THE SHARES REPRESENTED HEREBY MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE TERMS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE SHARES).  SUCH AGREEMENT GRANTS TO THE COMPANY CERTAIN RIGHTS OF FIRST REFUSAL UPON AN ATTEMPTED TRANSFER OF THE SHARES.  THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE.”

 

All certificates evidencing Shares purchased under this Agreement in an unregistered transaction shall bear the following legend (and such other restrictive legends as are required or deemed advisable under the provisions of any applicable law):

 

“THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.”

 

(f)                                   Removal of Legends.  If, in the opinion of the Company and its counsel, any legend placed on a stock certificate representing Shares sold under this Agreement is no longer required, the holder of such certificate shall be entitled to exchange such certificate for a certificate representing the same number of Shares but without such legend.

 

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(g)                                  Administration.  Any determination by the Company and its counsel in connection with any of the matters set forth in this Section 10 shall be conclusive and binding on the Optionee and all other persons.

 

SECTION 23.                              ADJUSTMENT OF SHARES.

 

In the event of any transaction described in Section 8(a) of the Plan, the terms of this option (including, without limitation, the number and kind of Shares subject to this option and the Exercise Price) shall be adjusted as set forth in Section 8(a) of the Plan.  In the event that the Company is a party to a merger or consolidation, this option shall be subject to the agreement of merger or consolidation, as provided in Section 8(b) of the Plan.

 

SECTION 24.                              MISCELLANEOUS PROVISIONS.

 

(a)                                 Rights as a Stockholder.  Neither the Optionee nor the Optionee’s representative shall have any rights as a stockholder with respect to any Shares subject to this option until the Optionee or the Optionee’s representative becomes entitled to receive such Shares by filing a notice of exercise and paying the Purchase Price pursuant to Sections 4 and 5.

 

(b)                                 No Retention Rights.  Nothing in this option or in the Plan shall confer upon the Optionee any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Parent or Subsidiary employing or retaining the Optionee) or of the Optionee, which rights are hereby expressly reserved by each, to terminate his or her Service at any time and for any reason, with or without cause.

 

(c)                                  Notice.  Any notice required by the terms of this Agreement shall be given in writing.  It shall be deemed effective upon (i) personal delivery, (ii) deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid or (iii) deposit with Federal Express Corporation, with shipping charges prepaid.  Notice shall be addressed to the Company at its principal executive office and to the Optionee at the address that he or she most recently provided to the Company in accordance with this Subsection (c).

 

(d)                                 Modifications and Waivers.  No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Optionee and by an authorized officer of the Company (other than the Optionee).  No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.

 

(e)                                  Entire Agreement.  The Notice of Stock Option Grant, this Agreement and the Plan constitute the entire contract between the parties hereto with regard to the subject matter hereof.  They supersede any other agreements, representations or understandings (whether oral or written and whether express or implied) that relate to the subject matter hereof.

 

(f)                                   Choice of Law.  This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, as such laws are applied to contracts entered into and performed in such State.

 

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SECTION 25.                              ACKNOWLEDGEMENTS OF THE OPTIONEE.

 

(a)                                 Tax Consequences.  The Optionee agrees that the Company does not have a duty to design or administer the Plan or its other compensation programs in a manner that minimizes the Optionee’s tax liabilities.  The Optionee shall not make any claim against the Company or its Board of Directors, officers or employees related to tax liabilities arising from this option or the Optionee’s other compensation.  In particular, the Optionee acknowledges that this option is exempt from Section 409A of the Code only if the Exercise Price is at least equal to the Fair Market Value per Share on the Date of Grant.  Since Shares are not traded on an established securities market, the determination of their Fair Market Value is made by the Board of Directors or by an independent valuation firm retained by the Company.  The Optionee acknowledges that there is no guarantee in either case that the Internal Revenue Service will agree with the valuation, and the Optionee shall not make any claim against the Company or its Board of Directors, officers or employees in the event that the Internal Revenue Service asserts that the valuation was too low.

 

(b)                                 Electronic Delivery of Documents.  The Optionee agrees to accept by email all documents relating to the Company, the Plan or this option and all other documents that the Company is required to deliver to its security holders (including, without limitation, disclosures that may be required by the Securities and Exchange Commission).  The Optionee also agrees that the Company may deliver these documents by posting them on a website maintained by the Company or by a third party under contract with the Company.  If the Company posts these documents on a website, it shall notify the Optionee by email of their availability.  The Optionee acknowledges that he or she may incur costs in connection with electronic delivery, including the cost of accessing the internet and printing fees, and that an interruption of internet access may interfere with his or her ability to access the documents.  This consent shall remain in effect until this option expires or until the Optionee gives the Company written notice that it should deliver paper documents.

