Document:

Exhibit 4.2

 

NATERA, INC.

 

AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

February 20, 2013

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
1.
    	
Restrictions on Transfer
    	
1
    
	
 
    	
 
    	
 
    
	
2.
    	
Registration Rights
    	
3
    
	
 
    	
2.1
    	
Definitions
    	
3
    
	
 
    	
2.2
    	
Request for Registration
    	
4
    
	
 
    	
2.3
    	
Company Registration
    	
5
    
	
 
    	
2.4
    	
Form S-3 Registration
    	
7
    
	
 
    	
2.5
    	
Obligations of the Company
    	
8
    
	
 
    	
2.6
    	
Information from Holder
    	
10
    
	
 
    	
2.7
    	
Expenses of Registration
    	
10
    
	
 
    	
2.8
    	
Delay of Registration
    	
10
    
	
 
    	
2.9
    	
Indemnification
    	
10
    
	
 
    	
2.10
    	
Reports Under the 1934 Act
    	
12
    
	
 
    	
2.11
    	
Assignment of Registration Rights
    	
13
    
	
 
    	
2.12
    	
Limitations on Subsequent Registration Rights
    	
13
    
	
 
    	
2.13
    	
“Market Stand-Off” Agreement
    	
13
    
	
 
    	
2.14
    	
Termination of Registration Rights
    	
14
    
	
 
    	
 
    	
 
    
	
3.
    	
Covenants of the Company
    	
15
    
	
 
    	
3.1
    	
Delivery of Financial Statements
    	
15
    
	
 
    	
3.2
    	
Inspection
    	
15
    
	
 
    	
3.3
    	
Termination of Information and Inspection Covenants
    	
16
    
	
 
    	
3.4
    	
Right of First Offer
    	
16
    
	
 
    	
3.5
    	
Observer Rights
    	
18
    
	
 
    	
3.6
    	
Board Committees
    	
19
    
	
 
    	
3.7
    	
Proprietary Information and Inventions Agreements;   Consulting Agreements
    	
19
    
	
 
    	
3.8
    	
Redemption Rights
    	
19
    
	
 
    	
3.9
    	
Reservation of Common Stock
    	
20
    
	
 
    	
3.10
    	
Stock Vesting
    	
20
    
	
 
    	
3.11
    	
Corporate Opportunities and Information Use
    	
20
    
	
 
    	
3.12
    	
D&O Insurance
    	
20
    
	
 
    	
3.13
    	
Green Dot Corporation
    	
20
    
	
 
    	
3.14
    	
Foreign Corrupt Practices Act
    	
21
    
	
 
    	
3.15
    	
Termination of Certain Covenants
    	
21
    
	
 
    	
 
    	
 
    
	
4.
    	
Miscellaneous
    	
21
    
	
 
    	
4.1
    	
Successors and Assigns
    	
21
    
	
 
    	
4.2
    	
Governing Law
    	
21
    
	
 
    	
4.3
    	
Counterparts
    	
21
    
	
 
    	
4.4
    	
Titles and Subtitles
    	
21
    
	
 
    	
4.5
    	
Notices
    	
22
    
	
 
    	
4.6
    	
Expenses
    	
22
    
	
 
    	
4.7
    	
Entire Agreement; Amendments and Waivers
    	
22
    

 

i

 

	
 
    	
4.8
    	
Severability
    	
22
    
	
 
    	
4.9
    	
Aggregation of Stock
    	
23
    
	
 
    	
4.10
    	
Additional Investors
    	
23
    
	
 
    	
4.11
    	
Amendment and Restatement of Prior Agreement
    	
23
    

 

ii

 

AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

THIS AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT (the “Agreement”) is made as of the 20th day of February, 2013, by and among Natera, Inc., a Delaware corporation (the “Company”), and the investors listed on Schedule A hereto (each an “Investor” and together the “Investors”).

 

RECITALS

 

WHEREAS, certain of the Investors (the “Existing Investors”) hold shares of the Company’s Series A Preferred Stock, Series A-1 Preferred Stock, Series B Preferred Stock, and/or shares of Common Stock issued upon conversion thereof (the “Series A Preferred Stock,” “Series A-1 Preferred Stock,” and “Series B Preferred Stock” respectively) and possess registration rights, information rights, rights of first offer and other rights pursuant to an Amended and Restated Investors’ Rights Agreement dated as of December 19, 2008 by and among the Company and such Existing Investors (the “Prior Agreement”);

 

WHEREAS, the Prior Agreement may be amended, and any provision therein waived, with the consent of the Company and the holders of a majority of the outstanding Registrable Securities (as such term is defined in the Prior Agreement);

 

WHEREAS, the Existing Investors as holders of a majority of the outstanding Registrable Securities (as such term is defined in the Prior Agreement) of the Company desire to terminate the Prior Agreement and to accept the rights created pursuant hereto in lieu of the rights granted to them under the Prior Agreement; and

 

WHEREAS, certain Investors are parties to the Series E Preferred Stock Purchase Agreement of even date herewith by and among the Company and certain of the Investors (the “Series E Agreement”), which provides that as a condition to the closing of the sale of the Series E Preferred Stock (the “Series E Preferred Stock,” collectively with the Series A Preferred Stock, the Series A-1 Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock, the “Preferred Stock”), this Agreement must be executed and delivered by such Investors, Existing Investors holding a majority of the outstanding Registrable Securities (as such term is defined in the Prior Agreement) of the Company and the Company.

 

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the Existing Investors hereby agree that the Prior Agreement shall be superseded and replaced in its entirety by this Agreement, and the parties hereto further agree as follows:

 

1.                                      Restrictions on Transfer.

 

(a)                                 Each Holder agrees not to make any disposition of all or any portion of the Shares or Registrable Securities unless and until:

 

 

(i)                                     there is then in effect a registration statement under the Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or

 

(ii)                                  (A) The transferee has agreed in writing to be bound by the terms of this Agreement, (B) such Holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition and (C) if reasonably requested by the Company, such Holder shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration of such shares under the Act.  It is agreed that the Company will not require opinions of counsel for transactions made pursuant to Rule 144, except in unusual circumstances.  After its Initial Offering, the Company will not require any transferee pursuant to Rule 144 to be bound by the terms of this Agreement if the shares so transferred do not remain Registrable Securities hereunder following such transfer.

 

(b)                                 Notwithstanding the provisions of subsection (a) above, no such restriction shall apply to a transfer by a Holder that is (A) a partnership transferring to its partners or former partners in accordance with partnership interests, (B) a corporation transferring to a wholly-owned subsidiary or a parent corporation that owns all of the capital stock of the Holder, (C) a limited liability company transferring to its members or former members in accordance with their interest in the limited liability company, or (D) an individual transferring to the Holder’s family member or trust for the benefit of an individual Holder; provided that in each case the transferee will agree in writing to be subject to the terms of this Agreement to the same extent as if he were an original Holder hereunder.

 

(c)                                  Each certificate representing Shares or Registrable Securities shall be stamped or otherwise imprinted with legends substantially similar to the following (in addition to any legend required under applicable state securities laws):

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.