 

(c)                                  No Notice of Expiration Date.  The Optionee agrees that the Company and its officers, employees, attorneys and agents do not have any obligation to notify him or her prior to the expiration of this option pursuant to Section 6, regardless of whether this option will expire at the end of its full term or on an earlier date related to the termination of the Optionee’s Service.  The Optionee further agrees that he or she has the sole responsibility for monitoring the expiration of this option and for exercising this option, if at all, before it expires.  This Subsection (c) shall supersede any contrary representation that may have been made, orally or in writing, by the Company or by an officer, employee, attorney or agent of the Company.

 

SECTION 26.                              DEFINITIONS.

 

(a)                                 “Agreement” shall mean this Stock Option Agreement.

 

(b)                                 “Board of Directors” shall mean, as the case may be, (i) the managing member of the Company’s predecessor, Natera, Inc., LLC or (ii) the Board of Directors of the Company, as constituted from time to time or, if a Committee has been appointed, such Committee.

 

(c)                                  “Code” shall mean the Internal Revenue Code of 1986, as amended.

 

(d)                                 “Committee” shall mean a committee of the Board of Directors, as described in Section 2 of the Plan.

 

(e)                                  “Company” shall mean Natera, Inc., a Delaware corporation.

 

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(f)                                   “Consultant” shall mean a person who performs bona fide services for the Company, a Parent or a Subsidiary as a consultant or advisor, excluding Employees and Outside Directors.

 

(g)                                  “Date of Grant” shall mean the date of grant specified in the Notice of Stock Option Grant, which date shall be the later of (i) the date on which the Board of Directors resolved to grant this option or (ii) the first day of the Optionee’s Service.

 

(h)                                 “Disability” shall mean that the Optionee is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment.

 

(i)                                     “Employee” shall mean any individual who is a common-law employee of the Company, a Parent or a Subsidiary.

 

(j)                                    “Exercise Price” shall mean the amount for which one Share may be purchased upon exercise of this option, as specified in the Notice of Stock Option Grant.

 

(k)                                 “Fair Market Value” shall mean the fair market value of a Share, as determined by the Board of Directors in good faith.  Such determination shall be conclusive and binding on all persons.

 

(l)                                     “Immediate Family” shall mean any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law and shall include adoptive relationships.

 

(m)                             “ISO” shall mean an employee incentive stock option described in Section 422(b) of the Code.

 

(n)                                 “Notice of Stock Option Grant” shall mean the document so entitled to which this Agreement is attached.

 

(o)                                 “NSO” shall mean a stock option not described in Section 422(b) or 423(b) of the Code.

 

(p)                                 “Optionee” shall mean the person named in the Notice of Stock Option Grant.

 

(q)                                 “Outside Director” shall mean a member of the Board of Directors who is not an Employee.

 

(r)                                    “Parent” shall mean any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

 

(s)                                   “Plan” shall mean the Natera, Inc. Amended 2007 Stock Plan, as in effect on the Date of Grant.

 

(t)                                    “Purchase Price” shall mean the Exercise Price multiplied by the number of Shares with respect to which this option is being exercised.

 

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(u)                                 “Right of First Refusal” shall mean the Company’s right of first refusal described in Section 7.

 

(v)                                 “Securities Act” shall mean the Securities Act of 1933, as amended.

 

(w)                               “Service” shall mean service as an Employee, Outside Director or Consultant.

 

(x)                                 “Share” shall mean one share of Stock, as adjusted in accordance with Section 8 of the Plan (if applicable).

 

(y)                                 “Stock” shall mean the Common Stock of the Company.

 

(z)                                  “Subsidiary” shall mean any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

 

(aa)                          “Transferee” shall mean any person to whom the Optionee has directly or indirectly transferred any Share acquired under this Agreement.

 

(bb)                          “Transfer Notice” shall mean the notice of a proposed transfer of Shares described in Section 7.

 

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THE OPTION GRANTED PURSUANT TO THIS AGREEMENT AND THE SHARES ISSUABLE UPON THE EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.

 

GENE SECURITY NETWORK, INC. AMENDED 2007 STOCK PLAN:

STOCK OPTION AGREEMENT

 

SECTION 27.                              GRANT OF OPTION.

 

(a)                                 Option.  On the terms and conditions set forth in the Notice of Stock Option Grant and this Agreement, the Company grants to the Optionee on the Grant Date the option to purchase at the Exercise Price the number of Shares set forth in the Notice of Stock Option Grant.  The Exercise Price is agreed to be at least 100% of the Fair Market Value per Share on the Grant Date (110% of Fair Market Value if this option is designated as an ISO in the Notice of Stock Option Grant and Section 3(b) of the Plan applies).  This option is intended to be an ISO or an NSO, as provided in the Notice of Stock Option Grant.

 

(b)                                 $100,000 Limitation.  Even if this option is designated as an ISO in the Notice of Stock Option Grant, it shall be deemed to be an NSO to the extent (and only to the extent) required by the $100,000 annual limitation under Section 422(d) of the Code.