 

THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN INVESTOR RIGHTS AGREEMENT BY AND BETWEEN THE STOCKHOLDER AND THE COMPANY.  COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON

 

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WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY.

 

(d)                                 The Company shall be obligated to reissue promptly unlegended certificates at the request of any Holder thereof if the Company has completed its Initial Offering and the Holder shall have obtained an opinion of counsel (which counsel may be counsel to the Company) reasonably acceptable to the Company to the effect that the securities proposed to be disposed of may lawfully be so disposed of without registration, qualification and legend, provided that the second legend listed above shall be removed only at such time as the Holder of such certificate is no longer subject to any restrictions hereunder.

 

Any legend endorsed on an instrument pursuant to applicable state securities laws and the stop-transfer instructions with respect to such securities shall be removed upon receipt by the Company of an order of the appropriate blue sky authority authorizing such removal.

 

2.                                      Registration Rights.  The Company covenants and agrees as follows:

 

2.1                               Definitions.  For purposes of this Section 2:

 

(a)                                 The term “Act” means the Securities Act of 1933, as amended.

 

(b)                                 The term “Form S-3” means such form under the Act as in effect on the date hereof or any registration form under the Act subsequently adopted by the SEC that permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC.

 

(c)                                  The term “Holder” means any person owning or having the right to acquire Registrable Securities or any assignee thereof in accordance with Section 2.11 hereof.

 

(d)                                 The term “Initial Offering” means the Company’s first firm commitment underwritten public offering of its Common Stock under the Act.

 

(e)                                  The term “1934 Act” means the Securities Exchange Act of 1934, as amended.

 

(f)                                   The terms “register,” “registered,” and “registration” refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Act, and the declaration or ordering of effectiveness of such registration statement or document.

 

(g)                                  The term “Registrable Securities” means (i) the Common Stock issuable or issued upon conversion of the Preferred Stock and (ii) any Common Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security that is issued as) a dividend or other distribution with respect to, or in exchange for, or in replacement of, the shares referenced in (i) above, excluding in all cases, however, any

 

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Registrable Securities sold by a person in a transaction in which his rights under this Section 2 are not assigned.

 

(h)                                 The number of shares of “Registrable Securities” outstanding shall be determined by the number of shares of Common Stock outstanding that are, and the number of shares of Common Stock issuable pursuant to then exercisable or convertible securities that are, Registrable Securities.

 

(i)                                     The term “Rule 144” shall mean Rule 144 under the Act.

 

(j)                                    The term “SEC” shall mean the Securities and Exchange Commission.

 

(k)                                 The term “Shares” shall mean shares of the Company’s Preferred Stock held from time to time by the Investors listed on Exhibit A hereto and their permitted assigns.

 

2.2                               Request for Registration.

 

(a)                                 Subject to the conditions of this Section 2.2, if the Company shall receive at any time after the earlier of (i) four (4) years after the date of this Agreement or (ii) six (6) months after the effective date of the Initial Offering, a written request from the Holders of fifty percent (50%) or more of the Registrable Securities then outstanding (for purposes of this Section 2.2, the “Initiating Holders”) that the Company file a registration statement under the Act covering the registration of Registrable Securities with an anticipated aggregate offering price of at least $40,000,000, then the Company shall, within twenty (20) days of the receipt thereof, give written notice of such request to all Holders, and subject to the limitations of this Section 2.2, use all commercially reasonable efforts to effect, as soon as practicable, the registration under the Act of all Registrable Securities that the Holders request to be registered in a written request received by the Company within twenty (20) days of the mailing of the Company’s notice pursuant to this Section 2.2(a).

 

(b)                                 If the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to this Section 2.2 and the Company shall include such information in the written notice referred to in Section 2.2(a).  In such event, the right of any Holder to include its Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder) to the extent provided herein.  All Holders proposing to distribute their securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company (which underwriter or underwriters shall be reasonably acceptable to a majority in interest of the Initiating Holders).  Notwithstanding any other provision of this Section 2.2, if the underwriter advises the Company that marketing factors require a limitation on the number of securities underwritten (including Registrable Securities), then the Company shall so advise all Holders of Registrable Securities that would otherwise be underwritten pursuant hereto, and the

 

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number of shares that may be included in the underwriting shall be allocated to the Holders of such Registrable Securities pro rata based on the number of Registrable Securities held by all such Holders (including the Initiating Holders).  In no event shall any Registrable Securities be excluded from such underwriting unless all other securities are first excluded.  Any Registrable Securities excluded or withdrawn from such underwriting shall be withdrawn from the registration.

 

(c)                                  Notwithstanding the foregoing, the Company shall not be required to effect a registration pursuant to this Section 2.2:

 

(i)                                     in any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, unless the Company is already subject to service in such jurisdiction and except as may be required under the Act; or

 

(ii)                                  after the Company has effected two (2) registrations pursuant to this Section 2.2, and such registrations have been declared or ordered effective; or

 

(iii)                               during the period starting with the date sixty (60) days prior to the Company’s good faith estimate of the date of the filing of and ending on a date one hundred eighty (180) days following the effective date of a Company-initiated registration subject to Section 2.3 below, provided that the Company is actively employing in good faith all commercially reasonable efforts to cause such registration statement to become effective; or

 

(iv)                              if the Initiating Holders propose to dispose of Registrable Securities that may be registered on Form S-3 pursuant to Section 2.4 hereof; or

 

(v)                                 if the Company shall furnish to Holders requesting a registration statement pursuant to this Section 2.2 a certificate signed by the Company’s Chief Executive Officer or Chairman of the Board stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such registration statement to be effected at such time, in which event the Company shall have the right to defer such filing for a period of not more than one hundred twenty (120) days after receipt of the request of the Initiating Holders, provided that such right shall be exercised by the Company not more than once in any twelve (12)-month period and provided further that the Company shall not register any securities for the account of itself or any other stockholder during such one hundred twenty (120) day period (other than a registration relating solely to the sale of securities of participants in a Company stock plan, a registration relating to a corporate reorganization or transaction under Rule 145 of the Act, a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities, or a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered).

 

2.3                               Company Registration.

 

(a)                                 If (but without any obligation to do so) the Company proposes to register (including for this purpose a registration effected by the Company for

 

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stockholders other than the Holders) any of its stock or other securities under the Act in connection with the public offering of such securities (other than a registration relating solely to the sale of securities of participants in a Company stock plan, a registration relating to a corporate reorganization or transaction under Rule 145 of the Act, a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities, or a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered), the Company shall, at such time, promptly give each Holder written notice of such registration.  Upon the written request of each Holder given within twenty (20) days after mailing of such notice by the Company in accordance with Section 4.5, the Company shall, subject to the provisions of Section 2.3(c), use all commercially reasonable efforts to cause to be registered under the Act all of the Registrable Securities that each such Holder requests to be registered.  If a Holder decides not to include all of its Registrable Securities in any registration statement thereafter filed by the Company, such Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth therein.

 

(b)                                 Right to Terminate Registration.  The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.3 prior to the effectiveness of such registration whether or not any Holder has elected to include securities in such registration.  The expenses of such withdrawn registration shall be borne by the Company in accordance with Section 2.7 hereof.

 

(c)                                  Underwriting Requirements.  In connection with any offering involving an underwriting of shares of the Company’s capital stock, the Company shall not be required under this Section 2.3 to include any of the Holders’ securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by the Company (or by other persons entitled to select the underwriters) and enter into an underwriting agreement in customary form with such underwriters, and then only in such quantity as the underwriters determine in their sole discretion will not jeopardize the success of the offering by the Company.  If the total amount of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the amount of securities sold other than by the Company that the underwriters determine in their sole discretion is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, that the underwriters determine in their sole discretion will not jeopardize the success of the offering. In no event shall any Registrable Securities be excluded from such offering unless all other stockholders’ securities have been first excluded.  In the event that the underwriters determine that less than all of the Registrable Securities requested to be registered can be included in such offering, then the Registrable Securities that are included in such offering shall be apportioned pro rata among the selling Holders based on the number of Registrable Securities held by all selling Holders or in such other proportions as shall mutually be agreed to by all such selling Holders.  Notwithstanding the foregoing, in no event shall the amount of securities of the selling Holders included in the offering be reduced below twenty percent (20%) of the total amount of securities included in such offering, unless such offering is the initial public offering of the Company’s securities, in which case the selling Holders may be

 

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excluded if the underwriters make the determination described above and no other stockholder’s securities are included in such offering.  For purposes of the preceding sentence concerning apportionment, for any selling stockholder that is a Holder of Registrable Securities and that is a venture capital fund, partnership or corporation, the affiliated venture capital funds, partners, retired partners and stockholders of such Holder, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single “selling Holder,” and any pro rata reduction with respect to such “selling Holder” shall be based upon the aggregate amount of Registrable Securities owned by all such related entities and individuals.

 

2.4                               Form S-3 Registration.  In case the Company shall receive from the Holders of at least thirty percent (30%) of the Registrable Securities (for purposes of this Section 2.4, the “Initiating Holders”) a written request or requests that the Company effect a registration on Form S-3 and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holder or Holders, the Company shall:

 

(a)                                 promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders; and

 

(b)                                 use all commercially reasonable efforts to effect, as soon as practicable, such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holders’ Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holders joining in such request as are specified in a written request given within fifteen (15) days after receipt of such written notice from the Company, provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance, pursuant to this section 2.4:

 

(i)                                     if Form S-3 is not available for such offering by the Holders;

 

(ii)                                  if the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate price to the public (net of any underwriters’ discounts or commissions) of less than $5,000,000;

 

(iii)                               if the Company shall furnish to Holders requesting a registration statement pursuant to this Section 2.4 a certificate signed by the Company’s Chief Executive Officer or Chairman of the Board stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such registration statement to be effected at such time, in which event the Company shall have the right to defer such filing for a period of not more than one hundred twenty (120) days after receipt of the request of the Initiating Holders, provided that such right shall be exercised by the Company not more than once in any twelve (12)-month period and provided further that the Company shall not register any securities for the account of itself or any other stockholder during such one hundred twenty (120) day period (other than a registration relating solely to the sale of securities of participants in a Company stock plan, a registration

 

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relating to a corporate reorganization or transaction under Rule 145 of the Act, a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities, or a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered);

 

(iv)                              if the Company has already effected two registrations on Form S-3 for the Holders pursuant to this Section 2.4; or

 

(v)                                 in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance.

 

(c)                                  If the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to this Section 2.4 and the Company shall include such information in the written notice referred to in Section 2.4(a).  The provisions of Section 2.2(b) shall be applicable to such request (with the substitution of Section 2.4 for references to Section 2.2).

 

(d)                                 Subject to the foregoing, the Company shall file a registration statement covering the Registrable Securities and other securities so requested to be registered as soon as practicable after receipt of the request or requests of the Initiating Holders.  Registrations effected pursuant to this Section 2.4 shall not be counted as requests for registration effected pursuant to Sections 2.2.

 

2.5                               Obligations of the Company.  Whenever required under this Section 2 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

 

(a)                                 prepare and file with the SEC a registration statement with respect to such Registrable Securities and use all commercially reasonable efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to one hundred twenty (120) days or, if earlier, until the distribution contemplated in the Registration Statement has been completed;

 

(b)                                 prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Act with respect to the disposition of all securities covered by such registration statement;

 

(c)                                  furnish to the Holders such number of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them;

 

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(d)                                 use all commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions;

 

(e)                                  in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering;

 

(f)                                   notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing;

 

(g)                                  cause all such Registrable Securities registered pursuant to this Section 2 to be listed on a national exchange or trading system and on each securities exchange and trading system on which similar securities issued by the Company are then listed; and

 

(h)                                 provide a transfer agent and registrar for all Registrable Securities registered pursuant to this Agreement and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration.

 

Notwithstanding the provisions of this Section 2, the Company shall be entitled to postpone or suspend, for a reasonable period of time, the filing, effectiveness or use of, or trading under, any registration statement if the Company shall determine that any such filing or the sale of any securities pursuant to such registration statement would in the good faith judgment of the Board of Directors of the Company:

 

(i)                                     materially impede, delay or interfere with any material pending or proposed financing, acquisition, corporate reorganization or other similar transaction involving the Company for which the Board of Directors of the Company has authorized negotiations;

 

(ii)                                  materially adversely impair the consummation of any pending or proposed material offering or sale of any class of securities by the Company; or

 

(iii)                               require disclosure of material nonpublic information that, if disclosed at such time, would be materially harmful to the interests of the Company and its stockholders; provided, however, that during any such period all executive officers and directors of the Company are also prohibited from selling securities of the Company (or any security of any of the Company’s subsidiaries or affiliates).

 

In the event of the suspension of effectiveness of any registration statement pursuant to this Section 2.5, the applicable time period during which such registration statement

 

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is to remain effective shall be extended by that number of days equal to the number of days the effectiveness of such registration statement was suspended.

 

2.6                               Information from Holder.  It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 2 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be reasonably required to effect the registration of such Holder’s Registrable Securities.

 

2.7                               Expenses of Registration.  All expenses other than underwriting discounts and commissions incurred in connection with registrations, filings or qualifications pursuant to Sections 2.2, 2.3 and 2.4, including (without limitation) all registration, filing and qualification fees, printers’ and accounting fees, fees and disbursements of counsel for the Company shall be borne by the Company.  Notwithstanding the foregoing, the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 2.2 or Section 2.4 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all participating Holders shall bear such expenses pro rata based upon the number of Registrable Securities that were to be included in the withdrawn registration), unless, in the case of a registration requested under Section 2.2, the Holders of a majority of the Registrable Securities agree to forfeit their right to one demand registration pursuant to Section 2.2 and provided, however, that if at the time of such withdrawal, the Holders have learned of a material adverse change in the condition, business or prospects of the Company from that known to the Holders at the time of their request and have withdrawn the request with reasonable promptness following disclosure by the Company of such material adverse change, then the Holders shall not be required to pay any of such expenses and shall retain their rights pursuant to Section 2.2 and 2.4.