 

(c)                                  Stock Plan and Defined Terms.  This option is granted pursuant to the Plan, a copy of which the Optionee acknowledges having received.  The provisions of the Plan are incorporated into this Agreement by this reference.  Capitalized terms are defined in Section 14 of this Agreement.

 

SECTION 28.                              RIGHT TO EXERCISE.

 

(a)                                 Exercisability.  Subject to Subsection (b) below and the other conditions set forth in this Agreement, all or part of this option may be exercised prior to its expiration at the time or times set forth in the Notice of Stock Option Grant.  Shares purchased by exercising this option may be subject to the Right of Repurchase under Section 7.

 

(b)                                 Stockholder Approval.  Any other provision of this Agreement notwithstanding, no portion of this option shall be exercisable at any time prior to the approval of the Plan by the Company’s stockholders.

 

SECTION 29.                              NO TRANSFER OR ASSIGNMENT OF OPTION.

 

Except as otherwise provided in this Agreement, this option and the rights and privileges conferred hereby shall not be sold, pledged or otherwise transferred (whether by operation of law or otherwise) and shall not be subject to sale under execution, attachment, levy or similar process.

 

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SECTION 30.                              EXERCISE PROCEDURES.

 

(a)                                 Notice of Exercise.  The Optionee or the Optionee’s representative may exercise this option by giving written notice to the Company pursuant to Section 13(c).  The notice shall specify the election to exercise this option, the number of Shares for which it is being exercised and the form of payment.  The person exercising this option shall sign the notice.  In the event that this option is being exercised by the representative of the Optionee, the notice shall be accompanied by proof (satisfactory to the Company) of the representative’s right to exercise this option.  The Optionee or the Optionee’s representative shall deliver to the Company, at the time of giving the notice, payment in a form permissible under Section 5 for the full amount of the Purchase Price.  In the event of a partial exercise of this option, Shares shall be deemed to have been purchased in the order in which they vest in accordance with the Notice of Stock Option Grant.

 

(b)                                 Issuance of Shares.  After receiving a proper notice of exercise, the Company shall cause to be issued one or more certificates evidencing the Shares for which this option has been exercised.  Such Shares shall be registered (i) in the name of the person exercising this option, (ii) in the names of such person and his or her spouse as community property or as joint tenants with the right of survivorship or (iii) with the Company’s consent, in the name of a revocable trust.  In the case of Restricted Shares, the Company shall cause such certificates to be deposited in escrow under Section 7(c).  In the case of other Shares, the Company shall cause such certificates to be delivered to or upon the order of the person exercising this option.

 

(c)                                  Withholding Taxes.  In the event that the Company determines that it is required to withhold any tax as a result of the exercise of this option, the Optionee, as a condition to the exercise of this option, shall make arrangements satisfactory to the Company to enable it to satisfy all withholding requirements.  The Optionee shall also make arrangements satisfactory to the Company to enable it to satisfy any withholding requirements that may arise in connection with the vesting or disposition of Shares purchased by exercising this option.

 

SECTION 31.                              PAYMENT FOR STOCK.

 

(a)                                 Cash.  All or part of the Purchase Price may be paid in cash or cash equivalents.

 

(b)                                 Surrender of Stock.  At the discretion of the Board of Directors, all or any part of the Purchase Price may be paid by surrendering, or attesting to the ownership of, Shares that are already owned by the Optionee.  Such Shares shall be surrendered to the Company in good form for transfer and shall be valued at their Fair Market Value as of the date when this option is exercised.

 

(c)                                  Exercise/Sale.  All or part of the Purchase Price and any withholding taxes may be paid by the delivery (on a form prescribed by the Company) of an irrevocable direction to a securities broker approved by the Company to sell Shares and to deliver all or part of the sales proceeds to the Company.  However, payment pursuant to this Subsection (c) shall be permitted only if (i) Stock then is publicly traded and (ii) such payment does not violate applicable law.

 

(d)                                 Promissory Note. Subject to the Board of Directors’ authority to refuse at any time in its sole discretion to allow payment under this paragraph, all or part of the Purchase Price may be paid with full-recourse promissory note in accordance with the requirements of Section 7(c) of the Plan.

 

(e)                                  Net Exercise.  To the extent that the option is exercised with respect to vested Shares that are not subject to the Right of Repurchase under Section 7 below and further subject to the Board of Directors’ authority to refuse, in whole or in part, at any time in its sole discretion to allow

 

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payment under this Subsection (e), payment of the Purchase Price may be satisfied by a “net exercise” arrangement pursuant to which the Company will reduce the number of Shares issued upon exercise of the option by the largest whole number of Shares with a Fair Market Value that does not exceed the aggregate Purchase Price; provided, however, the Company shall accept a cash or other payment from the Optionee to the extent of any remaining balance of the aggregate Purchase Price not satisfied by such reduction in the number of whole Shares to be issued; provided, further, that Shares will no longer be subject to the option and will not be exercisable thereafter to the extent that (i) Shares issuable upon exercise are reduced to pay the Purchase Price pursuant to the “net exercise” arrangement, (ii) Shares are delivered to the Optionee as a result of such exercise, and (iii) Shares are withheld to satisfy any tax withholding obligations under Section 4(c) above.

 

SECTION 32.                              TERM AND EXPIRATION.

 

(a)                                 Basic Term.  This option shall in any event expire on the expiration date set forth in the Notice of Stock Option Grant, which date is 10 years after the Grant Date (five years after the Grant Date if this option is designated as an ISO in the Notice of Stock Option Grant and Section 3(b) of the Plan applies).

 

(b)                                 Termination of Service (Except by Death).  If the Optionee’s Service terminates for any reason other than death, then this option shall expire on the earliest of the following occasions:

 

(i)                                     The expiration date determined pursuant to Subsection (a) above;

 

(ii)                                  The date three months after the termination of the Optionee’s Service for any reason other than Disability; or

 

(iii)                               The date six months after the termination of the Optionee’s Service by reason of Disability.

 

The Optionee may exercise all or part of this option at any time before its expiration under the preceding sentence, but only to the extent that this option is exercisable for vested Shares on or before the date when the Optionee’s Service terminates.  When the Optionee’s Service terminates, this option shall expire immediately with respect to the number of Shares for which this option is not yet exercisable and with respect to any Restricted Shares.  In the event that the Optionee dies after termination of Service but before the expiration of this option, all or part of this option may be exercised (prior to expiration) by the executors or administrators of the Optionee’s estate or by any person who has acquired this option directly from the Optionee by beneficiary designation, bequest or inheritance, but only to the extent that this option was exercisable for vested Shares on or before the date when the Optionee’s Service terminated.

 

(c)                                  Death of the Optionee.  If the Optionee dies while in Service, then this option shall expire on the earlier of the following dates:

 

(i)                                     The expiration date determined pursuant to Subsection (a) above; or

 

(ii)                                  The date 12 months after the Optionee’s death.

 

All or part of this option may be exercised at any time before its expiration under the preceding sentence by the executors or administrators of the Optionee’s estate or by any person who has acquired this option

 

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directly from the Optionee by beneficiary designation, bequest or inheritance, but only to the extent that this option is exercisable for vested Shares on or before the date of the Optionee’s death.  When the Optionee dies, this option shall expire immediately with respect to the number of Shares for which this option is not yet exercisable and with respect to any Restricted Shares.

 

(d)                                 Part-Time Employment and Leaves of Absence.  If the Optionee commences working on a part-time basis, then the Company may adjust the vesting schedule set forth in the Notice of Stock Option Grant.  If the Optionee goes on a leave of absence, then the Company may adjust the vesting schedule set forth in the Notice of Stock Option Grant in accordance with the Company’s leave of absence policy or the terms of such leave.  Except as provided in the preceding sentence, Service shall be deemed to continue for any purpose under this Agreement while the Optionee is on a bona fide leave of absence, if (i) such leave was approved by the Company in writing and (ii) continued crediting of Service for such purpose is expressly required by the terms of such leave or by applicable law (as determined by the Company).  Service shall be deemed to terminate when such leave ends, unless the Optionee immediately returns to active work.

 

(e)                                  Notice Concerning ISO Treatment.  Even if this option is designated as an ISO in the Notice of Stock Option Grant, it ceases to qualify for favorable tax treatment as an ISO to the extent that it is exercised:

 

(i)                                     More than three months after the date when the Optionee ceases to be an Employee for any reason other than death or permanent and total disability (as defined in Section 22(e)(3) of the Code);

 

(ii)                                  More than 12 months after the date when the Optionee ceases to be an Employee by reason of permanent and total disability (as defined in Section 22(e)(3) of the Code); or

 

(iii)                               More than three months after the date when the Optionee has been on a leave of absence for 3 months, unless the Optionee’s reemployment rights following such leave were guaranteed by statute or by contract.

 

SECTION 33.                              RIGHT OF REPURCHASE.

 

(a)                                 Scope of Repurchase Right.  Until they vest in accordance with the Notice of Stock Option Grant and Subsection (b) below, the Shares acquired under this Agreement shall be Restricted Shares and shall be subject to the Company’s Right of Repurchase.  The Company, however, may decline to exercise its Right of Repurchase or may exercise its Right of Repurchase only with respect to a portion of the Restricted Shares.  The Company may exercise its Right of Repurchase only during the Repurchase Period following the termination of the Optionee’s Service, but the Right of Repurchase may be exercised automatically under Subsection (d) below.  If the Right of Repurchase is exercised, the Company shall pay the Optionee an amount equal to the lower of (i) the Exercise Price of each Restricted Share being repurchased or (ii) the Fair Market Value of such Restricted Share at the time the Right of Repurchase is exercised.