 

2.8                               Delay of Registration.  No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2.

 

2.9                               Indemnification.  In the event any Registrable Securities are included in a registration statement under this Section 2:

 

(a)                                 To the extent permitted by law, the Company will indemnify and hold harmless each Holder, the partners, officers, directors and stockholders of each Holder, legal counsel and accountants for each Holder, any underwriter (as defined in the Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Act or the 1934 Act, against any losses, claims, damages or liabilities (joint or several) to which they may become subject under the Act, the 1934 Act, any state securities laws or any rule or regulation promulgated under the Act, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a “Violation”):  (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements

 

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thereto, (ii) the omission or alleged omission to state in such registration statement a material fact required to be stated therein, or necessary to make the statements therein not misleading or (iii) any violation or alleged violation by the Company of the Act, the 1934 Act, any state securities laws or any rule or regulation promulgated under the Act, the 1934 Act or any state securities laws,  and the Company will reimburse each such Holder, underwriter, controlling person or other aforementioned person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the indemnity agreement contained in this subsection 2.9(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation that occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Holder, underwriter, controlling person or other aforementioned person; provided further, however, that the foregoing indemnity agreement with respect to any preliminary prospectus shall not inure to the benefit of any Holder or underwriter or other aforementioned person, or any person controlling such Holder or underwriter, from whom the person asserting any such losses, claims, damages or liabilities purchased shares in the offering, if a copy of the most current prospectus was not sent or given by or on behalf of such Holder or underwriter or other aforementioned person to such person, if required by law to have been so delivered, at or prior to the written confirmation of the sale of the shares to such person, and if the prospectus (as so amended or supplemented) would have cured the defect giving rise to such loss, claim, damage or liability.

 

(b)                                 To the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls the Company within the meaning of the Act, legal counsel and accountants for the Company, any underwriter, any other Holder selling securities in such registration statement and any controlling person of any such underwriter or other Holder, against any losses, claims, damages or liabilities (joint or several) to which any of the foregoing persons may become subject, under the Act, the 1934 Act, any state securities laws or any rule or regulation promulgated under the Act, the 1934 Act or any state securities laws, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration; and each such Holder will reimburse any person intended to be indemnified pursuant to this subsection 2.9(b) for any legal or other expenses reasonably incurred by such person in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the indemnity agreement contained in this subsection 2.9(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder (which consent shall not be unreasonably withheld), and provided that in no event shall any indemnity under this subsection 2.9(b) exceed the net proceeds from the offering received by such Holder.

 

(c)                                  Promptly after receipt by an indemnified party under this Section 2.9 of notice of the commencement of any action (including any governmental action),

 

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such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.9, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding.  The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.9, but the omission to so deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.9.

 

(d)                                 If the indemnification provided for in this Section 2.9 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and the indemnified party on the other hand in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense, as well as any other relevant equitable considerations; provided, however, that no contribution by any Holder, when combined with any amounts paid by such Holder pursuant to Section 2.9(b), shall exceed the net proceeds from the offering received by such Holder.  The relative fault of the indemnifying party and the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

 

(e)                                  Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.

 

(f)                                   The obligations of the Company and Holders under this Section 2.9 shall survive the completion of any offering of Registrable Securities in a registration statement under this Section 2 and otherwise.

 

2.10                        Reports Under the 1934 Act.  With a view to making available to the Holders the benefits of Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to:

 

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(a)                                 make and keep public information available, as those terms are understood and defined in Rule 144, at all times after the effective date of the Initial Offering;

 

(b)                                 file with the SEC in a timely manner all reports and other documents required of the Company under the Act and the 1934 Act; and

 

(c)                                  furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144 (at any time after ninety (90) days after the effective date of the first registration statement filed by the Company), the Act and the 1934 Act (at any time after it has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested to avail any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration or pursuant to such form.

 

2.11                        Assignment of Registration Rights.  The rights to cause the Company to register Registrable Securities pursuant to this Section 2 may be assigned (but only with all related obligations) by a Holder to a transferee or assignee of such securities that (i) is a subsidiary, parent, partner, limited partner, retired partner, affiliated venture capital fund or stockholder of a Holder, (ii) is a Holder’s family member or trust for the benefit of an individual Holder, or (iii) after such assignment or transfer, holds at least 500,000 shares of Registrable Securities (subject to appropriate adjustment for stock splits, stock dividends, combinations or the like), provided:  (a) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned; (b) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement, including, without limitation, the provisions of Section 2.13 below; and (c) such assignment shall be effective only if immediately following such transfer the further disposition of such securities by the transferee or assignee is restricted under the Act.

 

2.12                        Limitations on Subsequent Registration Rights.  From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of a majority of the Registrable Securities, enter into any agreement with any holder or prospective holder of any securities of the Company that would allow such holder or prospective holder (a) to include any of such securities in any registration filed under Section 2.2, Section 2.3 or Section 2.4 hereof, unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of such securities will not reduce the amount of the Registrable Securities of the Holders that are included or (b) to demand registration of their securities.

 

2.13                        “Market Stand-Off” Agreement.

 

(a)                            Each Holder hereby agrees that it will not, without the prior written consent of the managing underwriter, during the period commencing on the date of the

 

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final prospectus relating to the Company’s Initial Offering and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred eighty (l80) 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) (i) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (whether such shares or any such securities are then owned by the Holder or are thereafter acquired), or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities, in cash or otherwise.  The underwriters in connection with the Company’s Initial Offering are intended third-party beneficiaries of this Section 2.13 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto.  Each Holder further agrees to execute such agreements as may be reasonably requested by the underwriters in the Company’s Initial Offering that are consistent with this Section 2.13 or that are necessary to give further effect thereto.  Any discretionary waiver or termination of the restrictions of any or all of such agreements by the Company or the underwriters shall apply to all Holders subject to such agreements pro rata based on the number of shares subject to such agreements.

 

In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the Registrable Securities of each Holder (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period.

 

(b)                                 Each Holder agrees that a legend reading substantially as follows shall be placed on all certificates representing all Registrable Securities of each Holder (and the shares or securities of every other person subject to the restriction contained in this Section 2.13):

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCK-UP PERIOD OF UP TO 180 DAYS AFTER THE EFFECTIVE DATE OF THE ISSUER’S REGISTRATION STATEMENT FILED UNDER THE ACT, AS AMENDED, AS SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL HOLDER OF THESE SECURITIES, A COPY OF WHICH MAY BE OBTAINED AT THE ISSUER’S PRINCIPAL OFFICE.  SUCH LOCK-UP PERIOD IS BINDING ON TRANSFEREES OF THESE SHARES.

 

2.14                        Termination of Registration Rights.  No Holder shall be entitled to exercise any right provided for in this Section 2 (i) after three (3) years following the consummation of the Initial Offering, (ii) as to any Holder, such earlier time after the Initial Offering at which such Holder (A) can sell all shares held by it in compliance with Rule 144 or

 

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(B) holds one percent (1%) or less of the Company’s outstanding Common Stock and all Registrable Securities held by such Holder (together with any affiliate of the Holder with whom such Holder must aggregate its sales under Rule 144) can be sold in any three (3)-month period without registration in compliance with Rule 144 or (iii) after the consummation of a Liquidation Event, as that term is defined in the Company’s Restated Certificate of Incorporation (as amended from time to time).