 

(b)                                 Lapse of Repurchase Right.  The Right of Repurchase shall lapse with respect to the Restricted Shares in accordance with the vesting schedule set forth in the Notice of Stock Option Grant.

 

(c)                                  Escrow.  Upon issuance, the certificate(s) for Restricted Shares shall be deposited in escrow with the Company to be held in accordance with the provisions of this Agreement.  Any additional or

 

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exchanged securities or other property described in Subsection (f) below shall immediately be delivered to the Company to be held in escrow.  All ordinary cash dividends on Restricted Shares (or on other securities held in escrow) shall be paid directly to the Optionee and shall not be held in escrow.  Restricted Shares, together with any other assets held in escrow under this Agreement, shall be (i) surrendered to the Company for repurchase upon exercise of the Right of Repurchase or the Right of First Refusal or (ii) released to the Optionee upon his or her request to the extent that the Shares have ceased to be Restricted Shares (but not more frequently than once every six months).  In any event, all Shares that have ceased to be Restricted Shares, together with any other vested assets held in escrow under this Agreement, shall be released within 90 days after the earlier of (i) the termination of the Optionee’s Service or (ii) the lapse of the Right of First Refusal.

 

(d)                                 Exercise of Repurchase Right.  The Company shall be deemed to have exercised its Right of Repurchase automatically for all Restricted Shares as of the commencement of the Repurchase Period, unless the Company during the Repurchase Period notifies the holder of the Restricted Shares pursuant to Section 13(c) that it will not exercise its Right of Repurchase for some or all of the Restricted Shares.  The Company shall pay to the holder of the Restricted Shares the purchase price determined under Subsection (a) above for the Restricted Shares being repurchased.  Payment shall be made in cash or cash equivalents and/or by canceling indebtedness to the Company incurred by the Optionee in the purchase of the Restricted Shares.  The certificate(s) representing the Restricted Shares being repurchased shall be delivered to the Company.

 

(e)                                  Termination of Rights as Stockholder.  If the Right of Repurchase is exercised in accordance with this Section 7 and the Company makes available the consideration for the Restricted Shares being repurchased, then the person from whom the Restricted Shares are repurchased shall no longer have any rights as a holder of the Restricted Shares (other than the right to receive payment of such consideration).  Such Restricted Shares shall be deemed to have been repurchased pursuant to this Section 7, whether or not the certificate(s) for such Restricted Shares have been delivered to the Company or the consideration for such Restricted Shares has been accepted.

 

(f)                                   Additional or Exchanged Securities and Property.  In the event of a merger or consolidation of the Company with or into another entity, any other corporate reorganization, a stock split, the declaration of a stock dividend, the declaration of an extraordinary dividend payable in a form other than stock, a spin-off, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company’s outstanding securities, any securities or other property (including cash or cash equivalents) that are by reason of such transaction exchanged for, or distributed with respect to, any Restricted Shares shall immediately be subject to the Right of Repurchase.  Appropriate adjustments to reflect the exchange or distribution of such securities or property shall be made to the number and/or class of the Restricted Shares.  Appropriate adjustments shall also be made to the price per share to be paid upon the exercise of the Right of Repurchase, provided that the aggregate purchase price payable for the Restricted Shares shall remain the same.  In the event of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, the Right of Repurchase may be exercised by the Company’s successor.

 

(g)                                  Transfer of Restricted Shares.  The Optionee shall not transfer, assign, encumber or otherwise dispose of any Restricted Shares without the Company’s written consent, except as provided in the following sentence.  The Optionee may transfer Restricted Shares to one or more members of the Optionee’s Immediate Family or to a trust established by the Optionee for the benefit of the Optionee and/or one or more members of the Optionee’s Immediate Family, provided in either case that the Transferee agrees in writing on a form prescribed by the Company to be bound by all provisions of this Agreement.  If the Optionee transfers any Restricted Shares, then this Agreement shall apply to the Transferee to the same extent as to the Optionee.

 

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(h)                                 Assignment of Repurchase Right.  The Board of Directors may freely assign the Company’s Right of Repurchase, in whole or in part.  Any person who accepts an assignment of the Right of Repurchase from the Company shall assume all of the Company’s rights and obligations under this Section 7.

 

SECTION 34.                              RIGHT OF FIRST REFUSAL.

 

(a)                                 Right of First Refusal.  In the event that the Optionee proposes to sell, pledge or otherwise transfer to a third party any Shares acquired under this Agreement, or any interest in such Shares, the Company shall have the Right of First Refusal with respect to all (and not less than all) of such Shares.  If the Optionee desires to transfer Shares acquired under this Agreement, the Optionee shall give a written Transfer Notice to the Company describing fully the proposed transfer, including the number of Shares proposed to be transferred, the proposed transfer price, the name and address of the proposed Transferee and proof satisfactory to the Company that the proposed sale or transfer will not violate any applicable federal, State or foreign securities laws.  The Transfer Notice shall be signed both by the Optionee and by the proposed Transferee and must constitute a binding commitment of both parties to the transfer of the Shares.  The Company shall have the right to purchase all, and not less than all, of the Shares on the terms of the proposal described in the Transfer Notice (subject, however, to any change in such terms permitted under Subsection (b) below) by delivery of a notice of exercise of the Right of First Refusal within 30 days after the date when the Transfer Notice was received by the Company.