 

3.                                      Covenants of the Company.

 

3.1                               Delivery of Financial Statements.  The Company shall, upon request, deliver to OrbiMed or its permitted assigns (“OrbiMed”) (so long as OrbiMed continues to hold at least 676,901 shares of Series E Preferred Stock (subject to appropriate adjustment for stock splits, stock dividends, combinations or the like) and each Investor (or transferee of an Investor) that holds at least five percent (5%) of the then outstanding Registrable Securities (subject to appropriate adjustment for stock splits, stock dividends, combinations or the like) (each, a “Major Investor”):

 

(a)                           as soon as practicable, but in any event within one hundred twenty (120) days after the end of each fiscal year of the Company, an income statement for such fiscal year, a balance sheet of the Company and statement of stockholders’ equity as of the end of such year, and a statement of cash flows for such year, such year-end financial reports to be in reasonable detail, prepared in accordance with generally accepted accounting principles (“GAAP”), and audited and certified by independent public accountants of nationally recognized standing selected by the Company;

 

(b)                           as soon as practicable, but in any event within forty-five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Company, an unaudited income statement, statement of cash flows for such fiscal quarter and an unaudited balance sheet as of the end of such fiscal quarter comparing actual results to budgeted results and in a format reasonably satisfactory to Claremont Creek Ventures and Harmony Partners (“Harmony”);

 

(c)                                  as soon as practicable, but in any event at least thirty (30) days prior to the end of each fiscal year, a budget and business plan for the next fiscal year approved by the Board of Directors, prepared on a monthly basis, including balance sheets, income statements and statements of cash flows for such months and, as soon as prepared, any other budgets or revised budgets prepared by the Company; and

 

(d)                                 such other information relating to the financial condition, business or corporate affairs of the Company as the Major Investor may from time to time request, provided, however, that the Company shall not be obligated under this subsection (d) or any other subsection of Section 3.1 to provide information that it deems in good faith to be a trade secret or similar confidential information.

 

3.2                               Inspection.  The Company shall permit each Major Investor, at such Major Investor’s expense, to visit and inspect the Company’s properties, to examine its books of account and records and to discuss the Company’s affairs, finances and accounts with

 

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its officers, all at such reasonable times as may be requested by the Major Investor; provided, however, that the Company shall not be obligated pursuant to this Section 3.2 to provide access to any information that it reasonably considers to be a trade secret or similar confidential information.

 

3.3                               Termination of Information and Inspection Covenants.  The covenants set forth in Sections 3.1 and 3.2 shall terminate and be of no further force or effect upon the earlier to occur of (i) the consummation of the sale of securities pursuant to a registration statement filed by the Company under the Act in connection with the firm commitment underwritten offering of its securities to the general public, (ii) when the Company first becomes subject to the periodic reporting requirements of Sections 12(g) or 15(d) of the 1934 Act, whichever event shall first occur or (iii) the consummation of a Liquidation Event, as that term is defined in the Company’s Restated Certificate of Incorporation (as amended from time to time).

 

3.4                               Right of First Offer.  Subject to the terms and conditions specified in this Section 3.4, the Company hereby grants to OrbiMed (so long as OrbiMed continues to hold at least 676,901 shares of Series E Preferred Stock (subject to appropriate adjustment for stock splits, stock dividends, combinations or the like) each Investor that holds at least 6,000,000 shares of the outstanding shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock in the aggregate (subject to appropriate adjustment for stock splits, stock dividends, combinations or the like) (an “Offering Investor”) a right of first offer with respect to future sales by the Company of its Equity Securities (as hereinafter defined).  The term “Offering Investor” includes any general partners and affiliates of an Offering Investor.  An Offering Investor shall be entitled to apportion the right of first offer hereby granted it among itself and its partners and affiliates in such proportions as it deems appropriate.

 

Each time the Company proposes to offer any shares of, or securities convertible into or exchangeable or exercisable for any shares of, its capital stock (“Equity Securities”), the Company shall first make an offering of such Equity Securities to each Offering Investor in accordance with the following provisions:

 

(a)                                 The Company shall deliver a notice in accordance with Section 4.5 (“Notice”) to the Offering Investors stating (i) its bona fide intention to offer such Equity Securities, (ii) the number of such Equity Securities to be offered and (iii) the price and terms upon which it proposes to offer such Equity Securities.

 

(b)                                 By written notification received by the Company within twenty (20) calendar days after the giving of Notice, each Offering Investor may elect to purchase, at the price and on the terms specified in the Notice, up to that portion of such Equity Securities that equals the proportion that the number of shares of Common Stock that are Registrable Securities issued and held by such Offering Investor (assuming full conversion and exercise of all convertible and exercisable securities then outstanding) bears to the total number of shares of Common Stock of the Company then outstanding (assuming full conversion and exercise of all convertible and exercisable securities then outstanding). The Company shall promptly, in writing, inform each Offering Investor that elects to purchase all the shares

 

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available to it (a “Fully-Exercising Investor”) of any other Offering Investor’s failure to do likewise.  During the ten (10) day period commencing after such information is given, each Fully-Exercising Investor may elect to purchase that portion of the Equity Securities for which Offering Investors were entitled to subscribe, but which were not subscribed for by the Offering Investors, that is equal to the proportion that the number of shares of Registrable Securities issued and held by such Fully-Exercising Investor bears to the total number of shares of Common Stock of the Company then outstanding (assuming full conversion and exercise of all convertible and exercisable securities then outstanding).

 

(c)                                  If all Equity Securities that Offering Investors are entitled to obtain pursuant to subsection 3.4(b) are not elected to be obtained as provided in subsection 3.4(b) hereof, the Company may, during the ninety (90) day period following the expiration of the period provided in subsection 3.4(b) hereof, offer the remaining unsubscribed portion of such Equity Securities to any person or persons at a price not less than that, and upon terms no more favorable to the offeree than those, specified in the Notice.  If the Company does not enter into an agreement for the sale of the Equity Securities within such period, or if such agreement is not consummated within sixty (60) days of the execution thereof, the right provided hereunder shall be deemed to be revived and such Equity Securities shall not be offered unless first reoffered to the Offering Investors in accordance herewith.

 

(d)                                 The right of first offer in this Section 3.4 shall not be applicable to (i) the issuance or sale of shares of Common Stock (or options therefor) to employees, directors, officers, consultants and other service providers for the primary purpose of soliciting or retaining their services pursuant to plans or agreements approved by the Company’s Board of Directors, (ii) the issuance of securities pursuant to a bona fide, firmly underwritten public offering of shares of Common Stock registered under the Act, (iii) the issuance of securities pursuant to the conversion or exercise of convertible or exercisable securities, (iv) the issuance of securities in connection with a strategic partnership, provided such strategic partnership is for other than primarily equity financing purposes, or a bona fide business acquisition of or by the Company, whether by merger, consolidation, sale of assets, sale or exchange of stock or otherwise approved by the Company’s Board of Directors, (v) the issuance and sale of Series E Preferred Stock pursuant to the Series E Agreement, (vi) the issuance of stock, warrants or other securities or rights pursuant to a commercial credit transaction or an equipment or real property lease, provided such issuances are for other than primarily equity financing purposes or (vii) the issuance of securities that, with unanimous approval of the Company’s Board of Directors, are not offered to any existing stockholder of the Company or affiliates of such existing stockholder.  In addition to the foregoing, the right of first offer in this Section 3.4 shall not be applicable with respect to any Offering Investor in any subsequent offering of Equity Securities if (i) at the time of such offering, the Offering Investor is not an “accredited investor,” as that term is then defined in Rule 501(a) of the Act and (ii) such offering of Equity Securities is otherwise being offered only to accredited investors.