 

(b)                                 Transfer of Shares.  If the Company fails to exercise its Right of First Refusal within 30 days after the date when it received the Transfer Notice, the Optionee may, not later than 90 days following receipt of the Transfer Notice by the Company, conclude a transfer of the Shares subject to the Transfer Notice on the terms and conditions described in the Transfer Notice, provided that any such sale is made in compliance with applicable federal, State and foreign securities laws and not in violation of any other contractual restrictions to which the Optionee is bound.  Any proposed transfer on terms and conditions different from those described in the Transfer Notice, as well as any subsequent proposed transfer by the Optionee, shall again be subject to the Right of First Refusal and shall require compliance with the procedure described in Subsection (a) above.  If the Company exercises its Right of First Refusal, the parties shall consummate the sale of the Shares on the terms set forth in the Transfer Notice within 60 days after the date when the Company received the Transfer Notice (or within such longer period as may have been specified in the Transfer Notice); provided, however, that in the event the Transfer Notice provided that payment for the Shares was to be made in a form other than cash or cash equivalents paid at the time of transfer, the Company shall have the option of paying for the Shares with cash or cash equivalents equal to the present value of the consideration described in the Transfer Notice.

 

(c)                                  Additional or Exchanged Securities and Property.  In the event of a merger or consolidation of the Company with or into another entity, any other corporate reorganization, a stock split, the declaration of a stock dividend, the declaration of an extraordinary dividend payable in a form other than stock, a spin-off, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company’s outstanding securities, any securities or other property (including cash or cash equivalents) that are by reason of such transaction exchanged for, or distributed with respect to, any Shares subject to this Section 8 shall immediately be subject to the Right of First Refusal.  Appropriate adjustments to reflect the exchange or distribution of such securities or property shall be made to the number and/or class of the Shares subject to this Section 8.

 

(d)                                 Termination of Right of First Refusal.  Any other provision of this Section 8 notwithstanding, in the event that the Stock is readily tradable on an established securities market when the Optionee desires to transfer Shares, the Company shall have no Right of First Refusal, and the

 

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Optionee shall have no obligation to comply with the procedures prescribed by Subsections (a) and (b) above.

 

(e)                                  Permitted Transfers.  This Section 8 shall not apply to (i) a transfer by beneficiary designation, will or intestate succession or (ii) a transfer to one or more members of the Optionee’s Immediate Family or to a trust established by the Optionee for the benefit of the Optionee and/or one or more members of the Optionee’s Immediate Family, provided in either case that the Transferee agrees in writing on a form prescribed by the Company to be bound by all provisions of this Agreement.  If the Optionee transfers any Shares acquired under this Agreement, either under this Subsection (e) or after the Company has failed to exercise the Right of First Refusal, then this Agreement shall apply to the Transferee to the same extent as to the Optionee.

 

(f)                                   Termination of Rights as Stockholder.  If the Company makes available, at the time and place and in the amount and form provided in this Agreement, the consideration for the Shares to be purchased in accordance with this Section 8, then after such time the person from whom such Shares are to be purchased shall no longer have any rights as a holder of such Shares (other than the right to receive payment of such consideration in accordance with this Agreement).  Such Shares shall be deemed to have been purchased in accordance with the applicable provisions hereof, whether or not the certificate(s) therefor have been delivered as required by this Agreement.

 

(g)                                  Assignment of Right of First Refusal.  The Board of Directors may freely assign the Company’s Right of First Refusal, in whole or in part.  Any person who accepts an assignment of the Right of First Refusal from the Company shall assume all of the Company’s rights and obligations under this Section 8.

 

SECTION 35.                              LEGALITY OF INITIAL ISSUANCE.

 

No Shares shall be issued upon the exercise of this option unless and until the Company has determined that:

 

a.                                      It and the Optionee have taken any actions required to register the Shares under the Securities Act or to perfect an exemption from the registration requirements thereof;

 

b.                                      Any applicable listing requirement of any stock exchange or other securities market on which Stock is listed has been satisfied; and

 

c.                                       Any other applicable provision of federal, State or foreign law has been satisfied.

 

SECTION 36.                              NO REGISTRATION RIGHTS.

 

The Company may, but shall not be obligated to, register or qualify the sale of Shares under the Securities Act or any other applicable law.  The Company shall not be obligated to take any affirmative action in order to cause the sale of Shares under this Agreement to comply with any law.

 

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SECTION 37.                              RESTRICTIONS ON TRANSFER OF SHARES.