 

(e)                                  The rights provided in this Section 3.4 may not be assigned or transferred by any Offering Investor; provided, however, that an Offering Investor that is a venture capital fund may assign or transfer such rights to an affiliated venture capital fund.

 

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(f)                                   The covenants set forth in this Section 3.4 shall terminate and be of no further force or effect upon the consummation of (i) the Company’s sale of its Common Stock or other securities pursuant to Registration Statement under the Act or (ii) a Liquidation Event, as that term is defined in the Company’s Restated Certificate of Incorporation (as amended from time to time).

 

3.5                               Observer Rights.

 

(a)                                 As long as Sequoia Capital owns not less than one percent (1%) of the outstanding shares of Preferred Stock (or an equivalent amount of Common Stock issued upon conversion thereof), the Company shall invite a representative of Sequoia Capital to attend all meetings of its Board of Directors in a nonvoting observer capacity and, in this respect, shall give such representative copies of all notices, minutes, consents and other materials that it provides to its directors; provided, however, that such representative shall agree to hold in confidence and trust and to act in a fiduciary manner with respect to all information so provided; and, provided further, that the Company reserves the right to withhold any information and to exclude such representative from any meeting or portion thereof if access to such information or attendance at such meeting could adversely affect the attorney-client privilege between the Company and its counsel or would result in disclosure of trade secrets to such representative or if such Investor or its representative is or is affiliated with a direct competitor of the Company.

 

(b)                                 As long as Lightspeed Venture Partners (“Lightspeed”) owns not less than one percent (1%) of the outstanding shares of Preferred Stock (or an equivalent amount of Common Stock issued upon conversion thereof), the Company shall invite a representative of Lightspeed to attend all meetings of its Board of Directors in a nonvoting observer capacity and, in this respect, shall give such representative copies of all notices, minutes, consents and other materials that it provides to its directors; provided, however, that such representative shall agree to hold in confidence and trust and to act in a fiduciary manner with respect to all information so provided; and, provided further, that the Company reserves the right to withhold any information and to exclude such representative from any meeting or portion thereof if access to such information or attendance at such meeting could adversely affect the attorney-client privilege between the Company and its counsel or would result in disclosure of trade secrets to such representative or if such Investor or its representative is or is affiliated with a direct competitor of the Company.

 

(c)                                  As long as Harmony owns not less than one percent (1%) of the outstanding shares of Preferred Stock (or an equivalent amount of Common Stock issued upon conversion thereof), the Company shall invite a representative of Harmony to attend all meetings of its Board of Directors in a nonvoting observer capacity and, in this respect, shall give such representative copies of all notices, minutes, consents and other materials that it provides to its directors; provided, however, that such representative shall agree to hold in confidence and trust and to act in a fiduciary manner with respect to all information so provided; and, provided further, that the Company reserves the right to withhold any information and to exclude such representative from any meeting or portion thereof if access to such information or attendance at such meeting could adversely affect the attorney-client privilege between the Company and its counsel or would result in disclosure of trade secrets to such representative or if such Investor or its representative is or is affiliated with a direct competitor of the Company.

 

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(d)                                 As long as OrbiMed owns not less than one percent (1%) of the outstanding shares of Preferred Stock (or an equivalent amount of Common Stock issued upon conversion thereof), the Company shall invite a representative of OrbiMed to attend all meetings of its Board of Directors in a nonvoting observer capacity and, in this respect, shall give such representative copies of all notices, minutes, consents and other materials that it provides to its directors; provided, however, that such representative shall agree to hold in confidence and trust and to act in a fiduciary manner with respect to all information so provided; and, provided further, that the Company reserves the right to withhold any information and to exclude such representative from any meeting or portion thereof if access to such information or attendance at such meeting could adversely affect the attorney-client privilege between the Company and its counsel or would result in disclosure of trade secrets to such representative or if such Investor or its representative is or is affiliated with a direct competitor of the Company.

 

(e)                                  As long as Claremont Creek Ventures owns not less than one percent (1%) of the outstanding shares of Preferred Stock (or an equivalent amount of Common Stock issued upon conversion thereof), the Company shall invite a representative of Claremont Creek Ventures to attend all meetings of its Board of Directors in a nonvoting observer capacity and, in this respect, shall give such representative copies of all notices, minutes, consents and other materials that it provides to its directors; provided, however, that such representative shall agree to hold in confidence and trust and to act in a fiduciary manner with respect to all information so provided; and, provided further, that the Company reserves the right to withhold any information and to exclude such representative from any meeting or portion thereof if access to such information or attendance at such meeting could adversely affect the attorney-client privilege between the Company and its counsel or would result in disclosure of trade secrets to such representative or if such Investor or its representative is or is affiliated with a direct competitor of the Company.

 

3.6                               Board Committees.  The director designated by Sequoia Capital pursuant to the terms of the Amended and Restated Voting Agreement, of even date herewith, as amended from time to time, shall have the right to be a member of any committee of the Board of Directors.

 

3.7                               Proprietary Information and Inventions Agreements; Consulting Agreements.  The Company shall require all employees and consultants who create intellectual property on behalf of the Company to execute and deliver a Proprietary Information and Inventions Agreement, in substantially the form approved by the Company’s Board of Directors or a Consulting Agreement.

 

3.8                               Redemption Rights.  If the Company grants redemption rights exercisable by a stockholder or any series of equity securities with redemption rights (whether by amendment to the Company’s Restated Certificate of Incorporation or otherwise), then the Company shall grant the same redemption rights to all holders of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock on the same terms and conditions.

 

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3.9                               Reservation of Common Stock.  The Company will at all times reserve and keep available, solely for issuance and delivery upon the conversion of the Preferred Stock, all Common Stock issuable from time to time upon such conversion.

 

3.10                        Stock Vesting.  Unless otherwise approved by the Board of Directors, all stock options and other stock equivalents issued after the date of this Agreement to employees, directors, consultants and other service providers shall be subject to vesting as follows: (a) twenty-five percent (25%) of such stock shall vest at the end of the first year following the earlier of the date of issuance or such person’s services commencement date with the Company and (b) seventy-five percent (75%) of such stock shall vest in equal monthly installments over the next thirty-six (36) months.