 

(a)                                 Securities Law Restrictions.  Regardless of whether the offering and sale of Shares under the Plan have been registered under the Securities Act or have been registered or qualified under the securities laws of any State, the Company at its discretion may impose restrictions upon the sale, pledge or other transfer of such Shares (including the placement of appropriate legends on stock certificates or the imposition of stop-transfer instructions) if, in the judgment of the Company, such restrictions are necessary or desirable in order to achieve compliance with the Securities Act, the securities laws of any State or any other law.

 

(b)                                 Market Stand-Off.  In connection with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Securities Act, including the Company’s initial public offering, the Optionee or a Transferee shall not directly or indirectly sell, make any short sale of, loan, hypothecate, pledge, offer, grant or sell any option or other contract for the purchase of, purchase any option or other contract for the sale of, or otherwise dispose of or transfer, or agree to engage in any of the foregoing transactions with respect to, any Shares acquired under this Agreement without the prior written consent of the Company or its managing underwriter.  Such restriction (the “Market Stand-Off”) shall be in effect for such period of time following the date of the final prospectus for the offering as may be requested by the Company or such underwriter.  In no event, however, shall such period exceed 180 days plus such additional period as may reasonably be requested by the Company or such underwriter to accommodate regulatory restrictions on (i) the publication or other distribution of research reports or (ii) analyst recommendations and opinions, including (without limitation) the restrictions set forth in Rule 2711(f)(4) of the National Association of Securities Dealers and Rule 472(f)(4) of the New York Stock Exchange, as amended, or any similar successor rules.  The Market Stand-Off shall in any event terminate two years after the date of the Company’s initial public offering.  In the event of the declaration of a stock dividend, a spin-off, a stock split, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company’s outstanding securities without receipt of consideration, any new, substituted or additional securities which are by reason of such transaction distributed with respect to any Shares subject to the Market Stand-Off, or into which such Shares thereby become convertible, shall immediately be subject to the Market Stand-Off.  In order to enforce the Market Stand-Off, the Company may impose stop-transfer instructions with respect to the Shares acquired under this Agreement until the end of the applicable stand-off period.  The Company’s underwriters shall be beneficiaries of the agreement set forth in this Subsection (b).  This Subsection (b) shall not apply to Shares registered in the public offering under the Securities Act.

 

(c)                                  Investment Intent at Grant.  The Optionee represents and agrees that the Shares to be acquired upon exercising this option will be acquired for investment, and not with a view to the sale or distribution thereof.

 

(d)                                 Investment Intent at Exercise.  In the event that the sale of Shares under the Plan is not registered under the Securities Act but an exemption is available that requires an investment representation or other representation, the Optionee shall represent and agree at the time of exercise that the Shares being acquired upon exercising this option are being acquired for investment, and not with a view to the sale or distribution thereof, and shall make such other representations as are deemed necessary or appropriate by the Company and its counsel.

 

(e)                                  Legends.  All certificates evidencing Shares purchased under this Agreement shall bear the following legend:

 

“THE SHARES REPRESENTED HEREBY MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF,

 

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EXCEPT IN COMPLIANCE WITH THE TERMS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE SHARES).  SUCH AGREEMENT GRANTS TO THE COMPANY CERTAIN RIGHTS OF FIRST REFUSAL UPON AN ATTEMPTED TRANSFER OF THE SHARES AND CERTAIN REPURCHASE RIGHTS UPON TERMINATION OF SERVICE WITH THE COMPANY.  THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE.”

 

All certificates evidencing Shares purchased under this Agreement in an unregistered transaction shall bear the following legend (and such other restrictive legends as are required or deemed advisable under the provisions of any applicable law):

 

“THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.”

 

(f)                                   Removal of Legends.  If, in the opinion of the Company and its counsel, any legend placed on a stock certificate representing Shares sold under this Agreement is no longer required, the holder of such certificate shall be entitled to exchange such certificate for a certificate representing the same number of Shares but without such legend.

 

(g)                                  Administration.  Any determination by the Company and its counsel in connection with any of the matters set forth in this Section 11 shall be conclusive and binding on the Optionee and all other persons.

 

SECTION 38.                              ADJUSTMENT OF SHARES.

 

In the event of any transaction described in Section 8(a) of the Plan, the terms of this option (including, without limitation, the number and kind of Shares subject to this option and the Exercise Price) shall be adjusted as set forth in Section 8(a) of the Plan.  In the event that the Company is a party to a merger or consolidation, this option shall be subject to the agreement of merger or consolidation, as provided in Section 8(b) of the Plan.

 

SECTION 39.                              MISCELLANEOUS PROVISIONS.

 

(a)                                 Rights as a Stockholder.  Neither the Optionee nor the Optionee’s representative shall have any rights as a stockholder with respect to any Shares subject to this option until the Optionee or the Optionee’s representative becomes entitled to receive such Shares by filing a notice of exercise and paying the Purchase Price pursuant to Sections 4 and 5.

 

(b)                                 No Retention Rights.  Nothing in this option or in the Plan shall confer upon the Optionee any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Parent or Subsidiary employing or retaining the

 

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Optionee) or of the Optionee, which rights are hereby expressly reserved by each, to terminate his or her Service at any time and for any reason, with or without cause.

 

(c)                                  Notice.  Any notice required by the terms of this Agreement shall be given in writing.  It shall be deemed effective upon (i) personal delivery, (ii) deposit with the United States Postal Service, by registered or certified mail, with postage and fees prepaid or (iii) deposit with Federal Express Corporation, with shipping charges prepaid.  Notice shall be addressed to the Company at its principal executive office and to the Optionee at the address that he or she most recently provided to the Company in accordance with this Subsection (c).

 

(d)                                 Modifications and Waivers.  No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Optionee and by an authorized officer of the Company (other than the Optionee).  No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.

 

(e)                                  Entire Agreement.  The Notice of Stock Option Grant, this Agreement and the Plan constitute the entire contract between the parties hereto with regard to the subject matter hereof.  They supersede any other agreements, representations or understandings (whether oral or written and whether express or implied) that relate to the subject matter hereof.

 

(f)                                   Choice of Law.  This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, as such laws are applied to contracts entered into and performed in such State.

 

SECTION 40.                              DEFINITIONS.

 

(a)                                 “Agreement” shall mean this Stock Option Agreement.

 

(b)                                 “Board of Directors” shall mean, as the case may be, (i) the managing member of the Company’s predecessor, Gene Security Network, LLC or (ii) the Board of Directors of the Company, as constituted from time to time or, if a Committee has been appointed, such Committee.

 

(c)                                  “Code” shall mean the Internal Revenue Code of 1986, as amended.

 

(d)                                 “Committee” shall mean a committee of the Board of Directors, as described in Section 2 of the Plan.

 

(e)                                  “Company” shall mean Gene Security Network, Inc., a Delaware corporation.

 

(f)                                   “Consultant” shall mean a person who performs bona fide services for the Company, a Parent or a Subsidiary as a consultant or advisor, excluding Employees and Outside Directors.

 

(g)                                  “Disability” shall mean that the Optionee is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment.

 

(h)                                 “Employee” shall mean any individual who is a common-law employee of the Company, a Parent or a Subsidiary.

 

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(i)                                     “Exercise Price” shall mean the amount for which one Share may be purchased upon exercise of this option, as specified in the Notice of Stock Option Grant.

 

(j)                                    “Fair Market Value” shall mean the fair market value of a Share, as determined by the Board of Directors in good faith.  Such determination shall be conclusive and binding on all persons.

 

(k)                                 “Grant Date” shall mean the Grant Date specified in the Notice of Stock Option Grant, which date shall be the later of (i) the date on which the Board of Directors resolved to grant this option or (ii) the first day of the Optionee’s Service.

 

(l)                                     “Immediate Family” shall mean any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law and shall include adoptive relationships.

 

(m)                             “ISO” shall mean an employee incentive stock option described in Section 422(b) of the Code.

 

(n)                                 “Notice of Stock Option Grant” shall mean the document so entitled to which this Agreement is attached.

 

(o)                                 “NSO” shall mean a stock option not described in Section 422(b) or 423(b) of the Code.

 

(p)                                 “Optionee” shall mean the person named in the Notice of Stock Option Grant.

 

(q)                                 “Outside Director” shall mean a member of the Board of Directors who is not an Employee.

 

(r)                                    “Parent” shall mean any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

 

(s)                                   “Plan” shall mean the Gene Security Network, Inc. Amended 2007 Stock Plan, as in effect on the Grant Date.

 

(t)                                    “Purchase Price” shall mean the Exercise Price multiplied by the number of Shares with respect to which this option is being exercised.

 

(u)                                 “Repurchase Period” shall mean a period of 90 consecutive days commencing on the date when the Optionee’s Service terminates for any reason, including (without limitation) death or disability.

 

(v)                                 “Restricted Share” shall mean a Share that is subject to the Right of Repurchase.

 

(w)                               “Right of First Refusal” shall mean the Company’s right of first refusal described in Section 8.

 

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(x)                                 “Right of Repurchase” shall mean the Company’s right of repurchase described in Section 7.

 

(y)                                 “Securities Act” shall mean the Securities Act of 1933, as amended.

 

(z)                                  “Service” shall mean service as an Employee, Outside Director or Consultant.

 

(aa)                          “Share” shall mean one share of Stock, as adjusted in accordance with Section 8 of the Plan (if applicable).

 

(bb)                          “Stock” shall mean the Common Stock of the Company.

 

(cc)                            “Subsidiary” shall mean any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

 

(dd)                          “Transferee” shall mean any person to whom the Optionee has directly or indirectly transferred any Share acquired under this Agreement.

 

(ee)                            “Transfer Notice” shall mean the notice of a proposed transfer of Shares described in Section 8.

 

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