 

3.11                        Corporate Opportunities and Information Use. The Company acknowledges that certain of the Investors and their affiliates, members, equity holders, director representatives, partners, employees, agents and other related persons are engaged in the business of investing in private and public companies in a wide range of industries, including the industry segment in which the Company operates (the “Company Industry Segment”).  Accordingly, the Company and the Investors acknowledge and agree that a Covered Person (as defined below) shall:

 

(a)                                 have no duty to the Company to refrain from participating as a director, investor or otherwise with respect to any company or other person or entity that is engaged in the Company Industry Segment or is otherwise competitive with the Company, and

 

(b)                                 in connection with making investment decisions, to the fullest extent permitted by law, have no obligation of confidentiality or other duty to the Company to refrain from using any information, including, but not limited to, market trend and market data, which comes into such Covered Person’s possession, whether as a director, investor or otherwise (the “Information Waiver”), provided that the Information Waiver shall not apply, and therefore such Covered Person shall be subject to such obligations and duties as would otherwise apply to such Covered Person under applicable law, if the information at issue (i) constitutes material non-public information concerning the Company, or (ii) is covered by a contractual obligation of confidentiality to which the Company is subject.

 

Notwithstanding anything in this Section 3.11 to the contrary, nothing herein shall be construed as a waiver of any Covered Person’s duty of loyalty or obligation of confidentiality with respect to the disclosure of confidential information of the Company.

 

For the purposes of this Section 3.11, “Covered Persons” shall have the meaning set forth in the Company’s Restated Certificate of Incorporation (as amended from time to time).

 

3.12                        D&O Insurance.  Provided that the Investors have at least one representative serving on the Company’s Board of Directors, the Company shall use reasonable best efforts to obtain and maintain directors and officers liability insurance in the aggregate minimum coverage amount of $1,000,000.

 

3.13                        Green Dot Corporation.  The Company shall not enter into any banking or nonbanking transaction with Green Dot Corporation or any of its subsidiaries (Next

 

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Estate Communications and Bonneville Bancorp) without the prior written consent of Sequoia Capital.

 

3.14                        Foreign Corrupt Practices Act.  The Company represents that it shall not and shall not permit any of its subsidiaries or affiliates or any of its or their respective directors, officers, managers, employees, independent contractors, representatives or agents to promise, authorize or make any payment to, or otherwise contribute any item of value to, directly or indirectly, to any third party, including any Non-U.S. Official, in each case, in violation of the FCPA, the U.K. Bribery Act, or any other applicable anti-bribery or anti-corruption law. The Company further represents that it shall and shall cause each of its subsidiaries and affiliates to cease all of its or their respective activities, as well as remediate any actions taken by the Company, its subsidiaries or affiliates, or any of their respective directors, officers, managers, employees, independent contractors, representatives or agents in violation of the FCPA, the U.K. Bribery Act, or any other applicable anti-bribery or anti-corruption law.  The Company further represents that it shall and shall cause each of its subsidiaries and affiliates to maintain systems of internal controls (including, but not limited to, accounting systems, purchasing systems and billing systems) to ensure compliance with the FCPA, the U.K. Bribery Act, or any other applicable anti-bribery or anti-corruption law.

 

3.15                        Termination of Certain Covenants.  The covenants set forth in Sections 3.5, 3.6, 3.7, 3.8 and 3.12 shall terminate and be of no further force or effect upon the consummation of (i) the Company’s sale of its Common Stock or other securities pursuant to Registration Statement under the Act or (ii) a Liquidation Event, as that term is defined in the Company’s Restated Certificate of Incorporation (as amended from time to time).

 

4.                                      Miscellaneous.

 

4.1                               Successors and Assigns.  Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties (including transferees of any shares of Registrable Securities).  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

 

4.2                               Governing Law.  This Agreement shall be governed by and construed under the laws of the State of California as applied to agreements among California residents entered into and to be performed entirely within California.

 

4.3                               Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

4.4                               Titles and Subtitles.  The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

 

21

 

4.5                               Notices.  All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed effectively given:  (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient; if not, then on the next business day, (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (iv) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt.  All communications shall be sent to the respective parties at the addresses set forth on the signature pages attached hereto (or at such other addresses as shall be specified by notice given in accordance with this Section 4.5).

 

4.6                               Expenses.  If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.

 

4.7                               Entire Agreement; Amendments and Waivers.  This Agreement (including the Exhibits hereto, if any) constitutes the full and entire understanding and agreement among the parties with regard to the subjects hereof and thereof.  Any term of this Agreement (other than Section 3.1, Section 3.2, Section 3.3, Section 3.4, section 3.5 and Section 3.6) may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the holders of a majority of the Registrable Securities.  The provisions of Section 3.1, Section 3.2 and Section 3.3 may be amended or waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the holders of a majority of the Registrable Securities that are held by Major Investors.  The provisions of Section 3.4 may be amended or waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and each Offering Investor.  The provisions of Sections 3.5(a) and 3.6 may be amended or waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and Sequoia Capital.  The provisions of Section 3.5(b) may be amended or waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and Lightspeed.  The provisions of Section 3.5(c) may be amended or waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and Harmony.  The provisions of Section 3.5(d) may be amended or waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and OrbiMed.  The provisions of Section 3.5(e) may be amended or waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and Claremont Creek Ventures. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any Registrable Securities, each future holder of all such Registrable Securities, and the Company.

 

4.8                               Severability.  If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision(s) shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision(s) were so excluded and shall be enforceable in accordance with its terms.

 

22

 

4.9                               Aggregation of Stock.  All shares of Registrable Securities held or acquired by affiliated entities (including affiliated venture capital funds) or persons shall be aggregated together for the purpose of determining the availability of any rights under this Agreement.

 

4.10                        Additional Investors.  Notwithstanding Section 4.7, no consent shall be necessary to add additional Investors as signatories to this Agreement, provided that such Investors have purchased Series E Preferred Stock pursuant to the subsequent closing provisions of Section 1.3 of the Series E Agreement.

 

4.11                        Amendment and Restatement of Prior Agreement.  Upon the effectiveness of this Agreement, the Prior Agreement shall be of no further force and effect, and shall be superseded and replaced in its entirety by this Agreement.

 

23

 

IN WITNESS WHEREOF, the parties have executed this Amended and Restated Investors’ Rights Agreement as of the date first above written.

 

	
 
    	
 
    	
 
    	
 
    	
NATERA, INC.
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
Matthew   Rabinowitz, President
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Address:
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
 FOR NATERA, INC.

 

 

IN WITNESS WHEREOF, the parties have executed this Investors’ Rights Agreement as of the date first above written.

 

	
 
    	
INVESTOR:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
HARMONY   PARTNERS FUND I, L.P.
    
	
 
    	
By:   Harmony Partners I, LLC
    
	
 
    	
Its:   General Partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
Mark   Lotke, Managing Director
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address:
    	
Suite 240
    
	
 
    	
 
    	
2200   Sand Hill Road
    
	
 
    	
 
    	
Menlo   Park, CA 94025
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
HARMONY   NATERA, LLC
    
	
 
    	
By:   Harmony Partners I, LLC
    
	
 
    	
Its:   Manager
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
Mark   Lotke
    
	
 
    	
Its:
    	
Managing   Director
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address:
    	
Suite 240
    
	
 
    	
 
    	
2200   Sand Hill Road
    
	
 
    	
 
    	
Menlo   Park, CA 94025
    
					

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
 FOR NATERA, INC.

 

 

IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement, as amended by that certain Omnibus Amendment and Consent Agreement dated as of April     , 2013.

 

	
 
    	
INVESTOR:
    
	
 
    	
 
    
	
 
    	
 
    
	
Date:   April     , 2013
    	
ROYALTY   OPPORTUNITIES S.ÀR.L
    
	
 
    	
By   OrbiMed Advisors LLC,
    
	
 
    	
its   investment manager
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
Samuel   D. Isaly
    
	
 
    	
Title:
    	
Managing   Member
    
				

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
 FOR NATERA, INC.

 

 

IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement, as amended by that certain Omnibus Amendment and Consent Agreement dated as of April 17, 2013 and that certain Omnibus Amendment and Consent Agreement dated as of July     , 2013.

 

	
 
    	
INVESTOR:
    
	
 
    	
 
    
	
 
    	
 
    
	
Date:   July     , 2013
    	
HEALTHCOR   PARTNERS FUND II, LP
    
	
 
    	
By:   HealthCor Partners II, LP, as general partner
    
	
 
    	
By:   HealthCor Partners GP, LLC, as general partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
				

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
 FOR NATERA, INC.

 

 

IN WITNESS WHEREOF, the parties have executed this Investors’ Rights Agreement as of the date first above written.

 

 

	
 
    	
INVESTOR:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Claremont   Creek Ventures, L.P.
    
	
 
    	
 
    
	
 
    	
By:
    	
Claremont   Creek Partners, LLC
    
	
 
    	
Its:
    	
General   Partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Claremont   Creek Ventures II, L.P.
    
	
 
    	
 
    
	
 
    	
By:
    	
Claremont   Creek Partners, LLC
    
	
 
    	
Its:
    	
General   Partner
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Claremont   Creek Partners Fund, L.P.
    
	
 
    	
 
    
	
 
    	
By:
    	
Claremont   Creek Partners, LLC
    
	
 
    	
Its:
    	
General   Partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
 FOR NATERA, INC.

 

 

IN WITNESS WHEREOF, the parties have executed this Investors’ Rights Agreement as of the date first above written.

 

 

	
 
    	
INVESTOR:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Sequoia   Capital XII
    
	
 
    	
Sequoia   Technology Partners XII
    
	
 
    	
Sequoia   Capital XII Principals Fund
    
	
 
    	
 
    
	
 
    	
By:
    	
 SC XII Management, LLC
    
	
 
    	
 
    	
A   Delaware Limited Liability Company
    
	
 
    	
 
    	
General   Partner of Each
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Managing   Member
    

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
 FOR NATERA, INC.

 

 

IN WITNESS WHEREOF, the parties have executed this Investors’ Rights Agreement as of the date first above written.

 

 

	
 
    	
 
    	
INVESTOR:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
MATTHEW   RABINOWITZ
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Address:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
 FOR NATERA, INC.

 

 

IN WITNESS WHEREOF, the parties have executed this Investors’ Rights Agreement as of the date first above written.

 

 

	
 
    	
 
    	
INVESTOR:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
MALMI   LLC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Marissa   Mayer, as Trustee
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Address:
    	
 
    

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
 FOR NATERA, INC.

 

 

IN WITNESS WHEREOF, the parties have executed this Investors’ Rights Agreement as of the date first above written.

 

 

	
 
    	
 
    	
INVESTOR:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
CHRISTOPHER   ALAFI
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Address:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
 FOR NATERA, INC.

 

 

IN WITNESS WHEREOF, the parties have executed this Investors’ Rights Agreement as of the date first above written.

 

 

	
 
    	
INVESTOR:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
THE   FOUNDERS FUND II LP
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
THE   FOUNDERS FUND II ENTREPRENEURS FUND LP
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
THE   FOUNDERS FUND II PRINCIPALS FUND
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Title:
    	
 
    

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
 FOR NATERA, INC.

 

 

IN WITNESS WHEREOF, the parties have executed this Investors’ Rights Agreement as of the date first above written.

 

 

	
 
    	
INVESTOR:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
LIGHTSPEED   VENTURE PARTNERS VIII, L.P.
    
	
 
    	
 
    
	
 
    	
By:
    	
Lightspeed   General Partner VIII, L.P.,
    
	
 
    	
 
    	
its   general partner
    
	
 
    	
 
    
	
 
    	
By:
    	
Lightspeed   Ultimate General Partner VIII, Ltd.,
    
	
 
    	
 
    	
its   general partner
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
Ravi   Mhatre
    
	
 
    	
 
    	
Duly   Authorized Signatory
    
				

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
 FOR NATERA, INC.

 

 

IN WITNESS WHEREOF, the parties have executed this Investors’ Rights Agreement as of the date first above written.

 

 

	
 
    	
INVESTOR:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
AMBERBROOK   VI LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Its:
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
					

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
 FOR NATERA, INC.

 

 

IN WITNESS WHEREOF, the parties have executed this Investors’ Rights Agreement as of the date first above written.

 

	
 
    	
INVESTOR:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
JVEN   CAPITAL, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Its:
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
					

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
 FOR NATERA, INC.

 

 

IN WITNESS WHEREOF, the parties have executed this Investors’ Rights Agreement as of the date first above written.

 

	
 
    	
INVESTOR:
    
	
 
    	
 
    
	
 
    	
 
    	
ALEX   MOSHKEVICH
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
 FOR NATERA, INC.

 

 

IN WITNESS WHEREOF, the parties have executed this Investors’ Rights Agreement as of the date first above written.

 

	
 
    	
 
    	
INVESTOR:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
THE M. M. GOOD REVOCABLE TRUST
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:   
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
Marissa Mayer, as Trustee
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Address:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
 FOR NATERA, INC.

 

 

IN WITNESS WHEREOF, the parties have executed this Investors’ Rights Agreement as of the date first above written.

 

 

	
 
    	
INVESTOR:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    	
ALAFI   CAPITAL COMPANY, LLC
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Address:
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    

 

SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
 FOR NATERA, INC.

 

 

Schedule of Investors

 

Harmony Partners Fund I

Harmony Natera, LLC

Sequoia Capital XII Principals Fund

Sequoia Capital XII

Sequoia Technology Partners XII

Claremont Creek Ventures, L.P.

Claremont Creek Partners Fund, L.P.

Claremont Creek Ventures II, L.P.

Lightspeed Venture Partners VIII

The Founders Fund II Entrepreneurs Fund LP

The Founders Fund II LP

The Founders Fund II Principals Fund

Christopher Alafi (qualified individual)

Amberbrook VI LLC

Malmi LLC

jVen Capital, LLC

Alex Moshkevich (qualified individual)

Royalty Opportunities S.ÀR.L

HealthCor Partners Fund II, LP

Carl SeidenExhibit 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.

 

1

 

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

 

2

 

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

 

3

 

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

 

4

 

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

 

5

 

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

 

6

 

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

 

7

 

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

 

8

 

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

 

9

 

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

 

10

 

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

 

13

 

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

 

14

 

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.

 

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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.

 

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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.

 

31

 

(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

 

32

 

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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